Government amends controversial Home Information Packs

The slowdown in the housing market has compelled government to make changes to the bitterly criticised Home Information Packs (HIPs) which were introduced last year and were branded as a waste of time.

The National Association of Estate agents had requested review of HIPs to help the sagging housing market. The agents had reported that they could sell less than one home per week in London, the South-West and the South-East.

As per the government’s announcement, validity period of the energy performance certificate was being extended to three years from existing one year, with effect from October 2008. A Hip contains energy performance certificate and title deeds and costs £350 to the sellers.

The spokesperson for Department for Communities and Local Government (DCLG) commented that extension of validity period would increase flexibility for the sellers.

The old packs were strongly defended by DCLG insisting that it assisted families in saving on fuel costs and minimising carbon emissions.

Amendment to the rule was announced after the Royal Institution of Chartered Surveyors (Rics) in its report warned that the UK housing market was heading for virtual paralysis. Rics reported that housing sales in August were at their lowest level ever witnessed in last 30 years.

Renting - a fast catching trend in London

London is witnessing a fast catching trend: Those who can’t afford to buy are renting and those who find no customers to sell are letting. The number of property sales in London has gone down by 50%. The estate agents are busier with ‘To Let’ transactions than with ‘For Sale’. People are avoiding borrowing due to fear of further slump in the market.

The latest Knight Frank London Residential Review reveals 30% rise in lettings across London offices. 30% more are offering to rent their properties, thereby balancing supply and demand position in the letting market.

The old perception about renting that it was second-rate or ‘dead money’ has changed dramatically. Renting is now considered to provide more flexibility and value for money. It is becoming a favourite option with families and students. With large number of properties in London available for letting, the high growth in rental values is likely to drop back to 5% from existing 16%, providing a better deal to the renters.

The Royal Institution of Chartered Surveyors reported very fast rise in the letting instructions in London. 43% of surveyors reported rise in lettings in July. A higher number of “forced-to-let” landlords are emerging in comparison to the old buy-to-let landlords, creating a situation of larger supply than demand in London. The rise in to-let properties has led to a fall of 5% in rents in Chelsea, South Kensington and Knightsbridge.

Do’s and don’ts of letting your property

London is witnessing a phenomenal rise in letting of properties due to a slump in the housing sales. More landlords are preferring lettings than selling due to fear of further decline in the housing prices.

It has become all the more important for landlords to know the do’s and don’ts in lettings to avoid problems at a later stage.

1. Make us of services offered by letting agents, who are fully bonded, members of the Association of Residential Lettings Agents. They cover both your rent and tenant’s deposit.

2. Seek references from the tenant to know more who you are letting to. It is vital to know who you are letting to. The tenancy agreement must be properly drawn up and joined to one of the tenancy deposit protection schemes.

3. Draft tenancy agreement properly and register it under one of the tenancy deposit protection schemes. Enclose a list of inventory and photographs key furnishings and rooms.

4. Get an energy performance certificate which is mandatory from October 1 for every landlord. The certificate indicates gas and electricity consumption of the property.

5. You must inform your insurer about letting. Failure to do this would result in negation of contract.

6. It is equally important to inform your mortgage lender. The lender may negotiate with you and charge additional interest.

7 Price your property properly with the help of a good estate agent. Verify credentials of your tenant before agreeing to let your property.

8. Ensure to fix breakdowns of equipment such as washing machines, dish washers, gas connections etc. quickly. This would keep your tenant happy.

9. Get acquainted with laws and guidelines regarding tenancies, deposits and safety requirement of landlords.

Students reminded about personal possession insurance cover

University students who would be trekking back to their institutions have been reminded by the Sainsbury’s Home Insurance about insurance of their personal possessions. The company, which researched the home insurance market, observed that 25% of policies of students who were staying away from their homes did not cover personal possessions.

There are 430,000 households in England and Wales where students stay. The research indicates that a large number of young people are putting their possessions at risk while staying in rented flats and homes, with no guarantee of compensation.

