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Is the UK Doomed to be a Nation of Renters?

Research carried out by major accountancy firm, Price Waterhouse Coopers, found that more than half of the 20 to 39-year-olds in the UK will be forced to rent privately by the year 2025.

The dearth of available housing in the UK has led to a sharp rise in the price of property,  this coupled with the increased regulation of the mortgage industry (reducing the availability of mortgages) has meant that buying a house is rapidly becoming out of reach of most 20 to 39-year-olds.  

Stricter mortgage regulations, with a lower loan to value ratios, have meant that the average deposit required for a first-time buyer has increased almost fivefold since the late 1990s from £10,000-£50,000. Although there has been a upward trend in salaries, salaries are unlikely to increase to a level where they can keep pace with the increase in the price of property.  

20 to 39 year olds become trapped in a “rental cycle”, whereby the need to pay increasing rents reduces the amount of disposable income available for a mortgage deposit ; the householder is then having to rent for a longer period of time.  Stricter affordability criteria for obtaining a mortgage and a reduction in the length of mortgage terms available, means that if the 20 to 39-year-old is unable to apply for their first mortgage before the age of 35, the likelihood of them obtaining a mortgage is greatly reduced.  The end result is that unless the 20 to 39-year-old has a family wealthy enough to provide financial help, has a significant increase in salary, or wins the lottery, they are likely to be consigned to renting for the whole of their adult life.

What is Wrong with Renting?

In many parts of Europe, such as Germany and Switzerland, renting is the norm due to a mixture of longer term tenancies and higher quality properties.   

The evolution of a rental culture in Germany (where only 39% of the population own their own home compared with 60% in the UK), has many parallels with the growth in the rental market in present day UK. 

The roots of the dominant rental market in Germany,  is said to date back to the aftermath of the Second World War. After the Second World War, there was a severe shortage in housing and high unemployment. The German Banks were in a very weak position with very little capital available for housebuilding and mortgages.  Housebuilding had to be left to the German Government, who instigated large housebuilding projects with the aim of not only increasing housing available but also of reducing unemployment.  However, the weakness of the German banks coupled with the lower earnings of the German workforce, meant that the emphasis had to be on renting property rather than buying property.  Even though the pattern is changing in Germany with a recent boom in property buying, renting remains the dominant choice of housing. The German preference for renting is put down to rents being controlled by the local government and even tighter mortgage regulations making mortgages difficult to obtain. Germany’s banking system has a more cautious approach to mortgages, requiring substantial guarantees to finance loans meaning that homeownership is not an option for those on a lower income.

In France, just only 50% of householders live in their own property.  In Paris, the number is less than one in three.  Despite Nicolas Sarkozy declaring in 2011, that he intended to turn France into “a nation of homeowners”,  the trend has continued towards the rental market.  France is plagued by the same property shortage issues as the UK , making properties in cities such as Paris almost impossible for young couples to afford (the average asking price being more than €8000 a square metre).  As with the UK,  French rents are becoming increasingly expensive with a flat measuring 100 square metres commanding €600 a week in a good area. Recent changes in the law in France have, however, held back rent increases. 

Solution?

The difficulty for 20 to 39-year-olds in escaping a life of renting, is a complex issue to solve.  One proposed solution is to lighten the regulation on mortgages, but that may lead to the Mortgage madness of the early 2000’s which is often cited as being a causal factor in the credit crunch.  Another solution, is a cap on the level of rents.  Such a cap, is likely to cause difficulties for landlords, reducing the number and quality of rental properties available.  When a cap on rents was proposed by the Labour opposition, such was the concern, that even Shelter (a prominent housing charity) were opposed, stating that the housing market was too fragile for such a cap to be imposed without there being a significant increase in the properties available.  
Various Government initiatives such as “Help to Buy” in which the Government (through the auspices of the Homes and Communities Agency) provide a government backed loan to home buyers enabling them to reduce the deposit required to buy a property to 5%.   Although this has provided a much-needed boost for some homebuyers, it has also increased the demand for housing and some may argue fuelled the rise in house prices.  Any rise in house prices has the effect of exacerbating deposit issues as larger and larger deposits are required.

The most obvious solution is to increase the number of homes available, which in turn, should reduce the increases in house prices making properties more affordable, lowering the size of deposit required to purchase.  Such increases in the supply of housing, needs to be handled carefully,  as a disproportionately large increase in housebuilding in any given area may have a detrimental effect on the value of existing properties in the area.  Further, there are many pundits that give “lip service” to supporting an increase in housebuilding,  however when it comes to a suggestion of affordable housing being built on their doorstep, they are not so keen.

Future forecast

The general view of the market pundits generally, is  that the housing supply shortage is likely to last for at least the next decade and the increase in “Generation Rent” to continue until at least 2025.

What’s happening with housebuilding in England and Wales?

200,000 new homes per year over the course of this Parliament have been promised by the Government which is a level of new home building that has not been seen since before 2007.

Current trends 

Seasonally adjusted house building starts in England were estimated at around 40,300 in the three months up to March 2015, being  a 31% increase over the previous three months.  Completions were estimated at 34,040 in the same quarter being 10% higher than the previous quarter.

Annual housing starts totalled 140,500 in the three months to March 2015 with completions totalling 125,100, representing a 5% increase in building starts and an 11% increase in building completions over the previous 12 months.

