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Caley & Co
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WATFORD UNEMPLOYMENT DROPS TO 4.2% AND ITS EFFECT ON THE WATFORD PROPERTY MARKET

It was late May 2016, The Right Hon. Member for Tatton, Mr George Osborne, published an official HM Treasury analysis stating UK house prices would be lower by at least 10% (and up to 18%) by the middle of 2018 compared with what is expected if the UK remained in the European Union. So, eight months on from the Referendum, are we beginning to show signs of that prophecy? The simple answer is yes and no.

Looking at the most recent set of data from the Land Registry, property values in Watford are 1.97% down month on month (and the month before that, they had barely grown with an increase of only 0.65%) – so is this the time to panic and run for the hills?

Doom and Gloom then? Well, let me consider the other side of the coin.

Well, as I have spoken about many times in my blog, it is dangerous to look at short term. I have mentioned in several recent articles, the heady days of the Watford property prices rising quicker than a thermometer in the desert sun between the years 2011 and late 2016 are long gone – and good riddance. Yet it might surprise you during those impressive years of house price growth, the growth wasn’t smooth and all upward. Watford property values dropped by an eye watering 2.01% in July 2012 and 0.81% in November 2014 – and no one batted an eyelid then.

You see, property values in Watford are still 13.81% higher than a year ago, meaning the average value of a Watford property today is £438,400. The Office for Budget Responsibility, the Government Spending Watchdog, recently revised down its forecast for house-price growth in the coming years - but only slightly.
The Watford housing market has been steadfast partly because, so far at least, the wider economy has performed better than expected since Brexit. There is a robust link between the unemployment rate and property prices, and a flimsier one with wage growth. Unemployment in the Watford Borough Council area stands at 2,300 people (4.2%), which is considerably better than a few years ago in 2014 when there were 3,000 people unemployed (5.6%) in the same council area.

However, inflation is the only thing that does worry me. Looking at all the pundits, it will get to at least 3% (if not more) in the latter part of 2017 as the drop in Sterling in late 2016 renders our imports with higher prices. If that transpires then the Bank of England, whose target for inflation is 2%, may raise interest rates from 0.25% to 2%+. However, that won’t be so much of an issue as 81.6% of new mortgages in the UK in the last two years have been fixed-rate and who amongst us can remember 1992 with Interest rates of 15%!

Forget Brexit and yes inflation will be a thorn in the side – but the greatest risk to the Watford (and British) property market is that there are simply not enough properties being built thus keeping house prices artificially high. Good news for those on the property ladder, but not for those first-time buyers that aren’t!
http://www.caleyandco.com/…/watford-unemployment-and-its-p…/
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“HOW MUCH WOULD IT COST TO BUY ALL THE PROPERTIES IN WATFORD?”

This fascinating question was posed by the 11-year-old son of one of my Watford landlords before the Christmas break (doesn’t that seem an age away now!). I thought to myself, that over the Christmas break, I would sit down and calculate what the total value of all the properties in Watford are worth … and just for fun, work out how much they have gone up in value since his son was born back in the autumn of 2005.
In the last 11 years, since the autumn of 2005, the total value of Watford property has increased by 85% or £11.87 billion to a total of £25.83 billion. Interesting, when you consider the FTSE100 has only risen by 30.78% and inflation (i.e. the UK Retail Price Index) rose by 37% during the same 11 years.
When I delved deeper into the numbers, the average price currently being paid by Watford households stands at £486,096.… but you know me, I wasn’t going to stop there, so I split the property market down into individual property types in Watford; the average numbers come out like this ..
READ MORE HERE: http://www.caleyandco.com/general/total-value-of-all-watford-property/
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£88m a year black hole in the watford property market - is buy to let immoral? (part 2)

An Englishman’s Home is His Castle as Maggie Thatcher lauded - everyone should own their own home. In 1971, around 50% of people owned their own home and, as the baby-boomers got better jobs and pay, that proportion of homeowners rose to 69% by 2001. Homeownership was here to stay as many baby boomers assumed it’s very much a cultural thing here in Britain to own your own home.

But on the back of TV programmes like Homes Under the Hammer, these same baby boomers started to jump on the band wagon of Watford buy to let properties as an investment. Watford first time buyers were in competition with Watford landlords to buy these smaller starter homes … pushing house prices up in the 2000’s (as mentioned in Part One) beyond the reach of first time buyers. Alas, it is not as simple as that. Many factors come into play, such as economics, the banks and government policy. But are Watford landlords fanning the flames of the Watford housing crisis bonfire?

