Written By Em

Em Morley

Could 2017 be the year of leasehold change?

Published On: January 13, 2017 at 10:58 am

Tags: leasehold,leasehold process,leasehold properties,The Conveyancing Association

The Conveyancing Association has moved to outlined its position on focusing its efforts to reform the leasehold process. It has suggested that 2017 should be the year when substantial change is delivered.

For a number of years, the Conveyancing Association has been campaigning for leasehold reform and has worked with industry stakeholders in order to deliver change.

Encouragement

The CA was very encouraged by the debate that took place in the House of Commons last year on leasehold and commercial issues. Housing Minister Gavin Barwell said he was not comfortable with the present situation surrounding fees, delays, high rents and lack of information for clients.

Mr Barwell cited a recent survey that suggested 57% of those questioned said they regretted buying a leasehold property. As such, he said the Government would be forwarding plans to root out abuse of leasehold properties during 2017.

In addition, The CA continues to obtain documentary evidence and research to share with the Government and other stakeholders on the leasehold problem.

Could 2017 be the year of leasehold change?

Pivotal

Beth Rudolf, Director of Delivery at the Conveyancing Association, observed: ‘One can’t help but feel that last year’s debate at the House of Commons represented a pivotal moment for securing real change in the leasehold process.’[1]

‘Following up on the fantastic work of the All Party Parliamentary Group, the debate highlighted many of the problems and issues we have been campaigning about for some time, and there was an assurance from Gavin Barwell that the Government would be putting plans in place to deal with these abuses. Much of the focus has been on escalating ground rents on new-build properties and whilst an important issue to confront, we will be seeking to ensure that all other leasehold problems such as the unreasonable fees routinely charged by some lease administrators, and the delays inherent within the process, are also addressed,’ she continued.[1]

Concluding, Rudolf said: ‘2017 can be the year for true leasehold change and the progress that we have all made in the last 12 months should now be translated into action and delivery. We will continue to focus heavily in this area and, with the support of our members and others, will be looking to support all moves for the changes that are required.’[1]

[1] http://www.propertyreporter.co.uk/finance/is-2017-the-year-for-%E2%80%98leasehold-change%E2%80%99.html

Prime Central London House Prices Hold, but Transactions Plummet

Published On: January 13, 2017 at 10:32 am

Author: Em Morley

Categories: Property News

Tags: house prices,London,London property market,prime central london

2016 proved a challenging year for prime central London house prices and sales, according to London Central Portfolio (LCP). So how will the past 12 months affect the next year in the market?

Over the last year, sales activity slumped in prime central London following Stamp Duty changes, which dramatically affected sentiment, and the uncertainty caused by the Brexit vote.

With these headwinds, prime central London house prices have started to fragment, creating a watershed at £1m. As a result, property prices at the lower end have shown modest growth, while values have come down at the luxury end.

For the market as a whole, however, prime central London house prices have remained stable, reports LCP. According to Q3 statistics from the Land Registry, prices fell by just 0.5% overall on an annual basis, to £1,590,472.

More significant has been the 24% decline in transactions over the past 12 months. The 58% and 50% falls for Q2 and Q3 respectively far outweigh the 29% increase recorded in Q1, ahead of the introduction of the 3% Stamp Duty surcharge for additional properties.

The number of transactions for the last year stands at just 3,696, found LCP. This is one of the lowest annual figures recorded by the Land Registry and equivalent to the depths of the financial crisis. It’s a huge 42% lower than two years ago, when the new Stamp Duty rates for residential property were introduced, significantly increasing the tax burden on homes worth more than £1.125m.

Prime central London house prices

Prime Central London House Prices Hold, but Transactions Plummet

Unlike the sub-£1m end of the market, the luxury sector – particularly the new build market – has been hit hard by a series of new taxes. Three successive Stamp Duty increases since 2012 have caused a rise from 5% to 15% on some purchases, alongside other taxes, such as the introduction of non-resident Capital Gains Tax (CGT) and the Annual Tax for Enveloped Dwellings (ATED).

Luxury prime central London house prices have suffered a correction over the past year, with marked drops in sales activity, despite an influx of discretionary capital in Q1 as buyers rushed to beat the Stamp Duty surcharge deadline.

While definitive statistics are difficult to come by in the luxury market, all market data points to a softening in prices. Knight Frank has recorded declines between 6.2% and 7.3% for 2016 for homes worth more than £1m. Other high-end estate agents have reported similar or greater declines, and LCP’s in-house research upholds these claims, indicating an overall fall in prices above £1m of 6.4%.

Price growth at the top end of the market, where the average value stands at £3,357,811, traditionally experiences extreme volatility in periods of political and economic turmoil. This has been seen in house price fluctuations since 2000, as the market felt the effects of the dotcom bubble and a weak stock market, before the financial crisis hit.

