Hadley Taylor Blog
At Hadley Taylor we like to keep our clients updated on the latest local property news and opinion.
How to survive the property market in election year
My advice to buyers and sellers this year is to ignore the fact that it is an election year. Traditionally we are all a little reticent in election years but in fact once we have cast our vote there is nothing we can do individually to alter the outcome of a general election so we might as well get on with our business as usual. This year the positives far out-weight the negatives with wages rising more quickly than inflation, interest rates at an all-time low, more people being in work than ever before and an economy growing faster than any other economy in Europe. House prices are forecast to rise by 3% nationwide in 2015 and interest rates will rise but only after the election.
The much welcomed and long overdue reforms of stamp duty will make it cheaper for the vast majority of people to buy a house this year so we can expect more buyers and sellers to enter the market.
Some investors might be thinking about taking advantage of the recent changes in pension rules that allow them to determine how they spend their pension pot at the age of 55. Buying a buy to let property with part of one’s pension pot might be a wise move as long as it doesn’t incur any tax liability which means that it would have to be a sizeable pension pot to start with. This rules out most of the over 55’s because the average Brit has a pension pot of about £30,000.
The outcome of the election will be a hung parliament with either the Conservatives or Labour winning the most seats by a very narrow margin. The Liberals will want to cling onto power and fall into line behind whichever party wins the most votes to form another coalition government.
The flavour of government in May will dictate how buyers and sellers will fare over the next few years. Labour favour taxes on assets such as property whereas the Tories favour taxes on income and purchases. So expect mansion taxes, higher council taxes, higher stamp duty and capital gains tax on your primary residence if Labour come out on top. Labour might also fancy rent controls which will completely alter the business plans of thousands of buy to let landlords.
So my advice in election year is to keep calm and carry on.
“Britain’s Property Boom”
I watched a Chanel 4 program last week titled “Britain’s Property Boom”. I watched this documentary not because I thought it would be informative but because I knew it would be intensely irritating, and it certainly lived up to my expectations.
The program was a sequence of sob stories about Londoners struggling to get a foot on the property ladder in the capital in the face of rapidly rising prices and competition from overseas buyers. The problem I had with the program was that this is old news. The program was obviously made in the summer. I would say the issues raised in the piece were 4 or 5 months out of date which means that things have moved on. The fact of the matter is that the London market started to cool in the second quarter of this year and by the time this program was made buyer activity in the capital was falling like a stone. This is typical of the rather lazy approach property journalists tend to adopt when talking about the UK housing market.
This sort of journalism is unhelpful and misleading because it talks about a market that has passed, in an international city with little relevance to the rest of the country. It is true that foreign money has raised prices in the capital to eye watering levels but this is temporary. There is a limit to how much bent Russian and Chinese money can be laundered in one city. Most of the property purchased by overseas buyers in recent years is empty, it’s not lived in by the owner and nor is it let. Ghost towns are being created in London. Whole streets and tower blocks are quiet and still with no vibe or sense of community whatsoever. This is not a good thing for London at all. This is, however, just a phase and it will pass. When these properties are eventually let or sold on prices and rents will fall because supply and demand will have its way in the end.
There is much hysteria about the UK property market at present. Many estate agents are looking forward to filling their boots when pension rules change in April. Under the new rules the over 55’s will soon be able to plunder their pension pots and many of them, it is thought, will invest in a buy-to-let property. The truth is that some folk may choose to do this but most of them will be exposing themselves to a considerable tax liability in the process, so smarter investors will think twice before taking the plunge.
With the much welcomed changes to stamp duty announced in the autumn statement last week, 2015 is shaping up to be a better year for us than this year has been because more buyers and sellers will enter the market in the knowledge that the government will take less of their hard earned cash out of each purchase. In 2015 prices will rise at a lower rate than they have done this year due to the increase in supply, lack of wage inflation, poor economic growth in the Eurozone and the uncertainty that a General Election always brings.
What is the truth about the property market if you strip away the spin and the hype?
London distorts the UK property market more so than any other capital city distorts its host county. When it comes to international property markets London is the capital of the World whereas New York is just New York and Paris is just Paris. London can no longer be compared with any other part of the country when it comes to property prices.
Nearly all property journalists live in London whereas most real people live outside of London and also have their money invested in property outside of London. Consequently, most commentators are obsessed with the London market and the Russians and Chinese buyers that sustain it. So what’s really going on in other parts of the country such as Norfolk?
Generally speaking property prices in Norfolk have returned to where they were in 2007. In some parts of the country they have now exceeded the previous peak and in other parts of the country they still lag behind where they were in those heady days. Estate Agents don’t actually care whether prices are falling, rising or level. What we do care about is how many deals are in the market right now because agents only get paid on transactions.
First, it’s worth pointing out that this year the Land Registry will record about 70% of the number of transactions that we had at the last peak of activity in 2007. No other market could sustain such a marked reduction in traffic as we have seen in the property market in recent years and it will be some time before transactions return to peak levels. In fact some commentators say that transactions will never return to peak levels because the market has changed and this is because sellers have changed.
Sellers either need to borrow more or to be earning more in order to move up market to a bigger or better property. Lenders are, quite rightly, applying proper lending rules today instead of dishing out monopoly money as they did just a few years ago, so most folk can’t borrow more, even if their circumstances have improved. Wage inflation is a thing of the past for most people at the moment so as a consequence many sellers are staying put.
Another key factor in the mix is of course tax. Thanks to the progressive and insidious nature of stamp duty, tax is now a major hindrance to the property market. Faced with the prospect of finding £20,000 to pay the tax on a family house in Norwich it’s not surprising that many sellers decide to stay put.
Downsizers are also thin on the ground because ultra-low interest rates mean that they don’t have to downsize for economic reasons as they have done in the past. Many sellers will put off downsizing until interest rate rises start to bite at some point in the furture.
The market in Norfolk is therefore sustained by relocation, death and divorce and whilst these three factors are constant, we lack the aspirational seller moving up market, the downsizers and the folk just moving because they fancy a change, all of which we have seen in the past.
The good news is that buyers still find plenty of good reasons to move to prosperous cities like Norwich to work, to raise children, to invest or to retire to. So if you have a house to sell you will do very well in a market currently starved of good housing stock.
Agents Mutual to launch new internet property portal to rival Rightmove and Zoopla
Who provides better information – professionals or the internet ?
I did a little experiment the other day. I consulted the Zoopla website and asked it to value my house. Of course I know how much my house is worth and I wouldn’t be much of an estate agent if I didn’t. I was expecting Zoopla to be way off the mark but I wasn’t expecting Zoopla to be an eye watering £110,000 off the mark. The fact is that information produced by Zoopla or any other website for that matter isn’t necessarily correct and in an age when young people believe that what they find on the internet is the truth, it is important to remember that knowledge, opinion and wisdom can only be sourced from humans and not from websites.
Good estate agents understand value. The value of a specific location, the value of how the space works, the value of a particular style and period of a property and the value of the condition and finish of a property. Estate agents also understand the strength of the market in their area at that specific moment. Internet sites, that claim to be able to calculate the value of your biggest asset, work on statistics and little else.
The latest in a long line of internet estate agents, Easy Property, is launching soon. They will provide a low cost method of selling or letting your house. Internet estate agents are not a new concept. They’ve been around as long as the internet itself. At present internet estate agents account for a paltry 2% of the market. So why haven’t internet estate agents gained any significant market share?
The reason is that internet estate agents don’t provide what sellers really want. Sellers want someone to provide an accurate valuation based upon sound knowledge and experience, someone to measure up the property and prepare a floor plan, someone to produce an energy performance certificate, someone to advertise the property in as many different ways as possible, someone to take photographs and prepare a prospectus, someone to speak to all their contacts who might be looking for a house like theirs and someone to do accompanied viewings. That someone is a human being and not a website.
Once a buyer is on the hook, the seller then wants someone to use their expertise to negotiate the best possible price, someone to prepare terms of business, someone to manage inspections of the property by surveyors, valuers and other professionals and tradesmen, someone to negotiate their way through any tricky survey or title issues, and someone to manage hand over of the property upon completion.