I believe that the landlords of the 8,884 Watford rental properties are not exploitive and are in fact, making many positive contributions to Watford and the people of Watford. Like I have said before, Watford (and the rest of the UK) isn’t building enough properties to keep up the demand; with high birth rate, job mobility, growing population and longer life expectancy.

According to the Barker Review, for the UK to standstill and meet current demand, the country needs to be building 8.7 new households each and every year for every 1,000 households already built. Nationally, we are currently running at 5.07 per thousand and in the early part of this decade were running at 4.1 to 4.3 per thousand.

It doesn’t sound a lot of difference, so let us look at what this means for Watford …

For Watford to meet its obligation on the building of new homes, Watford would need to build 467 households each year. Yet, we are missing that figure by around 195 households a year.

For the Government to buy the land and build those additional 195 households, it would need to spend £88,077,323 a year in Watford alone. Add up all the additional households required over the whole of the UK and the Government would need to spend £23.31bn each year … the Country hasn’t got that sort of money!

With these problems, it is the property developers who are buying the old run-down houses and office blocks which are deemed uninhabitable by the local authority, and turning them into new attractive homes to either be rented privately to Watford families or Watford people who need council housing because the local authority hasn’t got enough properties to go around.

The bottom line is that, as the population grows, there aren’t enough properties being built for everyone to have a roof over their head. Rogue landlords need to be put out of business, whilst tenants should expect a more regulated rental market, with greater security for tenants, where they can rely on good landlords providing them high standards from their safe and modernised home. As in Europe, where most people rent rather than buy, it doesn’t matter who owns the house – all people want is a clean, decent roof over their head at a reasonable rent.

So only you, the reader, can decide if buy to let is immoral, but first let me ask this question - if the private buy to let landlords had not taken up the slack and provided a roof over these people’s heads over the last decade .. where would these tenants be living now? ….. because the alternative doesn’t even bear thinking about!
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WATFORD’S PRIVATE RENTING SET TO HIT 12,526 HOUSEHOLDS BY 2021 - IS BUY TO LET IMMORAL? (PART 1)

Can we blame the 55 to 70-year-old Watford citizens for the current housing crisis in the town?

Also known as the ‘Baby Boomer Generation’, these Watford people were born after the end of the Second World War as the country saw a massive rise in births as they slowly recovered from the economic hardships experienced during wartime.

Throughout the 1970’s and 1980’s, they experienced (whilst in their 20’s, 30’s and 40’s) an unparalleled level of economic growth and prosperity throughout their working lifetime on the back of improved education, government subsidies, escalating property prices and technological developments, they have emerged as a successful and prosperous generation.

...Yet some have suggested these Watford baby boomers have (and are) making too much money to the detriment of their children, creating a ‘generational economic imbalance’, where mature people benefit from house-price growth while their children are forced either to pay massive rents or pay large mortgages.

Between 2001 and today, average earnings rose by 65%,
but average Watford house prices rose by 177.4%

The issue of housing is particularly acute with the generation called the Millennials, who are young people born between the mid 1980’s and the late 1990’s. These 18 to 30 years, moulded by the computer and internet revolution, are finding as they enter early adult life, very hard to buy a property, as these ‘greedy’ landlords are buying up all the property to rent out back to them at exorbitant rents ... it’s no wonder these Millennials are lashing out at buy to let landlords, as they are seen as the greedy, immoral, wicked people who are cashing in on a social despair.

Like all things in life, we must look to the past, to appreciate where we are now.

The three biggest influencing factors on the Watford (and UK) property market in the later half of the 20th Century were, firstly, the mass building of Council Housing in the 1950’s and 60’s. Secondly, for the Tory’s to sell most of those Council Houses off in the 1980’s and finally 15% interest rates in the early 1990’s which resulted in many houses being repossessed. It was these major factors that underpinned the housing crisis we have today in Watford.

To start with, in 1995 the USA relaxed its lending rules by rewriting the Community Reinvestment Act. This Act saw a relaxation on the Bank’s lending criteria’s as there was pressure on these banks to lend on mortgages in low wage neighbourhoods, as the viewpoint in the USA was that anyone (even someone on the minimum wage) any working class person should be able to buy a home. Unsurprisingly, the UK followed suit in the early 2000’s, as Banks and Building Society’s relaxed their lending criteria and brought to the market 100% mortgages, even Northern Rock started lending every man and his dog 125% mortgages.

