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.
The Boston housing market has gone through a sea change in the past decades with the Buy-to-Let (B-T-L) sector evolving as a key trend, for both Boston tenants and Boston landlords.
A few weeks ago, the Government released a White Paper on housing. It was interesting that the private rental sector played a major part in the future plans for housing. This is especially important for our growing Boston population.
In 1981, the population of Boston Borough Council area stood at 52,500 and today it stands at 66,900.
Currently, the private rented (B-T-L) sector accounts for 19.1% of households in the town. The Government want to assist people living in the houses and help the economy by encouraging the provision of quality homes, in a housing sector that has grown due to worldwide economic forces, pushing home ownership out of the reach of more and more people. Interestingly, when we look at the 1981 figures for home-ownership, a different story is told.
58.7% Boston people owned their own home in 1981
32.16% Boston people rented from the Council or Housing Association in 1981
and 9.14% Boston rented from a Private Landlord
The significance of a suitable housing policy is vital to ensure suitable economic activity and create a vibrant place people want to live in. With the population of the Boston area set to grow to 76,000 by 2037 – it is imperative that Boston Borough Council and Central Government all work actively together to ensure the residential property market doesn’t hold the area back, by encouraging the building and provision of quality homes for its inhabitants.
One idea the Government has proclaimed is a variety of measures aimed at encouraging the Build-to-Rent (B-T-R) sector (instead of the B-T-L sector). These include allowing local authorities to proactively plan for B-T-R schemes, and making it simpler for B-T-R developers to offer inexpensive private rented homes.
To do this, the government will invent a distinct affordable housing class for B-T-R, called ‘Affordable Private Rent’, which will oblige new homes builders to provide at least 1 in 5 of a new home developments at a 20% discount on open-market rents and three year tenancies for tenants. In return, the new home-builders will get better planning assurances.
Private landlords will not be expected to offer discounts, nor offer 3-year tenancies – but it is something Boston landlords need to be aware of as there will be greater competition for tenants.
Over the last ten years, home ownership has not been a primary goal for young adults as the world has changed. These youngsters expect ‘on demand’ services from click and collect, Amazon, Dating Apps and TV with the likes of Netflix. Many Boston youngsters see that renting more than meets their accommodation needs, as it combines the freedom from a lifetime of property maintenance and financial obligations, making it an attractive lifestyle option.
Private rented housing in the Boston area, be it B-T-L or B-T-R, has the prospective to play a very positive role.
Last week, we posted an article on the plight of the Boston 20 something’s. Often called by the press ‘Generation Rent’. Attitudes to renting have certainly changed over the last twenty years and as my analysis suggested, this change is likely to be permanent. In the article, whilst a minority of this Generation Rent feel trapped, the majority don’t – making renting a choice not a predicament. The Royal Institution of Chartered Surveyors predicted that the private rental sector is likely to grow substantially by 1.8m households across the UK in the next 8 years, with demand for rental property unlikely to slow and newly formed households continuing to choose the rental market as opposed to buying.
However, my real concern for Boston homeowners and Boston landlords alike, as I discussed a couple of months ago, is our mature members of the population of Boston. In that article, I stated that the current OAP’s (65+ yrs in age) in Boston were sitting on £818.03m of residential property … however, I didn’t talk in depth about the 50yr to 64yr old Boston people and what their properties are worth – and more importantly, how the current state of affairs could be holding back those younger Generation Renters.
In Boston, there are 2,436 households whose owners are aged between 50yrs and 64yrs and about to pay their mortgage off. That property is worth, in today’s prices, £398.5m. There are an additional 2,984 mortgage free Boston households, owned by 50yr to 64yr olds, worth £488.2m in today’s prices, meaning…
Boston OAP’s are sitting on £1.70bn worth of Boston property
These OAP’s are sitting on 10,420 Boston properties and many of them feel trapped in their homes, and hence I have dubbed them ‘Generation Trapped’.
Recently, the English Housing Survey stated 49% of these properties owned by the Generation Trapped, as I have dubbed them, are ‘under-occupied’ (under-occupied classed as having at least two bedrooms more than needed). These houses could be better utilised by younger families, but research carried out by the Prudential suggest in Britain it’s estimated that only one in ten older people downsize while in the USA for example one in five do so.
The growing numbers of older homeowners who want to downsize their home are often put off by the difficulties of moving. The charity United for all Ages, suggested recently many are put off by the lack of housing options, 19% by the hassle and cost of moving, 14% by having to declutter their possessions and 14% by family reasons such as staying close to children and grandchildren.
Helping mature Boston homeowners to downsize at the right time will also enable younger Boston people to find the homes they need – meaning every generation wins, both young and old. However, to ensure downsizing works, as a Country, we need more choices for these ‘last time buyers’.