The point here is that professionals use technology and the internet to do their job. The internet does not and never will do the job of a good professional.
How to select an Estate Agent
Some sellers believe that estate agents are all the same and that the outcome of the sale will be the same regardless of the estate agent they choose. This is the first big mistake some sellers make in their efforts to sell what is usually their biggest financial asset. For example, some agents are affiliated to professional bodies and some are not, some agents are qualified and some are not, and some agents are licensed and some are not. Size doesn’t matter in this regard because some very big estate agents are not licensed, affiliated or qualified, and some very small estate agents are, and vice versa.
My advice to anyone selecting an estate agent is very simple. Firstly, choose the firm that sells properties like yours in your road. Secondly, choose the firm that is qualified to do their job, affiliated to either the Royal Institution of Chartered Surveyors or the National Association of Estate Agents and licenced to practice estate agency, preferably by the NAEA. Ask about all of this before you even let an estate agent into your property. Last but not least, choose the agent that has been recommended to you by someone you trust who has recently sold their house.
The very last thing sellers should do is choose the agent by doing an internet search or choose the agent that charges the lowest fee. This is often a very expensive mistake. If the agent in question meets the selection criteria above and also charges the lowest fee then that’s a bonus.
Hadley Taylor celebrates first ten years in business
Later this month at Hadley Taylor we will celebrate our first ten years in business. It certainly doesn’t seem that long since we first opened our doors to the public and a lot has changed in the intervening years.
In 2004 house prices in Norwich were about 22% lower than they are today. In that period prices have risen, fallen and risen again but the long term trend has been in an upward direction as Norwich continues to develop into a prosperous and cosmopolitan regional city. The property market behaves in a very different way today compared to how it did in 2004 however. In 2004 we had more sellers than buyers whereas today we have more buyers than sellers. We have more investment buyers today than we did then and fewer first time buyers. In fact only 3% of buyers today are below the age of 30 which in itself is a worrying statistic. We have fewer downsizers because low interest rates mean that most people don’t need to downsize. We also have fewer people moving up the property ladder because low wage inflation means that fewer people can afford to buy a bigger house. The typical profile of our buyers today tends to be people moving from other parts of the country into the Norwich to further their careers or to seek a better work/life balance or people moving from other parts of the Norfolk into the city to be closer to good schooling.
Property taxes have risen dramatically during the past ten years. The Government will rake in about 40% more in stamp duty this year compared with 10 years ago on trading volumes that have fallen 40% in the same period.
There are more estate agents in Norwich than there have ever been. Some agents have started up during the last ten years and some have bitten the dust. Legislation and regulation has increased dramatically during the past ten years. We now have a property ombudsman scheme, licencing and third party deposit schemes which are all good initiatives. Home information packs have been introduced and then thankfully scrapped. The next decade is bound to present us with a whole new raft of new challenges and we will adapt to them as we always have.
We have launched several new initiatives within Hadley Taylor which are designed to sustain our business into the next decade. We have seen our team change and grow over the years. Some things remain constant, however, such as our commitment to personal service and our knowledge of the market and the local area. Our first employee, Jean Bergin, who started the business with me 10 years ago still works for us today and she still does a great job.
What effect will higher interest rates have on the property market?
As sure as night follows day, interest rates will rise. They will rise soon. In fact I think they will start to rise in August or September. The base rate will rise gradually during the next couple of years until we hit what the Governor of the Bank of England calls the “new normal” of about 2.5%.
So what does this mean for the UK property market?
Some young people who only know rock bottom rates will be somewhat rattled by any rate rise so we can expect to see a drop off in confidence from first time buyers. For those of us old enough to remember mortgage rates at 17%, the rate rises predicted will not cause any real adjustment to our financial outlook.
We can expect to see more property coming onto the market which will be good news all round because we are currently in the grip of a nationwide stock shortage. Hundreds of thousands of properties are currently empty and not up to let or for sale. These properties have been inherited or vacated by elderly people moving into care. The owners of these properties have been in no particular hurry to dispose of them because the prospect of turning them into cash, in the low interest rate environment in which we find ourselves, is not in the least bit attractive. With higher rates these same owners will take an altogether different approach to disposing of their assets.
Higher rates will also convince many home owners that the time has come to downsize and reduce or pay off their mortgages. Downsizers have had no real motivation to take the plunge for the last five years during which rates have been manipulated to the floor. Downsizers who liberate some funds from the sale of larger properties will soon be able to get a much higher return on their savings. So we can expect to see more large family houses coming on the market.
Higher rates will also impact those buy-to-let landlords whose business models depend on low rates. It is unlikely that rents can be raised in line with interest rates so some investment properties will cease to be in yield and these will be the properties that are culled from investment portfolios. So expect to see more terrace houses and flats coming on the market as a result.
The rules of supply and demand dictate that if there is more supply then prices will fall. The flip side of this is that our population continues to increase exponentially, so demand for housing will keep rising and this will counter any downward pressure on house prices on the supply side.
How to sell your house quickly
The first decision we have when selling our biggest asset is which estate agent to employ. This should be quite a straightforward process. My advice is always to use an agent that has been recommended by someone you trust who has recently sold their house. Also you should choose an agent who sells houses like yours, in your road. Always remember that the right agent may not be the cheapest agent or the agent who offers the highest valuation which he subsequently can’t achieve.
Having chosen the right agent, there are many other ways in which one can make the process of selling as short and as stress-free as possible. Firstly make sure all your paperwork is in order. Your property should be registered at the Land Registry but if it isn’t, make sure you get this process started before you put the house up for sale, because otherwise your solicitor will have to start the registration from scratch once you have agreed a sale. Make sure you have building regulations and planning permission paperwork for any extensions or alterations you have carried out and make sure you have electrical safety certificates for electrical work carried out, FENSA certificates for windows and doors you have changed and recent evidence of servicing of gas appliances. These will all be requested by the buyer’s solicitor so you might as well be prepared.
When you agree a sale you will need a solicitor and at this point you can start to dictate the length of time the transaction will take. Some solicitors take four weeks to get you to exchange of contracts and others will take four months. Why any solicitor would choose to take as long as four months has always been a mystery to me but believe it or not it does happen. The cheapest solicitors, in my experience, are often the slow, uncommunicative types. My advice is to appoint a local solicitor that has been recommended to you and a firm where your transaction will be dealt with by one person who will actually speak to you on the phone when you call. The very last thing you should do is to use a corporate conveyancing service located in a call centre miles away from the property in question where your sale will be dealt with by a “team”. These services are cheap but they will drive you mad and make you wish you had paid another £100 for a proper solicitor.
Sellers can play their part in speeding up the process by responding promptly to their solicitor’s requests for information and documents.
Lastly, my advice is to compromise. When two parties agree a property transaction it is rare that one party gets everything their own way so it is unrealistic to assume that this will happen. Grown up people know that we all have to compromise sometimes. For example if you state categorically that you will only move house on a certain Friday in August don’t be surprised if your buyer or someone else in the chain might have a problem with this. Be flexible and offer as many dates for completion as you possibly can. Good will goes a long way in the property business. You may also have to compromise on the price if nobody else thinks the property is worth as much as you do.
The good news is that the majority of transactions go through in a fairly straightforward way. For example, we were instructed to sell a very nice terrace house recently in Leopold Road. We agreed a sale in four days and once the sale was agreed the transaction took just four weeks to exchange with completion following two weeks later and both buyer and seller were delighted with the outcome. The solicitors involved on both sides did an excellent job and I would happily recommend them to anyone.
Is your agent licensed to sell your house?
The National Association of Estate Agents has launched a campaign to raise awareness of their licensing scheme. It seems that consumers are not aware that some estate agents are licensed to practice by the NAEA and some are not.
Most estate agents are members of the NAEA and some are affiliated to the Royal Institution of Chartered Surveyors. Both of these are excellent professional bodies and membership ensures that best practice is followed and that a redress system is in place for agents who make mistakes or, worse still, fall foul of the law. Sellers would be very foolish to use an agent who is not affiliated to one of these two organisations but believe it or not there are several estate agents in Norwich who are not regulated by either body.
