Hadley Taylor Blog
At Hadley Taylor we like to keep our clients updated on the latest local property news and opinion.
Have interest rates peaked?
The Bank of England have got things wrong for at least a year. Andrew Bailey was far too slow to react to rising inflation last year, he wrongly described the rise as “transitory” and then he raised interest rates far to high to compensate for his previous errors.
Proper economists know that cost push inflation, which is what the UK has experienced, cannot be controlled by increasing interest rates. Cost push means higher prices caused by external factors or Government policy. What should have happened is that the Government should have acted to reduce inflation and not just sit back, and watch people get crushed by higher energy costs, higher food costs and higher mortgage and rent costs. Reduction in VAT, scrapping of VAT on energy and enforcing a fairer method of calculating wholesale electricity prices are just three of the measures the Government could have introduced but instead they chose to do nothing at all.
Today the Bank of England held the base rate at 5.25% which is the first correct decision we have seen from Andrew Bailey for some time. This could signal the peak in interest rates, and this will be a good thing for anyone with a mortgage, for businesses and for the economy generally.
In recent weeks we have seen more competitive fixed term mortgage rate products being offered by the big lenders and I think we will see a lot more during the next few days.
As for the property market, we have seen a correction in prices since August 2022 and this has not been a bad thing for younger people trying to buy their first home or for those trading up. I think it will be a while before we see prices starting to rise but I expect that in the spring we will see the long term trend continue in an upward direction. Rents have continued to rise in recent months while house prices have fallen and this will continue for another three or four years due to lack of stock in the private rental sector.
How have we ended up in a mortgage crisis?
The Bank of England raised base rates to 5% this week. This will translate into higher mortgage rates, and this will cause pain for anyone on a variable rate, a tracker rate or for anyone who is due to come off a fixed term contract. Higher rates also make it harder for young people to get on the property ladder in the first place.
The Bank of England is obviously trying to combat inflation but why do we have inflation in the first place?
Inflation in the UK is primarily caused by the high cost of energy. In fact, we endure the most expensive energy in the Western world. Is this some fluke or is it by choice? Yes, you guessed it, it’s by choice. Parliament decided in it’s relentless pursuit of Net Zero, that we should have very high levels of green taxes on our energy, and this is one reason why our energy is so expensive in the UK. The second reason is that OFGEM preside over a ludicrous method of pricing energy for consumers and businesses using a mechanism that links the cost of electricity to the cost of wholesale gas. In other words, the consumer does not benefit one bit from the lower cost components of our energy supply such as wind, solar, oil or nuclear. This again is a political choice. Lastly Governments of all colours over the last 26 years have also neglected to have a meaningful energy policy and this has left us exposed to expensive imported energy.
And then there’s quantitative easing. This is the pumping funny money into the economy. This has been going on since 2008 and came to a head during the furlough period. QE was always going to cause rampant inflation as sure as night follows day. Again, a political choice.
Proper economists know that the inflation we have today is not driven by consumer spending. It is caused by cost push. If Andrew Bailey, the Governor of the Bank of England was an economist, he would know this. Raising interest rates will not have very much effect on inflation. If only we had Kenneth Clarke or Nigel Lawson as chancellor or Mervyn King at the Bank of England, we might actually have some competence in the right positions at this crucial time.
A Labour Government next year won’t save the day either because their policies of managed decline will be identical to the Tories.
So where does this leave the property market? Well, we have buyers and sellers keen to make a move and there are just as many people out there with no mortgage, enjoying higher rates on their savings as there are people struggling with rent or mortgage costs. There has been a property price correction going on in recent months but as always, this is followed by an upturn, and this will come next year.
The property sector will prevail as we always have despite whatever obstacles the Government puts in our path. We run faster, we jump higher, we adapt.
What does today’s budget mean for the housing market?
The short answer to that question is not much. We have seen lots of tinkering around the edges today but very little in the way of significant change. In past budgets the government has often introduced some sort of sweetener to stimulate the property market, and this has helped some people in the short tern but always had unintended consequences in the long run. This time round Jeremy Hunt has resisted the temptation to meddle with stamp duty and I think this is a good thing.
One of the biggest changes today was to corporation tax which will rise from 19% to 25%. This will make the UK less attractive to inward investment and this can only be regressive. In fact, I think that Gordon Brown or Dennis Healey would be very proud of this particular measure.
The most illuminating thing for me was the confirmation that the office for budgetary responsibility and the Bank of England have got their predictions over the last few months very wrong indeed. Both organisations predicted in the Autumn that we would have recession for most of 2023, far higher inflation, far higher unemployment and far higher interest rates. The Bank of England have completely mismanaged the controlling of inflation so I am not in the least bit surprised that they can’t forecast any better than a GCSE economics student. The Office for Budgetary Responsibility have a long track record of being too pessimistic about the economy so, really, we have to ask whether they should exist at all.
The economy faces a long haul out of the COVID downturn and the self-induced energy crisis, but it has proven to be more resilient than the “experts” predicted, and I would say exactly the same when it comes to the property market.
Reasons to be cheerful
The mainstream media seem to be happiest when they are delivering bad news and they do like to keep us in a state of fear.
Recent economic indicators have been much more promising in recent weeks, but they are not much trumpeted by the BBC. For example, we are not in a recession. We may move into recession later this year but there again we may not. Recessions are not pre-ordained and sometimes we can talk ourselves into recession if we’re not careful.
The FTSE all share index and the FTSE 100 for that matter, hit all-time highs last week and this is a very good thing for anyone with a pension fund.
Inflation has fallen for the last three months. Don’t get me wrong, inflation is still too high, and the governor of the Bank of England should go to the bottom of the class for his miss-management of interest rates, but inflation should fall much faster from February onwards because the spike in energy prices we saw following Russia’s invasion of Ukraine will start to have much less effect on consumer prices moving forward.
Interest rates are about to peak and already we are seeing much more competitive fixed rate mortgage deals being offered by lenders. I have always maintained that the banks will go out of business unless they lend money so we can expect more competition between lenders on mortgage rates later this year.
As for predictions about the property market, the mainstream media are just as misguided. Most commentators talk of a property price crash. I have always maintained that we would have a correction and sure enough Norwich house prices have fallen since September so your house is worth slightly less than it was in the summer. Prices will fall a little further until later this year when they will settle and then start rising again next year.
The not so good news for younger people trying to get on the property ladder is that the long-term trend for property prices since 1997 has been inexorably upwards. This is because the government builds new houses at a much slower rate than it chooses to increases our population, and in a market driven by supply and demand the end result is higher house prices. If Labour form a government in 2024 we wont see any change in trajectory of house prices because their policies on the supply bit and the demand bit will be exactly the same as the Tories.
What does the budget mean for the property market?
Yesterday’s budget was a depressing watch all-round. The government are set to continue policies of managed decline that we have had to endure since 1997 in order to compensate for higher energy costs, high inflation and higher interest rates most of which are a direct consequence of their own policies. But what are the implications for the property market?
I don’t see many implications for property sales at all. Interest rates should moderate in the summer and despite a shallow recession next year, incessant demand for housing will keep property prices close to their all time high.
