Local property market information for the serious investor

Month: June 2017

36.1 miles – The average distance people go to escape living in Cardiff Bay

Doom and Gloom for Cardiff Bay Property Market?

How far do Cardiff Bay people go to move to a new house?” This was an intriguing question asked by one of my clients the other week. Readers of my property blog will know I love a challenge, especially when it comes to talking about the Cardiff Bay Property Market!

For the majority, the response is not very far. It is much more common for homeowners and tenants in Great Britain to move across town than to the next town or county. Until now, it’s been hard to say how many homeowners and tenants moved from (and to) relatively far away to buy or rent their new home. However, I carried out some research and requested some statistics from the Royal Mail. What came back was fascinating!

Using statistics for the 12 months up to the middle of Autumn 2016, 335 households moved out of Cardiff Bay (CF10), moving an average distance of 36.06 miles – the equivalent of moving from Cardiff Bay to Swansea (as the crow flies).  The greatest distance travelled was 243 miles – that’s more than 9 marathons (when someone moved to Beamish).

Considering there were 236 property sales in CF10 in the year and countless tenant moves, the numbers seems consistent – once you find a city you like, you tend to want to settle down and if you do move, you might only move to a different neighbour-hood, or for better transport links or, to be closer to the school you want to get your children into, but the likelihood is you won’t travel far.

I then turned my attention to people moving into Cardiff Bay. Using the same statistics for the 12 months up to the middle of Autumn 2016, 339 households moved into Cardiff Bay (CF10), moving an average distance of 77.66 miles – the equivalent of moving from Aberystwyth to Cardiff Bay (again as the crow flies). The greatest distance travelled was 398 miles – that’s more than 15 marathons (when someone moved from Aberdeen to Cardiff Bay).

I have looked at the data of every person moving into Cardiff Bay and these have been plotted on a map of the UK. Looking at the map below, it shows exactly where most people come from, when moving into Cardiff Bay. As you can see, there are a high proportion of people moving from London and the East.

So, what does all this mean for the landlords and homeowners of Cardiff Bay?

When an agent markets a property for rent or let, it is vital to know the tenant or property buyer well, that the properties they are letting/selling fit those tenants/buyers, so they almost sell themselves. These days that means not only knowing how many bedrooms, reception rooms etc., a property offers but the budget buyers and tenants want to spend on a property in that area as well as where they come from.

The estate and lettings industry loves the mantra “location, location, location”. I say it might be helpful to factor in where (and how) far people are moving from, so the property can be sold or let more easily. Many say knowledge is power and whilst I do enjoy writing my blog on the Cardiff Bay property market, I also use the information to help my clients buy, let and sell well. So for example, the information gained for this article, will enable my team and I to be more efficient in where to direct our marketing resources to ensure we maximise our clients’ properties sale-ability or rent-ability.

 

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79% of Cardiff Bay Properties are Leasehold

Doom and Gloom for Cardiff Bay Property Market?

There are 23.36 million properties in England and Wales with 64% being owner occupied and 36% being rented either from a private landlord, local authority or housing association.

Over nine out of ten of those English and Welsh owner-occupied properties are a whole house or bungalow. Now, most people would assume they would be freehold – however, of those renting nearly half of rental properties, 44% to be precise, lived in other leasehold apartments and flats.

It might be wise to quickly explain the difference between freehold and leasehold. When someone owns the freehold of a property they own it outright, including the land it is built on, whilst with a leasehold property the leaseholder owns the property for the length of their lease agreement. Leaseholders must pay the person who owns land (the freeholder) ground rent and other fees. When the leasehold ends, ownership returns to the freeholder although the leaseholder can extend the lease or they can buy the freeholder out, but there are rules and regulations with regards doing that.

Therefore, it would be safe to assume that houses are freehold and flats are leasehold .. wouldn’t it? Not necessarily! Most houses are freehold but some might be leasehold – usually through shared-ownership schemes – but more and more new homes builders are selling houses on a leasehold as well. The protection of the law afforded to leaseholders who own a flat is massive, but sadly lacking to leasehold houses sold privately.