What very few people seem to be aware of is that although the NAEA regulates all its members, they restrict licensing to only those agents who can meet certain strict criteria. To be licenced to practice estate agency members are required to be a principle, partner or director of their business, they have to have approved professional indemnity insurance, they have to have passed the NAEA technical qualification in residential property sales, they have to be registered at Companies House and they need to agree to be regulated by the NAEA. These requirements should all sound perfectly reasonable to consumers but most agents are not licensed. In fact only 13 agents in Norwich are licenced by the NAEA. At the last count there were 44 estate agents in Norwich which means that most sellers are using unlicensed agents.
So why is this important? When an estate agent is standing in your living room wearing a shiny suit and a permatan and telling you through his perfect veneered teeth that he can get you more than you hoped for your house and he’ll charge you less than anybody else, do you really care if he is licensed or not? Probably not until he makes a mistake or does something dodgy and then you’ll spend the rest of your life telling anecdotes at dinner parties about crooked estate agents to anyone who is prepared to listen.
Smart people would never dream of using an unlicensed midwife to deliver their baby or an unlicensed dentist to pull out their teeth. Imagine letting an unlicensed driving instructor teach your teenager how to drive or leaving your toddler with an unlicensed child minder. Would you get into an unlicensed taxi or book a holiday with an unlicensed travel agent? It simply isn’t done to take these risks so why do most people use an unlicensed estate agent?
My advice to anyone thinking of selling is to only use an agent who is affiliated to a professional body and ask the agent whether he’s licensed before you trust him with your biggest asset. Hadley Taylor is, of course, a business licensed to sell property by the National Association of Estate Agents.
Time for Government to review stamp duty
Estate Agents up and down the land will tell you that they have plenty of buyers but not enough sellers. This has been the case for about five years and the situation is not likely to improve very much in a hurry. There are three reasons for this phenomenon. Firstly we haven’t had enough wage inflation during the past five years to allow many people to move up market. Second, with interest rates manipulated to their historical low since 2008 there has been little need for people to down-size for economic reasons. As a result, most properties coming to the market today come as a consequence of death, divorce or work relocation.
The third reason that so few people are selling is the eye watering cost of stamp duty. Government sees property transactions as easy money and since the introduction of a progressive scale for stamp duty, we have seen aspiration penalised in preference to keeping stamp duty as a flat tax which would be fairer all round.
Faced with tax bills of £15,000 on a £300,000 purchase or £24,000 on a £600,000 purchase, it’s not surprising that so few people are moving house. If the Government reformed this unjust tax and opted for a flat 1% on all property transactions we would see many more transactions each year with many more people moving and this would provide a more fluid jobs market which in turn would be good for the economy.
So where would the Government make up the extra billions needed to fund hospitals, schools and welfare I hear you ask? Well, if more of us moved house we would spend more on extensions, loft conversions, carpets, curtains, kitchens, bathrooms, domestic appliances and professional services. This extra spending would be great for the economy and the VAT paid on goods and services would more than compensate for the lower tax grab on stamp duty.
Sounds simple doesn’t it. So why doesn’t the Government pay more attention to the legion of organisations lobbying on this very issue of late? The answer is that people in Government aren’t very bright and they would rather go for the low hanging fruit of stamp duty at 3% or 4% for most of us, rather than look at a fairer system that would stimulate more tax revenue and economic growth in the long run.
Sell your house at Poundland!
Steve Smith, the man behind Poundland, has launched an on-line estate agent called Estates Direct. He claims to be able to sell houses anywhere in the UK and he charges his customers as little as £390. Sounds good doesn’t it?
This type of service, however, is nothing new. I seem to remember not so long ago that Tesco were going to revolutionise estate agency with their on-line property service and before that it was Google who were going to upset the apple cart and before that it was Sarah Beeny.
On-line estate agents have been coming and going for about 15 years so the business model is getting a bit tired. None of them have gained any great critical mass and this is for two very good reasons. Firstly most people wishing to sell their biggest asset want more than the on-line agent offers. Of course they want internet marketing but they also want lots of other things too. They want local knowledge, advice, excellent marketing, a local presence, local press advertising, floor plans, someone to take the pictures, an energy performance certificate, someone to put the for sale board up, accompanied viewings, someone to negotiate the selling price on their behalf and someone to navigate their way through an adverse survey report when it arrives. On-line services just don’t do this.
The second reason that none of the on-line services have caught on is that there’s no future in running a service business that aims to be the cheapest. Estate agents that charge the least whether they are high street businesses or on-line services never last. They go bust.
I work in the most competitive business there is and our fees are structured accordingly. However, what we do offer is great value for money. Selling a house using an on-line service can be very expensive in the long run because the optimum price is rarely achieved for the asset. Our clients are delighted to pay our fees because they know that they have sold their prize asset at the optimum, and often “best in street” price.
There are some very good Volkswagen adverts on TV at the moment. Maybe you have seen them. One compares a cheap shark cage that’s falling to bits with a shiny new safe one that’s a little bit more expensive. You know the one. Another compares a moth bitten old parachute with a brand new well packed one that’s, yes you’ve guessed it, just a little bit more expensive. The message in the advert is a very old message and a very simple message and that is that you tend to get what you pay for. Estate agency is just like that. You tend to get what you pay for.
Of course if one were selling a house in virtually any other country on the planet the fees paid to the selling agent would be considerably more than those paid to agents in the UK. This is because we have a relatively stable and mature property market with a fair degree of regulation and lots of healthy competition compared to anywhere else.
Why the Government loves estate agents ?
The economy is recovering and so too is the property market, and estate agents up and down the country are at the centre of it all.
In recent months thousands of estate agents have taken on new staff and this has helped the unemployment figures and reduced the amount the Treasury has had to spend on out of work benefits. In fact the property sector has out-performed virtually every other sector when it comes to employment figures.
Then there is the tax contribution estate agents make. The vast majority of estate agents are small businesses and they have to be in profit otherwise they would simply cease to exist. This means that they pay corporation tax on their profits. They also pay PAYE contributions for the people they employ and local business rates on their premises.
Stamp duty is charged on every purchase of more than £125,000 and as most transactions around the country are at a higher value than this we can assume that stamp duty is collected on the vast majority of transactions. In fact more stamp duty was collected last year than at the peak of the housing bubble in 2007 despite the lower number of transactions. In 2013 an eye watering £7 billion was collected by the Treasury in stamp duty on one million transactions compared to £6.7 billion in 2007 on 1.6 million transactions.
Even when you’re dead the Government can make a killing on your property through inheritance tax which is levied at 40%.
Then of course there’s VAT calculated at 20% on agents fees, solicitors fees, survey fees, removal services, carpets, new kitchens, the list is endless. Like all other VAT registered businesses, estate agents collect this tax from their clients completely free of charge and send it to HMRC.
Property is great business for the Government. Property is easy to tax because you can’t hide it easily in a balance sheet or off shore it in the Cayman Islands and the tax revenue raised from stamp duty and VAT feed into the Treasury straight away unlike some other taxes that are rather more retrospective.
There is a perception fostered by the media classes that estate agents are held in the same low regard as bankers, lawyers and traffic wardens by the general public. In reality if we want more schools, hospital beds, teachers, doctors and nurses to look after our growing and ageing population, someone will have to pay for them and increasingly Governments of all political hues are looking to the property sector to foot the bill.
What does the New Year hold?
This year the UK economy will grow faster than that of any other developed Western nation or so we are told by economic commentators. UK property prices will also rise faster than at any time for several years, having said that, it is important to point out that we have a two speed property market in the UK, in other words, London and the rest of the country. London is an international property market and should not be compared to any other part of Britain. London competes with a tiny number of other international capital cities and any talk of average house price rises that includes London’s figures is somewhat miss leading. There are huge disparities between what goes on in the capital’s property market and all other regions of the country. There are, of course, huge disparities within the capital itself. For example there are some London boroughs where one can buy a terrace house for £250,000 and there are some London boroughs where a terrace house will set you back about £9,000,000.
