Buying, selling and letting - Friday, December 15, 2006

Consolidating legislation to reduce the burden on businesses is a key platform for the government’s regulatory review. But, according to ARMA, the Association of Residential Managing Agents, this relative ease of use and understanding demands a large learning curve at the start. Recent changes to fire regulations – the most far-reaching for 30 years – are a case in point, says ARMA.

Those responsible for managing residential blocks need to ensure they understand recent changes to fire safety regulations. One expert, Phil Jones, from Quantum Risk Management, explains: ‘From 1 October 2006, there has been a new Regulatory Reform (Fire Safety) Order which will mean that the onus for assessing risk in the common parts of residential building falls to the owners, managers or employers of those working in apartment blocks.
‘The emphasis is on prevention and risk assessments which must be carried out by what the regulations describe as a “competent” person.’

Another expert, David Foster, ARMA’s Health and Safety consultant and a director of Eljay Health and Safety, agrees. ‘The new Order seems to have adopted a common-sense approach. People who are applying themselves to fire safety in a sensible manner have nothing to fear from the new regulations. In fact, it should assist them. However the legal requirement for risk assessments and for them to be undertaken by competent persons should not be ignored.’
The Order provides a risk assessment-based system with specific people (i.e. ‘responsible persons’) charged with the responsibility for safety in any premises they manage or own. Where there is more than one ‘responsible person’ the law requires them to co-operate.
Until October there were two major pieces of specific fire safety legislation – the Fire Precautions Act 1971 and the Fire Precautions (Workplace) Regulations 1997 [amended]. These are based on very different philosophies. The first of these ensures that in the event of a fire, people can evacuate the building safely; the second puts the onus on employers to identify – and eliminate – risk.

Add to these pieces of legislation the myriad of additional fire safety regulations and the situation until now has become complex and confusing. Phil Jones has high hopes of the newly-introduced regulations cutting through this complexity and providing a main port of call. However, he says: ‘In principle the regulators appear to have succeeded in achieving their goal which is to reduce burdensome layers of legislation. However, we shall have to wait over the coming months and years to see how the enforcement decisions interpret the new legislation.’
The main duty holder is the ‘responsible person’ in relation to the premises. It should always be remembered that in the case of a residential block, the common parts form a place of work for a number of different people, as well as forming the link to someone’s home. Employers and managers therefore must ensure the safety of employees as well as the well-being of the residents using the building.
Undertaking a single risk assessment is not sufficient. Regular reviews must be carried out with such factors as dangerous substances stored or used on the premises kept under close scrutiny.

Where more than five people are employed, risk assessments must record significant findings, safety measures taken and people identified as being especially ‘at risk’. Training, communication and provision of equipment are all part of the duties of the ‘responsible person’.
A further key issue for property managers is the need to ensure that emergency exit routes are kept clear at all times. This is not always an easy achievement in a residential block but again the ‘responsible person’ has an overriding duty of care to ensure that exits are not obstructed and are clearly marked – with doors opening outwards.

Fire Certificates will no longer be issued by the Fire Authority on the enactment of the new Order. However, where a Fire Certificate is in force and reflects current standards this may be used as part of the fire risk assessment process.
The ‘responsible person’ has an over-riding duty to see to this but he or she must ensure that any person they appoint to assist with or undertake any preventative or protective measures is ‘competent’. Contravention of the regulations can mean more than a fine. Phil Jones cautions: ‘A responsible person commits an offence if he or she fails to comply with the duties imposed by the Order. These are prosecutable through the courts, and fines or even imprisonment can result’.

For further information call ARMA’s Secretariat on 020 7978 2607 or visit arma.co.uk

Research from buy-to-let specialist Landlord Mortgages  reveals that 25 per cent of landlords have refinanced over the last year to create ‘war chests’ in anticipation of a softening housing market. The money they put by is earmarked to allow them to take full advantage of lower prices.
Lee Grandin, Managing Director, Landlord Mortgages, says, ‘Landlords are preparing themselves for a much-publicised softening property market by refinancing their portfolios rather than trimming them down. The benefits of this are two-fold: investors avoid capital gains liabilities and put themselves in a strong position to snap up potential bargain properties if the property bubble bursts.

‘The experienced landlord will be taking advantage of this ‘cheap’ money and will be ready to make the most of an uncertain market. At Landlord Mortgages we are seeing a great deal of ‘pound cost averaging’ in the landlord community whereby investors even out house price fluctuations by buying at regular intervals, thus averaging out the returns over a longer period of time.
‘For those landlords whose portfolio needs external management, fees will be a factor in keeping margins to a satisfactory level and as a result landlords will need to review the deals their lettings companies offer. Most companies charge approximately 15 per cent for full management but the recently launched www.lettingagent.com charges 8 per cent or less. So if landlords are paying more than this they need to ask their management companies why.’

