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Washing Machine Energy Ratings for Houses was the phrase one Luton landlord told me a few years ago when we were talking about the colour bar chart graphs that every property has had for over 10 years now. Now these weren’t brought in to use the whole palate of ink in people’s printers, but to increase the energy efficiency of the UK’s housing stock. The vast majority of Luton landlords are, by now, acquainted with the legislation that came into force on the 1st of April 2018, that means all new and renewed private tenancy agreements must have an Energy Performance Certificate (EPC) rating of E or above, otherwise it would be illegal to rent the property out (EPC ratings go A to G – A being the best and G the worst).
Yet, from 1st April 2020, those rules will be extended to also cover existing Luton tenancies, meaning that under the new legislation, properties with an EPC rating of F or G will be classed as unrentable – meaning it will be illegal to rent the property and the landlord will be liable for a fine of £5,000.
It will be illegal for any landlord to let any Luton Rental property with an EPC rating of F & G from April 2020
Back in 2018, there was a loophole for Luton landlords of F & G rated rental homes on new tenancies, where they did not need to upgrade the property for five years if it cost them money (called the ‘no cost to landlord’ exemption rule) – yet back in April 2019 this exemption to improve rental properties was removed – so they too are included in these new rules.
Therefore, this means that Luton landlords must use their own cash to cover the cost of improving their Luton property to at least an EPC band E, and we aren’t talking about an insignificant number here….
305 Luton (LU1) properties will be illegal
to rent out from the 1st April 2020
.. as they have energy ratings of F and G.
Now this requirement to upgrade the property is subject to a spending cap of £3,500 (including VAT) for each rental property, as landlords only need to spend what they need to, to improve their Luton property to EPC rating E.
In cases where a Luton landlord is unable to improve their Luton property to EPC rating E within the £3,500 cap, then they still need to spend their hard earned cash and carry out the most appropriate measures which can be installed up to the £3,500 cap, and then register an exemption (with 3 quotes from 3 contractors) for their property on the basis that all relevant improvements have been installed and the property remains below an E.
Luton homes such as some G rated flats on Castle Street or some G rated terraced houses on Cambridge Street, Princess St and Wellington St will all be illegal to rent out by April
If you are a self-managing Luton landlord or a landlord with another Luton agent, then feel free to pick up the phone and chat through any concerns with regard to these new regulations, how to read a EPC graph, how to find the EPC rating of your home, in fact anything – call me. The last thing you need is a £5,000 fine on top of the £3,500 improvement bill.
One final thought though – it might be wise for Luton landlords who have had their rental properties for a while now to get a new EPC carried out on their property (something we can help with irrespective of whether you are a landlord of ours or not) as recent research has also acknowledged that some early EPC’s understated the thermal efficiency of solid walls. As countless Luton rental properties are pre 1925, which is when most (not all) new properties were built with cavity walls, the Dept for Business, Energy and Business Strategy have now recalibrated EPC’s to give a truer result. This probably means that some solid wall properties, Victorian and Edwardian terraced houses and converted flats, presently rated F under an EPC will no longer demand any improvement works and certainly less building work may be required in the case of a G rated rental property.
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Have the Baby Boomers (people between the ages of 55yo to 75yo) messed things up for the Millennials in terms of getting on the Luton property ladder? They bought their own council houses in the 80’s and 90’s, meaning there are no affordable homes for today’s youngsters, thus driving up the demand for rental homes and the price of homes (making them unaffordable). So, I decided to look at the figures, which do not make for good reading.
In 1980, the average Luton household income was just under £6,000 per annum and the average Luton house price was £17,916; whilst today, the average Luton household income is £33,028 per annum, yet the average household value is £266,900, meaning...
the average value of a Luton home was 2.99 times more than the average household income in 1980 compared to today, where it is 8.08 times a Luton household income
… it’s no wonder then that Millennials are pointing the finger at Baby Boomers!
And the problems don’t just stop there. Not only do the newspapers state there is a housing crisis of affordability, but also a crisis of the availability of homes for people to live in. The political parties using housing as a ‘vote getter’ mentioned stats such as in 1981 there were 5.1 million council houses and today that stands at 1.6 million. This is important because, as a substantial number of people will never be able to afford to buy, social housing plays a significant role in homing them.
It all looks rather damning and the phrase ‘OK Boomer’ looks quite apt.