While the long-term outlook for the sector remains strong as a global destination, it may take several years to correct, as prices rebase themselves to take account of higher buying costs.

The prime central London private rental sector

Despite the gloomy picture for the luxury end of the market and more subdued reports for prime central London as a whole, one sector has shown positive growth in 2016.

Prime central London’s private rental sector typically shows a far more consistent performance than the discretionary luxury end of the market. Having been far less affected by the recent introduction of new taxes, the mainstream sector has experienced a 4.3% rise in value over the past year. As an entry price market, it is also more accessible, remaining particularly attractive to international investors taking advantage of current exchange rate benefits caused by Brexit.

This is supported by the Land Registry data for October 2016. Annual price growth for the City of Westminster, where prices average £937,473, hit 3.8%. In contrast, Kensington and Chelsea, where prices are typically over £1m, has recorded a decline of 2.6%.

While decreases in transactions have been seen in this sector, this is as much due to a lack of sellers as buyers, claims LCP. It explains that property in the mainstream sector is generally a long-term hold and commercially rented, so if sellers are unable to achieve their price expectations, they will generally retain their assets, which supports property values.

Although 2016 has been a rollercoaster year for prime central London’s property market, the moderate price growth at the lower end of the market is good news, insists LCP. The investment firm anticipates that after a year of constrained activity, coupled with increased uncertainty both in the USA, elsewhere in the EU and the Middle East, investors will actively re-enter the market.

The firm believes that, whatever the next year holds, prime central London will remain a globally sought-after destination for property.

Many amateur landlords in Scotland don’t understand obligations

Published On: January 13, 2017 at 10:00 am

Author: Em Morley

Categories: Landlord News

Tags: Buy-to-Let,landlords,private landlords,renting in Scotland,Shelter Scotland

There are thousands of private landlords in Scotland requiring more support in order to give their tenants a better service, according to housing and homeless charity Shelter Scotland.

Assessing the first year’s work of two Oak Foundation backed pilot projects assisting landlords in the Highlands and Dundee, the charity has concluded that there are too many inexperienced landlords who do not understand their legal obligations.

Guidance

During the last year, Shelter’s private landlord support officers have given information and guidance in 542 cases. They found that most of the landlords receiving help rent out just one property.

In addition, Shelter’s investigation found that many became landlords as a result of a change in their own circumstances. The vast majority wanted to comply with legislation and to do whatever it meant to be a good landlord.

James Battye, Shelter Scotland private renting project manager, observed: ‘It is reasonable to believe that what we have found in Dundee and the Highlands may be well true across Scotland. That means there could be thousands of landlords who don’t have a full grasp of their legal responsibilities.’[1]

‘Shelter Scotland’s Private Landlord Support project has highlighted this gap in support for inexperienced landlords and is creating a template for services that would benefit them and their tenants in the future,’ he continued.[1]

Many amateur landlords in Scotland don’t understand obligations

Expansion

The number of households privately renting has nearly tripled in size since 1999 to provide homes for 350,000 Scottish households. These include 91,000 families with children.

As the Scottish private rental sector continues to grow, it is imperative that landlords are more professional.

Mr Battye noted: ‘Many landlords are finding themselves ill-equipped for managing housing for people in relationship, health or financial crisis.’[1]

‘We will continue to provide the Private Landlord Support Service in the Highlands and Dundee until March 2018 with financial backing from the Oak Foundation. In Dundee the private landlord support officer is based within the council while in the Highlands the support officer is hosted by Lochaber Housing Association. Invaluable support is provided by both local authorities enabling the projects to reach people on the landlord register,’ he concluded.[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2017/1/thousands-of-amateur-landlords-dont-understand-their-legal-responsibilities

Protect Your Properties from Burst Pipes this Winter

Published On: January 13, 2017 at 9:41 am

Author: Em Morley

Categories: Property News

Tags: burst pipes,landlord insurance,property damage,winter

As the cold weather finally hits and freezing conditions persevere, rental properties are particularly vulnerable to potentially expensive winter damage, such as burst pipes.

Landlords and letting agents are urged to protect their properties from burst pipes in order to avoid costly repairs.

Protect Your Properties from Burst Pipes this Winter

Burst pipes are a common issue over the winter period, especially if a property is left unoccupied for any length of time in freezing conditions. Losses resulting from burst and leaking pipes – including damage to ceilings, walls and carpets – cost an average of £4,500 to repair, so you don’t want to be caught out!

A particular case from the Deposit Protection Service (DPS) shows just how much damage burst pipes can cause to a property and the resulting expenses. In this case, the tenant left the property for three weeks over the Christmas period to visit family, without turning the stopcock off.

