Stamp Duty Dropped back
The stamp duty threshold dropped back to £125,000 on 1 January, prompting a rush on mortgage approvals and completed home sales in the final months of 2009.
The government concession, which had temporarily pushed the threshold up to £175,000 for just over a year, had been aimed at halting the rapid slump in the property market.
This should not put new buyers off though more and more lenders are offering attractive products with a lower deposit required for a first property. The Bank of England has shown no signs of increasing rates in the near term,so this will help existing and new buyers to keep mortgage costs low.
However be prepared to face tougher scrutiny by lenders and make sure your credit file is up to date.Having a bad credit file will make it more difficult for banks and building societies to lend.It is advisable to start monitoring your file for a period of 6 months before starting to apply, this will give the credit agencies time to correct any mistakes or missing information that they have on you. eg could be an old flat mate gone bankrupt that might show as a financial alias to you.
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.
Foxtons with the banks
This’ll bring tears to your eyes: unloved estate agent Foxtons has been taken over by its lenders.
Another indignity for BC Partners, the private equity whizz-kids who took the inspired decision to buy estate agency Foxtons right at the top of the property market: they’ve been forced to cede control of the estate agency to the banks, as part of a restructuring deal to slash its debts. If it wasn’t already clear what a stinker of a deal Foxtons was, it certainly is now. But since these unethical financiers and pushy estate agents are considered to be among the chief culprits for the credit crunch, sympathy will probably be in short supply.
For those whose properties are still managed by Foxtons, the business is still being run as per normal and they need not fear about their properties being mismanaged in anyway. The estate agency business is still thriving but on lower profit margins. BC is still the biggest shareholders of the estate agency.
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Highest Level of Mortgages
The number of mortgages approved for house purchase rose to its highest level for nearly two years during October as buyers continued to return to the market, figures showed today.
Around 42,238 loans were approved for people buying a property during the month, nearly double the number seen in October last year and the highest level since January 2008, according to the British Bankers’ Association.
Net lending, which strips out redemptions and repayments, also held firm at £3.1 billion.
But unsecured lending remained subdued as consumers instead focused on paying down their debts and building up savings.
David Dooks, BBA statistics director, said: ‘The longer it takes to emerge from recession, the longer we will see households and businesses continue to borrow with caution.
‘The banks’ mortgage lending, still growing by more than 4 per cent a year, shows one aspect of consumer behaviour but unsecured borrowing is subdued and people are building up deposits.’
Both spending and repayments on credit cards was unchanged from the previous month at £5.7billion and £6billion respectively.
But once interest and charges were taken into account, outstanding credit card debt rose by £199million – double the average rise seen during the previous six months.
Demand for personal loans and overdrafts remained depressed, leading to an overall fall in unsecured lending of £325million – the 12th month in a row during which it has contracted.
The BBA said demand for personal loans was particularly weak, with outstanding loan debt dropping by £2.9billion during the first nine months of 2009.
Remortgaging levels also remained subdued during the month, as low interest rates mean many people are better off staying on their lender’s standard variable rate when their existing deal comes to an end.
Only 20,685 loans were approved for people switching to a new deal, the lowest figure since November 1999, and just a third of the level seen during October last year.
The low levels of remortgaging meant total mortgage advances also remained depressed during October at £9billion, slightly ahead of the previous month’s figure but still 20 per cent lower than a year ago.
But consumers continued to save during the month, with people setting aside £3.2billion, contributing to a £17billion increase in deposit levels since the beginning of the year.
Ed Stansfield, property economist at Capital Economics, said: ‘Over the past three months, BBA data show that there has been a distinct easing in the pace at which mortgage demand is rising.
‘The surge in pent-up demand among cash-rich buyers, released in the early stages of 2009, appears to be fading.
‘Still-tight lending criteria coupled with a weak economic outlook suggest there is little prospect of a marked rise in mortgage demand next year.’
Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said: ‘The lack of supply of property coming on to the market is proving to be an increasingly important obstacle to a more meaningful pick-up in transaction levels.
‘Inevitably, the number of new instructions will remain fairly subdued into the year-end but it is crucial that more fresh stock is placed with agents in the early part of 2010 to give the market a further boost.
‘More importantly, this is critical to preventing a further sharp upward move in house prices.’
House Price Rises
More estate agents are reporting house price rises than at any time since the credit crunch caused the bottom to fall out of the property market, it is claimed today.
Twenty-two per cent more agents saw rises than falls in September, according to the Royal Institution of Chartered Surveyors.