There are particularly strong areas of new build starts in parts of London but also in areas further to the north such as Bedfordshire, Cambridgeshire, Northamptonshire and Leicestershire. Other areas of increased housebuilding activity are Hampshire and along the south coast.  Nationally, some of the greatest increases in housebuilding starts are in districts of Leicestershire, Derbyshire and parts of Essex; whereas the areas with the largest fall in the rates of housebuilding include districts such as Hertfordshire and Surrey.

East London and a band starting to the north of the London greenbelt running through Cambridgeshire, Bedfordshire, Northamptonshire and Leicestershire, with another cluster of Local Authorities around Norwich saw the highest rates of new build completions. Other areas with a strong growth in new build completions include districts in Devon through Gloucestershire to Hampshire. The lowest level of completions are in Oxfordshire and a few boroughs in London.  Increases in new build completion rates between the year to March 2014 and the year to March 2015 are seen in 208 of 326 local authorities.

Perceived obstacles to increasing the number of new homes to be built
Nimbyism (Not In My Back Yard).

The biggest obstacle to the building of new homes in the UK, is seen by developers as being Nimbyism.  Although the Home Builders Association has said that there have been changes, the planning system in the UK is still  perceived to be slow, expensive, and overly bureaucratic. The Government has been working towards improvements with one change in 2010, being a simplification of the planning process and an introduction of a simpler National Planning Policy Framework which, according to the government, saw the number of detailed planning permissions granted rising year by year with a total of 240,000 in 2014 compared to 158,000 in 2011.

Shortage of land 

Another obstacle is said to be the lack of land available for building new homes. Such shortage has the effect of not only slowing the progress of new home constructions nationally, but also pushes up prices making the new homes less and less affordable.  The Department of Communities and Local Government is said to be working on policies to free up land but this is still a difficult issue. 
One solution often proposed is building on “greenbelt” land.  There are 14 “greenbelts” in England put in place as a protection against urban sprawl with the aim of protecting the countryside. Only a set of special circumstances allow development on such land and amongst these circumstances are the need for affordable housing and the recycling of previously contaminated land. 

There has been a 430% rise in the number of new homes being built on greenbelt land in the UK in the past 5 years (according to construction consultancy Glennigan) one of the main drivers of this increased development of greenbelt land is the sale of land by local Authorities who are experiencing a shortage of funds during this period of public sector austerity.

The year leading up to June 2015 saw a doubling in the number of planning approvals on greenbelt land across the UK (from 5607 to 11,977). The surge in overseas buyers and the shortage of housing, is said to have been a major factor in the increase of new house building in greenbelt land.  757 new sites were given the go-ahead on greenbelt land around London in 2014/15, representing an increase of 106 over the previous year.

The Government, particularly the Chancellor George Osborne, is particularly enthusiastic in promoting the use of greenbelt land to stimulate housebuilding in the UK. Government initiatives  encourage Local Authorities to allow building on parts of the greenbelt by swapping it for land elsewhere. Government pressure on local authorities to increase planning approvals, saw 70% of planning applications for large housing developments, which had been rejected by local authorities, being overturned on appeal.
However the approach of the Government has been seen as being mixed, with the Communities Secretary, Eric Pickles, issuing new planning guidance to safeguard the greenbelt stating that “Local people don’t want to lose the countryside to urban sprawl”. Despite this, an overhaul of planning laws in 2012 has helped to promote the faster development on greenbelt land.

Land banking

Housebuilders are also criticised for “sitting on the land”, waiting for the land to increase in value, a process known as land banking. A suggestion for tackling this, is to introduce a tax on land banks.
Lack of building by Local Authorities and Housing Associations
There are calls for the government to return to building new homes as they did before the Thatcher government, when the emphasis for building affordable social housing was switched to the private sector (in the form of Housing Associations).  However, Housing Associations have never been able to build at rates comparable to pre-1979 local authority house building, largely because of the strict regulations governing Housing Associations.

Skill Shortage

Due to the collapse of the property market during the credit crunch in 2007/2008, the building industry is experiencing a severe skills shortage as many building workers have dropped out of the construction employment market altogether, and due to the shortage of opportunities, the number of construction courses were reduced. Shortages exist across all of the main building trades with the highest demand being for bricklayers. 

Shortage of buildings Materials

The collapse of the construction industry during the credit crunch, saw a significant reduction in the demand for building materials, which in turn, saw a reduction and building materials being produced, with, for example, the number of brickworks being kept in production falling from 80 to 50. The result is that suppliers of building materials have to play “catch up” as activity increases in the house building industry. Such shortages not only cause delay in the construction of new housing developments, but also push up the prices of materials.
In conclusion, we are likely to see the pressure on housing increasing for the foreseeable future particularly with a rapidly rising population and the construction industry struggling to catch up with demand.

U.K.’s  Accidental Property Millionaires

The number of property millionaires in the UK has doubled in recent years; there is currently, and estimated 500,000 property millionaires in the country.  A recent article in the Telegraph stated that now between 1 and 65 people living in the UK are now millionaires; yet on the media, we are inundated with news stories about austerity, benefits and zero hours contracts with low wages ; we continue to strive and work all the hours but still appear to be left with  less and less in our pockets at the end of the day. So where are all these millionaires? There does not appear to be a rise in Rolls-Royces, Lamborghinis or Porsches on the neither road recently nor does there seem to be a noticeable rise in luxury yachts. Where are these new millionaires hiding?

The answer is, that this “new breed” of millionaires are as ordinary as you and I, and in fact you may not even notice them on the High Street; they are just as likely to be your neighbour (especially if you live in London or the Home Counties) or your colleague at work.  These are the “accidental” millionaires brought about by the ever increasing rise in property values particularly, in areas such as London.

