Depending on which newspaper you read or which website you follow you will have probably read that rental yields are either going up or going down. RICS, the ARLA and paragon mortgages have all put out reports in the last few months, that at some points, on the surface seem to contradict what each other has said in someway; however, when you dig deeper and get behind the facts, there is not always as much conflict as there first appears.The truth is that each point of view is correct, in its own way. Just a few short months ago newspapers were reporting rises in rents and warning that alongside the
this could have disastrous consequences for tenants who are currently short of cash. Yet a few months on and you can now also find reports of stagnate or falling rental values.Many landlords are struggling financially at the moment.
Particularly hard hit are fairly new entrants to the buy to let market who hoped to make a quick fortune. Numerous novice buy to let investors who have flooded the property market in the last couple of years, are finding themselves in a negative equity.However, what most statistics don’t make obvious is the regional differences and differences in the types of properties being reported on.A more in depth study of reports from
reveals that rent is indeed still on the rise in certain location, while rent is decreasing in others. It also reveals that the type of property you are renting out has something to do with whether you are experiencing good times or bad times in the current rental market.Previously many investors felt confident that they could do general re and make general assumptions such as the North West is a good place for rental yield or parts of the south good for capital growth.We are currently in a situation that these types of blanket assumptions are proving to be less accurate than they used to be. A study of
July buy to let index report reveals some interesting facts.Closer scrutiny reveals that according to Paragon places like East Midlands and Greater London there is a negative %change/yr where as the North and Wales are flourishing in comparison.Many landlords and would be owner occupiers alike are veering away from purchasing property at the moment since they are worried about the instability in the current market.Home owners are having difficulty selling their properties at the moment, so many are taking the decision to still move and rent out their current property.Property developers and flippers are having difficulty getting good prices for their properties so they to are having to rent them out.Many owner occupiers who have to sell at the moment are choosing to rent another property rather than plough their money back into another property that might soon be in negative equity. Some of these scenarios are causing the market to be flooded with more properties to let that there would have been previously; because of this, in general, tenants have more choice and this is why in some areas rental prices are stalling or even going backwards as tenants relish their new found power to negotiate a cheaper rental price.In this scenario bulk build flats are inevitably the first and the hardest hit. Highly sort after but low supply properties are still bucking the trend and seem destined to continue to do so. The first thing that landlords have to do is to evaluate their current position. How is their portfolio geared? If they are struggling to get tenants could they afford to reduce the rent in the short term?Buy to let landlords have to be realistic in the current market. Even if they know the area they are investing in well, they need to look at it again and analyse any changes that have occurred over the last few months. Is the rent they are asking for really achievable?Are you prepared to take a loss in cash flow for the next few months or even couple of years to hold unto your property portfolio?You have to give yourself as much opportunity as you can to be successful in the current property market conditions. Any edge you can give your property will be crucial. The smallest detail can be the difference between success and failure. The tiniest piece of the puzzle could the difference between someone renting one of your properties or renting someone else’s.Re-evaluating your market and paying attention to the smallest details could help you thrive while others are struggling.Take all the reports you get about rental yields with a pinch of salt at the moment, no matter who they come from. Take note of what they say but compare it to what else is being said. The most important thing is that you understand the state of play with the rental yields in the locations that you personally invest in, as well as having a general idea of what is happening in the rest of the rental property market.
**Nothing on this website should be confused with financial or legal advice. If you need this, or any other type of advice, please seek the help of a competent professional. In addition, because real estate laws change all the time and differ from state to state, and even city to city in the same state, everything in these pages should be considered general marketing advice and ideas. Please see link to full Disclaimer at the bottom of this page.
There has been an ever-increasing call for stamp duty to be scrapped all together. With the turmoil currently happening in the housing market this cry has been getting louder and louder.Rumours that the government is planning a major change in relation to stamp duty are beginning to circulate. There is a need to urgent clarification on the issue.Earlier in the month Mr Darling hinted that something was in the pipeline to help the property market.There are even rumours about a temporary suspension or relief from stamp duty in the coming months.There has also been talk of a deferral of the stamp duty, so that first time buyers especially (or only) would not need to pay it immediately and might only need to pay it as and when they move up the property ladder.The uncertainty is not helping the housing market to stabilise and clarification is needed on any proposals the government has.Any potentially homebuyer that gets wind of the rumours is likely to hold of any purchase of property, until the situation has been clarified. This in turn is destabilising the economy even more.An announcement is thought to be eminent as regards to the government’s exact plans are as regards to this matter.However, they are being cautious sense any decision that they make might have an immediate impact on the feasibility of Gordon Brown remaining in power. **Nothing on this website should be confused with financial or legal advice. If you need this, or any other type of advice, please seek the help of a competent professional. In addition, because real estate laws change all the time and differ from state to state, and even city to city in the same state, everything in these pages should be considered general marketing advice and ideas. Please see link to full Disclaimer at the bottom of this page.