So when we roll the clock forward to today, and we can observe those very same footloose banks from the early/mid 2000’s (that lent 125% with a just note from your Mum and a couple of breakfast cereal tokens), ironically reciting the Bank of England backed hymn-sheet of responsible-lending. On every first time buyer mortgage application, they are now looking at every line on the 20-something’s banks statements, asking if they are spending too much on socialising and holidays ... no wonder these Millennials are afraid to ask for a mortgage (as more often than not after all that – the answer is negative).

Conversely, you have unregulated Buy To Let mortgages. As long as you have a 25% deposit, have a pulse, pass a few very basic yardsticks and have a reasonable job, the banks will literally throw money at you ... I mean Virgin Money are offering 2.99% fixed for 3 years – so cheap!

So, in Part Two next week, I will continue this emotive article and show you some very interesting findings on why young people aren’t buying property anymore (and it’s not what you think!).

For more articles go to http://www.caleyandco.com/blog/
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WATFORD OAP’S SITTING ON £5.23 BN OF PROPERTY

Watford people aged over 65 currently hold more housing wealth in their homes than the annual GDP of the whole of Luton … and this is a problem for everyone in Watford!

Many retiree’s want to move but cannot, as there is a shortage of such homes for mature people to downsize into. Due to the shortage, bungalows command a 10% to 20% premium per square foot over houses of the same size with stairs. To add to the woes, in 2014, just 1% of new builds in the UK were bungalows, according to the National House Building Council - down from 7% in 1996.

My research has found that there are 11,578 households in Watford owned outright (i.e. no mortgage) by over 65 year olds. Taking into account the average value of a property in Watford, this means £5.23 billion of equity is locked up in these Watford homes, compared to the GDP of the whole of nearby Luton being £4.5 billion of GDP.

A recent survey by YouGov, found that 36% of people aged over 65 in the UK are looking to downsize into a smaller home. However, the Government seems to focus all its attention on first-time buyers with strategies such as Starter Homes to ensure the youngsters of the UK don’t become permanent members of ‘Generation Rent’. Conversely, this overlooks the chronic under-supply of appropriate retirement housing essential to the needs of the Watford’s rapidly ageing population. Regrettably, the Watford’s housing stock is woefully unprepared for this demographic shift to the 'stretched middle age’, and this has created a new 'Generation Trapped’ dilemma where older people cannot move.

Some OAP’s who are finding it difficult to live on their own, are unable to leave their bungalow because of a lack of sheltered housing and ‘affordable’ care home places. So, older retirees can't leave bungalows, younger retirees can't buy bungalows and younger people can't buy family houses.

Interestingly, adding insult to injury, the problem will only get worse, as in the 50 year old to 64 year old homeownership age range there are an additional 7,789 Watford households that are mortgage free and a further 8,929 Watford households who will be completing their mortgage responsibility. With Government projections showing the proportion of over 65’s will rise by over a third from the current 17.7% to 24.3% of the population in the next 20 years ... this can only add greater pressure to the Watford Property market.

House prices have rocketed over the last 40 years because the supply of property has not kept up with demand. With migration, people living longer and high divorce rates (meaning one family becomes two) we need, as a Country, 240,000 properties to be built a year to just stand still. In the 1990’s and early 2000’s, the Country was building on average 180,000 to 190,000 households a year, but since the Credit Crunch (2009), that has only been between 130,000 and 145,000 households a year.

The solution …. release more land for starter homes, bungalows and sheltered accommodation because land prices are killing the housing market as the large firms dominating the construction industry are more likely to focus on traditional houses and apartments. My opinion – until the Government change the planning rules and allow more land to be built on – Bungalows could be a decent bet for future investment as they continue to attract ever growing premiums?

For more information on The Watford Property Market visit out blog - http://www.caleyandco.com/blog/
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WATFORD SEMI DETACHED HOUSE PRICES RISE BY 441% IN 20 YEARS

The semi-detached house with its bay windows and net curtains has long been ridiculed as an emblem of safe, lacklustre and desperately uncool suburban life; the homes of the likes of Hyacinth Bucket in Keeping up Appearances and more latterly Alan Partridge – but they could have the last laugh - having enjoyed one of the highest price growths of any property type in Watford, up by an average 441% increase in the last twenty years.

The semi can now laugh in the face of its posher detached counterpart, which saw a rise of only 367% in the same 20-year period. Looking at smaller properties, flats/apartments only rose 373%, whilst terraced houses did better at 475% (although they were starting from a lower base and demand from buy to let landlords has had a big part in driving the values on that type of house (i.e. the price a buy to let landlord is prepared to pay is driven by the rent the landlord can achieve).

