Share Ownership Schemes
This Government backed scheme, does it really benefit the people who wants to get on the property ladder?
Well I believe that some housing associations are milking it on the rent and the service charge that tenants and leaseholders have to pay.The whole point of this scheme is to have a low rent and a mortgage that will enable the 50% owner to buy the other half on a staircasing basis.
Take for example Sheperd’s Bush Housing Group, on a typical one bedroom flat that cost £300k in Fulham( That is overpriced too), the housing association charges as much rent as the mortgage! Its around £500 a month!! and a mortgage for interest only cost roughly the same.I found it wrong that the rent is so high, most people that buy on the share ownership scheme are key workers or young professionals who try to get on the property ladder, how does the housing association expect those leaseholders to buy the rest of the flat if the rent is so high? And in this current climate civil servants and the rest of the working economy expects only inflation pay rises, so practically impossible to save and buy the rest unless a rich uncle leaves you something behind.
Mortgage Lenders increase charges by more than £1,000
Homeowners in the UK face rising mortgage rates costing up to £1,400 extra a year despite the Bank of England’s base rate freeze.
Many mortgage lenders have raised their standard variable rate since the base rate was set at 0.5 per cent last March.
Eight building societies have raised their standard variable rate during the freeze.
Mansfield Building Society will become the latest lender to raise its SVR for existing customers, up 0.35 percentage points to 5.59 per cent.
Chief executive Nigel Quinton said part of the blame lay with the difficulty of competing for mortgage and savings customers with banks which have been helped by the taxpayer.
One of the most controversial changes was made by Nationwide which has the best SVR at 2.5 per cent. It changed the rules for customers who have taken out a mortgage with it since April 30 last year.
When their deal ends, they are not allowed to move to the 2.5 per cent rate, but are forced on to one at 3.99 per cent
On another hand, Virgin has made and acquisition of Somerset-based Church House – cleared by the Financial Services Authority – gives it the platform to move into deposits and mortgages and boost the scale of the business through further deals.
Sir Richard Branson, chairman of Virgin Group, said: “The Church House Trust business offers us a strong platform for growth.“Virgin Money aims to bring simplicity to the UK banking market, which has traditionally been a complex sector.”
Virgin has been known to provide a better deal for customers over the years, the moving into the banking sector will hopefully cut down on all the unnecessary stealth charges being offered by the other bands.
2010: Year of the big property freeze?
Let’s get the bad news over first: the build-up to 2010 – rising values and estate agents claiming five buyers for every seller – may prove far better than the year itself.
If you think tales of woe will add to your post-Christmas indigestion, look away now. For almost every analyst, lender and agent warns that while top homes in London and the country may hold their value, most others will experience 2010 price falls of up to 10 per cent.
There will be relatively few sales, too. Top-end purchasers are likely to sit tight until after the May election and some deals, mainly in central London, may collapse if they were relying on City bonuses that are now being taxed or scrapped. “The attack on high-value bonuses has the potential to hit that sector of the housing market hard, at least in the short term,” says Ray Boulger of mortgage broker John Charcol.
At the other end of the scale, the typical first-time buyer, who already has to find a 20 per cent deposit for a home, must now secure an extra £500 thanks to the end of the stamp duty holiday on January 1. In the past year, 132,500 purchasers – more than a quarter of all transactions – took advantage of the break, and most were first timers.
The rest of us, those who buy homes priced £250,000 to £750,000, may well be unlikely to feel like moving, what with a deteriorating economy, growing unemployment, rising taxes, falling public spending and possibly interest-rate rises.
These middle-ranking properties face 10 per cent falls in value next year, easily wiping out their 2009 gains, according to business consultancy Capital Economics.
“Our hunch is that considerable job losses are in the pipeline,” warns Capital Economics spokesman Ed Stansfield. “But even if we’re wrong and the recovery turns out to be stronger than we expect, the housing market looks vulnerable to the increase in interest rates that would be triggered by a strong recovery.”
