A Chelmsford homeowner emailed me last week, following my article posted in the Chelmsford Property Blog about the change in attitude to renting by the youngsters of Chelmsford and how they thought it was too expensive for first time buyers to buy in Chelmsford. There can be no doubt that buy to let landlords have played their part in driving up property values in Chelmsford (and the UK) and from that made housing a lot less affordable for the 20 and 30 somethings of Chelmsford.
In the email, they said they thought the plight of the first-time buyers in Chelmsford was like a novice tennis player, playing tennis with Andy Murray. If you played him once you will unquestionably lose and if you were to play him 100 times you would lose 100 times. That is what they thought it was like for all the 20 something’s first time buyers of Chelmsford going against all the buy to let landlords.
They went on and asked if the Bank of England (BoE) should be tasked to control house price inflation in the same way as the BoE controls inflation. The BoE has a target for the annual inflation rate of the Consumer Prices Index of 2%, whilst it is also required to support the Government’s economic policy, including its objectives for growth and employment. So, should BoE be charged with containing buy to let housing market, by possibly changing the rules on the loan-to-value (LTV) ratio’s?
So, let’s look at how affordable Chelmsford is? The best measure of the affordability of housing is the ratio of Chelmsford Property Prices to Chelmsford Average Wages, (the higher the ratio, the less affordable properties are). (i.e. looking at the table below, for example in 2014, the average value of a Chelmsford property was 9.81 times higher than the average annual wage in Chelmsford).
… but it’s not the only reason.This deterioration in affordability of property in Chelmsford over the last couple of years has been one of the reasons why the younger generation is deciding more and more to rent instead of buying their own house.
A quick look on Money Supermarket today found 169 lenders prepared to offer 75% LTV Buy to let Mortgages and none at 85% LTV. Lenders have self-imposed a high level of entry for buy to let landlords (i.e. putting down at least 25% of the purchase price in cash). The BoE don’t need to meddle there! Also, the Tories have certainly done lots to level the playing field in favour of first time buyers. For nearly a year now, Landlords have had to pay an additional 3% in stamp duty on any buy to let purchase and over the coming four years, tax rules on landlord’s claiming mortgage interest relief will affect their pocket. Neither, it doesn’t help that the local Authority sold off council houses in the Thatcher years and so for many on low incomes or with little capital, owning a home has simply never been an option (today or in the past).
It’s easy to look at the headlines and blame landlords. First time buyers have been able to access 95% LTV mortgages since 2010, meaning even today, a first-time buyer could purchase a 2 bed apartment in Chelmsford for around £170,000 and only need to find £8,500 deposit. Yes, a lot of money, but first time buyers need to decide what is important to them. Either save up for a couple of years to save the deposit and go without two annual foreign holidays, the full Satellite or Cable TV package with Sports and Movies costing three figures a month, the latest mobile phone and out socialising … or not as the case maybe?
I think we as a Country have changed … renting is returning to be the norm. So my opinion is, landlords have it tough. Let’s not blame them for the ‘perceived’ woes of the nation … because to be frank … we haven’t always been a country of homeowners. Roll the clock back to 1964, and nationally, 30% of people rented their home from a private landlord – today – its only 15.3% nationally.
If you are an existing landlord or someone thinking of become a first-time landlord looking for advice and opinion on what (or what not to buy in Chelmsford), one source of information is the Chelmsford Property Blog www.chelmsfordpropertyblog.co.uk.
