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In this article, I look at how green and eco-friendly the households in Luton are and the potential effect of making them greener in the coming years.
Improving the energy efficiency of Britain’s 27.2 million homes, which are responsible for more than a quarter of the country’s CO2 and other greenhouse gas emissions, is seen as key to tackling the issues of climate change, fuel poverty and our country’s energy security. This is particularly important as in June the Government announced they were going to make the country carbon neutral by 2050, meaning Britain’s homes need some enormous retro-fitting to meet these ambitious climate targets.
Researchers at Nottingham Trent University said it would cost on average £17,000 per property to retrofit an average UK home to make it carbon neutral with renewable energy and insulation (if done en masse and not piece meal). That would cost the Country £462.4bn (interesting when the NHS costs £154bn per year). Now of course 22.7m homes are privately owned so that would be the responsibility of the owners, but if we look at publicly owned council housing, that would cost the Government in excess of £76.5bn - HS2 is ‘only’ £56bn!
The benefits of making homes carbon neutral go further than saving the planet, as occupants would have much lower gas and electric bills (which total £31.824bn per year), warmer households and a much-lower strain on the NHS, which currently spends about £848m a year treating conditions that arise from cold housing. Also, local authorities would have to spend a lot less than the £5.2bn a year for ongoing property maintenance by the installation of extra insulation and renewable energy such as ground source heating, wind or solar panels.
To improve efficiency ratings, last year the Government banned landlords from renting property with an energy performance rating of F and G (the lowest ratings), yet I don’t think there is an appetite to force private homeowners to do this work (although you never know in the future??). Homeowners would be unenthusiastic to take on the bother and cost of such building works, yet the Government could offer incentives and grants, which along with the funds saved on their energy bills could make the plan more appealing?
So, what about eco credentials of the properties of Luton homeowners and landlords?
Every home that has been built, rented out or put on to the market in Luton since 2007 has had to have an Energy Performance Certificate (E.P.C), giving it a rating between A and G (rather like those stickers you see on fridges and washing machines). A is highest rating (i.e. most efficient and greener) and G is the worst energy performance rating. So, looking at Luton first, then comparing us to the rest of the UK, this is the result...
So, 32.1% of Luton homes are in that eco-friendly A to C energy performance banding ratings, which is proportionally 13.68% lower than the national average.
So, what next? Well the Government will endeavour to make the green revolution as painless as possible with technology developments like LED light bulbs, for example, saving greenhouse gases without people noticing. In the future we might have hydrogen central heating instead of mains gas, all have solar panels for electricity, all triple glazed windows and even ground sourced heating ... sounds pie-in-the-sky? Well who would have thought some of the most wanted cars would be electric and hybrid 10 years ago, built by the likes of Tesla?
There is no doubt that the energy efficiency of a property will rise in the coming years as the cost of fuel and people’s opinion on going green changes. You don’t need to spend £17,000 to find out what you can do to make your property greener. Look at your E.P.C and it will tell you what small changes you can make to improve your Luton home’s energy efficiency rating and ultimately save yourself money.
If you want to find your E.P.C rating of your Luton home, go to www.epcregsiter.com
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In this weeks article on the Luton property market, I consider the historic effect that new homes make on the whole Luton property market, whether we are building enough homes and what that means for existing Luton homeowners and Luton landlords.
Of the 27,600 houses and apartments sold in Luton (LU2) since 1995, 980 of those have been new homes, representing 4.5% of property sold. So, I wondered how that compared to both the regional and the national picture …and from that, the pertinent questions are: are we building too many new homes or are we not building enough?
Roll the clock back a few years and in 2013 the Government expressed its disappointment that, as a Country, builders weren’t building enough new homes to house our citizens. They promised to hasten new homes building to the fastest rate since the 1980’s when the Country was building on average 168,100 private households a year. The Housing Minister stated he wanted the private sector to build in excess of 180,000 households a year, a figure which seemed unachievable at the time. In 2013, private house building was in the depths of a post Credit Crunch dip, with just 96,550 private new homes being built that year. Yet, in the five years since then, private new-build completions have climbed steadily, rising by 59.5% to 154,100 new home completions in 2018..so on appearances alone, whilst the growth is impressive, the new homes builders haven’t met their targets….. or have they?
