 |
|
 |
Hot Topic
Deal of the WeekCompetition
Friday, 19th Sept.
10am-6pm
Saturday, 20th Sept.
10.30am-5.30pm
Sunday, 21st Sept.
10.30am-4.30pm
   |
||||||||||||||||||||||
|
 |
 |
||||||||||||||||||||
NEWSLETTER ISSUE 4
Click here to read the latest PI Newsletter Click here to subscribe to the next newsletter What a state we're in! There seems little doubt that punitive Stamp Duty is an area where most of us involved in property would like to see reform. Gordon Brown and his Chancellor are now said to be urgently considering a complete Stamp Duty holiday, letting all buyers off the hook for the time being, or a Stamp Duty holiday just for first-time buyers. Indeed, with repossessions rising sharply (and higher than official figures, according to Shelter), the one thing the Government cannot afford to do is dither about Stamp Duty. However, a holiday is not the same thing as reform and is only a temporary measure. Indeed, arguably it is one that could scare the horses since the last time there was a Stamp Duty holiday was in the depths of the early nineties housing recession. So, announcing a holiday would simply convey the message that the Government officially accepts there is a housing crisis – not that the couple who took out an interest-only fixed rate loan on a £180,000 property two years ago would need convincing: their fix has now come to an end, and their mortgage now costs them an extra £300 a month: tough when their house is now worth less than they paid for it, and they’ve lost one salary after starting a family. But a Stamp Duty holiday does not solve the long-term problem which, in a nutshell, is how purchasers can find many thousands of pounds extra to pay the tax when their finances are already being stretched with a new mortgage. Stamp Duty is not a bit of loose change: it is by far and away the biggest cost in home moving and I’ve always considered it a nerve on the Government’s part when it criticises estate agents and lawyers for their fees. These dwindle into insignificance compared with what the Government takes as its own commission. I still think the burden of paying Stamp Duty should be moved from buyer to sell would solve at least some of the problem and possibly help get the housing market moving again, and John Clarke agrees. “From the buyer's point of view this has psychological benefits which would feed through as a greater willingness to buy,” he says. He also dismisses the suggestion from another reader that it would be unfair, because sellers would have to pay Stamp Duty twice over. “Current sellers need not pay twice, (unless the thief of Downing Street makes them),” he says. “It would be a simple matter to exempt current owners by reference to the Land Registry and/or HMRC.” He, like many others, criticises the lenders for their previously crazy lending practices. It was not so long ago that the most anyone could borrow was twice joint income for couples and two and a half times sole income. High time for lenders to start re-lending at more sensible levels, he says. Another reader agrees, citing the case of a 26-year old labourer on a low wage who made the most of the lending boom, buying a house a month on a 100% plus mortgage, until he amassed 20 properties. Mike Donovan, editor of Practical Farm Ideas, (what an eclectic bunch of people read this newsletter), blames Gordon Brown fairly and squarely for the housing market mess. “As chancellor he decided the level of money supply, and hence had a considerable influence on the availability of credit in the economy,” he writes. He also blames Brown for keeping the mood up-beat with spurious financial figures on inflation, national borrowing and debt that reflected wishful thinking rather than facts. And the solutions? Scrap Home Information Packs, taper Stamp Duty down, guarantee housing loans, raise income tax for those earning over £200,000 and recognise that housing is the bedrock of today’s national economy. One reader’s views mentioned in the last newsletter, that the supposed housing shortage is a myth promoted by the Government and perpetuated by the Kate Barker report, resulted in a powerful response. This came from LibDem councillor in the London Borough of Brent, Anthony Dunn, who invited me to go to Brent to see the housing crisis shortage for myself. In Brent, there are some 19,000 households on the waiting list, some of whom have been waiting 20 years. “To pursue an argument that there is no supply issue is to fly in the face of reality,” he writes. “Brent already has proportionately one of the largest private rented sectors in the country; as an authority, we would have an even worse situation without the private sector landlords who provide accommodation for rental through registered social landlords.” The issue is massively complex and simply to blame everything on the government when times get tough is to duck it, he believes. “If people have chosen to invest in property, this is for their own reasons rather than the Government’s. “If buy-to-let investors piled into city centre apartments with ludicrously low space standards in poor locations and are now having problems obtaining decent rentals, then whose fault is this? Were they coerced into buying them? Did the Government force them? Of course not. Stop passing the buck and start placing the mirror in the faces of those complaining the most; they thought they were in for an easy, highly profitable, risk free ride. It hasn’t turned out that way; it’s called the free market. “And why on earth should we get back to handing out tax breaks to a sector that has enjoyed ridiculous levels of taxpayer subsidy already – with seriously distorting