PFC News & Views - propertyfinder.com

What can landlords and tenants expect when it is time to renew?

2008-08-06T12:09:38Z

Before the term “credit crunch” entered the public domain and the market was soaring, most agents experienced a higher than average level of renewals as tenants tried to insulate themselves from escalating rents and increased demand for property. Come renewal time, many tenants found that they had to negotiate their rentals afresh and accept significant increases in order to remain in situ.

Now that conditions have changed dramatically, lettings departments are still presiding over a record number of renewals. This time around, however, everyone involved in the process is increasingly sensitive to increased outgoings. Tenants may be deciding whether or not to downsize as landlords are struggling to make their numbers come right with the higher cost of finance.

That being said, tenants realise that rents have moved on to a higher level generally and that relocating themselves, their families and belongings has its own significant costs. In turn, landlords are reluctant to incur void periods. Furthermore, a good landlord appreciates and respects a good tenant and is usually willing to accommodate them as much as is reasonable.

By way of a fair resolution, we are negotiating an upward adjustment for inflation in line with RPI. This figure (4.2% at time of going to press) is readily available from the Office of National Statistics as well as Lonres, the trade website. As agents, we also benefit from having an objective standard to assist us in carrying out our responsibility to our clients, as well as our duty of care to our customers.

Tessa Lang
Lettings Manager
Des Res Ltd.

Q&A What is the difference between freehold and leasehold?

2008-07-07T12:05:59Z

The terms ‘freehold’, ‘leasehold’ and 'commonhold' refer to the different ways in which properties in England and Wales only can be owned. (Scotland follows separate regulations)

Property expert Nicholas Leeming provides an overview of the terms...

]]> What is freehold?
Freehold title gives you absolute ownership of land and property. These properties are therefore more desirable and worth more.

What is leasehold?
Leasehold title gives you the right to occupy property for the period of the lease only after which it reverts to the freeholder. The leaseholder owns everything within the walls while the freeholder owns structure and the land which it is built on. The length of the lease has a direct impact on the value of the property.

What is a lease?
A lease entitles a tenant to occupy a property in return for paying a rent, subject to any conditions contained in the lease. A legally binding document stating the terms and conditions under which the property is occupied and used.

What is commonhold?
This form of ownership was introduced in September 1994 and applies to interdependent properties so allowing flats to be held on a freehold basis.

What is a Rent Act tenancy?
These are older leases which fall under the jurisdiction of the Rent Acts and which may, among other things, limit the amount by which rents can be increased at any one time.

What is an Assured Shorthold tenancy?
These are more modern forms of leases which most properties are now let under and are for a minimum term of 6 months.

What is Leasehold Enfranchisement?
This is the process by which a qualifying leaseholder may acquire the freehold for their property for a market value

Q&A: How to manage your property finances after the credit crunch

2008-06-05T14:32:07Z

The credit crunch has had a big impact on the property markets and has created both challenges and opportunities. One of the biggest frustrations which it has resulted in has been the lack of mortgage availability for even buyers with a relatively good financial record.

Property expert Nicholas Leeming gives his advice:

]]> For those looking to buy a home now could be a good time if you can get your finances in order.

There is a large stock of property for sale and, as the months progress, there will be more vendors prepared to discount their guide prices. This cycle in the market brings opportunities for buyers who understand that the long term fundamentals of property ownership remain positive, even if short term comment in the press is negative.

So what should you do if you want to buy a home and make the most of this opportunity?

First of all get your own property (if you have one) valued and be realistic about the net proceeds that this will realise. It is a brave person in any market who commits to buy without having agreed the sale of their own property first, so look at renting as an interim solution. Then do your research on what funding options may be available to you. If you need a mortgage then spend time in looking at what offers are out there....but it is not just the rates that you should check, it is the terms such as the deposit and income cover which can be just as important. With satisfaction on this front you should be ready to start your search.

Needless to say the internet is one of the most efficient ways of finding property and is the best research tool.

When looking at property think carefully about how the building society or bank will look at it for security purposes and will an independent valuer confirm the level that you are proposing to bid. Also will the lender require additional work to be done to the property which may be expensive to carry out. Without a mortgage offer being confirmed you may not get very far with your purchase and you may land up with some hefty abortive costs!

