Hadley Taylor Blog
At Hadley Taylor we like to keep our clients updated on the latest local property news and opinion.
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.
February 7th 2017
Alternative housing white paper
The Government has this week issued a housing white paper which, it is hoped, will in some way solve our housing crisis. I can remember several governments issuing umpteen white papers on housing over the years and none of them have really got to the root of the problem. For decades governments of all colours have always focussed on how we can build more houses. Some proposals looked at building on green belt which is undesirable for most of us. Some proposals suggested building on land far away from towns and cities which is environmentally unsustainable. Some proposals suggested higher density developments, some proposals suggested building smaller units, despite the fact that humans are getting bigger, and some proposals suggested prefabricated homes which would take us back to post war Britain.
No government dare state the obvious which is that if there is too much demand we should do something about the demand rather than always focussing on the supply side.
So my alternative housing white paper has just four proposals:
Deal with the demand for housing by focussing on our population growth. At present our population grows by half a million people every year. About two thirds of this is due to immigration and one third is due to a higher birth rate. Every year about 300,000 people decide to leave the UK. We can’t do anything about this because it’s their choice to leave. Every year about 630,000 people decide to come to live in the UK. We can do something about this because it’s our choice whether they come or not. This concept is called an immigration policy and if we had one we would be able to regulate the number of people in our country and so control demand on housing and for that matter the demand on lots of other important things such as healthcare, education and infrastructure.
Bring the 900,000 empty residential properties up and down the country back into use. Many of these vacant properties are owned by the public sector but the remainder are in private ownership. There are empty houses in every street in Norwich. Government legislation could easily force these properties onto the open market where they would find buyers and investment and eventually tenants and homeowners. This one initiative would solve our medium term housing crisis in the space of just a few years.
Reduce stamp duty to encourage older people to downsize and encourage younger people to upsize. Neither of these two groups is active enough in the housing market and this causes inefficiencies in how the market operates.
If measures one, two and three don’t do the trick, build well designed, affordable, efficient homes in appropriate urban locations.
So why don’t we try it? The answer is that there are too many vested interests at play. Governments rely on population growth because it almost guarantees GDP growth and GDP has become the holy grail of all UK Governments since the Second World War. House building is now big business and it would not be in the interests of corporate house builders if we did anything to control demand or re-use old housing stock. Reducing stamp duty, which is a very easy tax to collect, would reduce the amount of money the government could spend on public services. So until we become more enlightened about housing we can expect the housing crisis to continue.
25th January 2017
Are online estate agents conning us?
There’s not a day goes by that we don’t see online estate agents advertising their services on the TV or radio. There are several online agents and each has their own unique sales patter.
One leading brand would have you believe that they don’t charge you for selling your house. They say they don’t charge commission. This is because they don’t charge commission but they do charge you a fee instead and they want all £849 of it up front whether they sell your house or not, unlike proper estate agents who only charge you the day your sale completes.
Another leading brand will tell you that you can save £5000 if you use their services – “that’s a new kitchen”. The fact is they also want you to pay £595 up front whether they sell your house or not. What they don’t tell you is that the average fee charged by a proper estate agent across the country is £2700, so the £5000 is just a number their marketing department has made up.
Both these leading brands will tell you they will send a “local property expert” to value your house. For a start this person is very rarely local. In fact they often come from a neighbouring town or sometimes a neighbouring county. These people are far from being “property experts”. They are commission only sales people who, given the choice, would rather be working for a proper estate agent if they could. If sellers don’t employ a real expert, who is properly trained, qualified, regulated and licenced, they may not achieve the best price for their property and this is where using an online agent can prove very costly indeed. Just how much expertise can you buy for £595? We don’t employ online dentists, financial advisers or surgeons so why would we put our biggest financial asset in the hands of the cheapest type of agent we can find?
The other big difference between online agents and proper estate agents is that your local independent estate agent is part of your community. They live in your neighbourhood, their kids probably go to the same school as yours, they pay their taxes in the UK and they spend most of their profit in your town. Online agents are big corporations. If they pay any taxes at all, who knows where they pay them, the owners don’t live in your town and their profits are spent on second homes in the Med.
