Reside General Manager Toby Martin summarises rental activity over the last month, with the latest facts and figures from the local market.
With the newspapers full of news about the death of homeownership and the growth in Generation Rent, it must surprise many (as it did with me) that the number of homeowners in Bath has grown.
To give some context…
So, what is behind this growth in homeownership and is it a good thing?
Politicians love it when homeownership rises, as they believe owning a house turns individuals into model upright citizens. It was one of the critical reasons for the council house sell-off in the 1980s.
Yet the hard data to back this up is unexpectedly slim, whilst other studies hint that homeownership has some harmful costs to the economy, such as reduced entrepreneurial spirit and the disinclination to move home to find work.
However, increasing homeownership may be a good foundation for Britain’s economic recovery after the last few years. Homeowners have a greater propensity to live in single-family unit homes like townhouses and semi-detached houses.
A greater demand for more single-use homes supports the construction of such dwellings (instead of other types such as small apartment blocks or Homes of Multiple Occupation). This is important because single-family unit homes tend to be better build quality, have more extensive gardens, and have more local amenities.
So, what are the sort of numbers I am talking about in Bath?
So, what is behind this growth in homeownership?
So, the final question has to be…
The biggest hurdle could prove to be the supply of available homes.
Many ‘accidental landlords’ have been selling their properties recently, which first-time buyers have bought. Accidental landlords put their own homes up for rent in the early to mid-2010s because they could not sell. Now they have been motivated to cash in on the higher Bath house prices in the last couple of years, which increased the supply of properties to buy for owner-occupation.
Also, the number of houses on the market in Bath and nationally available to buy from existing owner-occupiers is starting to grow (nationally up from 355,700 in December 2021 to 431,000 in March 2022). This is giving greater confidence to other Bath homeowners too scared to put their homes up for sale because they are concerned they would to not be able to find anything else. Things are starting to change in that regard.
Also, there are signs of a recovery in British new home building as the number of new housing starts in 2021 hit the highest level since the financial crisis of 2007. Yet with a steady increase in Bath landlords returning to the market in the last few months, this tide will turn.
Bath’s homeownership could continue to swell for a while yet!
The ability of local authorities to build council houses came into law in July 1919 with the 1919 Housing and Town Planning Act. It was one of the most important pieces of domestic legislature passed after WW1 and was the first time in the UK that a nationally public funded system of providing homes was made for the masses. It was paid for mostly by central government and provided by local authorities (councils) and public utility societies (which in later years became today’s housing associations).
Just over 1 million council houses were built between 1920 and 1939, whilst 5,804,150 council houses were built between 1946 and 1979. This is compared to 4,533,440 private homes and 260,910 housing association properties in the same time frame (’46 to ’79).
So, between 1946 and 1979, the council house was the dominant force of British housing. But that all changed in 1979!
Many people believe it was Margaret Thatcher who was the architect of allowing the sitting tenant of a council house to buy their home. Interestingly, council house tenants have been able to buy their council house from as early as the mid 1930s, albeit with little or no discount. Also, as late as 1977, the Labour Housing Minster published a Green Paper extolling the virtues of homeownership and council tenants being able to buy their home at a discount.
But after the General Election of 1979, the new Tory government drafted the Housing Act 1980, which gave the Right to Buy, which became law in the autumn of 1980. Then things really took off!
This new law established a right for most council tenants who had been in their home for three years or more to a discount. The discount started at 33% and increased by 1% for each extra year, up to a maximum of 50%. If the tenant sold the house within the first five years of ownership, a prorated repayment of their discount was required.
But the issue was that when a council house was sold, it took that house out of the council’s portfolio for future generations. From the start, there were limitations on local authorities’ use of monies from the council house sales as most of it had to be given to central government in London, meaning only 390,560 new council houses were built between 1980 and 1989. Looking at the numbers locally …
No wonder the country has a housing crisis… but as my regular readers know – the devil is in the detail… and that devil is the humble housing association.
