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The stamp duty tax holiday is over, furlough finished at the end of September, unemployment is due to rise and inflation is rife … is this the end of the post lockdown Luton property boom?

 

Surely, we are heading for house price correction?

 

Forecasting what will happen in the Luton property market this Autumn may not be as simple as it first appears.

 

It’s true the Luton property market is starting to settle down after an all-time number of property deals were completed in June.

 

More Luton people will have moved home in 2021 than in any year since 2007, with an estimated 1.5 million home buyers nationally having bought a property.

 

Roll the clock back to last Christmas, and the Government’s Office for Budget Responsibility, projected that national house prices would drop between 6% and 8%.

 

By Christmas, the price of the average home

in Luton will be about £278,900 up 9.7% on last Christmas.

 

Let us not forget there were so many ambiguities at the start of 2021. We were about to start a 5-month lockdown, hospitals were bursting at the seams with patients, the vaccines hadn’t started, 4 in 10 employers had furloughed their staff and we had just had Brexit ... things didn’t look good.

 

Yet, nothing could be further from the truth 10 months later - the Luton property market has been on fire. But after a heated summer in the Luton property market, things certainly can’t carry on as they have been since the end of lockdown.

 

So, where are we with the Luton property market as it stands? Taking reference from historical data on the website The Advisory (I would certainly recommend you check it out)…

 

68% of properties on the market today in Luton

are sold subject to contract (stc).

 

How does this compare to October 2019 and October 2017?

 

In October 2017, 42% of Luton properties were sold stc,

 whilst in October 2019, 38% of properties were sold stc.

 

Yet how does that compare to the national picture?

 

In 2017, 39.72% of the country’s properties for sale were sold stc whilst in 2019, that figure was 38.11%.

 

Now I love a good league table, so then decided to compare our locality to the rest of the country

 

So, I chose to look at the LU3 postcode specifically. For information, there are 2,234 postcode districts in the country.

 

The 2021 sold stats put LU3 in at 241st place in

the country, 812th in 2017 and 390th in 2019

… meaning we have improved from both the 2017 and 2019 figures.

 

As we enter the last 3 months of the year, there are not so many uncertainties as there were at the start of 2021. On the good news front, 49 million Brits have had at least one jab (45m two jabs) and the UK will be the world’s fastest growing advanced economy this year according to the IMF.

 

Conversely, the furlough scheme ended at the end of September and with energy prices going through the roof, a real shortage of homes for sale (as I have discussed a number of times in recent blogs) and rising inflation on the back of a shortage of raw materials and trained staff, forecasting this and what will happen to Luton house prices might not be as easy as it seems.

 

Post stamp duty holiday, it is now recognised that the majority of the demand for people moving home is focused by a profound unhappiness and frustration with the homes we live in, revealed during the first lockdown in 2020.

 

Buyers (and tenants – so take note Luton buy-to-let landlords) want space ... in fact, three types of space … and they will pay handsomely for them!

 

  • Office space (be that bedroom or study)
  • Outside space (gardens or proximity to green areas)
  • Broadband with ‘outa-space’ download speeds

 

And whilst there is a shortage of properties coming on to the market, demand and supply economics mean…

 

Luton house prices should remain relatively stable going into 2022.

 

The number of properties coming onto the market in Luton is slowly improving, yet not enough to diminish house values.

 

Also, don’t forget Luton first-time buyers still have stamp duty relief all to themselves again and mortgages are cheap. At the beginning of the 2020 lockdown (spring 2020), mortgage providers removed their higher risk 5% deposit mortgages for fear of a housing market crash. Currently, the vast majority of these low 5% deposit mortgages are back, together with the Governments own 5% deposit mortgages.

 

Yet many Luton homeowners are concerned about inflation

and its effect on their mortgage payments.

 

Inflation is important because if inflation gets too high, the Bank of England will need to raise interest rates to reduce inflation. Because mortgages payments are based on the bank of England interest rate, higher mortgage payments will affect what people can afford. Normally the higher the mortgage rate, the less likely house prices are to increase (and in fact if interest rates are too high, house prices will fall).

