Falling house prices are creating investment opportunities

The fall in the property prices in the UK has continued for more than a year now. This was revealed in the findings of the survey conducted by leading estate agency Chesterton.

Chesterton’s “Poll of Polls” pointed out that there was drop to £184,333 in the average residential price in England and Wales.

According to the firm, figures indicated that prices have been falling for 13 months consecutively and were going down across all regions. Bigger falls were being witnessed in London and the South West during this time.

Chesterton appointed the Centre for Economics and Business Research (CEBR) to conduct survey on its behalf.

According to CEBR chief executive Douglas Mc Williams, the cautious approach of the financial institutions towards lending has impacted all levels and falls in house prices were also taking pace at the top end of the housing market.

The chief executive of Chesterton, Robert Bartlett, informed that some highly placed property professionals are making the most of the drop in prices. He remarked that cash rich buyers had good opportunity to take full advantage of the situation. The firm reported that five deals of cash sales were made in Kensington, London last month.

UK landlords should upgrade to cavity walls to reduce energy bills

The introduction of the Energy Performance Certificate from October 1 for landlords and house sellers has made the improvement of energy efficiency all the more important from a savings point of view, said Mike Malina, an energy efficiency expert.

Malina has suggested installation of cavity wall insulation to those looking at reducing the energy bills of their homes and striving to improve their EPC rating. He commented that expensive double glazed windows were mainly cosmetic. He felt that one should not invest on double glazed windows unless there was drastic need for replacement.

He argued that if the windows were in sound condition, replacing them with a double-glazed variety was not a good idea since many more cost-effective approaches could be undertaken first to get much higher returns on investment.

Malina recommended thermostatic radio valves and draft stripping in homes to enhance energy efficiency without the need to spend large amounts.

An improvement in energy efficiency would also mean reduction in carbon emission. According to the department of Communities and Local Government reports the existing old UK homes emitted 1.6 tonnes of carbon on average per year which was almost twice (0.9 tonnes) the average in the newly constructed homes.

The Government has introduced the Landlords’ Energy saving Allowance (LESA), which is a gift to the savers of energy. It is a tax break which entitles landlords for tax returns against expenses incurred in installing energy saving items or equipments.

Insulations help in consumption reduction. Amount spent on insulations, hot water systems and cavity wall will attract tax return up to maximum £1,500 per property.

A caution note for landlords regarding tax liabilities

It is important that buy-to-let landlords know about their tax liabilities and keep their accounts in order before impending crackdown by HM Revenue & Customs.

According to the Target Chartered Accountants, tax officers have been empowered to visit landlords’ homes and verify their documents. It cautioned that HMRC had gathered details of the landlords through the UK and overseas letting agents and was planning a crackdown on tax evaders.

According to Mark Tuckwell at Target, a misconception has been prevailing amongst the landlords that loss making owners were not supposed to declare their income. HMRC however does not hold the same view. Those having a source of income are supposed to declare income and will be liable for any inquiry on this issue by the tax officers. Even if there was no tax liability, the enquiry could cause lots of hassles and incur significant cost.

Mark also mentioned that many landlords mistakenly believed that they would never be detected by the taxman. HMRC has an easy access to the information on relevant properties to track those not disclosing their incomes. He advises that landlords should avoid knock on their doors and spare themselves of heavy penalties by voluntarily disclosing their income. Voluntary disclosures are being rewarded with generous concessions by the authorities.

Mark also points out that many landlords who did not take advice from tax consultants were unnecessarily paying more tax due to ignorance about allowable expenses on property. He suggested landlords to avail of experts’ advice on tax matters.

Landlords getting high return from University towns

The latest University Town House Price Review by Halifax, revealed that landlords letting their properties in university towns were enjoying high returns, while others are helplessly suffering from unprecedented downslide of the property market.

The Halifax survey, which tracked movements of the house prices in university towns across the UK, pointed out that buy-to-let landlords and parents who bought properties in university towns for their student children have been benefitting handsomely from returns on investment in the last 5 years.