The reintroduction of full VAT at 17.5 per cent may have an effect. Everything from conveyancing fees and estate agents’ charges to the hire of removals firms will rise in cost from next week. Peter Bolton King of the National Association of Estate Agents says: “There’s a danger that the property slump that hit thousands of families hard over the past 12 months will hit thousands more, harder, in the year ahead.”
Yet it may not be all dreadful. There will be significant regional variations according to Savills’ research team and local agents in each area.
The canny few
Among the few people likely to do well in 2010 are those canny owners who have added value to homes, or those with ”best in class” houses in the country.
Matthew and Rachael Sutton believe they have a house that fits both categories. Their stunningly refurbished home, in part of a large house at Nidd, is in one of the country’s most sought-after locations on the rural edge of Harrogate.
Their hard work, in just seven months, has turned it from a wreck into a classic home. “It was a repossession with period features but everything else in poor condition. We started from scratch, keeping the features, replacing everything else,” says Matthew, 32, a joiner. He and Rachael, 28, a manager, are moving into central Harrogate.
“We didn’t intend to move so quickly but we miss the city. We know the market is unpredictable but we hope our location makes our home desirable,” Matthew says.
The Suttons believe their home (on sale for £550,000 through Savills, 01423 535807, www.savills.com ) is one of those that will tick all the must-have boxes for increasingly demanding buyers.
“Houses that sell well are those without blights near good schools in the traditional areas. Best in class properties will always attract competition, with
peak market figures achieved in some cases,” predicts Philip Selway, of the relocation company The Buying Solution. But he admits those homes are rare – perhaps just a few thousand around the country.
For the rest of us, despite the apparent recovery of recent months, the 2010 housing market may be something we just have to grin and bear – a bit like opening that intriguing-shaped gift on Christmas morning, only to find it was a cardigan disguised as something more interesting.
Remember buy-to-let?
Like Mark Twain’s death, rumours of the demise of buy-to-let have been greatly exaggerated.
Rental demand rose in 2009 and there is no sign yet of a reversal. “Restricted access to mortgage finance means would-be first-time buyers are renting.
Uncertainty over house prices means ”treading water renting is a safer option than risking negative equity”, says Barry Manners of Chard lettings agency in London. He knows shrewd investors buying ex-council flats at low prices and enjoying 13 per cent annual rental yields.
Can anything upset the applecart in 2010? The return of full stamp duty may deter some investors expanding their portfolios but the acid test will be if interest rates rise. That may force highly geared landlords to quit, causing the flood of flats on sale that some pundits expected a year ago. It may be a knife-edge market late in 2010.
South West down 2.8 per cent
“The election may fuel the desperate need for stock by frightening off potential sellers. This could result in a premium for property in popular areas, giving a false sense of security,” says Richard Greetham of Bradleys in Exeter.
South East down 3.1 per cent
This region will see improving transport links to London, such as the 68-mile high-speed railway connecting St Pancras to the Channel tunnel. “Canterbury until now has seemed a vast distance from the capital, but will only be an hour away,” says Philip Harvey of Property Vision.
London down 4.1 per cent in Greater London, flat in prime locations
Prime areas such as the West End, Holland Park and Docklands are different from the normal market. Camilla Dell, of London buying agency Black Brick, tips Mayfair, Knightsbridge and Belgravia to remain strong because of their many foreign buyers.
Wales down 6.8 per cent
“It’s still too difficult for new entrants to the property ladder,” says Nigel Jones of John Francis estate agency. Almost all buyers in Wales need mortgages, so the number of movers may remain low.
Midlands own 4.5 per cent
Prime areas of the Cotswolds will enjoy stable prices but this region is dominated by average and below-average-priced homes with buyers heavily reliant on mortgages. Job losses will rise, too.
Northern England down 7 per cent
Patrick McCutcheon of Yorkshire’s Dacre, Son & Hartley says the future relies on realistic sellers: “If vendors jump on the bandwagon and start increasing their prices it could derail the recovery.”
