Yet higher mortgage rates could see Matlock buyers paying a lot more each month for the privilege

Being a Matlock 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 Matlock would-be first-time buyers were about to buy their first Matlock 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 Matlock 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 Matlock first-time buyers were unable to buy their first Matlock 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 Matlock 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 Matlock second-hand homes as well and is open to all Matlock 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 Matlock 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 Matlock first-time buyers it was intended to benefit, who are finding it hard work to get on the first rung of the Matlock 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 Matlock terraced/town house…

The average price paid for a Matlock terraced/town house in the last 12 months was £188,400

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 £851 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 £790 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 £589 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 Matlock property market with the new scheme? No, it won’t.

It will be a good boost to the Matlock (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 Matlock homeowner, potential Matlock first-time buyer or anyone involved in the Matlock property market and you would like to chat about anything I’ve covered in this article or any of my other articles on the Matlock property market, please don’t hesitate to drop me a line.

...and new 5% deposit mortgages for Matlock first-time buyers

The Chancellor Rishi Sunak announced two initiatives to keep the Matlock 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 Matlock first-time buyers to buy their Matlock home with a 5% deposit from this April. Let me look at what each initiative means to the Matlock property market.

1.    Stamp Duty Holiday extension for Matlock 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 Matlock since 2001/2.

The average stamp duty paid by a Matlock homebuyer is £4,129

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 141 properties that are sold STC in Matlock 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 Matlock house prices?

The extension has heightened confidence in the Matlock 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).

2.    5% deposit mortgages for Matlock first-time buyers

From next month, Matlock first-time buyers will be able to buy Matlock 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 Matlock, I estimate…

482 Matlock people could be helped onto the Matlock property ladder with these 5% deposit mortgages

The Government backed scheme will be open to Matlock 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 Matlock 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 Matlock 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 Matlock first-time buyers will be able to afford to buy their first home in Matlock. Banks will typically lend between four and a half and five times the gross annual income – this means with a modest 5% deposit; many Matlock 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 Matlock homeowners who don’t have the equity built up in their existing home – thus helping second or third (or more) time Matlock buyers as well.

How do both of these changes affect Matlock buy-to-let landlords?

I know many of you Matlock landlords are adding to your Matlock 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 Matlock might not be as strong in the coming decade.

Don’t get me wrong, tenant demand will continue to outstrip supply of Matlock rental properties for the foreseeable future, yet the tenant/landlord balance could alter slightly in the medium term. Matlock 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 Matlock 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 Matlock homeowner, buyer, tenant or landlord and you want to discuss your options on selling, buying or renting a property in Matlock and the surrounding area, do not hesitate to contact me personally.

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 6,670 homes in Matlock, 2,152 households are 65 years or older, and 75.0% of those households (1,614) are owned (mostly without a mortgage).

A full split as follows …

•    Owned 75.0%
•    Council House 18.9%
•    Privately Rented 4.2%
•    Living Rent Free 1.4%
•    Shared Ownership 0.5%

I talk with many Matlock pensioners who want to move yet are unable to. There appears to be a shortage of suitable properties in Matlock for members of the older generation to downsize into. Due to their high demand and low supply, Matlock 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)?

Matlock pensioner homeowners are now worth £610.9m.

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 Matlock’s quickly ageing population. Unfortunately, Matlock’s housing stock is sadly ill-equipped for this demographic shift to the ageing homeowners.

Also, to add insult to injury, those more mature Matlock pensioners in their 80’s and 90’s who do live in the restricted number of Matlock 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 Matlock retirees (in their bigger two/three storey family houses) can't buy those Matlock bungalows (occupied by the older retirees), which means those Matlock 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 Matlock people make money on this news? Shrewd Matlock 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 Matlock property market so everyone is happier with their lot.

If you would like a chat about the Matlock property market – don’t hesitate to give me a call.

In Britain, there are 27,071,500 households, of which 17,044,450 are owned, which are worth a total of £3,925,865,212,950 (£3.92 trillion). Over the last 5 years, an average of 86,096 properties sell each month, meaning just over a million UK households move home per year. Therefore, the average British homeowner moves every 16 years 5 months.

These statistics refute a common hypothesis that British neighbourhoods are becoming more fleeting and transitory. On the face of it, they appear to show that, once you have succeeded to buy a property you can call home, there isn’t much motivation to move again.