The private rental sector, however, will continue to shrink due to forthcoming increases in capital gains which will force many landlords to sell up. When there are fewer properties in the rental sector rents rise and this isn’t a good thing for young people or the low paid. The government wants to eliminate private landlords altogether and instead have all rental property owned by major corporations.
Most UK estate agents are small businesses, and we should all be concerned about this budget. The government’s onslaught on small businesses continues with higher taxes on dividends, a big rise in the minimum wage, freezing of the VAT threshold and a revaluation of business rates. Again the government doesn’t really want any small businesses despite the fact that they employ more people and raise more taxes than the corporate sector. Instead, they want all products and services to be provided by major corporations. The end result for the property sector will be fewer independent estate agents and therefore less local knowledge and expertise and more homogenous corporate agents.
So, in summary we can expect an even bigger tax burden, a bigger state, less enterprise and more public sector borrowing. One could be forgiven for asking what the Tories are for at all?
Michael Gove is committed to building 300,000 homes every year. Why is this a fantasy?
Michael Gove is our new Secretary of State for Levelling Up, Housing and Communities and has voiced his commitment to building 300,000 new homes every year. This sounds like an ambitious and laudable aim but I’m afraid its just not going to happen.
We haven’t built 300,000 new homes in this country for 70 years so why Mr Gove thinks we can do it now is I’m afraid all smoke and mirrors. In the 1950’s when we were capable of such feats, we were re-building our housing stock following the second world war and there was a huge nationwide effort to house people in decent housing. This great endeavour was not entered into purely for profit, in fact the motivation for this drive was much more meaningful and that’s why we succeeded.
House building is about to hit the buffers in the UK because the Government will have to decide whether to continue with it’s policy of population growth and the house building program that goes with it or stick to it’s environmental policies and keep to it’s net zero objectives.
The Government can’t do both and here’s why. The disruption to green field sites caused by new house building releases nitrates into our water ways, new housing also means more sewage, and this also releases more nitrates into our water ways. At the moment we have a nitrate crisis in this country which is endangering the ecosystems in our rivers and unless we come up with a solution, we are going to have to resign ourselves to lifeless rivers.
New build development also produces enormous carbon emissions due both to the materials used and the process of construction. The location of housing estates being nearly always out of town is also problematic because new residents have to get their car out just to buy a bottle of milk.
So, the Government can keep on with it’s program of increasing the population or it can follow it’s green agenda but it absolutely can’t do both.
How far will property prices fall next year?
The short answer is not much.
There is no doubt that we face several months of economic uncertainty with high energy prices, high inflation and rising interest rates and this will have a negative effect on house prices. A correction, as we call it in the trade, is due and would actually be a good thing for younger people struggling to buy their first home or move up the property ladder, but a correction is all we’re going to get.
Our last correction was in 2008 when property prices fell by an average of about 15% nationwide. The situation we find ourselves in today is not nearly as dire as 2008 because the main issue then was a lack of liquidity. There is no shortage of liquidity in the banking sector today. In the early 1990’s we saw a sustained period of house price deflation with several hundred thousand homes falling into negative equity, high levels of unemployment and home repossessions. This could be described as a crash. The repossession rate today is at historic lows by comparison and unemployment is exceedingly low.
I think we will see inflation start falling as quickly as it went up once we get into next year and lenders will start offering more competitive five-year fixed rate mortgage deals once they can get a better fix on where the central banks are going. Energy prices are kept artificially high in the UK mainly due to high levels of green taxes so we should expect energy to be eye wateringly expensive at least for the time being.
So, yes, in the short term we will see property prices fall. Premium properties and premium locations will as always do better.
Immigration is by far the biggest influence on property prices because we need to build a house every six minutes in order to accommodate incomers and this is clearly impossible so the long term trend for UK property prices is, I’m afraid, inexorably upwards.
Why do the Conservatives insist on constantly stimulating demand for housing?
As if it wasn’t bad enough that the Tories increase house price inflation by importing far more people into our small county every year than we can possibly build houses to accommodate, the Government has just announced a reduction in stamp duty which will result in higher house prices.
First time buyers and house movers will welcome the reduction in stamp duty, and I have always felt that the tax is simply a tax on aspiration but I’m afraid history shows us that whenever the Government intervenes in the property market there is always a distortion in demand and generally an increase in prices.
The property market is one of supply and demand. For the benefit of the Government, that means that if you have too much demand and not enough supply, the price goes up.
Higher house prices sound great if, like me, you already own a property, but it is a disaster for most people under the age of 40 who are struggling to afford to buy they first home or move on from their present home. Increasingly in this country we are divided into two groups, the older folks who own most of the property younger people who tend not to. This is not a healthy way to run a society.
How do we deal with the empty homes crisis?
There are about 900,000 empty homes in the UK at a time when there is more pressure on housing than ever before.
Several hundred thousand of these empty properties are owned by local authorities across the country or Government departments, the MOD being the biggest culprit.
Most empty properties are, however, owned by private individuals and families who are in no hurry to live in them, rent them or sell them. These families have clearly not noticed that there is a severe housing shortage in the UK and don’t see that they have a social responsibility to get these properties occupied.
Foreign investors have bought up huge tracts of London in recent years. Most of this money is dirty money and laundering it in London’s property market is clearly an easy option for crooks from despotic regimes. It wouldn’t be so bad if these properties were let, but unfortunately most of them sit empty. London has become a strange mix of densely populated and declining areas like Tower Hamlets sitting cheek by jowl with up market areas with whole streets of shiny empty apartment blocks owned by Chinese and Russian investors.
Then there are several hundred thousand additional properties that are lived in for just a few weeks each year by second home owners. Whilst I believe in a democracy like ours, people should be allowed to own as many houses as they like, I also believe that all properties should be put to good use. Frankly in such a densely populated country as ours, we don’t have the luxury of having so much empty housing stock.
The Government should seriously look at the number of empty properties and how to get them put to good use before building hundreds of thousands of modern boxes on housing estates on the outskirts of all our towns and villages.
Why is the private rental sector shrinking?
There are fewer properties to rent in the private rental sector than last year and next year there will be even fewer.
The reason for this is that some private landlords are selling up and exiting the sector altogether. Some landlords are selling up while house prices are at their peak. We are due a correction in property prices so it is perfectly understandable why they would want to do this. The Government has also made it much less profitable to be a landlord, what with changes to tax regimes and increased legislation. Landlords are also aware that further legislation is on its way which will make it even harder to turn a profit on a residential rental.
Some Landlords are simply switching from shorthold tenancy to serviced accommodation. This form of rental involves more work for the landlord but does produce more profit and is less impacted by new legislation.
The lesson for the Government is that we still have a free market so if it becomes too difficult for investors to operate profitably, they will simply take their money somewhere else. The consequence of Government legislation around the private rental sector is that there will be less rental housing stock and consequently higher rents. Not a good outcome for the young or the low paid.
Why are house prices so high?
People often ask me why property prices are so high. My response isn’t what they expect, and it certainly isn’t in line with the mainstream media’s narrative.
Property prices have risen across the country since 1997 with a 15% realignment in 2008 due to the global banking crisis. Today house prices are higher than they’ve ever been.
