Wednesday 30 September 2015

Why Are Fewer & Fewer People Moving House in Sunderland?

Years ago, it seemed that people moved all the time, friends of mine always seemed to be packing up and moving on to their next home. I actually read on the internet that the average UK person moves 8 times in their life - or every 9 to 10 years, however, from research I have carried out it shows things have changed considerably in Sunderland in recent years, and interestingly, the trend seems to be getting worse!

In Sunderland, there are 119,758 households. However, after we remove the 32,399 council & social houses, 14,552 privately rented houses and 889 houses where the occupants live rent free, that leaves us with 71,566 owned properties, be that 100% outright, with a mortgage or shared ownership

This means 59.8% of the properties in Sunderland are occupied by the owner (interestingly the national average is 64.2%, Sunderland has a higher proportion of social and privately rented housing than the national average)

There were 1,501 property sales in Sunderland within the last 12 months

Based on those figures that's a shockingly low 2% of Sunderland property owners who sold and moved within the last 12 months (and given the sales figure will also include purchases by investors, the actual number of people moving within Sunderland could be much, much lower)

There are a couple of reasons for this. Firstly, the cost of moving house has risen dramatically over the last twenty years and, secondly, with many remortgaging their properties in the mid 2000’s before the price crash of 2008, there is a reluctance or inability in a small minority of homeowners to finance a home sale/purchase, due to lack of equity

These are both factors leading to driving fewer moves by existing homeowners.

However, the big effect has been the change in house price inflation. Back in the 1970’s and 1980’s, house prices were doubling every 5 to 7 years. Even in Greater London, with its stratospheric property price increases over the last few years, it has taken 13 years (August 2012 to be exact) for property values to double to today’s levels

So what does this all mean for Sunderland Landlords?

Well, for the same reasons existing Sunderland homeowners aren’t moving, fewer ‘twenty somethings’ are buying their first home as well. Sunderland young adults may aspire to own their own home, but without the social pressure from their peers and parents to buy their first property as soon people reach their early 20’s, the memory of the 2008 housing crisis and the belief the hard times either aren't over or the worst is yet to come, current and would-be homeowners are warming to the idea of renting

I also believe UK society has changed, with the younger generations wanting prosperity and happiness; but wanting it all now... instantly... today... without the sacrifice, work and patience that these things take

As a society, we now expect things instantly, and if it doesn’t come easy, doesn’t come quick, some young adults ask if it is really worth the effort to save for the deposit?  Why go without holidays, the newest iPhone, socialising four times a week and the fancy satellite package for a couple of years, to save for that 5% deposit

Why should they if there is no longer a social stigma in renting or pressure to buy as there was say a generation ago?

Interestingly, 11.9% of Sunderland properties are privately rented based on the latest ONS data, more than double what is was in 2001 (only 5,453 households or 4.7% of the total 116,356 households were privately rented in 2001)

As a result, the demand for rental properties continues to grow from tenants, meaning those wishing to invest in the buy to let market, over the long term, might be on to a good thing?

If you want to have a free, no obligation discussion about any aspect of the Sunderland property market please feel free to give me a call on 0191 567 8577 or email neil.whitfield@belvoirlettings.com

Budget 1 Bedroom Ground Floor Flat in Ashbrooke (8.7% Gross Yield)

This 1 bedroom ground floor flat off Gray Road in Ashbrooke could appeal to a range of tenants, young single people, students or older tenants looking to downsize (and I would target the latter as they tend to be less transient)

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It needs a new kitchen and bathroom and it would make sense to install gas central heating prior to redecorating and changing the carpets in order to attract the best tenant (Ashbrooke has A LOT of flats and apartments to rent so to stand any chance of securing or retaining tenants the property has to be in the very best condition with gas central heating an absolute must)

Spend £10k to achieve this and you could look to achieve 8.7% Gross Yield based on a modest £400pcm rent and a total investment of £55k

Click here for details https://www.onthemarket.com/details/1846321

Call me on 0191 567 8577 for more details on this one or email neil.whitfield@belvoirlettings.com for more information about any aspect of the Sunderland property market

Tuesday 29 September 2015

"Needs Work" Corner Plot 3 Bedroom Town End Farm Semi (Possible 8.25% Gross Yield)

