Cardiff Property Blog

Local property market information for the serious investor

How The Rented Sector Has Transformed The Property Market In Cardiff

The Cardiff housing market has gone through a sea change in the past decades with the Buy-to-Let (B-T-L) sector evolving as a key trend, for both Cardiff tenants and Cardiff landlords.

A few weeks ago, the Government released a White Paper on housing. I have had a chance now to digest the report and wish to offer my thoughts on the topic. It was interesting that the private rental sector played a major part in the future plans for housing. This is especially important for our growing Cardiff population.

In 1981, the population of Cardiff stood at 286,900

and today it stands at 357,200.

Currently, the private rented (B-T-L) sector accounts for 9.9% of households in the city.  The Government want to assist people living in the houses and help the economy by encouraging the provision of quality homes, in a housing sector that has grown due to worldwide economic forces, pushing home ownership out of the reach of more and more people. Interestingly, when we look at the 1981 figures for homeownership, a different story is told.

61.25% Cardiff people owned their own home in 1981

27.28% Cardiff people rented from the Council or Housing Association in 1981

 and 11.47% Cardiff rented from a Private Landlord

The significance of a suitable housing policy is vital to ensure suitable economic activity and create a vibrant place people want to live in. With the population of Cardiff set to grow to 437,000 by 2037 – it is imperative that City of Cardiff Council and Central Government all work actively together to ensure the residential property market doesn’t hold the area back, by encouraging the building and provision of quality homes for its inhabitants.

One idea the Government has proclaimed is a variety of measures aimed at encouraging the Build-to-Rent (B-T-R) sector (instead of the B-T-L sector). These include allowing local authorities to proactively plan for B-T-R schemes, and making it simpler for B-T-R developers to offer inexpensive private rented homes.

To do this, the government will invent a distinct affordable housing class for B-T-R, called ‘Affordable Private Rent’, which will oblige new homes builders to provide at least 1 in 5 of a new home developments at a 20% discount on open-market rents and three year tenancies for tenants. In return, the new homebuilders will get better planning assurances.

Private landlords will not be expected to offer discounts, nor offer 3-year tenancies – but it is something Cardiff landlords need to be aware of as there will be greater competition for tenants.

Over the last ten years, home ownership has not been a primary goal for young adults as the world has changed. These youngsters expect ‘on demand’ services from click and collect, Amazon, Dating Apps and TV with the likes of Netflix. Many Cardiff youngsters see that renting more than meets their accommodation needs, as it combines the freedom from a lifetime of property maintenance and financial obligations, making it an attractive lifestyle option.

Private rented housing in Cardiff, be it B-T-L or B-T-R, has the prospective to play a very positive role.

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Cardiff’s ‘Generation Trapped’ and the £15.99bn legacy

Last week, I wrote an article on the plight of the Cardiff 20 something’s often referred to by the press as ‘Generation Rent’. Attitudes to renting have certainly changed over the last twenty years and as my analysis suggested, this change is likely to be permanent. In the article, whilst a minority of this Generation Rent feel trapped, the majority don’t – making renting a choice not a predicament. The Royal Institution of Chartered Surveyors (RICS) predicted that the private rental sector is likely to grow substantially by 1.8m households across the UK in the next 8 years, with demand for rental property unlikely to slow and newly formed households continuing to choose the rental market as opposed to buying.

However, my real concern for Cardiff homeowners and Cardiff landlords alike, as I discussed a couple of months ago, is our mature members of the population of Cardiff. In that previous article, I stated that the current OAP’s (65+ yrs in age) in Cardiff were sitting on £6.89bn of residential property … however, I didn’t talk in depth about the ‘Baby Boomers’, the 50yr to 64yr old Cardiff people and what their properties are worth – and more importantly, how the current state of affairs could be holding back those younger Generation Renters.

In Cardiff, there are 20,798 households whose owners are aged between 50yrs and 64yrs and about to pay their mortgage off. That property is worth, in today’s prices, £4.74bn. There are an additional 19,088 mortgage free Cardiff households, owned by 50yr to 64yr olds, worth £4.35bn in today’s prices, meaning…

Cardiff Baby Boomers and Cardiff OAP’s are sitting

on £15.99bn worth of Cardiff Property

These Cardiff Baby Boomers and OAP’s are sitting on 70,095 Cardiff properties and many of them feel trapped in their homes, and hence I have dubbed them ‘Generation Trapped’.