This is the highest ‘positive reading’ since May 2007 and compares with a figure of 10 per cent in August
The evidence suggests the price revival is being driven by an acute shortage of properties, particularly family homes. There is also clear evidence of a North-South divide, with prices in London and the South-East showing a surge while many parts of the North are still suffering falls
Ian Perry, a spokesman for the institution, said: ‘A lack of supply is still underpinning the rise in house prices.
‘Meanwhile, the level of inquiries from potential purchasers is increasing.
‘This imbalance between demand and supply suggests that house prices will move higher in the near term.’
Separate research from the Council of Mortgage Lenders shows that the number of loans for house purchase in August was up 29 per cent on the same month last year.
The figure hit 53,000, which was down marginally on the July total of 56,000.
The August figure is more than twice that seen at the start of the year, but still well down on the 100,000 that is typical of a thriving market.
The Bank of England and other economists have warned of ‘false dawns’ of recovery in the housing market and wider economy.
Some commentators say the current price revival could fall into this category, given that it is driven by a property shortage rather than a wider economic recovery
Bank of Mum and Dad reopens
By Julian Knight
How much would you sacrifice for your children? An awful lot probably. How about signing over a portion of your home so that they can own theirs? That is precisely what thousands of parents are doing by releasing equity in their own homes.
“We have seen a sharp increase in the number of clients who are saying they need the money to help their kids either get on the property ladder or to help them move out of negative equity,” said Dean Mirfin, a director at Key Retirement Solutions, an independent financial advice (IFA) firm specialising in equity release.
Key’s internal client statistics show that 36 per cent of people buying an equity release product gave helping their children with property as a reason, up from 25 per cent two
“Parents either seeing their children faced with not being able to get a mortgage or being stuck on expensive deals are acting to free up cash to give to them. In effect, they are being handed some of their inheritance early to tide them over the credit crunch,” Mr Mirfin said.
Even just a few thousand pounds raided from the bank of mum and dad can make a huge difference to the housing prospects of their offspring. According to financial information service Moneyfacts, the average interest rate on a 90 per cent loan to value fixed rate mortgage is 6.55 per cent, while someone able to find a bigger deposit of 25 per cent can expect to pay just 5.24 per cent on average.
Nevertheless, the equity release market as a whole is down about one-fifth year on year. “It’s natural that with property values falling, people are a bit nervous that they won’t be able to release the money they need, hence some are waiting and seeing or exploring other options,” said Jock Cassidy from Ashley Law Independent Financial Advisers. But according to Mr Cassidy, options can be limited. “Downsizing suffers from the same property market problems and there is often a strong emotional attachment to a family home. If the individual has an income they can remortgage or draw down from their current mortgage, but they will have to make repayments on this debt.”
But a fall of one-fifth in total equity release contracts is small beer compared with the drop-off seen in new mortgage applications. “Some advisers have seen their mortgage business disappear completely. They are now being encouraged to sell equity release instead and this does raise concerns,” Mr Mirfin said.
Consumer group Which? last week condemned the quality of advice being offered to people looking to release equity from their homes, echoing previous concerns raised by the Financial Services Authority in 2005.
According to Mr Cassidy, equity release is not to be taken out lightly. “You have to examine all the client’s circumstances before considering equity release. For example, the cash people receive through equity release could bar them from vital benefits such as pension credit.”
There are two main types of equity release, home reversion and lifetime mortgage. Home reversion plans involve selling your property now to a financial provider in return for a cash lump sum and the right to live in the property, rent-free, for life. These plans have declined in popularity in recent years, though.
With the other alternative, a lifetime mortgage, you keep ownership of the property and take out a mortgage, but instead of paying the mortgage interest every month, it “rolls up” and is paid, with the capital, out of your estate or if you sell. “Equity release can be a complex product with major differences from contract to contract,” said Vanessa Owen, the head of equity release at Liverpool Victoria. “Check that your adviser regularly works in the field of equity release and make sure you get a solicitor to read the contract.”
Despite the recent fall in equity release contracts, a combination of the ageing population, low levels of pension saving and paltry annuity rates is likely to encourage more people to look at equity release.
“Another major reason for equity release is to fund crucial home improvements which allow them to stay in their own home rather than go into a nursing home,” Ms Owen said.
Helping hand: ‘My daughter could buy her own home’
Ann Robertson, 70, a retiree from Renfrew, Scotland, wanted to help her daughter buy her first home. “She had been paying rent for years and she really wanted her own place,” said Ann. “But mortgage lenders ask for such massive deposits these days it’s almost impossible.”
