Buying, selling and letting - Wednesday, June 22, 2005

More people than ever are owning a second home and becoming landlords for the first time. Charles Gordon of Credence Property Services takes us through his top ten tips for success

Hot spot Areas Look for an area that has a high demand for rental properties. A property which can not be rented or stands empty for months is a poor and often costly investment. Seek out areas which are currently undergoing improvement and regeneration as this can add thousands of pounds to the value of your investment. Planned new extensions to the London underground have recently created hot spot areas in Penge, Anerley and Woolwich.

The Property Research carefully the average rental price in the area, for the kind of property you are going to rent. This will give you an indication as to whether the rental income gained from your investment will be enough to cover the mortgage. Remember only top quality properties yield top end rents

The Tenant Consider carefully the kind of tenant you would like and the financial and legal implications of this. Some insurers will refuse to insure you if you rent your property to a housing benefit or social security tenant. In this case you will need to approach a specialist insurance company

Bad Tenants Protect yourself as far as possible from poor paying tenants and those that are destructive to property by doing your research and insisting upon references.

Extra insurance against tenants Use an insurance plan such as Let Plan, who for a small fee will take on the reasonability of the tenants payments and can cover landlords liability, rent guarantee and legal expenses.

Tenancy Agreement The more specific the agreement the better you will be protected. A basic agreement will protect you in law but it won’t cover you for any specific standards you may require. If you desire particular maintenance of your property such as regular mowing of the lawn then make sure you specify it in the agreement.

Professional Advice Don’t go it alone, take time effort and professional advice in order to familiarise your self with tenancy law. It is a logistical minefield and mistakes in the area are extremely costly.

Building Insurance Check your buildings insurance carefully before letting out your property to a tenant. Renting can often invalidate your buildings insurance so always ensure that you have valid insurance

Mortgage Investigate your mortgage thoroughly, and ensure that it allows you to rent your property. A buy to let mortgage allows for this but most residential ones do not. When budgeting take into account that changing a residential mortgage to a commercial one can raise the cost by about 1% or approx £100.00 per month

Eviction of Tenants If it gets to this stage then ALWAYS Seek professional and legal advice before proceeding. Evicting tenants is a complicated and bureaucratic process and the success of your eviction could hinge on something minor such as whether you served the right notice on the right day or not.

Credence 020 8698 6000
credence.ltd.uk

Remortgaging, investing still popular

Over three quarters (78.5%) of property investors are considering remortgaging this year, seeking to take advantage of low rates and competitive lending deals, according to research by the Property Investor and Homebuyer Show North (24 to 26 June, G-Mex Manchester).
This figure has risen consistently over the last three years, showing a 25% increase in the number of people considering remortgaging since 2002 [see graph 1]. This is reflected in data from the Council of Mortgage Lenders (CML) which reveals that remortgages now form almost half (48%) of all mortgage loans totalling approximately £9,300 million pounds, compared to £5,400 million in 2002.

The survey also revealed that 80% of property investors would use additional funds gained through re-mortgaging to reinvest in additional property, emphasising the confidence the majority of investors still hold in the long-term gains of the buy-to-let market, despite negative reports and forecasts from some commentators. Another recent survey from the Property Investor and Homebuyer Show North revealed that 84.9% are still relying on their property portfolio or home to provide them with future wealth.

Shopping around

Nick Clark, Managing Director of the Property Investor and Homebuyer Show North, comments: “Property investors always want to see their money working hard for them and are now more willing than ever to shop around to negotiate the best deal possible for their mortgage. With interest rates historically low and likely to decrease further in the next few months, we are expecting to see many more homeowners and property investors remortgaging to take advantage of competitive deals.”
Lee Grandin, Managing Director of Landlord Mortgages, comments:
“There has been a visible surge in remortgaging over the last few years. Recently we have seen many buy-to-let investors opting for lifetime trackers as they are at their lowest rates above the base rate. One product we offer is only 0.64% over the Bank of England base rate for the life of the mortgage. The other popular option is three-year fixed rates under 5%; these suit investors as they offer some stability, but don't tie them in for too long if rates do come down.”

Rental market

‘There has been little sign of the post election surge of interest that market commentators believed would generate a fresh demand for lettings. The market has remained static and steady, but in the back of many minds, interest rates must come down before people have the confidence to commit to the lettings and sales markets.’ Comments Dayle Hodgson, Senior Lettings Manager for Central and South London.