During the cold weather, a pipe froze and then burst, flooding the property. The carpet and lino were extensively damaged, and the washing machine was completely destroyed. Excess water had to be drained from the property and it had to be dehumidified.

The Founder and CEO of Imfuna, the provider of digital inventory app Imfuna Let, Jax Kneppers, comments: “If landlords and agents take a few simple precautions, they can help protect their properties from burst pipes. For example, it’s a good move to provide the tenant with specific instructions about heating the property in cold periods. Landlords and agents should ensure the tenancy agreement contains a clause outlining the tenant’s obligations to shut off the heating system if the property is vacated in winter.

“It is important to instruct the tenant to inform the agent or landlord if they are vacating the property for more than 14 days in winter (this is also normally included in the tenancy agreement). A detailed check-in inventory with clear photos, signed by the tenant, will also protect landlords in the event of a deposit dispute over damage.”

So what should you do if you do experience a burst pipe?

Kneppers explains: “If a property experiences water damage, landlords and agents should provide a detailed account of any damage caused by burst pipes and keep invoices for any repairs done if the property is damaged. It is essential to take out landlord insurance as a precaution to help cover damages.”

Landlord insurance provider Just Landlords has a specialist policy for landlords of unoccupied properties. If you require this cover, click here: https://www.justlandlords.co.uk/unoccupiedinsurance

Although burst pipes are an unfortunate circumstance for both landlord and tenant, a detailed record of a property’s condition before and after the pipes burst will make the repair process as quick and pain-free as possible.

Renting could be more financially sound then estimated

Published On: January 12, 2017 at 2:19 pm

Author: Em Morley

Categories: Finance News

Tags: homeownership,property,renting,rents

Interesting new research reveals that the financial benefits of renting a property as opposed to owning could have been underrated.

Financial researcher at the University of Stirling, Dr Isaac Tabner, believes the cost of renting includes expenses such as homeowners, such as property maintenance and insurance.

Hidden costs

Dr Tabner said just a simple comparison between rent and mortgage costs can overlook hidden fees, thus overestimate the financial benefits of owning a property as opposed to renting.

The research, published in the International Review of Financial Analysis, gives a detailed explanation of how costs of owning versus renting a property could be assessed. Tenants’ and owners’ personal circumstances and macro-economic conditions are also taken into account.

When reviewing transaction costs, rental yields, inflation and length of ownership, the study reveals that in periods of deflation or zero inflation, people who rent are usually better off financially than those owning outright.

Favourable

In addition, the report found when economic conditions return to be favourable, households could need to own their home for between five and ten years before the costs of rent they no longer pay are sufficient to compensate for buying transactions costs.

Of course, rising inflation could serve to favour homeowners.

Renting could be more financially sound then estimated

Continuing, Tabner said: ‘It is often thought that buying a house makes more financial sense in the long run: however, renting is frequently more worthwhile than buying for financially-constrained households, as well as households likely to relocate within 10 years.’[1]

‘As well as a reduced ability to recover transaction costs, households relocating within a few years face a higher risk that medium-term prices will move against them, thus reducing or eliminating their equity, while financially-constrained households face much higher mortgage costs,’ he added.[1]

A full transcript of the research can be sourced here.

[1] https://www.lettingagenttoday.co.uk/breaking-news/2017/1/renting-may-be-financially-more-worthwhile-than-previously-thought

What Will 2017 Hold for London’s Property Market?

Published On: January 12, 2017 at 10:42 am

Author: Em Morley

Categories: Property News

Tags: house prices,London,London property market,property hotspots

It’s a question that will be on every property owner’s, investor’s and buyer’s lips – what will 2017 hold for London’s property market?

Mark Lawrinson, of London estate agent Portico, answers some key questions and reveals his top predictions and potential hotspots in London’s property market for the following 12 months…

2016 recap

We all know that 2016 proved an extremely eventful year. House prices in the capital ballooned to unbelievable levels, the additional 3% Stamp Duty rate for additional homes was introduced, and the Bank of England cut interest rates to just 0.25%, making mortgages the most affordable they’ve been for a long time.

London’s new Mayor, Sadiq Khan, opened the Night Tube on several lines and set out plans for more “genuinely affordable” London homes. But despite his efforts, affordable housing is still a huge problem and concern for the majority of Londoners – and the issue is exacerbated by the fact that property sales volumes in the capital are now at historic lows.

The year culminated with Philip Hammond’s first Autumn Statement, in which he pledged to ban letting agent fees charged to tenants, in an attempt to help generation rent.

Through all of these changes in the property market, the country experienced a number of political shocks. EU referendum worries dominated the summer months, before the shock of the Brexit vote left the UK – and its property market – in a period of uncertainty. The USA’s election of Donald Trump as its president also caused a shockwave this side of the pond.