So, aren’t people moving home so much?

Could it be put down to a certain sense of complacency or apathy to moving home? Whereas we might love our home in Matlock and Wirksworth, most of you (including myself) still want to ‘better our lives’ with a bigger house, better area etc, which typically requires us to climb up the Matlock and Wirksworth property ladder.

Yet with Matlock and Wirksworth house prices having risen by 186.4% in the last 20 years, the cost of going up the next rung on the Matlock and Wirksworth property ladder is prohibitive.

Everyone harks back to the 1980’s, when we had an upbeat booming property market as a backcloth, Brits moved home every eight years; so now with the average at just over 16 years this equates to each British homeowner moving around three to four times in their adult lifetime. Maybe we should all call our homes ‘Dunroamin’ and be done with it!

Or does it?  

We have all heard the phrase ‘lies, damn lies and statistics’ … well the stats mentioned above hide some amazing features of the British property market. When homeowners get into their 50’s and 60’s, their tendency to move home drops like a stone. The average length of time a homeowner without a mortgage moves home is 24 years and 7 months (and just under 7 out of ten outright homeowners i.e. without a mortgage are 65 years old or older).  

Yet, homeowners with a mortgage move on average every 10 years and 11 weeks.

So, whilst I cannot determine who has a mortgage and who doesn’t, I can look at how quickly people move home in Matlock and Wirksworth and the DE4 area.  I have looked at the last 50 property sales in Matlock and Wirksworth, and I have found some interesting findings.

On average Matlock and Wirksworth homeowner only move every 13 years and 8 weeks.

Nothing interesting about that you might say, when compared to the national average ... yet the devil is in the detail.

There appears to be a two-speed Matlock and Wirksworth property market … look at the top 25% of Matlock and Wirksworth home movers, and then the next slice … these Matlock and Wirksworth people are moving home really quickly, yet the gap for the next two slices widens tremendously.

•    Top 25% quickest Matlock and Wirksworth home movers move every 4 years & 8 weeks
•    The next 25% quickest Matlock and Wirksworth home movers move every 8 years & 32 weeks
•    The next 25% quickest Matlock and Wirksworth home movers move every 15 years & 30 weeks
•    Whilst top 25% slowest Matlock and Wirksworth home movers only move every 23 years & 40 weeks

When looking at the properties that fall into the later bands (i.e. the ones that don’t move/sell so often), they tend to be the larger properties where the homeowners have lived for 25/30 years plus.

The lesson we all should learn is that once people get into their 50’s and 60’s, their propensity to move home drops considerably. This means the properties on the lower rungs of the Matlock and Wirksworth property ladder do appear to sell quickly (as they are occupied by younger homeowners) yet once Matlock and Wirksworth people get older, their tendency to move diminishes. This puts a roadblock on the younger generation wanting to buy the larger Matlock and Wirksworth properties these mature homeowners live in.

What is holding the older generation back from selling and downsizing to free up homes for families that desperately need them? Some of it will be apathy, some of it will be holding on to the home that they brought their family up in, yet the bottom line is…

46.5% of the homes owned in Britain have
two or more spare bedrooms.

As a nation, we need to rethink how we can encourage older homeowners to sell their large homes to release them to the younger families that desperately need them. Some suggest tax breaks, yet the Government won’t be in the mood to give huge tax breaks as the measures to protect the economy over the last 12 months will ultimately need to be paid back.

One thing I do know, we as a Country have seen (and will continue to see) a lot of demographic change together with an increasing elderly population, so it’s not just about how many homes we build, but whether we are building the right kind of homes the older generation will want to move into.

Interesting times ahead for the Matlock and Wirksworth property market!

If you have a Matlock and Wirksworth property to sell or let in the coming weeks, months or years and would like to know how this and other factors will affect you and your property ... without obligation, don’t hesitate to give me a call or drop me line.

Over the last six months, the Matlock Property Market has been flourishing. As soon as an estate agents ‘For Sale’ flag went up, neighbours would be checking out Rightmove to see the internal pictures and compare the asking price to their own home (go on .. admit you do that too – every Matlock homeowner does). Flabbergasted by optimistic asking price tags, those same Matlock homeowners stand open-mouthed to see a sold slip added to the board a few weeks later.