Another 3 bedroom semi on a corner plot, this one in Town End Farm (SR5), an area regular blog readers will know is a particular favourite of mine for providing family friendly properties that deliver decent returns

This one needs work...how much work I couldn't say as there aren't any internal pics, however the agent description says it needs work, so let's budget on £10 - £15k to be on the safe side

It's being advertised at OIRO £75,000 and given a tip top condition 3 bedroom semi would go for around £90k in Town End Farm that doesn't leave a lot of room if you were spending at the top end of the refurb budget, so I'd be looking to knock at least £10k off the asking price to make it worthwhile

If you work on a total investment of £80,000 (£65,000 plus £15k refurb) it will deliver 8.25% Gross Yield based on £550pcm rent

Click here for details http://www.rightmove.co.uk/property-for-sale/property-54965861.html

Call me on 0191 567 8577 or email neil.whitfield@belvoirlettings.com for more information on this or any aspect of property investment in Sunderland

Monday 28 September 2015

Ready to Let 3 Bedroom Grindon Semi (7.7% Gross Yield)

This three bedroom semi in the popular Grindon area (SR3) is in a great internal condition an will be popular with working families

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It's being advertised with vacant possession so whilst it is just new to the market there may be a chance to negotiate on the £85,000 asking price if they have an urgent need to sell (looking at this one its unlikely to be a probate property so the vendors may have relocated or split up, either way it's worth a cheeky offer!)

Even assuming worst case and paying the asking price, it will could deliver £550pcm and therefore would return a healthy 7.7% Gross Yield

Click here for details https://www.onthemarket.com/details/1419118 

Call me on 0191 567 8577 or email neil.whitfield@belvoirlettings.com for more information about this property or any aspect of the Sunderland property market

Friday 25 September 2015

Three Bedroom Mid Terrace in Popular Redhouse Area - Needs Work (7.7% Gross Yield)

This spacious three bedroom mid terrace needs full redecoration, new flooring and a new bathroom suite to appeal to Good Tenants but once completes it should be easy to let to working families

It's priced at £74,950 and I'd allow a £10k worst-case budget on top of this to undertake the improvements

Once the work is completed it will command £525 - 550pcm rent and based on the total investment of £85,000 will return 7.4% - 7.7% Gross Yield

Click here for details https://www.onthemarket.com/details/2024708 


Call me on 0191 567 8577 or email neil.whitfield@belvoirlettings.com for more information about this property or any aspect of property investing in Sunderland

Thursday 24 September 2015

Another No Chain Property in Sought After Nookside (SR4) 6.9% Gross Yield

This 2 bedroom semi is in the popular Nookside area which tends to have more owner-occupied properties than decent rentals, meaning if this was refurbed to a good standard it will be popular with tenants

It's advertised with No Chain and looking at the decor, shower room (no bath), low maintenance outdoor space etc I'd suggest this has been occupied by an older occupier 

It means that you'd need to budget for redecoration throughout, new carpets & flooring, a new fitted kitchen and possibly refitting a bath to the bathroom - I would also suggest that given comparable nearby sales for 2 bedroom properties you should look to securing a decent reduction from the £86,950 asking price

If you budgeted on a £95k total investment it would return 6.9% Gross Yield based on £550pcm rent

Click here for details https://www.onthemarket.com/details/2024712 


Call me on 0191 567 8577 or email neil.whitfield@belvoirlettings.com to discuss this property or any aspect of property investment in Sunderland

Wednesday 23 September 2015

The 10 Year Time Bomb For The Sunderland Private Rented Sector

Many people think the British obsession with owning your home started in the early 1980’s, when Mrs Thatcher allowed council tenants to but their council houses, under the first Right To Buy scheme

The growth actually started just after the Second World War

Looking at the country as a whole, in 1951, 30% of residential properties were owner occupied, then every ten years that rose incrementally to 39% by 1961, 51% by 1971, 58% by 1981, 68% by 2001 

After that it dropped to 63.4% by 2011 and continues to drop today

After leaving home, early to mid-twenties young adults tend to start to settle down and move out of the family home into their own home. They have a choice of either buying their first house, albeit with a mortgage, or decide to privately rent for the long term – bearing in mind that the Council House waiting list is measured in decades at the moment!