(The phrase ‘OK Boomer’ become fashionable as it started as a way of showing Baby Boomers that things were "easier in the past", yet now it has become just a way for younger people to discredit the views of older people).
Well, checking the stats, the political parties seemed to forget the number of housing associations homes (which are also social housing) has risen from 0.4m to 2.6m homes in that time, therefore, whilst there is a drop in social housing, it’s a net figure of 2.3m fewer social-rented houses, instead of the 3.5m in the paragraph above.
Baby Boomers simply did the best they could with the circumstances given - it's not like that these older generations have been conspiring in the food aisles of Waitrose or M&S on how to mess things up for the next generation. There are fundamental underlying problems in British society that means things are difficult for our younger people - it's everyone’s responsibility to solve those underlying problems - we can't just blame the Baby Boomers. Millennials aren't morally superior to Baby Boomers just because they didn't grow up in the same era of economic growth and house price inflation.
What some people seem to forget is whilst Luton property values were lower, so were salaries. The true cost of affordability is the mortgage payments. Assuming someone bought an average property in 1980 and again in 2019, using a 95% mortgage at the prevailing mortgage rate of 17.8% in 1980 and the current 1.65%, today in Luton the mortgage accounts for 37.4% of the household income (assuming a single income) compared to 51.1% in 1980. This has to be one of the main reasons why many families became two wage households in the late 70’s/early 80’s as housing affordability was diminished with these eye watering high interest rates.
Things were much tougher for homeowners in 1980….
The issue here is something much deeper. Baby Boomers say it is the Millennials' own fault they can't afford to buy their own home because they spend all their money on three holidays, avocado on toast, going out down the pub 3 times a week and buying the latest iPhone or suchlike whilst Millennials accuse the Baby Boomer generation for ruining the housing market ‘per se’ by being selfish. Both are right and both are wrong.
In my own involvement with friends and family, many Luton Baby Boomers are trying their best to help out their now grown up children with a deposit. They are fully aware of current Luton house prices compared to when they bought their own homes.
I am not a fan of attaching labels, be it Millennials, Baby Boomer or Gen-X. It’s really a point of attitude and behaviour and circumstance rather than the date of your birth. Every generation has had its fair share of feast and famine and whilst I appreciate the irony of the title of this article, let’s stop labelling people and making assumptions, everyone needs to understand each generation’s issues and be more ungrudging to each other.
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How is the “Exodus” of Eastern Europeans Affecting the Luton Property Market?
I was having a thought-provoking conversation with a Luton buy-to-let landlord a few weeks ago about everything to do with property, Brexit and how the reported voluntary repatriation of Eastern Europeans had affected the property market in Luton. It transpired some of his Luton tenants, who had been in his property for over 10 years were returning to Poland. He was particularly disappointed as he told me they were some of the best, if not the best, tenants he had ever had.
In 2004, eight Eastern European countries joined the European Union and by 2015, EU net migration from those Eastern European Accession states (also known as the EU8), there was a net migration of an additional 42,000 EU8 adults per year coming into the UK, which equated for our local area of Luton an additional 411 adults per year coming into the area in 2015 alone.
Yet by 2018, net migration had reversed and that saw 147 more EU8 citizens leave than arrive to live in Luton
… and in the last set of figures released for year up to the Summer of 2019, net EU8 migration for Luton was a net loss of 69 EU8 people for the year. These are not huge numbers, considering ..
EU8 citizens only make up 5.37% of the
population in Luton
Yes, at the last count there were 10,905 EU8 European citizens living in our local area out of a population of 203,201.
Its fascinating that 35.7% of the EU8 citizens that came across to the UK after 2004 were degree level educated compared to the 3.18% of adult citizens born in the UK, yet of all the EU8 citizens in the country, 65.9% of are in private rented accommodation, 9.6% in social housing and 24.5% are home owners.
It is certain that migration of Eastern Europeans, especially in the early years of 2004 to 2010, made a huge impact on the Luton rental property market – yet as time has gone on, families have started to put roots down and bring children into the world. Luton landlords buying all the rental properties for this new demand meant house prices for homeowners bounced back particular well after the global financial crisis / credit crunch of 2008/9.
Again, looking at the figures, a good proportion of EU8 citizens have become homeowners and even landlords.
