First-time buyers trapped by rent rises

First-time buyers trapped by rent rises

The dream of homeownership has slipped farther from the reach of first-time buyers, who have been unable to afford a home because of the credit crunch.

Property Week - 25 June 2008

They are being squeezed again, by surging rents - up by almost a third in some areas - and by yet another increase in borrowing costs.

Monthly bills for a rented home have risen by an average 11.7 per cent across Britain in the past year, according to research from Paragon, a buy-to-let mortgage lender.

Tenants in the South West have been hit hardest, paying almost 30 per cent more in rent than a year ago, with those in East Anglia, the North and Yorkshire reeling from increases of up to 25 per cent.

Banks turned the screws even tighter yesterday when they raised the cost of borrowing, increased rates and demanded bigger deposits. One lender, Woolwich, will require as much as 20 per cent of the value of the property on many of its popular mortgage deals - full article

Rents Steady as Supply & Demand come into Balance

ARLA Members’ Survey Q2 2008

Marginal falls in rental returns for houses and flats are reported in the latest quarterly survey of ARLA’s member letting agents published today, June 9. This, ARLA believes, is due to the number of new developments coming on-stream. The Association also points out that this demolishes the myth that rent levels are soaring.

Demand for rental property still outstrips supply in some areas, with the proportion of letting agents reporting this imbalance at its highest in Greater London and the South East, followed by Prime Central London and the rest of the country. Overall, the proportion of agents reporting more tenants than there are properties available to rent remains at a historically high level of 39%. However, average weighted rents for houses are down by 7% and for flats by 9%.

Commented Ian Potter, Head of Operations for ARLA, “We are seeing corrections in individual locations throughout the country. The main cause of these is the developments of new blocks of two-bedroomed flats coming on-stream. In many places this has had a positive effect as it has allowed the rental market to provide stability in housing at a time of volatility in the sales market. It also demolishes the myth of soaring rent levels. As before in volatile times, the rental market is proving to be the white knight for housing as a whole.”

Average rents for a house range from £3,000 a month in London to £931 a month outside the South East. For flats, the rental difference is £2,000 a month in central London, £854 in the South East and £585 a month elsewhere.

Continue reading Rents Steady as Supply & Demand come into Balance…

VAT Implications on Selling Commercial Property

Kingston Smith Property Alert

Law changes often cause problems, so if you are considering selling a commercial property that is subject to an option to tax, make certain you are aware of the new rules. You should be aware of a VAT law change which affects property from 1st June 2008.

If you are selling a commercial property that might be converted into residential use, the buyer can now serve you (the vendor) a form which removes your option to tax, which could cause you to repay input tax that you had reclaimed for up to ten years. This can also affect you as a vendor if there is a chain of buyers, where the ultimate acquirer plans to convert it.

It is inevitable with new law, especially in this area, that someone is going to get a nasty shock. An option to tax that unexpectedly gets disapplied can cause some difficult input tax recovery issues.

If your potential buyer serves you such a notice before you have fixed the price (such as the exchange of contracts), you can seek to adjust the price of your building to take into account the tax that you will now be required to repay to HMRC, or in extreme cases consider seeking a new buyer. Most importantly, you should seek good professional advice before making a decision.

Continue reading VAT Implications on Selling Commercial Property…

Housebuilders pressured on all fronts

Housebuilders are coming under increasing pressure as news of restricted mortgage lending, falling house prices and fears of large land write-downs worry the sector.

After years of record profits and soaring house prices, speculation is now rife that housebuilders will be forced to raise cash with rights issues or debt for equity swaps. They could even turn to the government for help, like some of the banks have done recently.

Cityam.com - 25 June 2008

Press reports claim that a group of institutional investors are already working on plans to provide direct funding to shore up the beleaguered sector. The Telegraph says bankers at UBS have drawn up possible plans for a wide-ranging placing by major shareholders in companies including Taylor Wimpey and Barratt Development.

Brokers’ notes reinforced the downbeat mood in the sector with Goldman Sachs warning of a “deep downturn” in the property market, which it thinks could last up to three years. Goldman predicts that house prices could fall 6% this year and 8% in 2009 as sales volumes continue to drop.

“We believe the sharp contraction in mortgage availability has accelerated the house price correction and as a result, the downturn should be shorter than in the early 1990s,” Goldman analysts said in a note to clients. “However, we believe that this is highly dependant on lending banks returning to the market with competitive mortgages.”

Taylor Wimpey hit the headlines last week after the group’s debt was downgraded to ‘junk’ status by Fitch Ratings. “The rating action reflects (Taylor Wimpey’s) troubled business environment, with UK housing sales expected to persist at weakened levels during 2008 and 2009 as a result of a worsening macroeconomic environment, a severe contraction in UK mortgage lending and poorer sentiment among house buyers,” Fitch said in a statement - full article

Hammered! Buy-to-let unravels

We’ve all read the headlines about the property crash. But what’s it like to see your buy-to-let nest-egg auctioned off for less than half you paid for it. Richard Pendlebury reports from the frontline …

Richard Pendlebury, Daily Mail - 25 June 2008

A famous party venue for 140 years, the Cafe Royal is perhaps an unusual location for a wake. But yesterday, several hundred people gathered under its crystal chandeliers to mark a further nail in the coffin of the property boom.

