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The degree to which young Docklands people are locked out of the Docklands housing market has been revealed in new statistics.
A Docklands landlord was asking me the other week to what effect homeownership rates in Docklands in the early to middle aged adult age range had affected the demand for rental property in Docklands since the Millennium. I knew anecdotally that it affected the Docklands rental market, but I wanted some cold hard numbers to back it up. As you know, I like a challenge when it comes to the stats.. so this is what I found out for the landlord, and I’d like to share them with you as well.
As anyone in Docklands, and most would say those born more recently, are drastically less likely to own their own home at a given age than those born a decade earlier, let’s roll the clock back to the Millennium and compare the figures from then to today.
In the year 2000, 23.6% of Docklands 28-year olds (born in 1972) owned their own home, whilst a 28 year old today born in 1990) would have a 12.6% chance of owning their own home. Next, let’s look at someone born ten years before that. So, going back to the Millennium, a 38 year Docklands person (therefore born in 1962) would have a 34.8% chance of owning his or her own home and a 38 year today in Docklands (born in 1980) would only have a 27.1% chance of owning their own home.
Since the Millennium, overall general homeownership in the 25 to 44 year old age range in Docklands has reduced from 32.19% to 23.28%
If you look at the graph below, split into the four age ranges of 25 year olds (yo) to 29yo, 30yo to 34yo, 35yo to 39yo and finally 40yo to 44 yo, you will quite clearly see the changes since the Millennium in Docklands. The fact is the figures in Docklands show the homeownership rate has proportionally fallen the most for the youngest (25yo to 29yo) age range compared to the other age ranges.
The landlord suggested this deterioration in homeownership in Docklands across the age groups could be down to the fact that more of those born in the 1980’s and 1990’s (over those born in the 60’s and 70’) are going to University and hence entering the job market at an older age or those young adults are living with their parents longer.
I read some national homeownership statistics of different age groups with the same number of years after they left education (rather than at the same age) and that gave an identical dip to the graph above.  Neither are these drops in homeownership related with a significant increase in the number of young adults living with their parents. Again, nationally, that has hardly changed over the last 20 years as the percentage of 30-year-olds living with Mum and Dad only increased from 22% of those born in the early ‘70s to 23% of those born in the early ‘80s.
So, what does this mean for the rental market in Docklands?

Only one thing .. with the local authority not building Council houses, Housing Associations strapped for cash to build new properties and the younger generation not buying, there is only one way these youngsters can obtain a roof over their head and have a home of their own .. through the private landlord sector. Now with the new tax rules and up and coming licensing rules, Docklands landlords will have to work smarter to ensure they make the investment returns they have in the past. If you ever want to pick my brains on the future direction of the Docklands rental market .. drop me line or pop in next time you are passing my office.

A little bit of good news this week on the Docklands Property Market as recently released data shows that the number of first time buyers taking out their first mortgage in 2017 increased more than in any other year since the global financial crisis in 2009. The data shows there were 208 first time buyers in Docklands, the largest number since 2006.
I expect in 2018 that this increase of first time buyers will level out and maybe dip slightly as, nationally, figures demonstrate that first time buyer’s average household income was £40,691 and this represented 17.3% of their take home pay. Although, it might surprise readers that it is actually cheaper to buy than it is to rent at the ‘starter home’ end of the housing market. Many of you can remember mortgage rates at 12% ... even 15%. Today, at the time of writing this article, I found on the open market, 189 first time buyer mortgages at 95% (meaning only a 5% deposit was required) with 3 year fixed rates from a reputable High Street bank at 2.49% ... they even did a 3 year fixed rate 100% mortgage for 2.89%!
Interestingly, looking at the other end of the market, the buy-to-let investment in Docklands was subdued, with only 43 buy-to-let properties being purchased with a mortgage. However, I must stress, whilst there is no hard and fast data on the total numbers of landlords buying buy-to-let, as HM Treasury believes only 30% to 40% of buy-to-let property is bought with a mortgage. This means there would have been further cash only buy-to-let purchases in Docklands – it’s just that the data isn’t available at such a granular level.
In terms of the level of mortgage debt in Docklands, looking specifically at the E14 postcode, as you can see from the graph there has been a steady rise in borrowing over the last few years.