effects on UK investment patterns and the operation of the UK housing market? Housing is not internationally tradeable and does nothing to aid our appalling balance of payments situation. Instead of encouraging further dodgy housing investments, perhaps people should be encouraged to start investing in companies producing goods and services that we can sell to the rest of the world. “In terms of its tax treatment, housing ought to be treated just like any other sector so that the speculative froth that you and others have encouraged over the past few decades is thoroughly eradicated.” These are strong views which, in a strange way, chime with my own: I started by arguing that the Government should stop tinkering with the housing market, and should try to engage with it rather than control it. Which brings me to Home Information Packs. One year after their disastrously botched introduction, the Government announces proposals to beef them up by including another document, a property information questionnaire to be filled in by sellers. The Government is hell-bent in its belief that HIPs have improved the life of home buyers and sellers. But, I repeat, how does it know? Since last August, the housing market has collapsed (and, yes, bodies like the National Association of Estate Agents repeatedly warned that HIPs could trigger this) and the number of transactions fallen off not so much a cliff as a mountain. HIPs, once the credit crunch is over, may indeed prove to be a blessing not a cumbrance. But at the moment, there is simply no evidence or proof: indeed, if there is evidence it lies in this month’s surveys that estate agents continue to hate them, and nearly two-thirds of consumers have no use for them. So, yet another example of Government meddling in what most of us seem to believe should be a free market. Your views, as always, are very welcome. Please email: rosalind.renshaw@homebuyer.co.uk
Fine times
The National Landlords Association has warned that UK landlords will face hefty fines if they fail to provide tenants with an Energy Performance Certificate from October 1.
The NLA believes that total penalties could exceed £500 million. Buy-to-let lender Paragon has warned that 55% of landlords are unaware of the new requirement.
This is that all private rental properties let out to new tenants on or after October 1 must have an Energy Performance Certificate. Failure to have one could result in a fine of £200.
Prospective tenants must be shown an EPC, and a copy of the EPC must be given free of charge to the actual tenant before the tenancy agreement is signed.
Currently, EPCs are required as part of Home Information Packs, which are a legal necessity for houses put up for sale.
While EPCs have failed to make much impression in this sector – homebuyers tend to prioritise location and price over a property’s energy efficiency – it is thought that tenants will be attracted by properties with lower heating costs.
In the rental market, an EPC is valid for 10 years and can be reused as many times as required within that period. Landlords do not have to commission a new EPC each time a new tenancy starts, but they are required to give a copy of the latest EPC to new tenants. Landlords will not be obliged to make any of the changes suggested on the EPC to improve the property’s energy efficiency and environmental impact rating.
Costs of EPCs start at around £60. EPCs can only be issued by accredited Domestic Energy Assessors.
Reluctant renters More accidental landlords are emerging as frustrated sellers turn to renting out their properties instead.
But estate agents are warning that the lettings market is being flooded by inexperienced landlords who are often unrealistic about rental expectations and uneducated about tenants’ rights.
Lynn Hilton, the partner at Cluttons estate agents responsible for lettings, said: “Many of our new landlords are not entering the lettings market by choice and they have a great deal to learn about the business. A number are missing out on opportunities to let their property by refusing to budge at all on the asking rent. Instead, they are settling for void periods, which every professional landlord knows is seriously detrimental to yields.”
She added that professional landlords know they might have to subsidise their mortgages at times, but the new breed of landlords expect their rental income to cover all their costs from day one, which is not always realistic.
Cluttons reports that on average, a property which has been for sale for four months and failed to attract a buyer is successfully being let within two weeks.
The trend towards accidental landlords was also noted by Rightmove in its report for July, which reported that the average property is staying on the market for 87 days. The average agent has 75 properties on their books but, according to the latest survey from the Royal Institution of Chartered Surveyors, agents are typically selling only five properties per month.
Scottish slowdown
The Scottish housing market has turned down with savage abruptness – just weeks after forecasts that the country would survive the turmoil in the rest of the UK property sector.
Estate agents have laid off staff, while developers unable to sell properties are trying to rent them out instead – a trend first seen in Northern Ireland.
Clyde Properties, an estate agent in Glasgow, has lost three directors and made redundancies. Bill Cullens, chairman of the business, said sales of houses across Scotland were down 40% and house prices15%.
He said: “Along with other agencies there have been redundancies on the estate agency side. It would be foolhardy not to do these things.”