Recently, the English Housing Survey stated 49% of these properties owned by the Generation Trapped, as I have dubbed them, are ‘under-occupied’ (under-occupied classed as having at least two bedrooms more than needed). These houses could be better utilised by younger families, but research carried out by the Prudential suggest in Britain it’s estimated that only one in ten older people downsize while in the USA for example one in five do so.

The growing numbers of older homeowners who want to downsize their home are often put off by the difficulties of moving. The charity United for all Ages, suggested recently many are put off by the lack of housing options, 19% by the hassle and cost of moving, 14% by having to declutter their possessions and 14% by family reasons such as staying close to children and grandchildren.

Helping mature Cardiff (and the Country) homeowners to downsize at the right time will also enable younger Cardiff people to find the homes they need – meaning every generation wins, both young and old. However, to ensure downsizing works, as a Country, we need more choices for these ‘last time buyers’.

Theresa May and Philip Hammond can do their part and consider stamp duty tax breaks for downsizers, our local Council in Cardiff and the Planning Dept. should play their part, as should landlords and property investors to ensure Cardiff’s ‘Generation Trapped’ can find suitable property locally, close to friends, family and facilities.

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‘Generation Rent (Forever)’ – 27,898 Cardiff Tenants have no intention of ever buying a property to call home

The good old days of the 1970’s and 1980’s eh … with such lowlights as 24% inflation, 17% interest rates, 3 day working week, 13% unemployment, power cuts … those were the days (not)… but at least people could afford to buy their own home. So why aren’t the 20 and 30 something’s buying in the same numbers as they were 30 or 40 years ago?

Many people blame the credit crunch and global recession of 2008, which had an enormous impact on the Cardiff (and UK) housing market. Predominantly, the 20 something first-time buyers who, confronting a problematic mortgage market, the perceived need for big deposits, reduced job security and declining disposable income, discovered it challenging to assemble the monetary means to get on to the Cardiff property ladder.

However, I would say there has been something else at play other than the issue of raising a deposit – having sufficient income and rising property prices in Cardiff. Whilst these are important factors and barriers to homeownership, I also believe there has been a generational change in attitudes towards home ownership in Cardiff (and in fact the rest of the Country).

Back in 2011, the Halifax did a survey of thousands of tenants and 19% of tenants said they had no plans to buy a home for themselves. A recent, almost identical survey of tenants, carried out by The Deposit Protection Service revealed, in late 2016, that figure had risen to 38.4%, with many no-longer equating home ownership to success and believing renting to be better suited to their lifestyle.

You see, I believe renting is a fundamental part of the housing sector, and a meaningful proportion of the younger adult members of the Cardiff population choose to be tenants as it better suits their plans and lifestyle. Local Government in Cardiff (including the planners – especially the planners), land owners and landlords need an adaptable Cardiff residential property sector that allows the diverse choices of these Cardiff 20 and 30 year olds to be met.

This means, if we applied the same percentages to the current 72,650 Cardiff tenants in their 30,042 private rental properties, 27,898 tenants have no plans to ever buy a property – good news for the landlords of those 11,536 properties. Interestingly, in the same report, just under two thirds (62%) of tenants said they didn’t expect to buy within the next year.

.. but does that mean the other third will be buying in Cardiff in the next 12 months?

Some will, but most won’t … in fact, the Royal Institution of Chartered Surveyors (RICS) predicts that, by 2025, that the number of people renting will increase, not drop. Yes, many tenants might hope to buy but the reality is different for the reasons set out above.  The RICS predicts the number of tenants looking to rent will increase by 1.8 million households by 2025, as rising house prices continue to make home ownership increasingly unaffordable for younger generations.  So, if we applied this rise to Cardiff, we will in fact need an additional 12,875 private rental properties over the next eight years (or 1,609 a year) … meaning the number of private rented properties in Cardiff is projected to rise to an eye watering 42,917 households.

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Cardiff First Time Buyers borrow £219.1m in the last 12 months

Starting with the bigger picture, over the last 12 months in the UK, 1,061,557 properties were sold with a total value of £223.74 bn. To give that some context, ten years ago 1,581,727 properties sold with a total value of £405.56bn, so it can be seen the number of people moving house has dropped by over a third over the last decade.