The general advice to property buyers in the light of the current credit crunch is to do you homework in advance and be sure that you do not expose yourself to unnecessary financial risk. There are opportunities in the current market as well as challenges....make sure that you make the most of it!

Q & A: Stamp Duty

2008-05-08T13:16:37Z

Property expert Nicholas Leeming of propertyfinder.com answers your questions on stamp duty:

]]> Why do we pay stamp duty?

Stamp duty is the oldest tax administered by the Inland Revenue and was introduced in 1694 to pay for the war against France. The tax was extended to property sales in 1808 and its sole purpose now is to generate revenues for the government.

How much is stamp duty?

Stamp duty used to be levied at 1% on the sale price of a property above a basic threshold. In July 1997 Gordon Brown increased the tax to 1.5% on properties between £250,000 and £500,000. There have been a number of subsequent changes and the current rates are shown below:

Purchase price of residential property Rate of Stamp Duty Land Tax (% of the total purchase price)

£0 - £125,000 0%

£125,001 - £250,000 1%

£250,001 - £500,000 3%

£500,001 or more 4%

What is the result of the tax?

The tax take for HMRC in 2007/8 will be around £6,863m with an average bill for each property sold of £4,950 this tax year. The comparable figure 10 years ago was £709 representing an increase of nearly 600%. In London the affect is even worse with average stamp duty paid on a property reaching £12,409. Three London boroughs alone paid more stamp duty last year than Scotland, Wales and Northern Ireland combined! Today’s first time buyers will pay around £20,000 in stamp duty over their lifetime.

Is it possible to reduce or avoid stamp duty?

The most common way of avoiding stamp duty was to attribute a high percentage of the agreed sale price to the fixtures and fittings so as to reduce the value of the property to below the threshold for stamp duty. While this could create worthwhile savings, this practice has now been stopped and there are now no effective ways of avoiding the tax.

The rental market is increasing

2008-04-09T20:16:55Z

Nicholas Leeming, major client director of propertyfinder.com, commented on the CML buy-to-let figures and the escalating demand for private rented homes:

]]> 'The vast majority of the rental sector is booming at the moment, driven by tenant demand. The number of people searching for rented homes on our site has increased 36% since last August when the credit crunch began. Mortgage costs are high and confidence in the housing market is low – in the short term, a lot of potential first-time buyers are choosing to remain in rented accommodation, at least until the picture of the market is a little clearer.

In the long term, the role of buy-to-let in the UK housing market is likely to get bigger rather than smaller. We estimate that around 3.1 million of today’s over 30s who had expected to retire in their own homes will actually live out their golden years in rented accommodation due to affordability constraints. Most of these people will find homes in the private rented sector.’

With the legislation about to be extended to new build properties, how have HIPs already affected the housing market?

2008-04-09T10:19:08Z

Nicholas Leeming, major client director of propertyfinder.com:

Where HIPs are concerned, the only thing the government has been consistent on is indecision. The main impact on the market has been from dithering over implementation, rather than the actual legislation. Now that HIPs are compulsory for almost all properties, they are just an expensive, unavoidable inconvenience – much like death and taxes.

]]> Where were they introduced?

The legislation was initially intended to speed up the process of buying and selling a home by making vital information on a property available to buyers upfront. This would prevent people pulling out of purchases further down the line. But after several U-turns, the government burdened the market with a diluted HIP that does not provide the information a buyer needs. Without a structural survey, a buyer and their mortgage lender don’t have the information to guarantee they can proceed with buying the property.

Agent Response

Agents tell me HIPs have done nothing to speed up transactions for this reason – there’s nothing in them of use. Buyers aren’t even looking at them and don’t ask to see them. Solicitors often refuse to rely on the information they contain.

EPCs

Supporters (mostly those with a vested interest) make a lot of positive noise about EPCs. But buying a home is an emotive process and the energy efficiency of the property will not influence the decision of the vast majority of buyers. HIPs have become about complying with an EU directive on reducing carbon emissions, not about helping buyers and sellers of property.

