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As more babies are being born to Boston mothers, the increase will continue to add pressure to the over stretched Boston property market and materially affect the local property market in the years to come.
On the back of eight years of ever incremental increasing birth rates, a significant 5.83 babies were born for every new home that was built in the Boston Council area in 2016. I believe this has and will continue to exacerbate the Boston housing shortage, meaning demand for housing, be it to buy or rent, has remained high. The high birth rate has meant Boston rents and Boston property prices have remained resilient – even with the challenges the economy has felt over the last eight years, and they will continue to remain high in the years to come.
This ratio of births to new homes has reach one its highest levels since 1945 (back in 1970’s the average was only one and a half births for every household built the early). Looking at the local birth rates, the latest figures show we in the Boston Council area had an average of 68.6 births per 1,000 women aged 15 to 44. Interestingly, the national average is 61.7 births per 1,000 women aged 15 to 44 and for the region its 61.3 births per 1,000 women aged 15 to 44.
The number of births from the Boston women between the ages of 20 to 29 are much higher than the national average, but those between 35 and 44 were significantly lower. However overall, the birth rate is still increasing, and when that fact is combined with the ever-increasing life expectancy in the Boston area, the high levels of net migration into the area over the last 14 years (which I talked about in the previous articles) and the higher predominance of single person households … this can only mean one thing … a huge increase in the need for housing in Boston.
Again, in a previous article a while back, I said more and more people are having children as tenants because they feel safe in rented accommodation. Renting is becoming a choice for Boston people.
The planners and Politian’s of our local authority, central Government and people as a whole need to recognise that with individuals living longer, people having more children and whilst divorce rates have dropped recently, they are still at a relatively high level, meaning one household becomes two households … demand for property is simply outstripping supply.
The simple fact is more Boston properties need to be built… be that for buying or renting.
As an agent in Boston, I am frequently confronted with queries about the Boston property market, and most days I am asked, “What is the best part of Boston and its villages to live in these days?”, chiefly from new-comers. Now the answer is different for each person – a lot depends on the demographics of their family, their age, schooling requirements and interests etc. Nonetheless, one of the principal necessities for most tenants and buyers is ease of access to transport links, including public transport – of which the railways are very important.
Official figures recently released state that, in total, 285 people jump on a train each and every day from Boston Train station. Of those, 29 are season ticket holders. That’s a lot of money being spent when a season ticket, standard class, to Peterborough is £3,852 a year.
So, if up to £112,000 is being spent on rail season tickets each year from Boston, those commuters must have impressive jobs and incomes to allow them to afford that season ticket in the first place. That means demand for middle to upper market properties remains strong in Boston and the surrounding area and so, in turn, these are the type of people whom are happy to invest in the Boston buy to let market – providing homes for the tenants of Boston…
“The bottom line is that property values in Boston would be much lower, by at least 1% to 2%, if it wasn’t for the proximity of the railway station and the people it serves in the town”
And this isn’t a flash in the pan. Rail is becoming increasingly important as the costs associated with car travel continue to rise and roads are becoming more and more congested. This has resulted in a huge surge in rail travel.
Overall usage of the station at Boston has increased over the last 20 years. In 1997, a total of 133,310 people went through the barriers or connected with another train at the station in that 12-month period. However, in 2016, that figure had risen to 207,368 people using the station – that’s 570 people a day.
The juxtaposition of the property and the train station has an important effect on the value and saleability of a Boston property. It is also significant for tenants – so if you are a Boston buy to let investor looking for a property – the distance to and from the railway station can be extremely significant.
One of the first things house buyers and tenants do when surfing the web for somewhere to live is find out the proximity of a property to the train station. That is why Rightmove displays the distance to the railway station alongside each and every property on their website.
The Boston Property Market is a very interesting topic and has been particularly fascinating over the last 12 years when we consider what has happened to Boston rents and house prices.
