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No Stoke without fire

  • 09/09/2003
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Its central location, low house prices and proximity to other major cities makes Stoke-on-Trent an interesting prospect for buy-to-let investors

The city of Stoke-on-Trent often fairs badly in national surveys. It was voted England’s ‘fattest city’ by Men’s Health magazine this year, soon after Staffordshire was voted the worst county to live in by Country Living. Stoke-on-Trent is ranked the thirty-fourth most deprived local authority district in England and the third most deprived in the West Midlands, with six of its wards considered among the 10% most deprived in the country.

It has long been reliant on coal mining and pottery manufacturing and it was not uncommon until the mid-90s for several members of a family to be employed by the same pottery company. However, the last coal mine ‘ Silverdale Colliery ‘ closed in December 1998 and the burgeoning success of cheaper pottery manufacturers, predominantly in South East Asia, has resulted in the gradual demise of Stoke-on-Trent’s main industry and employer.

The big names ‘ Wedgwood, Royal Doulton and Spode ‘ are still there but others such as major tableware manufacturer Biltons have gone. Besides wiping out thousands of jobs, this has had a knock-on effect on local newsagents, sandwich shops and specialist suppliers to the industry as the boarded-up shop fronts show only too well.

Factory shops, offering china and earthenware at discounted prices, still attract many visitors to the city, but surprisingly, unlike other cities that have been stripped of their core industries, Stoke-on-Trent has not been successful at creating new opportunities or attracting new investment. And while one of the city’s exports ‘ singer Robbie Williams ‘ is enjoying international success, this is in stark contrast to the current health of his hometown.

Britannia is one of the largest white-collar employers to remain in the area. In other sectors, the theme park, Alton Towers, about 10 miles east of the city, has a very large but seasonal workforce and mobile phone specialist Caudwell Communications is a sizeable employer in Stoke-on-Trent itself. However, tyre manufacturer Michelin has slashed its local workforce over the last few years from over 10,000 in the late 1970s to just 1,100 today.

Investment opportunities

The city of Stoke-on-Trent is formed of six towns ‘ Stoke, Hanley (generally acknowledged as the city centre), Burslem, Longton, Tunstall and Fenton. The towns have a combined population of over 240,000.

The Potteries ‘ as the area is known ‘ is within easy access of Birmingham, Manchester and Nottingham thanks to the M6 and A50 and its central location next to the Staffordshire Moorlands and nearby Peak District, making it an ideal place to commute from. The A50 and A52 will soon be joined by the new M6 toll road that is due to open next year. The Midlands west coast mainline is also undergoing extensive repairs to speed up train journeys on the route between Manchester and London.

Neville Richardson, chief executive of Britannia Building Society, thinks the area needs to project itself as one that people want to come to. ‘It is a great location, has a good train network and is close to some fantastic countryside.’

Britannia ‘ the UK’s second largest building society – is based in the leafy market town of Leek, just outside Stoke-on-Trent and one million of the mutual’s members live within a 50-mile radius of its headquarters. However, it does not pay procuration fees, unlike Platform ‘ the non-conforming lender ‘ which is the Society’s only intermediary arm and Richardson has no plans for the parent company to start paying fees to intermediaries.

Richardson explains: ‘I think sometimes people are supposedly getting independent advice but often intermediaries will not quote a Britannia product because they do not get a fee. We prefer to put money in our members’ pockets not brokers’.’

Britannia is interested in the market though, and it submitted feedback to the Government following the announcement by Gordon Brown of a study into fixed rates in April. Britannia has always had a medium-term fixed rate and he says 5-10-year fixed are among its best buys.

‘Then you look at 25 years ‘ the bottom line is with the way interest rates are working, short-term money is cheaper than long-term. It is important to have a stable housing market and as a mutual it is important that we are here for the long-term. The last thing we want is to be repossessing houses,’ says Richardson.

Affordability issues

Although Stoke has not enjoyed the 150% increase in prices witnessed in other parts of the West Midlands, the average property was worth just over 40% more in the second quarter of this year, compared with the same period in 2002 according to Halifax.

Gerald Gregory, managing director of capital investment management at Britannia, believes property is more affordable in Stoke-on-Trent than elsewhere.’ It is still possible to buy here as a first-time buyer. Affordability is better here than in most parts of the UK. The average loan price is lower here and that helps the group because we have a commitment to the area. It spreads the risk. The market around here is still buoyant but local wage levels are low,’ he says.

However, Richard Dickson, marketing manager of the Staffordshire Building Society, does not consider any part of the city a hotspot, describing it as: ‘A strange mix of traditional urban areas, surrounded by beautiful countryside and even compared with the Black Country people here are very proud of their area and history.’

However, buy to let is one part of the market that is doing well in most of the six towns, with buyers from the South East in particular, viewing it as a good-value buy-to-let location. The now-derelict warehouses along the Trent and Mersey canal that runs through the city, are likely to be converted into luxury accommodation which is could attract a lot of interest among buy-to-let investors.

Sandra Lythgoe, sales negotiator at estate agent Bob Gutteridge, in nearby Newcastle-under-Lyme agrees that buy to let is on the way up. ‘We have got a lot of people from the south buying here for investment purposes. In Cheshire prices are much higher but this is an ideal place to be.’

The estate agent’s rental business is also thriving. Lythgoe says: ‘A lot more people are renting. People are not making the commitment to property but it amazes me how much people will pay for rent. I have got a two-bed townhouse to rent at £400 a month ‘ they could have a mortgage for that.’