Student accommodations are the vulnerable targets of burglars due to vacancy for longer periods and possession of costly consumer goods in case of shared flats or houses. The research also revealed that 11% of policies were covered for meagre £1,000 or less while 34% were covered for £3,750 or below. These values were far below the value of student’s possessions which could be worth thousands of pounds for devices like laptops, PCs, mobile phones, iPods, digital cameras, jewellery, textbooks and bicycles.

Home Insurance Manager, Neil Laird, advised students to check contents insurance policies of their parents for “away from home” clause, and confirm if its adequacy for the value of their possessions. This would give them security against chances of burglary.

Renting to own – a way to realise the dream of home ownership

Many people who had been dreaming of owning a home could not convert it in to reality. Demands of high deposits from lenders, high entry level prices in spite of credit crunch discouraged attempts for buying home.

A professional couple or an individual may be finding it difficult to get on to the property ladder since lenders are unable to provide mortgage on affordable terms. The question arises as to how someone with poor credit history or short residency period can realise the dream of owning a home?

There is a way out; in the renting to own approach, which is now taking hold in the UK.

Renting to own, fundamentally involves a seller, and a tenant willing to buy. By signing an option agreement, a tenant or a buyer can purchase a property after a specified period by exercising the option in the agreement. The tenant or the buyer has to pay up to 5% instead of 15% to 20% deposit for a contract for six months or up to 20 years and more.

The purchase price is mentioned in the beginning of agreement even if the option to buy is not exercised for 5 years. The rent is charged at the market rate along with an additional amount towards deposit, meaning that first time buyer could buy a property with minimal deposit and simultaneously accrue equity over the rent.

The only limitation in this rent to buy approach is the extent of flexibility which the seller and tenant are prepared to exercise. With theses set of advantages, renting to own is poised to flourish in the next few years in the UK housing market.

Nationwide to announce two separate mergers with Derbyshire and Cheshire

The UK’s largest building society Nationwide announced mergers with Cheshire and Derbyshire Building Societies on September 8. Nationwide’s £179bn of assets and a network of 900 branches would absorb £7.1bn assets and 50 branches of Derbyshire and £45bn assets and 45 branches of Cheshire. Both the societies would retain their brands and networks at high-street. This will minimise member’s upheaval and confine redundancies to the head office.

The industry regulator, Financial Services Authority, was not involved in the transactions but was fully aware of the developments. Both the societies held their negotiations with Nationwide separately. Graham Picken, chief executive of Derbyshire, approached in the summer, while Cheshire boss Karen Cormick initiated discussions more recently. Both the deals were aimed at pre-empting adverse impact of deteriorating economy and had nothing to do with immediate danger to either society.

In the backdrop of severe credit crunch, it was predicted that a consolidation in the £350m building society sector would be forthcoming. Building societies which cannot access equity funding unlike banks, become vulnerable to economic downslide since they get no other source of income than their savings to rely on.
While many societies in the sector were struggling, Nationwide exploited the downturn. It showed £9.1bn increase in deposits and 17% jump in pre-tax profits for the year to April 2008.

Sale of properties is taking more than 3 months time in London

Property website, Globrix, has revealed that half the properties in London have been waiting for sale for more than 3 months. While the buyers are unable to get quick mortgages and waiting further fall in prices, the landlords are holding out for higher prices, leading to a delay in sales.

Globrix established that around 60% of homes in Tower Hamlets and Kingston were unsold for more than 3 months. The proportion in Kingston went up to 62% from 31% since the beginning of 2008. It rose to 43% from 18% in Croydon and to 56% from 20% in Harrow.

The only exception to this scenario was the Bexley Borough where the percentage of unsold properties for more than 90 days remained unchanged at 41%. According to Daniel Lee of Golbrix, the London market is almost at a standstill and a large number of properties are not finding buyers.