Mortgage lenders may, however, offer some light relief for landlords. Jonathan Cornell, Director of Hamptons International Mortgages says, ‘ Many lenders are offering competitive, three year buy to let fixed rates at less than 5 per cent.

Throughout 2005 we have seen lenders displaying an unprecedented interest in the buy to let market, and products are more competitive than ever before. Some lenders buy to let rates are actually lower than other lenders residential rates. We have also seen a great degree of product innovation in the buy to let market with lenders finding new ways to help landlords borrow as much as possible on their properties.’

Mortgages becoming more affordable

The proportion of household income spent on monthly mortgage payments across England and Wales increased in May to 18.5 per cent of average household take home pay, up from 18.3 per cent in April and equaling the recent high set in February 2005 and November 2004, according to the new Woolwich Mortgage Affordability research. The recent low was set in March 2002 at 15.6 per cent, just two months after the Woolwich started monitoring affordability.

Andy Gray, head of mortgages for Woolwich, said: ‘The mortgage affordability numbers show that the concern expressed by some commentators about affordability is probably overdone. Much has been made of the current house price to earnings ratio (HPE) being at a record 6.32 – up from 4.9 in the housing recession at the beginning of the 1990s.’

However, says Gray, the data shows the increase in the mortgage burden has been slower and reached less dramatic levels than the HPE would suggest, growing from 15.6 per cent of after-tax earnings to 18.5 per cent. ‘This also indicates that nationally the cost of servicing a mortgage is still affordable for most.’

The stabilising of affordability nationally has been due to improvements in the cost of servicing mortgages in London and the South East. London's mortgage burden reached its highest in November 2004 with 23.2 per cent of income spent on mortgages; this has fallen steadily to 22.8 per cent in May 2005. The South East reached its peak in December at 19.2 per cent and has fallen to 18.7 per cent in May 2005.

Buying 'saves £37,000'

A new study by Abbey suggests that renting a home costs 11 per cent more than buying the same home. The average property now costs £326,849, while the same property would cost £364,499 to rent over the course of the standard 25-year mortgage term.

However, this belies the fact that in most parts of the UK the gap between the cost of renting and buying is narrowing, and is currently at its smallest since Abbey began to research the statistic ten years ago. The bank said a rise of 12.6 per cent in house prices, added to a 0.75 per cent jump in interest rates during the period, had made buying more costly. Not surprisingly, London is the most expensive region in which to rent a home, and in the capital renting is still four per cent cheaper than buying.

Post-election rental surge fails to materialise
Hamptons International says the lift in the rentals market that was widely expected in the wake of last month’s general election has not happened. In London the average rental price was the same when compared with the figures from May 2004, while in the UK generally it rose.

London saw rental values achieving £396 per week compared to £392 in 2004, and Hamptons International's country offices saw average weekly rentals of £375, a marked increase from £319 in 2004. Market appraisals last month rose 12 per cent compared to the same time last year. but actual stock levels are lower.

Interest rates should fall, say agents

As the number of first-time buyers dwindles, the National Association of Estate Agents (NAEA) urges a rate cut. Peter Bolton King, chief executive of the NAEA, says, ‘It is widely reported that confidence in the economic future is at a low and that private investors are turning to commercial property over the residential market. We would therefore urge the monetary policy committee to seriously consider reducing interest rates in July in order to revive the housing market and the economy on the whole.’
The number of first-time buyers in the housing market during May shrunk by more than half that of the previous month, reports the National Association of Estate Agents (NAEA) today.
This disappointing news comes at a critical time of year for the housing market as the summer months usually set the tone for the rest of the year ahead, says Mr Bolton King. ‘If more first-time buyers are not encouraged onto the housing ladder it will be difficult to warm the housing market – and economy – up throughout the rest of the year.’
 
Confidence returning to the market

There has been a marked turnaround in confidence among house hunters over the prospects for the housing market, according to Propertyfinder’s May survey. Although 34 per cent of those in the market for a home now expect house prices to fall over the next 12 months, the majority (54 per cent) expect prices to rise.