In Norwich we have seen modest property price rises in 2013 and we will see modest price rises this year too. These price rises are driven by supply and demand and cheap money rather than wage inflation. Of course rising house prices are not good news for anyone trying to get on the housing ladder or for those wanting to upgrade to a larger property and making housing unaffordable for our grandchildren can’t be desirable for society as a whole.
There is some hope for those struggling to buy their first home, however, and this will come in the form of higher interest rates. Higher interest rates will put a lid on price inflation and hopefully prevent a property price bubble and an over-heating of the market. We do not live in a free market when it comes to interest rates. Instead we live in a false paradigm of ultra-low rates and a normalisation of rates is long overdue. The Government and the Bank of England have manipulated interest rates for the past five years for economic and political reasons and only time will tell whether their collective actions were worthwhile but as sure as night follows day rates will rise. The Bank of England has indicated that it will raise rates once unemployment falls to 7%. What the Bank of England didn’t count on was that unemployment would fall as fast as it has and we will soon be at the target level. The Government will want interest rates to remain at their historical low for as long as it takes them to win the next general election but their hand might be forced by a property price bubble in London and inflationary pressures in the wider economy.
In reality I believe rates will start to rise in the fourth quarter of this year and this will be good news for savers and bad news for the over indebted. Higher rates will result in more properties coming onto the market as we see a return to a more normal economic cycle.
Property taxes – are they fair?
The political classes all like to talk about fairness. In fact it’s the new buzz word in Westminster but how fair are property taxes?
Government sees property as an easy target. Property is a physical asset. You can see it and keep a record of it very easily unlike income, gain or profit and that is why there are so many property taxes.
The one thing that is holding up the property market more than any other single factor is the amount of tax that the treasury want to take out of every property transaction. If you buy a house for £200,000 you will pay £2000 in tax, if you buy a house for £300,000 you will pay £9000 in tax and if you buy a house for £600,000 you will pay an eye watering £24,000 in tax. No wonder then that many homeowners would rather stay put than hand over their hard earned cash for the privilege of moving house. Expenses such as survey fees, estate agent fees, removal costs and solicitor’s fees seem like small beer when compared to stamp duty at 4% or even 5% in some cases.
Governments of all colours come up with all sorts of hair brained ideas to get the property market moving a little better. Most of these schemes involve some sort of shared ownership or some convoluted financial product or even more government borrowing which only adds to the national debt. Abolishing stamp duty would be a radical change to the tax system and would help us move to flatter and fairer taxes whilst giving the property market a shot in the arm.
Double taxation is unfair and in other more enlightened economies double taxes have been abolished. Double taxation is where people are taxed twice. For example we pay income tax on the money we earn to buy a house in the first place and then we pay tax on that money again when we complete the transaction. The other property tax that is an unfair double tax is of course inheritance tax. In fact inheritance tax is a triple tax because having paid tax on the money needed to buy a house we then pay stamp duty when we complete the transaction and our heirs pay inheritance tax on the same property when we die. Maybe Nick Clegg, David Cameron and Ed Milliband should consider how fair that is.
Council tax is another property tax levied against the size and value of your house. This is rather absurd because council tax pays for local services, therefore the charge should be levied against the services we use rather than the property we live in.
It is statistically proven that when taxes are seen to be fairer, fewer people try to avoid paying them and more tax is actually collected. Britain will eventually move to a fairer tax system whereby we are taxed only on income, gain, profit and purchases and against the services we use as is the case in other more developed economies. I fear though that these changes will be a little slow in coming given the level of unfairness coming out of Westminster.
Why are there so many empty houses in this country?
At a time when there is enormous demand for housing, it is hard to believe that there are currently about 900,000 empty residential properties in the UK. Add to this several hundred thousand commercial properties and it’s easy to see that we have a problem. These are not second homes, these are unused, vacant properties and most of them have been vacant for several years or even decades.
So why do people own properties and keep them empty? I’ve never been able to work this one out because in my book property is for living in and if one doesn’t live in it you need to work in it or it needs to earn you an income by letting it. Otherwise owning vacant property is a fine way of wasting money. Council tax will increasingly be charged on vacant property in the future and then there are the other costs of ownership such as utilities, maintenance and insurance. Property in Norwich hasn’t seen much of an increase in value for about five years and is unlikely to rise in value very much for a few more years so there really isn’t any point in keeping properties that are surplus to requirements hoping that one day they’ll be worth a fortune.
Local authorities and Government departments are also guilty of sitting on hundreds of thousands of vacant properties up and down the country either because they’ve forgotten that they own them or because they are too incompetent to do anything about renovating, letting or disposing of them.
Selling or letting vacant properties are the only two options. The market for selling or letting property is reasonably strong in Norwich at present so selling at a good price or letting to create income shouldn’t be a problem at all. Vacant properties can be transformed into desirable places for people to live or work.
Some vacant properties are, of course, on the market for sale but they don’t seem to sell in a hurry because they are nearly always overpriced. One thing I have learnt over the years is that there is no such thing as a property that won’t sell, only properties that are too expensive.
Why do sales fall through?
Thankfully we don’t see many sales fall through but when they do it’s very irritating for us and often upsetting for our clients.
Sales rarely fall through as a consequence of issues raised in a survey report. If the buyer wants to buy and the seller wants to sell then most unforeseen structural problems that come to light in a survey report can be accommodated for within a re-negotiation of the selling price by an experienced estate agent. Down valuations are rare but these can usually be dealt with in the same way. Sales do fall through at this stage in the sale if the buyer is not sufficiently motivated to buy or if the seller is not realistic enough about the evidence presented to them about their property. Like most things in life buying and selling property requires compromise and this means grown up behaviour on both sides.
So if the survey is not the main reason for a fall through what is? Well human nature has a lot to do with it. Some buyers just get cold feet and believe it or not some sellers get cold feet. Also circumstances can change during the course of the sale. For example, buyers or sellers can lose their job, have an accident, pass away, become pregnant, fall in love or fall out of love and all of these life changing events can change the way people feel about their sale or purchase.
The golden rule is that a house isn’t sold until contracts have been exchanged so my advice is to get to exchange of contracts as soon as you can. This means you will have to chase your agent, your solicitor, your surveyor or your lender to get things done in a timely fashion but if you drive the process most properties can be bought in 4 weeks. If your solicitor can’t work to this time frame then find one that can but always go by recommendation from someone you trust.
What effect have low interest rates had on the property market?
The Bank of England has pegged interest rates at historically low levels for several years now in an attempt to resuscitate the economy. This medicine has been hard to swallow for savers but it seems to have done the trick for the ailing patient with the economy growing again and a record number of people being in employment. Property prices have stabilised since the dark days of 2008 and 2009 and we now have stable prices in all markets with the exception of planet London.
Interest rates will of course have to rise. Not any time soon, and when they rise they will not rise fast, but as sure as night follows day, rise they will. When they do, some normality will return to the property market.
Low interest rates over such an extended period of time have had a distorting effect on the property market. Transactions fell off a cliff in 2008 and although we have seen modest increases in the number of transactions in the market since then, we are still well below peak levels. This is due in part to low interest rates. Few sellers have needed to sell in recent years because most home owners have been able to sustain mortgage repayments with rates at their low levels. Households may have seen increases in the cost of fuel and food but their mortgage costs have plummeted. In order to get a little more fluidity in the property market we need a little more motivation to sell and this will come with higher rates.
Time and time again agents, when presenting their clients with reasonable offers, hear the words “I don’t need to sell”. I for one would like to hear the words “I really do need to sell” a little more often and I’m sure I will, once we see higher interest rates.
Low rates have also spawned an army of amateur landlords who have got into buy to let because it has offered a far better return than savings rates. We’ve also seen a growth in accidental landlords who have been able to retain properties that are surplus to requirements because the mortgage payments have been sustainable. Being a landlord isn’t all it’s cracked up to be and it’s certainly not for the faint hearted. When interest rates rise, many of these amateur and accidental landlords will want to pay down their loans and move their cash into fixed rate savings and we will see more ex rental stock coming onto the market for sale.
So when the time comes for interest rates to rise we will see more stock on the market and this will mean more potential business for estate agents and more choice for house hunters. More stock also means stable prices rather than price inflation so this will be a good thing for younger people trying to make their first jump onto the property ladder.