Property values in Matlock are 7.9 per cent higher than a year ago.

The newspapers are full of stories of this mini property market boom, which has been fuelled by the Stamp Duty Tax cut, which ends on the 31st March 2021. Not only has it pushed up values in Matlock, but it has also theoretically brought forward house moves from 2021 into 2020.

The most up-to-date transaction figures (i.e. the number of people moving home) endorse it too. In the UK, 137,200 property sales/transactions took place in December, the highest number of sales/transactions in December since 2006 (when it topped 149,200 transactions, only for it to fall to 32,700 transactions in December 2008 at the height of the Credit Crunch).

The exact figures from the Land Registry for Matlock won’t be available for another six weeks or so, yet in December 2019, 69 properties changed hands in Matlock. Looking at anecdotal evidence of for sale board changes, my database and the portals, I believe we will end up around 93 to 104 Matlock property sales/transactions for December 2020.

So, how does all this compare to other years?

The number of UK transactions continued to be relatively stable between November 2019 and March 2020. That decreased by around half in April/May 2020 compared to April/May 2019, triggered by economic impacts relating to the public health restrictions introduced. Since the first lockdown was lifted in the late spring, sales/transactions have increased steadily upwards each month, mirroring the relaxing public health restrictions for the property market during the summer and autumn of 2020 and introducing Stamp Duty Tax Holidays.

Before we all get the Champagne corks flowing, what the December national figures (and the corresponding provisional Matlock stats) don’t tell us, is that April to December 2020 transactions ended the year 13.7 per cent down compared to April to December 2019 transactions — the lowest since 2012. Don’t get me wrong, 13.7 per cent is impressive given that we are in the middle of a recession and even more remarkable considering there was a 48.7 per cent fall in transactions in 2008 (compared to 2007) when the Credit Crunch hit.

The biggest question though, is, how much of the urgency since the summer to buy property can be credited to the …

•    existing pent-up demand that built up in 2018/9 and was starting to be released in the ‘Boris Bounce’ in January/February 2020
•    new demand from home workers looking for bigger properties
•    people moving out of the big city centres
•    the Stamp Duty Tax cut

— or a mixture of all four?

Nobody can categorically know whether the UK property market would have ricocheted as quickly without the Stamp Duty Tax cut.

Talking to many buyers, sellers, agents and solicitors in the Matlock property market over the last three or four months, the anecdotal evidence I have collated from those people seems to imply that the outbreak of activity in the Matlock property market has mainly been put down to the lifestyle factors (bigger house with office space etc) and pent-up demand, meaning the Stamp Duty Tax Holiday is seen as the icing on the cake for most people. Yet, there will be some buyers, whose motivation has been purely to save money on the tax duty. Overall though, in the vast majority of house purchases, this allows us to be reasonably hopeful about what will happen once the Stamp Duty Tax Holiday is withdrawn on the 31st March.

However, some newspapers are preaching a story that the property market will collapse without a Stamp Duty Tax Holiday extension. Nobody can argue that a phased withdrawal from the Stamp Duty Tax Holiday would be better than some homebuyer’s sales falling through, when the tax holiday finishes in late March. Even if your motivation isn’t to save money on the tax holiday, it could be the motivation of a buyer in your chain – meaning it becomes your issue. Nobody knew in July, when the tax holiday was announced, that we would get another two national lockdowns with the inevitable delays from remote working by solicitors, mortgage providers and local authority search departments. My advice to all people currently sold subject to contract is to ask the question, “What if we don’t complete the sale by the end of March?”. Better to sort it now than have a nasty surprise in the last week of March.

All property taxation is long overdue for reform, from Stamp Duty to Council Tax. When Margaret Thatcher tried to change local Rates to Poll Tax in the late 1980’s, those who are old enough can remember the Poll Tax Riots, hence the nervousness of any party since to make any changes. There is no way the Government will abolish Stamp Duty when it raises between £11bn to £13bn a year, yet with all the upheaval we have experienced in the last year, there could be an appetite to change the way property is taxed.

The Government has already spent £271bn on interventions due to the pandemic and needs every penny so that it can start to repay those debts over the coming decades.

I have a feeling most Matlock property buyers and sellers would compromise on the price they pay for their next home to cover the cost of the Stamp Duty Tax after April, rather than lose the chance of owning the forever home they longed for during the first lockdown.

