Lincoln Home Moves Hit Record High in June

as 184.7% more people sell in June compared to the Lincoln area 10-year average

June 2021 was the busiest month ever for UK estate agents, home removal companies and conveyancers since monthly records began, as HMRC logged 213,120 residential transactions in June, a jump of more than 216% nationally on the same month last year (when the housing market had just reopened after the initial lockdown).

The cause of this was all the homebuyers trying to complete their property purchases before the approaching Stamp Duty Holiday deadline finished at the end of June. This was important as house buyers had until 30th June to complete their sale to save up to £15,000 in Stamp Duty Tax.

Many property market commentators believed the property market would slump after the Stamp Duty Holiday finished. Yet, I haven’t observed many property sales falling through or renegotiations because the buyer had to pay the extra Stamp Duty, and talking to other property professionals around the UK, neither have they.

Let’s not forget that the Stamp Duty Holiday isn’t totally over as it is a tapering off until 30th September. This means homes and apartments sold under £250,000 will still profit from the Stamp Duty Holiday.

So, what sort of property transaction numbers are we talking about here in Lincoln?

An average of 163 properties a month in the Lincoln area have sold in the last 12 months, compared to the 10-year rolling average of 277 properties sold per month.

 The best month ever before this June was March 2016, when there was a rush by Lincoln buy-to-let landlords to secure a property before the introduction of a 3% Stamp Duty surcharge for second homes. In March 2016, 635 Lincoln properties changed hands.

My calculations show 790 Lincoln households sold in June 2021, 184.7% more than the long-term average.

So, what has driven this? The Stamp Duty changes caused some Lincoln people to bring their home moves forward from 2022/3 to take advantage of the tax savings. Yet the most significant thing, talking to many Lincoln homebuyers and sellers, is the pandemic has changed the way people live. Working from home and needing additional office space has meant many Lincoln families (and others from out of the area) are seeking larger properties with more extensive gardens and better access to the countryside. I really can’t see this social trend changing for a long time. I believe this means Lincoln property prices in the medium term will not be markedly different over the next couple of years yet…

Don’t be alarmed to see volatile short-term changes in the run-up to Christmas (both up and down) with Lincoln house prices.

I have always been a believer in the medium-term (i.e. over a couple of years) house price trends instead of the monthly trends, which can sometimes be like a yo-yo. I have always said the best bellwether to the health of the Lincoln property market is the number of property transactions rather than the house prices.

Finally, I can only see this continuing as Banks scrabble to give money away in the form of cheap mortgages. A few weeks HSBC and TSB launched a 0.94% two-year fixed rate deal for those wishing to borrow 60% or less. More recently, the Nationwide Building Society launched a 0.99% five-year fixed-rate mortgage deal (again on a maximum of 60% loan to value basis).

If you would like a chat about the Lincoln property market, your options and where you stand in the Lincoln property market – please do not hesitate to give me a call.

In the meantime, I would love your thoughts on this.

Has the pandemic made you move home earlier?

What do you think will happen in the coming years to property in Lincoln? Share your views.

#Lincoln #ForSale #ukhousing #housing #property #propertymarket #ukproperty #freevaluation #valuemyhome #Estateagents #houseprices #thewaltersway

Why Savvy Lincoln Buy-to-Let Landlords Don’t Use 10-Year Mortgages.

And the reason you shouldn’t either

I know of many Lincoln buy-to-let landlords who fell into property investing by accident. Many didn’t want to sell their family home when the Lincoln housing market crashed in the Credit Crunch of 2009/10, yet still needed to move (often for work). They thought they would keep their Lincoln family home in case they ever moved back to Lincoln. Yet by keeping it, it couldn’t remain empty (there was still a mortgage to pay on it), so they ended up renting their home out.

And that was the start of many Lincoln buy-to-let landlord’s journeys!

Many of you Lincoln landlords reading this have had your fair share of problems, from tenants doing a midnight flit, rent arrears and troublesome tenants, yet also had your rewards.