However, the lettings business is booming: “Last year we had 1,500 let and managed properties, today we are sitting on over 1,800,” said Cullens. He believes this will grow to 2,000 by the end of the year.
Meanwhile, lettings agency D J Alexander said it has received approaches from developers desperate to rent out flats that had been intended for sale.
Yet only at the end of June, Halifax – which with Bank of Scotland forms HBOS – predicted that Scotland would escape the worst of the housing slump.
In the first quarter of this year, Halifax said that Scottish house prices were still rising, bucking the trend of the rest of the UK.
Sharing the optimism were the agents taking part in an online poll this month carried out by property portal Propertyfinder. It found that one-third of Scottish consumers were confident that property prices would not fall, while 59% of agents said Scottish prices would not suffer the sort of drops seen in the rest of the UK.
Legal update A long-awaited ruling by the law lords overturning a Court of Appeal decision has been greeted as good news for all landlords.
The case surrounded a tenant who had sublet his property, against the rules of the tenancy agreement. His landlord, a local authority, then took steps to evict him.
However, the tenant claimed protection under the Disability Discrimination Act because he had schizophrenia. He argued that he had not been taking his medicine and was not responsible for his actions, and he said that his landlord had discriminated against him because of his disability.
He argued that just because the landlord did not know about his disability made no difference to their discrimination.
The tenant lost his case at the first hearing, but won it on appeal. The Lords have now over-ruled that victory, saying that landlords cannot breach the Disability Discrimination Act if whatever action they take in relation to a tenant is not based on the tenant’s disability. The law lords also said that landlords cannot discriminate against a disabled tenant if they are unaware of the disability.
Commenting on the ruling, Graham Cooper, head of the housing law team at Peterborough-based Greenwoods solicitors, said: “This will assist private landlords seeking to take possession of property from tenants who break the terms of their tenancies but claim discrimination on the grounds of disability as a defence.”
Spain’s pain
Spain’s largest developer, Martinsa-Fadesa, has filed for bankruptcy, creating shockwaves for thousands of Britons who have made down-payments on off-plan properties. They now face losing their money.
An estimated 12,500 unfinished properties are involved and any investor is urged to seek legal advice as soon as possible. The firm heavily targeted the British market, building apartments and luxury golf resorts along the Spanish and Portuguese coasts.
Martinsa-Fadesa is the country’s biggest-ever corporate failure and the Spanish government has already said it will not bail it out. The company had an empire of housing estates, hotels and shopping malls and collapsed with £4 billion of debts.
The news prompted Spain’s finance minister, Pedro Solbes, to abandon government spin and admit that his country faces the worst economic crisis in its history because of the property crash.
“This crisis is the most complex we have ever lived through, given the plethora of factors on the table at the same time,” he told Punto Radio in Madrid.
House prices in Spain have crashed 20% in the second quarter of this year.
Goldman Sachs has issued ‘sell’ recommendations on a clutch of Spanish banks, and shares in other Spanish developers have tumbled in value.
Meanwhile, Parador Properties, a British-based firm which introduced British buyers to new properties, mainly in Spain, has gone into voluntary liquidation, blaming overseas property markets.
Hot stuff
New overseas property purchasing statistics show that there is still plenty of appetite for buying abroad.
Foreign exchange specialist Currencies Direct has analysed the number of foreign exchange transactions made by Britons buying property abroad in the last six months.
Portugal is beginning to threaten the USA’s usual third spot, as Brits monitor the housing market across the pond and also begin to consider safer overseas bets than the high-risk, quick-return emerging markets regions of 2007.
Mark O’Sullivan, director of dealing at Currencies Direct, said: “Investors are now looking to established markets, whose appeal will remain consistent amongst ex-pats and holidaymakers, guaranteeing a rental market for as long as Brits can afford to holiday abroad.”
Despite housing woes in all three places, Spain, France and the USA still remain the favourites.
O’Sullivan thinks this might change: “When it comes to nurturing the steady growth of its property market, Portugal is learning from Spain’s mistakes, and as a result has much stricter planning regulations in place. This has ensured that new-build properties are coming on to the market steadily, and that Portugal is not suffering from any of the planning irregularities its neighbour has endured in recent times.”
Cyprus has also made it into the ‘top ten’ buying destinations.
O’Sullivan said: “Property prices have risen by as much as 80% over the past five years in Cyprus, but still represent good value, particularly for new-build property, which is in the majority on the island. Cyprus also enjoys a strong bond with the UK, has a consistently mild climate and favourable taxation laws – all factors which combine to make it a popular destination for retirees and investors.”