In addition to the 154,100 new homes completions in 2018, the private sector also provided an additional 29,700 new households gained from change of use between office, industrial and agricultural buildings to residential homes meaning, last year, the private sector created 183,800 new households. When we look at the public sector, there were 30,300 Housing Association new homes and 2,950 Council houses built last year, meaning after making a few other minor adjustments, the total number of new households/dwellings created in the UK in 2018 was 222,190.
Most of the growth can be credited to an improving economic framework, though continued help for first time buyers with the Help to Buy Scheme has enabled some younger buyers to bypass the issue of saving for a large deposit for a mortgage when buying a home, thus supporting confidence among new home builders to commit to large building schemes. Yet there is more to do. The Government wants the Country to return to the halcyon days of the 1960’s where, as a Country, we were building 300,000 additional homes a year .. and they want that to happen by 2025, a 36% increase from current levels.
In 2019, the country will create 257,500 households, so we are on our way to meeting that target but maintaining this level of house building will be a test. Even the Governments’ Auditors (the Office of Budget Responsibility) is predicting net additional dwellings will plateau at about 240,000 in the first few years of the next decade.
So, how does Luton sit within this framework?
The UK currently has 27.2m households, of which 2.45m (9%) of those have been built since 1995, whereas in Luton, of the 25,700 households in LU2, 980 were built since 1995 (representing 3.8% of all households), meaning Luton has a lower proportion of new homes building in the last couple of decades than the national figures.
I certainly feel there is an over reliance on the private sector to meet the Country’s housing needs. Local Authority’s need to step up to the plate and build more houses, and its true central government has released more cash for them to do just that, but probably only 20% to 25% of what is required. In the meantime, unless the Country starts to build 300,000 households a year, property prices will retain and improve their value in the medium to long term – which is good news for Luton landlords and Luton homeowners.
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In this week’s article I talk about how nationally, we as a country are moving less often than people in the 1970’s and 1980’s and what that means to Luton homeowners and Luton landlords.
The average homeowner in the UK moves every 20.2 years…
That average in the 1970’s and 80’s was around every 10 to 11 years; in the 1990’s it increased to the mid-teens (in terms of years) and in the early part of the Millennium, it dropped again to the low teens. When we had the Credit Crunch years of 2008/09/10, that shot up to every 25.3 years and has been steadily decreasing ever since to the 2018 figure of 18.7 years.
The graph shows that as the economy improved after the Credit Crunch, British homeowners started to move home more and may have be taking advantage of higher demand and lower supply in the housing market to sell their homes and move on to the next property. Yet, most Luton (and British) homeowners are more often than not buyers as well, so that cannot be the real cause. As mentioned already, people in the 70’s and 80’s moved a lot more than today.
So why is the long-term average length of time between moves since 2000 still much higher than it was in the preceding 30 years? For existing homeowners, some people have said their lack of an appetite to move home compared to the 1970’s and 1980’s might come down to their mortgages and the need for higher equity to put down on the next house. It is true the number of years you stay in your home determines how much you will pay back on the mortgage you took out when buying it. If you stay longer, you have the prospect to pay back a larger portion of the money you borrowed to buy the home. Interestingly, if you consider someone with a 25-year mortgage on the UK average variable rate of 3.4% for existing mortgage borrowers, borrowed say £200,000 at the start of the mortgage and made monthly payments on that mortgage, it would take 15 years and 1 month to build up over 50% (or £100k) in equity (and 17 years 2 months if interest rates were at their historic average in the 1980’s and 1990’s of 7%) … all assuming there was no decrease in value of the property.