Looking specifically at the figures for Cardiff Bay, at the last count in CF10 there were 9,573 properties. Since 1995, 8,696 properties in CF10 have changed hands and have been sold. Looking further at those 8,696 transactions in CF10 since 1995, using data from Land Registry and solicitors practice My-Home-Move, 78.99% have been leasehold (higher than the national average of 15%).

However, I am concerned about a few new homes builders selling new houses (not flats – houses) as leasehold. There has been a growing (yet small) trend for new-build houses to be sold as leasehold in recent years. While not all house builders use this model, those that do maintain it helps make developments financially viable.

The issue comes when builders sell the freehold separately to an investment company without informing the lease holder  – which they are legally allowed to do without telling the leaseholder. In England and Wales, the “right of first refusal” to buy the freehold is written in law to leaseholders of flats i.e. the freeholder must offer it to the leaseholders of all the flats of the building first), but not leaseholders of houses.

.. and this is the point I am trying to get across. If you are buying a new home and it’s a house (i.e. not a flat) – please check very carefully indeed whether its freehold or leasehold. If it is a leasehold, whilst you do have rights, they are not as strong as for those people buying a leasehold flat. I appreciate I am only talking about a very small percentage of the property market, but potentially this could end up costing thousands of pounds to those affected.

 

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What will the General Election do to 2,029 Cardiff Bay Homeowners?

In Cardiff Bay (or CF10 to be precise), of the 7,261 households, 682 homes are owned without a mortgage and 1,347 homes are owned by a mortgage. Many homeowners have made contact me with asking what the General Election will do the Cardiff Bay property market?  The best way to tell the future is to look at the past.

I have looked over the last five general elections and analysed in detail what happened to the property market on the lead up to and after each general election. Some very interesting information has come to light.

Of the last five general elections (1997, 2001, 2005, 2010 and 2015), the two elections that weren’t certain were the last two (2010 with the collation and 2015 with unexpected Tory majority). Therefore, I wanted to compare what happened in 1997, 2001 and 2005 when Tony Blair was guaranteed to be elected/re-elected versus the last knife edge uncertain votes of 2010 and 2015 … in terms of the number of houses sold and the prices achieved.

Look at the first graph below comparing the number of properties sold and the dates of the general elections

It is clear, looking at the number of monthly transactions (the blue line), there is a certain rhythm or seasonality to the housing market. That rhythm/seasonality has never changed since 1995 (seasonality meaning the periodic fluctuations that occur regularly based on a season – i.e. you can see how the number of properties sold dips around Christmas, rises in Spring and Summer and drops again at the end of the year).

To remove that seasonality, I have introduced the red line. The red line is a 12 month ‘moving average’ trend line which enables us to look at the ‘de-seasonalised’ housing transaction numbers, whilst the yellow arrows denote the times of the general elections. It is clear to see that after the 1997, 2001 and 2005 elections, there was significant uplift in number of households sold, whilst in 2010 and 2015, there was slight drop in house transactions (i.e. number of properties sold).

Next, I wanted to consider what happened to property prices. In the graph below, I have used that same 12-month average, housing transactions numbers (in red) and yellow arrows for the dates of the general elections but this time compared that to what happened to property values (pink line).

It is quite clear none of the general elections had any effect on the property values.  Also, the timescales between the calling of the election and the date itself also means that any property buyer’s indecisiveness and indecision before the election will have less of an impact on the market.

 

So finally, what does this mean for the landlords of the 3,741 private rented properties in Cardiff Bay? Well, as I have discussed in previous articles (and just as relevant for homeowners as well) property value growth in Cardiff Bay will be more subdued in the coming few years for reasons other than the general election. The growth of rents has taken a slight hit in the last few months as there has been a slight over supply of rental property in Cardiff Bay, making it imperative that Cardiff Bay landlords are realistic with their market rents. But, in the long term, as the younger generation still choose to rent rather than buy … the prospects, even with the changes in taxation, mean investing in buy-to-let still looks a good bet.

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