Rent to buy The Government’s new Rent to Buy scheme has been attacked on all sides.
The scheme, to be managed by the Housing Corporation, involves certain first-time buyers renting a property at up to 80% of market value, on the basis that they will be saving money for a deposit to buy it later.
When the buyer can afford it, they can buy a share of the property of at least 25% and continue to pay rent to a housing association on the remaining share.
Ultimately, the buyer can buy 100% of the property, or move and take with them the equity built up.
Housing minister Caroline Flint said: “We are determined to continue to do everything possible to promote long-term stability and fairness in the housing market.”
But shadow housing minister Grant Shapps said it was a gimmick.
“This Government must think the public are fools,” he said. “Having increased the costs of buying and selling a house by increasing Stamp Duty tenfold and introducing pointless red tape like Home Information Packs, ministers now want us to believe they’re on our side.
“If they were really serious about helping people get on the housing ladder they would scrap Stamp Duty for first-time buyers and abolish HIPs.”
Lembit Opik, the Liberal Democrats’ housing spokesman, said: “What is strangely absent from this announcement is any suggestion of how the Government imagines the rent-to-buy scheme will be paid for.”
David Bexon of property website Smart New Homes said the scheme was restricted to those meeting certain criteria and that it would make more sense for Stamp Duty to be scrapped for first-time buyers.
Rising importance The contribution made by private residential property investors to the UK economy is rising sharply because it is offering people who would normally be home owners an alternative to negative equity.
According to a study to be published in the autumn, the value of the private rented sector outstrips all privately owned commercial property.
The report, on the UK housing market, is by the respected Michael Ball, professor of urban and property economics at Reading University.
He puts the value of the private rented sector at over £500 billion, and forecasts that rents will rise by 10-15% both this year and next. Despite this rental inflation, he says the sector is helping to stabilise housing because it accommodates those who would otherwise be over-stretched house purchasers with rising negative equity.
He argues that a re-run of the nineties, when negative equity blighted the lives of many, is therefore less likely to occur.
Ian Potter, head of operations for the Association of Residential Letting Agents, said: “It was as a result of the appalling effects on young owner-occupiers in the last recession that ARLA took the initiative and launched buy-to-let to rebuild and refinance the private rented sector, and to mitigate the dreadful social consequences of housing boom and bust. It has proved remarkably successful.”
NEWSLETTER ISSUE 2
Click here to read the latest PI Newsletter Click here to subscribe to the next newsletter
Time to stop meddling....(continued) Developers found smaller sites increasingly uneconomic and so left them alone. Even on larger sites, the financial pressure to provide affordable housing resulted in the other units having their prices hiked up, with the result that much mainstream new housing became unaffordable for a good many people. It wasn’t exactly what the Government intended with its tinkering, but it is what has happened. House builders are now in serious trouble, unable to shift units or recoup their costs. This scenario had absolutely nothing to do with property investors or estate agents.
If we look at Stamp Duty, this has become an intolerable, unaffordable burden for most buyers, and the predictable calls have gone out for the Chancellor to give purchasers a Stamp Duty holiday – as happened in the housing crash of the early nineties.
However, had the Government listened to a simple suggestion (funnily enough, made by an estate agent) that the Stamp Duty tax burden be swapped from buyer to seller, it could have avoided this mess while not losing a penny paid into Treasury coffers.
Stamp Duty has helped freeze a lot of transactions. Again, it has nothing to do with investors or agents. And the imposition of Home Information Packs was nothing to do with investors or agents. The Government, which insisted that HIPs were the result of consumer demand although even Which? opposes them, equally insists that HIPs have not been a contributory factor in the market slowdown. But how on earth does it know?
Ironically, the market slowdown is not entirely bad news for property investors, although there is no denying that agents have been hit for six. Falling house prices and little buyer demand create excellent buying conditions for cash-rich investors. Again, this is probably not what the Government wanted, but perhaps it should be grateful to the property investor sector, currently providing affordable rental accommodation to many who would otherwise have no housing choice.
I would be most interested to hear your views.
Landlords stay Residential property investors are holding on to their portfolios and trying not to sell up during a period of price falls.
A survey by the Association of Residential Letting agents found that just 1.3% of landlords expect to be forced to sell up, while 40% expect to increase their portfolios over the next month.
A further 7.3% plan to change their portfolios: a number of landlords are expected to start refusing to accept tenants receiving housing benefit following a change in how the benefit is now paid, to the tenant rather than the landlord. Other landlords are thought to be getting out of ownership of Houses in Multiple Occupation after mandatory licensing on some HMOs was introduced.