 

Whilst I can’t give you advice, with the Bank of England base rate at a 300-year historic low of 0.1%, I’m still surprised that nearly 3 in 10 Luton homeowners with mortgages are not on a fixed rate mortgage. There has never been a better time to get a fixed rate mortgage, as there are deals out there with interest rates as low as 1%. This means even if interest rates do go up in the short term, you will be protected from higher mortgage costs. Anyway, back to inflation.

 

Inflation did rise quite quickly and steeply in 2008/9

but came back down within a year.

 

This was because of a shortage of staff and raw materials during the Credit Crunch of 2008/9, the very same issues we’re experiencing at the moment in Q4 2021. The type of inflation (yes, there are types of inflation!) in 2008/9 was called ‘push inflation’. Whilst inflation is not great, ‘push inflation’ could be described the better type of inflation (as long as is it doesn’t go on for too long).

 

The economic crippling hyper-inflation seen in the 1970s was ‘pull inflation’. The circumstances that create ‘pull inflation’ are not being experienced at the moment in the UK. This is good news because ‘pull inflation’ is bad inflation, which in turn would create massive problems to the UK economy as a whole.

 

Therefore, whilst inflation will probably rise to 4-5% by Christmas, I don’t believe the Bank of England will raise interest rates substantially as the message we are hearing from them is they see this as a short-term blip.

 

Opportunities for Luton buy-to-let landlords?

 

Ultra-low mortgage rates and a booming rental market is encouraging more Luton buy-to-let landlords to expand their rental portfolios, yet their strategy is changing. Yields are increasing as there is a shortage of rental properties, driving up rents. Also, there are Luton landlords looking to exit the rental market, often because they want to liquidate their portfolio for retirement. These portfolios don’t make it onto Rightmove and get sold ‘off market’.

 

Therefore, if you are a serious Luton buy-to-let landlord and you’re looking to expand your own portfolio, it’s really important to put yourselves on the mailing list of estate agents and also build up great one-to-one relationships with the same agents to ensure that you’re at the front of the queue for these off market rental portfolios and not at the back.

 

To conclude, nobody knows the answer to what will happen to the property market in Luton as we go into 2022. There are many factors that could affect the market in a positive and negative way, yet buying property is always a long-term investment (be it for yourself or to rent), so if you need any advice or opinion on what you should do, drop me a line or pop into the office and we can discuss the options you have over a cup of coffee.

 

Author

Taylor Kay

The number of properties for sale in Luton has fallen by 44% since this time two years ago (October 2019). One of the reasons is that many Luton buyers feel overwhelmed and fearful they will be made homeless if they sell their home and can’t buy another. So, I have decided to look again at the facts and give them to you in greater detail in this article.

My research has found the number of Luton properties for sale started to decline last autumn (2020).

Nationally, the same story is being written as the average UK estate agency office now has around 16 properties on their books to buy, compared to 43 a couple of years ago.

So why is this an issue?  Many Luton homeowners are wanting to move home and are worried they will put their current home on the market, it sells quickly and then be unable to find another home to buy – thus they believe they will then be making themselves homeless.

The fact is that most Luton home buyers need to sell before they can buy their next home, meaning they need to place their property on to the Luton property market before they can buy their next home.

Yet because of the low supply of properties for sale and the current high demand, there is an imbalance in the Luton property market. This means some Luton house sellers are nervous to put a ‘for sale’ board outside their house.

So, let me look at the Luton numbers in greater detail. According to the three main property portals (Rightmove, Zoopla and On-The-Market) ...

In October 2019, there were 1,577 properties for sale in Luton. Today, there are only 882 properties for sale, a reduction of 44%.

 

When I break it down into bedroom numbers and type it gets even more interesting (note things like building plots and part commercial/part residential etc., won’t be in these numbers so the stats below won’t precisely match up to those above).