In order to revive the housing market, the Government announced a stamp duty threshold under which properties costing below £175,000 have been exempted from stamp duty for a year. However, according to Globrix data, only 5% of properties in London, currently up for sale, would qualify for exemption.

The prices of mews houses in London are still stable though they continued to fall throughout the UK including Central London. The reason being mews houses properties are freehold, boast garages and roof terrace and attract no service charges.

Confidence of landlords in buy-to-let market still strong, reports Paragon Mortgages

The increase in tenant demand, rise in rents and falling prices combined together may lead to the growth of portfolios for landlords in the coming 12 months.

The research, conducted by the Paragon Mortgages, reveals that 71% of the landlords are tempted to purchase bargain properties at lower prices. The percentage of landlords intending to add properties to their portfolios is double the number intending to sell.

The research also points out that the vast majority preferred to wait for the time being, while 14% showed interest in buying properties in the current market.

Paragon’s Managing Director, John Heron, suggests that landlords should dispose off those properties which did not perform as per their expectations and bolster their portfolios by purchasing property at cheaper prices.

Heron reports that professional landlords are exploiting prevailing market conditions to expand portfolios. He considers them well placed to free up their equity for expanding portfolio.

Paragon’s research also highlights that large number of landlords have improved their rental properties by installing new boilers and enhancing energy efficiency.

Effective 1st October 2008, landlords would be legally bound to furnish EPC to the tenants, failing that they would be charged a £200 fine and barred from marketing the property until receipt of a certificate.

The cost of energy saving measures could be offset against income tax up to £1,500, as per provisions of the Landlord Energy Saving Allowance.

Bluemantle secures refinancing from 3 major banks

Three major banks, HSBC, Rothschilds and Royal Bank of Scotland, have agreed to refinance Bluemantle, an independent asset management property and development group.

The group had sought an £85 million refinancing package to tide over property downturn and the credit crunch.

By agreeing to refinancing, the three major banks have placed a vote of confidence in the Bluemantle group’s business. It is an indication that the property finance market is ready to support the right kind of business in spite of gloomy economic conditions prevailing in the property market.

Bluemantle, based in Alderly Edge, has developed into a fund management business from a family owned 20-year-old industrial property company. The group now consists of 20 equity investors and joint venture partners, who manage investment property worth more than £150m and a development pipeline worth £500m. The investment portfolio, covering 50 properties in the north-west, fetches an annual rental income of £9m from 270 tenants across all sectors.

Bluemantle is developing 14-acre Church Wharf in Bolton in partnership with Manchester based ASK.

Bluemantle also bought Preston’s Miller Arcade this year, by teaming up with Scottish development and investor company, Kilmartin. They bought the 53,000sq.ft. retail arcade at Fishergate for £8.6m by entering into a deal with developer Maple Grove, based in Preston.

Appealing decor and fittings could attract good tenants

The credit crunch and the property market slump are leading to creation of novel ideas that could help reduce the negative impact of the prevailing economic climate. The Residential Landlords’ Association (RLA) has suggested that buy-to-let investors improve the interiors of their properties in order to maximise lettings.

RLA director, Alan Ward, commented that landlords should make their properties more appealing by matching their interior decor and fittings to the likes of the tenants they are looking for. He also suggested researching the local market for deciding whether the buy-to-let property should be partly or fully furnished.

Alan Ward felt that landlords must put extra effort in this direction since a well presented property provided them with a wider choice of tenants for selection. He further suggested that chosen groups of tenants should also be researched to find out which facilities could meet their expectations. He elaborated with an example that a young professional, sharing any house would prefer to have a room with a separate bathroom than to share a larger bathroom with elaborate bathroom furniture.

With a decline of nearly 50% in property sales, housing developers and homeowners are being compelled by the circumstances to take innovative measures to attract tenants.

According to the Royal Institution of Chartered Surveyors, landlords needed to be savvier about marketing properties, since new instructions for lettings were continuously on rise.