New Build Properties

Which is precisely why this pointless legislation is being extended to recent new build properties. New properties are built to the latest building regulatory standards. A HIP won’t tell buyers anything new but with guaranteed high standards of energy efficiency, dragging them under the legislative net will undoubtedly boost the government’s energy efficiency statistics. So the government can furnish their green credentials at the expense of others. The only other outcome of extending the reach of HIPs will be to create work to placate the HIP providers who suffered from the earlier indecision and are now struggling in a slower housing market.

London Property News

2008-04-07T09:26:44Z

The London property market is more resilient than most other parts of the country. Despite hype about the reliance of London on financial services, the city has a strong and diverse labour market which shows little sign of faltering.

Nicholas Leeming, major client director of propertyfinder.com comments:

]]> Although prices of million and multi-million pound homes may be more vulnerable to weaker City bonuses, prices of normal family homes will ultimately be supported by the strong jobs market, continued migration to the capital and the shortage of housing.

Worryingly, there are reports emerging that a growing number of people are thinking of selling their home and moving into rented accommodation until property prices fall.

It’s a dangerous game to say the least. Speculating on the property market with your own home is definitely not for the faint-hearted. The average London property has to fall over 7% in value before you even break even once you take into account all the costs of selling, moving and then buying again; stamp duty is the biggest cost.

For people in more expensive homes, the market has to fall further still – over 8%. So you need the market to drop a very long way before this starts to look like an attractive prospect. And you have to consider how much the hassle and upheaval is worth to you.

The London rental market is certainly very busy at the moment. Tenant demand is strong and rents are rising rapidly. There is a lot of competition from tenants for the nicest homes, so those selling up to move into a rented home will have to fight for the best property. Good rented accommodation for a family in a decent school catchment area is like gold dust.

How should you make an offer for a property?

2008-04-01T17:14:57Z

Deciding on what and how to bid for a property is one of the most challenging parts of the house buying process. There is no set formula and this is a straightforward commercial negotiation, made all the more difficult because the individuals involved may have widely differing standards and business experience.

Property expert Nick Lemming gives his advice..

]]> Vendor Research

Before even thinking of submitting and offer you need to do as much research as possible into the background of why the property is on the market and how long has it been for sale.
A vendor with a deadline is more likely to negotiate than one who does not have to move. Similarly a property which has been on the market for some months may sell well below its guide price.
Remember also that the vendor is human... he or she will probably be more prepared to negotiate if you take the trouble to be courteous and show them respect. Discuss why they want to move, what their ideal timescales are and how you can help them in the process. This can be particularly important if they are elderly.

Competition

You also need to find out what the competition is. Ask the agent if it is worth viewing the property if you only have budget of £x (set discretely below the guide price): if he says no then you know that they feel in a strong position, if yes then it may indicate that there will be room for negotiation.
When looking around the house ask how many other viewers there have been and how long it has been on the market for.

Hidden Costs

With this information to hand you must also work out what you are able to bid for a property and what it is worth to you.
There are many hidden costs that you will have to pay, not the least of which is stamp duty which, at its highest and most penal rate, is charged at 4% of the value of the property. Add to that legal fees, the cost of improvements and moving, then the net funds available to bid with are soon reduced

Final Offers

How you submit your offer will depend on how the sale is being conducted. “Best & final” offers are submitted in writing and have to be with the agent before the relevant deadline.
Otherwise a verbal offer by telephone will usually suffice...but make sure that you keep a record of the agent’s name and time of your call. It is also often worth putting a deadline of, say, 48 hours for your offer to be accepted otherwise it is withdrawn: this makes it more difficult for the agent to use this to get other prospective buyers to submit a competing bid.
Unless submitting a best and final offer (which needs to be exactly that) you should pitch your opening offer at slightly below the price that you would be happy paying.
It is quite normal for an agent to ask for a better bid and, that you have offered below what the vendor is expecting, may well help to readjust their sights accordingly. Offering the guide price first time is not normally a good tactic!

Room for Negotiation?

The agent has a legal responsibility to report your offer in writing to their client. Beyond that the vendor decides on what course of action should be taken, often as advised by their agent. Particularly in the current market you need to be clear as to whether you already have a mortgage agreed in principle and whether your offer is subject to survey or any other conditions.
The cleaner your offer, then the stronger your negotiating position is and the more likely that an offer below the guide price will be accepted.