The survey finds the market stabilising, with respondents now expecting prices to slip just 0.3 per cent over the next 12 months, compared to expectations of a sharp drop of 7.7 per cent in the previous month. It is true, however, that April’s confidence was hit by the ‘general election effect’, a regular feature of the housing market at election time.

Further evidence of stabilisation comes from comparing the views of buyers to those of sellers. Both groups maintained very similar views on the outlook for house prices until September 2004, at which point buyers became markedly more pessimistic than sellers. A widening gap between the two groups signified stalemate in the market as overly optimistic sellers consistently overestimated the health of the property market while buyers sat on their hands. The gap has begun to narrow again, which signals that the market can look forward to healthier levels of activity. Similarly, the discounts buyers expect and the prices sellers expect to get are more in line than they have been in recent months; sellers on average say they will entertain offers 4.4 per cent below the asking price, while buyers, who have consistently demanded greater discounts in recent months than sellers were prepared to accept, were making offers in May at an average of 4.6 per cent below the asking price, very much in line with sellers’ expectations. To put this in context, the gap of 0.2 per cent is now a mere £360 off the average house price.

Despite a cooling housing market, buying to let is still extremely popular, says Johnny Turner. He looks at new developments with investment potential.

Buy to Let – What to Buy and Where?

Waterloo and Southbank: comment

Tony George, from Frank Harris and Company’s Waterloo and Southbank office, comments that a large proportion of properties around Waterloo and the Southbank are being purchased by buy-to-let investors.

“Most properties in the area are purchased as pied-de-terres or buy-to-let investments. Waterloo and the Southbank have been highly popular in recent years as people have been getting a more reliable return on their property investments compared to the huge ups and downs of the stock market. While this may not still be the case in other areas of London, investors can still see the long-term benefits of purchasing a but-to-let property along the Southbank. While it is commonly recognised that riverside apartments are more likely to retain their value in a sluggish housing market, they also can command a higher rental return.”
 
Frank Harris and Company highlight that the majority of lets in the area are to corporate tenants, who prefer portered developments and the excellent riverside location. This also works well for investors as they can normally guarantee a longer rental contract through corporate contracts, and they can be assured of the quality of tenants within their properties.

The area around Waterloo and the Southbank is a highly popular area for buy to let investors for many reasons:

The majority of properties are in modern, portered blocks, and therefore do not need a high level of maintenance.
Waterloo offers excellent transport services - As well as the mainline National Rail services, the Jubilee, Bakerloo, and Central and District London underground stations also service Waterloo. The Waterloo and City Line also takes residents directly in to The City.
The riverside developments along the Southbank offer stunning views for residents, with local bars and restaurants offering a range of entertainments.”

The most popular buy to let properties in the area are one bedroom apartments, which range from 550 sq ft to 600 sq ft, and are priced from around £300,000 upwards.

Properties around Waterloo and Southbank are ideally located for those who like to walk to work in and around The City and Westminster. The West End and Covent Garden are also easily accessible on foot.

For more information about properties in Waterloo and the Southbank, contact Frank Harris and Company on Tel 020 7620 3400 or visit frankharris.co.uk.

Recycling has never been easier. Here we find out tips and sources of information on becoming a more environmentally friendly household
Recycling has rarely been more important than it is now. With environmental issues frequently grabbing the headlines and a raft of recycling initiatives recently launched, it's becoming easier all the time.

Over 50 per cent of household waste can be recycled or composted, but UK households currently only recycle up to 12 per cent. And with so many methods available to help you recycle your waste, there is little excuse for not doing your bit.
In fact, the solution to minimising your household waste and disposing of it in the right way is about more than just recycling. A now commonly used slogan is 'reduce, reuse, recycle', which suggests that there’s more to the process than simply taking your empties to the local bottle bank (although that's a good place to start!)

Reduce

Before you think about recycling your waste, think about how to reduce the amount of waste produced by your household in the first place. Avoid buying food and products which are heavily packaged – this simple step will avoid you being left with lots of empty packaging to dispose of!

In addition, you can buy products which come in refill packs, such as detergents and some foodstuffs, to help keep your rubbish to a minimum.

Reuse
Get more use out of some of your household items, instead of just throwing them away.

For example, reuse items such as plastic carrier bags. According to the recycle-more website, each person in the UK uses an average of 134 plastic bags each year. This figure could be slashed if we put more effort into keeping and reusing them.