Scotland down 7.5 per cent
More than 85 per cent of buyers rely on mortgages so the credit crunch still bites hard. Prime Edinburgh homes will stay in good shape. “It’s grown to be a major European financial hub. That reputation hasn’t suffered in the downturn,” says Savills’ Jamie MacNab.
All figures: Savills 2010 Forecast
Dubai & London Property Market
If there is one thing wrong with global economic recovery getting under way so soon, as well that of various property markets around the world, is that too few people have learned from it. Too many people seem way to eager to go back into the way things were before.
Yesterday the big London estate agency’s said they were hoping that banker bonuses would support the housing market recovery in 2010; building another recovery on sand.
Today Dublin based Deluxe Properties has closed a so-called vulture fund, which will now spend ?£10m of private investor’s money on property in Dubai priced between 30 and 50% lower than its original price. The news comes despite the fact that analysts are forecasts a further 20-30% fall in prices next year, and the fact that the consensus of indices tells us prices fell nearly 50% in the first quarter of this year alone.
I’ve said it before and I’ll say it again, just because something is cheap does not make it a bargain, and something needs to change drastically in Dubai if property is ever going to have any true worth again, or certainly any time soon.
Just like the estate agents were going to be perfectly happy lining their own pockets in the kind of banker fuelled market that makes a correction inevitable, Dubai looks happy to fall back into the inevitably doomed cycle of foreign investors selling to foreign investors selling to foreign investors, leaving itself wide open to another dramatic crash should foreigners disappear again.
I have also been seeing a lot of developers and agents offering rental paid finance on their properties overseas, while some of these offers can’t fail to do what they suggest many people came unstuck buying into similar dreams in 2007. It seems that we have learned nothing from the crash at all.
That said: according to reports from agents, those currently buying overseas property as private individuals are conducting a far greater degree of research (due-diligence) than ever before. So perhaps it is just institutional investors and estate agents that haven’t learned, in which case it is potentially more a case of being set in their ways, and hard headed rather than failure to learn a lesson they should already have known.
By Liam Bailey
London Bankers Property Relapse
Estate agents are predicting a wave of instructions to sell homes in London from bankers looking to leave the UK in the wake of the new bonus “super-tax”.
Ed Mead, director of the estate agency Douglas & Gordon, said that the single biggest topic of discussion among his finance-based clients was when they can get out and when it would make most sense to do so.
“I have had two very colourful hedge fund partners, both getting me round to look at their large and architecturally unusual houses and talking explicitly about selling because of what is happening. Both were willing to sell for a bit less than they might have liked to ‘get in ahead of the rush’ as they put it, even though they are not directly affected by the tax.”
One banker, a client of the mortgage broker John Charcol, recently relocated to Geneva as a direct response to Labour’s stance on taxation. He said: “Geneva is far closer to my ski chalet and my villa in Provence, and I reduce my carbon footprint by taking fewer flights. I’m struggling to find a downside and probably need to thank Darling for given me the reason for relocating; without him I would probably never have done it.”
Trevor Abrahmsohn, head of the agency Glentree International, said: “I have seen a number of people I know – who are all staunch British entrepreneurs – going to Monte Carlo, Geneva and Zurich. The real estate agents in these places are having a field day. People are worried about where it will stop.”
Savills, the property consultancy, estimates that buyers from the financial and business services sector account for about half of total demand in the prime London markets. It said the strength of demand from “bonus buyers” was reflected in the fact that those employed in financial investment markets accounted for 33 per cent of all cash buyers on average.
While some agents report that buyers are having second thoughts if they are relying on a bonus payment next year, the impact is expected to be limited owing to the already pessimistic view on bonuses. Demand for prime housing is also seen as more broad, particularly given the prevalence of overseas buyers.
Lindsay Cuthill, of Savills, was showing homes to a banker subject to the bonus tax yesterday. “As yet he is unsure how this will impact – but he was still out there and still likely to make an offer on a house at £2.25m,” she said.