The Tory General Election Manifesto in 1979 had proposed the rights for both council house and housing association tenants to buy their own house under the Right to Buy scheme. The Conservatives argued housing associations, who obtained government funding, should be subject to the same Right to Buy proposals as councils. The Government won the vote in the Commons, yet lost the vote in the Lords, meaning housing association tenants could not buy their homes at a large discount.
At the time, there were only 400,000 housing association properties in the country, so the Government was not that worried. But the significance of housing associations developed in the 1980s and beyond as they were allowed to borrow money from the private sector.
Also, the Government encouraged councils to transfer their remaining council houses to housing association schemes from 1986. The advantage to these ‘stock transfers’ was the Government allowed housing associations to access private funding to improve their existing properties and buy new ones (good news for existing tenants complaining that the local authority never upgraded their homes).
Moreover, the Tory Government liked stock transfers, as it allowed them to dismantle council housing from the inside. Interestingly, Labour expanded the ‘Stock Transfer’ process in 1997 and further reduced the eligibility for council tenants’ Right to Buy, meaning the number of council tenants exercising their Right to Buy declined considerably.
Meaning today, even though the provision of council housing has dropped like the proverbial stone…
So, how has this changed the dynamic of the Bath property market in the last 40 years?
Would it surprise you to learn that the number of people who own their own home in Bath today is very similar to what it was 20 years ago before the property boom started? It’s just that even though we’ve had a large drop in the number of council houses and an increase in the number of housing association properties, the number of people owning their own home has remained relatively the same (in some areas of Bath this has actually increased), the significant issue is the growth of the private rented sector.
The question is, is it right for private individuals to make money from tenants who rent from them as opposed to the local authority? Or are private landlords providing better types, choices and quality of accommodation for these tenants, albeit at a higher rental rate than if they rented a council house?
I really do believe if it wasn’t for the growth of the buy-to-let landlord, which began in the early 2000s, we would have an even bigger housing crisis on our hands than the one we have currently.
Both local and central government have had their hands tied behind their backs since 2008 with a lack of funding, and it’s the private landlord who has stepped up and supplied in excess of 2.3 million additional rental properties since 2001, housing nearly 5,520,000 Brits.
What are your thoughts on this matter?
Nationally, the average length of time it takes from agreeing the sale of a property to the keys being handed over is 111 days (down from 117 days last year). In Bath, we are just above the national average at 112 days.
So why does it take 16 weeks, when all that is required is for lawyers to look at some paperwork and get a mortgage? Also, what can Bath homebuyers and sellers do to speed this up?
The legal process to buy and sell a UK property is called conveyancing. The conveyancing system itself hasn’t really changed in hundreds of years. After the housing market was reopened after the first lockdown in the spring of 2020, the property market returned with a bang, helped on by the stamp duty holiday.
In 2021, the number of properties selling in Bath skyrocketed, e.g. by 96% in June 2021 and by 65% in March 2021. Many conveyancers and solicitors had to sort the legal paperwork out for upwards of 120 to 150 properties each at any one time.
For years, conveyancers have complained of overwork and underpay. Conveyancing is seen as the Cinderella of the legal profession. This workload was the straw that broke the camel’s back, making many conveyancers leave the profession and go into better paid legal work, like corporate law.
Also, the legal process of conveyancing has built-in inefficiencies, and the conveyancing profession has been relatively slow to innovate. However, there are some excellent tech solutions that are being slowly rolled out across the industry to make the process more efficient and effective.
If you are buying or selling your Bath property as we speak, you won’t be able to wait for the conveyancing profession to be revamped, yet you can be as pre-emptive as possible to get your Bath house sale through earlier.
In a nutshell, make sure you have all the paperwork sorted on your home before you put it on the market. Next, get the ball rolling on your mortgage. If you receive some paperwork, read it, check it, sign it and send it back in a day; do not leave it a week. Finally, always communicate frequently with your estate agent and conveyancer.
When you instruct a solicitor, most will request money to start the ball rolling for searches and disbursements. They won’t lift a finger until that is paid.
You will have to prove who you are in the conveyancing process, so your conveyancer will ask you to show them proof of ID and address. If you are buying, they will need to prove you have the funds/deposit to buy the home (and if your deposit is coming from family/friends, then they are required to write a letter to that effect).
