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A look back at the Luton housing market
over the last decade
With all of us completing the Census, a couple of weeks ago, it made me realise profoundly that mine and my family’s life, which from our own point of view seems unique and delightful, makes us all into a series of statistics for the Census gatherers to pore over. To digest and regurgitate facts, figures and trends for those who are interested in the ever-changing social circumstances of these islands.
However, the information from the Census is vital to improving our lives - Governments can plan the future with the information it provides and we in turn can wonder about the lives of our past generations with the information provided therein historically if we so wish.
Whilst the information from this Census won’t be published until March 2023, let us have a look at what has been happening in the Luton property market since the last time we completed the Census in 2011.
Just to remind you, 2011 saw the wedding of Prince William and Kate Middleton, Mr Cameron was the PM, there was the last flight of the Space Shuttle and Game of Thrones premiered.
Whilst in the Luton property market…
- The average price paid for a Luton detached home in the last 12 months has been £393,400. The average value of a Luton detached home has risen by 52.3% in the last 10 years or £167,000
- The average price paid for a Luton semi-detached home in the last 12 months has been £283,300. The average value of a Luton semi-detached home has risen by 52.4% in the last 10 years or £113,100
- The average price paid for a Luton town house/terraced home in the last 12 months has been £236,600. The average value of a Luton town house/terraced home has risen by 48.6% in the last 10 years or £50,600
- The average price paid for a Luton apartment/flat in the last 12 months has been £149,100. The average value of a Luton apartment/flat has risen by 21.8% in the last 10 years or £28,300
New properties built in Luton…
Irrespective of any dip in Luton house prices or transactions when the Stamp Duty Holiday ends in the autumn, this is a trend that looks set to continue, with no sign that supply of new homes is anywhere near to keeping pace with demand for households.
There have only been 2,277 new properties built in Luton in the last 10 years, that’s around 19 a month. That means the population in Luton has risen by 3.63 people for every new home built over that decade.
Nationally, the Country has only built just over 180k homes a year over the last decade, 120k less than the national target of 300k. In the meantime, the population has grown by more than 4 million.
When looking locally at the size of new build property in Luton, the average property is just over 900 sq. ft., which is 8% smaller than a decade ago.
Rents in Luton…
Whether you are a winner or loser in terms of rental values depends on whether you are a Luton landlord or a Luton tenant.
The average rent for a property in Luton currently stands at £755 per month, whilst a decade ago, it was £629 per month
This means private rents have increased by £1.05 a month for the past ten years. Interesting, when compared to the national average of 98p a month whilst in London, rents have grown by £4.64 a month.
The next 10 years of the Luton Property Market…
The next ten years will also be just as fascinating. To try and predict would be a fool’s game.
For example, who would have believed what the Luton property market has done in the last 12 months since the start of Lockdown 1.0. The number of transactions (i.e. people moving) in turn with UK house prices having risen so much in the last year ... all during a worldwide pandemic and at a time of such mayhem and havoc in the UK and world economy, is nothing short of remarkable … the question is – is it sustainable?
Read these articles in the coming months and years and I will share with you what is happening to the value of your Luton property, be you a Luton homeowner or Luton landlord.
Author: Taylor Kay
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Yet higher mortgage rates could see Luton buyers paying a lot more each month for the privilege
Being a Luton first-time buyer in the last 12 months has not been an easy thing. Just before lockdown there were 400 ‘5% deposit mortgage’ deals and first-time buyers were able shop around to get the best deal. When the first lockdown hit, 5% deposit mortgages disappeared, meaning that as many Luton would-be first-time buyers were about to buy their first Luton home in 2020, the rug was pulled from under their feet.
Today, you can count on two hands the number of mortgage deals which allow a 5% deposit. Even worse, the number of hoops one has to jump through to get a 5% deposit mortgage is very high (plus you have to pay handsomely for the privilege, with mortgage rates of at least 4.15%).
In putting down a 5% deposit, you borrow the remaining 95% as a mortgage. These 95% mortgages (or Loan to Value) were very popular with Luton first-time buyers before the Credit Crunch. Nearly 1 in 6 mortgages were 90% to 95%+ Loan to Value mortgages in 2007 (15.5%), yet as the Global Financial Crisis hit in 2008/9 that dropped to only 1 in 63 mortgages being in 90% to 95%+ range in 2010 – meaning many Luton first-time buyers were unable to buy their first Luton home between 2010 and 2015.