The ratio of people owning a house with a mortgage verses privately renting is an extremely important guide to what people are doing about their housing needs and their prevailing attitude to renting vs buying

With that in mind, within the next 10 years, I am predicting it’s entirely possible that there will be more people renting privately in Sunderland than own a property with a mortgage and that the British love affair of property ownership will fade as the decades roll on

This is a really important change in the way we live, as I explained to a local Sunderland Landlord the other day, knowing when and where tenant demand is going to come from in the coming decade is just as important as the knowing the supply side of the buy to let equation, in relation to number of properties built in the city, Sunderland property prices and Sunderland rental values

In the Sunderland area as whole, there are 14,552 households that are privately rented via a Landlord or letting agent versus 25,611 households that are owned outright and 33,525 owned with a mortgage

Based on this my prediction of the private rented sector exceeding the number of owned properties in 10 years appears to be outrageous!

However, when we look deeper, 84% of Sunderland properties that are owned outright are owned by the over 55’s and 75% of those 59,136 Sunderland households which are either own either outright or with a mortgage are now over 45

I would expect the over 55’s who own with a mortgage to be paying their mortgage off as they enter retirement as I would with some of the people in their mid/late 40’s

Meanwhile, at the other end, in the under 35 age range – the age when most people bought their first home in the 1970’s, 80’s and 90’s – only 9% of the 20,018 Sunderland households occupied by the under 35’s are owned by occupiers with mortgages, with 52% of that age group privately renting (the remainder are mainly living with parents)

If that trend continues with under 35 renters continuing to rent as they grow older it is entirely feasible for the number of privately rented properties in Sunderland to exceed the number of properties owned with mortgages

It can be seen that as the older generation pay their mortgages off as they start to get to retirement and the younger generation aren’t jumping on the property ladder like they were 20 or 30 years ago, it’s likely that the private rental sector will be required to take up the slack, as more and more people will want a roof over their head but will choose (or be forced) to rent rather than buy

This will create a polarization in the housing market between those, mostly older, households who own outright and those, mostly younger, households who rent

With Local Authorities and Housing Associations not anything like the same quantity of houses  that they were in the 1950’s, 60’ and 70’s (despite the government's recent promise to build 1 million new homes by 2020), Landlords appear to have good demand for their rental properties for many decades to come

The recent anti-Landlord measures imposed by the government, such as the changes to mortgage interest tax relief, should clearly be of concern to private Landlords, as is the commonly held fear that this government would prefer the Private Rented Sector to be run by a handful of large institutional Landlords, each with thousands of properties rather than having the industry made up of many private Landlords with small portfolios

If you are a Landlord or thinking of become a Landlord, and would like to read more articles like this or discuss any aspect of the Sunderland Property Market, then please contact me on 0191 567 8577 or email neil.whitfield@belvoirlettings.com

Monday 21 September 2015

Overpriced Millfield 2 Bedroom Terrace...One To Watch

This 2 bedroom terrace has just been listed at at OIRO £69,950 which is significantly over what has been recently paid for similar properties on that street...I'm not going mad but I'd suggest you shouldn't reject it out of hand!!

It's location is pretty good, being a stone's throw from Millfield Metro and walking distance to the Hospital, University & City Centre

There have been 4 sales in the last couple of years on this street, all of them between £60,000 - £62,000 so when you add in that this needs quite a bit of work, with a £70k price tag it's pretty much guaranteed that the vendors aren't going to have buyers fighting over it!

My reading of this is that it suggests that the vendors may not know the local market particularly well (perhaps they're not local), or are pricing it according to what they want/need to get out of it rather than what is realistic or achievable based on local expert advice

In addition to the above, there are further signs are that it is a probate property - the tell tale signs are as follows;

  • "No onward chain"
  • Dated decoration, furniture & carpets
  • Dated fitted kitchen with freestanding cooker & grill
  • Bathroom converted to remove the bath & replace with a walk-in shower

Click here for details http://www.rightmove.co.uk/property-for-sale/property-36521520.html 

The evidence suggests an older occupier has lived there for some time and unfortunately has passed on or moved into residential care