There’s currently much talk of what will happen to the rental property market following Brexit. To judge that, I believe we must look what happened in the 2008/9 credit crunch, and what has happened since, to judge rationale and methodically, the possible ramifications for long-term investors in the Boston property market. You see, an important, yet overlooked measure is the performance of rental income vs house prices (i.e. the resultant yields over time). In Boston, as for the rest of Great Britain, notwithstanding a slight drop in 2008 and 2009, property rentals have been gradually increasing.
The income from rentals has been progressively increasing over the last 12 years. Today, they are 14.5% higher than they were at the beginning of 2005.
In fact, over the last five years, the average growth has been 1.6% per annum. From a landlord’s point of view, increase in average rental income is not to be sneered at. However, the observant readers will be noting that we are ignoring an important factor – our friend inflation.
Turn the clock back to 2005, and we have a property being rented for say £900 a month and that is still being rented at £900 a month today, in Spring of 2017. While the landlord is not getting any less income, this £900 is no longer worth as much. Let me explain, in 2005, £900 may have bought a two-week 4* holiday in Italy. Yet, holidays have increased in line with inflation (which has been 38.5% since 2005), so our holiday would cost today £1,246. Therefore, the landlord could no longer afford the same holiday, even though having the same amount in pound notes from their rental property.
This means when we compare rents in Boston to inflation since 2005, Boston landlords are worse off today, when they receive their monthly rental income, than they were in 2005 by 24% in real terms (rents increased by 14.5% since 2005, less the 38.5% inflation since 2005 – net affect 24% drop)
However, rental income is not the only way to generate money from property as property values can increase. Although in the short term, cash flows are diminishing, many Boston landlords may be content to accept that for a colossal increase in capital value.
Property values in Boston have risen by 12.4% since 2005
This equates to a 1.03% per annum increase over the last 12 years. Even more interesting that this includes the 2008/9 property crash, this will make those Boston landlords and investors feel a little better about the information regarding rents after inflation.
Moving forward, the prospects of making easy money on buy to let in Boston have diminished, when compared to 2005. Last decade, making money from buy to let was as easy as falling off a log – but not anymore.
It would be true to say, my rental income verses property prices study does lead to noteworthy thoughts. I am often asked to look at my landlord’s rental portfolios, to ascertain the spread of their investment across their multiple properties. It’s all about judging whether what you have will meet your needs of the investment in the future. It’s the balance of capital growth and yield whilst diversifying this risk.
If you are investing in the Boston property market, do your homework and do it well. While some yields may look attractive, there are properties in many areas that do not have the solid rudiments in place to sustain them. If you are looking for capital growth, you might be surprised where the hidden gems really are. Take advice, even ask your agent for a portfolio analysis like we offer our landlords.
If you would like to see which properties we think would make an ideal investment property then click on the Buy To Let Deal Of The Week videos we also showcase on our blog page
2017 has started with some positive interest in the Boston property market. Taking a snap shot of the Boston property market for the first quarter of 2017, the picture suggests some interesting trends when it comes to the number of properties available to buy, their asking prices and what prices properties are actually selling for.
Let us first consider the number of properties for sale, compared to 12 months ago:
|Type of Boston Property||Number of Properties on the Market 12 months ago||Number of Properties on the Market now||% change|
So when we add in building plots and other types of properties that don’t fit into the four main categories, that means there are 400 properties for sale today compared with 346 a year ago, a rise of 16%.
Boston asking prices, compared to the same as a year ago, are 6% lower.
