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Category: Property Market Research

Update On The Exeter Property Market

The Exeter housing market has gone through a sea change in the last 30+ years with the sector evolving as a key trend, for both Exeter tenants and Exeter landlords. A few weeks ago, the Government released a White Paper on housing. 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 Exeter population.

The private rented sector accounts for 21.2% of households in Exeter, interesting when you consider that was only 11.49% of Exeter households rented from a Private Landlord back in 1981

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 Exeter set to grow to 144,000 by 2037 (from its current 127,300) – it is imperative that Exeter City 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.

The average monthly rent for an

Exeter property is £816 per month

Many Exeter 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.

Investing in Exeter buy to let property is different from investing in the stock market or depositing your hard-earned cash in the Building Society. When you invest your money in the Building Society, this is considered by many as the safe option but the returns you can achieve are awfully low (the best 2-year bond rate from a High St Building Society is an uninspiring 0.75% a year!). Another investment is the Stock Market, which can give good returns, but unless you are on the phone every day to your Stockbroker, most people invest in stock market funds, making the investment quite hands off and one always has the feeling of not being in control.

However, with buy to let, things can be more hands on. One of the things many landlords like is the tactile nature of property – the fact that you can touch the bricks and mortar. It is this factor that attracts many of Exeter’s landlords – they are making their own decisions rather than entrusting them to city whizz kids in Canary Wharf playing roulette with their savings.

I always say investing in property is a long-term game. When you invest in the property market, you can earn from your investment in two ways. When a property increases in value over time, it is known as ‘capital growth’. Capital growth, also known as capital appreciation, has been strong in recent times in Exeter, but the value of property does go up as well as down just like shares do but the initial purchase price rarely decreases.  Rental income is what the tenant pays you – hopefully this will also grow over time. If you divide the annual rent into the value (or purchase price) of the property, this is your yield, or annual return.

Over the last 5 years, an average Exeter property

has risen by £54,050 (equivalent to £29.62 a day),

Taking that average Exeter property to a current average value of £282,800.

Yields for Exeter landlords range from 5% a year and can reach double digits’ percentages (although to achieve those sorts of returns, the risks are higher).

2017 will be an interesting year for everyone in Exeter, be they buy-to-let landlords, existing homeowners or future homeowners.  For more thoughts on the Exeter property market like this, please come and speak to our experienced team at Northwood, 85 South Street or call the office on 01392 435 130. For property news updates please log onto my blog exeterpropertyblog.com.

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Exeter First Time Buyers borrow £119m 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 Exeter property market, not just from your point of view, but also from every player’s point of view. Over the last 12 months, 2,476 properties have sold (and completed) in Exeter, worth £667.5m. Interestingly the number of properties changing hands in Exeter 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 Exeter buy-to-let investors.

Those looking to buy a home in the spring and summer of 2017 will face a far less competitive Exeter 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 Exeter itself, first time buyers have borrowed more than £119m in the last 12 months to buy their first home. This is a ringing endorsement of their confidence in their jobs and the local Exeter 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 Exeter market, at this moment in time there are an impressive 705 properties for sale, (so lots of choice). All this will be welcome news amongst Exeter 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.  For more thoughts on the Exeter property market like this, call the property experts on 01392 435 130.

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Exeter property price rises set to be more restrained in 2017 due to Brexit

While Brexit has not yet had a sizeable impact on the Exeter housing market, my analysis is pointing to the fact that the economic viewpoint still remains uncertain and Exeter property price growth is likely to be more subdued in 2017 – although that isn’t a bad thing so let me explain.

 Since the summer, apart from a little wobble of uncertainty a few weeks after the Referendum vote, property values (and the economy), on the whole has outperformed what most people were anticipating. In fact, when I looked at the property prices for our Exeter City Council area, these were the results…

 October 2016                     – rise of 3.84%
September 2016               – rise of 1.01%
August 2016                       – rise of 1.26%
July 2016                              – rise of 1.76%
June 2016                            – drop of 0.23%

The UK property market continues to perform robustly (because we can’t just look at Exeter as if in its own little bubble) with annual price growth set to end this year at 6.91% and most South West region property market at 7.18%.

Talking to fellow agents in London, the significant tidal wave of growth seen from 2013 through to 2015 in the capital has subdued over the last six months. However, as that central London house price wave has started to ripple out, agents are starting to see stronger property growth values in East Anglia and the South East regions outside of London, than what is being seen within the M25. So, fellow Exeter landlords and homeowners, is this the time to get your surfboards ready for the London wave?

Well, we in Exeter haven’t really been affected by what is happening in the central London property mega bubble (i.e. Kensington, Chelsea, Marylebone, Mayfair etc.). The property market locally is more driven by sentiment, especially the ‘C’ word … confidence. The main forces for a weaker Exeter Property market relate to economic uncertainty surrounding the Brexit process, which I believe will impact unhelpfully on consumer confidence in the run up to and just after the serving of the Section 50 Notice by the end of Q1 2017.

In addition, the influence of reforms to the taxation of landlords is expected to result in a reduced demand from buy to let landlords, which will limit upward pressure on property values. However, on the other side of the coin, demand from tenants has been strong, but this has been counterbalanced by a strong supply of rental properties. In my opinion, there is a slight risk of rents not growing as much in 2017 as they have in 2016, but by 2018 they will rise again to counteract Philip Hammond’s changes to tenant fees.

The broader Exeter rental market looks relatively positive with modest rental growth expected and rents might rise further if landlords begin to sell properties in an effort to offset to the impact of tax rises.