Online estate agents are nothing new. They have come and gone since the internet was born. They have never really caught on because there’s no future in being the cheapest.
Consumers have a choice and thankfully most consumers still choose a traditional estate agent.
11th January 2017
What is going on in the property market?
Foxtons estate agents have just seen their share price drop due to a 40% fall in sales in the last quarter of 2016, Countrywide, who own Abbotts estate agents, have recently closed 59 offices across the country and Bovis Homes have just issued a profit warning because they built fewer new homes than expected last year.
This all sounds a bit dramatic but what’s really going on? Well first of all, London, which is where Foxtons sell houses, is an international property market and is increasingly detached from the rest of the UK property market. London has for many years relied heavily on foreign investment but the number of these overseas investors has fallen in recent months mainly due to changes in property taxes. As a consequence London will see prices falling slightly this year whereas the rest of the country will see prices rising slightly. In general there will be a marked slowdown in the rate of increase in property values this year. This means that prices will still rise for most of us but they won’t rise in the same way that they have for the past 6 years. In other words we have had the best of property price inflation for the time being. This change in tempo is due to affordability issues, uncertainty surrounding what sort of Brexit deal can be negotiated and the prospect on the horizon of higher interest rates and higher inflation.
The good news is that a slower rate of growth is actually a very good thing for the property market and for the broader economy. Many younger people need wages to rise faster than property prices in order to get on or move up the property ladder so they will be delighted at news of a slower rate of growth. Slower growth also reduces the risk of the property market over heating as it has done several times in the past with dramatic consequences.
So what does this mean for buyers and sellers? It means stability, with prices rising gently, which makes 2017 a good time to make that move with confidence.
8th December 2016
So that was 2016
This year hasn’t been an easy year in the property market. Despite selling more houses than last year I won’t have many fond memories of 2016, at least from a business stand point. The property market relies on sentiment and confidence and it falters on indecision and uncertainty. This year we have seen plenty of indecision and uncertainty and very little cause for strong sentiment and confidence. We have an entirely new government which in itself is unsettling and we have seen a series of political shocks in other parts of the world. The Brexit vote or rather the hysteria surrounding the Brexit vote has caused many sellers to hold back and this has caused under supply which is not at all helpful for anyone trying to find somewhere to live.
Changes in stamp duty on second homes and investment properties, which came into effect in April, also caused ructions at the start of the year with more transactions on this type of property than usual in the first quarter and far fewer than usual ever since.
So what does 2017 have in stall for the property market?
Thankfully next year we won’t have a general election or a referendum and as a result, much less uncertainty I hope. There will be a fair amount of gnashing of the teeth about how good a Brexit deal the government can negotiate so we will not be completely in the clear for some time. Inflation will rise thanks to a rising oil price, and interest rates will start their long awaited upward trend very soon into the New Year. Looking at the positives, we have an economy that is growing faster than any other G7 country, we have virtually full employment, the FTSE100 index continues to show incredible resilience given the political upheavals we have had, and consumer spending ends the year as high as a kite.
What this all means for the property market in 2017 is more transactions than this year and prices rising, but not as sharply as in recent years. So as we move into the New Year let’s all be glad that Norwich remains an incredibly popular place for people to move to for work or lifestyle and make next year the time to make that move with confidence.
22nd November 2016
What could the Autumn Statement hold for the UK property market?
The Autumn statement is an opportunity for the government to make some adjustments to the fiscal planning of the economy. I dare say that Philip Hammond will declare that the government intends to build thousands of new houses, but seeing as every chancellor since I can remember has said this with very little effect on the number of houses we actually build in this country, I think we can take that announcement with a pinch of salt. What the property market needs more than anything else is a reform of stamp duty. Tax is the biggest cost when we move house and the increasing cost of stamp duty has stalled the market when it comes to the availability of homes to buy.
Anyone looking for a house will know exactly what I mean. This tax has become punitive in that it punishes people for aspiring to live in a bigger house. It also discourages older people from downsizing. The way stamp duty is calculated is based more on ideology than on revenue generation. Stamp duty should be a flat tax of say 1% levied on all property transactions compared to the complex system we have in place at present. Other more enlightened countries have adopted flat taxes on income and on transactions and they have found that they actually raise more tax revenue than punitive taxes because people don’t avoid paying them nearly so much. In other words if we reduce property taxes people will move house more often and this will free up the market and create more economic activity in the long run.