 

 

# Properties on the Market in Oct 2019

# Properties on the Market in Oct 2021

Percent Change

5+ Bedrooms

125

69

-45%

  4 Bedrooms

206

100

-51%

  3 Bedrooms

584

198

-66%

  2 Bedrooms

402

260

-35%

  1 Bedroom

217

213

-2%

 

... and when I looked at the type of properties ... it got even more interesting…

 

 

 

Type of Property

# Properties on the Market in Oct 2019

# Properties on the Market in Oct 2021

Percent Change

Detached

271

121

-55%

Semi

524

187

-64%

Terraced

274

97

-65%

Flat

423

397

-6%

 

As you can see, there have been some interesting changes in the number of properties on the market in Luton over the last few years, depending on the type and the number of bedrooms, yet all types of housing are down considerably.

So, if Luton homeowners do sell, will they be made homeless if they can’t find their next ‘forever home’?

The answer is quite simply ... NO!

Luton properties are coming on to the market all the time, yet the buyers have got to be in the game, in it to win it so to speak. If you keep looking at properties, without even having your property on the market, let alone sold (subject to contract), then you will fall into a self-fulfilling prophecy of not being able to buy another home and will always be chasing your tail.

And it’s those magic words of “subject to contract” that are your get out of jail card.

The average time taken from agreeing a sale to it being legally binding (i.e. exchange of contracts) is about 19 weeks.

During those 19 weeks, you are ‘sold subject to contract’, which means you have four or five months to find your new home and the likelihood of not finding your next forever home is very small.

And even if you can’t find anywhere, you will never be homeless as the sale is not legally binding until you exchange contracts, so you can withdraw from the sale up to that point, without penalty.

One final word of advice to all Luton home movers.

 

Around 6 in 7 Luton homebuyers could

have missed their ‘forever home’ in 2020/21

 

Let me explain, in a study of various UK estate agents, 84.8% of homebuyers were not on the estate agent's mailing list before they contacted the agent to view the home according to Denton House Research.

 

Yes, 6 out of 7 buyers (84.8%) waited until the property came on to the market on one of the portals (e.g. Rightmove, Zoopla or On The Market) before asking to view it. But would it surprise you that depending on the location and type, up to one in five houses don’t actually make it on to the portals for sale.

 

This means if the homebuyer hadn’t registered themselves on the agents mailing list, they would’ve missed out on their ‘forever home’, because they would not have known the property was for sale until it was too late.

 

Quite simply, if you are serious about moving home in Luton, get yourself on the mailing lists of all the agents in Luton.

 

Author 

Taylor Kay

 

As they struggle to meet demand, Argos have had to increase the wages of their HGV drivers from £11.41 an hour to £15 an hour - a rise of 31.2% meaning their pay goes from £27k to £35k. Care home providers are offering signing-on bonuses of many thousands of pounds to entice nursing staff away from their competitors, and new homes contractors say labour costs are growing as the housing boom pushes up demand for bricklayers and joiners. Restaurant chains, coffee shops, blue-collar workers in factories and warehouses are seeing wages rise at an extraordinary rate.

 

The average wage for a worker in Luton in full-time

employment is £582.30 per week (before tax).

 

We can all argue over the reasons behind it; some suggest the ‘B’ word (ending in ..xit), whilst others put it down to the pandemic and some the demographic changes of UK population.

 

So, before I look at what it could do to the Luton property market, let me look at why wages are rising. You will note all the above inflation wage increases are in blue-collar industries.

 

(Blue-collar workers refers to any worker who engages in physical or manual labour, such as building, hospitality, maintenance etc., whilst white-collar workers are those classed in the professions and service industries).

 

What are the reasons for these wage increases?

 

  1. In the past, the demand for inexpensive ‘blue-collar’ labour has been fed by a steady supply of Eastern European workers since 2004. Yet with the ‘B’ word, that has now ended.

 

  1. Also, even in late July, the furlough scheme has kept 1.9 million Britons from their jobs.

 

  1. Fewer ‘Generation Z’ (those in their late teens to mid 20’s) who normally would work in the hospitality industry are not working at the same rate they used to, when compared to before the pandemic.

 

  1. And finally, fewer ‘Baby Boomers’ (those born before 1965) are working since the end of the first lockdown.

 

 

 

 

How could these wage increases affect

the Luton property market?

 

White-collar wages, since the turn of the millennium have risen in real terms yet blue-collar wages have remained stagnant (although they started to pick up slowly just before the pandemic).