James Hyman, partner for residential sales at Cluttons, the property consultants, said: “It is a little bit early to tell what the impact of the bank bonus tax will be on buyers; however, we are already noticing that vendors are now taking a second look at any offers which may have been slightly below the asking price as the anticipation of selling at a premium to bonus buyers is less likely.”
There are still fears that the nascent recovery in the prime London market could be impacted by the pre-Budget proposals. Mr Hyman said: “The changes to banks bonuses will have severe repercussions for the property market. This could greatly reduce the liquidity in the bonus market and leave many bankers . . with a potential shortfall in earnings.”
Copyright The Financial Times Limited 2009
Derivatives point to UK housing slowdown in 2010
Derivatives point to UK housing slowdown in 2010
Monday, November 9, 2009 2:20 PM
* 5.5 pct house price growth seen over calendar 2009
* Economic uncertainty crimps projections for 2010-2011
By Sinead Cruise
LONDON, Nov 9 (Reuters) – UK housebuyers may still have a
chance to secure a bargain home between 2010 and 2011, with
annual house price growth seen at about half the 5.5 percent
expected by end-2009, indicative derivatives data shows.
Participants in Britain’s junior property derivatives sector
said the recovery of the supply starved residential market
remained on solid footing, but price rises were set to slow as
housebuilders upped construction in an effort to meet demand.
“Physical house prices in the UK have continued to increase
despite worries that unemployment, restrictive lending and an
increase in taxation would prevent recovery,” Peter Sceats, a
broker at Tradition Property told Reuters.
“Some traders are focusing heavily on the core fundamental
of supply and demand and believe the rate at which new homes are
being (and have been) built is severely insufficient for the
UK’s future housing needs,” he said.
Average UK house prices are seen rising by nearly 12 percent
over the next five years, the data shows, against September
projections of an 8.5 percent rise for the same period.
On Nov. 3, Halifax Building Society, one of the UK’s largest
mortgage providers, said house prices had risen 1.2 percent in
October, squeezing the annual decline to its smallest in
one-and-a-half years as higher demand and a lack of homes for
sale buoyed prices. [ID:nL3376075]
Last week, housebuilders Redrow and Taylor Wimpey
added to the rising tide of optimism in the UK housing
market, after reporting stabilising sales and shrinking
inventories. [ID:nL4449667]
“Despite Taylor Wimpey reporting strong results in a market
they described as significantly better than last year, the
property derivative market is still slightly cautious about 2010
and 2011,” said Michel Heller, a trader at CB Richard Ellis/GFI.
Notwithstanding this caution, Heller said derivative prices
are pointing to a brighter longer-term, with an average expected
house price rise of around 25 percent over the next 10 years.
Average UK house prices, as measured by the non-seasonally
adjusted Halifax House price index, stood at 165,430 pounds in
October, from a peak of 201,081 pounds in August 2007.
Below are expected annualised percentage changes in UK house
prices based on non-seasonally adjusted Halifax House Price
Index derivatives.
The young market provides investors with an opportunity to
adjust or hedge exposure to the UK housing market synthetically
– in a cheaper and more efficient way than buying or selling
bricks and mortar.
The table is based on indicative HPI swaps mid-price data
provided by interbank brokers Tradition Property, CB Richard
Ellis-GFI and Tullett Prebon and is made up of simple averages.