9th November 2016
House prices set to keep rising but not like you think.
House prices in the UK are set to keep rising but at a much slower rate than in recent years according to property group JLL. The reason for the slowdown in house price inflation is the uncertainty over the outcome of the forthcoming Brexit negotiations. They forecast that house prices will rise by just 1% in 2017 across the Eastern region which is significantly less than the last five years. In 2018 prices should rise by 1.5% and in 2019 they should rise by 2.5%.
This change in tempo will be good news for millions of young people trying to get on the property ladder for the first time and for all those movers looking for something bigger who will find that their wages will outpace property prices for a sustained period for the first time in years.
For many sellers, who have been holding on, waiting for the market to peak, the time may have come to make their move having had the best of house price inflation in recent times.
31st October 2016
Growth in the economy proves doubters wrong but what does it mean for the property market?
Gross domestic product grew in the third quarter by 0.5% which is considerably more than economic forecasters were hoping for and also considerably more than most other developed economies. This is more evidence that the economy is proving to be incredibly resilient following the historic vote to leave the EU. Let’s not forget the legion of doom mongers who predicted a recession immediately after June’s referendum if we voted to leave. This army of learned individuals and organisations included David Cameron, George Osborne, Mark Carney, the Treasury, the IMF, TUC, CBI and many more have all been proved wrong. David Cameron and George Osborne have departed the scene and the governor of the Bank of England, Mark Carney, may follow shortly because his dour outlook simply doesn’t fit with what’s actually going on.
So what does this have to do with the property market I hear you say? Well the property market depends to a large degree on confidence and sentiment, and if the establishment and the ruling classes try to scare us to death about the state of the economy, which is what happened for the first half of this year, then the natural thing for us to do is to hold back. As a consequence many buyers, and particularly, sellers up and down the country have been delaying their plans.
Now that we know that the gloom mongering was all about spin and nothing to do with hard evidence, the good news for the property market is that we can now all get off the fence and get on with business. Property prices are rising steadily, demand from buyers moving to Norwich is strong and with interest rates at an all-time low, affordability has never been better. So whether you’re buying or selling now is the time to make your move with confidence. East Anglia has led the way in recent months as the fastest growing property market in the UK and Norwich remains a highly desirable destination for buyers relocating from other parts of the country.
24 October 2016
Should we feel so sorry for Millennials?
Millennials are people in their twenties and early thirties. They are widely considered to be less well-off and have poorer prospects than their parents, the Baby Boomers. I have written in the past about the unfairness that many young people feel when compared with older generations particularly in relation to property. However, if we take a closer look at some of the data, the lot of the Millennial might not look so bleak.
Firstly, Millennials pay less tax than their parents did. Income tax, corporation tax and many other taxes are considerably lower today than they were in the seventies, eighties and nineties and tax allowances are more generous today than they were then. As a consequence, disposable income is greater today than it was thirty years ago.
Interest rates are at an all-time low, so despite the inexorable rise in property prices, it is actually more affordable for a Millennial to buy a house today than it was for their parents when mortgage payments are calculated as a proportion of income. The only other hurdle in recent years has been the size of deposits that lenders have insisted on from first time buyers, however, this too has been relaxed with many lenders once again offering 95% or even 100% mortgages in certain circumstances.
Millennials are more likely to enjoy a comfortable retirement than their parents thanks to auto-enrolment. Employers are now legally bound to provide and contribute to work place pensions. Baby Boomers enjoy a good income in retirement today only if they worked in the public sector, if they benefitted from a final salary pension or if they had the foresight to make their own private pension arrangements. An alarming number of Baby Boomers have had to fall back on their state pension and whatever savings they may have put by.
So, despite high property prices, Millennials have never had it so good when it comes to buying their first home.
18 October 2016
What does the post Brexit economic landscape hold for the property market?
As we move towards independence from the EU the economic landscape of the UK will change considerably. In fact quite a lot has changed already.