This is pleasing to see, as new mortgage debt is created by first time buyers, buy-to-let landlords and home movers themselves, that is being roughly equalled by the amount being paid off with mature mortgaged homeowners in their 50’s and 60’s finally paying off their mortgage.
So, what does all this mean for the Docklands Property Market?  Well, the stats paint a picture, but they don’t inform us of the whole story. The upper end of the Docklands property market has been weighed down by the indecision around the Brexit negotiations and rise in stamp duty in 2014, when made it considerably more expensive to buy a home costing more than £1m. The middle part of the Docklands property market has been affected by issues of mortgage affordability and lack of good properties to buy, as selling prices have reached the limit of what buyers can afford under existing mortgage regulations. The lower to middle Docklands property market was hit by tax changes for buy-to-let landlords, although this has been offset by the increase in first time buyers.
If you are in the market and selling now and want to ensure you get your Docklands property sold, the bottom line is you have to be 100% realistic with your pricing from day one and you might not get as much as you did say a year ago (but the one you want to buy will be less – swings and roundabouts?). I know it’s not comfortable hearing that your Docklands home isn’t worth as much as you thought, but Docklands buyers are now unbelievably discerning.

So, if you are thinking of selling your Docklands property in the coming months, don’t ask the agent out a few days before you want to put the property on the market, get them out now and ask them what you need to do to ensure you get maximum value in the shortest possible time. I, like most Docklands agents, will freely give that advice to you at no cost or commitment to you.

Yes, I said ‘rentirement’, not retirement ... rentirement and it relates to the 520 (and growing) Docklands people, who don’t own their own Docklands home but rent their home, privately from a buy to let landlord and who are currently in their 50’s and early to mid-60’s.
The truth is that these Docklands people are prospectively soon to retire with little more than their state pension of £155.95 per week, probably with a small private pension of a couple of hundred pounds a month, meaning the average Docklands retiree can expect to retire on about £200 a week once they retire at 67.
The average rent in Docklands is £1,951 a month, so a lot of the retirement “income” will be taken up in rent, meaning the remainder will have to be paid for out their savings or the taxpayer will have to stump up the bill (and with life expectancy currently in the mid to late 80’s, that is quite a big bill …  a total of £243,484,800 over the next 20 years to be paid from the tenant’s savings or the taxpayers coffers to be precise!
You might say it’s not fair for Docklands tax payers to pick up the bill and that these mature Docklands renters should start saving thousands of pounds a year now to be able to afford their rent in retirement.  However, in many circumstances, the reason these people are privately renting in the first place is that they were never able to find the money for a mortgage deposit on their home in the first place, or didn’t earn enough to qualify for a mortgage …and now as they approach retirement with hope of a nice council bungalow, that hope is diminishing because of the council house sell off in the 1980’s!
For a change, the Docklands 30 to 40 somethings will be better off, as their parents are more likely to be homeowners and cascade their equity down the line when their parents pass away.  For example, that is what is happening in Europe where renting is common, the majority of people rent in their 20’s, 30’s and 40’s, but by the time they hit 50’s and 60’s (and retirement), they will invest the money they have inherited from their parents passing away and buy their own home.
So, what does this all mean for buy to let landlords in Docklands?
Have you noticed how the new homes builders don’t build bungalows anymore ... in fact some would said the ‘bungalow storey’ is over.  The waning in the number of bungalows being built has more to do with supply than demand.  The fact is that for new homes builders there is more money in constructing houses than there is in constructing bungalows.  Bungalows are voracious when it comes to land they need as because bungalow has a larger footprint for the same amount of square meterage as a two/three storey house due to the fact they are on one level instead of two or three.