What’s hot and what’s not?
Supply and demand has always played a significant role in the property market. What is flavour of the month today may not be next year and supply of certain types of property can change from over supply to under supply in no time at all. Generally speaking we have under supply of good quality homes in Norwich at most price points.
Right now in Norwich we have high demand for investment properties in locations close to the city centre with good letting potential priced up to £125,000. Investing in property is becoming a very common component of pension planning as investors seek to spread their assets as widely as possible. Three bedroom family houses in mature residential areas priced up to the £250,000 stamp duty threshold are also in short supply and we never seem to have enough detached four bedroom family houses in established residential areas around the £400,000 mark.
Building plots of any size and at almost any price are like hens teeth in Norwich. As one moves out of the city into the villages there seem to be more single plot opportunities but even these are scarce.
New build homes are still very popular with a particular type of buyer who wants an easy life and is not overly concerned about location. New build is easy because there’s not much to think about. You just move in and start living. However, ten year old houses are not in such demand because there is always an identical brand new house on another estate just down the road where the developer is offering free carpets, free legal fees and cash back when you move in.
Properties in remote areas are becoming harder and harder to sell due the cost of travelling to and from work, school and play. Properties with oil fired central heating are becoming harder to sell because of the insane cost of heating oil and remote properties outside of catchment for good schooling are becoming harder to sell as the postcode lottery of our education system becomes an increasing issue for parents of school age children.
There has been much hype in the media about a pick-up in the housing market and while it would appear that there is more buyer activity this year than last, the rules of supply and demand still apply.
What foundations is the property market built on?
The media and most estate agents are doing all they can to talk up the property market at the moment. In fact hardly a day goes by when I don’t hear or read some headline about the over-heating of the property market and a house price bubble. Most of these reports talk about house price inflation as if it were a good thing that our children will be priced out of the property market altogether in years to come. Reporting also makes reference to rises in average prices across the country which is not helpful because although there is a lot of price inflation in London at the moment, in some parts of the country prices are stable and in some they are still falling. Property portal rightmove.co.uk is over egging the pudding more than anyone, reporting that asking prices are rising faster than they have for years. This, of course, is completely irrelevant because asking prices mean nothing whereas selling prices mean everything. Not wishing to rain on everyone’s parade too much it is fair to say that Norwich has fared reasonably well since the dark days of 2009 and we are seeing some modest price inflation.
Property price inflation is only ever a good thing, however, if it is caused by economic growth, increases in productivity and increases in average earnings. Unfortunately even the most optimistic economist would struggle to say that all of these indicators are going in the right direction fast enough to justify the levels of price inflation in the London property market in recent months. Economic growth is modest, productivity is lower today that it has been for years and wages are stagnating. The economy is recovering but it will still take some time for productivity and wages to head in the right direction.
Instead, the foundations that are underpinning the property market are firstly the bizarre phenomenon of buy to let landlords being subsidised by housing benefit, the Government’s mad help to buy scheme which encourages sub-prime lending and historically low interest rates that give existing and new borrowers a false sense of security about their ability to meet their obligations in the future.
If the Government is ever to address the deficit it will have to first tackle the limitless housing benefit bill and this will result in reduced rental yields for landlords, the Government will also have to do an about turn on the help to buy scheme before it all ends in tears and the Governor of the Bank of England may have to raise interest rates rather earlier than he thinks to stave off inflation in the broader economy.
Another factor, in London at least, is foreign investors buying up anything they can lay their hands on. David Cameron was mocked earlier this month at the G20 summit by a Russian politician who boasted about Oligarchs buying up most of Kensington and Chelsea. The truth is that they’re investing in London because there’s nothing much worth investing in in Moscow. This foreign money, of course, won’t last forever as foreign investors find alternative safe havens for their laundered cash.
Once these drugs have been withdrawn from the patient the property market will have to deal with the cold turkey reality that price inflation is only ever a good thing if it’s the right sort of price inflation.
Are estate agency awards all they appear to be?
One could be forgiven for thinking that awards for estate agents were dished out by independent panels of experienced industry professionals whose criteria for deciding winners reflected the views of consumers and industry peers. If this were the case I would be delighted to get involved, but I’m afraid this impression is far from reality.
Award ceremonies for many industries have become an industry in themselves. Specialist award ceremony companies organise these events, and they have become very sophisticated marketing machines. Some of the revenue for these businesses comes from sponsorship by providers of estate agency signage, property portals or estate agency software, and these providers use the event and the contact list it generates to hard sell their products and services once the hang overs have worn off the following day. The remainder of the income comes from high end ticket prices for the ceremonies themselves. So yes, you’ve guessed it, if the agent doesn’t want to pay £299 for their ticket, they probably won’t win an award.
The panels of “expert” judges for these events often includes some TV celebrity with some tenuous link to the property sector, but there is a distinct lack of credibility or independence in the selection of these experts, and the awards tend to go to the companies making the biggest financial contribution, surprise, surprise!
So if you hear an estate agent bragging about their latest award, just take it with a huge pinch of salt, and remember how they got it. My advice is always the same when it comes to selecting an estate agent to sell your biggest asset, ask for a recommendation from someone you trust who has recently sold their house. If of course you don’t know anyone who has recently sold their house you won’t go far wrong by choosing a member of the Norwich and District Association of Estate Agents. Membership of this professional body does not depend on how much each business is prepared to pay. Instead, membership depends on whether the agent is prepared to run an ethical business, stick to a code of conduct and share best practice.
Chanel 4 Despatches documentary is spot on
I watched with interest the Chanel Four documentary titled “The Property Market Uncovered” on Monday night. The program was both refreshingly accurate in its depiction of some estate agency practices and confirmed my own concerns about their behavior. If you missed it I thoroughly recommend you watch it on C4 catch up. The program focusses on the illegal practice of pressurising buyers to use in-house legal and financial services which is endemic in some corporate chains of estate agents and is the result of a relentlessly target-driven culture within these businesses. It is illegal to discriminate against a buyer who does not choose to use an agent’s in-house services over one that does.
Practices such as preferred buyers, prioritised offers, failure to put offers forward, misleading information about the Government’s help-to-buy scheme and miss-selling of buy to let mortgages were all highlighted in this excellent program.
So why am I writing about it? Well it is no surprise to me that all the culprits were corporate estate agents where these illegal practices are systematic. Independent agents can of course be dishonest too but only on a case by case basis and the crooked ones don’t last long before they are found out. In Norwich the best bet is to use an agent who is a member of the Norwich and District Association of Estate Agents. We have 30 member firms and we don’t let just any agent join our group. We’re picky about ethics and some agents don’t want to join our organisation because they shy away from scrutiny and codes of practice.
There are plenty of excellent estate agents to choose from. My advice is to go to a local firm, with a stake in the community you live in, that has been established for some time and that has been recommended to you by someone you trust.
How to deal with an adverse survey report
In my experience sales very rarely fall through as a consequence of an adverse survey report. Some buyers identify an adverse survey as the reason they might want to pull out of a purchase but it is nearly always used as a smoke screen because the buyer is too embarrassed to admit that they have simply changed their mind about the property in question.
When an adverse survey report is genuinely an issue for the buyer but they are still motivated to proceed, then this is where your estate agent really starts to earn their fee and in my experience at this point I know there will probably be a sale at the end of the process. Of course this rather depends whether you’re using an agent in the first place, otherwise you will have to deal with this rather thorny issue yourself if selling privately, or if you’re using an internet service to sell your biggest asset. It also depends whether you’re using an experienced and skilled agent who has seen it all before. The cheapest agent is never the most skilled or experienced but then that goes without saying.
The first advice I give to buyers when they have a survey report done is to speak to the surveyor in person or by telephone once they have received the report. This is because the surveyor can translate building terminology into plain English and expand on issues raised in the survey in a rather more effective way than they can do within the narrow confines of the report. The surveyor can also give an opinion and even offer advice which is, after all, what you’re paying for.
