In the first of a new series of blogs, OnTheMarket.com finds out what is going on in a corner of the property market. In the first instalment, estate agent Ajay Jagota reveals what is happening in the north east.
There’s no getting away from the fact that it’s been a sluggish start to 2015 for the north east property market.
After rising by 9.5% between April and September alone last year – returning to 2008 levels for the first time – house prices were finally on the move again, 14% above the low of £129,000 recorded in April 2009 and poised for even more growth in the new year.
Pension changes coming into effect this month will allow over 55s greater freedom to take their pensions as a lump sum, with so-called “silver landlords” likely to take advantage of the return on their investment offered by buy-to-let properties, pushing up prices.
Stamp duty changes announced by George Osborne in his Autumn Statement will cut £1,000 from the cost of buying a north east home, encouraging more buyers into the market.
Low inflation and expected delays in lifting interest rates have also led to suggestions of a “mortgage price war” as several major lenders launch “record low” fixed-rate deals.
At the start of the year, I predicted that house prices in our region would rise by 10% this year.
I stand by that. But it hasn’t happened. Not yet at least.
In fact, house prices in the region have fallen back over the past few months – down 0.3% over the first eight weeks of the year and down 3% since September.
So what happened? As far as I’m concerned the government’s Help to Buy scheme put a sturdy foot on the accelerator of house prices and just when the ripple from the property boom in London and the south east started to reach our region, the Mortgage Market Review slammed the brakes back on.
For now, I can only suggest the election has caused the property market to go into hibernation, with buyers and sellers alike waiting to see what impact the outcome has on their household finances.
That isn’t to say that some areas aren’t performing strongly. Prices in North Shields remain 9.7% up on last summer, over the Tyne in South Shields they’re up 6.5%. Blyth is up 4.4% this year alone – 29 times the regional average.
Switching from sales to lettings, the north east rental yields are as good as any in the UK – Gateshead homes will regularly give you in the region of 7%, with rental returns rather than capital appreciation the key to making money from property. With the average house in the north east currently costing £154,950 – 44% below the national average of £272,000 – investors can literally double their money over a number of years.
Three bedroom family properties remain the most rentable and sellable properties in our region. This is symptomatic of a larger cultural change we’ve been seeing in the rental sector over recent years. People are increasingly planning to stay in rented properties indefinitely, even choosing them for family homes. As such, things like gardens, garages and in particular the space for family to expand are increasingly critical.
The addition of bedrooms with a loft conversion or extension could raise the value of a property in the region by as much as 50% – adding more than £70,000 to the value of a typical north east home. A semi-detached property in Sunderland with three bedrooms instead of two will increase income for landlords by £852 a year – and raise the price of a Newcastle home by £39,000.
Every month we produce a report on the current state of the north east market – KIS Housing NOW – pulling together up-to-the-minute data on a street-by-street level to offer an indispensable guide to the state of the north east property market. You can sign up at www.kis.co.uk or at my own website www.ajayjagota.co.uk.
Ajay Jagota is Chief Executive Officer and founder of KIS Group.
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