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More than 3 babies have been born for every new home that has been built in Tower Hamlets since 2012, deepening the Docklands housing shortage.

This discovery is an important foundation for my concerns about the future of the Docklands property market - when you consider the battle that todays twenty and thirty somethings face in order to buy their first home and get on the Docklands property ladder. This is particularly ironic as these Docklands youngsters’ are being born in an age when the number of new babies born to new homes was far lower.

This will mean the babies being born now, who will become the next generation’s first-time buyers will come up against even bigger competition from a greater number of their peers unless we move to long term fixes to the housing market, instead of the short term fixes that successive Governments have done since the 1980’s.

Looking at the most up to date data for the area covered by Tower Hamlets Council, the numbers of properties-built versus the number of babies born together with the corresponding ratio of the two metrics …





It can be seen that in 2016, 2.98 babies had been born in Tower Hamlets for every home that had been built in the five years to the end of 2016 (the most up to date data). Interestingly, that ratio nationally was 2.9 babies to every home built in the ‘50s and 2.4 in the ‘70s. I have seen the unaudited 2017 statistics and the picture isn’t any better! (I will share those when they are released later in the year).

Our children, and their children, will be placed in an unprecedented and unbelievably difficult position when wanting to buy their first home unless decisive action is taken. You see it doesn’t help that with life expectancy growing year on year, this too is also placing excessive pressure on homes to live in availability, with normal population growth nationally (the number of babies born less the number of people passing away) accumulative by two people for every one home that was built since the start of this decade.

Owning one’s home is a measure many Brits to aspire to. The only long-term measure that will help is the building of more new homes on a scale not seen since the 50’s and 60’s, which means we would need to aim to at least double the number of homes we build annually.

In the meantime, what does this mean for Docklands landlords and homeowners? Well the demand for rental properties in Docklands in the short term will remain high and until the rate of building grows substantially, this means rents will remain strong and correspondingly, property values will remain robust.



The simple fact is we are not building enough properties. If the supply of new properties is limited and demand continues to soar with heightened divorce rates, i.e. one household becoming two, people living longer and continued immigration, this means the values of those existing properties continues to remain high and out of reach for a lot of people, especially the blue collar working families of Docklands.

Looking at some recent statistics released by the Government, the ratio of the lower quartile house prices to lower quartile gross annual salaries in Tower Hamlets London Borough Council has hit 11.66 to 1. 

What does that mean exactly and why does it matter to Docklands landlords and homeowners?

If we ordered every property in the Tower Hamlets London Borough Council area by the value of those properties, the average value of the lower quartile properties (i.e. lowest 25%) would be £380,000. If we then did the same, and ordered everyone’s salary in the same council area, the average of the lowest quartile (lowest 25%), the average salary of the lowest 25% is £32,603 pa, thus dividing one with the other, we get the ratio of 11.66 to 1.

Assuming there is one wage earner in the house, the chances of a Docklands working family being able to afford to buy their own home, when it’s over eleven times their annual salary, is very slim indeed. The existing affordability crisis of people wanting to buy their own home is the unavoidable outcome of the decade on decade failure to build enough homes to keep up with demand. Nevertheless, improving affordability is not a case of just constructing more homes. Tower Hamlets London Borough Council needs to ensure more properties are not only built, but built in the right locations and of the right type and at the right price to ensure the needs of these lower income working families are met, because at the moment, they presently have few options apart from the private rental sector.

Looking at the historic nature of the ratio, it can clearly be seen in the graph below that this has been an issue since the early to mid 2000’s.




However, if one looks at the historic data, those on the bottom rung of the ladder (those in the lower quartile of wage earners) used to be housed by the local authority instead of buying. However, the vast majority of council houses were sold off in the 1980’s, meaning there are much fewer council houses today to house this generation.

Many of the lower quartile working class families were given a lifeline to buy their own homes in middle 2000’s, with 100% mortgages, but the with the credit crunch in 2009, that rug (of 100% mortgages) was rudely pulled from under their feet. You see it is cheaper to buy than rent ... it’s the finding of the 5% deposit that is the challenging issue for these Docklands working class families. So unless the Government allow 100% mortgages back, the fact is, demand for rental properties will outstrip supply.

In the long term, to alleviate that, I would suggest the Docklands community hold their local politicians at Tower Hamlets London Borough Council to account for the actions they could take to ensure the affordability of housing and the extent to which they work with private developers and housing associations and aggressively use the planning tools at their disposal to safeguard the local community getting the new households we need. Tower Hamlets London Borough Council could make certain parcels of residential building land for private rented development only, eliminating the opportunity of the land being bought to develop large executive homes, which do not solve the current problem. 

