Buying, selling and letting - Monday, October 04, 2004

Low inflation means low interest rates

The latest inflation figures show the annual inflation rate fell in September by 0.2 per cent to 1.1 per cent, the lowest level since March. This is good news for those worried about the prospect of future interest rate rises.
The falling inflation rate, which took analysts by surprise, takes the pressure off the Bank of England’s monetary policy committee to raise interest rates; several economists are now predicting that the base rate will remain at its present level of 4.75 per cent for the rest of the year.
The inflation rate, however, is still expected to rise again, according to the Bank of England.

Surprise upturn in house prices

House prices rose by 1.4 per cent in September according to Halifax, the UK’s largest mortgage lender. The surge in house price inflation followed a small fall in August, and the Halifax says that the annual rate of house price inflation now stands at 20.5 per cent.
Nationwide recently reported figures for September housing a 0.2 per cent rise in September, up from 0.1 per cent in August.

Investors head north

Hunters Estate Agents is seeing a surge in buying in the North of England. Many professional investors from the South and overseas currently view the North’s property market as one of the UK’s best performing property hotspots, according to Steve Arksey, regional manager of Hunters Land and New Homes.
‘Many exhibitors at this year’s Property Investor Show have reported a major fall in sales activity compared to this time last year,’ says Arksey. ‘However, Hunters has been inundated with enquiries from investors that genuinely believe there is plenty of room for the North’s property market to continue growing – even if it will be at a slower pace than over the last three years.
‘This has been reinforced by record volumes of lettings being secured through Hunters’ Manchester, Leeds and York offices. The average time taken to secure a new let is now less than two weeks and voids are virtually non-existent.’

One in three miss out on low rates

New research from Alliance & Leicester has found that one in three consumers overlook the most important factor – the rate of interest they will be charged – when choosing a loan. Thirty-five per cent of consumers admit the annual percentage rate or “APR” is not the first thing they look for when choosing a loan.
Andy Bayes, head of personal loans at Alliance & Leicester, said, ‘While two out of three people rightly focus on the rate of interest when choosing a loan, there is still a large number of people who pay over the odds by not giving it their full attention.’
Among those who said the rate of interest is not their main priority, 37 per cent thought all banks’ loans are similar; 19 per cent said they did not fully understand APRs; and 13 per cent though a couple of per cent would not make much difference to the cost of their loan.

What agents want

According to a poll of National Association of Estate Agents (NAEA) members, the average agent wastes up to 30 per cent or even more of their time showing people properties which are either clearly too expensive for their income or simply unsuitable for their obvious requirements (for example a family of four asking to see a one-bedroom flat). In addition, a staggering 50 per cent of sales fall through due to either the buyer or seller suddenly changing their minds. With the UK offering one of the lowest estate agency fees in Europe, the industry calls on the public to reconsider the ways in which they can help their agent achieve what they both want.

Buyers

Ensure you get your finances in order before you look for a property. Find out exactly how much you can borrow: many people organise this after they have had an offer accepted and are surprised by how little they can borrow, and then pull out of the sale.
Discuss what type of property and where you want to live before you start viewing properties. If you desperately want a garden or a third bedroom, do you really want to look at properties without them? Research the area. This sounds straightforward but a lot of sales fall through at a late stage due to a lack of knowledge about the area. Locations, particularly in big cities, vary from one street to the next. It is advisable to visit at different times of the day so you can really get a feel. If you rely on public transport, try out the journey.
Think before making the offer. Although getting an offer accepted does not mean the agreement is legally binding, the property will often be taken off the market and the seller’s expectations will be raised. Do not make an offer on a property unless you are serious.

Sellers

Don’t lie about your home or why you are moving as the buyer will find out at a later date and either pull out or – in a worst-case scenario – take you to court. Don’t ignore the facts. If your home has been on the market for four months and you have had no viewings, it is likely to be overpriced and you must accept this. Agents work on a percentage of the final sale price, so if they tell you its overpriced it is likely to be overpriced!
If you’re unhappy with an agent say so. It is not acceptable to complain about the service you’ve received when it comes to paying the bill – by this point the agent cannot act on it. The Ombudsmen is very clear that complaints should be flagged up at the time.
Give your home a chance. And remember that if you won’t allow sale boards or weekend viewings, your home will take a lot longer to sell.