Therefore, don't be alarmed when we see property values ease slightly in Q3 2021 when the price paid for property reflects the lower price to account for the Stamp Duty that will need to be paid from the 1st April.

If you are a Matlock homeowner or Matlock buy to let landlord and you would like a chat about where you and your Matlock property stands in the current Matlock property market, don’t hesitate to give me a call or drop me a line.

What does this mean for Wirksworth property owners?

With most Wirksworth families home schooling their children in lockdown and the forthcoming Stamp Duty Holiday deadline on the 31st March 2021, less Wirksworth properties have been coming onto the Wirksworth property market since the new year. This has prompted a 29% drop in the supply of Wirksworth homes for sale compared to September 2020.

For the past couple of decades, like clockwork, Wirksworth estate agents’ busiest times for putting property onto the market is the new year to Easter rush, with a smaller flurry of new properties coming onto the market in the mid/late summer. Yet, since the ending of lockdown 1.0 in the late spring 2020, nothing has been normal about the Wirksworth property market.

Throughout the summer, the number of properties coming onto the market in Wirksworth steadily rose to its peak in September and the number of properties then becoming sold subject to contract (stc) rose even higher (and whilst statistics don’t exist for the properties sold stc, anecdotal evidence suggests there were just under 50% more Wirksworth properties sold stc in the last six months of 2020, compared to the same 6 months in 2019).

However, back to the number of properties for sale…

the peak of the number of Wirksworth properties on the market in autumn was 27 –  that now stands at 19.

The first lockdown caused many Wirksworth homeowners to want to move with the need for extra space to work from home and in some cases larger gardens. This was further exacerbated by Wirksworth home movers also trying to take advantage of the Stamp Duty Holiday to save themselves money on this tax.

This meant many more Wirksworth properties came onto the market (more than a “normal” year) in the last 6 months of 2020. However, those Wirksworth home movers motivated to move for the extra space/save money on the tax, did so in the summer/autumn and have already placed their home on the market (and are probably by now sold stc rushing to get their house purchases through before the deadline on the tax savings).

So, how does Wirksworth compare to other property markets, and what does this reduction in Wirksworth properties on the market mean to Wirksworth homeowners and landlords?

There are 37% less properties on the market today in Wirksworth, compared to 12 months ago. When I compared that to the national picture, according to Zoopla, there are 12% less properties on the market today (compared to a year ago).

There are currently 47,900 apartments for sale in London compared to January 2020, when there were only 32,600 – a massive rise of 46.9% … all the more interesting when there are only 15.1% more London semi-detached houses for sale and 1.8% more London detached homes over the same 12-month period. The jump in London apartments for sale is being pushed by an upsurge of London up-sizers eager to trade their city living apartment up to suburban houses, and a small handful of panicky London buy to let investors who are wanting to exit the London property market following falling rents for apartments. Looking closer to home, there are…

40% less detached properties for sale in Wirksworth than a year ago, whilst there are 67% less apartments.

So, whilst there are some differences between the supply of individual types of property in Wirksworth (e.g. detached vs apartments), the overall reduction in the number (i.e. supply) of properties for sale can only mean one thing, when there is a reduction in the supply of anything and demand remains stable, this will mean continued upward pressure on Wirksworth house prices in the short term.

Will overall demand for Wirksworth property continue to be stable?

Lockdown 3.0 will probably cause another wave of Wirksworth people who want to move home (thus increasing demand). The last property crash (the Credit Crunch in 2009) was caused by a huge increase in the supply of properties for sale when people lost their jobs and interest rates were much higher. People couldn’t afford their mortgages and so dumped their homes onto the market all at the same time – causing an oversupply of property for sale and hence house prices dropped.

Compared to the 19 properties for sale in Wirksworth today, at the height of the Credit Crunch in January 2009, there were an eyewatering 98 properties for sale in Wirksworth.

It was this increase in the level of property for sale in Wirksworth (mirrored across the whole of the UK) that caused property prices to drop between 16% and 19% (depending on the type of property) in Wirksworth over the 12 to 14 months of the Credit Crunch. So, as long as there is no sudden change in the demand or supply of properties and interest rates remain at their current ultra-low level – the medium-term prospects for the Wirksworth property market look good.
If you are a Wirksworth homeowner or a Wirksworth buy to let landlord and want to chat about the future of the Wirksworth property market – do drop me a line.