Either way, canny investors would be advised to keep a watching eye on this one - it certainly doesn't warrant any action at the moment but perhaps it's one to stick in your calendar to revisit in 6 - 9 months time as at that point the vendors may be more open to a cheeky offer that's well below the true market value (and reflective of the £10 - £15k it will take to redecorate, sort out the kitchen, bathroom etc)

Give me a call on 0191 567 9577 or email neil.whitfield@belvoirlettings.com to discuss this investment, identifying other similar properties or any aspect of property investment in Sunderland





Friday 18 September 2015

Hylton Castle 3 Bedroom End Terrace (7.9% Gross Yield)

This 3 bedroom end terrace in the popular Hylton Castle area looks a bit scruffy on the outside but internally looks to be in a reasonable condition


Whilst the outside could do with a lick of Sandtex White and a bit of a tidy up, internally the decoration and flooring look OK but ideally the dated fitted kitchen would be replaced with something a bit more modern, or at the very least the unit doors replaced

Tidy it up and £495 will be achievable and it should attract a stream of working family tenants so it will return 7.9% based on the £75,000 asking price

Click here for details www.onthemarket.com/details/1895576

Call me on 0191 567 8577 or email neil.whitfield@belvoirlettings.com for more information

Thursday 17 September 2015

Extended Three Bedroom Town End Farm End Terrace (8.8% Gross Yield)

This 3 bedroom end terrace in Town End Farm is in a neat & tidy condition so it should get good interest from working family tenants

The decoration & flooring looks to be neutral and in decent condition, the kitchen is basic but serviceable so it should be lettable as-is and it should be possible to achieve £550pcm which would give 8.8% Gross Yield based on the 'Offers Over' asking price of £75,000

Click here for details http://www.rightmove.co.uk/property-for-sale/property-53176877.html

Call me on 0191 567 8577 or email neil.whitfield@belvoirlettings.com to discuss this property in more detail or any aspect of property investment in Sunderland

Wednesday 16 September 2015

Managed & Tenanted 3/4 Bedroom End Terrace (+6.7% Gross Yield)

One of our Landlords is looking to sell this 3/4 bedroom end terrace close to Chester Road and Sunderland University by auction, with a Guide Price of £125,000

We've managed it for many years and it is a versatile property that in the past has been let to families, students and professionals

It's currently let and achieving £695pcm with long term young professional tenants in place, delivering 6.7% Gross Yield

That't the most you'd achieve letting to families or sharers on a single AST but with a little creative reconfiguring it could lend itself to a room-by-room 4 room Multi-Let that would considerably increase the return - a rough calculation based on £80prpw for the 4 double rooms (leaving 1 single room out of the equation for now) would return over £1,300pcm)

For this to work would really need the lounge to be partitioned into providing a 4th double bedroom and it would benefit from the utility at the rear being changed to a 2nd bathroom (or alternatively to look at providing ensuites, there should be enough room), so there would be a cost involved in undertaking this

Click here for details http://www.zoopla.co.uk/for-sale/details/38117000 

Call me on 0191 567 8577 or email neil.whitfield@belvoirlettings.com for more information

Comparing Sunderland Property Gross & Net Yields

The standard method I've used on this blog for comparing the a return on property investment is Gross Yield, as it's simple and easy to understand...a £6,000pa return (£500pcm) on a £100,000 property gives 6% Gross Yield

Gross Yield is simply calculated by dividing the annual rental return (before costs) divided by the cost of the property


I use this method on the blog as it gives an easy to understand way of comparing one property against another but it doesn't give a true reflection of the cash you'll be left with at the end of the month

As a rule of thumb I'd rarely promote a property as a decent investment in Sunderland unless it achieved at least 6% Gross Yield

Net Yield is calculated by taking all the costs out so gives a much more detailed of whether a property is likely to give positive or negative cashflow, but given costs are variable between each property and each investor's circumstances are different, it simply can't be used on something like a blog post without detailed knowledge of the cost of finance, letting & management costs, voids, insurances, maintenance etc for each property

One useful method of comparing investments using Net Yield is to look at the 'Cashflow Neutral' position, that is to find the where the Net Yield is zero - then walk away from the 'Cashflow Negatives' and give consideration to the 'Cashflow Positives'