In 1996 the average value of a Watford semi stood at £94,600,
today it stands at £511,800

Such is the attractiveness of semis, which are cheaper than detached houses but have most of the same benefits for families. Semi-detached houses were built in their hundreds of thousands by the Victorians and Edwardians between the wars and through to the present day. Interestingly in the late 19th Century and early 20th century – they often weren’t referred to as semi-detached – but as villas!

So whilst Europeans live on top of each other in apartments us British chose, in the late Victorian and early Edwardian times, suburban comfort, being near … but not too near, the neighbours! I once heard someone say the semi-detached house was a peculiar crossbreed that doesn’t stand on its own — it is inseparable from its neighbour — yet somehow still embodies a dream of suburban independence.

Nearly one in three houses in Watford is a semi-detached house

There are 16,615 semi-detached properties in Watford and they represent 31.09% of all the households in Watford. Watford has such a mix of semi-detached properties with the older classic bay fronted semis to more modern ones built in the last couple of decades. Especially with the older ones, the semi offered a hall to provided separation between the reception rooms and privacy for their occupants. Also the downstairs offered larger rooms to accommodate dining tables, whilst upstairs, bedrooms were smaller, yet cosy.

However, probably the most overlooked aspect of popularity for semis is the garden. The front garden, designed to separate the house from the world, and the back garden designed for private relaxation. The semi in the suburbs was relaxing, well presented, plumbed and enhanced by a garden so that when a window was opened the air had a chance of being genuinely fresh… and it’s for all those reasons why 276 semi-detached houses have been sold in Watford in the last 12 months alone. Still as popular today as they were with the Victorians all those years ago – some things just stand the test of time!

For more on the Watford Property Market......
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WATFORD PROPERTY MARKET – Q4 UPDATE

Well, hasn’t 2016 been eventful. The ups and downs of Brexit, the Queen’s 90th, Andy Murray winning Wimbledon, Trump, Bake Off to Channel 4 and something close to the hearts of every buy to let landlord and homeowner in Watford ... the Watford property market.

So, let’s look at the headlines for the Watford property market...

In the last month, Watford property values rose by 1.22%, leaving them, year on year 17.9% higher, whilst interestingly, Watford asking prices are down 2.0% month on month. All three statistics go to show the Watford property market has recovered well after the summer lull, which was worsened by the uncertainty surrounding the EU vote back in June. Irrespective of all the issues, the average value of a Watford home now stands at £445,600.



Generally, Watford asking prices continue to hold up well, as asking prices are 5.8% higher year on year. At this time of year, asking prices tend to drop on the run up to Christmas and locally, they have dropped by 2.0% this month (November 2016), although this compares well with last year’s drop in Watford asking prices, as we saw asking prices drop by 0.3% in November 2015.

Now it’s true to say, after chatting with fellow property professionals in Watford, all of us have seen the number of property sales fall slightly, suggesting a slowing market, but it is very early days and it could be the time of year. Also, the numbers are limited, so it’s interesting to take note from a recent survey by the Royal Institution of Chartered Surveyors, stating new buyer enquiries and new instructions are falling at the same rate, suggesting that there will not be a downward pressure on property values.

Looking at the figures for the UK (as we can’t just look at Watford in isolation), property values are generally rising slower than a few years ago, but on a positive note, there's still growth across the UK. You see, slowing property value growth isn't solely Brexit related, but after a number years of double digit rises in property values, affordability has weakened and cooling price growth is widely seen to be a natural correction of the market.

On the other hand, interest rates being at a record low of 0.25% are helping the property market. The cut in interest rates in the late summer was the medicine for the post-Brexit worry and will, as a consequence, ensure that the UK economy continues to be underpinned by buoyant property prices.

So, what will happen in 2017 in the Watford property market?

Some say until we know what type of exit the UK will make from the EU it is hard to evaluate the outcome. Although, I believe, the whole Brexit issue is a sideshow to the main issue in the UK (and Watford) housing market as a whole. As I have mentioned time and time again over the last few months, the biggest issue is demand outstripping supply when it comes to the number of households required to house us all. Watford has an ever-growing population: with immigration (we still have at least two years of free movement from EU members into the UK), people living longer and the fact we need thousands of additional households as the country has nearly 115,000 divorces a year (where one household becomes two households). These are interesting times ahead!

For more updates on the Watford Property Market go to:
http://www.caleyandco.com/blog/
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