The ARLA review also found that investment landlords expect to hold their properties over the long term – an average of 17.2 years.
Landlords are also increasingly cautious over their borrowings: 40% have invested 50% or more of their own money in their properties, while 37% report loans to value of between 51% and 75%. Less than 2% have borrowings in excess of 90% of the value of their investments.
The survey also found that most landlords arrange their mortgages through brokers, and that when choosing a mortgage, the initial interest rate is the most influential factor.
Fines threat
Landlords who do not produce Energy Performance Certificates could be fined £200.
The requirement becomes law on October 1 and places new responsibilities on landlords.
Communities and Local Government has just issued guidance for landlords on EPCs.
Landlords will have to produce the certificates once every ten years at their own expense and make them available to all prospective tenants, before any rental contract is signed.
The EPCs can be issued by Domestic Energy Assessors, Home Inspectors or by landlords themselves if they apply for accreditation.
There are some important points in the guidance.
EPCs will not be required for Houses in Multiple Occupation where there are shared facilities. But they will be mandatory on ‘whole’ or ‘parts’ of buildings where the ‘parts’ are self-contained units of accommodation.
EPCs will not be required where a tenant who is already in residence continues after October 1, even when a tenancy agreement is renewed. However, EPCs will be mandatory whenever there is a change of tenant.
The same EPC can be produced for up to ten years, even if the landlord updates the accommodation with improved insulation or other enhanced energy measures.
However, if the landlord decides to sell the rental property, the EPC will expire after one year of issue.
Other than HMOs, the only other exemption is for emergency accommodation provided by landlords for tenants needing to relocate urgently. Even so, EPCs must be provided as soon as possible.
Landlords who do not produce an EPC when asked, either by a tenant or local Trading Standards, will face fines of £200.
London falls
House prices in central London are continuing to fall – and at a faster rate.
The monthly fall accelerated in June, from a 1.5% decline in May to a 1.7% drop, according to estate agents Knight Frank, which says the downturn is slowly reversing last year’s gains. However, prices still remain 7.5% higher than a year ago.
But the real story is that sales volumes have fallen off a cliff, and are down by 60% on June 2007.
Only the most expensive properties are selling, with prices down just 0.9% in June, and standing 22.7% higher than a year ago.
Liam Bailey, head of residential research at Knight Frank, said: “There can be no doubt that even property in prime central London has been hit by the double whammy of the credit crunch and wider concerns over the global economy.
“The headline price figures hide the marked slowdown in sales volumes. In some parts of the capital, the number of homes being sold has fallen by as much as 70% over the last twelve months – a result of the tightening market for mortgage finance and a crisis of confidence in the housing market.”
However, he said that the market for properties worth over £10 million is relatively untouched by the gloom, driven by super-rich international buyers.
He added: “Elsewhere, there is some evidence that vendors are being more realistic. Achieved prices are now 4% lower than asking prices.”
There are also fewer properties on the London market. New instructions fell by one-third in June. Knight Frank expects prices to continue falling this year and warned that “if the chaos continues” there could be double-digit deflation.
Lending falls Mortgage lending from building societies slumped again last month.
Data from the Building Societies Association shows that net lending was down from £1,262 million in May to £125 million in June.
The statistics follow hot on the heels of Bank of England mortgage approval figures for May, when the number of new home loans fell to just 42,000 – a collapse of 63.8% since the same month a year ago, when there were 116,000 loan approvals.
The number of new home loans has now hit an all-time low.
Last year, there were just under one million housing transactions – well under the normal 1.4 million that is the long-term average. This year, it looks as though a new record low will be set as the credit crunch continues.
Meanwhile, the gloom continued with the latest Nationwide Building Society survey, which showed that house prices in June fell 7.3% from their peak in October, wiping an average of £13,500 off the average house price.
However, the rate at which house prices fell slowed; they tumbled 2.5% in May and 0.9% in June.
And there is more bad news from the bearish research consultancy Capital Economics, which warns that the UK economy is on the verge of a recession that could see up to a million jobs shed over the next 18 months.
Forecasting a severe recession next year, it predicts that average UK house prices will be 35% lower by the end of 2010.
Bargain basement
Now is the perfect time to pick up bargains in the USA. This is the advice from a surprising source – a UK estate agent who is emigrating to Florida.
Danny Anysz, who has sold, let and managed properties in London for more than 20 years, will be concentrating on selling properties in Florida to UK investors.