So what do I predict will happen to the Exeter housing market in 2017? In Exeter, I believe property values are expected to rise by 1.5% in 2017, compared to a rise of 8.5% last year, then picking up again with a rise of 2.4% in 2018, 3.1% in 2019, 4.6% 2020 and 6.1% in 2021.

But these predictions do not take into account any effect of a possible snap General Election or further referendum on ratifying any Brexit deal (if that comes to pass in the future).

 

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Exeter Property Market – Q4 Update 2016

Well, hasn’t 2016 been eventful. The ups and downs of Brexit, the Queen’s 90th, Andy Murray winning Wimbledon, Trump, Bake Off to Channel 4 and something close to the hearts of every buy to let landlord and homeowner in Exeter … the Exeter property market.

So, let’s look at the headlines for the Exeter property market…

In the last month, Exeter property values rose by 0.06%, leaving them, year on year 4.1% higher, whilst interestingly, Exeter asking prices are down 0.9% month on month. All three statistics go to show the Exeter property market has recovered well after the summer lull, which was worsened by the uncertainty surrounding the EU vote back in June. Irrespective of all the issues, the average value of an Exeter home now stands at £290,300.

Generally, Exeter asking prices continue to hold up well, as asking prices are 5.7% higher year on year. At this time of year, asking prices tend to drop on the run up to Christmas and locally, they have dropped by 0.9% this month (November 2016), although this compares well with last year’s drop in Exeter asking prices, as we saw asking prices drop by 2.3% in November 2015.

Now it’s true to say, after chatting with fellow property professionals in Exeter, all of us have seen the number of property sales fall slightly, suggesting a slowing market, but it is very early days and it could be the time of year. Also, the numbers are limited, so it’s interesting to take note from a recent survey by the Royal Institution of Chartered Surveyors, stating new buyer enquiries and new instructions are falling at the same rate, suggesting that there will not be a downward pressure on property values.

Looking at the figures for the UK (as we can’t just look at Exeter in isolation), property values are generally rising slower than a few years ago, but on a positive note, there’s still growth across the UK. You see, slowing property value growth isn’t solely Brexit related, but after a number years of double digit rises in property values, affordability has weakened and cooling price growth is widely seen to be a natural correction of the market.

On the other hand, interest rates being at a record low of 0.25% are helping the property market. The cut in interest rates in the late summer was the medicine for the post-Brexit worry and will, as a consequence, ensure that the UK economy continues to be underpinned by buoyant property prices.

So, what will happen in 2017 in the Exeter property market?

Some say until we know what type of exit the UK will make from the EU it is hard to evaluate the outcome. Although, I believe, the whole Brexit issue is a sideshow to the main issue in the UK (and Exeter) housing market as a whole. As I have mentioned time and time again over the last few months, the biggest issue is demand outstripping supply when it comes to the number of households required to house us all. Exeter has an ever-growing population: with immigration (we still have at least two years of free movement from EU members into the UK), people living longer and the fact we need thousands of additional households as the country has nearly 115,000 divorces a year (where one household becomes two households). These are interesting times ahead!

 

 

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What will the 0.25% Interest Rate do to the Exeter Property Market?

I had an interesting chat with a St Leonards landlord who owns a few properties in the city. He popped his head in to my office as his wife was shopping in the area (and let’s be honest talking about the Exeter Property Market is a lot more interesting than clothes shopping!). We had never spoken before (because he uses another agent in the city to manage his Exeter properties) yet after reading my blog on the Exeter Property Market for a while, the landlord wanted to know my thoughts on how the recent interest rate cut would affect the Exeter property market and I would also like to share these thoughts with you……

Well it’s been a few weeks now since interest rates were cut to 0.25% by the Bank of England as the Bank believed Brexit could lead to a materially lower path of growth for the UK, especially for the manufacturing and construction industries. You see for the country as a whole, the manufacturing and construction industries are still performing well below the pre credit crunch levels of 2008/09, so the British economy remains highly susceptible to an economic shock. This is especially important in Exeter, because even though we have had a number of local success stories in manufacturing and construction, a large number of people are employed in these sectors. In Exeter, of the 55,149 people who have a job, 2,666 are in the manufacturing industry and 3,821 in Construction meaning

4.8% of Exeter workers are employed in the Manufacturing

sector and 6.9% of Exeter workers are in Construction

The other sector of the economy the Bank is worried about, and an equally important one to the Exeter economy, is the Financial Services industry. Financial Services in Exeter employ 1,382 people, making up 2.5% of the Exeter working population.

Together with a cut in interest rates, the Bank also announced an increase in the quantity of money via a new programme of Quantitative Easing to buy £70bn of Government and Private bonds. Now that won’t do much to the Exeter property market directly, but another measure also included in the recent announcement was £100bn of new funding to banks. This extra £100bn will help the High St banks pass on the base rate cut to people and businesses, meaning the banks will have lots of cheap money to lend for mortgages.. which will have a huge effect on the Exeter property market (as that £100bn would be enough to buy half a million homes in the UK).

It will take until early in the New Year to find out the real direction of the Exeter property market and the effects of Brexit on the economy as a whole, the subsequent recent interest rate cuts and the availability of cheap mortgages. However, something bigger than Brexit and interest rates is the inherent undersupply of housing (something I have spoken about many times in my blog and the specific effect on Exeter). The severe undersupply means that Exeter property prices are likely to increase further in the medium to long term, even if there is a dip in the short term. This only confirms what every homeowner and landlord has known for decades.. investing in property is a long term project and as an investment vehicle, it will continue to outstrip other forms of investment due to the high demand for a roof over people’s heads and the low supply of new properties being built.

For more thoughts on the Exeter Property Market, please visit the Exeter Property Market www.exeterproeprtyblog.com

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