House prices in England and Wales showed another significant rise in October, according to figures from the Land Registry. The rise of 1.2 per cent in October was the second month in a row that the figure had increased by over a percentage point.
The average home price in England and Wales is now £171,709.
The overall figure for house price inflation was seven per cent, with the brunt of the increase borne in the South, which has seen overall annual house price inflation increase by 9.6 per cent in London and 8.1 per cent in the South East. The two regions saw respective monthly rises of 1.6 and 1.9 per cent, with London houses now costing an average of £309,432.
While first-time buyers in or around the capital face increasing difficulty and hardship trying to get on the housing ladder, the news was better in the North East where, despite a monthly rise of 2.9 per cent, the annual rise has been a below-average 5.8 per cent with the average price now £125,660.

Despite high demand for property in catchment areas for schools that are seen as high-quality, the value-added-premium that potential buyers are willing to pay for the privilege is falling, says RICS (Royal Institution of Chartered Surveyors) in a recent survey.
When a similar survey was last conducted, in August 2003, estate agents suggested buyers were willing to pay a 12 percent premium. With the exception of London, this percentage figure has fallen to eight percent, with the premium for primary schools lower than for secondary schools. Due to rising house prices the actual figure being paid has remained unchanged at £16,000.
The latest figures suggest that the substantial rise in house prices has led to affordability difficulties in the areas close to good schools, which in turn is putting a lid on prices in these sought after locations.

Jeremy Leaf, RICS spokesperson, says, ‘A secondary school with a good reputation can cause mayhem in a local property market. Buyers with children of school age will do and pay anything to get their children a place. However, our latest figures suggest some people are simply being priced out of the market in these key locations.
‘It is quite normal for potential buyers to check the local Ofsted reports before they read the particulars for their preferred properties. The education effect on property prices can extend well beyond the school run boundaries.’
Some estate agents, responding to the questionnaire raised the point that properties more suited to non-family purchasers can actually suffer because of their close proximity to a secondary school where the heavy traffic caused by school runs and children loitering around the premises out of school hours can be unappealing.

This year, it certainly seems that what an increasing number of people want for Christmas is less debt. Compared to a survey conducted last year, where 18 per cent had used their Christmas bonus to pay off debt, this year 26 per cent of people surveyed who received a bonus intended to use their bonus to reduce the amount they owe. 
With the desire to be debt-free high on many people’s Christmas lists, it’s therefore surprising to find that only two per cent of consumers intend to use their bonus to reduce their mortgage, often people’s biggest financial burden, when doing so could save them thousands of pounds.    
Simply paying the average annual bonus into a current account mortgage each year could pay off your mortgage more than six years early, saving thousands of pounds in interest in the process, which really would be something worth celebrating.
Debbie Milsom, spokesperson for The One Account, comments:  ‘We all yearn to be mortgage-free, but this need not be an impossible dream.  Having a current account mortgage, like The One Account, brings together your mortgage, current account, savings, loans and credit cards.  Simply put, it means that any money in your current account, be it monthly salary, savings, or indeed your hard-earned bonus, is constantly working to reduce your mortgage but is accessible at all times. You have worked hard for your bonus – so let your bonus work hard for you.’
Milsom continues, ‘Having your current account working for your mortgage provides flexibility and uses your monthly income or extra money to help you reduce the interest paid on your mortgage and in turn reduce the term.  The fact that over 80 per cent of The One Account customers are on track to pay off their mortgage earlier clearly demonstrates this.
‘It is the lifestyle benefits of The One Account that really makes it stand out - undoubtedly the most inspiring is the ability to pay off your mortgage early.  Shrink your mortgage, not your dreams.’


Got a mortgage and want to be able to make better use of your bonus this year? Have a go on the Mortgage Shrinker at www.oneaccount.com

AXA Real Estate Investment Manager’s Alan Mooney, Head of UK Research & Strategy, identifies trends and key themes for the UK property market in 2007:

“2006 is shaping up to be another good year for property.  After strong returns of 19.1 percent in 2005, total returns for the first three quarters of 2006 stood at 13.9 percent with likely returns for the year of between 17 – 18 percent.  As in the previous year, the strong performance of the property market was driven by downward yield movement as the volume of liquidity continued in 2006.