Survey reports on older properties will always include a list of defects and repairs. This is entirely normal with any property of any age even if it appears to be well maintained because it is, after all, second hand. Surveyors will always recommend a series of specialist inspections such as gas appliance inspections or damp and timber inspections and this is also entirely normal. Buyers of properties in need of modernisation are always paying a discounted price which takes into account the investment they will need to make once they move in. Some inexperienced buyers then assume that there is a further discount to be had once the survey report is in hand. This is only ever the case if the surveyor down values the property in his report.
Most surveyors include a valuation section in their building surveys and this provides an independent opinion of the value of the property warts and all. Buyers and sellers should use this independent opinion as a guide for any further negotiation.
So, when selling your home, especially if it’s a period home, use an experienced agent who can guide you through the process and deliver a satisfactory outcome. When choosing a surveyor, always use one that is properly qualified and one who does not also sell houses as this may introduce a conflict of interest into the advice on offer.
Reviewing the year
As we come to the quiet end of another year in our business it is always interesting to look back at the last 12 months and also to look to the future with, I have to say, a fair degree of optimism.
2013 has been a good year for us. We have agreed more sales this year than we did in 2012 or 2011. There are several reasons for this increase in sales. Firstly there have been more first time buyers in the market for their first home and secondly, private individuals with cash in the bank have been buying up lettable properties in good residential areas as part of their pension portfolio. Confidence has returned to the market even if transaction volumes nationally are still at a much lower level than they were at the peak of the market in 2007.
My first prediction for 2014 is that prices will rise modestly. However, we can’t expect anything like the price inflation seen in the London market in recent months because London can only be compared with a handful of international capital cities and as London increasingly establishes itself as the capital of the World of art, finance, music and fashion we will see the disparity in prices between London and the rest of the UK grow even further.
My second prediction is that the Government’s Help to Buy Scheme will bite the dust in 2014. This ill thought out scheme encourages buyers to borrow more than they should and places the liability for some of that debt onto the taxpayer. The Bank of England is anxious that a property price bubble is building, partly due to Help to Buy and the Governor of the Bank of England, if he has any sense, will kill off the scheme before the year is out.
My third prediction is that interest rates will start to rise before the end of next year. Rates have been at historically low levels since 2008 and while this rather drastic measure has saved many mortgage holders and small businesses from extinction, the time will soon come for rates to rise. Normalising the Bank of England base rate would mean raising it to 4 or 5 percent. The fragile economic recovery won’t stand that level just yet but we can expect a slow but steady rise in rates starting in the fourth quarter of 2014. Higher rates will be great news for savers but will also mean higher repayments for mortgage holders. This will result in much more housing stock coming onto the market as households try to downsize their outgoings. Many landlords will also want to divest into tamer investment vehicles once their yields start to look a bit thin. Inevitably higher rates will also serve to keep the lid on house price inflation and prevent the market from over-heating and this can only be a good thing for the next generation of home buyers.
Regardless of outside factors beyond our control it is reassuring to know that Norwich remains a vibrant place to live and work with low crime rates and a beautiful county to explore beyond the city boundaries. So whether you’re buying or selling, 2014 might be the year to do it.
How affordable is property in Norwich?
Affordability in the property market is something the media like to bang on about a lot these days. We haven’t seen any house price inflation for five years, however property booms have made property increasingly expensive especially for first time buyers. Property booms are not a recent phenomenon though. We had property booms in the sixties, the seventies, the eighties and the nineties which made life equally difficult for previous generations of young people trying to get on the property ladder.
The statistics of course don’t always match up to the media spin either. For example Halifax claimed recently that “house price affordability was at its best level since 1999 and that a typical mortgage today required just 28% of household income to service it”, which is less than one might have expected.
The Nationwide claimed earlier this year that “first time buyer homes are more affordable than they have been since 2003 with a typical first time buyer’s mortgage requiring 34% of income to service it.”
So how does this work in real life? Well it is possible to buy a one bedroom flat in Norwich for about £80,000. In fact there are twelve such properties on the market in Norwich right now. With a 20% deposit this would require a mortgage of £64,000 which represents a multiple of two and a half times average earnings. On the face of it this tells us that property prices in Norwich are very affordable assuming that first time buyers can first save or borrow from mum and dad the 20% deposit.
What has changed since I bought my first one bedroom flat in 1983 is that the expectations of first time buyers have changed and what they really want is a three bedroom house and this is where the affordability issue raises its head. So when the media report unsustainable property prices for first time buyers what they really should be reporting are the changes in expectations of young people when buying their first home.
The good news is that property of all types hasn’t been as well priced since 2006 and prices are not likely to rise or fall very much at all for some considerable time. As for first time buyers, well they are definitely back in the market.
Why are there more tenants than buyers?
One thing I have learned about the property market over the years is that things always change and if agents are to succeed we have to change with it. One trend in recent years is that there are an increasing number of people who want to rent a house rather than buy one. Now in the long run it is far cheaper to buy a house than to rent one but for many renting is the right solution to their housing needs at the time. There are many reasons for the increasing number of tenants.
First time buyers need bigger deposits today than they have for years so unless the bank of mum and dad is open for business a lot of first time buyers have to delay their first purchase until they have saved their deposit and they tend to rent while they are doing this. Mortgage lenders are also much stricter today with their lending criteria and self-certified mortgages are a thing of the past so not everyone will qualify for a mortgage. For example, self-employed people will need several years of accounts before a lender will consider their application and buyers who work on commission or bonuses will only have a proportion of these earnings taken into account by lenders. Some workers will have to rent in the short term and some may never meet lenders’ strict criteria so renting is the only answer.
Renting is a more flexible way to live for some who are on temporary work contracts or know that their work will take them to a different location in the near future. Renting is an easier way to live for some who don’t fancy the idea of repairs and maintenance. Tenants can simply call the landlord when something in the property needs replacing or fixing and this is an attractive option for busy people with better things to do with their time than get up a ladder or get the paint brush out.
Rents are at an all-time high and as demand increases rents will also increase giving landlords a competitive rate of return when compared with other long term investment vehicles.
So whether you wish to sell or let your property or whether you want to buy or rent, we can help you.
The New Year is often a good time to take stock of what has passed and look forward to what lies ahead.
2012 was a challenging year for anyone working in the property sector, but then again that’s nothing new seeing as how we’re five years into the worst economic slow-down in living memory. However, it would be unwise to be totally taken in by the doom mongers in the media and in the chattering classes.
So what about 2013? Well at Hadley Taylor we had a better year in 2012 than the previous year and we are forecasting another modest improvement this year. Property is selling just fine as long as sellers don’t think their homes are worth more than anyone else does. We continue to have more buyers than sellers contacting our business and most economic indicators are promising. For example inflation is not rising, interest rates will continue to be at their historically low level for some years to come, the deficit is reducing, consumer confidence in recent months has improved significantly, employment is at an all-time high and most importantly economic growth is positive and recession is behind us.
So will 2013 be a good time to buy or sell? My answer to that question is that it will be as good a time as it’s been for years and as good a time as it will be for several more years to come. Generally speaking property prices in Norwich are lower today than they were in 2006 and are not likely to rise or fall very much at all for some considerable time. The reason I don’t think prices will rise much is because there simply isn’t enough wage inflation or liquidity to cause house price rises. I don’t think prices will fall much either because our rapidly increasing population will continue to stimulate demand. What we are left with are level prices.
This all adds up to house price stability which is what we all need in spades. So whether you’re a first time buyer, an investor, a downsizer or someone looking to trade up, we have a very stable market in which to make your move.
Is it easier to sell a big house than a small one?
I was asked recently by the Eastern Daily Press property journalist whether it is easier to sell a larger property than a small one and here is my response which was printed in last week’s paper:
It is a myth that million pound houses always sell and are not as affected by peaks and troughs as much as lower value properties. It is also a myth that it is easier to sell an expensive house than a lower value house. It is true, however, to say that the seller of a big house is sometimes an easier client for an agent to work for because he or she is often a more mature and experienced individual and is therefore more likely to accept good advice when it is offered.