A couple of years ago, the Government set up the Home Buying and Selling Group to find the answer to this problem. Chaired by the well-known property guru Kate Faulkner, it is looking at an amalgamated Seller’s Information Pack (SIPs) and an IT-based single platform to share and communicate that SIP between buyers, sellers, their conveyancers, the estate agent, mortgage providers and brokers and finally surveyors.
The advantage of the SIP is that it can be created before the buyer has been found, meaning property buyers would be more knowledgeable when making an offer. Also, once the sale has been agreed upon, the SIP could be sent straightaway electronically to the buyer’s legal team (from the seller’s legal team) to start the procedure of asking for searches and raising inquiries.
So, before the SIP becomes mandatory, there are things everyone can do to ensure they secure the home of their dreams quicker.
I recommend that the seller, the agent and the conveyancer start to liaise with each other to get the key information on the property being sold as quickly as possible. Then once a buyer is found, I believe it is vital that the agent regularly communicates with all the stakeholders in the chain to ensure everyone is playing their part to expedite the sale.
In the future, utilising technology and every agent/conveyancer preparing information upfront with the SIP will drastically reduce the time it takes between agreeing a sale and the keys/monies handed over.
The conveyancing process will have to change to meet the needs of the 21st Century, but how long that will take is the big question.
Reside General Manager Toby Martin summarises rental activity over the last month, with the latest facts and figures from the local market.
If you had been living in a cave since the end of Lockdown No. 1, you might have still heard that the property market has been on fire in Bath (and the UK as a whole) for the last 18/20 months.
It has been very much a seller’s market, especially in 2021. Yet as we enter the second quarter of 2022, I have noticed a slight rebalancing of the Bath property market towards buyers, something that is good news for everyone (sellers and buyers) locally.
Interestingly, Bath was bang on the national average of 72 days in 2020. Yet, last year, this was reduced to 66 days in Bath (51 days nationally).
Well, that was last year, and things have changed slightly since.
That doesn’t sound a lot, yet that is an eternity in this market!
So, why are there so many properties on the market in Bath still for sale after all this time? It usually comes down to one thing… the practice of ‘overvaluing’.
So before I explain what overvaluing is, let me give you some background.
Many agents in 2021, were achieving top prices for Bath property with multiple offers becoming the standard. The property they were selling was only available to buy for days before the owner obtained multiple offers that were not only at a satisfactory level, but more than they ever dreamed likely.
Although this was great news for Bath homeowners, this caused fewer homes to come onto the market in the last six months in Bath, as people were afraid to put their home on the market without having a property to buy.
With fewer properties coming onto the market, some estate agents have become more and more desperate to get a larger slice of this smaller property market. It has seen an unwelcome side of the estate agency profession, the estate agency practice of ‘overvaluing’.
While ‘overvaluing’ is nothing new, the custom has been generally limited to a small number of estate agents. Yet now, it’s become more prevalent and creates uncountable distress and pressure for some Bath homeowners.
Many Bath homeowners want to sell quickly to get the property of their dreams. Yet, in many cases, when they do put their property on to the market, they don’t sell quickly enough because of this ‘overvaluing’ (even with the fantastic current property market conditions).
To give you an idea of the issue …
There are hundreds of Bath families having their dreams dashed by ‘overvaluing’.
Therefore, let me look at exactly what overvaluing is, why it’s on the rise and most importantly, the harm overvaluing causes to homeowners like yourself.
You would think the most important thing in estate agency is all about finding the best buyer for your home, at the best price, who can make the move with the least amount of hassle.
To us it is, and to many other Bath estate agents, it is as well. Yet, to some agents, sales aren’t the essential objective. Instead, it is having a vigorous catalogue of properties to sell to generate more future leads.
Deprived of an endless number of new properties for sale, the enquiries estate agents receive will significantly drop, leaving them high and dry without any buyer (or seller) leads, the lifeblood of estate agents.
Therefore, some (not all) estate agents will feed on a homeowner’s appetite to get the highest possible price for their Bath home by giving them an over-inflated suggested asking price at which to market their property (i.e. ‘overvaluing’).
