Nick Taylor's Blog

January 2015

Thursday, 01 January 2015

How to survive the property market in election year

My advice to buyers and sellers this year is to ignore the fact that it is an election year. Traditionally we are all a little reticent in election years but in fact once we have cast our vote there is nothing we can do individually to alter the outcome of a general election so we might as well get on with our business as usual. This year the positives far out-weight the negatives with wages rising more quickly than inflation, interest rates at an all-time low, more people being in work than ever before and an economy growing faster than any other economy in Europe. House prices are forecast to rise by 3% nationwide in 2015 and interest rates will rise but only after the election.

The much welcomed and long overdue reforms of stamp duty will make it cheaper for the vast majority of people to buy a house this year so we can expect more buyers and sellers to enter the market.

Some investors might be thinking about taking advantage of the recent changes in pension rules that allow them to determine how they spend their pension pot at the age of 55. Buying a buy to let property with part of one’s pension pot might be a wise move as long as it doesn’t incur any tax liability which means that it would have to be a sizeable pension pot to start with. This rules out most of the over 55’s because the average Brit has a pension pot of about £30,000.

The outcome of the election will be a hung parliament with either the Conservatives or Labour winning the most seats by a very narrow margin. The Liberals will want to cling onto power and fall into line behind whichever party wins the most votes to form another coalition government.

The flavour of government in May will dictate how buyers and sellers will fare over the next few years. Labour favour taxes on assets such as property whereas the Tories favour taxes on income and purchases. So expect mansion taxes, higher council taxes, higher stamp duty and capital gains tax on your primary residence if Labour come out on top. Labour might also fancy rent controls which will completely alter the business plans of thousands of buy to let landlords.

So my advice in election year is to keep calm and carry on.

December 2014

Thursday, 11 December 2014

"Britain's Property Boom" 

I watched a Chanel 4 program last week titled “Britain’s Property Boom”. I watched this documentary not because I thought it would be informative but because I knew it would be intensely irritating, and it certainly lived up to my expectations.

The program was a sequence of sob stories about Londoners struggling to get a foot on the property ladder in the capital in the face of rapidly rising prices and competition from overseas buyers. The problem I had with the program was that this is old news. The program was obviously made in the summer. I would say the issues raised in the piece were 4 or 5 months out of date which means that things have moved on. The fact of the matter is that the London market started to cool in the second quarter of this year and by the time this program was made buyer activity in the capital was falling like a stone. This is typical of the rather lazy approach property journalists tend to adopt when talking about the UK housing market.

This sort of journalism is unhelpful and misleading because it talks about a market that has passed, in an international city with little relevance to the rest of the country. It is true that foreign money has raised prices in the capital to eye watering levels but this is temporary. There is a limit to how much bent Russian and Chinese money can be laundered in one city. Most of the property purchased by overseas buyers in recent years is empty, it’s not lived in by the owner and nor is it let. Ghost towns are being created in London. Whole streets and tower blocks are quiet and still with no vibe or sense of community whatsoever. This is not a good thing for London at all. This is, however, just a phase and it will pass. When these properties are eventually let or sold on prices and rents will fall because supply and demand will have its way in the end.

There is much hysteria about the UK property market at present. Many estate agents are looking forward to filling their boots when pension rules change in April. Under the new rules the over 55’s will soon be able to plunder their pension pots and many of them, it is thought, will invest in a buy-to-let property. The truth is that some folk may choose to do this but most of them will be exposing themselves to a considerable tax liability in the process, so smarter investors will think twice before taking the plunge.

With the much welcomed changes to stamp duty announced in the autumn statement last week, 2015 is shaping up to be a better year for us than this year has been because more buyers and sellers will enter the market in the knowledge that the government will take less of their hard earned cash out of each purchase. In 2015 prices will rise at a lower rate than they have done this year due to the increase in supply, lack of wage inflation, poor economic growth in the Eurozone and the uncertainty that a General Election always brings.

November 2014

Tuesday, 11 November 2014

What is the truth about the property market if you strip away the spin and the hype?

London distorts the UK property market more so than any other capital city distorts its host county. When it comes to international property markets London is the capital of the World whereas New York is just New York and Paris is just Paris. London can no longer be compared with any other part of the country when it comes to property prices.

Nearly all property journalists live in London whereas most real people live outside of London and also have their money invested in property outside of London. Consequently, most commentators are obsessed with the London market and the Russians and Chinese buyers that sustain it. So what’s really going on in other parts of the country such as Norfolk?

Generally speaking property prices in Norfolk have returned to where they were in 2007. In some parts of the country they have now exceeded the previous peak and in other parts of the country they still lag behind where they were in those heady days. Estate Agents don’t actually care whether prices are falling, rising or level. What we do care about is how many deals are in the market right now because agents only get paid on transactions.