Most regions see landlord rental incomes rise

Paragon Mortgages’ September buy-to-let index reveals a pick-up in rental incomes across all but three regions. Rents increased in seven regions and five out of ten regions are now registering rents of over £9,000 per year.

Property values also rose in August across eight of the ten regions – except for the North and the South East, where prices fell slightly. Average property values are now £141,765 as compared with £124,128 in January, a significant increase of 14 per cent.
John Heron, managing director of Paragon Mortgages, says: ‘Landlords across the majority of the country are seeing a rise in rental incomes, fuelled by solid demand from tenants. Those regions witnessing the biggest rent rises were also those which experienced the greatest rise in property values. Prices paid by residential property investors are still increasing, but only very slightly: in August they were up by just 0.8 per cent, in contrast with the large rises seen in the first half of the year when investors had to compete with owner-occupiers in a busy market with limited stock available.’
As a result of rises in property values over the past couple of months, yields have slipped slightly in recent months. On average, landlords are achieving a yield of 6.7 per cent gross from their investment properties.

Landlords continue to enjoy good overall returns, with total returns generated since August 2003 of just over 22 per cent (on an average property purchased that month) – a total of £27,620, comprising £18,266 in capital appreciation plus £9,354 in rental income on a property worth £123,498 at purchase.
Seven out of ten regions provide landlords with a total annual return in excess of 25 per cent. Overall returns tend to be lower in southern regions, where house price inflation has been relatively weaker over the past year, and yields lower. Year-on-year, the rate of increase of landlord property values has also declined, from over 17 per cent in July to 14.8 per cent in August. Paragon’s data continues to show annual house price inflation for investors at lower levels than the latest figures published by Halifax and Nationwide, suggesting that overall landlords continue to negotiate better deals on properties than owner occupiers.

Generally, there is an inverse correlation between yield and property value (i.e. the cheapest properties offer the best percentage yield). The North saw an increase in yields of nearly two per cent as property values dipped slightly in August. Conversely, in London and the South East, where properties values are higher, yields are lower.

Welcome drop in fixed-rate mortgages

Home owners enjoying a welcome break after four base rate rises in eight months are in line for more good news. Falling swap rates – the money-market rates that determine fixed-rate pricing – have led lenders to cut the cost of fixed loans.
Stroud & Swindon Building Society has launched a two-year fixed-rate mortgage at 4.79 per cent. Those with a home valued at less than £250,000 will pay £494 in arrangement fees. The fee rises to £594 for properties worth more than £250,000.
The two-year fix from Derbyshire Building Society charges interest at 4.8 per cent, while Yorkshire Building Society offers a three-year deal at 5.1 per cent for those moving house and 5.15 per cent for home owners who want to remortgage.
Britannia Building Society has cut the rate on its ten-year fix by a tenth of a percentage point to 5.49 per cent.
Is this, however, a good time to fix? David Hollingworth of mortgage broker London & Country thinks so. He says: ‘Hanging around on a gamble for a cheaper rate may not pay off, particularly for home owners on an expensive standard variable rate.’
Simon Tyler of broker Chase De Vere Mortgage Management agrees. ‘There will almost certainly be another interest rate rise this year,’ he says. ‘The cheap fixed rates launched in the past few days should be snapped up because they will not be around for long.’

Housing market slowdown continues

The average property price in the UK fell for the third consecutive time last month, according to figures released today by the National Association of Estate Agents (NAEA), as over three-quarters of estate agents confirmed that they believe prices have reached their peak. Asking prices were on average 1.3 per cent lower than in the previous month and the annual increase in house prices was 8.5 per cent, down from 10.3 per cent the previous month. In addition, 79.6 per cent of estate agents believe that house prices have reached their highest point and will now decline – excellent news for first-time buyers.
Some prospective buyers who have been holding off waiting for prices to hit their peak earlier in the year are now reacting to the slight drop in prices and re-entering the market. In addition, they are reacting to the slowdown and attempting to achieve further discounts, securing an average of 5.5 per cent off the asking price compared to average discounts of around three per cent earlier in the year.
NAEA president Richard Hair comments: ‘The steadying of prices has encouraged more buyers than is usual at the end of the summer and activity in general is high, although overpriced property attracts little interest. Prices are not going to crash but there may well be further small correction before normal service is resumed.’