Yes, there is small number of Luton EU8 citizens leaving as they have had the dilemma on whether they should stay or go, and some families, using the wealth that they have built up whilst working in the Country have returned to their home country or other EU member states. Decisions like that are not easily made and often tainted with dejection and disappointment – yet again, looking at the numbers, this is very much the minority. As an agent, we are seeing European people (not just EU8 countries) come and European people go, and it was like that before 2016 and to answer the question ... we believe we have a case of ‘bad news’ selling newspapers yet again.
Of course if one of your star tenants leaves your Luton rental property and then you read an article about mass migration in one the red top newspapers or Daily Mail, it is going to worry you (like it did my Luton landlord friend), yet with the information we shared with him – it has put his mind at rest (and the best part – we were able to find him a new tenant within the week – who ironically also came from Europe to live and work in the UK!).
To conclude, hopefully the end is in sight with Brexit, it would be a huge loss for the Country to see its embedded and settled European community depart as it must be quite melancholic for our fellow Europeans to even have to deliberate such a life changing move. All I can say is I think we are all eagerly anticipating the ‘B-word’ situation becoming stable again so that all of us, wherever we originate from, can reasonably plan our future in our sceptered isle.
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The £2.9 billion mortgage debt of Luton homeowners
Irrespective of the shenanigans and political goings on in Westminster recently, the housing market (for the time being anyway) shows a striking resilience, fostered by the on-going wide-ranging monetary policy by the Bank of England. With interest rates and unemployment low, UKplc is heading into 2020 in reasonable condition. Additionally, despite the UK’s new homes industry improving its year on year new build figures (building 173,660 new homes this year to date - notably 8% more new homes than at the same time last year), there has been an unequal increase in demand for housing, especially in the most thriving areas of the Country.
With the discussion on whether the younger generation can afford to buy, it is true the average cost of a UK property in the early 1970’s was 3.8 times the average salary yet, nationally, it now stands at 8.4 times. On the face of it that doesn’t look good in anyone’s books – yet that isn’t the full story because it doesn’t reflect inflation and interest rates when it comes to the cost of borrowing money in relation to a mortgage for property.
The current level of mortgage interest rates has not been seen for many generations, meaning there are whole cohorts of the Luton home-owning population who have no appreciation of the pandemonium that will eat into their household budgets should we ever return to the average historical cost of borrowing (interest rates jumped to 15% in 1992 – which wasn’t that long ago and between 2003 and 2007 they were on average 4.9%).
Now, once first-time buyers have jumped the hurdle of saving enough for a 5% deposit, which is hard with rents and many carrying loans of personal debt (unsecured loans), first-time buyers are currently spending an average one sixth of their salary on their mortgage, meaning mortgage arrears are at historical lows. However, on the other side of the coin repossessions have started to grow, with 6,180 repossession orders made in the last quarter, a 55% jump from 2017, yet nowhere near the 2009 high of 29,145 in the first quarter of 2009.
Therefore, this week’s discussion on the Luton property market is – where are we with lending (mortgages and unsecured loans) and how is it affecting the Luton, and national, property market?
One vital measure of the property market (and economy) is the mortgage market. If all the mortgages were added up, they would total £968.1bn; a lot when you consider the UK’s GDP is only £2,190.1bn. Mortgages are important as uncertainty causes building societies and banks to curtail lending (remember what happened in the Credit Crunch) and that seriously affects property prices. Then we have unsecured personal loans; interestingly the average Brit owes £991.42 in unsecured loans, a total of £36.1bn.
Lending is the lifeblood of our economy. Go back to 2007, and the phrase ‘Credit Crunch’ hadn’t been invented, yet now the term has entered our everyday language. In the autumn of 2007 it took a couple months before the crunch began to affect the Luton property market, but in early 2008, and for the following year and half, Luton property values dropped each month like a stone.
Mercifully, after a phase of sluggishness, in 2011 the Luton property market started to recover slowly as certitude returned to the economy as a whole and in 2013 Luton property values started to rise as the economy sped upwards. Happily, the Bank of England recognised the start of another boom and bust cycle, so in Spring of 2015, new rules for mortgage lending were introduced and for the following few years we have seen a reappearance to more credible and steady medium-term property price growth.
Luton Property Values are 61.3% higher since the Credit Crunch
And what of the other side of the coin in terms of excess lending in Luton?