The Zoopla Rich List, lists 20 of the highest value streets in the UK,  these all being in London with Kensington Palace Gardens giving an average property price of £45,432,552 down to £9,441,730 in Essex Villas.  Kensington generally, boasts an average property price of £2,934,819 with lowly Cobham, coming in with an average property price of £1,067,159.

Highest value towns outside London are in Surrey, Buckinghamshire, Hertfordshire, Berkshire, Hampshire and Oxfordshire, with Virginia Water in Surrey heading the list with an average property price of £1,294,321 down to Windlesham in Surrey with an average property price of £715,988.

Ordinary people, have found themselves becoming millionaires without having to do anything other than occupy their houses, by way of example, properties in North London have increased by £400,000 in value over the last 8 years. Many longer term residents in areas such as Hackney will have seen the value of their properties rise beyond recognition; from my own point of view, I note that the house in which I grew up being in Stoke Newington, Hackney and which was sold by my parents for £12,000 in 1977, is now worth 1.5 million (on a recent visit, I noticed that our original neighbour is still living in the house next door).  

Examples in other areas further away from London such as Sandbanks, Poole, Dorset (average property price of £2,400,000), Graham Park Road in Newcastle (average property price £1,230,000), Bracken Park Scarcroft near Harrogate (average property price £934,000).

For many of these “accidental millionaires” the situation is surreal -their dream of becoming a millionaire has been realised, but where are the servants, the Butler and the yacht? Why are they still worrying about the electricity bill? Or the escalating council tax bill? Why are they still worrying about being able to afford a holiday this year?  These are the “asset rich and cash poor” which make up the majority of the accidental millionaires. 

Not all accidental millionaires are the same, particularly those that bought properties before the boom began in the late 1990s and now find themselves owning properties worth several millions, having bought the property for less than £100,000 and who are now mortgage free!

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Conveyancing: Mortgage Sharing

With the seemingly endless surge in property prices throughout England and Wales coupled with ever more stringent regulation on mortgages more and more aspiring house buyers are being priced out of the property market.  With high rents (often higher than mortgage repayments) those wishing to get their foot on the property ladder for the first time are seeing their dream of homeownership vanish before their eyes and are having to resign themselves to a life of renting.  This is a phenomenon which not only affects those working in  low paid occupations but which  is increasingly affecting those employed in higher paying professions; this is particularly the case  in London where the average house price is approaching the £500,000.  In the 1990s and early 2000’s, a salary of £50,000 would make buying the property a viable proposition whereas in current times this is not necessarily the case especially in the South East of England.

With mortgage lenders insisting on a minimum of 10% deposit (often up to 25% deposit) coupled with rents of more than £200 per week (often £300-£500 in London) saving for even a 10% deposit let alone 25% is well-nigh impossible. Then of course, there are the “affordability” tests being imposed by mortgage lenders which mean that unless the applicant has a cloistered lifestyle they are unlikely to be granted a mortgage unless they can put down a minimum of 50% deposit; delay your application beyond your 30th birthday and coveted mortgage offer gets ever more elusive.

Mortgage “Dating” Sites

An innovative solution is beginning to emerge in the form of a “shared mortgage”.  Yes we all know of parents helping their children to get deposit or jointly purchasing a house or friends clubbing together-but what about those who do not have parents that a wealthy enough to contribute to their mortgage or those that do not have friends who are in a position contribute or  do not have the inclination to do so? Websites such as “Property Buyers Match” and “Share Mortgage.com” are springing up to encourage people to club together in order to purchase a property that they would otherwise not be able to afford.  Based on the “dating site” model the idea is that a person looking to purchase a house in a particular area, searches for someone who is also looking to purchase a house in that same area who they can match up with and purchase the house together. Each potential house buyer, sets up their own account on the website in which they create their own profile setting out who they are, their likes and dislikes, property and area preferences, and so on and using the online chat facilities built into the site form a “property buying” relationship, pooling their resources enabling them to purchase properties at a price and in an area that they would otherwise not be able to afford.

Downsides

What are the downsides? At first sight, it is easy to liken such an arrangement to a group of friends sharing a tenancy and indeed there are many similarities: a group of people get together and sharing a house - living communally, each with their own rooms and contributing to the monthly rent. It may also be possible for each tenant or house sharer to have their own tenancy agreement.  However with a tenancy, if one of the tenants wants to move out, or if there is a breakdown the relationship, it is possible to get someone to take their place, or if the remaining tenants are unable to meet the cost of rent a tenancy can be brought to an end.  When sharing a mortgage, the party who wishes to leave the relationship cannot be replaced without going through the process of applying for completely new mortgage with all the application and affordability testing procedure involved. Further, if the mortgage arrangement is bought to an end, the remaining participants will have to buy the share of the party that is leaving the arrangement or sell the house.

Another consideration is the credit worthiness of each of the mortgage participants,  if, for example, one of the mortgage participants begins to accumulate debts and a poor credit record, this will reflect on the credit record of the other participants making it more difficult for them to obtain loans even when applying in their own right. If one of the mortgage participants should become unemployed, they would not be able to claim benefits to cover  their share of mortgage which will leave the other mortgage participants having to cover the whole of the mortgage.  A further consideration is the maintenance of the property, under a tenancy this would be the responsibility of the landlord whereas with home ownership,  this responsibility would lie with the mortgage participants.  Already, we can see that there are potential areas of conflict which at the outset, when everyone is new to the process and full of enthusiasm, may not be obvious to those looking to enter into a shared mortgage arrangement.