Most people pay Stamp Duty Tax when they buy a property, house, apartment or other land and buildings over a particular price in the UK. The Chancellor, Rishi Sunak (quickly followed suit by the Welsh and Scottish Governments), announced last July that Stamp Duty was partially being suspended on all English property transactions up to £500,000 (£250,000 in Wales and Scotland) - a Stamp Duty Holiday.

That meant only 1 in 8 English buyers would pay any Stamp Duty Tax on their home purchase (if it was over £500,000), saving any buyer up to £15,000 in tax on the purchase. The problem is the property needs to have been purchased and bought by the 31st March 2021. Complete the transaction a day later, and those buyers will have to pay Stamp Duty.

The issue is local authorities are snowed under with local search requests, mortgage companies and conveyancing staff are working from home, so property transactions are taking much, much longer. This means many Matlock (and UK) buyers who have currently sold (subject to contract) will miss out on the stamp duty saving.

Most (not all) estate agents have been warning the buyers and sellers in their property chains that some deals might not make the 31st March 2021 deadline and pleasingly, most people aren’t moving because of the Stamp Duty Holiday (they are moving because they need extra space because of the pandemic). However, it only takes one person in the chain not to be ‘singing off the same hymn sheet’ for the whole chain to collapse … so keep in touch with your estate agent.

A campaign by one of the national newspapers and an online petition to extend the stamp duty holiday has meant the topic could be debated in Parliament in the next few weeks, after 100,000 home buyers and sellers signed that petition, asking for an additional six-month Stamp Duty Holiday. The home buyers and sellers are worried the property market will collapse after March 31st when the Stamp Duty Holiday is removed.

The last time British home buyers were conscious of upcoming Stamp Duty changes, it distorted the number of properties sold. The bigger question though is, did it change the overall number of people moving home?

In November 2015, the then Chancellor, George Osborne, announced in his Autumn Statement that buy to let landlords would have to pay an additional 3% in Stamp Duty (over and above owner occupiers) for all property bought after the 1st April 2016. As shown in the graph below, this caused a surge in property buying (which we have seen since this summer with the Stamp Duty Holiday), with many Matlock buy to let landlords completing their property purchase in March 2016, as they dashed to complete their property purchase before the tax increase.

In the 3 years of 2015/6/7, the average number of Matlock and Derbyshire Dales properties sold (transactions) per month was 101 per month, yet in the month before stamp duty was changed in March 2016, transactions rose to 176, an uplift of 74.1% from the average or an extra 75 transactions in that month alone. Yet, look at the months of April and May, the property transactions numbers slumped, meaning in those two months combined, there were 51 less transactions.

So, if the Stamp Duty Holiday isn’t extended, what will that mean for the UK and Matlock property market?

London and the South East seem to be particularly exposed to the removal of the Stamp Duty Tax break because it has such a high proportion of property priced between £300,000 and £500,000. These areas benefit from the highest tax savings relative to house price.

Yet, with the average value of a Matlock home at £283,700, the stamp duty cost if the sale is delayed after the 31st March 2021 is £4,185 – a figure that shouldn’t break the bank

So, if the Stamp Duty Holiday isn’t extended – it might not be such the nightmare scenario as some people believe.

My advice to all buyers and sellers is to be constantly talking to your estate agent, your solicitor and your mortgage broker. With your estate agent to ascertain if they have asked every person (or asked the other agents in the chain to ask the question), “What if we don’t meet the stamp duty deadline?” With your mortgage broker and solicitor to give them all the information they need to ensure there are no delays with any information they request from you.

One final thought, some mortgage providers allow insurance policies to be purchased by your solicitor in case your searches (from the local authority aren’t back in time) … the cost of those will be much lower than the cost of the stamp duty ... again, speak with your solicitor.  Irrespective of whether you are a client of mine or not, if you would like a chat about anything mentioned in this article, don’t hesitate to contact us.

When William the Conqueror invaded our fair shores in 1066, like all good kings, he needed to buy loyalty and raise cash to build his castles and armies. He did this by feudal law system and granted all the faithful nobles and aristocrats with land. In return, the nobles and aristocrats would give the King money and the promise of men for his army (this payment of money and men was called a ‘Fief’ in Latin, which when translated into English it becomes the word ‘Fee’… as in ‘to pay’).