The study highlighted that in 35 out of 64 towns covered under the survey, the house prices were higher by £20,335 on average than those prevailing in the surrounding areas. Winchester attracted highest premium of £114,489, nearly 50% above the average price for Hampshire.

The other university towns attracting premium above £20,000 included Bath (43%), Warwick (46%), Cambridge (44%), Oxford (14%), Stirling (13%) and Newcastle (16%).

According to Halifax, students paid £96 as the average weekly rent for private accommodation. Region wise costs varied from £116 in Greater London to £64 in Northern Ireland. Manchester, with the largest student population, witnessed 63% increase in the house prices in past 5 years as compared to national average of 44%.

Guildford is reported to be the costliest university town in the UK where average house cost stood at £363,503; followed by Winchester at £343,332 and Bath at £326,403. Hull is the only university town with lowest average cost at £124,108.

All about Energy Performance Certificate (EPC)

Effective from October 1, landlords in the UK letting their property are legally bound to furnish Energy Performance Certificate to tenants. Thousands of second property owners are confused over what they are expected to do.

An Energy Performance Certificate (EPC) grades buildings on the basis of energy efficiency and carbon emissions. ‘A’ grade is assigned to very efficient and ‘G’ graded to poorly rated.

The report is prepared by the officially appointed qualified energy assessors. An EPC is always accompanied by recommendations which list various cost effective measures and other improvements to enhance the energy ratings of the property. It could include recommendation for installing low carbon-generating systems. The certificate also provides information as to which grade the property would be elevated if all recommendations were implemented by the owner.

EPC is mandatory for those who let their property to a new tenant, with exceptions to those landlords who take lodgers or let their second home for holiday rental.

If a property is bought for children to live in and if some of its rooms were let while children were studying in university, an EPC would not be needed.

It can cost from 50 pounds to 150 pounds, depending on the size of the property and region.

The certificate is valid for 10 years for one property. Failure to obtain a certificate results in a fine of up to 200 pounds plus fees for completion of an energy assessment.

If your property is already let, you would not require an EPC until it is rented to a new customer.

UK Landlords urged to comply with Energy Performance Certificate

The UK landlords have been urged by Paragon Mortgages to comply with Energy Performance Certificate (EPC) regulation effective October 2008.

It would be legally binding on landlords to show an EPC to prospective tenants while offering a property for rent. Failure to comply will incur a fine and would prevent the landlord from letting. This could result in longer void periods.

Paragon’s trends research revealed that a large number of landlords still did not obtain EPC. The data indicated that a whopping 81% had no EPC for any of their rental property while only 5% were reported having obtained EPC for all of their properties till date.

27% of landlords were planning to get the certificate before October 1, but 54% would like to wait until the expiry of the current agreement. 8% were ready to take a risk by waiting until enforcement officers contacted them regarding an EPC. 11% flatly refused to obtain the EPC for any of their rental properties.

Paragon Mortgage’s M.D. John Heron warned that landlords could not afford to ignore regulations since it would prolong void periods and hoped that more number of landlords would comply with regulation pretty quickly before expiry of 6-months Assured Short-hold Tenancies. He advised landlords to get EPCs before letting property next time.

Tips for presenting a property to let

Property letting is one of the most opted for alternatives by property owners in the UK. Having finalised the rental price for your property to let, the next important step in letting is the presentation of property to the potential tenant. Offering the property in good order is as vital as pitching the right price. A good presentation of the property generates initial interest in the tenant.

You should describe your property in brief, covering information about its internal and external order and the facilities available locally. The first thing to attract potential tenants would obviously be the price and secondly the images of property which may be presented through photographs. The tenant should be shown internal shots of the property first before showing exterior.

While taking photographs for property to let advertisement, tide up areas like kitchen and lounge nicely. Remove all the clutter and mess from the place. Offer vision of a nice place to live in to the potential tenant. A clean and tidy lounge or kitchen photograph in the ad would generate more enquiries than poorly presented interiors. It’s also worthwhile having your property professionally cleaned to make it more presentable, and if you’re based in the capital, using professional home cleaners in London is a good idea.