The suggestion of pushing the asking price of your Bath home up by 10%, 15%, even 20% could be seen by many as a temptation too good to miss. Yet once you are on the market, the agent is trained to slowly get you to reduce your asking price over a lengthy sole agency agreement.
The problem is that the home of your dreams might have sold during the 3 months in which you have been reducing your price. Also, Which? reports in 2017 and 2019 proved you ended up getting less for your home when it did eventually sell (which means you lose money) and finally, the agents know homeowners perceive that it’s a hassle to swap agents (which it isn’t).
Would it surprise you that some estate agency chains pay their staff a commission when they put the property on to the market, not when it sells? So, their team overinflate their suggested asking prices to get that commission.
Over the last 18 months, with the rising property market, there has undoubtedly been a valid reason for pushing the envelope on the asking price. Yet, if every house like yours is on the market or sold subject to contract at £300,000 to £320,000, yours isn’t going to achieve £355,000, let alone £375,000 – even in this market.
With 65.8% of Bath homes still for sale after a month, the market is starting to level out and if you are keen to sell, then let me give you some advice.
Nearly everything I’ve written in this article similarly applies to getting your property valued by a lettings agent. Many agencies secure instructions by quoting a high rental figure and tying their client into a lengthy sole agency period.
A couple of weeks later, the landlord will receive a phone call from their agent, saying that they must ‘listen to the market’ and reduce the advertised rent.
The landlord will eventually find their tenant, but weeks later than they should have done, and with an agency that was prepared to secure their business by deliberately overpricing.
(Come on, be honest – you have done that yourself haven’t you?)
When the property is eventually reduced because it has the stigma of being on the property market too long (begging the question from potential buyers or tenants that there may be a problem with the property itself hence no interest?), often when it does eventually let or sell, the owner will achieve less than it would have done if it were priced correctly from day one (as per the two reports from Which? in 2017 and 2019).
Of course, on the other hand, setting the asking price below its market value means potentially leaving money on the table needlessly – hence the need for a good agent.
Putting your Bath home or buy-to-let investment on the market at the right price from the beginning is the key to selling within the best time frame and for the best price to a serious and motivated buyer / tenant.
Ask a handful of estate agents to value your home, ask them to back up any valuation of your Bath home with cold hard comparables of similar properties to yours – ideally, properties that have actually sold, rather than ones that are languishing on the market at a high asking price.
Find your own comparables by searching ALL the property portals (i.e. Rightmove, Zoopla, Boomin, OnTheMarket).
If you only take away one thing from this article, when you search the portals for comparables, make sure you include under offer/sold STC properties, as that will triple the comparable evidence.
Thus, by doing your homework and then working with a dependable, trustworthy and experienced estate agent, who will help to ensure that your Bath property is put on the market to get you, the homeowner, the best price from day one without overcooking it so you don’t lose out, you will be just fine.
These are my thoughts, let me know if you have any yourself.
The UK is currently experiencing its highest inflation rate since the early 1990s. This increase in prices has primarily come about by the combination of an increase in demand for goods and services from consumers following lockdown last year together with global supply chain disruptions.
Most economists weren’t too concerned about this increase in the inflation rate as the very same thing happened in the early 1990s following the Credit Crunch with a similar rise in demand and supply chain issues. Thankfully, back in the early 1990s, inflation returned to lower levels quite quickly. However, the situation in Eastern Europe now could change matters.
The crisis in Eastern Europe has sparked even further rises in crude oil (which diesel and petrol are made from), gas and grain prices as pressure on supply chains around the world increases.
In my previous articles, I suggested UK inflation would rise to around 7% in the spring and drop back to 5% in the autumn and as we entered 2023, be approximately 3% to 4%.
Yet, with these issues, inflation could rise to 8% to 9% by late spring and still be around 6% to 7% in autumn, well above the Bank of England’s target of 2%.