For a start only a hand full of properties sell for more than a million pounds in Norfolk each year. These myths about the saleability of posh houses are generated in the tabloid press and are reporting certain transactions in London which is a property market not to be compared with any other part of the planet let alone the rest of the UK. I believe that the more buoyant sectors of the property market in Norwich at the moment are sub £125K, sub £250K and sub £400K with stamp duty playing a major role in buyer behaviour.
Time and time again I find that people spend more time selecting a new pair of shoes than they do selecting an estate agent to sell their most valuable asset.
Many sellers go for the cheapest agent thinking that the outcome of the sale will be the same regardless of the agent they choose.
Estate agents who offer cheap fees are doing so because they have nothing else to offer you. They don’t have enough experience, they don’t have enough local knowledge and they don’t have a track record of selling houses like yours. If they did they would charge you a little more wouldn’t they?
Hadley Taylor charges a fee that is not the cheapest but then it’s not the most expensive either. When we achieve the best in street price for our clients they are delighted to pay our fee because they are bright enough to realise that getting the best price for their biggest asset is more important than saving a few hundred pounds on the fee.
Also remember that we only earn our fee once we’ve done our job unlike some agents who want you to pay them some money up front, and we only charge a percentage of the selling price unlike some agents who charge a percentage of the asking price.
So always choose the right agent, not the cheapest agent and remember that not all agents are the same. If in doubt, ask for a recommendation from someone who’s successfully sold their house and you won’t go far wrong.
Should the Government be doing more to stimulate the housing market?
I was asked recently by the Easter Daily Press to comment on the Government’s latest ideas to stimulate the housing market.
First of all I don’t think it’s the Governments job to encourage people to buy houses. Whenever this has been done in the past the results have not been good for individuals, the property market or the economy in general. People should buy their first home after careful consideration and once they have saved a substantial deposit.
Speeding up the planning process would be a very good thing even if the answer is still “no”. The same could be said of much of what goes on in local authorities.
Slashing red tape for a limited period on home extensions sounds like a good idea but it may result in thousands of oversized ugly carbuncles on the faces of otherwise good looking properties. If extensions and improvements aren’t well designed home owners may find they don’t recoup their investment when they come to sell.
This months announcements are the latest in a long line of measures designed to breathe life back into the housing market. David Cameron and Nick Clegg want more houses built because their Government insists that more and more people will live on this small island. The truth is that if developers had the confidence to build more houses they would get on and build on the 200,000 plots they already have permission for. The truth is that developers generally don’t have that confidence or finance to get started and unless the Government wants to get into the house building business, the situation isn’t going to change in a hurry.
Of course there are millions of vacant properties up and down the country that could be renovated and put into use. If you look above shops in Norwich you will see that many of the upper floors are vacant. People could live in this accommodation and be located close to schools and work. Most of the redundant housing stock in the UK is of course owned by the central Government or local authorities so maybe Mr. Cameron and Mr. Clegg should look a bit closer to home before they do anything else.
Estate Agents don’t have to be irritating
If you’ve had your property on the market in recent years you’ve almost certainly had your door knocked by an estate agent other than the one you have appointed to sell your house. This agent will claim to have been in the area and thought they’d ask if they could offer their services. The culprit has been driven to this type of canvassing by a desperate attempt to meet corporate targets in what is a very challenging and competitive market. We, of course, don’t do this and, I hope, no member of the Norwich and District Association of Estate Agents would do this either. That’s because we work to a code of practice and we think that this sort of behaviour falls very definitely into the category of bad practice. In fact the Office of Fair Trading would certainly have something to say about it.
Having carefully decided which estate agent to employ to dispose of our most valuable asset the vast majority of us would find this sort of door step approach incredibly irritating and I for one don’t want to be tarred with the same brush as these snake oil salesmen in cheap suits.
What is more disturbing is the fact that some sellers are elderly, unwell or vulnerable and this may well be the reason they have decided to sell in the first place. This type of vendor should not be worried by unsolicited door stepping. So if your house is on the market and you are troubled in any way by this type of unscrupulous behaviour then speak to The Ombudsman for Property who will be very glad you called.
To buy or to rent that is the question
The rental market has expanded enormously in recent years due in part to the fact that first time buyers are struggling to raise deposits to buy their first home. If the bank of mum and dad isn’t lending then renting is often the only option available.
Renting, though, is a very expensive business. According to Barclays Bank it costs about £200,000 more to rent a typical family house than it cost to buy one over a 50 year cycle. This figure takes into account all of the acquisition costs, mortgage payments and maintenance costs and does not factor in any capital appreciation.
So it is clearly cheaper to buy than to rent which leaves us with the affordability issue. My advice is to buy what you can afford in the best possible location. We all want as many bedrooms, bathrooms and living rooms as possible and a few acres and a pool would be nice but a two bedroom terrace in a good area is really as good a start as we should hope for and buying it rather than renting it is the smartest thing to do.
The other benefit to buying over renting is that nobody can give you notice to quit at any time of their choosing.
Changes in the rate of vat on listed buildings alterations
I was asked my opinion recently by the EDP property journalist about the Government’s proposed changes in the rate of vat on listed buildings alterations and how this would affect those undertaking such projects. My response was as follows:
I can see this from both sides of the fence
The increase in vat on listed buildings alterations will of course increase the cost of adding to and altering historic buildings and this is a big problem for charities, the church and voluntary organisations charged with the responsibility of undertaking such work and these organisations will have to decide whether the changes or alterations are absolutely neccessary. Private individuals will also have to decide whether such alterations are necessary although some owners of large listed properties may of course be able to afford the extra cost and will go ahead with alterations regardless.
I suspect Brian Berry of the Royal Institute of Chartered Surveyors is right in his assumption that this change in vat is about raising more money, however, the Government is running out of ways of raising more tax revenue and in it’s attempts to balance the books after years of deplorable overspend there will be many more compromises to be made in all aspects of taxation and expenditure.
Perhaps RICS should propose another way of raising the money or maybe they think the state should go further into the red?
Choosing The Right Agent
I was asked this week by the Eastern Daily Press journalist what sellers should do if they are unhappy with the service their estate agent is providing. I was pleased to answer her question which she then printed in the property supplement this week
If you’ve chosen the right agent to sell your home in the first place they should be able to sell it assuming the price is right.
Some folk of course don’t choose the right agent, they choose the cheapest agent or the agent who valued the property higher than anyone else and this means they have almost certainly chosen the wrong agent. If you’ve chosen the agent who sells more houses like yours, in your postcode, than anyone else then you’re on the right track and I would always go by personal recommendation when dealing with such an important transaction.
If you feel your agent is not doing a good enough job the first thing to do is speak to them and discover why the property hasn’t sold. The next thing to do is to act upon the advice they give you. The agent may advise changes to the marketing material, a change in the presentation of the property, a change to the advertising or a change in the price. Sellers who act upon advice tend to get a result whereas sellers who don’t, stay on the market for months complaining to all their friends and family how inept their agent is.
If you want to change agents it’s very easy. If you have an agency agreement with the agent, read it and observe the terms of the agreement with regards to termination. Some agent’s agreements don’t have termination conditions or notice periods, some agent’s agreements will run for 4 or 8 weeks and some agents, believe it or not, will tie you in for 3 or 4 months. The latter is probably not the sort of agent to select in the first place. Once you have come to the end of the contract period and given notice to the agent you can then appoint another agent who hopefully will have more success.
The good news is that the vast majority of the properties we are instructed to sell end up being sold.
Don’t be caught out by agents’ small print
If you’ve ever employed an estate agent to sell a property you may well have seen an agent’s contract or agreement. Most estate agents use these contracts to confirm what has been agreed between agent and client and they are good practice and a good thing for all concerned.
However, some agents produce reams and reams of contract drawn up by some corporate lawyer back at corporate headquarters and these rather long winded tomes are designed that way to catch you out. The agent knows you are unlikely to read through it so you’re unlikely to discover the rather onerous terms of business concealed within it.
Believe it or not some of these corporate agent’s sole agency contracts tie the client in for 13, 16 or even 26 weeks. Imagine not being able to sack you agent if he does a bad job for 26 weeks! The next thing you’re unlikely to notice is that if you do want to part company with the agent at the end of the term some of these contracts require an astonishing 28 days notice of termination. When it comes to paying your agent if he does succeed in selling your house most agents charge a percentage of the selling price. Some corporate estate agents, however, think it’s perfectly alright to charge a percentage of the asking price regardless of the price they actually sell the house for.