Apart from presenting photographs, potential tenants should also be furnished some more details which may include:

• Number of bedrooms and bathrooms
• Facilities in kitchen
• List of devices such as fridge, washing machine etc.
• Furnishing, décor style and quality
• Flooring
• External features - garden, vehicle parking area
• Utility bills and council tax details

A good property description would help you in gaining more interest in your property and getting a good tenant for letting.

Get familiar with the laws and responsibilities before letting your property

First time buyers who intend renting their homes should get well acquainted with the laws and responsibilities to avoid pitfalls in letting at a later date.

Renting out your home due to relocation or buying another property for rental income, makes you a landlord with more responsibilities.

The first thing you must not forget is to notify your mortgage lender about your decision for renting. Failure to notify would amount to breach of contract. The lenders charge higher upfront fees and interest rates for buy-to-let mortgages.

It is very important to inform your insurance provider. Your policy would be invalidated if you do not keep them posted.

If you seek services of letting agent to ease yourself with work of getting references, drafting tenancy agreements etc, ensure that agent is member of the National Association of Estate Agents or Association of Residential Letting Agents and the Royal Institution of Chartered Surveyors which are governed by strict code of conduct and lend more security to letting process.

Even if your property remained vacant for some period, you are responsible for upkeep of property such as DIY maintenance, painting and plumbing.

You are also responsible to put tenant’s deposit into any Government-authorised Tenancy Deposit Protection Scheme. The deposit is held in to the scheme till end of the tenancy contract. If the landlord fails to notify within 14 days, the tenant can obtain a court order directly and make landlord repay the deposit.

Get best returns on your property by letting it to holiday makers

If you have made an investment in a property to let, renting it to holiday makers would be one of the good options for getting the best returns from investment as compared to opting for a long-term tenant.

There are of course merits and demerits in going with this option. Property for holiday letting requires high standard of regular upkeep and maintenance. The biggest advantage is the income you can churn out from lettings for shorter holidays.

The holiday makers would always be looking if your place suited them for the kind of holiday and good time they had wanted to enjoy.

Ensure you furnish your property well so that it meets all the necessities of the holiday makers you want to attract. If you were intending to let your property to families, ensure providing washing machine, fridge, TV etc. Add facilities like hot tub or an open fire place. These may involve bigger investment but would keep your property occupied through out the year and may fetch you higher prices.

Do not hesitate to spend on advertising your property. Be quick in answering to customer enquiries, one who responds quickly gets the customer fast. You must assign somebody to greet your tenant and lend personal touch to their stay for holiday.

Finally request them to give a written feedback about their experience with your letting, which would help you in making improvements and utilising good feed back for future marketing.

How to secure successful re-mortgaging in the credit crunch

Welcoming the downward trend in mortgage interest rates, buy-to-let investors and property owners need to get organised to clinch best deals from lenders and banks during current credit crunch.

Delay could mean that borrower was in position to revert to lender’s variable rate at the time of re-mortgaging. The Property Owners Directory has cautioned that re-mortgage products were very few and delay on borrowers’ part could lead to loss of opportunity in the tough market.

There are around 1.4 million mortgage deals that would end in 2008 and all would be looking for re-mortgage, as reported by the Financial Services authority.

The Bank of England recently reported that number of loans for re-mortgage in July had fallen to 69,000 down from 80,000 in June.

Property owners should hasten up the process for re-mortgage as soon as they come across a good deal while ensuring to complete legal formalities efficiently. If the documentation is readied earlier, the lawyers would be in position to complete legal process quickly and secure the deal with the lender.

A lawyer would need documents like Planning Permission, Buildings Regulations Completion Certificate for already carried out alterations and a copy of tenancy agreement in case of rented property.

Published tips for re-mortgaging are available with Property Owners Directory.