Turn old clothes into rags for cleaning, use old newspaper to clear up after pets, use old glass jars as storage jars – with a little imagination you could do a lot to reduce the amount of waste generated by your home.

Recycle

There are plenty of opportunities for you to recycle. Most local councils now run recycling schemes, and will collect your recyclable waste together with your household rubbish. If you don't already benefit from a service like this, you should soon; the Household Waste Recycling Act 2003 requires local authorities in England to provide kerbside collections for their residents by 2010, so you're entitled to lobby your local council to offer recycling if they don't already do so.

Top recycling tips

The first step is to find out where your nearest recycling facilities are. As well as putting out your recyclables for collection, you can also do your bit by nipping down to the bottle and paper banks when necessary
If you have a garden, think about composting. It's a great way of recycling a lot of your kitchen waste and other natural materials. To get the most out of recycling you'll have to buy a composter, but this shouldn't break the bank and they're available from many DIY and household stores
Parents can consider using traditional terry-towelling nappies on their babies, instead of disposable ones, which generate a lot of waste. Don't worry about being squeamish – you can now buy disposable liners for them!

One of the trickiest aspects of recycling is finding out what can be recycled and what can't. If your weekly shopping contains an assortment of plastic bottles, glass jars, cardboard cartons and newspapers, you need to know what can be disposed of in the right way. The website recycle-more.co.uk contains a really useful list of the symbols you will usually find on household packaging materials. This will help to take the guesswork out of your recycling and will tell you whether a particular piece of packaging is recyclable, and if so, what you should do with it
As well as recycling your own household waste, make the effort to purchase products that are made from recycled materials. To find out more about what products are made from recycled goods, visit recycledproducts.org.uk

Put an end to receiving junk mail, which you'll probably end up throwing away. Under the Data Protection Act you are entitled to opt out of receiving junk mail through the post, and can do so by contacting the Mailing Preference Service. Find out more at mpsonline.org.uk
Consider buying a shredder to destroy any sensitive personal or financial documents that you are disposing of. Given the recent publicity around identity theft, it might pay to prevent your information falling into the wrong hands.
Mixed material packaging like drinks cartons can be harder to recycle than materials such as paper or glass – there is only one suitable facility in the UK – located in Fife, Scotland. You can send your drinks cartons there to be recycled but you have to pay the postage. More information can be found at drinkscartons.com.

Laura Quiggan casts some light on how to find the appropriate lighting for your home

Good lighting is essential for any home, not only to aid sight and security, but also as a simple and effective method of creating mood and atmosphere. But, faced with a choice of dimmers, downers, uppers, spots and clusters, you could be forgiven for feeling mystified. It is worth investing a little time and effort in seeking enlightenment.
Household lights should be chosen for their purpose, not just the way they look. Decide which kind of lighting suits each room in your home and consider the function of the room. Clear bright lights are practical for a working kitchen, but not for the more intimate atmosphere of the bedroom. Are there specific objects you want to highlight? Where will people sit? What overall mood do you want to create?
Light can come from the top, middle or bottom of a room, but make sure the overall effect is a welcoming glow and not a harsh glare. A well-lit room will have equal levels of light radiating from the floor and ceiling, with surrounding pockets of bright light contrasting with shadow to give depth and mood.
Understanding the variety of lights on the market and how they can be used to enhance your home helps to create the look you want to achieve.

Pendant lights

The most common type of fitting, comprising a bulb and shade hanging from a ceiling rose, which casts a circle of light downward.

Ceiling lights

These straightforward lights are mounted directly onto the ceiling in a closed unit. The lack of shade allows the beam to fill a room with a clear, even illumination. Ceiling lights are more commonly used for lighting kitchens and bathrooms where condensation and steam are likely to affect other fittings and shades.

Recessed ceiling lights

Fitted directly into a ceiling cavity to sit flush with the ceiling, giving an even illumination. These are particularly useful for rooms with low ceilings or for minimalist tastes where unobtrusive décor is required.

Wall and sconce lighting

Produces a soft outward glow that can be used in support of main illuminations. These lights are well suited to hallways and doorways, but can be used in groups to create higher levels of light.