Officially, the event in question was simply the latest housing auction to be held at the Regent Street venue. Yet it became apparent early in the proceedings that the 297 lots on offer there were a guided tour of Britain’s worsening property crash.

Over the course of the day, properties from Bridgend to Newcastle upon Tyne either failed to sell or went for sums which made a mockery of their original, overinflated, asking prices. ‘It was wince-inducing,’ said one auction analyst last night - full article

What’s all the fuss about Energy Performance Certificates?

Did you know that buildings produce nearly half of the UK’s carbon emissions? Each household in the UK creates around six tonnes of carbon dioxide a year. That’s six times the weight of the rubbish a household throws away in a year. It’s also double the carbon dioxide emissions that the average car produces in a year. The average household could save around 1.5 tonnes of carbon dioxide a year by making their home energy efficient.

By Paul Robinson, CEO Ezylet.com - 25 June 2008

Energy Performance Certificates (EPC) are being introduced to help improve the energy efficiency of buildings as part of a series of measures being introduced across Europe to reflect legislation which will help cut buildings’ carbon emissions and tackle climate change.
By October 2008 all buildings rented out will require one. The EPC gives home owners, tenants and buyers information on the energy efficiency of their property by providing ‘A’ to ‘G’ ratings for the building, with ‘A’ being the most energy efficient and ‘G’ being the least, with the average to date being ‘D/E’.

EPCs only apply to England and Wales (Northern Ireland and Scotland are producing their own regulations) and will be required by law.

Landlords will need to provide an EPC which will be valid for ten years, to prospective tenants, the first time they let or re-let a property after 1 October 2008 while letting agents will need to get EPCs for properties they are marketing to new tenants.

There is no need to obtain a certificate for existing tenants.

Continue reading What’s all the fuss about Energy Performance Certificates?…

LandlordZONE Newsletter - June 2008 - Conveyancing

Welcome to the June 2008 edition of the LandlordZONE® Newsletter.

Conveyancing, HIPS & EPCs - June 2008 Issue 30

Download the Full Newsletter

As I write this, mid-June 2008, things look pretty gloomy.

The credit crunch is putting the banks under extreme pressure (we still don’t know the full story) leading to a contracting property market because of a severe tightening of lending criteria and the end of cheap money.

Savills last week revised their forecast that residential property values could fall by 9%, to as much as 25%, by the end of 2009.

This in turn is severely affecting the construction industry which is seeing builders halting new development plans and even mothballing some current developments.

Rising redundancies in related industries will inevitably have knock-on effects to the economy as a whole, which is already feeling the effects of rising inflation and in particular higher commodity prices and quite dramatic fuel price rises. Households are also feeling the effects of rising food and fuel prices and therefore retailers’ profits will be hit, inevitably affecting commercial rents and tenancies.

The whole scenario looks set to lead to a full blown recession (the first we’ve seen in the UK for 18 years—so much for Gordon’s “the end of boom and bust”) unless moves by government and the Bank of England have their desired effect—so far there’s little evidence of this.

Fortunately for landlords residential rents and demand for renting is holding up very well, though the situation could deteriorate quickly if mass redundancies result. Established landlords with sizeable chunks of equity in their properties will inevitably ride our the storm and many well take advantage of distressed selling and falling values to add to their portfolios, ready for the up-turn—but things can get worse yet!.

Additionally, an overall shortage of UK housing should help shore up the market in many locations, especially as new development will slow down or stop.

The ones most likely to suffer are those overstretched newbie property investors, and in particular those owning new-build urban flats whose values are badly affected due to oversupply and poor tenant demand in some locations.

You didn’t need to be the Sage of Omaha or even those illustrious property education “experts” running overpriced property courses to see this coming a long time ago. For what some have paid for these courses you could have gleaned more wisdom buying 3 or 4 good investment books and spending a luxurious two weeks of study in one of the best hotels in the Caribbean!

For all those responsible for fleecing and then leading naive and unsuspecting investors into a living hell, to now say: “we were taken by surprise by the credit crunch”, is nothing short of scandalous in my view.

Tom Entwistle, Editor

This issue is wholly sponsored by Coverlet one of the leading providers of insurance for the rental property market.

Landlord’s Insurance from Coverlet

This month’s Topic - Conveyancing, HIPS and EPCs

Conveyancing is the legal and administrative process associated with transferring the ownership of land or buildings from one title holder to another.

Recent legislation has added HIPS and Energy Performance Certificates to the traditional conveyancing, surveying and mortgage finance services associated with property transfers.
The whole process starts once an offer has been made and accepted for a property, and solicitors’ details have been exchanged by the two parties.

