Buying, selling and letting - Monday, April 19, 2004

Whether looking to buy a new family home or a buy-to-let investment property, buyers can still make great returns by predicting the next ‘up-and-coming’ area, reports The County Homesearch Company. There is a cliché that the arrival of a premium coffee chain heralds gentrification, but by the time the first cappuccinos are being sipped the canny investors will have already moved in.
The County Homesearch Company has identified ten reliable signs that a district is on the up:

·   Look for skips in front gardens and on the roadsides.

·  Check if the council has plans to impose parking restrictions – residents-only parking is very desirable and can attract buyers to an area

·  Estate agents are often the first to sniff out an opportunity, so look for new upmarket estate agencies opening on the high street

·   Investigate the stock at the local garden centre. Patio furniture and high-style, low-maintenance garden accessories show the presence of time-poor affluent professionals

·    See if the local sandwich bars are re-styling as delis; when Parma ham and Sicilian olives take over from egg and cress, it could be time to call the estate agents

·    Working parents are desperate for good childcare provision. Private daycare nurseries are often very quick to spot new areas of opportunity, so look out for any new openings

·    If the local pub has developed its exterior and installed outdoor gas heating, it is a sign that the ‘al fresco’ crowd is moving in

·   The large supermarket chains have to spot trends well in advance, so keep an eye on any new upmarket stores such as Waitrose

·   When an area acquires a new name, such as Brackenbury Village or Between the Commons, it is a sign that the estate agents are gearing up for a push

·  Curtain, sofa and other interior design shops will start to spring up very rapidly as new owners overhaul their properties

Jonathan Haward, founder and managing director of The County Homesearch Company, comments: ‘As the housing market is still growing year on year, the trend for affluent buyers to move into traditionally down-at-heel areas continues. If buyers want to take advantage of this, they have to spot the signs as early as possible to make the maximum gains.’

Planning permission ensures that buildings go up in the right place and with minimum disruption to the community. Anna Bowden explains

The planning system helps to balance the developments the country needs (for example new homes, factories, offices and schools) with our duty to protect and improve the environment. This balance is essential to ensure that development and growth are environmentally sustainable; that is meeting the needs of the present without affecting the ability of future generations to meet their own needs. It does not control how a building is constructed – that is the function of Building Regulations – and there are also separate systems governing, for example, developments affecting listed buildings or the demolition of unlisted buildings in conservation areas.

Each council must prepare and adopt policies for development in its area, and when you apply to your council for planning permission the application will be decided in line with these policies, unless there are very good reasons not to do so.

Do you need to apply for planning permission?

You do not always need planning permission. It is not required, generally speaking, for changes to the inside of buildings or for small alterations to the outside, such as the installation of telephone connections or alarm boxes. Other small changes, for example putting up walls and fences below a certain height, have a general planning permission for which a specific application is not required. If you are unsure whether you need it or not, check informally with the council. For a fee, you can also apply for a formal decision. This is known as a lawful development certificate. If your council refuses a certificate, you can either apply for planning permission or appeal to the Secretary of State.

Things that you might need planning permission for include working from home, extending existing premises, building flats over shops or building new premises. Working from home is an interesting issue - the key test here is whether or not the overall character of the property will change as a result of the business i.e. is it still a home or is it now business premises? For example, will your business result in a marked rise in traffic or people calling; will it involve activities unusual in a residential area; will it disturb your neighbours at unreasonable hours or create other forms of nuisance such as noise or smells?
The construction of new premises nearly always needs an application for planning permission. The development plan in force in your area will give you some indication of whether or not your proposal is likely to be acceptable, so it is worth talking to your council before submitting an application. If there are difficulties, officers may be able to suggest ways to make your proposal more acceptable.

How to make an application?

It is not necessary to make the application yourself – if you wish you can appoint an agent (for example an architect, a solicitor, or a builder) to make it for you. In most cases a decision will be made within eight weeks, although large or complex applications may take longer. Your council should be able to give you an idea about the likely timetable. There will also almost certainly be a fee involved, the amount of which will vary according to the type of development proposed. The revenue from fees contributes towards the cost to the council of handling applications and the fee is not refundable unless the application is invalid.
Once your application has been accepted, a copy will be placed in the planning register to be available to anyone who wants to see it. The council will also notify neighbours by letter or will fix a notice on or near the site, and may also advertise your application in a local newspaper to give the public the opportunity to express views. Anyone can comment on your proposals. Your local council will assess the relevance of comments and, in the light of them, may suggest minor changes to the application to overcome any difficulties. A report will then be sent to the planning committee or the planning officer making the decision.