So, what happened in 1997? Tony Blair came to power and one of his key policies was to increase immigration on an industrial scale. Prior to this immigration had been at sustainable levels of a few tens of thousands each year and this had been the norm since the 1950’s. Blair was a very astute political operator, and he knew that immigrants were much more likely to vote Labour so importing hundreds of thousands of immigrants each year would be a vote winner. He went on to win three terms in office. When the Tories came to power in 2010 instead of reversing mass immigration, they decided to continue with it. They did this because more immigrants mean more houses and the Conservatives biggest donors have for some considerable time been national house builders.
The housing market is one of supply and demand. Nearly all politicians and media commentators only talk about solving the supply side of this issue. In other words, they all say we need to build 300,000 houses each year until the problem is solved. The reality is that we don’t have enough labour, materials or land to build anything like this number of houses each year even if it was desirable which it certainly isn’t. The environmental impact of building all over our farmland is also entirely in conflict with the Government’s crusade to reduce CO2 emissions. Furthermore, recent events have taught us that we need to be more self sufficient in food production which means that we need our farmland for farming.
No politician or commentator ever suggests we look at the demand side of the issue, in other words, curb mass immigration.
At this point the open borders types start wringing their hands. However, in my experience these are the very same middle-class people who complain that their children can’t afford to buy a house. They don’t seem to be able to connect rapidly rising population with higher house prices. They would say that we should do our bit and take “our share” of immigrants. The fact is that we are not like other counties. England is the most densely populated part of Europe, and the UK is the most densely populated country in the developed World. France has a quarter of the population density as England so until our European neighbours are as full up as we are, we should have an embargo on immigration and this will not only solve the housing crisis, it would also allow all our public services to recover so that they can properly serve the population we already have.
Has Rightmove had its day?
Since the dawn of the internet, thousands of websites have come and gone. Does anyone remember Friends Reunited, My Space or Bebo?
Websites at some point lose their relevance and this is about to happen to Rightmove.
Rightmove is no longer the leading property portal when it comes to user experience. On The Market offers a better user experience because it’s clearer and less cluttered.
Rightmove no longer offers value for money when compared to other property web portals such as On The Market and Zoopla. Estate agents measure this in terms of sales leads against cost.
Rightmove’s corporate culture is increasingly poisonous. Righmove treats its customers with the most disgusting level of contempt and they unashamedly run their business solely to satisfy share-holders demands for higher and higher dividends and share price.
The biggest change, however, is in consumer behaviour. House buyers no longer go straight to Rightmove when looking for a new home. Increasingly consumers are searching more generically. They are increasingly using terms such as “houses for sale in Norwich” for example, and this brings up all the property portals and most estate agents in the area. This means that Rightmove’s unique selling point has been diluted.
We will see many Norfolk estate agents drop Rightmove this year and their clients won’t have to worry that their property will get any less exposure as a consequence.
27 July 2020
What does the property market look like in the post lockdown world?
We are thankfully seeing a decline in COVID 19 infections and deaths, and consumers and businesses are slowly getting back to as near normal as they can. Whilst it may be some time before we can all live our lives as we would like, we have had plenty of evidence to tell us how the property market is functioning following an unprecedented period of uncertainty.
Norwich has emerged from the crisis as an even more attractive place to live than it was before the March lockdown. We have received scores of enquiries from Londoners wishing to escape the capital and come to Norfolk. The reason for this is because many individuals and companies have discovered that home working is actually just as productive as working in the office and this means that where you live is no longer as important as it once was. Millions of people may no longer need to live within a certain commutable distance to London so why wouldn’t families want to relocate to somewhere like Norwich?
Confidence in the market is surprisingly strong given what has happened to our economy and our society this year and we have secured plenty of sales since lockdown has eased. There are certainly fewer buyers than a normal Spring and Summer but the buyers we have seen active in the market are motivated, realistic and proceedable.
The recently announced stamp duty holiday has certainly given buyers an incentive to get moving but we might see a negative impact on house prices when this incentive period comes to an end at the end of March.
What is emerging as we look at the economic crisis that will inevitably follow the COVID 19 crisis is that we have a nation of haves and have nots like never before. There are those with a secure job and those without and this will determine who is doing the buying and selling in the property market for the next few years.
2 July 2019
Will Boris abolish stamp duty?
Assuming he becomes our next Prime Minister, Boris Johnson has announced that he plans to scrap stamp duty as part of a raft of ideas designed to give the economy a boost when we leave the EU.
Regardless of ones views about Brexit, this is fantastic news for the property market and for the wider economy. This is because stamp duty is a tax on aspiration and a drag on the economy. I have been writing about this very subject for many years so I for one would be delighted to see this odious regressive tax abolished.
The biggest problem with the housing market right now is that people aren’t moving up the property ladder like they used to and the number one reason for this is punitive levels of stamp duty. This change in behaviour causes a lack of suitable housing stock, skills shortages in areas with the lowest property transactions and a general stagnation in the market.
Not so long ago the whole process of moving house was a significant driver of the economy because moving triggers the purchase of a whole range of products and services and the government did very well out of it too because they collected lots of VAT. Now people move less often and this means less expenditure on kitchens, bathrooms, extensions, loft conversions, windows, boilers, carpets and professional services.
So bring it on Boris. Let’s stimulate the economy and the housing market, and who knows, HMRC might collect more tax into the bargain.
30 April 2019
Time for action on Stamp Duty
We live in a very polarised society at the moment. Whether its Leave vs Remain, Tory vs Labour or Baby Boomers vs Millennials, opinions seem very divided.
When it comes to taxation there are also two camps. There are those who think taxes should be higher and those who think taxes should be lower. Higher taxes tend to result in less tax being collected by the government. This is because when you tax enterprise and hard work too much you end up discouraging enterprise and hard work. When government reduces taxes they always collect more revenue because people don’t mind paying a fair rate of tax so they are happier and more hard working. This has certainly been the case since corporation tax was reduced and since the 50% income tax rate was lowered. This simple truth has been well known for generations.
The present government haven’t followed this lesson across the board however. Since the increase in higher rates of stamp duty there has been a reduction in transactions across the property sector resulting in a reduction in tax collected. During the last tax year the government scooped £12.9b of our money in stamp duty which is quite a reduction on the £13.6b they scooped during the previous year.
Time for Philip Hammond to wise up and reform this odious tax on aspiration.
26 February 2019
Will Equity Release be the next big mis-selling scandal?
There was a time when if a retired couple wanted to pay off their mortgage or release some capital from their family home, they would sell their property and buy a smaller one. This was called down-sizing.
These days many older property owners fall for something called equity release. This relatively new financial product is promoted relentlessly everywhere we look on an industrial scale by corporations intent on squeezing every penny of profit from vulnerable people. If you turn on the TV, listen to commercial radio, go online or read a newspaper it won’t take long before you’re bombarded with adverts for equity release. These products are promoted as magical devices which enable retired folk to have a much better financial life, free of debt, mortgage repayments and worry. They promise a life rich in long haul holidays, new kitchens and brand new cars. In reality they are just loans against your property with relatively high interest rates and punitive penalties if you decide, for whatever reason, to exit the loan. They are fine for people who have no interest in leaving any financial legacy but they are a disaster for families wishing to pass on wealth to future generations.