Track lights

This versatile system consists of individual spotlights on a run. Track lighting is ideal for enhancing specific features by redirecting the beams, or for areas where support lighting is required. Small diameter track lighting can do more than highlight a painting – it can also serve to accent the perimeters of a room by helping to define spaces and create balance.

Fluorescent lights

Ceiling mounted fluorescent lights are activated by a starter mechanism. The bulb is a long glass tube containing mercury vapour, and these last up to eight times longer than conventional bulbs. Fluorescent lights have the advantage of giving off only a small amount of heat and are ideal for use above work surfaces in kitchens.

Light bulbs

To soften areas of lighting try varying your light bulb wattage, opacity and colour. Although initially more expensive than conventional bulbs, energy-efficient halogen and daylight bulbs have a longer life span and can save on bills in the long run. For lighting effects as dramatic as the price, search out individual bulb creations in colour and stained glass at trendy markets.

Up or down?

Downlighters and uplighters have become popular in the home and can be very effective in creating different moods. Downlighting with a solid conical shade will push the light out and down, allowing very little light to filter upwards. To enhance the illumination even more, use a shade with a white interior to reflect the light. Uplighting shines the light upwards onto the ceiling to create a soft light and a theatrical, inviting atmosphere. Small or redundant spaces between plants, furniture and the wall can be enhanced with uplighting to make the room appear larger.

In today’s shopaholic society, knowing that you’re near good retail facilities is a home-buying bonus. Johnny Turner scouts a few of the best new homes for shoppers.

Those in the market for a new home will keep in mind the practicalities such as transport, schools and entertainment spots. Another must is proximity to good shopping, and there are quite a number of new developments that make purchasing a pleasure.
Barratt has been busy in the regeneration department with its Centreway development in Ilford. Centreway is located on the site of derelict shops and carries on the shop-til-you-drop ethos, with its High Road location very well located for shopping options. Following on from the neighbouring Barratt development Spectrum 67, Centreway comprises 239 apartments, mainly one- and two-bedrooms, in a spectacular series of buildings rising to a maximum 16 storeys.
The apartments will offer designer kitted kitchens complete with integrated appliances, fitted family bathrooms (and en suite shower rooms where appropriate). There is also central heating, double glazing, mains-wired smoke alarms and TV, satellite and telephone points.
Rooftop penthouse apartments will have terraces which give panoramic views over eastern London and metropolitan Essex.

There will be private parking under the building, as well as audio entry system and a daytime concierge. The development will also include a private day nursery and a fitness room for residents, and an adjoining health centre/doctor’s surgery is proposed.
Apartments at Centreway start at £186,995. Call the sales office on 020 8514 7125.

Another Essex location that is great for proximity to shopping is Purfleet, where Weston Homes is selling Chambers Place. The development, launched a month ago, is situated adjacent to Barratt Homes’ scheme The Haven. Weston showcases its newly upgraded specification at Chambers Place, and will offer the highest quality of fixtures and fittings available in the area.
The apartments will feature spacious reception rooms with open-plan kitchens and dining areas – ideal for entertaining. Fully fitted kitchens will have stainless steel oven, hob and splashbacks, as well as a range of optional appliances including freidge/freezer, washing machine and tumble dryer. Spacious master bedrooms will include built-in wardrobes.
Purfleet is a thriving environment in the Thames Gateway area, with London within convenient reach for commuting. The location is also just miles from two of England’s largest shopping centres, Lakeside and Bluewater; between them you’ll have access to over 650 shops.
Prices for apartments at Chambers Place start at £139,500. For further information contact the marketing suite on 01708 864252 or visit westonhome.co.uk.

Berkeley Homes provides homes that are perfect for a fully rounded shopping experience at its Tabard Square in the Borough area of London. Not only is the location central enough to be within easy reach of London’s most popular shopping districts but the homes themselves are above shops! That is in addition to the wonderful gastronome’s paradise that is Borough Market, just moments away.
Besides the 46,000 sq ft of commercial space, Tabard Square will provide high-style one-, two- and three-bedroom apartments that are ideally suited to today’s metropolitan dweller, priced between £320,000 and £615,000. Call 020 7321 2122 to find out more. Six penthouses are also soon to be launched; register your interest on the same number or visit berkeley homes.co.uk.