These nobles and aristocrats would then rent the land to peasants in return for more money (making sure they made a profit of course) and the promise to enlist themselves and their peasants into the Kings Army (when requested during times of war). The more entrepreneurial peasants would then ‘sublet’ some of their land to poorer peasants to farm and so on and so forth.

The nobles and aristocrats owned the land, which could be passed on to their family (free from a fee i.e. freehold), while the peasants had the leasehold because, whilst they paid to use the land (i.e. they ‘leased it’ which is French for ‘paid for it’), they could never own it. Thus, Freehold and Leasehold were born (you will be pleased to know that in 1660 the Tenures Abolition Act removed the need of Freeholders to provide Armies for the Crown!).

4.3 million properties in the UK are leasehold

… and 41 properties in Wirksworth are leasehold. By definition, even when you have the leasehold, you don’t own the property (the freeholder does). Leasehold simply grants the leaseholder the right to live in a property for 99 to 999 years.

Apart from a handful of properties in the USA and Australia, England and Wales are the only countries of the world adhering to this feudal system style tenure. In Europe you own your apartment/flat by using a different type of tenure called Commonhold.

The average price paid for leasehold properties in Wirksworth over the last year is £166,217.

The two biggest issues with leasehold are firstly, as each year goes by and the length of lease dwindles, so does the value of the property (particularly when it gets below 80 years). The second is the payment of ‘ground rent’ – an annual payment to the freeholder.

Looking at the first point on the length of lease, the Government brought in the Leasehold Reform Act 1967, which allowed tenants of such leasehold property to extend their lease by upwards of 50 years. However, this was very expensive and as such only kicked the can down the road for half a century (when the owner would have to negotiate again to extend another 50 years – costing them more money, time and effort).

Ground rents on most older apartments are quite minimal and unobtrusive. The reason it has become an issue recently was the fact some (not all) new homes builders in the last decade started selling houses as leasehold with ground rents. The issue wasn’t the fact the property was sold as leasehold nor that it had a ground rent, it was that the ground rent increased at astronomical rates.

Many Wirksworth homeowners of leasehold houses are presently subject to ground rents that double every 10 years.

That’s okay if the ground rent is £200 a year today, yet by 2121, that would be £204,800 a year in ground rent, meaning the value of their property would almost be worthless in 100 years’ time.  One might say it allows for inflation, yet to give you an example to compare this against, if a Wirksworth leasehold property in 1921 had a ground rent of £200 per annum, and it increased in line with inflation over the last 100 years, today that ground rent would be £9,864 a year.

This is important because the majority of leasehold properties sold in Wirksworth during the last 12 months were apartments, selling for an average price of £166,217.

So, without reforms, the value of these Wirksworth homes will slowly dwindle over the coming decades. That is why the Government reforms announced recently will tackle the problem in two parts.

Firstly, ground rents for new property will effectively stop under new plans to overhaul British Property Law. Under the new regulations, it will be made easier (and cheaper) for leaseholders to buy the freehold of their property and take control by allowing them the right to extend the lease of their property to a maximum term of 990 years with no ground rent.

Secondly, in the summer, the Government will create a working group to prepare the property market for the transition to a different type of tenure. Last summer the Law Commission urged Westminster to adopt and adapt a better system of leasehold ownership – Commonhold. Commonhold rules allow residents in a block of apartments to own their own apartment, whilst jointly owning the land the block is sitting on plus the communal areas with the other apartment owners.

These potential leasehold rule changes will make no difference to those buying and selling second-hand Wirksworth leasehold property.

Yet, if you are buying a brand-new leasehold property, most builders are not selling them with ground rent (although do check with your solicitor). The only people that need to take any action on this now are people who are extending their lease. If you are thinking of extending the lease of your Wirksworth property before you sell to protect its value, your purchaser may prefer to buy on the existing terms and extend under the new (and better) ones later (meaning you lose out).

Like all things – it’s all about talking to your agent and negotiating the best deal for all parties. Should you have any questions or concerns, feel free to pick up the phone, message me or email me and let’s chat things through.