“The market in Florida has, I believe, bottomed out and there are two big wins for UK buyers: first, they make on currency, and second, they will eventually make on capital appreciation.
“It’s now possible to buy lovely properties, overlooking the water and with 24-hour security, for between £160,000 and £170,000.” At their peak, the properties were selling for £500,000.
Anysz will work with US realtors and also plans to offer an active management service for absentee landlords.
He said it is a myth that America is littered with foreclosed properties: “That is changing fast,” he said. “The banks realised that when there were four foreclosed properties in a street, they would never sell any of them. Also, foreclosure takes so long, as properties have to be advertised for three months. Another problem was that people would trash the property before leaving.
“The result is that the banks are now allowing people to remain in their homes, while their mortgage payments are deferred.”
Anysz said it is possible to take out mortgages in this country at 75% loan to value. For the time being, he can be contacted at wlcommercial@aol.com
Portugal shines
The property market in Portugal is set for a boost after the launch of a major tourism initiative.
Traditionally a popular destination for UK holiday makers and owners of second homes, Portugal offers sunshine, sea, plenty of golf, a low cost of living, and properties that run the full gamut of prices.
You can still pick up seaside properties in old fishing villages for around £30,000, but there is also a burgeoning market for the super-rich who have £1 million-plus to spend on villas. Previously, they might have bought in the South of France, but in Portugal their money goes a lot further.
Somewhere in between are apartments in central Algarve starting from £70,000.
It all sounds perfect enough, but Portugal has decided it must try harder in the tourism stakes. That is because tourists have been tending to fly further afield, with more destinations available through low-cost airlines. The tourism industry has also been highly seasonal in Portugal.
So now the Portuguese government has put in place a far-reaching national strategic plan to promote the country and improve their tourism trade, particularly from October to May.
Hotels will be modernised and hospitality staff trained in customer service skills. There are also plans to improve the country’s infrastructure, transport links and air access.
So, could Portugal be the next big thing? It is not exactly an emerging market, but it would appear to offer healthy, long-term prospects.
Bridging soars A company specialising in short-term bridging finance has had so much demand for its services that it has had to extend its own lines of credit from banks.
While banks and other lenders are shutting their doors to borrowers, including buy-to-let investors, Bridgingloans has seen a 50% rise in inquiries for bridging finance during the second quarter of the year. Most of the demand is from residential property investors looking to snap up bargains.
In turn, the company has had to seek additional funds to help it deal with the rise in business. All of its credit extensions are from existing relationships with UK banks, which the firm says is testament to the growth potential of the bridging loans sector.
Ryneveld van der Horst, finance director, says that current market conditions have seen an increase in the number of opportunities for property investors who have the cash available for immediate purchases. Roughly 60% of bridgers on the company’s books are currently property investors looking for funding to increase their portfolios.
While bridging is expensive, it is rapidly available, allowing borrowers to capitalise on a bargain and purchase a property quickly, while waiting to arrange more conventional borrowing.
City loss City Lofts, the developer of trendy city centre apartments, has gone into administration days after it was forced to put 250 of its unsold units, plus an unstarted development site, in the hands of a receiver. It has blamed “extremely difficult market conditions” and had been trying without success to restructure its business.
Bank of Scotland Corporate, part of HBOS, which is City Lofts’ biggest lender and has lent on most of its schemes, has appointed Jon Gershinson of Allsop as receiver of the unsold apartments. City Lofts itself has had Ernst & Young appointed as administrator.
The unsold properties include apartments at a scheme at Salford in Greater Manchester (203 units), the Springfield Mill complex in Nottingham (105), Roberts Wharf in Leeds (198), Prince’s Dock in Liverpool (162) and Admiral House in Cardiff (167).
The development site that has gone into receivership is in Birmingham. City Lofts had been planning to build 295 apartments and 66,500 sq ft of commercial space on the site.
In Liverpool alone, the 20 unsold apartments have a reported market value of nearly £4 million. The development, which includes two linked 20- and 10-storey buildings, was completed in 2006, showing how long the apartments have remained on the shelf.
The City Lofts crisis shows how serious market conditions are, and how badly confidence in city centre apartment blocks has slipped.
City Lofts, based in Harrogate, Yorkshire, was formed in 1996. In its last set of published accounts, to December 2006, it recorded pre-tax profits of £4.6 million on a turnover of £67.2 million.
Meanwhile, Imagine Homes founder Grant Bovey is in talks with his lender, HBOS, about the restructuring of his property investment business.