Date 1YR 2YR 5YR 10YR 20YR
09/11/09 5.5 2.83 2.37 2.47 3.63
22/09/09 1.3 1 1.7 2.1 3.5
10/08/09 -1 0.3 1.8 2.1 3.43
30/06/09 -7.5 -5.5 -1.37 0.9 2.63
18/05/09 -11.5 -9.3 -2.7 0.4 2.3
2/04/09 -18.7 -13.5 -4.3 -0.4 1.9
17/02/09 -20.3 -14.2 -5.1 -0.05 2
06/01/09 -19.7 -14.7 -5.5 0.15 2
11/09/08 -16.2 -11.2 -3.1 1.1 3
11/08/08 -15.5 -9.8 -3.0 1.0 2.9
11/07/08 -15.8 -10.5 -3.2 0.8 3.0
06/06/08 -13.2 -9.8 -3.0 0.1 2.2
06/05/08 -13.8 -9.1 -3.1 0.3 2.3
04/04/08 -8.3 -5.8 -2.0 0.5 2.4
14/02/08 -8.2 -5.7 -1.8 0.5 2.3
08/01/08 -9.0 -4.9 -1.7 0.4 2.6
18/12/07 -9.0 -4.8 -1.7 0.4 2.7
5/12/07 -9.7 -5.1 -1.4 0.5 2.7
29/11/07 -7.0 -3.8 -1.2 0.6 2.7
06/11/07 -2.5 -1.3 -0.9 0.8 2.8
20/9/07 -2.5 -1.0 0.2 1.2 2.5
1/9/07 -1.0 0.0 0.8 1.3 2.6
1/8/07 2.3 2.0 1.6 1.7 2.8
1/1/07 4.3 2.7 2.7 2.5 2.7
(Reporting by Sinead Cruise; Editing by Andrew Macdonald)
($1=.5960 Pound)
(See www.reutersrealestate.com for the global service for real
estate professionals from Reuters)
((sinead.cruise@thomsonreuters.com; +44 (0)207 542 5154;
Reuters Messaging: sinead.cruise.reuters.com@reuters.net))
Keywords: BRITAIN HOUSINGDERIVATIVES/
High End Property Shortage in London
Luxury homes in London are still falling in value, but at a much slower rate than of late due to a shortage of properties for sale.
The reluctance of the well-to-do to put their homes on the market while the country remains in recession is steadying prices, estate agent Knight Frank said today.
The average value of houses and apartments costing over £1 million fell 3.2% in October from a year earlier, the seventh-consecutive month of narrowing losses, according to the property broker.
Prices increased 2.1% from September, the most since July 2007. That leaves home values 16% below their March 2008 peak.
Luxury residences in neighbourhoods like Chelsea, Kensington and Mayfair may not return to peak prices until 2012, a year or two sooner than the rest of the UK housing market, Knight Frank estimates.
“The shortage of good property for sale is acute,” said Nathalie Hirst, the London head of Prime Purchase, which acts for wealthy buyers.
Estate agents are hoping that the arrival of year-end banker bonuses will give a lift to the higher end of the property market.
Recession kills off the property dreams
The recession has led to thousands of Britons giving up on the dream of owning their own homes, says a survey by the National Association of Estate Agents (NAEA).
In some British cities, as many as 30 per cent of adults no longer wish to own property, citing high prices and fears over redundancy as reasons.
The cities with the largest percentage of adults no longer looking to own property are Cardiff (30 per cent), Manchester (27.7 per cent) and Belfast (25 per cent). At the other end of the spectrum, 12.5 per cent of adults in Liverpool, 11.1 per cent in London and 10.3 per cent in Southampton are more optimistic about getting on the property ladder.
The lack of enthusiasm for all things property related is perhaps understandable in light of news showing that mortgage lending conditions are still tight. Bank of England figures released last week show a fall in the number of new mortgages in August, the first drop in 10 months. The bank’s quarterly credit conditions survey showed that approvals slipped from 52,404 in July to 52,317 in August. This is about half the level of mortgage loans seen at the height of the property market boom.
The NAEA says that the recession alone cannot be blamed for the pessimism about owning property and that the Government and lenders should shoulder some of the responsibility for the market torpor.
“The Government has so far refused to create a level playing field for house-hunters by reforming stamp duty, a tax on aspiration,” says Peter Bolton King, chief executive of the NAEA.