Whether you are a landlord, homeowner or tenant, it’s always important to keep an eye on the Cardiff property market, not just from your point of view, but also from every player’s point of view. Over the last 12 months, 4,560 properties have sold (and completed) in Cardiff, worth £989.4m. Interestingly the number of properties changing hands in Cardiff has also dropped when compared to a decade ago.

It might surprise you that first time buyers in 2017 will benefit from a slight decline in Cardiff buy-to-let investors.

Those looking to buy a home in the spring and summer of 2017 will face a far less competitive Cardiff property market than the same time of year in 2016, when the urgency to beat the buy-to-let stamp duty hike was in full swing.

Many landlords brought forward their purchases to beat the tax, and since then, the number of buy-to-let purchases has dropped slightly. First time buyers have taken advantage of that and have increased their buying. In fact, looking at the Bank of England figures, this is what UK lenders have lent on buy-to-let properties versus first time buyers over the last 12 months  …

Q4 2015 – £1bn buy-to-let mortgages vs £1.31bn for first time buyers

Q1 2016 – £1.35bn buy-to-let mortgages vs £1.08bn for first time buyers

Q2 2016 – £760m buy-to-let mortgages vs £1.28bn for first time buyers

Q3 2016 – £827m buy-to-let mortgages vs £1.42bn for first time buyers

When looking at the figures for Cardiff itself, first time buyers have borrowed more than £219.1m in the last 12 months to buy their first home. This is a ringing endorsement of their confidence in their jobs and the local Cardiff economy. Those 20 and 30 something’s who are considering being first time buyers in 2017 will find that the number of properties on the market has never been as good as it has for quite a while, meaning you have more choice of properties and less competition from so many buy-to-let landlords than a year ago.

Rightmove announced nationally that new seller enquiries are 26% up on the same time last year giving the stoutest indication that we may see a slight ease in the lack of properties on the market. When I look at the Cardiff market, at this moment in time there are an impressive 2,517 properties for sale, (so lots of choice). All this will be welcome news amongst Cardiff first-time buyers with a combination of a proportional reduction in new investors and landlords.

2017 will be an interesting year for all homeowners, be they buy-to-let landlords, existing homeowners or future homeowners.

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2 Bed Maisonette in Canton

Hi Everyone,

I hope you are all tucked away from storm Doris today!

On my daily browse on Zoopla this morning this lovely 2 bed maisonette in Canton attracted my attention. It looks in a great condition and could make an easy rental that is ready for tenants to move in to straight away. Located in the heart of Canton it is close to the local amenities of Cowbridge Road.

The other thing I like about this property is that it has an allocaed parking space which is within the gated development. It has just come on the market with Allen and Harris for £135,000 which seems like a fair price to me!

http://www.zoopla.co.uk/for-sale/details/43051991

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With 7,012 people in Private Rented Properties in Cardiff Bay – Should you still be investing in Cardiff Bay Buy To Let?

If I were a buy to let landlord in Cardiff Bay today, I might feel a little bruised by the assault made on my wallet after being (and continuing to be) ransacked over the last 12 months by HM Treasury’s tax changes on buy to let. To add insult to injury, Brexit has caused a tempering of the Cardiff Bay property market with property prices not increasing by the levels we have seen in the last few years. I think we might even see a very slight drop in property prices this year and, if Cardiff Bay property prices do drop, the downside to that is that first time buyers could be attracted back into the Cardiff Bay property market; meaning less demand for renting (meaning rents will go down). Yet, before we all run for the hills, all these things could be serendipitous to every Cardiff Bay landlord, almost a blessing in disguise.

Cardiff Bay has a population of 13,464, so when I looked at the number of people who lived in private rented accommodation, the numbers astounded me …

Cardiff Bay – Accommodation Type and the Number of Occupiers
Owned outright – Cardiff Bay Owned with a mortgage – Cardiff Bay Shared ownership (part owned and part rented) – Cardiff Bay Social rented (aka Council Housing) –  Cardiff Bay Private rented – Cardiff Bay Living rent free – Cardiff Bay
1,131 2,329 109 2,602 7,012 281
8.4% 17.3% 0.8% 19.3% 52.1% 2.1%

Yields will rise if Cardiff Bay property prices fall, which will also make it easier to obtain a buy to let mortgage, as the income would cover more of the interest cost. If property values were to level off or come down that could help Cardiff Bay landlords add to their portfolio. Rental demand in Cardiff Bay is expected to stay solid and may even see an improvement if uncertainty is protracted. However, there is something even more important that Cardiff Bay landlords should be aware of: the change in the anthropological nature of these 20 something potential first time buyers.