NEWSLETTER ISSUE 1 To advertise on the newsletter, please SB Media on homebuyer@sb-media.co.uk. Tel 0845 224 7497 Check out all the articles included in this weeks newsletter below....
Landlord Regulation proposed
Private landlords ought to be regulated by law, advises a new report into the state of the housing market in Britain. Sir Bryan Carsberg, a former head of the Office of Fair Trading, also recommends that estate agents should have to pass exams before being allowed to practise and calls for the abolition of compulsory Home Information Packs. But while these ideas garnered headlines, the small print which says that landlords should be regulated, whether they use agents or manage their own properties, largely escaped notice. Carsberg was commissioned by the main industry bodies, the National Association of Estate Agents, the Royal Institution of Chartered Surveyors and the Association of Residential Letting Agents, but emphasises that his findings are completely independent. His report is based on evidence and representations from all over the UK and makes 30 key recommendations. They have no legal status and at least one – the call to ditch HIPs – has already been refuted by the Government. However, the report is certain to be studied closely and is seen as hugely influential. For residential property investors, the most relevant points are: Landlords, letting and management agents should be regulated Landlords who do not use agents should be required by law to join a regulatory scheme There should be a redress scheme for tenants with grievances against agents and landlords Landlords should answer to an Ombudsman Anyone giving property advice to consumers should have a basic qualification Developers and builders selling direct should be regulated
HMO alert
Local authorities are cracking down hard on landlords who own Houses in Multiple Occupation and who are ignoring the law on licensing. The law, in force since April 2006, states that owners of houses of three or more storeys let out to five or more individuals forming at least two households, must obtain licences. Now a Derby landlord faces prosecution for not having a licence, and 350 other suspected HMOs in the city are to be visited in a blitz by council officials. Landlords of HMOs who let out their premises without licences face being fined up to £20,000, with Rent Repayment Orders taken out against them, which could mean losing up to 12 months of rent covering the time when the property was illegally let. The precedent was set by the prosecution of a landlord in Leamington Spa, Warwickshire, who was fined £18,000 and forced to pay back thousands of pounds of rent to student tenants – who had not even complained about the property or its management. Owners of HMOs are also warned that, without licences, they lose the right to terminate tenancies under the usual Section 21 procedures. The licences have proved controversial, with councils having a widely varying scale of charges and with some authorities bringing in licences for other forms of HMO. Property investors new to the HMO sector, which chiefly includes student lettings, are urged to take professional advice.
American pie
It is not a pretty picture in America. Houses are boarded up, property prices are falling, and ‘foreclosure’ bus tours have become the norm. The few buyers around are looking for just one thing: a bargain. But will they get one? Take Florida, where today’s housing market problems are more about over-supply than anything else, and where prices fell 6.4% in the first quarter of this year from last December. According to the Orlando Sentinel: “Local home values are still in the toilet and the flushing continues.” In other words, prices are still working their way down, aided by desperate developers off-loading their properties. Buyers in the US are doing their best to time the market – searching for the moment when prices bottom out before going for the kill. But investors in the UK have arguably more reason to buy – the 26-year high of the pound against the dollar. Currently, a 5-bedroom, 3-bathroom furnished home with pool in Clear Creek, 15 minutes from Disney World, is on (through British Homes Group) at $225,000 – or £115,000. We have no idea if that’s as low as it goes, but it’s worth noting that a number of investment funds are now launching, offering UK investors the chance to profit from the US house market crash. Among them is Weis Development Corporation, aiming to raise £80 million through a listing on the Alternative Investment Market in early July. WDC expects the US housing market to stabilise by the end of 2008 before rallying in 2009. A new President might help.
Indian style
In April, Hamptons International – best known for selling upmarket homes in Britain – opened near Delhi. It pointed out that India has one of the world’s fastest growing economies, with 8% annual GDP growth projected over the next few years. A boom in middle-class growth and a shortage of 19 million homes are also drivers for investors. “The property market will continue to flourish for many years,” says Sebastian Siddiqui, Hamptons sales manager in India. Overseas specialist David Stanley Redfern agrees, saying the Indian property market is one of the most vibrant in the world, and that certain areas take off quickly. Mumbai, for example, is now one of the world’s five most expensive cities. Redfern is marketing off-plan properties in Rudrapur, a government-created tax haven where 450 new businesses have so far set up, which range from £25,000 to £48,000. Capital growth is on the cards, and Redfern says rental yields could be up to 12%. Avatar International, another overseas estate agency, also likes India, and has properties on its books in Amritsar from £42,000, rising to under £100,000 for a four-bed penthouse. The catch? Be careful. Buying real estate in India is only open to Indians and ex-pats of Indian descent, or to those buying through certain types of funds. So, take thorough advice if you want to get in on the action.