Another pitfall to be aware of is that you may not be able to get out of the mortgage share  arrangement as quickly as you may wish or need to.   In order to bring the arrangement to an end, you will have to sell your share to one of the other mortgage participants.  If the other mortgage participants cannot afford to buy you out, the property will have to be sold.   In a buoyant property market, this should not present a problem as the property will sell more easily, however if there is a downturn in the property market and it takes time to sell the property, you will not be able to get your investment out and will have to continue to pay your share of the mortgage until the property is sold.

Safeguards

If a budding house buyer is aware of all these pitfalls and enters into the arrangement with their “eyes open” mortgage sharing may be the solution to that elusive first step of the housing ladder. Several safeguards have to be put in place:

Know your fellow mortgage participant -This is the biggest element of risk. Although you may have read their profile and chatted to them online and may even have arranged a face-to-face meeting, you do not actually know everything about their background.  Essential here, would be to obtain references, both personal, bank and credit references maybe even employment references, for example they may be employed at the outset but that employment may not be established and they could very shortly be out of work or have a transient history of employment. It would be prudent to go even further and do “an affordability check” of your own.

It is important to note, that credit references go by addresses as well as names (which is why you are required to declare each of your addresses within the six years preceding a mortgage or loan you are applying for) this means that if one of your fellow mortgage participants develops an adverse credit rating due to debts for example, this will be noted against the address of the property and as such will appear against your credit record for at least the next six years.

Draw up a legally binding agreement from the offset - This agreement should cover not just the proportions of the mortgage to be paid by each of the mortgage participants but should also cover things such as the percentage share of the value of the property to be attributed to each mortgage participant-this is referred to in legal terms, as being a “Declaration of Trust”.

Other matters to be covered in the agreement would be contingency plans what for example would be the procedure for dealing with the unemployment of one of the mortgage participants? Or if one of the mortgage participants were simply unable to pay or were late making payment? What items should be paid for by the mortgage participants and in what proportion, for example, utility bills, maintenance costs and so on. Who should decide what maintenance needs to be carried out? And how often?. Is there to be a reserve fund set up to pay for any large items of maintenance? In what proportions should each of the mortgage participants contribute? What would be the procedure in the event of one of the mortgage participants wishing to leave the arrangement?.

Part of the agreement should include the “rules or regulations” of the household such as setting out a housework rota, visitor rules and so on.

Obtaining the mortgage -The maximum number of people who can have a legal interest in the title to property is four.  If there are more than four people, the fifth, sixth and over can only have what is known as a “beneficial interest”. In light of this mortgage lenders will not give a joint mortgage to more than four people and, most will not lend to more than two joint owners.

Those mortgage lenders who do provide joint mortgages for up to four people, will generally only take the incomes of the first two joint applicants into consideration.

Upsides

What are the upsides? Firstly, you will have the opportunity to purchase and live in a property in an area that you would otherwise not be able to afford. If you live and work in London for example this may be the only way that you can achieve this.  Another bonus, is that if the value of the property continues to rise, so will the value of your contribution and this is likely to pay more than just leaving your money in the bank or losing it to the landlord in rent.  With house prices rising in London by 12% in the last year, mortgage sharing can be a very appealing proposition.

- See more at: http://www.iconvey.co.uk/Article/Article/1265#sthash.qEbrWZHB.dpuf

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Conveyancing: Last Time Buyers

Hardly a day goes by when we do not hear about the great British “housing crisis” in which house prices are too high, there are not enough houses being built and whole generations are condemned to a lifetime of renting.

House prices in England and Wales rose by an average of 8.8% in 2014-15 alone and the forecast is that they will continue rising every year until 2020. House prices in England and Wales are said to be 45 times the value they were in 1970s. In some areas, such as London and the south-east, even those families on a relatively high salary cannot afford to purchase a suitable home with an ever-growing proportion of 20-40-year-olds having to resign themselves to a life of renting.  Often those that are able to purchase a home, spent hours commuting to work as they are unable to afford property within striking distance of their place of work. The increasing cost of housing means that more and more families have both adult partners working; in families with small children this brings an additional cost in the form of childcare and so the costs continue to spiral ever upward making home ownership evermore evasive. Many put the large increase in house prices down to the fact that there are insufficient houses available to meet the ever-increasing demand and this is to a certain extent true-however there is another side to the coin.

At the same time as there being thousands of aspiring house owners not able to get their “foot on the housing ladder” (with 3.3 million 20-34-year-olds living with their parents[1]) there are 3.3 million home owners over 55 years old looking to downsize with an estimated 7.7 million spare bedrooms[2] said to be the equivalent of 2.6 million family homes (10 years of housing supply 1 based on the current Government targets or if based on current new housing completions-20 year supply).  Official figures in 2012/13 show that 8.1 million homes in England and Wales had at least 2 spare bedrooms. Although a significant number of these homes are in rural areas, the total number of under occupied homes is in fact larger in urban areas.

A leading factor in the large number of under occupied homes are those families where the children have grown up and “flown the nest” leaving the parents with a 3+ bedroomed property occupied by only one or 2 people.  A third of the over 55-year-old owners of under occupied homes (“the Last Time Buyers”) are living in the only property that they have ever owned (44% having occupied the property for 30 years or more and 21% for at least 20 years). The majority of the under occupied homes are in detached and semi-detached properties with only 1% living in flats. These are often people who are “asset rich” but “cash poor”, living on very low incomes being either retired or on benefits and who can only benefit from the increased value of the property if they are able to sell the property and moved to a smaller more suitable home.