If all this fills you with horror, then you can always ask a buying agent to represent you in the process, but otherwise the best advice is do not set your heart on a house until the vendor’s signature is on the contract....only then do you have certainty!

Stamp Duty bills soar far above home buyers' expectations

2008-03-18T16:11:54Z

The stamp duty paid on a home in the UK has reached an average of £4,950 this tax year, according to the latest research by propertyfinder.com, based on predictions using HMRC data.

This is up from £3,828 last year and just £709 ten years ago (a ten year increase of nearly 600%). During the tax year 2007/2008, the HMRC will have collected a total of £6,863m from home buyers.

]]> But the amount collected from region to region varies enormously. The average stamp duty paid on a London property is now £12,409, more than 7x the average £1,730 levy in the North East.

Nicholas Leeming, major client director of propertyfinder.com commented: "Stamp duty has become a major earner for the Treasury. But its burden is far from evenly spread. Three London boroughs alone paid more stamp last year than Scotland, Wales and Northern Ireland combined! We can expect the same pattern this tax year.”

London buyers massively underestimate how much they must fork out in stamp duty. On average, Londoners expect to have to pay £5,479 in stamp duty – the real figure is £12,409. Buyers in the south west, south east and east anglia also underestimate their liability. The midlands are almost spot on with their estimates of the stamp they must pay, whilst Wales, Yorkshire and the north think they are paying more stamp tax than they actually are.

However, almost every region in the country overestimates how much stamp duty they paid ten years ago.

Nicholas Leeming continued: “People have become so accustomed to being taxed heavily on their home – they can’t remember that this hasn’t always been the case. Taxes on our property assets - in particular through stamp tax - have rocketed over the last ten years. The average person will buy a home around four times in their lifetime – this means today’s first time buyers will pay £20.000 to the Treasury, just through stamp duty by the time they retire. Those towards the south of the country will pay many times this amount.”

Not only do people not remember the lower levels of tax they paid ten years ago, but they think that stamp duty has increased at a slower rate than council tax. Even though 50 percent of people think that council taxes have risen the fastest, in fact on average it has less than doubled when stamp duty has increased by a factor of seven.

“This year, revenues are higher and there are certainly more homes than ever dragged into the tax net by house price inflation. The best reforms would be to raise the lower threshold to a sensible level to help first time buyers on to the ladder, and to introduce marginal bands for everyone. These are the changes we’d like to see made in the budget. But it is such an easy tax to collect and with the government finances looking precarious, the chances of change look remote to say the least."

Q&A: How long should the completion process take? Who dictates the terms?

2008-02-21T16:53:43Z

The completion date is agreed between the vendor and purchaser and forms part of the contract for sale. Completion usually takes place 1 month after exchange of contracts, but this may vary depending on the circumstances of the parties and whether there is a chain involved. Your solicitor will advise on the issues that you should take into account before fixing a completion date.

Q&A: How can you negotiate with vendors?

2008-02-21T16:50:15Z

Most agents set a guide price slightly above of the figure that they expect to achieve for a property, but the precise level which a vendor will accept depends on a number of matters, the most important of which will be the number of competing bidders and the overall market conditions.

]]> The more secure you appear to be as a buyer, then the stronger your negotiating position will be i.e. if you are a cash buyer and not subject to the sale of your own house or a mortgage, then the better the position you are in to offer a lower price. In a declining market there are better deals to be done than in a rising market. Then it is up to your judgement as to who else is bidding!

Q&A: I've found the perfect home, what’s the next step?

2008-02-21T16:43:46Z

You might think that having an offer accepted on the right house means that the most challenging task is now over. The reality is different and you now need to make sure that, among other things, you can complete the funding and legal processes that any such purchase involves. As a guide to the next steps you should:]]> - Convince the vendor that you are proceeding fast with the purchase. They must believe that, even if another offer comes in, you are the best people to run with.

- Agree with the agent that the property should be taken off the market

- Progress your mortgage application as fast as possible

- Get a structural survey carried out from a surveyor approved by your building society/bank.