As house prices even out it’s easier for first-time buyers to enter the property market; and there is yet more help on the horizon, especially for certain key workers, says Mike Collins of Your Mortgage magazine.

Sally McCormack is a nurse who, until she qualified just over a year ago, was sharing rented accommodation in the East End of London with five fellow students. This was an acceptable arrangement for all concerned but, as invariably happens, the end of their training meant big changes.
‘A couple of the girls decided to go back to the Midlands, one had met a Scottish lad and went off to live with him in the Highlands and the other two went back to the London suburbs to live with their parents,’ she explains. ‘As I’m from Chelmsford, Essex, I didn’t fancy that journey every day, especially as I work odd shifts. But there was no way I could afford the rent in the house we had on my own. Basically, I wanted to buy a place in London, as close as possible to Bart’s Hospital, where I work’

Property lesson

Until this point McCormack was not an expert on London property prices, but her education on the subject was swift. ‘I started looking in estate agents’ windows and could scarcely believe my eyes,’ she recounts. ‘There was nothing below £120,000 and even that would only buy a poky flat in a rundown area.’
McCormack began to think that she might have to move home after all, until she heard about the Key Worker Living (KWL) scheme promoted by the Office of the Deputy Prime Minister (ODPM, to be found at odpm.gov.uk). ‘This scheme is a development on the Starter Homes initiative and was introduced in April this year,’ she explains.
‘I was awarded an interest-free loan of £30,000 to help me buy my flat in Wood Green, north London, for £120,000. I used a loan from my parents of £20,000 to put down a deposit and the remaining £70,000 is on a discount mortgage from Nationwide.’
So, how does the loan work? ‘I don’t pay interest on the government loan while I’m in the property, and the loan is repaid only when the property is sold or if I move to a different job that isn’t covered by the KWL scheme. The amount I’d have to repay would be worked out on the basis of what percentage of the property’s original value was covered by the loan – in my case 25 per cent of whatever I eventually sell the place for.’
And what does McCormack think of the scheme? ‘It makes the difference between having my own place – and a job I love in London – and going back to my parents’ house. It’s absolutely brilliant and I recommend the scheme to others.’

Share and share alike

Shared ownership is another way that first-timers can get a property. The Housing Corporation (housingcorp.gov.uk) allows you to buy a proportion of a property from a registered housing association (HA) landlord, and you pay rent on the remainder that you do not own. You can then buy more ‘slices’ of the property as and when you can afford it, until you own it all.
People eligible for the scheme are usually first-time buyers, and priority is given to those on local authority waiting lists. You must be able to obtain your own mortgage to meet the purchase costs on a percentage of the property.
If interested you can register with Homes (homes.org.uk), where you will find details of new shared ownership properties or properties being sold by existing shared owners.
Paul Fincham of Halifax says: ‘We lend on shared ownership schemes. As long as the share you own is at least 50 per cent you can apply for a normal loan. You could then increase your mortgage in increments to buy more of the property as you can afford it. But the housing association will usually want you to be in a property for at least two years before you increase your share.’


Are you a key worker?

If you are a key worker in one of the groups listed below you could get help to buy your first home or to move into a family home. Opportunities are also available to rent homes at affordable prices. The help is available in London, the South East and the East of England.
Key workers who may get help are:
·    Nurses and other NHS staff
·    Teachers in schools and in further education and sixth form colleges
·    Police officers and some civilian staff in some police forces
·    Prison service and probation service staff
·    Social workers, educational psychologists and planners (in London)
·    Occupational therapists and speech and language therapists employed by local authorities
·    Whole-time junior fire officers and retained fire fighters (all grades) in Hertfordshire fire and rescue services
Eligibility criteria will vary across regions depending on local recruitment and retention policies.
Source: ODPM


What help is available?