Most retired folk would be much better off financially biting the bullet and down-sizing rather than taking the rather easier, but in the long run costlier, equity release route.
Many older property owners who need to raise some cash but still want to remain in the family home would be much better off financially with a lifetime mortgage rather than equity release. Some lenders specialize in mortgages for people in their 60’s, 70’s and 80’s specifically for this purpose.
I can see that in the very near future we will see a spate of lenders being taken to the cleaners by the financial regulator over mis-selling of equity release products in much the same way as we have seen over PPI.
22 January 2019
Is it time to turn off Rightmove?
Rightmove enjoy a monopoly position in the UK property portal market. As a consequence they have seen fit to raise their subscriptions by 14% this year. This is off the back of a 12% increase in each of the two previous years. It is only a matter of time, therefore, before Rightmove becomes our biggest single business cost if this trend continues. The consumer will of course end up paying for this corporate greed by way of higher selling fees….
There is of course no justification for this eye watering price increase. Inflation is relatively low and falling at 2.1%. Wage growth is also modest. In fact if I was an employee of Rightmove who wasn’t getting a 14% increase in pay this year, I would be very unhappy right now. Maybe dissatisfied Rightmove employees should talk to On The Market – I hear they’ve been hiring.
Rightmove’s behaviour is of course blatant profiteering. Estate Agents of every shape and size, up and down the country have had quite enough of being ripped off in this way. We should all work together to rid ourselves of this greedy parasite. On The Market is not perfect and for many early adopters it has not been an easy ride. However, OTM remains our best and only chance to break Rightmove and establish some control over our portal costs. Consumers will follow the traffic and they will quickly switch to the portal with the most stock. Rightmove is nothing without our stock. Some people will say that Rightmove is too big to fail but recent history tells us otherwise. Remember Nokia, Friends Reunited, AOL, MySpace, Blackberry and Emoov? I’m sure people thought these brands were too big to fail too but they have all been consigned to the corporate dustbin.
We need to agree a date at which point all agents turn off Rightmove and switch to an alternative platform and let’s make this our Independence Day.
11 December 2018
My predictions for the property market in 2019
Brexit looms large over the property market in 2019 as it does over much of our lives. Who could have foreseen in 2016 that we would witness such levels of utter incompetence on the part of the political classes and Whitehall Mandarins as we have seen in recent months. Uncertainty over the outcome of the Brexit negotiations has certainly caused some buyers and sellers to hold back and the longer this farce continues, the more damage will be done. We can only hope that there is a resolution in the spring and the country can move forward.
The governor of the Bank of England has predicted a 30% fall in property prices should we leave the EU without a deal. However, I don’t agree with Mark Carney’s dire forecast firstly because he is firmly in the project fear camp and secondly because Parliament has no intention of allowing a no deal Brexit. It is fair to say, however, that we have come to the end of the latest cycle in house prices and house price inflation will be flat for a year or two. Whilst our population grows at such a fantastic rate and whilst the vast majority of people in the UK have a job it is very hard to see how property prices can fall very much at all.
Interest rates will rise in 2019 but only by minute and gradual increments. Mortgage lending will continue to be strong but this is all about households refinancing and not at all about households moving on.
In recent years we have become a nation of improvers rather than a nation of movers. When I started my business in 2004 people moved house on average every 7 years whereas today we move house on average every 17 years. This remarkable change in behaviour is due in part to the high levels of property tax levied on each purchase, making it more cost effective to stay put and extend homes rather than move on up the property ladder. This trend is likely to continue in 2019.
Buy to let as an investment model will continue to fall away as the preferred get rich quick scheme for the middle classes. Changes in stamp duty and mortgage interest relief have increasingly taken the gloss off buy to let and 2019 will see this trend continue. We will see more, smaller landlords bailing out of this sector in 2019 whilst bigger players and those holding properties within limited companies may continue to make it work.
The good news for the property market locally in 2019 is that Norwich remains an extremely popular destination for buyers seeking career progression or a change in lifestyle. So if you have a property to sell there is no reason why you shouldn’t achieve a great outcome in the New Year.
11 September 2018
Has Help to Buy had its day?
The government is considering whether to extend or end its Help to Buy scheme. This initiative was supposed to help first time buyers get on to the housing ladder by providing tax payer funded deposits that would eventually be paid back at a low rate of interest.
Like most government interventions in the housing market, Help to Buy meant well but was always flawed for a number of reasons.
Help to Buy merely serves to increase demand and this in turn increases property prices. If we are to help young people get on or move up the housing ladder we need to moderate house price inflation, not stoke it. Help to buy has clearly helped to increased house prices.
In practice, Help to Buy has also enabled some rather wealthy people, who never really needed assistance from the state in the first place, buy very expensive houses in London which can’t really be described as starter homes. There are of course thousands of deserving buyers who were clearly in need of assistance who have also benefitted from the scheme.
Agents like me were always rather mystified why the scheme was targeted solely on new homes. Why did buyers have to buy a new home in order to get assistance from the tax payer? The answer to this question lies in the fact that house builders form an incredibly powerful business lobby in the UK with many directors of corporate house builders also sitting on the benches in the House of Commons and the House of Lords. As a consequence by far the biggest benefactors of Help to Buy have been the multi-millionaire chief executives of our nation’s biggest house builders.
UK governments have a very poor record of success when it comes to disrupting the UK housing market. History shows us that whenever governments intervene in this particular free market there are always unintended consequences. It would be best if politicians stayed well away from the property market but if they are going to intervene then in future measures should be properly targeted and thought through, preferably with proper consultation with professional bodies such as the Royal Institution of Chartered Surveyors and the National Association of Estate Agents.
I for one hope that Help to Buy bites the dust sooner rather than later.
14 August 2018
Should we build on the green belt to solve the housing crisis?
Liz Truss is the latest in a long line of politicians to suggest that building houses on the green belt is necessary to solve the housing crisis. The Member of Parliament for South West Norfolk thinks that building thousands of new homes in the countryside is the answer to all our housing problems. Firstly, I don’t agree that there is a housing crisis and I certainly don’t agree that building houses in the countryside is a good idea.
House builders, of course, love building houses in the countryside because it’s easier than building them in towns and cities on brown field sites and so they make more profit. Profit being the primary and probably the sole driver for any house builder, they would build houses on green fields all day long if they got the chance. House builders form a very powerful business lobby, however, and this is why ministers continually suggest concreting over the green belt.
The reason it’s such folly to build homes in the countryside comes down to our need to protect the environment. We are told that unless we get a grip on CO2 emissions during the next 20 to 30 years we are going to have to deal with the consequences of an over-heated planet, parts of which are going to become increasingly uninhabitable in the future. Therefore, any new homes must be built in towns and cities in close proximity to jobs, schools and other amenities. Most new homes today are built in out of town locations with at least two cars parked outside each house. Here in Norfolk the vast majority of residents in new houses converge in their cars on the nearest town or to Norwich on a daily basis. This is clearly not desirable from a traffic congestion point of view and it certainly conflicts totally with the Government’s supposed commitment to the Paris accord on climate change.
There are other practical issues such as lack of public services, school places, broadband access, electricity generation capacity, mains gas supply and water resources, to name but a few, that make big out of town housing developments totally unsustainable.
