Two Speed Royal Leamington Spa Property Market?

Even with the General Election on the horizon, property values in Royal Leamington Spa are still 0.39% higher than they were 3 months ago, the diversion and ambiguity of an election typically makes house sellers who need to sell, price their property more realistically (although this only lasts a couple of months). Looking specifically at it from a Royal Leamington Spa landlord’s point of view, the Royal Leamington Spa properties favoured by investors are in short supply in many parts of the town because of a number of factors. One of the factors has been that we seen the number of first time buyers coming to buy their first home increase over the last 12 months in Royal Leamington Spa. 

  Another factor has been the fact that the banks have been pushing ‘let to buy’ (yes ‘let to buy’ is different to ’buy to let’) to homeowners (more of ‘let to buy’ in an up and coming article). Next, because of the banks, who are chasing low risk landlords with high deposits with very low mortgage rates- and the low risk landlords with high deposits tend to be attracted to the safer modern two and three bed town houses and semis in Royal Leamington Spa.

As I mentioned a few weeks back, the pension rules are changing which means buy to let landlords can use some, or all, of their pension pot to buy a property.  It shouldn’t be forgotten there are tax implications taking more than a quarter of your pension pot out (see the article from a couple of weeks ago) , so whilst many pension pots may not be able fund a suitably big enough tax free lump sum to buy the property outright, for most

it will provide enough for the 25% deposit (required by most BTL mortgage providers). It shouldn’t be forgotten landlords that the interest paid on the mortgage is tax deductible against the rent, thus lowering your income tax paid.

In the last 12 months, I have noticed a particular uplift in interest from ‘50 something’ Royal Leamington Spa people wanting to become landlords for the first time. In Royal Leamington Spa, the highest returns for the lowest investment are at the lower end of the market eg the classic apartment . Unfortunately one/two bedrooms apartments are coming to the market in smaller numbers than the larger four bed’s in  top end sectors of the Royal Leamington Spa property market. When looking at the actual numbers, in the later part of the Summer of 2014 in Royal Leamington Spa, in one month alone 121 one/two bed properties were on the market in Royal Leamington Spa.

However, in January this year, a notoriously excellent bumper month for properties coming on to the market, there were only 71 one/two bed properties on the market in Royal Leamington Spa to choose from. Today, that figure stands at only 91 ..whilst the number of four and five beds has increased significantly ...  interesting don’t you think?

At that lower end of the property market in Royal Leamington Spa, (ie where first time buyers and landlord investors compete with each other to buy those smaller properties), I believe throughout 2015, there will be a slow and steady tipping of the scales between supply and demand. In fact, from what I am seeing and hearing, early anecdotal evidence has suggested over the last few months, we are beginning to see a polarised Royal Leamington Spa property market, where we have high demand but low supply at the bottom end of the property market, yet high supply but lower demand at the top of market .. and that can only mean one thing ... prices will go up quicker on the smaller properties than the larger ones in Royal Leamington Spa, thus narrowing the gap for people looking to move up market!

Your Pension could now buy a Buy to Let property in Royal Leamington Spa

In a recent article, I mentioned that pension rules are changing this April. It certainly created a few emails, with people asking questions about it. 

Therefore, this week, I want to look a little deeper into the subject of your pension and the Royal Leamington Spa property market. George Osbourne, in last years’ Budget, announced pension reforms that come into effect this April, which will give people with pension’s unprecedented access to their pension pot and the freedom to look for alternatives. In a nutshell, after the 6^th of April, anyone aged over 55 will be allowed to withdraw all or part of their pension pot and spend it as they wish. Until now, you were allowed to take out a quarter of it and were forced to buy an annuity policy with the rest.

However, my readers always know that I like to tell it ‘as it is’. There are always two sides to a story, good and bad. Let me tell you the bad news first. There are some hefty tax implications by taking money from your pension pot. As before, as per the old rules, the first 25% can still be withdrawn from the pension pot tax free but, here is the sting in the tail, if you take more than a quarter of your pot (25%), anything above that initial 25% level will be taxed as income. So if you took the whole lot out, the first 25% will be tax free but the remaining 75% will be taxed at your income tax rate of 20%, 40% (or even 45% if you earn over £150,000 a year). .. and now the good news!

 

Under the old scheme, if you bought an annuity, when you died your annuity normally died as well. You would have no asset to pass on to your family. Also, the returns from pensions are awful at the moment. The best rates according to Hargreaves and Lansdown (big wigs in the City) state if you were 55 years old, the best rate you would get on your annuity pension would be 4.4% fixed for life (so it would never go up) or 2.2% but the payment would go up with inflation.  The sort of rates (also known as yields in the property investing game) being achieved in Royal Leamington Spa are in the order of 4% to 6%.

The other aspect of property investment is how the fact that property values have risen consistently over the last 50 years.  According to the Office of National Statistics, the life expectancy of a 65 year old male in Royal Leamington Spa is 19 years and 4 months (its only 16 years 9 months in Nuneaton but 19 years and 9 months in Stratford – well they are posh there!). If we roll the clock back 19 years 4 months to November 1995, property values in Royal Leamington Spa have risen by 180.1% to today..you wouldn’t have had that with your pension!   But this is the biggest win, even by taking a hit in income tax now,  by buying a property, you buy an asset that you can pass on to your family when you die.... (or the cats home if they aren’t nice to you!).

So where next? It totally depends which strategy you are going to look at, one strategy is to look to achieve relatively small rental returns (ie low yields) in an up market area which has decent capital growth or, alternatively, another strategy is to buy properties in not so good areas known to produce a high returns (ie high yields) but low capital growth (ie how much the value of the property goes up). Now, I am not financial advisor, so cannot offer financial advice on what the best thing for you with your pension is. However, I can share my knowledge and experience of the Royal Leamington Spa property market, what to buy, what not to buy and where to buy etc etc.