This month’s Newsletter content has been provided by Dominic Toller, Director of Marketing and New Business at LMS - www.lms.com

LMS is one of the UK’s leading providers of outsourced conveyancing, remortgage, survey and energy services to Estate Agents, Solicitors and the lending industry, and is now one of the UK’s biggest suppliers of HIPs. Last year LMS successfully managed some 400,000 transactions, helping to enable more than £26 billion in loans for intermediaries and lenders.

Now, through its subsidiary ERS, LMS is also the biggest full employer of Domestic Energy Assessors in the UK (100), and has the capacity to complete 300,000+ EPCs per annum. LMS offer a range of services to property clubs and networks and to the residential, rental and social housing sectors. Read on to get a better understanding of what’s now involved in the modern UK conveyancing process…

Download LandlordLOG in Adobe® .pdf format:
http://www.landlordzone.co.uk/BlogNews/LandlordLOGJune08.pdf

The links to the journal are also posted at:
http://www.landlordzone.co.uk/BlogNews/newsletter-archive.htm and at
http://www.landlordlog.com/

===========================================================

Why not forward this to a friend and if you think they will benefit from this service register at:

http://www.landlordzone.co.uk/site-zone/register.htm

Newsfeed Reader:
http://www.landlordzone.co.uk/blog/?feed=rss2&cat=7

Does Your Property Hold An EPC? It Needs To!

As of the 1st October 2008 ALL properties in the social and private rented sector in England and Wales will be legally required, to present an Energy Performance Certificate (EPC) to new tenants, warns the National Approved Letting Scheme (NALS).

In a recent study, the Government discovered that domestic energy accounts for 27% of the UK’s ENTIRE carbon dioxide emissions and with the requirement set down by Article 7 of the Energy Performance for Buildings Directive (2002/91/EC) Energy Performance Certificates will be a mandatory requirement.

Environmental concern and the implementation of energy saving measures are fast-growing in importance, especially in the property sector. There are, however, a few simple, yet effective ways, Landlords can ensure their properties are energy efficient ahead of arranging an EPC. These range from correctly insulating properties; using cavity wall insulation and loft insulation, which is efficient and is a cost effective way of storing energy. Double glazing will also reduce noise pollution and lower overall heating costs, as will replacing a boiler of 15 years or older.

Continue reading Does Your Property Hold An EPC? It Needs To!…

REAL LETTINGS: Connecting Landlords And Tenants

Who…?
• Broadway is a London charity that provides services to over 2,800 people every year who are at risk of, or are experiencing, being homeless. Its aim is to ensure that every single person finds and keeps a home.

• Real Lettings is Broadway’s pioneering social enterprise. Set up in partnership with the Empty Homes Agency in 2006, it has received funding from The London Housing Foundation and the Transitional Spaces Project. Current supporters include: Hammersmith and Fulham, Lewisham, Southwark and Westminster Councils.

Why…?
• Aware of the growing demands made on social housing in the capital, Broadway saw that the Private Rented Sector (PRS) was the only viable option to re-house the people it helped.

• London councils no longer provide leasing services for landlords with one-bed and studio properties. This is due to pressures to achieve social housing targets. Their priority is to house families in larger 2-3 bed properties.

• Broadway has worked with homeless people across London since 1977 and has more than 25 years experience managing properties in the rental sector as well as a waiting list of ready tenants.

• Real Lettings is an innovative social enterprise, which uses Broadway’s existing skills to plug this gap in the market. Landlords with one-bed and studio properties can access Broadway’s property management experience through competitive management and leasing services. Their properties are then used to re-house single people that have experienced homelessness.

Continue reading REAL LETTINGS: Connecting Landlords And Tenants…

‘Lettings Made Easy’

Although property sales have experienced a marked slow down in recent months the residential lettings market remains buoyant. With many estate agents and established letting agents exploiting this opportunity, an Irish-based software company is set to promote the latest version of its rental management software package, RentPro.

RentPro was developed by K-Point Internet Solutions, located in Warrenpoint, County Down, to streamline the many administrative tasks associated with the day-to-day running of a letting agency, and the application has evolved to reflect the changing needs of the market place. It is currently used by letting agents across the British Isles, cutting their management and reporting administration time from days to minutes.

K-Point recently hosted a seminar at the Canal Court Hotel Newry, County Down where they invited local estate and letting agents to a lunch time event to launch version 2 of RentPro, whose main focus has been making the application even easier to use. The seminar focused on the benefits and features of RentPro and members of the team were on hand to discuss individual needs. The event proved a success and a second seminar has been confirmed to be held at the Mercer Hotel, Dublin on the 2nd July, with further events planned throughout the British Isles.

The RentPro product development involved working closely with new and existing customers to determine where competing products have failed to deliver, as project leader Brian Murphy explains. “Our current RentPro users include local one-person ventures and multi-branch agencies in the Irish Republic and England, and we have gone to great lengths to ensure that the product caters for all their varying needs. Having continuous feedback from these clients during the development leaves us confident that our product is ahead of similar property management products in the UK and Irish markets.” Although primarily aimed at letting agents, a ‘lite’ version of RentPro is available for property investors who manage their own portfolios.

Continue reading ‘Lettings Made Easy’…