Although the number of real estate transactions in the overall
area has fallen sharply over the past three quarters (22% over the five year average), one segment that has posted more stable numbers has been Steamboat’s “luxury market”. Although not specifically defined in any real estate manual, I consider properties with purchase prices in the top 5% of the market being worthy of this distinction.With only a little over half of 2008 to compare, the bar has continued to be raised with the biggest and best Yampa Valley real estate has to offer.In 2007, the
posted 443 condominium sales, and the top 5% (22 properties) ranged in price from $805,000 to $2,150,000.Through August 1, 2008, there have been 10 sales in that same price range, with the highest priced condominium being a slopeside, four bedroom and bath, Antlers condominium for $2,500,000…a $350,000 increase.On the townhome side, the top 5% of the 249 townhomes that were sold last year (12) ranged in price from $1,779,000 to $3,125,000.Thus far in 2008, only five have sold within this range, but the highest two were substantially higher in sales price than what was posted in 2007…at $5,308,200 and $5,400,000. These were side-by-side townhomes located on the slopes and each averaged over 6,000 square feet.Yet, the most impressive increase in purchase price has come in the single family home sector. 2007 saw 427 purchases. The 21 transactions that defined the luxury home category recorded a price range between $2,375,000 and $7,700,000.With only seven months into 2008, there have already been two sales higher than last year’s record, at $8 million and $8.2 million. The highest was a 70 acre estate in the middle of the South Valley with a 5 bedroom home, barn with English-style pub and 3 bedroom caretakers quarters, all along a half-mile of the Yampa River.Although these sales numbers are striking, perhaps more telling of the state of the market is the number of listings. As of August 1, there were 82 condominiums listed for sale in the Steamboat Springs MLS that were priced above the 2007 “luxury market” price floor of $805,000.This equates to a 45 month supply. 47 townhomes were listed above the $1,779,000 threshold (a 47 month supply), and there is a 40 month supply of single family homes with 70 listed above the $2,375,000 basis set for luxury homes in 2007.The supply for a given time period is calculated by taking the total number of annual sales in a particular category and dividing it into the number of listings in that category.Furthermore, the percentage discount sellers have taken off of their list price has increased since 2007, reflecting added competition for buyers. In 2007, luxury condominiums were sold at an average of 98.80% of list price. In 2008 that number has dropped to 90.93%.Similar reductions have also held true for townhomes…100.79% in 2007 versus 96.87% in 2008, and in single family homes, the sales-to-list ratio has dropped from 96.69% to 90.98%.In comparison, MLS-wide average sales-to-list ratios thus far for 2008 have been 97.25% for condominiums, 97.24% for townhomes and 95.81% for single family homes. This suggests that luxury market sellers are more willing to negotiate a greater percentage off of their list price than sellers in the overall market.You may recall the caution I specified in my August, 2007 Steamboat Analyst and Newsletter regarding the Steamboat luxury market and how buyers need to be watchful on how a property is priced in this segment of the market.Looking at these numbers and the pace at which luxury sales occur shows a very healthy supply of high end properties for Steamboat buyers, and competition for these buyers is growing.While the bar continues to rise for the price buyers are willing to pay and the lavishness that is available in the Steamboat market, better opportunities for buyers are now presenting themselves more frequently than in the recent past. **Nothing on this website should be confused with financial or legal advice. If you need this, or any other type of advice, please seek the help of a competent professional. In addition, because real estate laws change all the time and differ from state to state, and even city to city in the same state, everything in these pages should be considered general marketing advice and ideas. Please see link to full Disclaimer at the bottom of this page.