So why do we need houses in the countryside? We don’t. We do need some homes in urban areas and these should be small, efficient and affordable units. The sole reason we need more houses in the first place is because successive governments think it’s a good idea to increase our population. It’s time this government got a grip on the true nature of our housing requirements and stopped caving in to vested interest groups.
10 August 2018
Bank of England raises interest rates
The Bank of England has raised its base rate by 0.25% to 0.75%. This is as high as the base rate has been for 10 years and although interest rates are still incredibly low some younger borrowers might be more concerned about what effect this change in policy will have on their debt repayments.
There seems to be very little evidence that interest rates needed to rise at all so perhaps the real reason why Mark Carney has raised rates at this time is so he can cut them again to cushion the effect of the UK leaving the EU next year. Carney is relentlessly pessimistic about the UK economy and about our chances of thriving outside of the EU so he will want to hedge his bets and this perhaps explains his latest move. Carney has been wrong all along about how robust the UK economy has been since June 23rd 2016 but like most fans of globalisation he is not likely to change his view in a hurry.
As for the property market, I don’t think the rate rise will have much impact because money is still relatively cheap and most borrowers are on fixed rate deals so they won’t feel the pain for some time yet.
15 May 2018
What happens if my agent goes into liquidation?
There do seem to have been a spate of Norfolk estate agents going into liquidation in recent months. The reason for this is nearly always because these firms haven’t been charging enough for their services. Some consumers really do believe that they can get the best possible service for the lowest possible price and in the grown up world this is rarely the case.
If you are selling through an agent that goes bust you might find that your property is transferred to another agent who has purchased the good will value of the business. This may be a perfectly workable arrangement as long as you want your business being dealt with by the company in question. If a sale has already been agreed on your property when the firm goes bust then this shouldn’t be too much of a problem either because at this point your transaction is in the hands of your solicitor. You may end up paying your fee to the receiver or to a different firm of estate agents who have purchased the good will of the failed venture but this shouldn’t change whether you have to pay the fee or how much the fee should be.
My best advice is to pick a long established firm in the first place and not a firm that is here today and gone tomorrow
24 April 2018
Why should I choose a NDAEA agent?
Consumers have a clear choice when selling what is in most cases, their most valuable asset. Sellers can choose an estate agent who is qualified, licensed, regulated and affiliated or they can choose one that is none of these things.
Some estate agents are members of the National Association of Estate Agents and some are members of the Royal Institute of Chartered Surveyors. Both of these organisations are regarded as the two professional bodies in the industry and both have redress schemes in place. Agents who are not affiliated to either of these organisations should be avoided at all costs.
Some of us are qualified to do what we do so ask before you commit. Agents who do not hold a relevant qualification should also be avoided at all costs.
Only a few of us are actually licensed to practice by the National Association of Estate Agents. Licensed estate agents should be first pick.
The bottom line is that you are more likely to find an agent who is qualified, licensed, regulated and affiliated within the Norwich and District Association of Estate Agents than if you look anywhere else. Our member firms also meet regularly for training events and to share best practice. We have a code of conduct and strict criteria for new members. Ask an NDAEA firm to tell you more about what we do and I’m sure they will be delighted to help you.
20 March 2018
Why there are so many second homes in Norfolk
The National Housing Federation has recently released research that reveals that there is now more second home ownership in Norfolk than ever before. In fact there are now more than 13000 second homes in Norfolk making it one of the biggest hotspots for second home ownership in the country.
It’s no surprise that the number of second homes in Norfolk is at an all-time high. The North Norfolk coast and the Norfolk Broads remain two of the UK’s best loved holiday destinations.
There are two main reasons for the rush to second home ownership in Norfolk other than it just being a great place to chill out.
Firstly it has become increasingly expensive for families to take a vacation abroad. This is partly due to rising taxes on flights and partly due to a weaker exchange rate. As a consequence, more and more families are holidaying in the UK. There are more foreign visitors to the UK who also want to come to Norfolk for their holidays and enjoy better value for money than they might have had prior to a weaker pound.
The other reason why people have been investing in second homes is that there are significant tax advantages in letting furnished holiday accommodation over shorthold tenancies. In recent years the Treasury has made buy to let less profitable and so furnished holiday lets has become the preferred vehicle for many property investors.
8 March 2018
Why Philip Hammond should give the economy and the property market a boost in his spring statement?
Next Tuesday Philip Hammond will deliver his spring budget statement. No doubt he will keep it bland and not risk upsetting the apple cart with any meaningful announcements. With tax receipts exceeding expectations in January he is ahead of schedule in his efforts to pay down the deficit so we won’t be too surprised if there are no surprises. There is, however, a great opportunity to not only re-invigorate the housing market but also re-invigorate the broader economy into the bargain.
I refer, of course, to stamp duty. This pernicious tax on aspiration is the number one reason why people are no longer moving up the housing ladder or, for that matter, moving down the housing ladder. As a consequence of this change in behaviour we find that the vast majority of properties that come to the market are as a consequence of death, long term care, genuine relocation or divorce. Very few people move house these days because they want something bigger or something smaller.
Abolishing stamp duty or even a meaningful reform of property taxes would stimulate more activity in the housing market and this would not only get people moving again, it would also stimulate the broader economy. An increase in transactions would result in HM Treasury being flooded with VAT receipts from all of the associated costs of moving, such as estate agency fees, removal costs, solicitor’s fees, broker’s fees and surveyor’s fees. There would also be a huge increase in VAT receipts from purchases of new kitchens, bathrooms, carpets and associated building alterations and extensions.
So come on Mr Hammond! Look at the big picture and kick stamp duty into touch for good.
14 February 2018
The cat’s out of the bag when it comes to online only estate agents
Stockbrokers Jeffries have released some research into a leading online only estate agent that confirms what proper estate agents have been saying for some time.
Jeffries estimate that online only estate agents sell as little as 50% of their listings compared to traditional estate agents who tend to sell about 80% of their properties. This is only of any importance because traditional estate agents only ask you to pay them if they achieve a sale, whereas online only estate agents will take your money whether they sell your house or not.
The online model has been with us for as long as the internet so this low-cost estate agency business model is nothing new. What is new is the amount of money being spent on nationwide television advertising. As a consequence, the Advertising Standards Authority have taken more interest in the leading players in this sector of the market. In fact the big players who advertise regularly are very well acquainted with the ASA who have wrapped them over the knuckles repeatedly for misleading consumers, firstly into thinking that they won’t pay for the service on offer, and secondly for overstating the savings consumers can make by using online only services over the traditional model.
The BBC’s Watchdog programme has also featured several online agents pointing out that their Local Property Agents are in fact commission only salesmen and not full-time employees of the agent at all. What’s more Watchdog criticised online only agents for training their Local Property Agents to exaggerate the number of listings they have in each area and the proportion of these properties that they actually sell.
As there is rarely any smoke without fire, I think it’s fair to say that Jeffries, the ASA and the BBC can’t all be wrong about online only estate agents. There is something very fishy about asking a call centre in Milton Keynes or Solihull to sell your house when you could use an established local business who might charge you a few hundred pounds more to sell your house but is more likely to sell your property and achieve a better price.
9 January 2018
Why do we have so many empty houses in the UK?