This is because ‘real’ UK household incomes characteristically have been the most consistent lead indicator of growth (or a drop) in house prices. This is because growing inflation erodes the value of money you earn, which reduces its buying power. When the cash in your pocket has a lower spending power, people tend to spend less when they buy or rent a home (and vice versa).
Next month, Income Tax thresholds will be frozen, and National Insurance contributions are increasing. Collectively, all these issues will create a drop of around 2% to 2.5% in the real disposable income of Britain’s households in 2022 (real disposable income – i.e. somebody’s take-home wages after tax and the effects of inflation are considered).
With less money in people’s pockets, their inclination to spend the money they do have could also be curtailed. Whilst savings are at an all-time high, many will decide to sit on the cash instead of spending it, especially as consumer confidence has dropped to minus 26 on the GfK index (whatever that means! But in all seriousness… more on that below).
All this can only mean… there is going to be a house price crash.
My heart goes out to people caught up in the awful humanitarian crisis in Eastern Europe. For the purposes of this article, however, I need to respectfully put that to one side for just a moment.
This blog is about the Bath property market, and Bathonians want to know what will happen to the Bath property market.
In the first half of the article, I looked at the impending 2 to 2.5% fall in real disposable incomes during 2022. I appreciate it’s going to be tough for many families in Bath. Yet, it is always important to consider what has happened in times gone by:
1982 – a drop of 2.3% in real disposable income
1992 – a drop of 3.7% in real disposable income
2008 – a drop of 5.8% in real disposable income
Yes, it’s going to be tough, but we got through 1982, 1992 and 2008 – and so we shall in 2022/23.
Next: the price of petrol is very high compared to a year ago.
The average price of unleaded petrol is £1.51/litre today, quite a jump from the £1.21/litre a year ago. But here is an interesting fact, petrol was a lot more expensive (in real terms) in 2011 than today. In TODAY’s money, a litre of unleaded petrol in 2011 would be the equivalent of £1.79/litre. We have some way to go before we get to those levels – and again, the Bath economy (and property market) kicked on quite nicely after 2011.
In 2015, owner occupiers were spending on average 17.3% of their household income on mortgages, yet in 2021 this had risen, albeit to 17.7% – not a huge increase.
Council (social) tenants have seen a drop in their rent from 29.2% of their household income in 2015 to 26.7% in 2021, whilst for private tenants it has dropped from from 36.4% in 2015 to 31.2% in 2021.
The average UK home spent 4.2% of their household income on energy in 2021, and that is due to rise to 6.3% after April (and probably 7% in October). Yet, as a country, we spend 9% of our income on restaurants and hotels and 8% on recreation and culture. As with all aspects of life, it will mean choices, and maybe we will have to forego some luxuries.
Just before I move on from this aspect of the article, again I appreciate I am talking in averages. Many people with low incomes suffer from fuel poverty and they will find the increases in energy prices hard.
79% of homeowners with a mortgage are on a fixed rate, so any rise won’t be instantaneous. But there will be a bizarre side effect from the issues in Eastern Europe. Surprisingly, though the current situation in Eastern Europe by its very nature will bring greater UK inflation, it will also probably defer the Bank of England raising interest rates. This means mortgage rates won’t increase as much, as the bank won’t want to exacerbate any pressures to the UK economy in 2023/24 caused by the conflict.
The stock market had priced an interest rate rise to 2% by the end of 2022. I suspect this will now be no more than 1% to 1.25% by Christmas, slowly going up in quarters of one per cent every few months. The crisis in Eastern Europe might even come to be seen as a defence for higher inflation throughout 2022, all meaning everyone’s mortgage increases will be marginal for now.
Next, let’s look at Consumer Confidence Indexes – these indexes are fickle things. I prefer to look at the Organisation for Economic Co-operation and Development Consumer Confidence Index as it has a larger sample range and a longer time frame to compare against. Looking at the data from the mid 1970s, the drop in consumer confidence is big, yet nothing like the drops seen in the Oil Crisis of the mid 1970s, Recession of the early 1980s, ERM crisis of 1992 and the Global Financial Crisis of 2008/09. Also, when compared to the other main economies of the world (G7), the UK has always bounced back much more quickly from recessions when it comes to consumer confidence.