The following help is available under the Key Worker Living scheme:
·    Equity loans of up to £50,000 to help key workers buy a home on the open market or a new property built by a registered social landlord
·    Higher-value equity loans of up to £100,000 for a small group of school teachers with the potential to become leaders of London’s education system in the future
·    Shared ownership of newly built properties. Under this system you buy at least 25 per cent of the home and pay a reduced rent on the remaining share
·    ‘Intermediate renting’ where the rent is set at a level between that charged by the social and private landlords
Source: ODPM

As the buyer’s market makes a comeback, it’s the areas that offer value for money that will see success. Johnny Turner looks at homes in two likely successes, Bow and Hackney.

All the recent evidence that a house price slowdown is now upon us means buyers are becoming more powerful. Following years of feeling excluded from the property market, first-time buyers and movers will start to see more affordable options – and it is the areas offering the more buyable properties that will have the lion’s share of prospective purchasers flocking to them.

Two such areas are the adjacent east London neighbourhoods of Bow and Hackney. Each has seen an influx of people who have found the proximity to central London, good green space and affordable property irresistible. Bow has benefited from the rise and rise of Canary Wharf, which is very nearby, while Hackney’s renaissance is partly due to a combination of its wealth of good-quality Victorian housing stock – and also the fact that buyers who were priced out of neighbouring areas such as Islington came eastward and liked what they found. Both locales are convenient for those whose desks are in the City.

Each of these areas has seen the expected follow-up to the initial reawakening of interest: vastly improved amenities, trendy bars, good restaurants and entertainment venues. They also happen to be located near some of London’s coolest markets, which only ups the desirability quotient further. But nothing proves an area is on the up like an abundance of good-quality newly built homes.
Telford Homes is a company with a good instinct for what buyers want, where they want to live and what they can afford. And Telford has seen great success in both the Bow and Hackney areas in recent years. The Goldsmiths Apartments in E2 was a groundbreaking scheme which found favour with a wide range of buyers, due to its simple, elegant design, good location and realistic pricing. And the Devons Road scheme in desirable E3 is now all reserved, as a combination of investment purchasers and owner-occupiers found the 24 one- and two-bedroom apartments very much to their liking.
Telford are now selling the successor to the latter development – and as with Devons Road, buyers are impressed. The Cubix Apartments, situated adjacent to the Devons Road apartments, is proof that the right specification in the right location will always find an audience.
The location, very convenient for both Docklands and the City, is ideal for a wide range of commuters; Devons Road DLR station is just moments from the development, meaning Canary Wharf is a quick four stops away.

Current availability at Cubix includes nine two-bedroom apartments, priced from £210,000, and two one-bedroom apartments, priced from £180,000.
The Telford Homes development De Beauvoir is the reimagining of the elegant De Beauvoir school building and grounds as a scheme of 34 one-, two- and three-bedroom newly built and converted apartments, ranging from 650 sq ft up to 1,200 sq ft. The building will boast stylish entrance foyers, a landscaped courtyard and parking facilities. In addition there will be a newly built house and three apartments converted from the caretaker’s cottage.

The location is a case of an historic neighbourhood that has woken up to find itself trendy and sought-after. Islington, directly to the west, experienced a staggeringly successful reinvention in the early 1990s, with the number of amenities increasing exponentially, housing becoming more sought-after and prices going through the roof. The ‘overspill’ effect led to De Beauvoir Town’s southerly neighbour, Hoxton, hitting the headlines as a prime destination – for its art scene, nightclubs and range of choice for home buyers – a few years ago. Now it’s the turn of the De Beauvoir area itself. It is literally surrounded by quality going-out options, shopping hotspots and transport connections. The proposed extension to the East London underground line, due in the next decade, will make this part of town even better connected.
In the Telford development, located on Tottenham Road, the original late-Victorian school building retains all the hallmarks of that style: an elegant brick and stone façade, tall windows, ornate gables and brick detailing. The Victorians’ emphasis on high design – and their belief in high ceilings and huge windows – means that buildings created during the 19th century, both converted and unconverted, are finding favour with home buyers two centuries later.
The new use of this historic building will see the creation of loft-style apartments, a type of home that Londoners cannot get enough of. These apartments will boast stylish reception rooms incorporating large sash windows, providing a generous window-to-wall ratio and allowing light to pour into the living areas.