Every week we are bombarded by politicians, the broadcast media and the commentariat about the “housing crisis” and the need to build millions of new houses across our green and pleasant land.
On closer inspection we find that these calls come from parties with a vested interest in new housing development such as house builders, local authorities and MP’s representing areas where housing is thought to be needed.
Whilst I too believe that we need to build appropriately priced housing in appropriate urban locations I have for some time asked why we don’t utilise the empty properties we already have.
Recent research has established that there are 11,000 homes across the country that have been empty for 10 years or more. In a country where local authorities are spending billions of pounds on temporary accommodation this is quite a scandal but I fear this is just the tip of the iceberg. In fact 60,000 properties have been empty for two years or more and 216,000 properties have been empty for 6 months or more. Councils have powers to penalise owners of empty properties but they are failing in their duty to implement these penalties and without greater intervention these properties will continue to be under-utilised. What makes these statistics even worse is the fact that the majority of these homes are in fact owned by the public sector.
Hundreds of thousands of additional homes could be created if all the redundant office and industrial buildings were converted for residential use. Much of these are also owned by central government or local authorities and are ideally located in urban areas.
In addition to hundreds of thousands of empty homes and commercial properties there are vast tracts of land already earmarked for housing developments which remains unused. Much of this is also held by government departments or local authorities. House builders own hundreds of thousands of building plots which are developed not to meet demand but to meet certain profitability criteria.
Generally I am opposed to government intervention in the housing market but I do feel that, when it comes to unused property, a little carrot and stick would sort out the housing crisis within a few years.
2 January 2018
My 2018 Predictions for the property market
In 2018 high property taxes will continue to be the number one reason why people move house less frequently than at any time since the 1970’s. The Government isn’t going to change course on stamp duty any time soon so we will just have to get used to the new normal and accept that there will be a shortage of homes for sale across the country.
Interest rates will continue their slow upward trajectory in 2018. This won’t be a problem for most of us but it could cause an issue for the overextended or for landlords with buy to let mortgages whose yield will be squeezed just a little bit more than they would like.
House prices will rise in Norfolk by about 3% in 2018 which is far less than in recent years. Prices will be restrained by low wage inflation and political uncertainty and at the same time prices will be underpinned by a shortage of stock and a rising population. Norfolk will fare much better than London and the South East where house price inflation will stall.
Uncertainty over the Brexit outcome will keep some buyers and sellers firmly on the fence in 2018. In my opinion they should all get off the fence and take control of their asset decisions rather than let events dictate their future. This is because the outcome of the Brexit deal will have far less impact on our personal finances than the chattering classes in the media would have us believe.
Estate agents will continue to change their business models in 2018. Some sellers will continue to use ubiquitous corporate agents or online only agents in the belief that good outcomes can be secured for the lowest fee. Canny sellers will seek out seasoned property professionals who, for a few hundred pounds more, can deliver real expertise and a much more advantageous financial outcome.
5 December 2017
How to buy a house in 28 days
Wouldn’t it be nice to agree to buy a house and 28 days later actually exchange contracts? Sounds a bit far-fetched I know but it is entirely possible and was the norm 30 years ago.
These days most residential property transactions take between 6 and 8 weeks to get to exchange but many take 3 or 4 months or even longer. Leasehold properties generally take slightly longer to transact than freehold properties. It is fair to say that transactions took less time to get to exchange of contracts just ten years ago than they do today in an age when technological advances in the way documents and communications are managed should shorten the time for each deal. So how can one buy a property in 28 days?
The first thing is to choose an estate agent who understands the buying process. Property professionals with a good reputation, years of experience, local knowledge and good connections will always trump a call centre or an online journal when it comes to tracking the progress of your sale. As a general rule, if the agent is a member of the Norwich and District Association of Estate Agents, the firm will be vetted, accredited and scrutinised by their peers so this is a good place to start.
Next you need to choose the right solicitor. Again, a walking, talking solicitor who’s been recommended to you by someone you trust will always do a better job than cheapandcheerful.com. Online services can be cheap but are rarely ever cheerful. Make sure your solicitor is local as you will generally have to visit their offices at least once during the purchase process and it helps if they have good local knowledge of the area you are buying or selling in.
Once you have agreed a purchase you need to get to work. There will be a number of tasks to attend to straight away such as ID protocols, payment of funds on account to cover searches, commissioning a survey, mortgage application and filling in property information forms. Nothing will happen on your sale or purchase until these tasks are taken care of, so don’t delay. Do them all at once and not one after the other. Never find yourself saying “it’s in the hands of my solicitor”. Solicitors need to be instructed what to do – not the other way around. Good solicitors like this approach believe me. Most sales take longer than they should not because the solicitor is too slow but because buyers and sellers take too long responding to all the tasks required of them.
So if you want to buy in 28 days, guess what, you can.
16 November 2017
Why has Hammond got it wrong on stamp duty?
The government seems to think that the main issue facing the property market is gazumping. If the powers that be actually asked people working in the property sector what our priorities were they would discover that gazumping is very low down on our list of gripes. The budget next week offers the government an ideal opportunity to reinvigorate the property market but only if the right measures are taken.
Stamp duty is by far the number one reason why there are far fewer transactions today than at any time since the 1970’s. At the moment the government simply wants too much of a slice of each purchase and this is why there are fewer first time buyers, downsizers and people aspiring to move on to a bigger property. Whilst it’s understandable that the Chancellor of the Exchequer would want to continue the stamp duty cash grab, it really is very short sighted. If stamp duty was reduced or even abolished there would be far more activity in the property sector and the government would have a field day collecting billions in extra VAT on solicitor’s fees, estate agent’s fees, surveyor’s fees, removals, carpets, furniture and the rest.
We also have a skills shortage in this country. In truth, we have the right skills in the right quantity but these skills are not always where we want them to be. This is because skilled people don’t always want to move to where the work is due to the high taxes associated with moving house. We would have a much more dynamic jobs market if we reformed stamp duty and this would result in greater productivity.
So please wise up Mr Hammond and look at the big picture. Stamp duty has become a tax on aspiration and it has to go.
6 November 2017
Should I sell my house at auction?
The vast majority of property in the UK is sold by private treaty. Private treaty allows a seller the opportunity to fully test a property on the market and it also allows the buyer to do due diligence before exchange of contracts. Less than 5% of property is sold at auction in the UK and there are some very good reasons for this.
In the past we have sold several houses at auction but I have very rarely seen any property sold at auction that wouldn’t achieve a better price if sold by private treaty and that’s why I very rarely advise auction as the best way forward for my clients.
There are some instances where selling at auction is the most suitable way to proceed. For example some institutions and charities are required to demonstrate complete transparency when disposing of unwanted property assets and the easiest way to achieve this is to sell at auction. Some distressed sellers require a quick and definite sale and going to auction is often the quickest and most assured way of achieving a sale albeit at a discounted price.
However, every auction sale has its fair share of properties that don’t make the reserve price. Generally speaking about 70% of auction properties sell on the day but that leaves 30% of auction sellers who have already parted with a fee who are left without a buyer.
Selling at auction is usually a more expensive way of selling than selling by private treaty through an estate agent so this is another factor to take into consideration.
My advice is to go to auction if you’re buying, because you might bag a bargain, but to stay away if you’re selling.