The council grants planning permission by sending you a letter notifying you of its decision. Generally, unless your permission says otherwise, you can begin the development at any time within five years of the granting of planning permission.
If you have not started work by then, you will probably need to reapply. If the permission is subject to conditions, for example, requiring you to submit for approval details of a specified aspect of the development which was not fully described in the application, these must be dealt with before the development can begin.
As an alternative to outright refusal, the council may grant permission subject to conditions – for example, restricting what you can do on the premises or requiring you to get specific approval for aspects of the development, such as the materials to be used, before you can proceed. Again, the council has to give reasons for the conditions. If you are not prepared to accept the conditions, you can discuss the position with the planning officer, who may be able to suggest ways of overcoming the council’s objections.

Timeshare meets buy-to-let

The buy-to-let boom has mutated into a new strain – an investment scheme offering people the chance to make money by buying a hotel room and letting it out to guests. Currently being run by company GuestInvest, under the deal investors buy a hotel room for up to 52 nights a year and can earn an annual return of up to seven per cent by letting members of the public pay to stay in it.
GuestInvest estimates that an investor should see returns of between five and seven per cent a year on the room, depending on how often they use it themselves. Revenue from letting the room is shared equally between the hotel and the room owner, and investors have to pay £500 a year towards maintenance and room renovation costs.
The venture is aimed at the type of person who might otherwise have to choose between paying for expensive hotels on a regular basis or buying a city-based home that they wouldn’t use that often.

Ministers step up home loan scheme

The government is to expand its scheme for housing aid for key public sector workers in the south-east. Deputy prime minister John Prescott and health secretary John Reid will extend the £230 million starter homes initiative fund launched three years ago. Loans from the scheme help key public sector workers get on to the housing ladder but will no longer be limited to first-time buyers. The loans only have to be repaid if the workers leave their job or sell their house.
The four schemes on offer are:
·    Homebuy, providing an equity loan of at least 25 per cent of the property value up to a limit of £50,000
·    London Challenge Key Teacher Homebuy, providing a higher loan value limit for which only a small targeted group of teachers will be eligible
·    Intermediate renting, offering a rent somewhere between social and open market rates
·    Shared ownership on new-build schemes, where the purchaser buys at least 25 per cent of the equity and pays rent on the balance
The recent Barker review on housing supply, published alongside the budget, confirmed that the number of newly-built social houses for rent has fallen from 42,700 in 1994–95 to about 21,000 in 2002–03. The current scheme gives priority assistance for teachers, police, nurses and other essential health workers, but these groups are likely to be extended.

If your salary is not big enough to enable you to buy your first property alone, you could consider buying with a partner or friends, says Your Mortgage magazine.

Advantages of buying together:

Afford to get onto the property ladder
Invest in your own property and not a landlord's
Move out of home – freedom from parents!
Share the cost of a deposit
Share mortgage costs
Share household bills

Disadvantages of buying together:

Share your living space
Have to ensure that you get on well with your friends
Need to draw up a will and take out additional insurance
Many couples buy their first home together and the lender will take into account both incomes. Traditionally, you can borrow two-and-a-half times your joint incomes, or three times the biggest income plus one times the smaller income, although some lenders now offer more.
Most mortgage lenders will let you buy with up to three other people, but many will only take into account the two highest incomes. Lenders tend to use affordability rather than income multiples, a slightly more sophisticated way of calculating how much should be lent by taking into account outgoings as well as income. However, before you dive into buying with friends you need to be aware of the potential pitfalls.

Best friends now?

The most important thing to remember is that you may be best friends at the moment but nobody can predict the future. One person may decide to go their own way at some point, perhaps because they want to set up home with a partner. Another member of the group may lose their job. It's essential that you know exactly what will happen when one person decides to leave.
Each borrower is responsible for the whole mortgage, not just their bit, so if three people bought together and one left, the other two would be responsible for the whole thing. It is important to seek legal advice before buying together and get a document drawn up, usually a trust deed, covering all potential situations. You also need to decide whether to own the property as joint tenants or tenants in common (see below).