I have just come back from a visit to my wife’s relations after a family get together. I got chatting with my wife’s nephew and his partner.  Both are in their mid/late twenties, both have decent jobs in Cardiff Bay and they rent. Yet, here was the bombshell, they were planning to rent for the foreseeable future with no plans to even save for a deposit, let alone buy a property. I enquired why they weren’t planning to buy? The answers surprised me as a 40 something, and it will you. Firstly, they don’t want to put cash into property, they would rather spend it on living and socialising by going on nice holidays and buying the latest tech and gadgets. They want the flexibility to live where they choose and finally, they don’t like the idea of paying for repairs. All their friends feel the same. I was quite taken aback that buying a house is just not top of the list for these youngsters.

So, as 52.1% of Cardiff Bay people are in rented accommodation and as that figure is set to grow over the next decade, now might just be a good time to buy property in Cardiff Bay – because what else are you going to invest in?  Give your money to the stock market run by sharp suited city whizz kids – because at least with property – it’s something you can touch – there is nothing like bricks and mortar!

 

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46 Cardiff Bay Households Occupied by OAP Renters

Recent statistics published by the Office of National Statistics show that there are 267,704 private rented households in the Country that are occupied by people aged 65 and older, meaning 4.39% of OAP’s are living in private rented property.

It got me thinking two things. How many of these OAP’s have always rented and how many have sold up and become a tenant?  In retirement, selling up could make financial sense to the mature generation in Cardiff Bay, potentially allowing them to liquidate the equity of their main home to enhance their retirement income.  I wanted to know why these older people rent and whether there was opportunity for the buy to let landlords of Cardiff Bay?

The Prudential published a survey recently that said nearly six out of ten OAP renters had never owned a home.  Two out of ten OAP renters were required to sell up because of debt, just about one in ten OAP renters sold their property to use the money to fund their retirement and the remaining one out ten OAP renters, rented for other reasons.

Funding retirement is important as the life expectancy of someone from Cardiff Bay at age 65 (years) is 17.7 years for males and 20.9 years for females (interesting when compared to the National Average of 18.7 years for males and 21.1 years for females).  The burdens of financing a long retirement are being felt by many mature people of Cardiff Bay.  The state of play is not helped by rising living costs and ultra-low interest rates reducing returns for savers.

So, what of Cardiff Bay?  Of the 647 households in Cardiff Bay, whose head of the household is 65 or over, not surprisingly 273 of households were owned (42.19%) and 301 (46.52%) were in social housing.  However, the figure that fascinated me was the 46 (7.11%) households that were in privately rented properties.

Anecdotal evidence, by talking to both my team and other Cardiff Bay property professionals is that this figure is rising.  More and more Cardiff Bay OAP’s are selling their large Cardiff Bay homes and renting something more manageable, allowing them to release all of their equity from their old home.  This equity can be gifted to grandchildren (allowing them to get on the property ladder), invested in plans that produce a decent income and while living the life they want to live.

These Cardiff Bay OAP renters know they have a fixed monthly expenditure and can budget accordingly with the peace of mind that their property maintenance and the upkeep of the buildings are included in the rent.  Many landlords will also include gardening in the rent! Renting is also more adaptable to the trials of being an OAP – the capability to move at short notice can be convenient for those moving into nursing homes, and it doesn’t leave family members panicking to sell the property to fund care-home fees.

Cardiff Bay landlords should seriously consider low maintenance semi-detached bungalows on decent bus routes and close to doctor’s surgeries as a potential investment strategy to broaden their portfolio.  Get it right and you will have a wonderful tenant, who if the property offers everything a mature tenant wants and needs, will pay top dollar in rent!

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Two bed in St Mellons with driveway parking

Morning All!

This one caught my attention this morning and might make you a lovely investment. Yes it is on the outskirts of Cardiff but is still a very popular area particularly as it is just minutes from away from the A48 and is easily accessible to both Newport and Cardiff.

It has just come on the market with Allen and Harris for £145,000, now this does seem a little high for 2 beds in the area but the property looks in good condition and has a large rear garden and driveway parking.

I think you could easily achieve a market rent in the region of £650 so based on the current asking price you would be looking at a yield of just over 5%

http://www.zoopla.co.uk/for-sale/details/42870813

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