With that in mind, I wanted to look at what property was actually selling for in Boston. Taking my information from the Land Registry, the last available six months property transactions for PE21 show an interesting picture (note the Land Registry data is always a few months behind due to the nature of the house buying process and so November 2016 is latest set of data). The price shown is the average price paid and the number in brackets is the number of properties actually sold.
|Detached||£188,468 (22)||£190,839 (28)||£199,475 (27)||£186,770 (25)||£206,024 (17)||£176,429 (22)|
|£128,573 (20)||£136,546 (21)||£130,133 (15)||£134,871 (12)||£125,463 (15)||£130,000 (13)|
|Terraced||£110,300 (13)||£99,041 (11)||£117,155 (21)||£115,648 (14)||£105,333 (9)||£116,156 (9)|
|All||£146,144 (58)||£151,083 (64)||£148,554 (72)||£149,904 (55)||£150,368 (45)||£147,681 (46)|
So what does all this mean for the property owning folk of Boston?
Well, with more property on the market than a year ago and asking prices 6% lower, those trying to sell their property need to be mindful that buyers, be they first timers, buy to let landlords or people moving up the Boston property ladder, have much more price information about the Boston property market at their fingertips than ever before.
Those Boston people who are looking to sell their property in 2017, need to be aware of the risks of over pricing their property when initially placing it on the market. Over the last 12 months, I have noticed the approach of a few Boston estate agents is to suggest an inflated asking price to encourage the homeowner and secure the property to sell on their books. The down side to this is that when offered to the market for the first time, buyers will realise it is overpriced and wont waste their time asking for a brochure. They won’t even view the property, let alone make an offer. So when the price is reduced a few months later, the property has become market stale and continues to be ignored.
Whilst the Boston property-market has an unassailable demand for property – there is one saying that always rings true – as long as the property is being marketed at the right price it will sell.
Investing in Boston buy to let property is different from investing in the stock market or depositing your hard-earned cash in the Building Society. When you invest your money in the Building Society, this is considered by many as the safe option but the returns you can achieve are awfully low – the best 2-year bond rate from Nationwide is a whopping 0.75% a year!. Another investment is the Stock Market, which can give good returns, but unless you are on the phone every day to your Stockbroker, most people invest in stock market funds, making the investment quite hands off and one always has the feeling of not being in control.
However, with buy to let, things can be more hands on. One of the things many landlords like is the tactile nature of property – the fact that you can touch the bricks and mortar. It is this factor that attracts many of Boston’s landlords – they are making their own decisions rather than entrusting them to city whizz kids in Canary Wharf playing roulette with their savings.
Investing in property though is a long-term game. When you invest in the property market, you can earn from your investment in two ways. When a property increases in value over time, it is known as ‘capital growth’. Capital growth, also known as capital appreciation, has been strong in recent times in Boston, but the value of property does go up as well as down just like shares do but the initial purchase price rarely decreases. Rental income is what the tenant pays you – hopefully this will also grow over time. If you divide the annual rent into the value (or purchase price) of the property, this is your yield, or annual return. So, over the last 5 years, an average Boston property has risen by £30,950 (equivalent to £16.96 a day), taking it to a current average value of £163,500. Yields range from 5% a year and can reach double digits’ percentages, although to achieve those sorts of returns, the risks are higher.
However, something I haven’t spoken of before is the more specialist area of flipping property to make money. (flipping is buying a property, carrying out some minor cosmetics and re selling it quickly). I have seen several investors recently who have made decent returns from this strategy. For example …
- One Boston buyer paid £100,000 for a 3 bedroom semi – detached house on Oak Crescent in April 2015. It appears some cosmetic work was done to the property and it was resold in October 2016 for £145,000 … 45.00% return before costs (or compound annual return equivalent of 26.70 % AER)
This demonstrates how the Boston property market has not only provided very strong returns for the average investor over the last five years but how it has permitted a group of motivated buy to let Boston landlords and investors to become particularly wealthy.
As my article mentioned a few weeks ago, more and more Boston people may be giving up on owning their own home and are instead accepting long term renting whilst buy to let lending continues to grow from strength to strength. If you want to know what – and what would not – make a decent buy to let property in Boston, then contact the Boston office on 01205 352019 or take a look at our Buy To Let Deal of the week on our You Tube channel and subscribe for future notifications.