Joint tenants or tenants in common?

Joint tenants are regarded by the law as owning the whole of the property without any form of separate share or distinction between them. On the death of one the whole of the property passes to the survivor or survivors. Normally the sole survivor of two joint tenants can sell the property and only needs a death certificate to prove his or her title or ownership. This is a very common and convenient form of ownership between husband and wife, where the parties are content for the survivor to be the absolute owner. Where property is owned in a joint tenancy, transfer of ownership on death is automatic. The ownership of the land held as joint tenants cannot be altered by a will. A will made by a joint tenant that leaves the land to anyone other than another joint tenant would be ineffective.
Tenants-in-common is the most common form of contract between co-owners who are not married or who have made different contributions to the price. It means that the co-owners are regarded in law as having separate and distinct shares. They may give their shares away by will and they may even charge or mortgage them to a lender. On the death of a tenant-in-common the share of the deceased co-owner is protected by the requirement that another trustee has to be appointed before the land or property can be sold. If the shares are complex a separate trust deed will usually be drawn up, setting the shares out.

Just do it!

Buying together could provide a valuable stepping-stone onto the housing ladder if your salary won't stretch to buy your first home alone; but make sure you fully understand what you are getting into. Choose people you know well to buy with; always get a legal document drawn up, setting out what will happen if someone wants to sell their share or if they can't afford to pay the mortgage for any reason; and agree in writing what share of the property each of the buyers own. And just remember that while money can't buy you love, if you come together with your eyes open then buying with a little help from your friends could turn out to be a great move!

New buyers boost prices to further heights

Hometrack’s March survey of the housing market reports a 0.7 per cent increase in house prices across the country, following last month’s 0.9 per cent rise (the strongest recorded increase since October 2002). This year’s monthly rises have been significantly above the typical month changes recorded last year. As a result of the strong rises seen so far this year, on top of the ongoing pent-up demand in the market, Hometrack has now upgraded its house price forecast to eight per cent (previously at four per cent).
Hometrack’s unique National Demand Index™ shows that both the number of properties for sale and the number of buyers registered have increased. However, the number of new buyers registered has increased by 6.5 per cent while the number of properties listed has risen by 4.2 per cent, implying that demand continues to outweigh supply. This pent-up demand suggests that further strong house price rises could well be a feature of the coming months.

Sales prices achieved

The average sales price achieved as a percentage of asking price continued to rise to 96.2 per cent, over two per cent up from the low of 94.2 per cent recorded in last year’s June survey. This is the highest percentage recorded since November 2002, and again provides evidence that demand is strengthening in relation to supply.
The average length of time taken to sell a property has fallen to 4.3 weeks (4.6 weeks in February’s survey). There is currently an average of 10.4 viewings before a sale is achieved.
John Wriglesworth, Hometrack’s housing economist, comments: ‘The housing market this month has strengthened, with strong house price rises across the whole country. Demand by new buyers is outweighing supply and the upward pressure on house prices continues. Low interest rates remain and, despite prospects of rises this year, buyers are not being deterred from borrowing even higher multiples of their income to afford their desired homes.
‘Income growth and employment prospects remain strong, particularly in London where City jobs and bonuses are on the increase. The current market is very much a sellers’ market, with buyers having to accept very-close-to-asking prices.

‘Due to all these factors, we have raised our house price inflation forecast for 2004 to eight per cent, previously at four per cent. Doom-mongering, headline-grabbing economists predicting an imminent housing market crash will soon have to raise their own forecasts, or face the consequences of looking incredibly foolish!’
hometrack.co.uk

Brown freezes stamp duty

Last week’s budget failed to address the housing industry’s worries over stamp duty, as Chancellor Gordon Brown announced there would be no shakeup of the structure of the tax. In the past year estate agents and other housing industry professionals have been vocal in their opposition to the present levels of taxation on house purchases; the lower threshold of £60,000, they say, should be raised to encourage first-time buyers back into the housing market.
Elsewhere in the Budget, Brown accepted that there is a shortage of housing and announced a consultation with the office of the Deputy Prime Minister to find ways of solving the problem.