My advice is to always read the contract in your own time before deciding whether to proceed. The Hadley Taylor contract is written in plain English, it takes up no more than one side of A4 and it is fair to both parties.
The other little scam that some corporate agents get up to is to measure up your house during their market appraisal before you’ve even decided which agent to appoint. They do this so that you feel more obliged to appoint them because they’ve taken some photographs, spent more time with you and drunk your tea.
How is the Property Market?
The property market has been a challenging environment in which to work since 2008 when the wheels fell off the wagon. Estate agents who are still in business and who have made radical adjustments to their cost base have got used to the new world order and are making a living.
There is a shortage of stock which is due in part to a lack of financial mobility on the part of some home owners wanting to trade up. This low level of transactions is also due in part to sellers holding back in the hope of achieving a better price at some point in the future.
Broadly speaking prices have remained unchanged for the past three years and are likely to remain unchanged for another three years. I think this represents a stable property market in which to buy or sell. Of course to those who have been weaned on ever increasing property prices fuelled by ever increasing wage inflation this view will come as a bit of a shock. However as time goes by more and more people will come to a point of realisation about the economy, their financial position and the value of their property. This process is a slow one and the drug of delusion is hard to kick.
Some will be grateful that prices are not likely to fall either. This is due to historically low interest rates which seem likely to stay and the continued increase in population growth that this Government seems to favour as much as the last one.
In our business we have more trouble finding realistic sellers than we do finding realistic buyers. If we think a property should sell at £400,000 there really isn’t any point in putting it on the market for £450,000 although sellers will always find a less experienced agent who will take instructions to sell at almost any price. The problem here is that the property doesn’t sell and the agent spends a lot of time and money flogging a rather overpriced dead horse. Better to choose an agent who sells most of the houses like yours and then take their advice on price.
The other mistake sellers make is to choose the cheapest agent. This can prove in the end to be a very expensive exercise because the cheapest agent rarely achieves the optimum price for the asset. This is why they are the cheapest, because they have very little else to offer their client.
So to sum up, the market is stable, prices are not likely to rise significantly for some considerable time and sellers who take advice from an agent in the know are likely to have great success.
TOP TEN TIPS TO BEST PRESENT YOUR HOME
1) Kerb Appeal – first impressions are important. Put yourself in the shoes of the viewer. Make sure the garden gate, front door and window frames are looking their best. Timber doors and windows may need a touch of paint, plastic doors and windows may need wiping down. The footpath leading to the front door or the driveway may need weeding. Plant some cheerful bedding plants to make the front of the property more welcoming. Replace the door mat if necessary. If at all possible put wheelie bins out of sight.
2) De-clutter – we want viewers to look at your property, not at the contents. So de-clutter as much as possible. Remove any items of furniture, children’s toys or personal effects that are surplus to requirements from the property and put them into storage.
3) Décor – Avoid any overly bold or bright colours, avoid patterned carpets and floral wallpapers and curtains. Use neutral colours, plain carpets and contemporary textiles to set the right scene.
4) Kitchens – Many buyers change the kitchen once they move in. Even old kitchens need to be clean so that viewers feel they can use them when they move in even if they change the kitchen eventually. If the kitchen flooring is dark or worn replace it with a light coloured vinyl. Replace spot light bulbs where necessary to give the right impression.
5) Bathrooms – Bathrooms need to be clean and fresh. Replace tired shower curtains and re-lay vinyl flooring if need be. Tile grout can be cleaned up with bleach or specialist cleaning products and replace the seals around the bath if there’s any mould. Remove any mould from the walls or ceiling with bleach cleaner.
6) Gardens – Lawns should be mowed, patios pressure washed, borders weeded and trees and shrubs pruned to give the right impression. Remove any garden toys or garden ornaments that are surplus to requirements and put them into storage.
7) Presentation – Make sure your property is clean and tidy when people come around to view with toys put away or put in their designated room. Kitchens should be clear of the breakfast things and bathrooms clean and tidy.
8) Paperwork – Is your paperwork in order? If your property has been altered or extended do you have the relevant building regulations and planning permissions? Changes to boilers and glazing may also require building regulations certificates or FENSA certificates. You will also need warranties for any fitted appliances, new windows, boilers or wood burners.
9) Pets – Some viewers will enjoy finding pets in your house when they visit but some will find it off putting. To be on the safe side remove cats and dogs from the property during viewing times and make sure the property is free of pet hairs and odours.
10) Make sure every room has a designated function. Dining rooms should have dining tables, bedrooms should have beds and studies should be clearly where you study. If you need to borrow a few items of furniture to make each room look dressed then this might be worth the effort. Rooms that have no clear function are not valued as highly by viewers as rooms that do. In family houses it is also important for some rooms to be designated adult rooms and some designated children’s rooms.
How to choose a surveyor
My advice to buyers is that they should always satisfy themselves that the house I’m selling them is what it appears to be and isn’t falling down or falling down a hole. The older the property the more important it is to have a full survey although sometimes a homebuyers report will suffice.
Surveyors come in all shapes and sizes. My advice is to always find a local surveyor who has been recommended by someone you trust. There’s no point in asking a surveyor from Cambridge to do a survey on a house in Norwich because they will be less familiar with the style and period of property in different areas, they will have more difficulty reaching the correct valuation and they will charge you more because they will have to travel further to do the job.
Never use a surveyor who is also an estate agent. Some estate agents who do provide surveying services have unwittingly introduced a conflict of interest into their business because they pass judgement on properties being sold by their competitors. Buyers should use a truly independent surveyor who is not also in the business of selling houses.
Most of all buyers and sellers should remember that very few sales actually fall through because of issues raised in a survey report as long as the seller is using a good estate agent.
How did bricks and mortar really perform in 2011?
At the end of each year it is always interesting to see how property has fared compared to other popular investment vehicles. With inflation running at about 5% one needs to invest prudently just to stand still these days.
In East Anglia property prices rose by about half of one percent. Not much to write home about I know but let’s compare this with other investments. Gold was the front runner in 2011 increasing in value by 14% but gold is a very volatile commodity and who’s to say what will happen to gold prices next year.
If one had played it safe and gone for a bank savings account the return would have been about 3% at the very best which is safe but in reality, not even keeping up with inflation. If one had opted for a FTSE 100 based investment one would have fared very badly. The FTSE 100 lost 8% of its value in 2011 and investors are still licking their wounds.
The other benefit of property is that you can live in it unlike stocks, shares, gold or bank deposits. Property as an investment is where the shrewd investor should look. Terrace houses in the Golden Triangle return about 5% gross, one bedroom flats and garages up to 8% and with a buoyant rental market there is no shortage of tenants.
So whilst gold has been the clear winner in 2011, property has fared very favourably too.
What is the future for new build?
With our population growing at about a quarter of a million people every year there is enormous pressure on housing in the UK and this is one factor that underpins and supports house prices. But how sustainable is it to keep building new houses in the way that we do?
Now there’s nothing wrong with modern houses – in fact we sell them all the time. What makes them so unsustainable is where and how they’re built. New houses tend to be on estates on green field sites on the outskirts of towns and cities. They are neither in town nor in the country. To live in them you need at least two cars per household in order to transport everybody to work, school and play. Each property has at least two flushing toilets and two power showers which have to be supplied by our dwindling water resource and there isn’t a doctor’s surgery, nursery school or shop for miles around. They tend to be built far too near low lying land and water courses because let’s face it the good sites have been developed already and this often makes them difficult to insure against flood.
One wonders who contrived this style of living in the first place and more to the point which bright spark in government gave it the seal of approval.
Very few new homes are built close to amenities within an established community because not only are brown field sites scarce, they are more costly to develop and seeing as profit is the key driver in new housing development that really wouldn’t do would it?
On this tiny island there really isn’t an easy solution to the problem other than the blindingly obvious which is for government to decide that we’re not going to increase our population by 250,000 every year and keep our land green and pleasant.