Since 1977, the average Bank of England interest rate has been 6.65%, making the current low rate of 0.75% very low indeed. Yet the issue isn’t the amount of lending, as much as the persons ability to pay. Therefore, whether a person’s mortgage is fixed or not is more important than the amount owed.
Thankfully, the proportion of borrowers fixing their mortgage rate has gone from 31.5% in the autumn of 2012 to the current 70.2%. If you haven’t fixed your mortgage – maybe you should follow the majority?
The total cost of mortgages owed by people in Luton is £2,972,259,344
(Based on the LU1 – LU4 postcodes)
In my modest opinion, if things do get a little rocky and uncertainty seeps back in the coming years (and nobody knows what will happen on that front), interest rates can only go one way from their current ultra low level of 0.75% ….and that is why I consider it important to highlight this to all the homeowners and landlords of Luton. Maybe, just maybe, you might want to consider taking some advice from one of the many qualified mortgage advisors in Luton?
If you are interested in the Luton Property Market the https://www.venture-residential.co.uk/blog is worth a visit.
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That number surprised you didn’t it? With the General Election done, I thought it time to reflect on renting in the manifestos and party-political broadcasts and ask why?
As the best way to tell the future is to look at to the past, so we decided to look at the number of people who rented a century ago (1920’s), and surprisingly 76% of people rented their home in the UK (as renting then was considered the norm). Yet in the latter part of the 1920’s, builders of the suburban housing estates with their bay fronted semis started to sell the dream of home ownership to smart renters.
Up until the mid 1920’s, the mortgage had been seen as a millstone around your neck. Now, due to some clever marketing by those same builders, it was started to be seen as a shrewd long-term investment to buy your own home with a mortgage. It fuelled the ambitions and goals of the up and coming well-to-do working class who reclassed themselves as lower-middle class. Meanwhile, the Government encouraged (through tax breaks) people to save in Building Societies whom in turn lent the money to these up and coming new homeowners thorough mortgages.
Roll the clock forward to the decade of the young Elvis, Chuck Berry, and Bill Haley (1950’s) and still 72% of Brits rented their home. Homeownership had boomed in the preceding 30 years, yet so had council house building. Then, as we entered the 1960’s and 1970’s homeownership started to grow at a higher rate than council housing.
The rate of homeownership started to drop substantially after the mid 1990’s, and now we roll the clock forward to today, there is no stigma at all to renting ... everyone is doing it. In fact, of the…
209,505 residents of Luton, 75,811 of you rent your house
from either the council, housing association or private landlords - meaning 36.2% of Luton people are tenants. Yet read the Daily Mail, and you would think the idea of homeownership is deeply embedded in the British soul?
131,047 Luton people live in an owner-occupied property
So, we have a paradox - homeowners or renters? The reason I suggest this, is, I noticed on the run up to the Election that housing was used at the General Election as way to get votes. This is nothing new, as all parties have always used housing to get votes, although previously it was about which party would build more council houses in the 1950’s through to council Right to Buy with Thatcher (and everyone since) - running election campaigns promising everybody their own home in one way or another.
Yet, did you notice at this election something changed? The parties weren’t talking so much about increasing homeownership but about protecting the tenant. It seems the link between homeownership as the main goal of British life is starting to change as we are slowly turning to a more European way of living. Renting is here to stay in Luton and incrementally growing year on year. You see, in Britain there is no property tax based on ownership, which many other western countries have. Instead Council Tax is paid by the occupier of the home (meaning the tenant pays - not necessarily the owner).
Both parties wanted to end no-fault evictions (which is a good thing), yet Labour went further and mentioned rent controls in their manifesto. As I have mentioned before in other articles on the Luton property market, rents since 2008 (even in central London) have not kept up with inflation - so again was that another headline to grab votes/election bribe? The fact is the majority of new British households formed since the Millennium can now expect to rent from a private landlord for life - therefore the parties focus on this important demographic.
Yet even with the new mortgage relief tax rules for landlords and the 200+ of legislation that govern the private rental sector, buy to let is still a viable investment option for most investors in Luton. There has never been a better time to purchase buy to let property in Luton … but buy wisely. Gone are the days when you would make a profit on anything with four walls and a roof. Most importantly do your homework, take advice and consider your options.