The majority of the Last Time Buyers find their under occupied homes burdensome having to pay for example, for heating and lighting unoccupied rooms and maintain large very under-used gardens. The most common reasons given for the last time buyers wishing to downsize were due to the stairs (being less able to climb the stairs), the large garden being unable to keep up with maintaining and cultivating garden, general maintenance and cleaning of the property , that the occupier needed support and care that can only be provided elsewhere or that the occupier needed to free up the value in the property by releasing the equity by selling due to the need to supplement a poor pension, benefits or simply just for an income of some kind.

The question is, therefore, why if so many of the Last Time Buyers wish to downsize by moving-what is stopping them? Firstly, there is the lack of suitable alternative accommodation with most looking for properties which are in the same area as the current home with easy access to healthcare shops. There is also a significant demand for bungalows and two-bedroom houses.  Unfortunately, there is a shortage of this type of housing within England and Wales were most emphasis in new developments is on either terraced, semi—detached or detached houses and flats.   Other reasons given for not being able to downsize are  not wanting to give up the family home and the stress of the process of selling the property and moving.     Almost a third of the Last Time Buyers considered moving but only 7% actually did move in the last 5 years, largely due to the lack of suitable properties and where there were suitable properties these are deemed to be too expensive.

There is no doubt that if the “7.7 million spare rooms” locked inside the under occupied properties owned by the Last Time Buyers were to be made available, this would make a significant contribution to solving the housing crisis faced by the majority of the younger families in England and Wales.  So what is the solution? In their report entitled "Last Time Buyers” Legal & General and the Centre for Economics and Business Research ((CEBR) identified 10 key factors that they felt needed to be addressed if the issue of under occupancy is to be solved:

Government schemes aimed at retirement housing: The Government needs to add a further emphasis to their housing policy (in addition to their “Help to Buy” scheme aimed at helping first-time buyers onto the property ladder). This being a new emphasis on the needs of older people and the expansion of the provision of age-specific housing to serve the needs of a rapidly ageing population. This focus has to be reflected in housing, planning and health and social care policy.

Greater integration between government housing policy and health and social care: The Government has to have an integrated focus on its policies recognising that if retirement housing is done well, it can connect the residential aspect with the health and social care system which will in turn, alleviate the increasing pressure on existing health services currently being experienced in respect of dealing with ever increasing numbers of elderly people with greater health needs.

There has to be a wider range of retirement housing: Currently the majority of retirement housing is based around leasehold retirement flats, a change of emphasis is required to include small one, two-bedroom houses and bungalows. A greater offering of shared ownership or part exchange retirement homes would make the option of downsizing more achievable both in the sense of cost and of alleviating the stress associated with moving.

There has to be a greater number of mid-market type retirement housing as the current provision is generally either at the lower end of affordable housing or in the premium private sector developments.

There has to be more urban retirement home provision: A greater urban retirement home provision will enable Last Time Buyers to find more, affordable homes close to family and friends without the need for significant commuting to and from shops and health centres, particularly as Last Time Buyers are less able to drive and rural bus services are becoming rarer and rarer.

Tax incentives may be a way of incentivising Last Time Buyers to move to a smaller property: An example of a suggested tax incentive is a form of stamp duty tax relief based on age. It is argued that fiscal impacts would be offset by a higher level of turnover stamp duty as the larger under occupied properties are bought by younger families. Another suggestion is a Council tax holiday from new retirement homes for the first three years of occupation.

Planning authorities should be made to put an emphasis on the delivery of more retirement housing as part of their Local Plan: With retirement housing being treated the same as affordable housing in terms of the Section 106 Agreement conditions, with a certain percentage of properties on anyone development having to be retirement housing.

In conclusion, the current shortage of housing which is the key factor in the current housing crisis can be significantly reduced if the large number of under- occupied homes are released to those seeking to occupy them. This can be done by enabling the Last Time Buyers (being homeowners of 55 and over who remain in the family home after the children have grown), to release the value of the equity in their homes by downsizing to a smaller properties. This will have the benefit of releasing larger family home 3-4+ bedrooms onto the market increasing the supply (which in turn is likely to have a downward pressure on house prices) giving more opportunities to younger families to own their own home of a suitable size.  Further it will enable those Last Time Buyers who are finding it increasingly difficult to maintain and to cope with the larger properties and who struggle with their health, to have manageable housing and more readily access the care and health resources they require. This should also have a positive knock-on effect socially as more Last Time Buyers are able to live closer to their families providing more support for young families but at the same time receiving more support through retirement schemes and reducing the burden on the general health service.

[1] "Last Time Buyers" a report by Legal & General in conjunction with the Centre for Economics and Business Research ((CEBR)

[2] Last Time Buyers" a report by Legal & General in conjunction with the Centre for Economics and Business Research ((CEBR)

- See more at: http://www.iconvey.co.uk/Article/Article/1264#sthash.vg2JN4wh.dpuf

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Conveyancing: Buy To Let For All

Buy to Let is arguably the fastest growing sector of the UK property market as more and more people are priced out of the house buying market and forced into a life of renting.  A shortage of both properties to buy and properties to rent, means that buy to let properties are becoming ever more profitable.

With property prices continuing to increase especially in areas such as London, it is becoming increasingly difficult to get into the buy to let market as increasing property prices squeeze rental yields. Entering the buy to let property market is rapidly becoming the preserve of corporate investors or those with a large disposable pension pot.