Increasing energy prices, rising inflation, an increase of sanctions, and a probable drop in consumer confidence and spending in the aftermath of the conflict will knock the post-pandemic recovery globally, which will lead to a recession around the world, including the UK.
A recession is when a country’s GDP drops in two consecutive quarters. For the last 300 years, there has been a direct link between British house prices and GDP (i.e. when GDP drops, UK house prices fall). Yet in 2020, the British GDP dropped by nearly 12%, but house prices went the other way.
Let’s look at what would happen if Bath house prices did drop by the same extent they did in the Global Financial Crisis of 2008/09.
House prices in Bath dropped by 17.2% in the Global Financial Crisis, the biggest drop in house prices over 16 months ever recorded in the UK.
Meaning that if Bath’s house prices dropped by the same percentage in the next 16 months, an average home locally would only be worth £331,184.
On the face of it, not good… until you realise that it would only take us back to Bath house prices being achieved in February 2020 – and nobody was complaining about those.
Yes, that means if they do drop in price, the 5.7% of Bath homeowners who moved home since February 2020 would lose out if they sold after that price crash. But how many people move home after only being in their home for a few years? Not many!
And all this assumes there will be a crash.
The circumstances of 2009 that caused the property crash are entirely different to 2022 (no lending by the banks, higher interest rates and increasing unemployment compared to today’s increased lending, ultra-low interest rates and low unemployment).
I do believe with all that’s happening in the world we might see a rebalancing of the Bath property market later in 2022, and could see the odd month with little negative growth in house prices… But it will be nothing like 2009.
The expected fall in household spending could be counterbalanced by UK businesses’ plans to invest more in their businesses (with last year’s tax breaks on investing), which will create even more jobs.
Who knows what the future holds? These are just my opinions – what are yours?
Homes that are left empty for an extended period can affect our locality and occasionally invite anti-social behaviour.
With a shortage of housing in the Bath area, these empty homes must be brought back into use to generate much-needed housing for local people.
As you can see in the first bullet point, some homes are only empty for a short period of time. Yet, those local properties that stand empty for more than six months and then deteriorate become a problem for our local community.
I appreciate there can be many genuine explanations why a property may be left empty for a long time. However, with council house waiting lists at high levels and the shortage of both properties to buy and rent in Bath, we must ask what is being done about this at Government level and how this could affect the Bath property market?
This impacts the Bath housing market with a lack of properties coming onto the market for sale and rent. This results in house prices being pushed up, making it less affordable for first-time buyers to get on the first step of the housing ladder.
It’s a real shame that many local properties are empty for over six months when there is an increasing demand for accommodation, at a time when there’s such a competitive housing market.
So, one might ask if this issue of long-term empty properties is a new problem? Well, not really.
I know our local authority likes to work with property owners of empty homes to bring them back into housing stock as it helps with the housing shortage, even with the help of grants if improvement work is needed for the empty home. Yet, they could use enforcement action where a homeowner is incapable or unwilling to bring their property back into use.
So, what is the Government doing nationally? Homeowners are charged a 50% premium on top of their Council Tax if their home has been empty for two years or more. This can rise to a 300% premium if the property has been empty for ten years or more.
The real answer is – they are not.
A handful of the properties belong to the local authority and are in poor condition because the tenant trashed the property.
Probate (where the person’s estate is put in order and passed onto the beneficiaries of the will) takes between six and twelve months. Most of these long-term properties are being modernised and renovated, whilst other Bath properties are part of a deceased estate. In other circumstances, some Bath homes have been left empty after the owner has been placed into a care home, yet there is no Power of Attorney to put the home onto the market.
Empty properties in Bath is not an issue that will sort the housing crisis we are suffering from.
The simple fact is the population is growing faster than the number of houses being built. We need to build more homes.
Whether that means council properties, housing association homes, private landlords or even owner-occupation housing the masses – that’s a massive question we could all talk about, day in day out until the cows come home.
So, tell me, what are your thoughts on the matter?
Reside General Manager Toby Martin summarises rental activity over the last month, with the latest facts and figures from the local market.