Yet in the recent Budget, Rishi Sunak has vowed to back the building societies and banks so that they can offer more of these higher 95% Loan to Value mortgage deals.
Many people have said this will mean there will a Luton house price boom – especially as Stamp Duty is extended until September
This scheme is nothing new as a practically identical scheme was launched by George Osborne in the 2013 Budget with his Help to Buy Scheme. Nearly 1 in 5 houses sold in the year after that budget used this scheme, yet Osborne’s was only for first-time buyers and it was only for brand new homes (not second-hand homes). Whilst there’s no doubt this caused an increase in house purchases, many commentators said it was a backdoor method to keep the country’s new homes builders afloat.
The big difference with this new 2021 scheme is that it’s available for Luton second-hand homes as well and is open to all Luton owner occupiers moving home
Yet, what will the banks mortgage interest rate charge be?
Although no building societies or banks have yet publicised what mortgage rates they will charge, all the High Street lenders including NatWest, Santander, HSBC, Virgin Money, Barclays and Lloyds have stated they intend to offer these 95% LTV mortgages.
Under the Government’s mortgage guarantee to the banks, Westminster will guarantee 20% of any mortgage offered at 95% Loan to Value. In principle, that means that building societies/banks should be able to offer the low mortgage rates as those available to people wanting to borrow 75% loan to value.
At the moment the average five-year fixed rate mortgage is 3.6% with
a 10% deposit, but if you have a 25% deposit, you can fix it for
five years at 1.63%
However, don’t forget though that the banks will be charged a ‘still to be decided’ amount to use the Government guarantee. On the last Help to Buy Scheme, it was rumoured they were charged 0.9% of the mortgage borrowed, so this cost would have to be passed on to the first-time buyer. I would suspect the eventual rates Luton first-time buyers will have to pay will be somewhere in the region of 3%.
This new 95% mortgage/5% deposit scheme is only going to work if the banks and building societies have sensible mortgage rates as it needs to help those Luton first-time buyers it was intended to benefit, who are finding it hard work to get on the first rung of the Luton housing ladder.
It all comes down to how anxious the banks and building societies feel about the true long-term effect of the pandemic once the furlough scheme ends in the autumn. Only time will tell.
Yet, to give you an idea of the difference the mortgage rates scheme will make on a typical Luton terraced/town house…
The average price paid for a Luton terraced/town house in the last 12 months was £236,500
Assuming a 35-year repayment mortgage and borrowing that amount on each scenario:
- At the current best 95% LTV mortgage rate (i.e. 5% deposit) of 4.15% mentioned at the start of the article, that would cost £1,069 per month in mortgage payments
- At the current average 90% LTV mortgage rate (i.e. 10% deposit) of 3.6% mentioned in the middle of the article, that would cost £991 per month in mortgage payments
- At the best 75% LTV mortgage rate (i.e. 25% deposit) of 1.63% mentioned at the start of the article, that would cost £739 per month in mortgage payments
As you can see, quite a difference.
I have to applaud Rishi Sunak for this initiative, yet will it be ‘fields of clover forever’ for the Luton property market with the new scheme? No, it won’t.
It will be a good boost to the Luton (and UK as a whole) property market. Whilst the mortgage guarantee offers a small portion of security for the lenders, it does focus on the riskiest part of the housing market. Many lenders still have cold shivers of the Northern Rock 125% mortgage debacle from a decade ago and those memories still ring true today.
The fact is these types of mortgages will be a higher risk, even if the Government are underwriting them with their smaller deposits, which will come through in bank’s and building societies higher pricing for these mortgages. Also, the lenders are already at near full capacity trying to get hundreds of thousands existing property sales and purchase deals through because of the Stamp Duty rush over the last 9 months. I await the rates in early April and will make comment again.
If you are a Luton homeowner, potential Luton first-time buyer or anyone involved in the Luton property market and you would like to chat about anything I’ve covered in this article or any of my other articles on the Luton property market, please don’t hesitate to drop me a line.
Author: Taylor Kay
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Luton Home Buyers £4,697,114 Windfall as Stamp Duty Holiday Stretched to September…
...and new 5% deposit mortgages for
Luton first-time buyers
The Chancellor Rishi Sunak announced two initiatives to keep the Luton property market firing on all cylinders into 2021.
Firstly, the £500,000 zero-rate Stamp Duty band has been extended to the 30th June 2021. After then it will phase down to £250,000 for an additional three months, returning to the pre-pandemic levels on the 1st October 2021. Secondly, Mr Sunak announced a scheme that will allow Luton first-time buyers to buy their Luton home with a 5% deposit from this April. Let me look at what each initiative means to the Luton property market.