The apartments are built to a premium specification, ideal for upwardly mobile professionals who desire the chic London lifestyle. The fully fitted kitchens feature a range of Systemat contemporary German units from Urban Myth; the white bathroom suites feature polished chrome fittings by Grohe, satin chrome heated towel rails, steel baths and coordinated ceramic wall tiling. All master bedrooms have en suite facilities and fitted wardrobes, and there is the option to use the second or third bedrooms as an office or study.
The finish combines soft antique white walls, warm neutral colours for carpeted areas, wood strip laminate floors in the living room and hallway and ceramic floor tiling to the kitchen and bathrooms. There is audio entry security to both the main entrance and the residents’ own underground garage; parking spaces may be purchased separately if required.
One one-bedroom apartment remains, priced at £275,000. There are also four two-bedroom apartments, at prices from £350,000. For more information call selling agent Thomson Currie on 020 7354 5224 or visit debeauvoir.com.

The east London areas of Bow and Hackney have benefited tremendously from the forward-looking attitude towards regeneration that has been demonstrated by government and developers; both of these locales are rich in disused land and buildings, the reinvention of which is having quite a ripple effect in terms of quality of life.
A good example of what is possible when derelict land and structures are treated with respect is Berkeley Homes’ Bow Central development, where phase two has now been released. The former site of a rubber and plastics factory is being transformed into a gated residential scheme of 146 contemporary apartments. The series of elegant buildings of four and five storeys will incorporate glazing and contrasting brickwork, with sleek, simple columns, picture windows and Juliet balconies. Around the building will be pedestrian pathways, landscaping, wide driveways and surface parking facilities. There will also be 14 three- and four-bedroom town houses.

The apartments range in size from 413sq ft to 892 sq ft, and many will have private balconies.
The interior spec and décor will be fresh and funky, and each will feature a bright and airy reception room. Fully fitted kitchens will have Karndean flooring, stylish units and sleek worktops, as well as a comprehensive range of integrated AEG appliances.
Bow Central lives up to its name, being in the heart of Bow and within 500 metres of Bow Road tube station and Bow Church DLR. Bow Road tube gives commuters access to both the Hammersmith & City Line and the District Line – and that opens up communications with a great many destinations popular with London commuters, from Victoria to Moorgate, Baker Street to Temple. For those who work in the City or Canary Wharf, this is the ideal place to live.
Berkeley offers a wonderful incentive for buyers in Block One, which is currently scheduled for occupation in February/March 2005: those who visit the sales and marketing suite between 12 noon and 4pm on 25 September and reserve a one- or two-bedroom apartment in the building will have their mortgage paid for a year (at five per cent of the purchase price; subject to terms and conditions).
Prices in this phase range from £180,000 to £280,000. The sales and marketing suite is open daily from 10am to 5pm. To find out more about Bow Central and the special buyer incentives call Berkeley Homes on 020 7321 2122.

East Central, the latest phase of Barratt’s new development in the heart of Hackney, offers stunning contemporary apartments in a 16-storey tower. East Central is a sleek, ultra-modern development featuring the striking tower at one end and a smaller block at the other, and will ultimately comprise 159 apartments. The development is within easy walking distance of London Fields mainline station, from where trains into Liverpool Street take only seven minutes.
Prices range from £199,995 to £362,995. Call 020 8986 6793 for further information.
One of the most impressive current developments in the Bow area is Urban Island, Countryside Properties’ collection of homes on Three Mills Island. Urban Island gives prospective buyers a unique combination of space, light and style – it is a truly ambitious collection of homes. The exclusive island sits on a curve of the River Lea and offers a tranquil waterside setting. Prices currently range from £224,950 to £489,950. Contact the marketing suite, open Thursdays to Mondays, on 020 8215 3377.

The legal process can be confusing to home buyers. Here we answer some frequently asked questions about the legal side of property purchase

Q What is the difference between a search and a survey?