 

So, if all blue-collar workers are now seeing a substantial increase in their real wages since the pandemic what will this mean, especially for the Luton property market? It would mean the following …

 

  1. Continued reduction in unemployment
  2. Growth in consumer spending
  3. Rents will continue to rise in the short term
  4. Rise in homeownership in the medium term

 

Starting with unemployment:

 

685 Luton people have come off the dole queue in the last 12 months alone, reducing the unemployment rate by 0.8% to the current 9.1% in our local authority area.

 

If wages continue to grow for everyone, that means unemployment will continue to reduce.

 

Secondly, these pay rises will start to burn holes in people pockets. We should assume those people with the extra cash will spend it. In fact, it is a recognised trait in economics that blue-collar workers tend to spend a lot more of any increase in disposable income (when compared to white-collar workers). This would give a boost to the retail, hospitality, leisure and travel industries very quickly.

 

Luton rents are already 7.1% higher than 12 months ago,

 

and if wages continue to grow, then rents will increase even further. This is because rents in the private sector tend to rise in line with wages rather than with property prices.

 

This is excellent news for Luton buy-to-let landlords.

 

Next, if wages for blue-collar workers continue to grow, I believe we will finally see a long-term growth in home ownership again. In 2008, 68% of people owned their own home, yet that had been slowly reducing over the 2010s to 63% in 2018. Yet since 2018, this has increased slightly to 65%.  

 

The Brits who had the biggest problem jumping on to the property ladder were not just the 20 somethings, but also middle-aged blue-collar workers. With blue-collar wages stagnant over the last two decades, and accelerating house prices, it was much tougher for them to save up a deposit for a mortgage.

 

Yet with the recent Government backed 5% deposit mortgages and more disposable income (because of the wage rises), some might decide not to spend the extra on going out and holidays and buy their first home instead (because most people want to own the place where they live – if they can afford it, they will buy).

 

Overall, if this increase in blue-collar wages is across the board, then this could be one of the greatest things to happen to the Luton property market in a long time.

 

It is certainly long overdue. Since the millennium, wages at the bottom end of the pay scale (i.e. blue-collar workers) have deteriorated, while the professional white-collar middle classes have done much better. The disparities between both classes/workers are both imbalanced and harmful to the economy and society as a whole.

 

But what is the real story behind the headlines?

 

One school of thought is that some fear these wage increases will fuel hyperinflation (and in turn, interest rates will have to rise to counter that).

 

As I have mentioned many times in my articles on the Luton property market, the last thing we need is a rise in interest rates (as mortgage rates will increase accordingly). A rise in interest rates will put a massive brake on the Luton property market – which is not good for anyone.

 

Also, we have to remember a few things …

 

there are still 1.9m people on furlough

(which stops at the end of September).

 

Not all of those people will go back to their original jobs, meaning they will need to find a new job, so the pay pressures could just as easily diminish as employment bottlenecks clear.

 

Also, the 8.3% wage increase is based on a year-on-year figure (i.e. a snapshot of now versus a year ago) and therefore the headline figures have been profoundly distorted by the large numbers of blue-collar workers on furlough in 2020 (i.e. they were on 80% pay). The Office for National Statistics have gone on record saying that, accounting for some of the distortions caused by the pandemic, real wages for blue-collar workers are more likely 3.5% up.

 

Finally, as with all things, the devil is in the detail. The newspaper headlines reporting the over inflated pay rises this spring are true. However, in truth (of course we all know bad news sells newspapers) these wage rises were focused on professions with specialist skills. For example, whilst wages for HGV lorry drivers have risen by double digits, pay rates for courier drivers have remained stagnant. At the same time, wage growth for white-collar jobs is almost at zero for yet another year.

 

To conclude, there are interesting times ahead for everyone involved in the Luton property market. I do not profess to know all the answers, however, I do have my own opinions. Whether you are a Luton first-time buyer, second-time buyer, homeowner, landlord or tenant and would like to pick my brains on any aspect to do with the Luton property market, please do not hesitate to drop me a DM, give me a call or send me an email.