First, it’s worth pointing out that this year the Land Registry will record about 70% of the number of transactions that we had at the last peak of activity in 2007. No other market could sustain such a marked reduction in traffic as we have seen in the property market in recent years and it will be some time before transactions return to peak levels. In fact some commentators say that transactions will never return to peak levels because the market has changed and this is because sellers have changed.

Sellers either need to borrow more or to be earning more in order to move up market to a bigger or better property. Lenders are, quite rightly, applying proper lending rules today instead of dishing out monopoly money as they did just a few years ago, so most folk can’t borrow more, even if their circumstances have improved. Wage inflation is a thing of the past for most people at the moment so as a consequence many sellers are staying put.

Another key factor in the mix is of course tax. Thanks to the progressive and insidious nature of stamp duty, tax is now a major hindrance to the property market. Faced with the prospect of finding £20,000 to pay the tax on a family house in Norwich it’s not surprising that many sellers decide to stay put.

Downsizers are also thin on the ground because ultra-low interest rates mean that they don’t have to downsize for economic reasons as they have done in the past. Many sellers will put off downsizing until interest rate rises start to bite at some point in the furture.

The market in Norfolk is therefore sustained by relocation, death and divorce and whilst these three factors are constant, we lack the aspirational seller moving up market, the downsizers and the folk just moving because they fancy a change, all of which we have seen in the past.

The good news is that buyers still find plenty of good reasons to move to prosperous cities like Norwich to work, to raise children, to invest or to retire to. So if you have a house to sell you will do very well in a market currently starved of good housing stock.

October 2014

Saturday, 11 October 2014

Agents Mutual to launch new internet property portal to rival Rightmove and Zoopla

October 2014

Wednesday, 08 October 2014

Who provides better information - professionals or the internet ? 

I did a little experiment the other day. I consulted the Zoopla website and asked it to value my house. Of course I know how much my house is worth and I wouldn’t be much of an estate agent if I didn’t. I was expecting Zoopla to be way off the mark but I wasn’t expecting Zoopla to be an eye watering £110,000 off the mark. The fact is that information produced by Zoopla or any other website for that matter isn’t necessarily correct and in an age when young people believe that what they find on the internet is the truth, it is important to remember that knowledge, opinion and wisdom can only be sourced from humans and not from websites.

Good estate agents understand value. The value of a specific location, the value of how the space works, the value of a particular style and period of a property and the value of the condition and finish of a property. Estate agents also understand the strength of the market in their area at that specific moment. Internet sites, that claim to be able to calculate the value of your biggest asset, work on statistics and little else.

The latest in a long line of internet estate agents, Easy Property, is launching soon. They will provide a low cost method of selling or letting your house. Internet estate agents are not a new concept. They’ve been around as long as the internet itself. At present internet estate agents account for a paltry 2% of the market. So why haven’t internet estate agents gained any significant market share?

The reason is that internet estate agents don’t provide what sellers really want. Sellers want someone to provide an accurate valuation based upon sound knowledge and experience, someone to measure up the property and prepare a floor plan, someone to produce an energy performance certificate, someone to advertise the property in as many different ways as possible, someone to take photographs and prepare a prospectus, someone to speak to all their contacts who might be looking for a house like theirs and someone to do accompanied viewings. That someone is a human being and not a website.

Once a buyer is on the hook, the seller then wants someone to use their expertise to negotiate the best possible price, someone to prepare terms of business, someone to manage inspections of the property by surveyors, valuers and other professionals and tradesmen, someone to negotiate their way through any tricky survey or title issues, and someone to manage hand over of the property upon completion.

The point here is that professionals use technology and the internet to do their job. The internet does not and never will do the job of a good professional.

September 2014

Monday, 01 September 2014

How to select an Estate Agent 

Some sellers believe that estate agents are all the same and that the outcome of the sale will be the same regardless of the estate agent they choose. This is the first big mistake some sellers make in their efforts to sell what is usually their biggest financial asset. For example, some agents are affiliated to professional bodies and some are not, some agents are qualified and some are not, and some agents are licensed and some are not. Size doesn’t matter in this regard because some very big estate agents are not licensed, affiliated or qualified, and some very small estate agents are, and vice versa.

My advice to anyone selecting an estate agent is very simple. Firstly, choose the firm that sells properties like yours in your road. Secondly, choose the firm that is qualified to do their job, affiliated to either the Royal Institution of Chartered Surveyors or the National Association of Estate Agents and licenced to practice estate agency, preferably by the NAEA. Ask about all of this before you even let an estate agent into your property. Last but not least, choose the agent that has been recommended to you by someone you trust who has recently sold their house.

The very last thing sellers should do is choose the agent by doing an internet search or choose the agent that charges the lowest fee. This is often a very expensive mistake. If the agent in question meets the selection criteria above and also charges the lowest fee then that’s a bonus.