Landlord borrowing less

Landlords continue to invest steadily but are borrowing less in relative to the value of their buy-to-let portfolios, according to the latest Buy-to-let Trends survey by Paragon Mortgages. UK landlords are still growing their portfolios of buy-to-let properties, the survey finds, with a rise in the average number of properties held up by five per cent to 11.9 this quarter. Portfolios are a third larger than they were at the end of 2002, up from 9.0 properties.
Over the same period, landlords have generally become more cautious in terms of the gearing of their portfolios, with average loan-to-value falling from 44 per cent in November 2002 to 41 per cent this quarter.

Mortgage lending slows

Mortgage lending slowed down last month to its lowest level for nearly a year, according to the Council of Mortgage Lenders (CML). A total of £20.1 billion was advanced during February, 6.5 per cent less than in January and substantially less than the high of £27.3 billion borrowed in October last year.
The CML said the figure followed previous seasonal patterns and added that it was too early to tell whether the slowdown pointed to an underlying reduction in consumers’ appetite for debt.
Most of the drop was due to a reduction in remortgaging, which totalled £8.3 billion, £1 billion lower than in January – the lowest level for a year. Lending to those buying a property was also slightly down at £9.8 billion – 49 per cent of total lending.

Brown freezes stamp duty

Last week’s budget failed to address the housing industry’s worries over stamp duty, as Chancellor Gordon Brown announced there would be no shakeup of the structure of the tax. In the past year estate agents and other housing industry professionals have been vocal in their opposition to the present levels of taxation on house purchases; the lower threshold of £60,000, they say, should be raised to encourage first-time buyers back into the housing market.
Elsewhere in the Budget, Brown accepted that there is a shortage of housing and announced a consultation with the office of the Deputy Prime Minister to find ways of solving the problem.

Landlord borrowing less

Landlords continue to invest steadily but are borrowing less in relative to the value of their buy-to-let portfolios, according to the latest Buy-to-let Trends survey by Paragon Mortgages. UK landlords are still growing their portfolios of buy-to-let properties, the survey finds, with a rise in the average number of properties held up by five per cent to 11.9 this quarter. Portfolios are a third larger than they were at the end of 2002, up from 9.0 properties.
Over the same period, landlords have generally become more cautious in terms of the gearing of their portfolios, with average loan-to-value falling from 44 per cent in November 2002 to 41 per cent this quarter.

Mortgage lending slows

Mortgage lending slowed down last month to its lowest level for nearly a year, according to the Council of Mortgage Lenders (CML). A total of £20.1 billion was advanced during February, 6.5 per cent less than in January and substantially less than the high of £27.3 billion borrowed in October last year.
The CML said the figure followed previous seasonal patterns and added that it was too early to tell whether the slowdown pointed to an underlying reduction in consumers’ appetite for debt.
Most of the drop was due to a reduction in remortgaging, which totalled £8.3 billion, £1 billion lower than in January – the lowest level for a year. Lending to those buying a property was also slightly down at £9.8 billion – 49 per cent of total lending.

You’ve found your new home – but is it safe? We identify some potential pitfalls regarding electrics

You’ve trawled round endless properties, found the house of your dreams, done your sums and made a decision. These are exciting times and it’s all too easy to get caught up in the euphoria and forget about the basics. But before you sign on the dotted line, you need to ensure that your investment is sound.

Homebuyer's Reports do not cover electrics

It is very likely that faults with your electrical system will not be found during the course of a normal Homebuyer’s Report. In order to protect yourself and your investment, it makes good sense to get a separate electrical survey carried out by an approved electrical contractor. It may well be the case that your electrical system needs attention and this could be both dangerous and costly. Your property may need to be totally rewired and this could cost more than you bargained for, so it’s important to get your electrics checked before you commit to buying.

How to get an electrical survey

An electrical survey is quick and easy to obtain. Getting an electrical survey done need not hold up the house buying process; it’s simple to arrange and to carry out, and won’t cost the earth. The first thing you must do is contact an electrician. Safety in your home is vital and the NICEIC (National Inspection Council for Electrical Installation Contracting) strongly recommends that you choose an approved contractor to carry out your survey. An NICEIC-approved contractor will do the job safely and to the requirements of the national safety standards.

Will my property be damaged?