The pound is worth considerably less than it was on June 23rd and, although it looks like our currency has stabilised at a new level against the US dollar of about $1.23, there has been a shift in the way the economy will work from now on. A weaker pound means that our holidays abroad will be more expensive and that retired Brits living in other EU countries who draw their pension in pounds will be worse off. Most importantly, everything we import will be more expensive. This, together with a rising oil price, will result in higher inflation. Higher inflation means that the Bank of England will have to raise interest rates sometime soon and keep raising them to keep the lid on inflationary pressures in the years to come. I felt that the last BOE interest rate cut was unnecessary and now I see that many economists and columnists are saying the same thing. For many people, higher interest rates will be a good thing rather than a complete disaster. After all we have more savers in this country than borrowers and asset prices have become hugely inflated due to ultra-low rates of interest. Individuals with shares or property have become disproportionately wealthy compared to those with cash since 2008.
A weaker pound is of course also a great opportunity for us in the longer term. Many economists have felt that the pound has been over valued for some considerable time and a weaker currency will boost exports, reduce imports and, in time, significantly help to re-balance our economy.
GDP will increase less next year than it did this year but our economy is still predicted to grow faster than most other developed economies. The FTSE 100 share index has performed incredibly well since the Brexit vote so anyone with a pension fund is far wealthier today than they were on June 23rd. In recent months pensions have outperformed property by a country mile so this may change our attitude towards planning for retirement in the future.
House prices in most of England are still rising although in some parts of London prices are cooling. This rise is due almost entirely to demand rather than any other economic indicator. Although the trend is still upward for most of us, it’s very hard to see how house prices will rise faster during the next five years than they have during the last five years.
5 October 2016
Have the over 40’s been hoarding property?
Recent research by the London School of Economics confirms a view I have often shared in my columns which is that the over 40’s are hoarding property in this country. Since the financial crisis in 2008 many middle class professionals in their forties have been retaining their old home and renting them out before moving on to their new homes. This trend has caused a distinct lack of housing stock across the country and has seen a decline in property transactions ever since. Anyone looking for a family house in Norwich right now will know exactly what I mean.
These accidental landlords have unwittingly put the brakes on economic and social mobility for millions of younger people who want to relocate or take their first step onto the property ladder. The consequence of there being fewer properties on the market for sale is of course higher prices and whilst this is all fine and dandy for the property owning classes, it is a disaster for our children.
We now have a property apartheid in the UK. Older people own most of the property whilst younger generations can only aspire to property ownership and many have come to the conclusion that they will never own their own home.
In recent months the government have made various tax changes to make buy to let less attractive in an attempt to level the playing field. Stamp duty, which is the tax payable on a property purchase, is considerably higher on any residential property that is not your main residence. Tax relief on buy to let mortgages will soon be reduced which will in turn reduce rental yields still further. The other significant change is that lenders are now stricter with their lending criteria on buy to let mortgages which will bring them in line with the rules on residential mortgages.
As rental yields decline further landlords have been looking to capital growth for their returns. This is all well and good in a rising market but what if prices rise at a slower rate as they are forecast to do during the next few years? People have very short memories. They tend to air brush out the fact that only five years ago we were in negative territory in most parts of the UK and falling property prices could return if our economy took a turn for the worst in the future. This scenario would leave landlords with very meagre returns if not a loss.
Buyers are moving to Norwich in droves so if you have a property or two to spare you could do your fellow man a favour and put it up for sale. After all buy to let isn’t all it’s cracked up to be.
15 September 2016
Less than half of home movers end up buying a property they found on a portal.
Property portals, such as rightmove.co.uk and onthemarket.com, have become a key component in how we search for a new home but they are in fact less influential in the process than we are led to believe according to a recent survey by consumer organisation, Which.
Property portals would have us believe that the vast majority, if not all house hunters find their dream home using the internet. The truth is very different. In fact only 45% of buyers end up buying a property they found on a portal. This begs the question as to how they found their home if not on the internet.
The majority of buyers find their new home by traditional mechanisms. For example, 11% find their home in an estate agents window which is bad news for any agent that doesn’t have one. A further 11% are introduced to their new home because an agent telephones them or emails them about it, which is more bad news for online agents who don’t do this because they don’t believe in human intervention. If you have a for sale board outside your house this will increase your chances of selling because 10% of buyers find their new home by driving round your area looking for boards. Make sure your agent advertises in the local paper because 6% of buyers still find their new home in the local rag. The remaining 17% of buyers found their dream house using other traditional mechanisms such as word of mouth or because they have visited and talked to an estate agent.