End of Buy to Let
Judith Heywood
Buy-to-let investors were not meant to survive this downturn. With the cost associated with borrowing up — if available at all — and income from rents down, aspiring investors who piled up the debts to plough into the rental market were expected to be among early casualties. But the predicted sell-off has not occurred. True, auction houses are disposing of new-build units at startling discounts, but this sector was always a small one. As our survey of investors suggests, many are unexpectedly sanguine: low interest rates, which have been held at 0.5 per cent for five months, are helping them to balance their books, even as rents subside and voids and arrears increase. And for the cash-rich it remains an excellent time to buy.
Not-so-brisk trade
Marcus Jays owns 143 properties in areas of London, such as Highgate, Walthamstow, Leytonstone, Forest Gate and Dagenham, through his company Questor Properties. This year the buy-to-let investor and property trader has bought — and sold — 30 homes, but this is only half of what he would have been turning over 18 months ago. “The market is very enjoyable now. When it was doing well, I was under pressure to buy homes, do them up and then sell them on for money for the next deal. Now I am making a nice living from the rents.”
With such a large portfolio, Jays has a good deal with his bank — a corporate lender — but he is aware that when his arrangement ends in 18 months he may be forced to accept less favourable terms. But, for now, his tracker borrowings and related costs add up to an interest rate of just 3 per cent. Such low costs make up for a cut in the rent that he can charge on larger, more expensive homes. He now earns £1,400 a month, rather than £1,700, from a property in Balham, South London; his smaller “bread-and-butter” flats (many ex-housing association, picked up at auction) are as in demand as ever.
Costs rising
Laurent Ezekiel, an advertising executive turned owner of 13 buy-to-let homes in East and North London, is watching interest rates carefully. He has held his position, neither selling nor buying, and believes that while interest rates stay low he can carry on. “I think that rates will rise much faster than rents. If they shoot up, I may have to sell several properties.”
Ezekiel — who featured in Bricks and Mortar in 2003 and in 2007 — says that rents are as much as 15 per cent lower than at the peak, driven down by assertive tenants in over-supplied areas. “You get them on the phone, saying a flat in the same building is on the market for 10 per cent less. You can’t say no and lose them.”
Ezekiel has been able to accommodate the fall in income because the cost of borrowing has declined, thanks to his tracker deals. “It is actually easier now because you don’t have to remortgage all the time. Even if your deal expires, you just go on to the standard variable rate, which is usually quite low.” If he could stockpile cash for more investments, he says he would buy homes in West Hampstead, northwest London, where he lives, rather than near the City, where he invests. “Prices in more residential areas have gone down, but they are also likely to go up more quickly.”
Saving up cash
As an analyst who worked in the credit industry, Shona Davison, pictured, suspected that the borrowing-fuelled housing bubble would not last. But Davison, 31, bought her first buy-to-flat at 24, when she realised after much househunting that she could not afford to buy in Wokingham, Berkshire, where she lived. Davison — on maternity leave after the birth of her son, Dexter, four months ago — purchased a flat in Sheffield, which she later sold to fund the purchase of two houses, since converted to flats. Last month she was announced as the national winner in the National Landlords Association Women in Property awards.
She believes it would be a good time to buy, but has relied in the past on remortgaging to release cash for deposits. But she is benefiting from the breathing space produced by her tracker mortgages. Her deals are interest-only, so she is able to save £2,000 a month profit on the rent she earns, with a view to using it for future investments. “I have always believed in interest-only deals, because of the tax relief. Due to the current mortgage situation, it would be daft to pay off more of the loan.”
Pared-down portfolio
Zahid Chaudri specialises in buying rundown family homes in the North London suburbs of Golders Green and Arnos Grove, converting them to apartments and renting them out. Five years into his buy-to-let career, the 28-year-old father-of-two owns 14 properties. But, reluctantly, he is close to selling two apartments, which he converted from a derelict house, bought for £465,000 last November. Each will bring in about £300,000, which — after costs of £80,000 — he says will give him little profit. “I am using bridging finance and it is difficult to refinance at the moment. Everywhere I have turned is a dead end.”