So Ann, advised by Key Retirement Solutions, decided to release some money from her property to give to her daughter. “I wanted to still own my home so went for a lifetime mortgage. They valued my flat at £80,000 and from that I was able to free up £26,000 in return for 30 per cent of the property.”
Ann took legal advice before signing the equity release contract and had to pay surveyor’s fees. “I did it at the start of the year and it freed up enough cash for me to fund my daughter’s deposit and to allow her to cover the moving fees. She now has a nice house in the same town as me.”
Ann has one eye on the possibility that in years to come she may need to move out of her home. “If I were to need long-term care, the authorities may force me to sell my home, so I figure I might as well get something out of it now rather than leave it to chance.”
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Properties in London renting is all the rage
Paul and Fiona Godwin-Brown and their two boys Tom and Charlie are living wild and free. They have given up pressured London life and moved into a rolling Devon valley, a mile from the sea. They let their house in London and are renting in Devon for the foreseeable future. “It has been the jammiest thing. The children think they have died and gone to heaven,” says Fiona.
Theirs may be the way forward for many. Renting is the new elastic in the market. It is no longer the preserve of the can’t-haves and students, but is being favoured by families, job movers and young executives. When house sales are hard to achieve and prices static, renting is perceived as the most effective way to get a new life and hit the start of school term for the children in a new area. “It is interesting being away from London and feeling that house prices are a bit irrelevant.”
How did it happen? Paul and Fiona put their London house, between Clapham and Wandsworth commons, on the market at the beginning of 2008 at around £1 million and were quickly becalmed by the recession. By May they decided to move anyway, let the house and get the boys into good local schools in or near Torquay. Fiona gave up her high-powered job as a business planner, and Paul began applying for jobs as a primary school teacher. It all happened very quickly. Good tenants were found for the London house and Paul and Fiona fell in love with the little village of Stokeinteignhead.
The house isn’t one of the many pretty thatched cottages but it has four bedrooms, an acre and a half of garden, a zip wire, tree-house, climbing frame and hen house. “It has exactly what we need,” says Fiona. “We realise that, surrounded by this wonderful countryside, people don’t need trophy houses in the same way. It is like having a property ownership hangover which you have to get over.”
They will probably sell the London house when the market recovers, then think again about buying. For now, however, renting is more than good.
Fiona is thrilled by the charms of village life. “Stokeinteignhead is in the most gorgeous valley and we can walk to the sea,” she says. Tom, 12, is at Torquay Grammar four miles away and Charlie, nine, is at a much prized village school a walk away. They have been there nearly a year and hope to stay another year or two. The four hens – Talulah, Dilly, Scramble and Rocky – produce four fresh eggs each morning which Fiona transforms into breakfasts, soufflés, meringues and cakes. For them, renting doesn’t mean living in a state of impermanence at all.
“There is a definite move towards renting,” says Liam Bailey, head of research at Knight Frank. “It is becoming more middle class. The hiatus in the market has caused people with bigger properties who can’t sell, to rent. There is a lot of it going on with bigger, better-quality family houses available to let.” Thrusting professionals and creatives are opting for it, too.
“If the mortgage market is difficult to access without a big 10 per cent to 25 per cent deposit, buying is only possible for those with large amounts of cash.” He anticipates the rented sector could grow from nine per cent to 25 to 30 per cent of the market.
Renting allows people to be flexible and adopt different lifestyles. Duncan Clerkin, a 34-year-old venture capitalist, is renting a two-bedroom flat through Knight Frank in Wimbledon. He has rented all his adult life, moving through shared flats in Finchley to living on his own now. “I considered buying in my late twenties but it was just getting harder to reach the bottom rung and I began to worry that the price bubble would burst. And now here we are, back at price levels of four years ago.
“When I shared with friends it meant that if one left, another could move in without the hassle of having to sell. Now I can come and go as I please on two months’ notice. With such uncertainty in the City I don’t want to be tied to a big mortgage. If another financial meteor were to hit us, then I could just hand in my notice and be off.” The flat is spacious enough to allow him to give dinner parties, have a friend to stay or take a lodger.
He delights in not having to spend weekends doing up a property and is very pleased that he hasn’t had to stump up a huge deposit, stamp duty and legal fees. “Renting is not more expensive,” he says. The flat costs £1,800 per month. Similar mortgage payments would allow him a purchase at £300,000, which in Wimbledon would mean no more than one bedroom.