You'll never know the exact costs for each property to work out the exact Net Yield 'Cashflow Neutral' position but there are ways to work out a reasonably robust estimate based on some common sense assumptions relating to the most common costs

For this excercise I've based the figures on a property investment that cost £100,000 and achieves £500pcm rent 

Cost of Finance
Clearly mortgage rates will vary, from 0.5% for older rates linked to the Bank of England base rate to 5% or 6% for more recent, longer term Fixed Rates - let's call it 5%

Management Fees
Management Fees of 12%+VAT on a £500pcm rent works out at £864 per year or 0.864% based on a £100,000 property - let's round that up to 1% to be on the safe side and include change of tenancy fees etc

Maintenance & Contingency
How do you estimate how much to allocate for maintenance? How long is a piece of string? I always advocate it's sensible practice to put 10% of the monthly rent aside for maintenance & unforseen issues, so that's £600pa or 0.6%

Insurance & Regulations
As legislation gets more & more onerous and Landlords are expected to comply with more regulations these costs will increase but for now it will be reasonable to budget 0.4% for Insurance, CP12's etc

Voids
Offer a Good Quality property at a sensible rent and voids shouldn't be too much of an issue but it's worth basing voids on a worst case scenario of 1 void month per year, so £500 or 0.5% of a £100,000 property

Add all of these together and you get to 7.5%, so based on the above rough guide any property which returns less than 7.5% Gross Yield will be 'Cashflow Negative' and will end up costing you money each month as the cost exceed the rental income, anything above 7.5% will be 'Cashflow Positive' and you make money each month

Clearly those paying a much lower mortgage rate should adjust their figures accordingly, as this will be the most significant factor affecting the above break even point

Of course comparing Gross or Net Yields is just one way of evaluating the worth of a property investment so it may be that a property that offers scope for decent Capital Growth potential looks to make a worthwhile investment even if it looks to be slightly 'Cashflow Negative' - this is likely to be the case in the more affluent areas such as the South East or Central London

If you would like to have a more detailed discussion about evaluating property investments in Sunderland give me a call on 0191 567 8577 or email neil.whitfield@belvoirlettings.com





Tuesday 15 September 2015

Cash Buyers Only! Three Bedroom Terrace For 'Offers Over' £40k (9.6% Gross Yield)

You're not going to get a mortgage on this Monkwearmouth Terrace, given the 'Offers Over' £40,000 asking price, meaning it's more suited to cash investors

A couple of two bedroom terraced properties on this street have sold this year, both for £32,500 so £40,000 for this three bedroom house looks about right

Given it needs work (decoration, flooring and a new kitchen as a minimum) I'd advise not paying much more than £40k to give a fighting chance of bringing the total cost of investment in at around £50,000

Done to a good standard it will attract a working tenant, done to a basic standard and the location will probably limit you to DSS

Based on a total investment of £50,000 and £400pcm rent it will return 9.6% Gross Yield

Click here for details http://www.zoopla.co.uk/for-sale/details/38134412

Call me on 0191 567 8577 for more details or email neil.whitfield@belvoirlettings.com

Monday 14 September 2015

40% Off Original Purchase Price - Bonners Raff (SR6) Apartment (6.2% Gross Yield)

This 2 bedroom apartment is in the sought after Bonners Raff development close to St Peters Metro, the National Glass Centre and the University St Peters Campus

Bonners Raff is a class above some of the other Sunderland apartment complexes built in the mid-2000's and attracts professional tenants as well as a smattering of students (but it's by no means the student Hall of Residence that some now are)

A quick glance at the Listing History on Zoopla reveals this was bought as new for £227,500 back in 2007, so at £135,000 it is only 60% of the original value

That means there is room for some Capital Growth - I'd be very skeptical about it ever getting back to the 2007 level but that doesn't mean that it won't increase organically with the market over time - it would be reasonable to suggest it's unlikely to fall further in value

Rents in Bonners Raff range from £650 - £750pcm depending on the layout of the apartment and as the description doesn't give too much away I've calculated the Yield on £700pcm, returning 6.2% Gross Yield

Click here for details www.zoopla.co.uk/for-sale/details/38122710 

Call me on 0191 567 8577 or email neil.whitfield@belvoirlettings.com for more information