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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.

 

As we go headlong into 2018, I believe UK interest rates will stay low, even with the additional 0.25% increase that is expected in May or June. That rise will add just over £20 to the typical £160,000 tracker mortgage, although with 57.1% of all borrowers on fixed rates, it will probably go undetected by most buy-to-let landlords and homeowners. I forecast that we won’t see any more interest rate rises due to the fragile nature of the British economy and the Brexit challenge. Even though mortgages will remain inexpensive, with retail price inflation outstripping salary rises, it will still very much feel like a heavy weight to some Docklands households.

Now it’s certain the Docklands housing market in 2017 was a little more subdued than 2016 and that will continue into 2018. Property ownership is a medium to long-term investment so looking at that long-term time frame; the average Docklands homeowner who bought their property 20 years ago has seen its value rise by more than 363%.

This is important, as house prices are a national obsession and tied into the health of the UK economy as a whole. The majority of that historic gain in Docklands property values has come from property market growth, although some of that will have been added by homeowners modernising, extending or developing their Docklands home.

Taking a look at the different property types in Docklands and the profit made by each type, it makes interesting reading..

However, I want to put aside all that historic growth and profit and looking forward to what will happen in the future. I want to look at the factors that could affect future Docklands (and the Country’s) house price growth/profit; one important factor has to be the building of new homes both locally and in the country as a whole. This has picked up in 2017 with 217,350 homes coming on to the UK housing ladder in the last year (a 15% increase on the previous year’s figures of 189,690. However, Philip Hammond has set a target of 300,000 a year, so still plenty to go!

Another factor that will affect property prices is my prediction that the balance of power between Docklands buy-to-let landlords and Docklands first-time buyers should tip more towards the local first-time buyers in 2018.

The Council of Mortgage Lenders expects the number of buy to let mortgages to drop by 34% from levels seen in 2015. This is because of taxes being increased recently on buy-to-let and harder lending criteria for buy to let mortgages, which means I foresee a gradual move in the balance of power in favour of first-time buyers rather than buy-to-let landlords. First time buyers will also be helped by The Chancellor eradicating Stamp Duty for all properties up to £300,000 bought by first-time buyers in the recent budget.

This means Docklands buy-to-let landlords will have to work smarter in the future to continue to make decent returns (profits) from their Docklands buy-to-let investment. Even with the tempering of house price inflation in Docklands in 2017, most Docklands buy to let landlords (and homeowners) are still sitting on a copious amount of growth from previous years.

The question is, how do you, as a Docklands buy to let landlord ensure that continues?

Since the 1990’s, making money from investing in buy-to-let property was as easy as falling off a log. Looking forward though, with all the changes in the tax regime and balance of power, making those similar levels of return in the future won’t be as easy. Over the last ten years, I have seen the role of the forward thinking letting agents evolve from a ‘rent collector’ and basic property management to a more holistic role, or as I call it, ‘landlord portfolio strategic leadership’. Thankfully, along with myself, there are a handful of letting agents in Docklands whom I would consider exemplary at this landlord portfolio strategy where they can give you a balanced structured overview of your short, medium and long-term goals, in relation to your required return on investment, yield and capital growth requirements. If you would like such advice, speak with your current agent – or whether you are a landlord of ours or not – without any cost or commitment, feel free to drop me a line.

One place for more information is my Docklands Property Market blog. If you are a landlord or thinking of becoming one for the first time, and you want to read more articles like this about the Docklands property market together with regular postings on what I consider the best buy to let deals in the London Docklands area, then it is well worth reading. You can also email me at This email address is being protected from spambots. You need JavaScript enabled to view it.

 

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I was recently reading a report by the Home website which suggested that hordes of landlords are selling their buy-to-let investments due to increasing burdens on them in the buy-to-let market. Their findings suggest the number of new properties that came onto the market nationally (for sale) jumped by 11% across the UK as a result.
Those increasing burdens include new tax rules coming in over the next 3 to 4 years and the announcement that all self-managing landlords (i.e. landlords that don’t use a letting agent to look after their buy-to-let property) will soon need to register with a compulsory redress scheme to resolve tenant arguments and disputes; as Westminster wants to heighten standards in the Private Rented Sector. 
 
Interestingly I was chatting with a self-managed landlord from Canary Wharf, when I was out socially over the festive period, who didn’t realise the other recent legislations that have hit the Private Rented sector, including the ‘Right to Rent’ regulations which came in to operation last year. Landlords have to certify their tenants have the legal right to live in the UK. This includes checking and taking copies of their tenant’s passport or visa before the tenancy is signed. Of course, if you use a letting agent to manage your property, they will usually sort this for you (as they will with the redress scheme when that is implemented).
 
If you are a self-managed landlord though, the consequences are severe because if you let a property to a tenant who is living in the UK illegally, you will be fined up to £3,000. That same Canary Wharf landlord popped into my offices in the New Year, and I checked all his paperwork and ensured he was on the right side of the law going forward – and I offer the same to any landlord in the Docklands area if you want me to cast my eye over your buy to let matters (and at no cost – ok just bring in some chocolates for the girls in the office!)
 