Buoyant economy

Barrie Hough, an independent financial adviser based in Burslem, believes the local economy is still quite buoyant on the property market because prices have rocketed in the last two years. He is also enthusiastic about the Government’s commitment to invest in the city’s housing.

Several new housing estates have been built on brownfield sites ‘ often in former mining areas. New builds are in progress in Norton, Waterhayes and Trentham Lakes, but a prerequisite of such builds is often that a small number of social housing accommodation must be built alongside those for private sale.

Hough adds: ‘There is a lot of money being pumped into the city and the cost of housing is not too high. It is a good place to commute from to Manchester for example where the salaries are much higher. Someone can live in a very good property in Stoke but only have a 40-minute commute to Manchester. A lot of people do it.’

Among the older housing stock, terraced houses ‘ built originally in the early 1900s to accommodate the large numbers of miners who moved into the area ‘ are to be found all around the six towns. In Stoke the average cost of such a property is between £35-£45,000 but in nearby Newcastle-under-Lyme ‘ a well-heeled neighbour of Stoke-on-Trent ‘ a terraced house is likely to sell for between £60-£70,000.

Until about 18 months ago, terraced houses were going out of fashion because developers were building three-bed semis which were being sold for £40-£50,000, often with legal fees and deposits paid. So first time buyers (FTBs) were by-passing terraced properties and buying semi-detached homes instead. However, now the semis are being sold for between £60-£70,000 FTBs are having to look at terraced homes again.

Of the lenders active in the city’s mortgage market, Halifax, Abbey National and Cheltenham & Gloucester are among the main players, as is Britannia. Hough also deals with Northern Rock, Mortgage Next and Mortgage Intelligence and of the mortgages he is arranging currently, 80% are remortgages.

‘Five years ago it was mainly purchases. People were not interested in remortgaging. Now people realise they can save money by remortgaging. And some people are remortgaging, not to move house, but to extend their property if they live in an area they are happy with,’ says Hough.

David Ginivan, corporate public relations manager at Britannia, agrees, confirming that there are very few FTBs. ‘We are seeing a lot of remortgaging but there is not as much movement in the market as lending figures are suggesting.’

Of Hough’s clients about 50% are interested in debt consolidation, 30% are adverse credit and 20% are good risks. That almost 80% of workers in Stoke-on-Trent earn less than the national weekly average of £460 makes the high level of debt unsurprising.

He believes Burslem represents the best value, given its current regeneration. The 1986 Garden Festival site ‘ most of which was built on part of the Shelton Steelworks ‘ was regenerated to house a shopping mall, cinema complex, restaurants and more recently, popular new office space.

Village life

Brian Alcock, partner at Brian Alcock & Associates, describes Stoke as: ‘¦a city that is like a big village. We are a low wage area so consequently house prices in Stoke-on-Trent are some of the lowest in the country. But you have also got houses within ten minutes of here selling for £500,000.’

‘We are trying to get people out of trouble. We are trying to get rid of their debts. Every other person we meet has a problem. I have a thing about right to buy ‘ I think everyone should be able to own his or her own home. With right to buys there is less pressure because people are already living in the property.’

Like others he is concerned about the Government’s lack of investment in new social housing and considers it one of the most pressing problems.

Under the West Midlands Regional Housing Strategy, North Staffordshire (encompassing Stoke-on-Trent) has been identified as a Housing Market Renewal Area. As a result, provision will be made for at least 600 new dwellings per year until 2011, with a minimum of 67% being built on previously developed land.

Stoke-on-Trent’s three-year housing strategy includes a plan to tackle poor housing conditions in the private sector, social exclusion and to address non-decent housing in the social housing sector. This will involve the clearance of 500 poor condition private dwellings, the rationalisation of 600 council homes and improvements to 9,300 properties mainly in Hanley, Stoke and Fenton.

This work is much needed: 41% of the Council’s properties were considered non-decent last year and just over a fifth of the city’s 17,000 private sector homes are classified as unfit. Outside of Shelton, Hanley and Normacot there is a very low percentage of ethnic communities. The Indian and Pakistani population is strongest in those areas ‘ according to the 1991 Census, people from afro-Caribbean and minority ethnic groups live in the older, worst, housing areas of the city. Shelton is also popular with students at Staffordshire University ‘ formerly a Polytechnic.

Alcock describes Stoke as having a cash economy. ‘Many people do not have a bank account. In Normacot, I have asked clients for a £10,000 deposit and they have run around to see various members of their family and come back to me with the money in a paper bag. Remember 30-40% of people in Stoke get paid in cash in an envelope.’

He also points out that it is not uncommon for three generations of a family to live within a couple of miles of each other. However, there is a significant trend of migration away from the city. According to the Office of National Statistics an estimated 6200 people left between 1991 and 2000, without a corresponding migration.

The Council estimates that the city’s population will decline by about 4.4% by 2002, including approximately 31,000 people under the age of 45. However, the number of residents over 65 is set to rise significantly, having an inevitable impact on special housing needs.

The housing stock is certainly old and the Council estimates that £142m of investment is needed to bring all of the Council’s stock up to the Government’s Decent Homes Standard by 2010.

The Council’s new corporate plan has set out a new vision for the City and its citizens: ‘Stoke-on-Trent city council will work to make Stoke-on-Trent a better place for all to live, learn, work and enjoy.’

It has only until 2005 to make that a reality ‘ a tall order for any city council.


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