- Stamp Duty Holiday extension for Luton home buyers
Coming out of the first lockdown in the early summer of 2020, there was a lot of apprehension that the British property market would flounder. Therefore, when the Stamp Duty Holiday was announced back in July 2020 to boost the property market, the deadline was set at the 31st March 2021. Little did anyone know of the snowball effect of people wanting to move because of the initial lockdown in the spring of 2020, the pent-up demand following the conclusion of the EU negotiations with the subsequent ‘Boris Bounce’ and then the Stamp Duty Holiday which made the perfect storm for what has been the busiest property market in Luton since 2001/2.
The average stamp duty paid by a
Luton homebuyer is £2,833
The reason the Stamp Duty extension is important is that many estate agents and solicitors have been warning for the last couple of months that home buyers would pull out of property deals or renegotiate if they could not complete their sale in time before the Stamp Duty Holiday ended.
So, by phasing down the Stamp Duty Holiday, this will allow some breathing space for burdened solicitors and mortgage lenders, thus decreasing the number of buyers pulling out of their property purchase because they unexpectedly have to find up to an extra £15,000 in Stamp Duty when property sales do not complete on time.
There are currently 1,658 properties that are sold STC in Luton alone and the vast majority of those will save money on their stamp duty because of this extension
So, what does the Stamp Duty extension mean for Luton house prices?
The extension has heightened confidence in the Luton property market. The Government watchdog ‘The Office for Budget Responsibility’, has predicted that house prices in 4 years’ time will be just over 13% higher, compared to their pre-Christmas predicted figure of 11% growth (over the same time frame).
- 5% deposit mortgages for Luton first-time buyers
From next month, Luton first-time buyers will be able to buy Luton homes worth up to £600,000 with a 5% deposit and a Government-backed mortgage with a fixed rate of up to 5 years.
Rishi Sunak wants to turn the millennial ‘Generation Renters’ into ‘Generation Buyers’ and believes this initiative should be able to help two million people get on the property ladder. When we look at what that would mean for Luton, I estimate …
6,802 Luton people could be helped onto the
Luton property ladder with these 5% deposit mortgages
The Government backed scheme will be open to Luton first-time buyers for 21 months (until the end of 2022) and available from lenders including NatWest, Lloyds and HSBC (plus others to be announced soon). It will be available on all Luton homes new or second hand (previous schemes applied to new homes only).
5% deposit mortgages were all but withdrawn from the market at the start of the pandemic in spring 2020 with an almost default minimum deposit of 10% (even as high as 15% in the autumn just gone) putting homeownership out of reach for all but the wealthiest Luton first time buyers.
I must admit I found it a scandal that homeownership among the 25 to 34 year olds plummeted from 69% in 1981 to 36% by 2014, although with certain Government incentives and low interest rates since then, that had risen to 41% by last year, but it’s not enough
With so many young families paying huge sums in rent, who could effortlessly afford to make mortgage repayments on the same property, they haven’t been able to save enough for a 10% initial mortgage deposit, let alone 15%.
Yet now with these new 5% deposit mortgages, many Luton first-time buyers will be able to afford to buy their first home in Luton. Banks will typically lend between four and a half and five times the gross annual income – this means with a modest 5% deposit; many Luton 20 and 30 somethings will now be able to buy their first home. Just before I finish this topic, the 5% deposit mortgages will also be available to current Luton homeowners who don’t have the equity built up in their existing home – thus helping second or third (or more) time Luton buyers as well.
How do both of these changes affect Luton buy-to-let landlords?
I know many of you Luton landlords are adding to your Luton rental portfolio because of the Stamp Duty Holiday and with the extension, you too will save some money from it. The issue of first-time buyer mortgages does mean the demand for private rented accommodation in Luton might not be as strong in the coming decade.
Don’t get me wrong, tenant demand will continue to outstrip supply of Luton rental properties for the foreseeable future, yet the tenant/landlord balance could alter slightly in the medium term. Luton landlords need to take a long hard look at their properties and ascertain if they are fit for purpose both now and into the 2030’s. Tenants are becoming a lot more demanding of what their rental property offers. Wood chip wallpaper, avocado green bathroom suites and kitchens fitted in the 1990’s (or before) simply won’t cut the mustard in the next decade.