Instead, I think the issue is a lot deeper than that. Firstly, I believe there has been a long-term change in attitude to moving home and this lack of people moving home (compared to the last 30 years of the 20th Century) is part of a slowdown in the country in social mobility. Interestingly, a million fewer people moved in the noughties (2000 to 2010) than in the 1970’s, after other changes in population have been taken into consideration. You see back in the 1970’s and 80’s, it was expected that people kept moving up the ‘property ladder’ to bigger and better homes (i.e. keeping up the Jones’).
Secondly, there has been a change in attitude to homeownership per se … as 20 to 30 somethings (Generation Rent) have been weaning themselves off the ‘homeownership drug’ for the last 15 years that the baby boomers were addicted to in the 1970’s and 80’s ... meaning there are less buyers at the bottom of the housing ladder to fuel the fire. That is an important factor on the long-term decrease in home moving as buy to let landlords have been buying the smaller style starter homes to house Generation Rent … yet landlords don’t tend to move up the housing ladder after a few years like first time buyers - landlords just buy another property.
So, what is happening in Luton with regard to people moving home?
I have mentioned a number of times in my articles about the Luton property market, that the number of people who move home (i.e. the number of property transactions) is a more important bellwether to the health of the local property market.
Therefore, I compared the number of people moving home in Luton to the regional stats of home movers and the country as a whole. I also decided to look at a long-term point of view to judge the Luton housing market, because as can be seen on the first graph, there is often short-term volatility. Looking at the stats...
Since 1995, Luton people have moved home 28.8% more often than the national average
Looking at this second graph, 101.7% of the Luton (LU3 to be precise) privately owned housing stock has been sold since 1995 - interesting when compared to the national figure of 79%. Why? Well I am sure this might be the topic of an up and coming article on the Luton Property Market Blog.
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In this week’s article I talk about the Council house waiting list over the last eight years and how that would affect the property market for Luton homeowners and landlords in the future!
In 1979, more than 4 in 10 British people lived in a council house, yet today that figure is only 1 in 12, whilst according to Shelter 65% of families on the Council House waiting lists had been on those lists for more than a year and 27% had been waiting for more than five years.
One solution to the housing crisis has always been for the local authority to build more homes, yet should the state provide people with secure and dependable places to live – or is that an out-dated point of view? To look at this objectively, let’s take a step back.
After WW2, both Tory and Labour governments were building council houses in massive numbers, yet it might surprise you to know that more Council houses were built per year under Tory Governments than Labour ones between the years 1945 and 1970.
Everything changed in 1979, when Margaret Thatcher delivered the right for Council tenants to buy their Council House (called the Right To Buy Scheme). Interestingly, Right To Buy was a Labour Party idea from one of Labour Manifestoes of the late 1950’s (although they lost to the Tory’s). Mrs Thatcher’s idea was based on massive discounts and 100% mortgages for those buying … but this was the real issue that has come back to bite us all these years later! Half the proceeds of the property sales went back to Westminster and the other half went back to the local authority – but the Councils half could only be spent on reducing their debt – not to be spent on building more Council houses.. hence why we have a shortage of council houses.
Today, in Luton, the Council House Waiting List has increased by 168.4% since 2011, meaning
13,150 families are waiting for a Council House
Interestingly though, if our local Council House Waiting List had changed by the same amount as the national one, the waiting list figure would be 2,993 instead, because nationally Council House waiting lists are 38.6% lower than 2011.
So where are these Luton families all living and what does this mean for Luton homeowners and Luton Landlords?
Quite simply, private landlords have taken up the slack and housed all those people that were on the waiting list. This is important as more and more tenants are stopping longer in the Private Rented Sector - the average length of time of a tenant stays in the same property is now 4 years. Renting is becoming a choice for many, as the years of this Millennium roll on. So much so, would it surprise you to know that renting a house can be more expensive than buying it as we have these ultra-low mortgage rates and 95% mortgages freely available?