But what of all these extra properties being dumped onto the market in Docklands? When I looked at the records the number of properties on the market in Docklands now, as opposed to a year ago, the numbers tell an interesting story …
 
 
1st Jan 2017
1st Jan 2018
 
Detached
16
8
-50%
Semi
11
10
-9%
Terraced
32
49
53%
Flat
1872
2118
13%
Plots +
Other
31
69
123%
Total
1962
2254
15%
 
 
Overall, Docklands does match the national trend, with the number of properties on the market actually rising by 15% in the last year.  It was particularly interesting to see the number of terraced increase by 53%, yet the number of detached on the market drop by 50%.
 
However, speaking with my team and other property professionals in the area, the majority of that movement in the number of properties and the types of properties on the market isn’t down to landlords dumping their properties on the market. The whole property market has changed in the last 12 months, with the majority of the change in the number and type of properties for sale due to the owner-occupier market, not landlords (a subject I will write about soon in my Docklands Property Market blog later this Spring?). You see, for the last ten years, each month there has always been a small number of Docklands landlords who have been releasing their monies from their Docklands buy to let properties - as is the nature of all investments!
 
Nationally, the number of rental properties coming on to the market to rent fell by 16% in Q4 2017 compared to Q4 2016 .. but that isn’t because there are 16% less rental properties to rent – it’s because tenants are staying in their rental properties longer meaning less are coming on the market to be RE-LET.
 
Nevertheless, some Docklands landlords will want to release the equity held in their Docklands buy to let properties in 2018. All I suggest is that you speak with your letting agent first, as putting a rental property on the open market often spooks the tenants to hand in their notice days after you put it on the market (because they don’t like the uncertainty and also believe they will become homeless!). This means you have an empty property, costing you money with no rent coming in.  However, some letting agents who specialise in portfolio management have select lists of landlords that will buy with sitting tenants in. If you have a portfolio in the Docklands area and are considering selling some or all of them – drop me a line as I might have a portfolio landlord for you (with the peace of mind that you won’t have any rental voids). 
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Looking at the newspapers between Christmas and New Year, it seemed that this year’s sport in the column inches was to predict the future of the British housing market. So to go along with that these are my thoughts on the Docklands property market.
With the average 5-year fixed rate mortgage at 1.98% (down from 3.47% in 2014) and 2-year fixed rate at 1.47% (down from 2.37% in 2014), mortgage interest rates offered by lenders are at an all-time low (even with the slight increase on the Bank of England base rate a few months ago). Added to this, there has been a low unemployment rate of 8.2% in Docklands, which has contributed to maintain a decent level demand for property in Docklands in 2017 (interestingly – an impressive 766 Docklands properties were sold in last 12 months), whilst finally, the number of properties for sale in the area has remained limited, thus providing support for Docklands house prices, meaning …
 
Docklands Property Values are 7.1% higher than a year ago
 
However, moving into 2018, there will be greater pressures on people’s incomes as inflation starts to eat into real wage packet growth, which will wield a snowballing strain on consumer confidence. Interestingly though, information from the website Rightmove suggested over a third of property it had on its books in October and November had their asking prices reduced, the highest percentage of asking price reductions in the same time frame, over five years. Still, a lot of that could have been house-sellers being overly optimistic with their initial pricing.
 
In terms of what will happen to Docklands property values in the next 12 months, a lot will be contingent on the type of Brexit we have and the impact on the whole of the UK economy. A lot of people will talk about the Central London property market in the coming year, and if the banking and finance sectors are negatively affected with a poor Brexit deal, then the London market is likely to see more of an impact.
 
Nevertheless, the bottom line is Docklands homeowners and Docklands landlords should be aware of what happens in the rollercoaster housing market of Central London, but not panic if prices do drop suddenly in 2018. Over the last 8 years, the Central London house prices have grown by 89.6%, whilst in Docklands, they have risen by similar figure of 79.5%. So if we do see a correction in the Capital, of say 5% to 10%, it will only take us back to Docklands house prices that were being achieved only 12 to 18 months ago ... and nobody was complaining or worrying then!
 
Hindsight is always better than foresight and predicting anything economic is all well and good when you know what is around the corner. At least we have the Brexit divorce settlement sorted and, as the UK economy and the UK housing market are intertwined, it all depends on how we deal as a Country with the Brexit issue. However, we have been through the global financial crisis reasonably intact ... I am sure we can get through this together as well?
 
Oh, and house prices in Docklands over the next 12 months? I believe they will end up between 0.8% lower and 0.6% higher, although it will probably be a bumpy ride to get to those sorts of figures.
If you would like to read more articles on my thoughts on the Docklands property Market – please visit the Docklands Property Market Blog 

 

I am often being asked by investors and first time buyers alike, where are the most popular streets in the E14 postcode area.

So, I decided to research this very subject. I ended up with so much data, I simply did not know what to do with it! My teenage son, a

regular YouTube viewer, suggested I do a series of videos. It is this very series that I now invite you to watch.

Once a week I will be releasing the next number, counting down from the 30th most popular street in E14, all the way to number one.

I hope you enjoy the videos, please click HERE to watch.

Thanks and kind regards.

Spencer

Property Portals