The average Lincoln landlord in the last ten years has seen their investment rise by an average of £78,800 and has earned in rent (before costs) £95,760.

Many of you reading this have started to learn about investing and creating a property portfolio by buying additional Lincoln homes to rent. The average Lincoln buy-to-let landlord now owns 3.38 properties that generate an impressive passive monthly income with the bonus of growing their household net-worth through growth in the value of their buy-to-let portfolio.

With the average Lincoln buy-to-let landlord in the 56-to-58-year age range, one thing I learned about savvy buy-to-let investing, the shrewd Lincoln landlords tend to want longer-term mortgages.

Taking longer-term mortgages reduces the risk to the landlord.

It sounds counterintuitive, yet it comes down to leverage. Let me explain that whilst leverage is formidable in buy-to-let, it is also quite risky.

Before I explain why some readers might not know what leverage is and how it relates to mortgages and buy-to-let, two-thirds of landlords are debt-free, yet those landlords who have come into the property investment game in the last 10 or 20 years have had to use borrowed money (mortgages) to finance their deals. Therefore, by putting down a small amount of say 20% and borrowing the other 80%, if you calculated your return on an investment base only the money that you put into the deal, then that is what is called leverage (i.e. using borrowed money as a funding source when investing in property and generate greater returns on borrowed money).

You would think, as, say a typical 55-year-old Lincoln landlord, you would want to be only taking a mortgage out for however long you intend to work (say ten years at most) – meaning your portfolio would be all bought and paid for by the time you retire. Yet the clever buy-to-let Lincoln landlords I talk to don’t see their portfolio as having to be paid off (and mortgage-free) by the time they retire. They have understood how to utilise and administer their mortgage debt rationally to enhance their returns without taking on unwarranted risk.

By taking a short-term mortgage of say ten years, compared to a 25-year mortgage, during those ten years, your monthly mortgage payments will be particularly high (because the longer the mortgage term, the smaller the monthly payments will be).

Also, you can pay off a 25-year mortgage in 10 years, but you cannot pay off a 10-year mortgage in 25 years.

Longer mortgage terms mean lower monthly mortgage payments, which in turn means greater cash flow and more elasticity within your rental portfolio. Now to some Lincoln landlords, possessing their rental properties debt-free is particularly important. Yet, I would still seriously consider taking the 25-year buy-to-let mortgage and make additional payments every month to help you to pay the mortgage off early.

Therefore, as an example, if you have a bad couple of months without any rent coming in or unexpected bills, you can return to making the mandatory lower monthly mortgage payments without getting your property repossessed.

So, by taking on the longer-term mortgage, you decrease your risk because it has the lower required payments.

Let me give you an example – if our Lincoln landlord wanted to buy a Lincoln terraced house property for say £162,500 and put down a 25% deposit of £40,625, the best buy-to-let deal I found online on the day of writing this article was a 1.79% Santander 5-year fixed-rate buy-to-let mortgage.

Looking at the mortgage payments per month when comparing the mortgage terms; on the 10-year mortgage, the mortgage payment would be £1,119.78 per month. Therefore, our landlord would have to top up from personal savings to make up the monthly mortgage payments. Whilst if they choose the 25-year mortgage, the mortgage payment would be £514.79 per month. This would mean our landlord would be in profit from day one.

Some might say though the longer term means more interest payments, as it’s 25 years and not 10 years. Yet, at today’s low interest rates, that would only mean an additional £20,065 in interest payments spread over 15 years – not much in the grand scheme of things.

 10-year Mortgage25-year Mortgage
25% Deposit Required£40,625£40,625
75% Mortgage Borrowed£121,875£121,875
Annual Interest Rate1.97%1.97%
Mortgage Length (in years)1025
Mortgage Payment per Month£1,119.78£514.79
Sum of Mortgage Payments£134,373£154,438
Interest Cost£12,498£32,563

Therefore, by taking the longer-term mortgage, as a savvy Lincoln landlord, you are ‘cash flow positive’, meaning you can build a reserve fund for every one of your rental properties to enable you to deal with any unforeseen voids and repairs.