Rents in the Rental Sector in Luton will increase steadily during the next five to ten years. Even though the Council House Waiting List has decreased, the number of new council and housing association properties being built is at a 75-year low. The government campaign against buy to let landlords together with the increased taxation and the banning of tenant fees to agents will restrict supply of private rental property, which in turn using simple supply and demand economics, will mean private rents will rise – making buy to let investment a good choice of investment vehicle again (irrespective of the increased fees and taxation laid at the door of landlords).
..and for home owners (and landlords) Luton property values will remain strong and stable in the medium term, as the number of people moving to a new house (and selling their old property) will continue to remain limited, meaning that due to lack of choice and supply Luton buyers will have to pay decent money for any property they wish to buy (especially ones in good locations and presented well).
Interesting times ahead for the Luton Property Market!
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I talk about the type of properties that are currently built in Luton, whether we’re building the right sort of properties to meet the current levels of demand in Luton and what the future holds for both landlords and homeowners in Luton with this information.
Would it surprise you to know that in some parts of Luton, predominantly prosperous areas with high proportions of mature residents, the housing crisis is not one of supply so much as dispersal of that supply? Theoretically, in Luton there are more than enough bedrooms for everyone - it’s just they are disproportionately spread among the population, with some better-off and more mature households living in large Luton homes with many spare bedrooms, and some younger Luton families being over crowded.
Yet it is not the fault of these well-off mature residents that this is the current situation. Let’s be frank, Luton doesn’t have enough housing full stop (otherwise we wouldn’t have the large Council House waiting list and all the younger generations renting instead of buying), but up until now it hasn't been clear that Luton actually also has the wrong types of properties.
We're not building the smaller homes in Luton that are needed for the starter homes and we aren’t building enough bungalows for the older generations, so they can be released from their larger Luton homes, thus allowing those growing Luton families to move up the ladder.
Looking at the stats for Luton, and LU1 in particular...
When I compared Luton (LU1) with the regional stats of the LU postcode, the locality has proportionally 44.9% more apartments, yet 46.4% less detached homes. Looking nationally, Luton (LU1) has proportionally 41.2% more terraced/town houses and proportionally 64.6% less detached houses.
I am finding that there has been a shortage of smaller townhouses and smaller apartments being built in Luton over the last 20 years, because most of the new builds in the last couple of decades seem to have been either large executive houses or the apartments that have been built were of the larger (and posher) variety, even though demand for households (as life styles have changed in the 21st Century) have been more towards the lower to middle sized households.
The builders do want to build, but there's a deficiency of building land in Luton, and if there's a shortage of building land, then of course new homes builders build whatever gives them the biggest profit. The properties that give them the largest profit are the biggest and most expensive properties and they certainly are not bungalows as they take up too much land. So who can blame them?
Yet would it surprise you to know that it’s not a lack of space (look at all the green you see when flying over the UK), it’s the planning system. Green belts must be observed, but only 1.2% (yes 1.2% - that isn’t a typo) is built on in this country as a whole with homes - we need the planners to release more land (and then force/encourage builders to build on it - not sit on it). Another problem is that of the smaller new homes that have been built, most of them have been snapped up for renting, not owning.
So, what’s the answer? Build more Council houses? Yes, sounds great but the local authority haven’t enough money to cut the grass verges, let alone spend billions on new homes in Luton. The Government did relax the planning laws a few years ago, for example for changing office space into residential use, yet they could do more as currently new homes builders have no incentive to build inexpensive homes or bungalows that the system needs to make a difference.
So, what does this mean for Luton homeowners and Luton landlords?
Changing the dynamics of the Luton, regional and national property market will only change in decades, not years. The simple fact is we are living longer, and we need 240,000 to 250,000 houses a year to stand still with demand, let alone start to eat into 30 years of under building where the average has been just under 170,000 households a year.
That means, today as a country, we have a pent-up demand of 2.25m additional households and we need to build a further 4.2m households on top of that figure for population growth between 2019 and 2039. So, irrespective of whether we have short term blip in the property market in the next 12/18 months, investing in property is, and always will be, a great investment as demand will always outstrip supply.