That means, as demand will continue to rise for bungalows supply will remain the same.  We all know what happens when demand outs strips supply … prices (i.e. rents) for bungalows will inevitably go up. 
As our families grow bigger the need for more space, be that bedrooms or reception rooms, has grown with it. Also, as our older generation lives longer and nursing home bills continue to rise quicker than a rocket on the 5th of November  (the average nursing home bill in the area being £862.50 per week) many families are bringing two households into one larger one.
So, should you move somewhere larger, or extend your Docklands property to make it large enough for you and your family? In some circumstances the choice has been made for you. If you live in an apartment with no garden, there isn’t much of an opportunity of making it larger. But if you have a house with a garden or an attic with sufficient headroom, extending your home becomes a real prospect.
Even if it makes more sense to extend or move, the choice hangs on a number of different dynamics – your future plans, money (both saved and access to finance), in what way you are emotionally attached to your home, the particular area of Docklands you live in and finally, the type/style of house you prefer.
Interestingly, the average British home is 968 sq.ft, which as you can see from the table, is in the middle of developed nations when it comes to the size of a property. Of the 1.11m homes sold in 2016 in England and Wales, the average floor area of the houses was 1,119 sq.ft – that’s about an eighth the size of an Olympic sized swimming pool. Apartments averaged 530 sq.ft that’s just over ten times bigger than an average garden shed. Looking at apartments and houses together, the average size of properties sold in England and Wales 968 sq.ft  – are slightly smaller than the European average, and much smaller than households in the US. 
So back to the question in hand.. extending does mean you will have a lot of inconvenience whilst the work is being carried out. The location of your Docklands property, the quality of construction, what type of room(s) you want to add, your plot, neighbouring building lines, planning regulations and the overall demand for your type of Docklands home, will make a vast difference to the financial repercussions of extending versus moving.
A medium-sized 270 sq.ft single storey extension (say around 17ft x 16ft) will add on average £160,950 to the value of a property in Docklands
It’s important to note the end result of the extension needs to be a sensible and realistic home. A two bed semi-detached house extended to a four bedrooms with no lawn or driveway, or a home with outsized reception rooms downstairs and miniscule bedrooms upstairs, could be problematic if  and when you come to sell your home in the future. Irrespective of whether your strategy is to live in your extended home for a long time, you will want to side-step outlaying a lot of money on costly building work that will make it tougher to sell.
In terms of what it would cost to build an extension, you can expect to pay on average between £140 to £200 per sq.ft, depending whether the extension is a single or double storey extension and other factors including finish and type of extension (note – I have seen it cost a lot more than these figures – so please speak with a builder) … So taking a mid line figure, that same 270 sq.ft extension on your Docklands home would cost on average £55,080.
However, moving means there are substantial costs incurred - Estate Agency fees, Removal Van, Survey Fees, Legal fees and Stamp Duty on the property you are buying. Neither option is the obvious choice and comparing the costs of extending your Docklands home to that of moving is not a stress-free undertaking.
How realistic each option is will probably come down to one thing .. your mortgage provider. You will need a considerable sum of equity in your Docklands home before you can think of increasing your mortgage more, because most lenders will require you to have at least 10% to 20% equity left in your property after the extension or move has been done.
The best advice I can give .. don’t assume anything …. get advice and opinion from builders, mortgage brokers, architects, mortgage people and of course… an agent. Look at your options and make an educated decision with all the superficial and objective facts in front of you.
As I am sure you are aware, one the best things about my job as an agent is helping Docklands landlords with their strategic portfolio management. Gone are the days of making money by buying any old Docklands property to rent out or sell on. Nowadays, property investment is both an art and science. The art is your gut reaction to a property, but with the power of the internet and the way the Docklands property market has gone in the last 11 years, science must also play its part on a property’s future viability for investment.
Many metrics most property professionals (including myself) use when deciding the viability of a rental property is what properties are selling for, the average rent, the yield and an average value per square foot.
However, another metric I like to use is the average rent per square foot. The reason being is that is a great way to judge a property from the point of view of the tenant ... what space they get for their money. Now of course, location (location, location in a Phil and Kirstie style) has a huge influencing factor when it comes to rents (and hence rent per square foot). Like people buying a property, tenants also have that balancing act between better/worse location, more vs. less money and size of accommodation (bigger and more rooms equalling more money) and where they live (location) verses making ends meet.
Interestingly, I know there are a lot of you in Docklands who like to see my statistics on the Docklands property market, so before I talk about the rental figures per square foot, I wanted to share the £ per square foot on the values. In Docklands, the current AVERAGE figures are being achieved (and I must stress, these are average figures, so there will an enormous range in these figures), but on average, properties in Docklands, split down by type are achieving …
·         Docklands Detached Property - £624 / sq ft
·         Docklands Semi Detached Property - £641 / sq ft
·         Docklands Terraced Property - £628 / sq ft
·         Docklands Apartments - £761 / sq ft
So, the rental figures:
The extent of space you get for your rent is replicated in the space you get for your money when buying a property. The average size of rental property in the Docklands area is 728.4 sq ft (interesting when compared to the national average of 792.1 sq ft)
This means the average rent per square foot currently being
achieved on a Docklands rental property is £32.45 per sq ft per annum
So, what we can deduce from this?  Well the devil is always in detail!
Whilst I was able to quote the average overall figure and the fact my research showed it was quite clear from data that there is relationship between the average £ per sq ft figures on property values and average £ per sq ft on rental figures as a property grows in size. However, something quite intriguing happens to those figures, in terms of what the property will sell for and what it will rent for, when we change and increase the size of the property.
My research showed that doubling the size of any Docklands property doesn’t mean you will double the value of it … in either value or rent. This is because the marginal value increases diminish as the size of the property increases. In layman’s terms … Subject to a few assumptions, double the size of the house doesn’t mean double the value … what really happens is a doubling of the size gives only an approximately 40% to 65% uplift in value, but here comes the even more fascinating part… when it came to the rental figures, double the size of the house meant only 20% to 45% in increase in rent.
In a future article, I will be discussing the actual added value an extension can bring ... but in the meantime, in an overall and sweeping statement, most of the time it makes sense to extend if you are going to live in the property as long as the extension is proportionate to the property, but if you are going to rent it out ... possibly not.
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