Don’t be alarmed about how the survey will affect the appearance of your new property – walls will not be drilled nor will floorboards be torn up. NICEIC-approved contractors are highly skilled and able to carry out an electrical survey by visual inspection. They know the tell-tale signs of damage and deterioration in your system which will give away the age of the installation. There will be very little, if any, disruption to your new home as a result of the survey.
If work does need to be done, make sure that:
·    You negotiate with your vendor a percentage of the value of the work to be deducted from the asking price of your new property
·    You get a full quote for any work that needs to be carried out and agree the specifications with your electrician
·    Your electrician brings catalogues so you can choose any new fittings you might want
·    Your electrician chases cables into the walls so that they become invisible
·    Your electrician does not run cables into the cavity of external walls
·    Your electrician tests his work when the job is done and issues you with a certificate (all NICEIC-approved contractors will do this as a matter of course)

When it comes to house buying, the National Inspection Council for Electrical Installation Contracting (NICEIC) is here to help. The NICEIC is an independent consumer safety organisation, which offers helpful advice on electrical safety. The
NICEIC's register of approved contractors is the place to find an electrician – all contractors on the register meet the Council's comprehensive skills and knowledge criteria and are assessed on an ongoing basis to ensure their technical capability and standard of work meets national safety standards.
Finding a local approved contractor couldn't be simpler. Either visit the NICEIC website – niceic.org.uk – or contact the NICEIC helpline on 020 7564 2320.

Size isn’t everything – but it certainly helps. Hotproperty shows how the right lick of paint can add space to your room

Can you put the kettle on while sitting in the lounge? Do you navigate your bed with a series of crablike movements? Can you open the front door without getting up? If you answer yes to any of these questions the chances are that your home is a little on the small side. If you can’t afford to move to bigger premises, then make your home seem bigger through the art of decoration.
Firstly, the colour, shade and pattern you apply to your walls have a drastic effect on how big or small your room appears. Warm colours, such as reds and oranges, ‘advance’ towards the eye and appear to bring the walls inward. Cool colours such as blue and green ‘recede’ and push the room out. This doesn’t mean you can’t paint your room in your favourite raspberry or terracotta colours – just choose a lighter shade from the same family.
Painting each room in a similar colour or shade will make boundaries less obvious and help your home appear larger. Neutrals enlarge and lift a room; contrast light colours with soft furnishings in strong, rich colours. Use differently textured surfaces, such as furry, shiny, rough and smooth.

Other ideas
·    Vertical stripes give height to a wall
·    Lift low ceilings by painting them white or lighter than the walls
·    Use small patterns on a light background to make walls seem bigger
·    Use translucent instead of opaque shades on lights
·    Clear clutter

Moderate year on the cards

According to figures released today by SmartNewHomes.com, new home demand prices across the country fell slightly last month, indicating an easing up of 2003’s strong property price rises.
The index tracks the location and price homebuyers are willing to pay for new properties, revealing that the average price a home buyer was willing to pay in February 2004 was £209,312, down 0.7 per cent on the month and 5.6 per cent on three months. Set against the context of sharply rising prices in 2003 (nine per cent) it is clear that prices are still up by 3.8 per cent on the same time last year. Despite this being a small annual increase it still signifies an ongoing healthy market, albeit one growing at a more sensible pace.

London and South East prices level out

London and the South East remain the most expensive areas in the country, with new home buyers willing to pay in excess of £250,000. However, the slowdown is hitting the top end of the market first, as London has become the only region where prices are lower than a year ago.

Popularity of apartments slows

Intense activity in the buy-to-let market over the last six months of 2003 led to apartments rising in popularity to dominate property searches, reaching a high of 47 per cent in December 2003 compared with 39 per cent for detached homes. However, detached houses are now making a comeback and have regained the top position, with 43 per cent of searches taking place for this property type in February compared with 41 per cent for apartments.
This levelling out of the popularity of apartments has been reflected in demand prices, with apartments the only property type to decrease in price over the last year (down by 0.9 per cent) in comparison to detached houses, whose prices rose by 7.8 per cent to an average of £268,455.

Moderate year ahead

David Bexon, chief executive of SmartNewHomes, commented: ‘The price home buyers are willing to pay for a property reflects economic and personal circumstances. Following the huge boom in demand seen last year, recent interest rate rises have prompted home buyers to start searching out keener prices. Nevertheless, prices are still well up on this time last year and the market is still strong. We expect prices will continue to rise, albeit at a more realistic rate.’
smartnewhomes.com