“Renting is the future, but the future is already happening because it is the fastest-growing sector of the market,” says Yolande Barnes, head of research at Savills. She anticipates that the private rented sector will grow to over 20 per cent of the property market because it offers a good deal to investors. “Prices are low, so there are opportunities to buy cheap, with low rates of interest which make yields look attractive. Maybe venture capitalists will be game to build portfolios with high income streams which the institutions will then buy.”
In the first half of last century 70 per cent of the population rented, according to Savills, until post-war regulation drove the private landlords and institutions away. In the Fifties, Sixties and Seventies private renting declined steeply as council housing increased. “Renting was at its lowest in the years between 1988 and 1992 when it hovered at about nine per cent,” says Yolande.
It was in the Thatcher years that home ownership developed extra potency, with council-house sales and a huge price boom. “Home ownership peaked in 2003 at 71 per cent,” she says, “and has been falling steadily ever since.” New assured shorthold and short tenancies gave landlords confidence to step back in. Buy-to-let mortgages provided the fuel and the rented sector crept back up by five per cent a year. “It is an extraordinary rate of expansion,” says Yolande. “Many disillusioned by the dotcom boom fell into property.”
Now we have new reasons for landlords to get set to let. “The equity rich, including older people, pensioners, entrepreneurs and successful businessmen, will be doing it because there is demand. It is all about the property rich staying property rich. That is the new class divide.”
Estate agents report that there is simply not enough rented property to go around in some country areas. In Winchester, where parents are hoping to be into a new home by the start of the September term, the letting of family houses has been “hectic”, says Savills. In London, rentals have been plentiful but one-bedroom flats have now become harder to get hold of. There is a “glut” in the east of London created by too many new developments in areas such as Canary Wharf. “People who would never normally have rented have chosen to do so as there is no longer a stigma attached,” says Jane Ingram, head of lettings at Savills. And the choice is wide. You can get anything from a funky and hip flat in the city to a huge estate or small cottage with a pig pen in the country.
Bargain property in London: flats for less than £175,000
With the overused mantra, “location, location, location” ringing in my ears, and in the hope that property prices in central London have finally reached rock-bottom, I set my sights on finding a pint-size, super cheap property in the capital under the £175,000 stamp-duty bar.
The estate agents I speak to are keen to reassure me that even the tiniest 30 sq m studio with a de sirable, central London postcode could rake in as much as £1,000 a month in rent.
“Rental yields have clearly improved as prices have fallen,” Lucian Cook, director of Savills research department, tells me. “The decision as to whether or not to buy depends on whether we are at the bottom of the market. We have seen an increase in activity, and investors who feel that we are not quite there are taking a five or 10-year view.”
Cook emphasises the importance of looking for properties that would be easy to rent with few void periods, which makes central London a good bet.
On the downside, it can be tricky to find buy-to-let mortgages on studio flats.
“There is oversupply in some city centre locations, where flats have fallen in price more steeply than other types of property,” says Bernard Clarke of the Council of Mortgage Lenders. But this is not true of all flats, as I am about to discover.
A quick browse online revealed plenty of apparent bargains in this sector, notably by auction. However, asking prices can be misleading. Having observed a studio in Hereford Road, Bayswater, advertised with a guide price of £160,000, going under the hammer for £258,000 I decide to leave the auction-house option to seasoned investors and head into town, where I discover a variety of studios for sale, from virtual walk-in cupboards to comfortable spaces with plenty of light. I also discover that, despite the downturn, they are selling like hot cakes.
You might think twice before viewing a studio with a very short lease. But if it happens to be a quick jog from Regent’s Park or within walking distance from Marylebone High Street and Oxford Circus, it is worth a look. A Thirties block at 105 Hallam Street, W1, has an elegant foyer and is popular with students at nearby Westminster University. It also houses more than a sprinkling of owner-occupiers and pied-à-terre part-timers.
The 25 sq m (269 sq ft) studio itself is a bright room on the sixth floor that offers comfortable living space even with double bed, sofa and furniture in situ. Storage space includes a built-in wardrobe and wall-to-wall vanity unit in the bathroom. A refrigerator, two-ring hob and a wall-mounted microwave and extractor hood are squeezed into the lobby area. Apart from a few distant treetops, the vista is of the backs of other buildings; not quite the “side views to Regent’s Park” promised in the details, with an asking price of £165,000 for an 18-year-lease.
Even so, agent Shirley Foster of Helen Watson Properties says she has little difficulty in selling these studios because of their W1 postcode. “Some investors will take a gamble on the short-term rent,” she says.