2 November 2017
Bank of England raises interest rates
The Bank of England raised interest rates today for the first time in 10 years from 0.25% to 0.5%. For many savers this will be good news, although for some borrowers it might not be what they were hoping for.
Interest rates have been at ultra-low levels for several years since the financial crisis of 2008. Many younger borrowers will not have any experience of normal interest rates which, as us older folk will remember, should be more like 5% as long term norm.
Most mortgage borrowers are on fixed interest rate deals so they won’t feel any pain until they come to the end of their fixed term arrangement. Those on tracker deals or standard variable rates will see their repayments rise which, at a time of low wage inflation, might cause some discomfort in family budgets.
This hike in borrowing costs is likely to be part of a trend rather than a one off, although further increases are likely to be modest and very gradual.
Looking on the bright side, this latest move does signify that our persistently resilient economy has come off life support and perhaps the Bank’s post Brexit kamikaze cut in rates last year was unnecessary after all.
10 October 2017
Is the property pendulum swinging in favour of hard pressed Millennials?
The age group most active in the property market is the over 65’s. Most of this generation can be classed as Baby Boomers. This is the generation sitting on most of the UK’s property wealth. Most of them have paid off their mortgage and many of them now use their home as a giant equity release cash machine to fund their retirement. They have benefitted from several property booms since the 1960’s and their good fortune is unlikely to be repeated. They also enjoyed free university education, tax relief on their mortgage payments and final salary pension schemes, all of which have been consigned to history. Many Baby Boomers have gone one stage further, entering the property market as landlords in the buy to let market and have done very nicely there too.
By contrast the group least likely to be active in the property market are the 18 to 35 year olds. Transactions within this age group have declined by 21% during the last 12 months alone. This is due to spiralling property prices, high levels of student debt, more stringent mortgage rules, weak wage inflation and high property taxes.
There is some hope on the horizon for the Millennials though. During the next 12 months average UK property prices are unlikely to increase by more than 2%. In other words wages should soon increase faster than property prices for the first time in many years and this will give younger people a chance to get on the housing ladder or move up the ladder as the case may be.
We will also start to see some Baby Boomer buy to let investors selling off their rental properties in light of weaker capital growth, the prospect of higher interest rates, tax changes on mortgage relief and increased regulation of the rental sector.
For the older generation the news of weaker property price inflation will come as something of a shock because they have headed into retirement high on the crack cocaine of rising house prices and owe most of their wealth to successive property booms. Could it be that the pendulum is at last swinging in favour of the young?
7 September 2017
Do wind farms affect house prices?
Whether you love them or loath them wind farms are here to stay for the time being but what impact do they have on house prices?
There is a whole debate as to whether wind turbines are an efficient way of generating electricity and another can of worms to be opened as to whether they are as environmentally friendly as we are led to believe. What I want to focus on is whether their presence will down value your biggest financial asset.
The London School of Economics thinks they do down value your home by up to 12% if you live within 2km of a wind turbine. Here are some reasons why this might be the case.
First there are certain health concerns about living near a wind turbine. There is a phenomenon known as “shadow flicker” which causes certain health problems if you live too near a turbine. Thankfully there are regulations about how near to residential properties a turbine can be located and mitigating measures can be taken to prevent the problem if it arises so this is not a big deal.
Noise pollution is a slightly bigger concern but again there are regulations around the proximity of turbines to residential areas. There have been, however, a number of court cases won against turbine operators on the basis of noise pollution.
The visual impact of land based and offshore wind farms is one of the biggest drags on property prices. Nobody wants to see a wind turbine from their home or for that matter from their holiday let and there is little doubt that values have fallen in areas where there are lots of turbines. Many sea views have been transformed into semi-industrial marine landscapes.
The biggest problem though is cable corridors and sub stations because for every wind farm there is an enormous amount of infrastructure required to turn the energy into electricity on the grid. Each cable corridor can be up to 50km long and 200m wide and can use up to 100 acres of land. Sub stations are by far the worst blot on the landscape as they can be seen for several miles particularly on the flat lands of Norfolk. Flooding is now a threat in rural areas where millions of tons of concrete used in the construction of sub-stations has caused run off issues.
So before you buy your next home, check first for wind turbines and for any future plans for wind farms in the area.
15 August 2017
Why are online only estate agents so expensive?
The unique selling point of an online only estate agent is that they are cheaper than a full service high street agent. But is that really the case?
The market leading online only estate agent would have us believe that they don’t charge anything at all. Behind the subterfuge of their TV advertising campaign it is clear of course that they do charge you a fee if not a commission. Thankfully the Advertising Standards Authority is on to this dishonest use of wording and the agent in question has been wrapped over the knuckles. The fee they do charge is £849 plus VAT outside of London and more if you are selling inside London. However, this only gets you their basic entry level service. If you want accompanied viewings, floor plans, photographs and the rest you will have to pay them a lot more. In fact it’s a bit like flying on Ryanair and having to pay extra to be seated next to your 12 year old child.
The key thing here is what do you actually get for your money because the agent in question will bank your fee regardless of whether they sell your house or not and regardless of how much they sell your house for, whereas a traditional agent will only expect to be paid if they sell your house and will do their best to get you the very best price for your house because they are incentivised to do so. The question is how much expertise can you buy for £849? Anyone who has worked in business or in a professional capacity will know straight away that the answer to that question is not a lot of expertise can be bought for £849.
In fact how much expertise is there to be found in an entire building full of call centre workers on little more than minimum wage? Certainly a lot less than a handful of members of the Norwich and District Association of Estate Agents.
The main reason why online estate agents prove to be very expensive when compared to going down the traditional route is that if they undersell your biggest asset by even 1% you will have lost a lot of money and would have achieved a much better financial outcome using a proper estate agent in the first place.
If in doubt, ask a proper estate agent to visit you in your home and ask them what service they provide and how it compares with that provided by an online only agent.
18 July 2017
How to find your dream home in a shrinking market
Anyone searching for their next home will have discovered that family houses are in very short supply. This is a nationwide problem and not just a local phenomenon. For example, there are only 35 detached family houses available for sale in NR4 and a mere 10 detached family houses available for sale in NR2. In previous years we would have seen at least double this number of houses on the market for sale.
With this shortage of housing stock unlikely to change in a hurry what can buyers do to improve their chances of finding their dream house?
First buyers need to be in a proceedable position. If buyers have a property to sell or haven’t even put their house on the market then they will go to the back of the queue for any property that is remotely desirable. Buyers need to have done their homework so that they know what they want, where their search area is going to be and how much they are likely to have to pay. This involves a fair degree of objectivity because we all think our house is nicer and more valuable when compared to other properties.
The next thing to do is to speak to all the agents who sell houses in your search area that are similar to the sort of house you are looking for. This doesn’t mean just emailing them and hoping for the best. It means phoning them or visiting them and talking to someone who seems to know what you are looking for and where to find it. According to a recent Which survey, less than half of buyers found the home they ended up with on the internet. This means that most of the rest found their dream home by talking to their local property expert.