Christmas Eve brought the news that Boris Johnson had conclusively agreed on a Brexit deal for the UK with the European Union. This gave optimism that the economic turmoil of leaving the EU would be radically reduced, yet what will this ‘trade deal’ do to the value of your Matlock home and the mortgage payments you will have to make?

Since the summer, the Matlock property market has been booming, yet many commentators have cautioned that the momentum cannot last. With unemployment and the end of Stamp Duty Holiday  on 31st March, the Halifax reported last week that they believed UK house prices would drop by at least 2% (and in some areas 5%) in 2021.

I find it fascinating the Matlock property market has defied the doom and gloom swamping the wider British economy in the last seven months. The Matlock property market has profited from the large swell in demand from better-off existing Matlock households trying to buy larger Matlock houses (as they are required to work from home) together with the added benefit of saving money from the Stamp Duty Holiday.

Matlock house prices are 8.1% higher than a year ago, making our local authority area the 35th best performing (of the 396 local authorities) in the UK.

With the Brexit deal being voted through in the Commons on the 30th December, many say this will boost the property market just as the Government-backed measures supporting the property market come to an end. Yet, in the face of rising unemployment due to the pandemic, the Brexit deal may do little more than avoid uncertainty for the Matlock housing market.

What will happen to Matlock house prices?

The Matlock property market in 2019 was held back because of the uncertainty of the Brexit deal. In January 2020, we saw the demand released in the fabled ‘Boris Bounce’, only for buyer and seller activity to fall off a cliff in March during the first lockdown. It then took off like a rocket once lockdown was lifted. UK house prices are 4.19% higher today, year on year (although some areas are breaking the mould, like Aberdeen whose house prices have dropped by 5.1% and at the other end of the scale, Worcester’s house prices have increased by 11.9% year on year). A lot of that growth in UK property prices has been fuelled by buyers spending their stamp duty savings on the purchase price of their new home. Yet, it cannot be ignored.

Of the 30,100 workers in the Derbyshire Dales, 2,200 are still on furlough (although roughly 40% of those people are still only on part-time furlough).

When the furlough scheme ends in April 2021, unemployment is likely to rise to in excess of 11%, whilst the protection for the homeowners utilising mortgage holidays will finish. Piloting the rocky shoreline of the recession is more important than any Brexit deal for Matlock homeowners, buy-to-let landlords, buyers and sellers.

In April, the market will also be dealing with the end of the Stamp Duty Holiday, which is due to come to an abrupt halt on the 1st April 2021. Consequently, we will continue to see the house price index's show growth in the first half of 2021. They will then recede as the  prices of Matlock homes purchased after the 1st April 2021 reflect the lower price paid (because buyers would have had to pay for their stamp duty again). Therefore, probably by the end of 2021, the Halifax may be correct, and Matlock house prices will be 2% to 5% lower than they are today, simply because of the stamp duty.

What will happen to mortgage rates?

The real benefit from the Brexit deal is that there will be no tariffs on most goods coming into the UK. 52% of all goods imported into the UK are from the EU (totalling £374bn per annum). The UK Government were planning to add between 2% and 10% tariffs under World Trade Organisation rules on the vast majority of those goods. Price increases because of those tariffs would have fuelled inflation, meaning the Bank of England would have to increase interest rates. Although 77.2% of British mortgages are on fixed rates (paying an average of 2.16%), eventually those increased Bank of England rates would have fed through into higher mortgage payments. To show you how vital low interest rates are …

the average Matlock homeowners’ mortgage is £425.21pm, owing an average of £173,358.

Yet if interest rates rose only 1.5%, Matlock homeowners’ monthly mortgage payments would rise to £641.91pm, and if interest rates were at their 50-year average, then the mortgages payments would be an eye-watering £1,250.11pm (note all mortgage payment figures mentioned above are only for the interest element of the mortgage- the capital repayment element would be additional and variable depending on the length of mortgage).

As I have mentioned many times in the articles I have written about the Matlock property market, low interest rates are vital to ensure we don't have a property market crash. That's not to say just because they are at an all-time low of 0.1% to aid the economy that there won’t be some form of realignment of property prices later in the year (as mentioned above). Yet low interest rates mean people can still pay their mortgages, so there won't be panic selling. That would mean there won't be a flood of property come to the market (like there was in the 1988 and 2008 property crashes when interest rates were much higher), suggesting property prices should remain a lot more stable.