“It needs somebody with nerves of steel and yet I recently had an investor who spent £160,000 on a property with a 16-year lease on the basis that his money was earning so little in the bank that he might as well take a risk and get some income from rent.”
There was more breathing space on the lease of a studio available in a white, stucco-fronted house in Belgrave Road, SW1, within range of Westminster’s division bell. Briefly on the market for £159,950, it had 41 years remaining on the lease. It has since been withdrawn; these studio flats are proving elusive. This is a shame, because it’s the kind of flat that would make a good investment: Julian Cotton, of estate agents Winkworth, in Pimlico, says that extending a lease could cost between £30,000 and £35,000, but adds: “The key is location: two minutes from Victoria and 10 minutes from Sloane Square or Westminster. Everything is on your doorstep.”
The property details for a third-floor studio in Orme Court, W2, just off Bayswater Road, look more promising. At £145,000 and 12.77 sq m (137 sq ft), it must be the cheapest and dinkiest home you’ll find so near to Kensington Gardens. Sunlight streams in from the sash windows, while white walls, kitchen and bathroom and stripped floorboards create an airy feel.
I wait a week, and make further inquiries, only to find it, too, has gone under offer. They’re being snapped up faster than you can say Julia Roberts.
Undeterred, I go south, through Kensington, to a ground-floor 16 sq m (175 sq ft) studio in Chelsea Cloisters, SW3, priced at £179,950. The carpeted foyer of this 24-hour portered block, just off the Kings Road, has the faded style of a three-star hotel. The studio, though the cheapest in Chelsea Cloisters, is a little claustrophobic. Eager to convince, six-feet tall Tom Dogger, of Winkworth Knightsbridge, paced out how a double-bed could just about fit by the window.
Oddly, the fitted kitchen has no base units – the idea is to give the new owner carte blanche over the placing of appliances. It is a bit of a shoebox but tenants will, it seems, pay as much as £250 a week for similar studios here. “When the market is very uncertain, you want to go for the best area you can afford,” says Dogger.
“Chelsea appeals to the international market, to people with other currencies who are buying in on the weak pound.”
Rather more central, if lacking the sophistication of Chelsea, is Storrington, in Regent Square, WC1. This ground-floor studio in a multi-storey, Camden council-owned block is somewhat frayed around the edges, but it is close to Russell Square and the Brunswick Centre, containing the Renoir Cinema, Waitrose and stylish shops.
At £172,500 for a relatively capacious 33 sq m (350 sq ft) pied-à-terre, this cosy home looks out on a garden square and is just 10 minutes from St Pancras International. Too good to be true? Sadly, yes. I phone the agents, only to discover it’s just gone under offer.
Will I have more success with a Camden Bus estate agency basement studio in Crowndale Road, NW1? It offers 30sq m (323 sq ft) of space, it’s painted a tasteful white, the floors and blinds are wooden. The slightly grubby communal hallway of this Georgian terrace house is covered in magnolia woodchip; but where else within strolling distance of Kings Cross, Euston and trendy Camden Lock can you sit out on your own private patio surrounded by roses and still get change from £170,000? It’s gritty, scruffy, noisy, but what a location. When I call, it’s still for sale. Maybe my search has finally come to an end.
STUDIO VIEWS
Orme Court Bayswater, W2
Now sold, with an asking price of £145,000 (98-year lease; approx £1,300 service charge)
Plus A leafy walk away from Kensington Gardens
Minus Minuscule; but sold quickly through Foxtons estate agents, which shows that right price, right location shifts flats
Hallam Street W1
£165,000 (Lease expires 2027; £2,400)
Plus Enviable West End address; well laid out
Minus Short lease; disappointing views
Value for money 2/5
Helen Watson Properties, 020 7580 6275; www.hwatson.co.uk
Crowndale Road NW1
£170,000 (119-year lease)
Plus Strolling distance from Camden Lock and Kings Cross.
Minus Slightly grubby communal hallway
Value for money 4/5
Camden Bus 020 7485 7485, www.camdenbus.co.uk
Storrington Regent Square, WC1
£172,500 (114-year lease; £1,600, under offer)
Plus Walk to Paris (via St Pancras!)
Minus Needs a new kitchen
Value for money 4/5
Frank Harris & Co, 020 7387 0077; www.frankharris.co.uk
Chelsea Cloisters SW3
£179,950 (101-year lease; approx £2,000)
Plus Within strutting distance of the Kings Road
Minus High service charges; lacks character
Value for money 3/5
Winkworth, 020 7589 6616; www.winkworth.co.uk