Author

Taylor Kay

A recent report by Legal & General stated that since the pandemic, many older homeowners had put their plans to move home 'on ice'. It said that fewer OAP homeowners are planning to downsize from their large family homes after the pandemic made them realise the actual value of their local community and space.

 

Historically, many OAPs move home to another part of the country to live near their grown-up children. Yet the pandemic has shown that OAPs can live quite well locally without moving to a strange new town to live near their children. The support networks of their friends in their existing community has emphasised the significance and importance of having friends close by.

 

Yet this trend isn't just for OAPs moving away. Many Luton OAPs who aren't moving away from Luton (because their family is still local) are also deciding to stay put longer for the same reasons. Even though they are rattling around their large 3 and 4 bed detached family homes, they love the space their large Luton homes offer.

 

And for those Luton OAPs who are wanting to move, the issue is that the choice of properties they could buy to downsize is limited. This scarcity of properties for sale, called the 'housing crunch’, can be seen by that lack of choice of properties for OAPs to move to.

 

Only 78 bungalows are for sale

within a 3-mile radius of Luton

 

In a 'normal' Luton property market, I would expect this to be double or even triple this number.

 

All these factors combined means these OAP "eternal homeowners" threaten to make the scarcity of properties coming on to the market even worse!

 

So, why is this an issue for everyone else?

 

Well, because Luton OAPs aren’t moving from their large 3 and 4 bed detached homes to smaller bungalows or ground floor apartments, this is creating a blockage on the housing ladder. Luton families, in their 30’s and 40’s, are desperate for larger 3 and 4 bed detached homes for their ever-expanding families. But if the OAP sellers of those family houses aren’t moving, they will remain overcrowded in their existing homes.

 

Let’s look at the numbers first.

 

  • There are 4.42m UK over-65 property owners, and their properties are worth a combined £1.53 trillion (which covers just under three-quarters of the national debt).

 

  • 3% of those aged 65 and over own their home (although 1 in 10 still has a mortgage).

 

  • There are 16,145 Luton homes occupied by OAPs, representing 20.8% of all the households in Luton (notable compared to the UK average of 31%).

 

  • 3% of those Luton OAPs are retired, meaning the rest are still working! (The national average is 83.4%).

 

  • The total value of the property in Luton owned by OAPs is £3.23bn.

 

  • 3% of Luton OAPs own their home outright (compared to the national average of 65.8%), and 6.5% of Luton OAPs own their home, albeit with a mortgage (compared to the national average of 5.5%).

 

Many Luton OAP homeowners simply love the house and neighbourhood they live in, often living in their homes for over 25+ years. I talk to many mature Luton homeowners who say they are afraid to put their home on the market, because they believe (incorrectly) if they find a buyer for their home and can’t find another property to go to ... they would be made homeless.

I can only share my opinions on the matter. The one thing I have seen in my years in the property market is that so many Luton people leave it too late to move home. So, when they do move, they aren’t fit enough to do all the jobs in their new home. Indeed, is it better to move home in your late 60's/early 70's, meaning you can still do the little things to make your new house a home, rather than in your late 70's/early 80’s and find the jobs are much harder to do?

Also, if you are worried about finding your next home, get yourself on the mailing lists of all the Luton estate agents.  A recent study showed only 1 in 6 buyers were on an agent’s mailing list for the property they bought. Therefore, by being on the mailing list, you will get to know of any suitable properties coming on the market before most others. This is important in this housing market; a property is often sold STC before it hits Rightmove (to a buyer that put themselves on the agent’s mailing list).

By downsizing, you could use the additional funds to top up your pension, take the family on a holiday of a lifetime (once it’s safe to do so of course), or help your children get on the housing ladder themselves with a deposit for their own home.

I fully appreciate many of the 12,079 OAP homeowners in Luton have many reasons to stay, be that sentimental, friendship, support networks etc. My advice to all of you is to do your homework, put yourselves on the mailing lists of agents (in case the property of your dreams comes up) and do what is best for you. By downsizing, you are giving yourself better options for your quality of life and massive opportunities to spend more time on the things you enjoy like your family, holidays, or even helping others.

The choice, as they say, is yours.