What this survey confirms is that selling property isn’t just about the internet and that most properties are sold by property professionals using traditional methods of sale. If consumers think they are being clever by using an online agent, the truth is they are only getting their property marketed to part of the market and if they are to achieve the optimum price for their biggest asset they need to be using the whole of the market which is where the proper estate agent comes in.
With housing stock in short supply the best advice from Which was to put your laptop away, visit estate agents, get to know them and make sure they understand what you are looking for.
8 September 2016
Why does it take so long to buy a house?
Property transactions in the UK are taking longer to go through at a time when one would have thought that advances in information technology would have hastened the process.
There are several reasons why transactions take so long and all of them are more to do with human intervention, or should I say lack of it, rather than any advances we may have made in the way information is shared on the internet.
It would be easy to say that solicitors take far too long with the conveyancing process. It is true that during August and between Christmas and New Year it’s hard to find a solicitor in the office. However, solicitors are not unlike most other professions in this regard. Gone are the days when we used to enjoy Christmas Day and Boxing Day and then return to work the day after. Extended periods of absence seem to be the norm in most businesses at certain times of year. However, if you employ a good local firm of solicitors they will ensure that the absence of your designated conveyancer does not have a negative impact on the progress of your sale. Alternatives to the traditional conveyancing model are now more common, but the very last thing sellers should do is use an online conveyancing service as this is often fraught with delay and incompetence.
Buyers and sellers have a responsibility to act in a timely fashion with proof of identity protocols, terms of business, payment on account, certification, planning permissions, building regulations and answers to enquiries. Delay with any of this will delay your sale so best to get your paperwork in order before you have a buyer.
By far the biggest factor affecting the speed at which a sale can proceed is the search process. Searches are processed by the local authority. Some local authorities around the country take as little as 48 hours to turn around a search request. Norwich City Council is currently taking five weeks to do a search and this is unacceptable given that they charge £120 for a local authority search and £150 for an environmental search. One would have thought that Norwich City Council would be so over endowed with fee income that it would have been able to put in place a state of the art search service but I’m afraid that’s not the case.
So my best advice for buyers and sellers hoping for a speedy transaction is to attend to your paperwork in a timely fashion and use an estate agent and a solicitor that has been recommended to you by someone you trust who has sold their house recently.
10 August 2016
The Bank of England interest rate was reduced last week to a new record low of 0.25%.
Whilst most estate agents think this is a good thing, I feel it was an unnecessary move, given the strength of the economy and will only add to demand for housing without doing anything to increase supply.
The economy grew by 0.6% in quarter two which is more than that of any other EU nation and this was during a period when we were being bombarded by scare stories from certain parties over the consequences of Brexit. Consumer spending in July was nearly two percent higher than the previous July which, again, is surprisingly good given the circumstances and the FTSE 100 currently stands at its highest point for well over a year. In light of all these indicators it is difficult to see why Mark Carney is in such a blind panic. He was particularly pessimistic about the UK economy during the referendum campaign so maybe he’s just being consistent.
What ultra-low interest rates do is to reduce further the cost of borrowing and this will push property prices up to eye watering levels and make property ownership unaffordable for millions of young people. We will soon live in a country where most people over the age of 50 own at least one property and nobody below the age of 35 owns anything at all. Equality means that everyone has the same chances in life but when it comes to property, most young people have no chance of home ownership unless their parents cough up a considerable sum to help their offspring onto the property ladder. This may be possible in some families but often, in the absence of appropriate pension arrangements, the family house is used as a cash machine to provide for old age and so helping out the next generation with a sizeable deposit isn’t always possible.
The other consequence of ultra-low rates is that it allows millions of younger mortgage holders to live in the false paradigm of cheap money. I can remember paying 17% on my mortgage in the early 1990’s and with interest rates being so low for so long we now have a whole generation who will get a great shock once rates start to rise.
I would have preferred to see interest rates stay where they were which would have allowed property prices to rise at a slower rate which, in the end, would be better for everyone.