Houses ‘cost eight times salary’

A new report by the National Housing Federation (NHF) shows that average house prices in England have risen to almost eight times the average salary. England’s Housing Crisis: The Facts points to an urgent need for an increase in the provision of homes for affordable rent and low-cost ownership. It shows that house prices have increased by 125 per cent since Labour was  elected in 1997.

Regionally, the South West is shown to be the country’s most unaffordable area, with house prices at 9.5 times average salaries in the region. Meanwhile, North Easterners would need to be earning £31,207 to take out a mortgage on an average house – and the average salary in that region is £18,570.

Liz Atkins, director of strategy at NHF, says, ‘The property market may be cooling but for thousands of people it’s too little too late. Home ownership is now well beyond the reach of many moderate earners, including dual-income families.’ She concludes: ‘If we want to keep families and communities together and revitalise our towns, cities and villages, we need to build more affordable homes for rent and low-cost ownership.’

Buyers are coming back

Buyers, it seems, are coming back to the market, according to two new surveys. The latest report from Hometrack notes that the number of buyers registered on estate agents’ books rose by 6.2 per cent last month, only the second time that the number of registered buyers has risen since last year.

Hometrack’s figures indicate that in the London area viewings were up by 1 per cent from April 2004, while offers being made on properties were 13 per cent higher. The length of time taken to sell a property has fallen from 7.6 weeks to 7.4 weeks. Meanwhile, prices in the capital have largely recovered from the price drops witnessed at the end of last year and buyer commitment and confidence is stronger, with 35 per cent fewer transactions falling through.

The upsurge in sales has been stimulated by stable interest rates, an improvement in the selection of property for sale and a more realistic view of pricing on the part of vendors.
Meanwhile, Hamptons International, in its monthly market observation, finds that the return of the much-missed buyer is particularly pronounced in the southern counties. London, Hamptons says, is ‘leaping’.

One persistent problem in the market, the study finds, is shortage of homes in the market. ‘Although we report more new stock for sale,’ says the report, ‘the shortage continues in many regions, helping to support prices in these areas. Properties in some areas are achieving premium prices.

Strong demand is one sign that the present market is ticking over in a reasonably healthy manner. ‘There remains a good level of underlying activity in the market and our managers highlight the quality and commitment of buyers. Well-presented, realistically priced properties are finding buyers.’

New home prices up

The average anticipated selling price of newly built homes started during October to December 2004 increased by three per cent on the same period the previous year. According to the New House-Building Council (NHBC) the average anticipated selling price was £179,000, while in terms of actual selling prices the proportion of new homes priced over £100,000 went up to 93 per cent, a significant increase on the 88 per cent recorded in the same period in 2003.
Imtiaz Farookhi, chief executive of NHBC, says, ‘NHBC statistics show that the number of applications to start new homes in the private sector remained steady compared with quarter four of 2003 and the social housing sector has experienced growth during the same period. UK-wide figures show a total of 41,824 applications to start new homes during quarter four of 2004, a one per cent decrease on the same period in 2003.

Lettings market healthy

The London lettings market started the year 2005 on an encouraging note, with levels of prospective applicants and stock increasing. Contributing factors include City bonuses, a static interest rate and a hesitancy for potential first-time buyers to enter the property market. Research by Hamptons International shows that landlord confidence is set to increase.
Discounting the traditionally slow December, properties available rose by 11 per cent in London between November and the end of January, compared to seven per cent UK-wide. Terry Inskip, Hamptons’ senior manager for Sunningdale and Windsor, says, ‘Market appraisals are definitely picking up, with more landlords ready to instruct.’
A healthy lettings market has a positive effect on the sales market, as investors tend to buy further properties when their rentals are generating good income.
Demand is currently high, particularly for one- and two-bedroom apartments, with many prospective applicants and tenants waiting to see what effect the upcoming general election will have on interest rates; it is widely believed that rates will head downward after the spring election.

Pension property boom?

Changes in pension investment rules next year could cause a boom in the housing market by up to 15 per cent, according to experts at a recent property trade show. Major changes to the rules regarding self-invested personal pensions (SIPPs) will take effect on 6 April 2006. SIPPs can presently contain several types of investment, including commercial property. However, after ‘A-Day’, when the new rules come into force, it will be possible to invest pension funds in residential property and non-commercial overseas property – and there will be tax breaks for those who do so.