Buy to Let Crowdfunding Platforms

But now a revolutionary idea is already making waves in the buy to let property market by opening up opportunities for those “wannabe” buy to let landlords who do not have the large financial resources and who up till now could not have contemplated entering the buy to let market.

A new breed of crowdfunding platforms is evolving which is specially geared for the buy to let property market giving individual investors the opportunity to purchase shares in a buy to let property for a minimum investment as low as £50 (Property Partner).  Examples of these new online crowdfunding platforms are “Property Partner”, “The House Crowd” and “Property Moose”. In order to participate, the user has to open an account and become a member of the particular crowdfunding platform. Properties are advertised on the platforms to members, giving the overall price at which the property will be purchased and the minimum number of shares/level of investment that a member can purchase or invest in that particular property. Once a sufficient level of investment has been obtained, the property is purchased using a “Special Purpose Vehicle (SPV)” which is in essence a company formed especially to purchase that particular property.  Each investor is given shares in the SPV to the value of their investment. The SPV then manages the property and the tenants and each investor is paid a dividend from the rental yield. Most if not all of these platforms have a secondary market for investors to sell their shares to other investors should they wish to redeem investment and any time.  

Crowdfunding buy to let platforms are a way to enter the buy to let market without having the hassles of sourcing the properties, buying the properties, finding the tenants, dealing with the administration and legal paperwork (particularly the “minefield” of landlord and tenant law) and maintaining the property and nightmare tenants.

What are the downsides?

Firstly, there is the usual investment downside being that if the value of the property goes down so does the value of your investment, however this this is a problem shared with most other investments on the market.

Secondly, there are the fees that the crowdfunding platform may charge some charge a single upfront fee, but others charge a monthly fee and a percentage of the rental yield.  The House Crowd charge each investor 5% upfront and a further charge in the region of 25% as a profit share in return for managing the property. Property Mousse charges a finder’s fee of 5% followed by 15% of the rental yield and 15% of any capital gain in the property is sold.  

Thirdly the element of control, investors have no control over how the property is managed the type of tenants that are chosen for the property or how costs are calculated. Some of the platforms reserve the right to raise finance against the property should the revenue from the property is not cover its running costs (as may occur for example during a period of voids or if a significant amount of work is required on the property). Most of the crowdfunding platforms are regulated by the FCA, and if the company running the platform collapses you will still have your share in the SPV, though the value of that share is debatable if there are large debts to be paid and you may find yourself in competition alongside several hundred other investors when trying to recoup your investment.

Then there’s the issue of being able to get your money out in a hurry if you need to; property in the UK takes an average of 3 months to sell, if you own the whole of the house, you may be able to make decisions, for example, you may decide to drop the price to get a faster sale (subject to the level of mortgage secured against property), however this decision-making is taken away from you when purchasing shares in the property through one of these crowdfunding platforms. Properties are generally sold after 5 years, with the sale proceeds being divided between the investors proportionate to the value of their investment.  If you need to withdraw your investment before the 5 years, then there is the “secondary” market in which you can sell your shares in the property to other investors if any are interested at the time, either way the value for which you can sell your shares for will depend on the value of the property at the time and there being a willing buyer ready to purchase at that price.

Convey

Developers Devouring London

London is now in the grip of the big developers and foreign investors. Having previously been ruled by the banks, the skyline of London is now ruled by the big corporate and international developers, leaving many property market pundits wondering whether the Banking Crash is to be replaced with the Property Developer’s crash.

As tighter controls take effect on the UK mortgage market, developers are increasingly looking towards the wealth of investors from the Middle East, China and Russia.  Not only in London (with its high land values and overly size developments) but across the country as a whole, local authorities are seeking to cash in on the increasing investment by relaxing planning policies such as affordable housing quotas, height limits and looking more towards the interests of the property developers, paying scant regard to the interests of local residents. Indeed many of the new developments come at the expense of those residents who are classed as the most vulnerable in our societies with whole council estates being demolished to make way for luxury flats, council land which would previously have been kept for social housing is being sold off to the highest bidding developer.

Cynical public relation campaigns are run in collaboration with the property developers, for example, when building the Olympic village and Park spin walls that the area was being “regenerated”, however the end result was that even developments termed “affordable housing” are now out of the reach of the low to middle earning residents of London.   Whole communities bustling and vibrant with life, that evolved over generations, which defined the character of whole areas of London have been bulldozed through to make way for gated communities, luxury high-rises bought as investments rather than homes by foreign investors with no connection to the area and no intention of ever living there. It is now common for property investors in far-flung cities such as Hong Kong, Moscow and Kuala Lumpur to buy up whole developments of residential apartments before they have even been advertised to local residents.

Corporate giants such as Lend Lease, Ballymore, Argent, CapCo , Land Securities and Berkeley are taking over the development of large areas of London, examples range from the much lauded developments along the Thames from Vauxhall through to Battersea Power Station known as “Nine Elms” , the redevelopment of Kings Cross and Victoria.  Into this rich mix, is added the International Developers financed by the sovereign wealth funds, national pension funds and oil revenues. Most notably amongst this group are the Qataris (who refinanced the Schard and snapped up the Olympic village) and the Malaysian and Chinese (who bought up Battersea Power Station, and the Royal Docks.