- Get quotes for the conveyancing i.e. the legal work and then instruct a solicitor to act for you

-Spend some time in the area of the house to see if there are any nasty surprises lurking!

- Keep in contact with your solicitor and building society/bank to ensure that they are making progress

- Brief the vendor on how you are getting on

- Understand the legal processes and the advice that you are given

- Subject to satisfactory offers of funding and acceptable terms, be ready to exchange contracts

Only when you have exchanged contracts can you begin to relax: at that point you have a legally enforceable agreement. Completion i.e. when the balance of the purchase price less any deposit has to be paid, is normally one month after exchange of contracts. You then have possession of the house, can move in and celebrate. Ahead of you are the joys of DIY and home improvements that many new purchases involve.

"Abolish HIPS" say Estate Agents

2008-02-20T11:50:14Z

As the government announced the roll out of HIPs on all homes by December 14th, propertyfinder.com’s survey of 842 estate agents reveals just what a shambles the legislation has been so far. HIPs, which are already compulsory in the home selling process for homes with three or more bedrooms, will be introduced on all homes from mid December.

]]> 70 per cent of estate agents think that HIPs have disrupted business, and 84per cent of them want the legislation abolished altogether. Instead the government is doubling the number of properties caught by the legislation. Estate agents say that 51 per cent of sellers do not know they need a HIP when they instruct the agent to market their property. Furthermore, a fifth of this group of sellers are put off marketing their property because of the extra hassle and cost involved.

This move is going to impact upon the very people Yvette Cooper has today pledged to help with affordable housing. The people who live in one and two bed homes are on lower incomes and will be deterred by the extra £350 cost of a HIP (average cost across all agents surveyed). The cost varies very little according to the size of the property so is a disproportionately large expense for smaller, less valuable homes. This is likely to constrain supply of first-time buyer property.

42 per cent of buyers do not know what a HIP is and don’t find the information contained useful, whilst a further 51 per cent know what a HIP is but don’t rely on it. That is a massive 93 per cent of buyers who find a HIP unhelpful - sellers are effectively paying £350 for nothing.

Warren Bright, chief executive of propertyfinder.com said: “Estate agents across the country can see HIPs are simply not delivering and want them abolished. Sellers don’t know what they are and buyers ignore them. Now this discredited scheme is being extended to all properties, the confusion will only deepen. For the government to be heaping new burdens on the property market at a time when it is already feeling some strain is beyond belief. The government should leave the housing market alone, not tie it up in red tape.”

Inspect Before You Buy

2008-02-20T10:26:34Z

After searching for so long to secure your dream home – and finally finding it - the desire to fast-track the contract and paperwork makes it really easy to overlook problems with the home, some of which may in fact be quite prominent.

]]> Perform a Do-It-Yourself inspection

It is difficult to imagine buying a car without checking the motor and taking it for a test drive. Unfortunately many people do just this when buying a house, which costs so much more! By properly inspecting the property you intend to purchase you’ll know the exact condition of it, thereby reducing the ‘surprise’ of possible costly repairs found to be necessary after you take possession. These lists show some of the aspects you should consider when inspecting a property:

Inside the home

• Check that all the floors are level and that there are no gaps between the floor and skirting boards.

• Jump lightly on wood floorboards to assess their stability.

• Look for signs of rising damp, including rotting carpet, mould on the walls or ceiling and musty odours.

• Check the walls and ceiling for warping and cracks. Fresh paint or wallpaper may be hiding problem areas.

• Assess whether doors and windows are square. Jamming may indicate structural subsidence.

• Make sure all light switches work. Also check each power point by using a power point tester (these are relatively inexpensive and can be purchased from hardware and electrical stores).

• Test the water pressure in both hot and cold taps. Ideally, turn on several taps simultaneously. Partially fill the bath or sink and observe the drainage of this water. Sluggish flow could indicate damaged or blocked sewer drains.

Outside the home

• Inspect fences and gates for stability and rot.

• Are there any large trees near the house? The root systems of trees can cause structural subsidence if they are close to the home.

• Check that the land's water runoff drains away from the house.

• Inspect all outside walls. Are they straight, cracked or rotten?