A This is a distinction that often baffles the buyer. A survey is a physical inspection of the property being purchased, which is carried out either by the buyer’s own surveyor or – if a mortgage is involved – one appointed by the mortgage lender. There are various types of survey available, generally falling under three levels of service:

·    Lender’s valuation A cursory look around on behalf of the bank or building society. This includes taking measurements of the rooms, as well as a broad analysis of what a similar property is likely to be worth in that particular area. This exercise is conducted simply to establish that any mortgage advance would be financially secure. The report will tell of major defects which affect the value, but not minor problems
·    Homebuyer’s survey and valuation This report, drawn up by the RICS and ISVA, provides details on the general condition of the property in a standard format, and should highlight significant defects. It also comments on the value and any factors affecting it. Can often be combined with the bank/building society valuation so that the same surveyor only makes one journey
·    Structural report A full building survey is essential for old or unusually designed properties, or those in poor repair. The surveyor provides a detailed report on most aspects of the structure; the report can be tailored for the client’s individual requirements. Advice is given on how to remedy defects and the likely cost involved

A search, on the other hand, involves putting a set of questions to various authorities, such as the local authority, water authority and coal authority, and involves no physical inspection of the property. The purpose of the search is to discover any current or potential environmental issues that may affect the structural soundness or value of the property in years to come.

Q I’ve been shopping around for a conveyancer and each one quotes a flat fee ‘plus disbursements’. What are disbursements?

A Disbursements are payments that your conveyancing solicitor pays on your behalf to other people, such as those for searches and land registration fees. The largest of these payments that a home buyer must budget for is stamp duty, which is a property tax payable to the government on the purchase of residential property. A property bought for £60,000 or less is not subject to stamp duty; for homes valued at above that figure the fee scale is as follows:

·    for properties over £60,000 but no more than £250,000 – one per cent of the purchase price
·    for properties over £250,000 but no more than £500,000 – three per cent of the purchase price
·    for properties exceeding £500,000 – four per cent of the purchase price

Other disbursements on a property purchase may include Land Registry search fees, a bankruptcy search charge and a bank transfer fee for sending the monies to the seller's solicitors on completion of the purchase. Your solicitor should be willing to outline what disbursements will have to be paid and at what stage of the sale they will be payable.

Women call the shots with estate agents

Research has shown that women are much more demanding than men in their dealings with and their expectations of estate agents. The survey, by propertyfinder.com, showed that women are far more likely to consider it essential that agents have a good local reputation, are readily available, make appointments, know the property and area well and will market their home on the internet.
Men, on the other hand, are far more likely to seek lower fees than women, are less concerned that agents make viewing appointments before turning up and do not see the importance of showing their home off in its best light. One commented, ‘I think buyers should just take me as they find me.’
Nicholas Leeming, director of propertyfinder.com, said: ‘Women research their agents in a different way from men. Men may underestimate the need to present a home at its best before a viewing and are less worried if potential viewers turn up unannounced.’
Overall, low fees come much further down the list. Vendors do not select on price, partly because agents’ fees are fairly standard but mainly because they are more concerned about quality of service. Sellers with higher-value homes are much more concerned about fees. Those who consider low fees ‘essential’ are generally selling homes 38 per cent more expensive than those who consider low fees ‘irrelevant’.
The internet has come of age too. Having a property effectively marketed on the internet is the second most important factor vendors use in selecting their agent. The internet is now the most important place to search for a new home, with 79 per cent of house hunters starting their search in front of a computer.

One in two Britons sees property as best route to riches

One in every two Britons (50 per cent) believes that investing in property is the best way of getting rich quickly, yet nearly half (49 per cent) say that they do not feel in control of their long-term finances, according to new ICM research commissioned by Interactive Investor (iii.co.uk).
The research also reveals that four out of five people who say that money keeps them awake at night only spend an hour or less a week actually looking after their finances. Over half of these insomniacs (51 per cent) spend less than five minutes per day. And more people lose sleep over job or money worries (43 per cent) than those who sleep soundly or worry instead about family (39 per cent), sex (13 per cent), weight problems (ten per cent) or their favourite sports team (seven per cent).