 

If you are a Luton homeowner and want to ask me anything about what I have said, please drop me a line to discuss the matter further at no cost or obligation.

 

Author

Taylor Kay

With Rightmove announcing a national drop of 0.3% in average asking prices in August, some are asking if the steam has been let out of the property market. Yet with the gains we have seen in the last 12 months, is this just a minor bump in the road? Alarm bells normally ring when new homeowners coming to the market for the first time are having to lower their initial asking price when compared to the market as a whole. 

 

So, what is actually happening in the national and local property market to asking prices and the number of properties for sale, and where does that leave Luton homeowners and Luton landlords?

 

1 in 7.4 homes already on the market today have reduced

their asking price in the last two weeks

 

That means new sellers bringing their property to the market for the first time, are having to curtail their initial asking price to remain competitive. Normally, this should ring alarm bells, particularly when this is the first time this has happened in 2021. Therefore, it’s vital to ‘look under the bonnet’ of the figures and see what, exactly, is happening locally.

 

Average asking prices for Luton homes

are 3% up compared to July

 

However, that figure hides some interesting anomalies - the average asking price of Luton apartments/flats are 2% lower than in July (that doesn’t mean they have dropped in value by that much – just the headline asking prices) whilst semi-detached houses have seen the average asking price rise by 3% in the last month.

 

So, if this is what is happening to Luton asking prices, what about the number of properties for sale. Looking nationally first…

 

there are currently just 285,970 properties for sale in the UK, which means 1 in 67 British homeowners are presently on the market – interesting when compared to 2005, it was 1 in 13.5 homeowners on the market.

 

With such little supply of properties for sale nationally, demand remains robust. Yet the property buyers in the market are being a little more reserved with the offers they are making compared to the Stamp Duty holiday frenzy times seen earlier in the year. They will pay handsomely, and yet top dollar won’t offer the ‘crazy price’ levels some Luton buyers were offering in the spring – hence the recent reduction in asking prices to a more realistic level.

 

Looking at the movement in the available properties for sale and to rent in Luton over the last few months, an interesting picture arises.

 

Number of Luton properties on the market

 

Apr-21

May-21

Jun-21

Jul-21

Aug-21

Luton Properties for Sale

792

856

861

842

823

Luton Rental Properties Available

357

383

431

430

439

 

 

 

 

The number of Luton properties for sale (and rent) is still at record lows when compared to the 30-year long term average.

 

The choice for Luton tenants is limited as well, as many tenants aren’t moving home. With the additional increase in demand from 1 in 10 Luton homeowners choosing to go into rented accommodation (albeit temporarily) Luton landlords with exceptional properties are getting decent rents, as discussed in a recent article I wrote about the level of rents in Luton.

 

With the current level of Luton properties for sale being around 40% to 50% below the long-term average (depending on the type of Luton property you own), it means when a Luton property is properly priced, given the intense competition, often it comes down to the position of the buyer and not the price they are prepared to pay.

 

When I say, “position of the buyer”, I mean, do they have a chain, do they have to sell their own property to buy another property?

 

Many Luton house sellers are selling their home before they buy. Selling before you buy can be a fruitful approach in a fast-moving property market. That does mean your own purchaser will have to demonstrate a certain amount of patience whilst you wait for the right home to come on to the housing market. 

 

However, because it is currently taking on average 19 weeks between sale agreed and exchange of contracts, with mortgage providers and solicitors taking their time due to the backlog, this often allows you to potentially play catch-up if it takes a couple weeks to find the right property for you.

 

Many home sellers are going even further by selling their Luton home first and then going into transitional rented accommodation. This subsequently puts them in pole position when their forever home comes up for sale as they have no chain. Although this takes a lot of determination and resilience, it does mean you will be in the very best position when the property of your dreams comes up.

 

The choice they say, as always, is yours!

 

If you would like a chat about the Luton property market and the best thing for you and your personal circumstances, do drop me a line. In the meantime, what are your thoughts on the current Luton property market? Do share in the comments.

 

Author: Taylor Kay

 

NAEA The Property Ombudsman TSI Client Money Protect Rightmove Zoopla OnTheMarket