• The condition of the mortar between the bricks must also be assessed.

• Make sure there is adequate sub-floor ventilation.

• Check the condition of the eaves. Water staining may be an indication of damaged gutters.

• Look at the line of the roof to make sure it is straight. Are there any broken tiles?

• Check the stumps for subsidence, rot, borer or termite attack.

A professional inspection

Professional inspectors should examine every accessible part of the home, including the roof space and sub-floor. They will check for poor structure, leaking roofing and guttering, subsiding footings, faulty wiring and plumbing, dampness, rot and many other faults.

Inspections are not designed to disclose cosmetic deficiencies (e.g. paint chipping in the kitchen). You will need to decide for yourself whether these types of items need attention.

You should be provided a written Inspection Report following the inspection. This will inform you of any property faults, how bad these are and give you a guide to probable repair costs. Inspectors may also be able to give you qualified advice on any home improvement ideas you may have.

Armed with this information you can decide whether you wish to purchase the property. If you do decide to make an offer on the property, you will be in a far better position to negotiate.

Your local Building Advisory Service, or perhaps the Construction Industry Council’s approved Inspector’s list, should be able to help you find a professional inspector.

The buying process can be so quick, especially in a hot market, and a lot of people are lulled into a false sense of security. They forget to perform the due diligence required of such a large purchase. After having discovered faults in the property many buyers find they can not afford to spend money on repairs and are forced to either take out a loan, or put up with the problem, which causes stress and annoyance. And It's not just the problem itself; it's what it leads to if it doesn't get fixed

There is no point getting angry with the seller either - in many cases, they are unaware of the problems themselves. It’s surprising what people live with without knowing it! They are usually very surprised when an inspection report comes back with issues on it – even more reason to have one done. By Joanna Johnson

To Buy or To Build?

2008-02-16T10:33:57Z

The average home-buyer can save £55,000 by having a three bed home built for them, compared to buying a new build from developers, according to new research from propertyfinder.com. Buying a home in England costs approximately £267,600 whereas the cost of land, materials and labour would total only £212,850 - a saving of more than 20 per cent.

]]> The cost of building a new home ranges from £152,644 in the East Midlands to £295,054 in London. The main reason for the huge discrepancy in the cost is the price of the land. In London, a hectare of land (with planning permission) costs an eye-watering £9.6m. In the East Midlands it is just £1.9m - one fifth of the cost. As a result, plot sizes tend to be smaller in more expensive regions. In London, the typical plot size is tiny to make it affordable - just 207sqm – almost half the expansive 390sqm enjoyed in the North West where home builders can spread themselves out more.

The savings - compared to the cost of buying a new build home - vary enormously. Those in the South East save the most (£101,389), three times the average saved in Yorkshire (£33,229). London home-builders save less than average – just £43,813, a mere 13 per cent compared to buying a new build home.

Warren Bright, chief executive of propertyfinder.com said: “The regions with the most expensive home prices are not, as you might expect, where the savings from commissioning your own build are highest. The relationship between land prices and house prices is the most important factor. Getting hold of the land is the main problem. For example, land in London is so scarce - and planning permission so hard to come by - it is barely worth the cost and effort of attempting your own project. Other regions show enormous savings, especially the South East and South West.”

The cost of having a home built has risen slightly faster over the last five years than buying a new home – 48 per cent compared to 45 per cent. In London it only costs 30 per cent more than five years ago to build your own home, compared to a 79 per cent increase in the North East. This reflects the change in land prices. The cost of a plot in London has risen only 35 per cent in the last five years, while aspiring home builders in the North East must pay 3.4x the price in 2002.

Warren Bright continued: “The price of new homes has underperformed the wider housing market by 20 per cent over the last five years and build costs have risen faster than the cost of buying a new home in all regions except London. But it can still make financial sense depending where you live and how high your pain threshold is. It can be a long and difficult process to take the reins – most people have neither the time, nor the inclination. You can save more if you actually get your hands dirty and do it yourself, but that’s another order of difficulty! Other countries are much more used to having homes built than we are here. The Germans and Australians, for example, enthusiastically build and are particularly proud of the more varied domestic architecture that has resulted.”