The best way to deal with a buy-to-let property is to see it as a small mini-business, and as with all businesses, you need to grow your income and reduce your expenses whilst in the background provide a decent rate of return for your investment.

The greater the amount of mortgage debt you carry, the greater your monthly mortgage payments, and the simple fact is, the shorter the mortgage term, the higher the monthly mortgage payments. So, if you take on a sensible level of mortgage debt and be ‘cash flow positive’, you can profit from much better returns without taking on excessive risk.

These are my thoughts – please share yours.

P.S. Before I go, I have to say this to cover my proverbial. My comments are only a very brief commentary on the issues raised and should not be relied on as financial advice and that no liability is accepted for such reliance, and that anyone needing such advice should consult a qualified financial adviser or other authorised person.

£323,520 – ‘Wood’ You Pay That for a Lincoln Terraced House?

The value of an average Lincoln terraced house has increased in value by £13,185 in the last 12 months, an increase in value of 8.64%.

Yet the costs of building a Lincoln home have shot up even more in the last 12 months, meaning the price of Lincoln new homes and any building works you do to your Lincoln home in the coming months and years could be a lot higher.

The British house building profession is experiencing a building materials supply problem. Everything from cement to bricks, timber and roof tiles, plastic guttering, copper wire and pipe to insulation, even kitchen sinks have become scarce – and when people can find them, they are costly.

For example, looking at the timber industry, three-quarters of the UK’s building timber comes from abroad, so lockdowns around Europe put a restraint on the timber processing industries of Sweden, Lithuania, and Latvia throughout 2020. In addition, building material supply chains were interrupted due to the application lockdowns imposed by their governments, resulting in many sawmills in those countries restricting shift work to comply with their country’s social distancing rules. Some mills even stopped all work for eight weeks last year, meaning they were incapable of cutting, milling or treating timber, causing their existing stocks of building wood to run dry.

Yet, whilst we were all in lockdown, everyone started doing DIY projects, so the public demand for building timber in the UK remained high, giving little opportunity for UK sawmills (let alone North-eastern Europe) to catch up and restock to the levels previously held before the pandemic.

Building timber costs 112% more than a year ago, steel RSJ’s are a lot more expensive because iron ore has gone up 120.1% whilst aluminium is up 56.8%, and copper is up 59.7%.

All the blame cannot be laid at the feet of the virus and lockdown. The ‘B’ word caused issues with supply at the start of the year. Building materials are a worldwide supply chain issue; this spring’s Suez boat crisis, when many boats were diverted around Africa (as the length of time the blockage was going to last was unknown), exacerbated the problem. All this has combined to make the cost of sending a 40ft container from China to Tilbury Docks £7,576 today, compared to £1,195 just before the crisis. Also, supplies of sand and cement are particularly low with massive demand from the large £98bn High Speed (HS2) rail project. All this combined is affecting many building projects, big and small, across the UK.

If an average Lincoln terraced house had risen by the price of building timber in the last 12 months, today it would be worth £323,520, not the current £165,789.

RSJ (steel joists) take twenty weeks to arrive, compared with the typical five weeks, whilst plasterboard is being rationed with weeks of delays for the ‘good stuff’ and MDF wood, usually takes seven days to arrive; now it takes over a month. Roof battens need to be ordered a month in advance, whilst pre-lockdown they were commonly held in stock by every building merchant.

Demand for building materials has increased so quickly because many British homeowners are driving the explosion. Those people in safe jobs with little opportunity to spend money on foreign holidays and fancy restaurants decided to invest in their property and gardens. According to the Bank of England, this craving for home improvement has particularly exploded since the mature generation have started to be double jabbed (their savings accounts having increased by £180bn during the pandemic).

As I have explained in previous articles, these increases in the price of raw materials will fuel inflation, affecting interest rates upward. An increase in interest rates will make a material difference to the value of Lincoln property. To what extent? Please read my previous articles on the Lincoln property market.

Please do share your stories of issues with builders and building materials over the last 15 months in the comments. I appreciate any stories you can provide to help others in Lincoln.