If you want to buy a desirable property in a favoured location such as the Golden Triangle, Cringleford or the North Norfolk Coast then be prepared to pay a premium for it. Good residential areas hold their value so you will always see a good return on your investment even if you think the price is a bit steep to start with. Last but not least, be decisive. Buyers who dither and pontificate nearly always fail to get what they want. Buyers who endlessly trawl through sold price archives and do all the maths about each potential property’s true value nearly always end up still living with the in-laws a year down the line.
Most importantly, always talk to an expert and not to a call centre in Milton Keynes.
June 8th 2017
Don’t you just love elections?
The property market relies on confidence and stability more than any other sector. Elections and referendums cause instability and hesitation and that is why estate agents like to see the back of them. There is no doubt that buyers, and particularly sellers, have been holding back during the past few weeks and this is not helpful if we want a dynamic property market which stimulates economic growth and supports a fluid jobs market. Our political classes have, in recent years, been determined to line up as many elections and referendums as they possible could. What with the Scottish independence referendum, the 2015 general election, the EU referendum, the local elections and now this year’s general election I think we are all rather punch drunk and in need of a rest from constant debating, campaigning and voting.
This year’s general election wouldn’t be so bad if it really was a “snap” election but 9 weeks of campaigning is hardly snap in my book. What the property market needs now is a sustained period of stability so that buyers and sellers can plan their next move with confidence well into the future without the fear that the government of the day will upset the apple cart. All we need now is for some little upstart north of the border deciding she wants another independence referendum because she didn’t like the result of the first one or worse still another EU referendum. With the SNP losing ground in Scotland a second independence referendum, thankfully, seems less likely.
Waking this morning we will all discover what our next government is going to look like and regardless of who we voted for, I’m sure we all hoped we could all breathe an enormous sigh of relief and get on with business as usual. However, the political classes and the electorate have decided that instability is the new norm so consumers and businesses will just have to get used to the new climate of uncertainty and make their own plans regardless. All the political parties have promised to build more houses. This is nonsense of course because governments don’t build houses at all. Houses are built by developers and housing associations and these organisations will only build houses if they believe that the government of the day is capable of delivering the right economic environment to make those developments pay. Thankfully Norwich remains a highly desirable place for professionals from all over the UK to move to for work opportunities and a better quality of life. So if you have something to sell we certainly have a buyer for it.
April 1st 2017
Have we had the best of house price inflation for the time being?
Property prices across the country are rising at a much slower rate than they have for the past five years. During the last 12 months house prices have risen by just 4% according to Nationwide and during the last three months they have stayed level with no increase at all. Having said this, there are some regions, such as the North East, that have still experienced strong growth and some regions, such as London, that have seen price falls.
Whilst house prices are not about to fall significantly, it is fair to say that we will see modest growth in prices until 2019. There are, as usual, many different reasons for this change in tempo. First, we seem to have hit an affordability ceiling with prices rising and wages struggling to keep pace while the cost of living has increased. Ultra-low interest rates have prolonged the strength of the market but with rates at a historic low, buyers have realised that the next direction for interest rates is up.
Uncertainty over our ability to negotiate a good Brexit deal will persist for at least two years and this will no doubt have an effect on confidence.
Slower price inflation will of course be great news for millions of people who are trying to get on the housing ladder for the first time or who are trying to move on to something bigger. Wages will now have a few years to catch up with property prices and this can only be a good thing.
Some landlords will be adversely affected by slower price growth. Professional landlords with multiple properties who are in the market for the long haul tend to focus on yield rather than growth and this sector will take slower price growth in their stride. However, there are plenty of small time landlords who don’t really understand yield and instead focus more on capital growth for their profit and it is this group who will be bailing out of buy to let investments during the next few years.
Thankfully we still have strong demand for quality housing stock in mature neighbourhoods. Norwich is relatively well insulated from rapid changes in property prices and the city remains a great destination for professionals seeking career progression and quality of life.
March 1st 2017
Period houses vs new build
There are advantages to buying new build and there are also advantages to buying a period house. New builds are easy. You buy them, move in and order take out. Period houses often have issues that need sorting out before you can feel comfortable and the issues will never stop coming your way while you live in them. New builds are much more efficient to heat whereas period houses leak energy from every crevice and it’s hard to make them more efficient.
Property moves with the fashion of the times and although new build is still very popular, the more discerning buyer is turning once again to period properties in mature neighbourhoods. This trend is due to many different reasons. New build is having a very bad press at the moment with at least one major house builder rushing the completion of thousands of new homes that are now deemed unfit to live in because of the significant number of defects. From a pure investment point of view, period house appreciate more than new build so don’t expect your new house to go up in value at the same rate as other more mature properties in the same area. Period houses may be harder to keep warm but they offer bigger room dimensions, higher ceilings and what few new builds provide and that’s character. Period houses generally have a bigger plot and there is more fresh air between you and your neighbours unlike most new builds which seem to be built with just a few feet between properties.
Very occasionally I see a new build which has quality, space and character but these examples are all individually designed contemporary homes built at great expense in the countryside away from amenities and any sense of community.
Period houses are located where most people want to live, near schools, shops, work and social life. New builds are generally located out of town so families need at least two cars to be able to do anything at all. New build developments are also often located within earshot of noisy main roads which diminishes any enjoyment of the limited outside space.
There is no doubt that period houses are harder work and you will need to wear a jumper indoors in the winter but they reward their owners with superior space, location, character and financial return.
February 15th 2017
Is buy-to-let dead?
A recent survey of buy-to-let landlords found that 25% of them have either just sold up or are considering selling in the near future.
In April the tax laws will change for many buy-to-let landlords. Instead of being able to claim full tax relief on mortgage payments, high rate tax payers will begin to see their margins squeezed over the next few years as their tax relief is reduced, thus making their return that much less.
Stamp duty also changed last year on the purchase of any residential property other than primary residences. An extra 3% tax is now payable over and above standard rate stamp duty and this makes investment purchases that much more costly. Some landlords will try to get around this one by forming limited companies to buy further properties but there are costs attached to this as well. Institutional landlords who already buy property within a limited company structure will not be affected by the new tax surcharge. Some investors are moving into commercial or mixed use properties where this 3% surcharge does not apply but investors should be aware of the difficulty in obtaining lending on commercial property.
During the last five years landlords have relied on capital growth to supplement their profits but here too there will be a change as house price inflation slows for the remainder of this year and into next year.
New lending rules which came into effect in the New Year, that restrict the amount that landlords can borrow, will cause a problem for any landlord who wants to re-mortgage, if they can’t meet the new stricter criteria. Landlords may be forced to sell up if they can’t re-mortgage or have to move onto a less competitive variable interest rate.
Rents have risen significantly in recent years but according to landlord referencing group, Homelet, rents will rise at a much slower rate this year and next.
Interest rates have been at an all-time low since 2008 and this has created historically cheap borrowing for landlords. Unless the Bank of England is prepared to see inflation sail through its own 2% target, Mark Carney will surely have to start raising interest rates this year. This will alter the business model for many buy to let landlords with a mortgage.
All these factors make buy-to-let a much less attractive investment vehicle moving forward. Big landlords with multiple properties who have seen it all before will no double carry on regardless. Smaller investors, many of whom are merely trying to build up a retirement nest egg, might do better looking at alternative investments such as bonds, ISAS and pensions linked to stocks and shares.