Auctions hammered
Half of all residential property lots are failing to sell in the auction room, and half of vendors are being turned away because they have unrealistically high guide prices. But these are not the only hallmarks of today’s salesrooms. At Allsop’s auction sales on May 29 and June 2, 38% of lots were repossessions, compared with 10-15% this time a year ago. Transactions are also falling, from 74% a year ago to little over half now. However, that does not mean that sales are not taking place: savvy investors are waiting until a property fails to sell under the hammer and making their move the following day. In many cases, properties are changing hands for some10% less than the reserve price – which in itself is the rock bottom price that the vendor had been prepared to accept. Tony Webber of Eddisons, property auctioneers in Leeds and Manchester, reported that at their May sale, just 14 of the 46 residential lots offered sold successfully. “There was very little appetite in the residential section of the sale, which has declined significantly over recent months,” he said. As for reserves, Gary Murphy, auctioneer at Allsop, the UK’s largest auctioneers, said: “We only list lots that we can sell in this market. We need to prepare a catalogue that is not going to waste buyers’ time. Auctions are there to create competition. There is no point setting reserves at a high level.”
Gas safety
Investors who have residential property in their portfolio are urged to ensure that they stick to the letter of the law when it comes to their responsibilities under gas safety. The reminder follows the death of a young girl from carbon monoxide poisoning and the subsequent conviction of the landlord. A list of responsibilities can be found in the Gas Safety Regulations 1998. Landlords can also check out their duties under the Health and Safety at Work Act. All maintenance checks, including annual safety checks, must be done by a competent CORGI-registered gas installer (www.trustcorgi.com or phone 0800 915 0485). There is also an HSE gas safety advice line to call (0800 300 363). The landlord’s responsibilities include ensuring gas fittings and flues are maintained safely, and that gas safety checks are carried out annually on boilers and all other gas devices. All tenants must be issued with a copy of the annual gas safety check certificate within 28 days of completion. Landlords should also keep their own records for at least two years.
New builds
New guidelines covering the way new builds are valued are to be introduced on September 1. The aim is to provide greater transparency, by making developers disclose the incentives which help them sell their products. Hard-to-value incentives such as payment of Stamp Duty, gifted deposits and rental guarantees have made it so difficult for lenders’ surveyors to value new builds that many, such as Mortgage Works, withdrew from the sector. The new procedures, announced by the Council of Mortgage Lenders, are designed to reduce risk for both borrowers and lenders. There are currently only a handful of buy-to-let lenders who will lend on new-build properties and they have already put stringent measures in place to ensure the mortgage offered reflects the true property valuation. Jonathan Moore, head of marketing at Mortgages for Business, said: “There is currently an oversupply of new-build apartments, particularly in city centres, leading to concerns over property valuation and achievable rents. This has meant that already cautious lenders are increasingly refusing to lend on this property type. “It seems unlikely that buy-to-let lenders will offer new-build mortgages in the short term until there is an upward trend in sector activity. “Investors should be wary of discounts and guaranteed rents, because a property should be attractive without the need for additional incentives.”
Development, Short sellers
It’s no secret that Britain’s housebuilders have been suffering woefully. Share prices are in ribbons, and Barratt Developments’ misery has been the most high profile. After its share price collapsed amid panic selling and talk of emergency funding, all eyes are on what it will say on June 30, when its financial year ends. Chief executive Mark Clare has already been forced to admit that it is in discussion with its four main lenders, HSBC, Royal Bank of Scotland, Barclays and Lloyds TSB. But he also criticised short-sellers for triggering the sharp sell-off in the shares. The short-sellers targeted shares not just in Barratt but Taylor Wimpey, Bellway and Redrow. But how do short-sellers operate? Essentially, short-sellers are traders who hedge their bets by simultaneously buying shares while also betting that the share price will fall. They do this by borrowing shares from other shareholders, usually for a small fee, which they then sell. They wait for the share price to fall – sometimes this might be a matter of minutes, but it can be weeks or longer. They then buy the same number of shares at the lower price, return these to the original lending shareholder, and pocket the difference between the shares they sold and the cost of the shares they bought later.
|
||||||||||||||||||||||
|
||||||||||||||||||||||
 |
Terms and Conditions | Online Media Pack | All content © The Homebuyer Show 2005 - 2008 |  |