Yet in the short term, all this means is demand for rental properties will continue to grow, keeping Docklands house prices high and Docklands rents high.


In my blog about the Docklands Property Market I mostly only talk about two of the three main sectors of the local property market, the ‘private rented sector’ and the ‘owner occupier sector’. However, as I often stress when talking to my clients, one cannot forget the third sector, that being the ‘social housing sector’ (or council housing as some people call it).

In previous articles, I have spoken at length about the crisis in supply of property in Docklands (i.e. not enough property is being built), but in this article I want to talk about the other crisis – that of affordability. It is not just about the pure number of houses being built but also the equilibrium of tenure (ownership vs rented) and therein, the affordability of housing, which needs to be considered carefully for an efficient and effectual housing market.

An efficient and effectual housing market is in everyone’s interests, including Docklands homeowners and Docklands landlords, so let me explain ..
An average of only 1,151 Affordable Homes per year have been built by London Borough of Tower Hamlets Council in the last 9 years
The requirement for the provision of subsidised housing has been recognised since Victorian times. Even though private rents have not kept up with inflation since 2005 (meaning tenants are better off) it’s still a fact there are substantial numbers of low-income households in Docklands devoid of the money to allow them a decent standard of housing.
Usually, property in the social housing sector has had rents set at around half the going market rate and affordable shared home ownership has been the main source of new affordable housing yet, irrespective of the tenure, the local authority is simply not coming up with the numbers required. If the local authority isn’t building or finding these affordable homes, these Docklands tenants still need housing, and some tenants at the lower end of the market are falling foul of rogue landlords. Not good news for tenants and the vast majority of law abiding and decent Docklands landlords who are tarnished by the actions of those few rogue landlords, especially as I believe everyone has the right to a safe and decent home.
Be it Tory’s, Labour, SNP, Lib Dems, Greens etc, everyone needs to put party politics aside and start building enough homes and ensure that housing is affordable. Even though 2017 was one of the best years for new home building in the last decade (217,000 home built in 2017) overall new home building has been in decline for many years from the heady days of the early 1970s, when an average of 350,000 new homes were being built a year.  As you can see from the graph, we simply aren’t building enough ‘affordable’ homes in the area.
 
 
The blame cannot all be placed at the feet of the local authority as Council budgets nationally, according to Full-Fact, are 26% lower than they have been since 2010.
So, what does this mean for Docklands homeowners? Well, an undersupply of affordable homes will artificially keep rents and property prices high. That might sound good in the short term, but a large proportion of my Docklands landlords find their children are also priced out of the housing market. Also, whilst your Docklands home might be slightly higher in value, due to this lack of supply of homes at the bottom end of the market, as most people move up the market when they do move, the one you want to buy will be priced even higher.
Problems at the lower end of the property market will affect the middle and upper parts. There is no getting away from the fact that the Docklands housing market is all interlinked .. it’s not called the Property ‘Ladder’ for nothing!