This year, we will find out how profound the effects of these events on London’s property market will be. Lawrinson shares his forecast:

Prices will soften or continue to rise slowly

Buyer affordability was stretched to the limits last year. With the current average house price in London at the highest it has ever been – £580,600 – property value growth simply cannot continue at this rate. Sales transactions in the capital have also dropped significantly since the Stamp Duty surcharge came into effect last year – now down by 60% in prime central London.

The combination of Brexit, over-inflated prices and falling sales volumes mean that price growth is expected to slow this year, with values in prime central locations most likely to soften.

And although Brexit will by no means solve generation rent, slower price growth and super low mortgage rates will come as welcome news to those hoping to get onto the property ladder.

Greatest price growth will be in Zone 3 outwards

What Will 2017 Hold for London’s Property Market?

Though Lawrinson expects prices to soften in prime central London, he still expects certain hotspots to experience growth – though perhaps not at the level seen in recent years.

If you’re seeking an investment in London’s property market, it’s vital that you buy in areas that are undergoing gentrification or infrastructure investment, Lawrinson insists, as these locations will offer healthy yields, making mortgage repayments less of a worry.

Areas in the outer zones are likely to experience the highest price growth of the year. Zone 5’s East Croydon is becoming the capital’s next big property hotspot, he believes, as it’s currently undergoing huge development, offers key train links and the Gatwick Express, and Westfield shopping centre will soon be arriving. Its mix of luxury and affordable living also makes the area great for young professionals.

Crossrail beneficiary Forest Gate is also likely to experience further gentrification when the high-speed rail link arrives this year, which will keep house prices on their upward climb. Leyton is another east London hotspot tipped for price growth – in fact, east London as a whole will be one of the best investment locations generally this year, due to improving transport links and affordable property values (when compared to the rest of the capital).

If you want to invest more centrally, Farringdon is a safe bet, again thanks to key infrastructure changes, such as Crossrail, and the fact that the nearby Silicon Roundabout is becoming a great area to live, work and play.

Rush in valuations

Back in 2015, then chancellor George Osborne revealed a shock tax change – the tax relief that landlords currently receive on finance costs will be restricted to the basic rate of Income Tax. Basically, the current rules that give most landlords a 40% discount on their finance costs will be cut to 20%. This tax change will be phased in gradually from 6^th April this year and will be fully implemented by 2020.

There’s no doubt that this reduction will make things more difficult for landlords. However, all investors must be aware that those who are basic rate taxpayers or those without a mortgage won’t be affected at all. Nevertheless, the change may also push around 22% of landlords into the higher tax bracket.

Secondly, there are steps that landlords can take to try and cut their interest costs – the first being remortgaging. Buy-to-let mortgage interest rates have dropped massively in recent years, so deals currently on the market will likely be substantially better than those arranged a few years ago.

With large house price increases in London, another tip is to get your investment property re-valued. This will make your lender recalculate your loan-to-value ratio (LTV), and a lower LTV means a better interest rate and a larger choice of lenders.

Will 2017 be a good year to buy?

For many Londoners, owning a home, a larger home or moving into a new area will likely be a key New Year’s resolution.

With sales volumes typically a leading indicator of price growth, there is a chance that values may soften, making 2017 a great year to buy. Having already witnessed an annual drop in house prices in Westminster, Lawrinson believes that bagging a bargain in London’s central market may be possible. However, he does warn that there is no way to be sure that this price correction will ripple out to Greater London.

Most importantly, he warns, it’s crucial that you buy when you’re ready. As nobody can accurately predict the market, it’s extremely difficult to try and time things to a drop in prices. If you’re buying a home, then holding off could be equally as detrimental as it could be positive.

Nonetheless, with money currently as cheap as it can be to borrow, getting on the property ladder or moving up it should be that bit easier.

As London’s property market has proven in the past, it is an extremely resilient region, making property investments as a business or home incredibly safe.

If you’re purchasing a property to invest or buy-to-let, then – so long as you use the advice available to you – you can protect your assets and minimise any risk. Buy in an up-and-coming area experiencing gentrification or infrastructure investment, advises Lawrinson, and you are likely to benefit from a boost in both rental yield and capital growth, even in a weak market.

When is the right time to sell?

Again, there is no right or wrong answer to this question, explains Lawrinson. If you need to sell to release money or trade up, there are buyers ready and waiting to take advantage of competitive rates and enter the market when the right property comes along. The firm is already starting to see overseas buyers return to London’s property market, keen to benefit from the weaker pound and softening prices in the prime sector.

Selling this year also gives you the advantage of limited competition in a limited marketplace, which could translate into a quick sale at a good price.