So what has happened to our renowned Planning Laws designed to protect us all from such wanton out-of-control developments? Paradoxically it may be our Planning Laws, or rather how these laws are exercised and managed, that are largely at the root of the issue and acting as a catalyst for what such development. This is particularly true of the regime governing the Section 106 Agreements  which form part of the Planning Consents under the Town and Country Planning Act 1990.  Councils use the provisions under Section 106 of the Town and Country Planning Acts to obtain funds from the developers for various infrastructure requirements  as a condition for the granting of the Planning Consent for the development.  The definition of these “infrastructure requirements” has become more and more elastic over the past decade, whereas they originally were designed to cover the expense of additional roads, schools and common facilities such as community centres and play areas which would be required due to the addition increase in the population of the area caused by development cash-strapped Local Authorities are increasingly using them to plug gaps in their revenues which have been brought about by government cuts.  The more elaborate the developments and the wealthier the developer and  investors behind them, the more greater the funding that can be extracted by the Local Authorities from the developers.  The higher sums secured by the Local Authorities often come at the cost of affordable housing with the Local Authority is using this requirement as a bargaining chip.  

#Developers   #property   #london   #investors  

Why Use an Online Conveyancer?

Traditionally, when buying or selling a Property people would appoint their local or family solicitor, who is a ‘jack of all trades’ in respect of the law, knowing a little about many areas of law but nothing substantial about any one area of law. The solicitors would charge by the hour and take months to complete the conveyance. Often it is several months after the purchase or when  you come to sell the property , that you become aware of what has not been done or has been missed, often because the  solicitor did not have the depth of knowledge in Property Law that is required. Overall using a small, local solicitor is expensive and most times, inefficient. You may believe that a local solicitor is one that you can pop in and see regularly – wrong, you may see the secretary and on the rare occasions that you are able to have a meeting with them… they charge by the hour!

What is needed is a solicitor who is an expert in Property Law, experienced in Property Law, dedicated to Property Law and does not charge the earth!  A firm that will always keep you up to date and that gives you access to check the progress of your transaction 24/7. Is this possible?  Yes! – Online Conveyancing.  

More and more solicitors are offering online  conveyancing services. The services they offer include:

·         A Fixed Fee guarantee- this means that you will be told the fee at the beginning of the transaction and this fee will not change – there will be no extra legal fees added.   This way you know exactly what you need to spend out in legal fees from the beginning.

·         A ‘no move- no fee’ service. This means that if the transaction does not proceed to completion (for example the other party pull out) you do not have to pay any legal fees. You may still have to pay for disbursements ( these are fees paid out by the solicitors to third parties on your behalf for example, title deeds and conveyancing services)

·         The provision of instant online quotes.

·         A case tracking system, whereby their system will email you or text you to let you know every time something happens or work is done on your transaction

·         Transparency-Due to online firms using online management tools, you will be able to obtain an accurate picture of how your purchase or sales progressing. You will be able to login and see an accurate audit of the trailer jobs being completed and what actions are still outstanding. The advantage of this is that you can login 24/7 and do not have to wait for the Conveyancer who is dealing with your matter to be available and you do not have to travel to the office to find out exactly what work has or has not been carried out.

·         Direct contact with the solicitor by email or telephone.

·         A large amount of experience and practice in purely conveyancing matters and Property Law.

·         Often cheaper fees than the traditional High Street solicitor –largely because running their business online is less costly to run.

Are there any downsides to using an online Conveyancer?

One of the biggest criticisms of online Conveyancers  are that they often take on more work than they are able to cope with and employee large percentage of unqualified staff.  Although this is undoubtedly true of some online firms it is also true of many of the existing high street firm, especially as level of the fees that they can charge continue to fall.

Many Local or High street Firms offer a range of areas of law with a smaller workforce, with the fee earners (Solicitors, Ilex practitioners, Licensed Conveyancers) having to practice in several different areas of law and are commonly “a jack of all trades and master of none. By using a firm that specialises in Conveyancing the person dealing with your Conveyancing Transaction is more likely to be an expert in that field.

Another criticism of online Conveyancers is that the service provided is less personal-you do not have the opportunity to have that personal one-on-one meeting with the person dealing with your Conveyancing Transaction. This is not unlike the situation in a high street firm, I have yet to find a high street firm whereby the practitioner will allow their clients to meet with them on a “add-hoc” basis; indeed the client is more likely to have contact with the secretary at a pre-booked appointment with many high street firms charging an additional fee simply for the time taken in meeting with their client.

It is often said that the service level from an online Conveyancer can be erratic. However I have found in my experience in working for both an online conveyancing firms and a high street firm that the same can be said of either. How work is managed in a firm does not relate to whether or not they are online or high Street it is simply a management issue.

Beware though, do not confuse a Conveyancing  firm that offers volume online conveyancing services with the  ‘Conveyancing Factories’. Conveyancing Factories are largely staffed with unqualified and poorly trained staff with call centres in other countries such as India and South Africa.  Although they will often appear cheaper, however you will rarely speak to the same person twice, anyone you do get to speak to will probably have very little legal expertise. The ratio of qualified staff to unqualified is very low. The system used by Conveyancing factories is very rigid and often designed around the most straight forward transaction – anything out of the ordinary will cause the system to come to a halt!  Finally some of the largest Conveyancing factories are owned by estate agents and may not totally have your sole interests at heart!