The demand from Luton tenants for properties with larger gardens, or the ability to keep pets or an extra reception room/garden office to allow them to enjoy their rented home more and also being able to work from home will ensure greater demand for your rental property … and the best bit, they will pay handsomely for that in higher rent.
If you are a Luton homeowner, buyer, tenant or landlord and you want to discuss your options on selling, buying or renting a property in Luton and the surrounding area, do not hesitate to contact me personally.
Author: Taylor Kay
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How wealth is distributed will always be a contentious issue, especially as the Baby Boomers (those aged between their late 50’s and late 70’s) wealth has grown exponentially over the last 20 years, compared to the wealth of the younger generation.
With most UK property in the hands of the older generation, with its total value about to smash through the £8 trillion barrier (up from £3 trillion at the start of the Millennium), is it right that so much wealth is concentrated in the hands of the older generations?
As national house prices have continued to grow unabated (for example in the last eight years by 49.9%, whilst real take home pay has only increased by 11.8%), this has meant younger people are finding it even harder to get onto the property ladder and those already on it to move up it.
Looking at the older end of the age range for home ownership …
of the 77,462 homes in Luton, 16,145 households are 65 years or older, and 76.8% of those households (12,403) are owned (mostly without a mortgage).
A full split as follows …
- Owned 76.8%
- Council House 17.0%
- Privately Rented 4.2%
- Living Rent Free 1.7%
- Shared Ownership 0.2%
I talk with many Luton pensioners who want to move yet are unable to. There appears to be a shortage of suitable properties in Luton for members of the older generation to downsize into. Due to their high demand and low supply, Luton bungalows and suitable ground floor apartments achieve on average a 15% to 25% premium per square foot over two/three storey properties. Yet would it surprise you only 1% of new builds in the UK are single storey bungalows (compared to 7% 25 years ago)?
Luton pensioner homeowners are now worth £4.87bn.
YouGov did a survey a couple of years ago and they found that just over one third of homeowning pensioners in the UK were looking to downsize into a smaller property. As I have stated before, as a nation, we need to rethink how we can encourage older homeowners to sell their larger homes to release them to the younger families that desperately need them.
The Government over the last 11 years have appeared to target all their attention on first-time buyers with a strategy such as the Help to Buy Scheme. However, this doesn’t address the long-established under-supply of appropriate retirement housing vital to the needs of Luton’s quickly ageing population. Unfortunately, Luton’s housing stock is sadly ill-equipped for this demographic shift to the ageing homeowners.
Also, to add insult to injury, those more mature Luton pensioners in their 80’s and 90’s who do live in the restricted number of Luton bungalows and suitable ground floor apartments are finding it difficult to live on their own, as they are unable to leave their bungalow/apartment because of a shortage of sheltered housing and ‘inexpensive’ care home places.
This in turn means the younger 60 to 70 year old Luton retirees (in their bigger two/three storey family houses) can't buy those Luton bungalows (occupied by the older retirees), which means those Luton families in their 30’s and 40’s can't buy those larger family houses (occupied by the younger 60 to 70 year old retirees) they need for their growing families ... it’s like everyone is waiting for everyone because of the logjam at the top of the property ladder.
So, what is the solution? Quite simple – build more homes!
In the last 30 years, the UK population has grown by around 12 million people, yet the number of properties has only grown by around 4.2 million.
With obstructive planning regulations, immigration, people living longer and increased divorce rates (meaning one family becomes two) we have needed 275,000 properties to be built a year since the Millennium to just stand still and meet demand. Twenty years ago, the UK was building on average 185,000 households a year, that figure dropped in the five years after the Global Financial Crisis in 2008 to 140,000 households a year. Thankfully that has increased steadily over the last five years and last year we created 245,000 households in the UK, however we still have all those years since the Millennium to make up for.
The answer is to build on more land for starter homes, bungalows and sheltered accommodation because land prices are holding back the property market, as the larger national building firms are more inclined to focus on traditional two and three storey houses and apartments than bungalows (because they make more money from them). You might say there is no land to build the property on, yet …
only 1.2% of the UK is built on with residential properties.
So how could Luton people make money on this news? Shrewd Luton property investors should consider purchasing bungalows, especially ones that need some titivating (possibly after somebody has passed away). Bungalows purchased at the right price and location are a great gamble for flipping. They should also be considered for renting out as demand will only outstrip supply. This would be a start to the solution of rebalancing the Luton property market so everyone is happier with their lot.
If you would like a chat about the Luton property market – don’t hesitate to give me a call.