Chaudri believes it counts against him that he has so many outstanding mortgages, with a typical loan-to-value ratio of 85-90 per cent. But, apart from these two sales, he sees no reason further to reduce his portfolio while interest rates remain so low, even though the most attractive rates on most of his deals have expired and reverted to standard variable rate. Buying is out, while lenders are so strict on loan-to-value ratios: “If averages LTVs went back to 85 or 90 per cent LTV, it would be a good time to buy.”
The canny are cashing in
It is a nightmare for buy-to-let investors; institutions have been circling the rental market for years, and now they are poised to strike. Aviva, the financial services giant, last week revealed advanced plans to build homes to rent en masse. The prospect of powerful rivals for tenants is one worry for small-scale investors; others are piling up: arrears and voids (periods between a property being let) are up, rents are down.
In this market, many investors have found their ambitions curbed. Brian Murphy, head of funding at the Mortgage Advice Bureau, a broker, says: “The amateur landlords who fuelled the buy-to-let boom have all but disappeared.” And even those with substantial portfolios — who at first were unaffected by more stringent lending rules — are finding that banks and building societies are reluctant to lend to investors with too many commitments.
Yet the air of landlords is one of optimism. Some are celebrating what they believe are signs that the “reluctant landlord” is in retreat. These are homeowners who, unable or unwilling to sell their homes at deflated prices, have opted to rent them out instead. The website FindaProperty.com reports that this trend contributed to a 119 per cent increase in rental properties listed on its site in the year to May. Since then the supply has fallen — but by a mere 2 per cent.
Alas, accidental landlords are likely to remain a feature of the market while good-value mortgages are difficult to obtain. Experts say many householders — like investors — are clinging to the relative attractiveness of lenders’ standard variable rate compared with what they would secure if they looked for a new deal.
But there are hints of better times ahead for investors. Jeremy Leaf, a Royal Institution of Chartered Surveyors spokesman, says that he is noticing more buy-to-let investors disposing of homes in the revived property market, but only to their own advantage. “They are being much more discriminating. If they have a donkey of a property, they are offloading it.” And the latest report from Arla, the Association of Residential Letting Agents, says that twice as many landlords — 16 per cent — report that they are buying more properties than three months ago.
Gary Murphy, the auctioneer at Allsop, agrees: “It is a buyers’ market and those investors with cash are taking advantage of it.”
Foxtons loses key court battle over unfair terms
A High Court judge has said that fees charged to landlords by letting agent Foxtons when tenants extended their contracts were like a “trap”.
Mr Justice Mann ruled that a number of terms and conditions used by Foxtons in its letting agreements with landlords were unfair and were not flagged up prominently enough.
These included requiring landlords to pay commission of 11% of the annual rent if a tenant remained in a property beyond the initial term, even if Foxtons paid no part in persuading them to stay, or was no longer collecting rent or managing the property.
The company also demanded commission of 2.5% of the property’s price if the landlord sold it to the tenant, even if they had not helped to broker the deal, while in some cases landlords had to go on paying commission even once the property had been sold.
In his judgment Mr Justice Mann said the repeat renewal commissions being charged were like a “trap” or “timebomb” for landlords, many of whom were amateur buy-to-let investors.
He said such important terms should be flagged up prominently not just in the contract, but also in any sales literature, as consumers would not expect important obligations to be tucked away in the small print and not be specifically brought to their attention.
He added that landlords were likely to be “astonished” when they found out about the potentially large financial liability they had to Foxtons when they sold a property, even though the group had paid no material part in the transaction.
He also found that Foxtons had used language in its contracts that was not plain and intelligible.
The court case was brought by the Office of Fair Trading after it received a number of consumer complaints.
The trading watchdog welcomed the ruling, and said it would now ask the High Court for an injunction preventing Foxtons from continuing to use the terms.