The Steamboat Springs real estate market is not the only resort market to have softened over the past several months. Comparing results posted by affiliate members of the Rocky Mountain Resort Alliance, a trade organization of MLS boards throughout the Rocky Mountains, seven of the boards that have posted results for the past five years show a similar downturn in activity.For the first six months of 2008, the Colorado resort areas of Summit County, Telluride, and Vail, along with Park City, UT, Sun Valley, ID and Jackson Hole, WY are all reporting slower than normal sales.Listing inventory in the Steamboat Springs Multiple Listing Service is at an all time high, with over 2,100 properties for sale at the end of the second quarter (June 30) of 2008.
The 5 year average is 1,338, equating to 159% of the 5 year norm. Park City, UT is right behind Steamboat at 158% of normal, while Sun Valley is the lowest and sitting near average at 102% (1,574 listings).Of the seven resorts surveyed, listing inventory in Steamboat has the highest percentage increase over the 5 year average.Over the past 5 years, Steamboat has averaged 669 transactions for the first half of the year. In 2008 only 462 sales closed, representing a 69% performance from normal.However, comparing the other areas, this is the second best result, as Telluride is at 78% of normal in sales, while Jackson Hole is at 59%, Summit County is at 58%, Vail and Park City are at 53% and Sun Valley saw a total of 187 sales in the first six months of 2008, which is only 47% of their 5 year average of 399 transactions.The absorption rate, which is the relationship of how rapidly the inventory (listings) is absorbed by the market (sales) or, supply vs. demand, shows Steamboat sitting in the middle of the pack. The first half of the year has our absorption rate at 43% – quite a way off of our 118% 5 year average or 37% of normal. Telluride fared best in this category at 58% of normal and Park City has the worst absorption rate at 27%.The absorption rate provides a buyer and seller with an idea of how long one would expect a property to stay on the market. As an example, a 100% absorption rate would mean there would be 200 listings in a year and 200 sales per year. A 50% absorption rate would equate to 200 listings a year and 100 sales, and one would anticipate a property to be on the market for two years before it sold.Of the seven markets surveyed, Steamboat typically sits in 5th place in total dollar volume. Vail averages slightly over $1 billion in transactions for the first six months of the year. Park City sees $800 million, Summit County averages $422 million, Jackson Hole $314 million, Steamboat $303 million, Sun Valley $274 million and Telluride comes in at $155 million.Although the number of transactions was down significantly, the total dollar volume of transactions did not seem to be affected as much. Steamboat hit 84% of its 5 year average at $253 million, and as mentioned earlier had 69% of the normal number of transactions.Summit County showed the best at 92% of their average, while Sun Valley fell off dramatically at 51%, or $139 million of their average $274 million of total dollar volume for the first half of 2008.Even with the slowdown, the average prices for a majority of the seven resort areas increased over the past year. In Steamboat, the average price dropped 2% from the prior year, to $547,000 from $558,000.Sun Valley and Telluride dropped as well ($819,000 to 743,000 and $1,494,000 to $1,313,000 respectively). Jackson Hole increased from a first-half 2007 average price of $1,312,000 to $1,708,000 in 2008, and Vail increased from $1,169,000 to $1,447,000.What does this all mean for the Steamboat Springs real estate market?First of all, it’s nice to know that we are not the only market experiencing a slowdown. National and international factors have all contributed.Second, for the end of 2007 to beginning of 2008 Steamboat activity was accelerated more than the other resort areas due to the ski area, Sheraton, Bear Claw III and Steamboat 700 sales, among others. Take these sales out of the picture and how they impacted the market and our downturn is not as dramatic as most of the others.However, what is most interesting is the number of listings currently on the Steamboat market. In the record year of 2007, there were 1,729 sales and averaged 1,081 listings over that time. With half of 2008 completed, Steamboat is sitting with 462 sales and 2,125 listings.Double the sales totals for the first half of 2008 and we could be at 920 sales by year-end. That equates to over a two year supply of listings! Park City is in a similar situation, and one could argue that Vail is, as well with 145% listings than normal.However, Vail only has 300 more listings than Steamboat, and conducts nearly twice as many sales. Acting in our favor is that with an average purchase price of $546,000, Steamboat Springs real estate is, by far, the most affordable market area surveyed, which should attract those seeking value in a . **Nothing on this website should be confused with financial or legal advice. If you need this, or any other type of advice, please seek the help of a competent professional. In addition, because real estate laws change all the time and differ from state to state, and even city to city in the same state, everything in these pages should be considered general marketing advice and ideas. Please see link to full Disclaimer at the bottom of this page.