A firm that offers online conveyancing is definitely the best choice.  You are far more likely to get qualified and experienced conveyancers, who specialise in Property Law.  You will be kept up to  date with the progress of your transaction and will be able to check the progress 24/7.  The legal fees will be reasonable and in the form of a fixed fee, so you know what you will have to pay from the start, and not have the fear of being charged extra every time you speak to your solicitor.  You will be able to contact your solicitor and receive documents by email.  As everything can be handled on line, you do not have to make time to see your solicitor.  

#OnlineConveyancer   #property   #buyingahome   #sellingyourhome  

The Crossrail Effect on West London

Having received Royal Assent in 2008, Crossrail is anticipated to increase the rail capacity of London by at least 10% when it opens in 2018. As the largest infrastructure project undertaken in London for at least the last two decades, Crossrail is the biggest upgrade to London’s railways since the Second World War.

Perhaps the greatest effects on the London Property market is being seen in the boroughs in the west of London being Acton, Ealing Broadway and West Ealing (which will all have Crossrail station is integrated with the current existing tube stations) which are seeing the significant increases in house prices as property investors rush to stay (“ahead of the game”). The key to the increase in the value of properties in these areas derives from the reduced commuting times to Greater and Central London brought about not just by the greater efficiency of Crossrail (with the travel time to Bond Street from Ealing Broadway being reduced by as much as 45%) but also by the resulting reduction of traffic on the already congested roads. The fact that Crossrail is anticipated to bring the Centre of London within “striking range” of these areas increases the viability of Acton and Ealing as residential areas for the financiers, bankers and corporate lawyers of the City and is welcome news for those that have been effectively priced out of Central London.

Another significant effect of Crossrail is that it will significantly reduce travel time to Heathrow (travel time from Acton to Heathrow reducing for forty-eight minutes to 23 minutes and Ealing Broadway from 22 minutes to 12 minutes) which is anticipated to encourage many more businesses to  relocate to Acton or Ealing where land and property prices are cheaper.

Acton has seen the greatest rise in house prices, with houses within ten minutes’ walk of Acton Station, rising by around 48% from July 2008 to July 2013. House prices in Ealing have risen by 13% in the same period. The number of new residential developments around Acton Station has also significantly increased with as many as five separate schemes currently going through the planning process.
Although Ealing Broadway has always been fairly well connected with the Central Line and District l tube services, the number of stops on the Central Line between Ealing Broadway and Bond Street, for example will be reduced to 4 in comparison with the current 11. Again, an added bonus will be the ability to take the train straight to Heathrow rather than having to combine the overland train with tube as is currently the case.  Ealing Broadway is set to be considerably upgraded which in turn is anticipated to attract additional commerce into the area.  Average house prices around Ealing Broadway Station have already outperformed those in the wider borough of Ealing by as much as 10% between July 2008 and July 2013.
West Ealing station is likely to see the greatest changes and is due to be redeveloped in time for the opening of Crossrail. Currently a mainline station linking services to the West Country (for example, Paddington to Bristol) the addition of a Crossrail terminal will introduce greater flexibility with the introduction of direct links to Central London and in particular, Canary Wharf. Currently in order to travel across London from West Ealing Station a commuter has to take two different trains; with the opening of Crossrail the journey will be direct with the travel time reduced by 50% and taking an average of 28 minutes. House prices have risen by 12% since 2008 with the average price of a house within striking distance of West Ealing Station averaging 5% more than those within Ealing as a whole.

#crossrail   #LondonProperty   #WestLondon  

UK Mortgage Approvals Are On the Rise

The tighter rules on mortgage lending, saw the number of Mortgage Approvals falling in most months last year, the effects of which were not only a cooling of  the house price growth, but also a significant slowdown in the housing market.  Although concerns about a new housing bubble were eased, new fears were created over whether this slowdown would cause the housing market to grind to a halt as homeowners were unable to move, the supply of properties on the market began to shrink.

Despite the fears of the Property market grinding to a halt, UK mortgage approvals are on the rise in 2015 with approvals in January numbering 60,786 rising from 60,349 in December 2014.  Mortgage approvals rose by a fraction in February to 60,935, the trajectory appears to be steadily upward, although the overall mortgage approvals remain low by historic standards.

The increase in mortgage approvals needs to be looked at in context for although the increase in mortgage approvals to 60,935 in February is welcomed,  the number of mortgage approvals are still 17% down on December 2013.

Property market pundits predict that the property market is poised for another rise in activity as the “mortgage war” will between lenders intensifies, many lenders begin offering lower rates on certain types of mortgage deals.  Other factors said to support a continued recovery in mortgage lending are the reforms to stamp duty, the increase in the number of employed, stronger growth in real incomes (through a combination of salary increases and lower inflation) and lower mortgage rates.  Another factor to be considered as the fact that the growth in house prices continues to slow having fallen by 0.1% in February according to the Nationwide index, 0.3% according to the Halifax index the annual rise in house prices slowing to 6.6%.

Another significant feature in the rise in mortgage approvals is the rise in the number of “high loan to value” mortgages being approved (high loan to value mortgages are classed as being loans to borrowers with up to 15% deposit).  There were 10,298 high loan to value loans approved in February being a 10.7% rise on those approved in January (9300).  February marked the third consecutive month of growth in the approval of high loan to value loans.  Despite this continued rise in the level of high loan to value approvals, there are no fears that they will return to the risky levels seen in the years up to 2007 where high loan to value borrowers made up one third of the total mortgage lending.  A significant factor in the revival of the high loan to value mortgages is seen as being the governments Help to Buy Scheme which allows buyers to put down a 5% deposit with the government loaning or guaranteeing the remaining 5%..
#mortgage   #lenders     #affordability  
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