 
A noteworthy number of buy to let landlords in Britain plan to buy more properties over the next year notwithstanding the frustrations, challenges and seismic changes in the private rented sector. According to Aldermore, the specialist Buy To Let lender, their research shows around 41% of portfolio buy to let landlord’s objective is to grow their buy to let portfolio (Portfolio landlords are landlords that own more than one property).
So, I thought, “Are Docklands landlords feeling the same?” If so, if these numbers were applied to the Docklands private rental market, what sort effect would it have on the Docklands property market as whole?
Talking to the landlords I deal with, most are feeling quite optimistic about the future of the Docklands rental market and the prospect it presents notwithstanding the doom and gloom prophecies that the property market will shrink. Many of those Docklands landlords who are looking to enlarge their portfolio are doing so because they still see the Docklands rental market as a decent investment opportunity.
With top of the range Bank and Building Society Savings Accounts only reaching 1.5% a year, the rollercoaster ride of Crypto currency and the yo-yoing of the Stock Market, the simple fact is, with rental yields in Docklands far outstripping current savings rates, the short term prospect of a minor drop in property prices isn’t putting off Docklands landlords.
The art to buying a Docklands buy to let investment is to buy the profit on the purchase price, not the anticipation of the future sale price.
No matter what the historical economy has thrown at us, with the global meltdown in 2008/9, dotcom crash of 2000, ERM in 1992, the three day week, oil crisis and hyperinflation in the 1970’s (the list goes on) ... the housing market has always bounced back stronger in the long term. That’s the point ... long term. Investing in buy to let is a long-term strategy. The simple fact is, over the long term with the increasing demand for rental properties, predominantly among Millennials as many cannot afford to get on the property ladder, and with councils not building enough properties of any kind, many youngsters are having to resort the private rental market for their accommodation needs.
So, what of the numbers involved in Docklands?
There are 2,257 landlords that own just one buy to let (BTL) property in Docklands (or E14 to be precise) and 4,914 Docklands landlords, who are portfolio landlords. Between those 4,914 Docklands portfolio BTL landlords, they own a total of 10,312 Docklands BTL properties and they can be split down into the size of landlord portfolio in the graph below….
If I apply the Aldermore figures that means 2,015 Docklands landlords have plans to expand their BTL portfolio in the coming year or so.
However, the Aldermore Research also showed that 8% of private landlords intended to reduce the number of properties they own. They put this down to continuing Government intervention in the housing market (as many landlords mentioned too many limitations and higher taxation) while some believed that tenants are excessively protected to the disadvantage of the landlord.
I would say there is no repudiating that the buy to let market has taken a bit of a beating, thanks to a plethora of Government regulation, new mortgage underwriting rules in 2014 and George Osborne’s tax changes. Yet there still remains an overall consciousness of optimism among the vast majority of Docklands buy to let landlords. Despite these latest changes, many landlords still view buy to let as a good investment, as long as you buy right and expand your portfolio taking into account the second rule of buy to let … assess your position on the ‘buy to let seesaw’ of capital growth and yield.

If you want to buy right and assess your own portfolio on the yield/capital growth seesaw ... drop me a note. I don’t bite and the opinion I give, whether you are landlord of mine or not as the case may be, is given freely, without obligation or cost. The choice is yours. Thank you for reading this article. To read others, please visit my Docklands Property Blog.

 

The average asking price of property in Docklands (or E14 to be precise) dropped by 2.6% or £17,777 compared to a year ago, taking the current average asking price to £659,083 compared with £676,860 this time last year.
The overall drop in asking prices is being put down to sellers being more realistic with their pricing and looking to benefit from the impending mortgage interest rate rises later in 2018. This is great news for first, second and third time buyers in Docklands starting their property hunting in the usually active spring market this year facing the opportunity of paying less for the property of their dreams. Even better news is that whilst first time buyers also have to pay less for their property, they also have the bonus of the Chancellor stopping Stamp Duty being paid by first time buyers!
Looking at the different sectors of the Docklands property market, splitting it down into property types, one can see what is happening to each sector of the market with regard to their average asking prices now compared to a year ago. Firstly, looking at the Pound note amounts…
  
 

  
Interestingly, when one looks at the percentages, the most movement in average asking price pressure is in the detached property type sector with the semi-detached being the only sector that saw a rise.
Now, I must stress this overall drop in the asking prices of Docklands property doesn’t necessarily mean the value of Docklands property is going down by the same amount.
Only time will tell if the current levels of Docklands asking prices is a correction of optimistic house sellers after a couple of months of enthusiastic asking price rises in the lead up to Christmas, or is it an initial sign that property values are slipping. To judge what is really happening to the Docklands property market, I believe these asking prices must be viewed in conjunction with both the values achieved and the length of time it takes to sell the property.
Also, these figures are averages, so it might also mean less expensive types of Docklands terraced or Docklands apartments, are on the market now, this dragging the average down, compared to a year ago.
One thought I would like to share with the Docklands homeowners and landlords wanting to sell their property, is the fact they need to be aware of the competition of other people selling their homes. One factor that could be contributing to a subdued demand for local property is the progressively strained buyer mortgage affordability (i.e. banks telling people they can only afford so much on a mortgage), meaning more and more buyers are hitting their maximum on the amount they are able to borrow on a mortgage sooner than they thought.
So, what does this all mean, especially for buy to let landlords in Docklands? During these months of flux, there could be some property bargains to be had. Lower asking prices mean you are buying in better yields and potential capital growth at the same time. Many Docklands landlords pick the phone up or email me with Rightmove links, asking my opinion on the BTL potential of property. I don’t charge for that service, so if you don’t want to miss out on such opinion, follow what they do and make contact ... I don’t bite!
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