There is, however, a growing sense of caution in the market, particularly in relation to secondary assets.  Anecdotal evidence suggests that the market for such property is now thinning, with the number of bidders for smaller secondary lot sizes reducing and properties taking longer to sell. Although prices have yet to be fully affected, there are early signs of easing in the secondary market. We expect this cautious mood to affect buying intentions in 2007.

There are several contributing factors which could potentially limit further positive yield movement in 2007. These have been identified as:
·    Pricing issues in the market, in particular the upward trend in base rates further eroding property’s yield premium
·    The first signs of nervousness amongst debt backed investors
·    An increasing resistance on the part of investors to prime yields
·    Early tentative signs of the unwinding in the compression of the yield gap

Further downward yield movement is likely to be limited to those property types which can demonstrate substantial potential rental growth.

In the occupational market, central London offices should continue to show strong rental growth but we expect there will be increasing concerns about this market as the amount of speculative space under construction continues to grow.  

With returns likely to be driven by rental growth rather than yield compression, we expect the UK market to deliver total returns in the high single digits in 2007”.

Housing Minister Yvette Cooper yesterday set out reforms to the planning system.  Planning Policy Statement 3 was issued by the Department for Communities and Local Government on the 29^th November 2006.  The guidance in the policy statement comes into effect on the 1^st April 2007 but may influence planning decisions before that date.

The guidance requires local authorities to identify a 15 year supply of development land for housing and sets a national minimum density of 30 dwellings per hectare for new developments.  A target of 60% is set for new development to be provided on previously developed land (Brownfield land).

Luke Carter, Head of Planning at Strutt & Parker’s Brighton office comments “The requirement for local authorities to identify a 15 year supply of land is welcomed, as this will give more surety to land owners and property developers.  However, it remains to be seen whether local authorities have adequate resources to identify sufficient sites given the strict requirements for greater public consultation at every stage of the plan making process”.

People who live with their partner but aren't married could find themselves out on the street or in a financial mess if they were to split up, according to a new briefing report published today by the LivingTogether campaign.

There are more than four million people in the UK living with their partner outside marriage, and more than a third of them live in rented homes - almost twice as many as married couples. Yet two thirds of people wrongly believe these couples have the same legal rights as those who are married, according to LivingTogether research.

The harsh reality, highlighted by the new report, is that those who 'cohabit' could find they have no right to remain in the home if they were to split up from their partner, even if they've lived there for years. If the home is rented or owned in only one partner's name, for instance, the other will have no legal right to stay if their ex asks them to leave. Even if the home is jointly owned, it can only be sold with the agreement of all owners. This can cause problems after a break-up if one partner wants to stay but can't afford to buy the other's share.

To raise awareness of the housing issues for cohabiting couples, the LivingTogether campaign, run by legal rights and information website Advicenow.org.uk, has compiled its new report to highlight the problems, and offer some simple solutions to help people protect themselves.  

Mary Webber, cohabitation expert at Advicenow said, "An alarming number of people still believe that they have a 'common law marriage' but the truth is, unless they take steps to protect themselves, they have very few rights. If the relationship ends, many will find themselves in a very difficult situation, potentially facing money problems or homelessness.

"Having said that, there are things they can do to help themselves. Writing a 'LivingTogether Agreement', for example, is a great way of setting out who owns property and possessions, and how contributions to the rent or mortgage are shared, which can make things much fairer in the event of a split. Also, no-one knows what's round the corner, so making sure your partner has an up-to-date will that would provide for you in the event of their death is really important for unmarried couples, who have no automatic inheritance rights."

The LivingTogether top tips for cohabiting couples:
*    Whether you rent or own your home, draw up a LivingTogether
Agreement, to set out who owns what, and who pays what. This will help keep things as fair as possible if you break up down the line
*    If you're planning to rent a home with your partner, make sure
the tenancy agreement is in both names
*    If you're moving into a home owned by your partner, think about
how you contribute to the mortgage, and things like home improvements. Make sure you're both clear about how things would be divided if you were to split up
*    If you're planning to buy together, think about whether both
names will appear on the deeds, and whether you want to be 'joint tenants' or 'tenants in common', as this will affect what happens if you separate or one of you dies. This is particularly important if you're both putting in different amounts of money
*    Make sure you both have wills, and that your partner has made
provisions for you if anything happened to him  
 
More details of the issues surrounding cohabiting couples and housing, along with the most up to date facts and figures are available in the LivingTogether report 'Property: The Risks and Remedies for Cohabiting Couples'.

Unseasonably strong growth in housing sales over November and falling levels of supply have resulted in an acceleration in the rate of house price growth according to the latest monthly housing market survey by Hometrack, the housing information business. House prices grew on average by 0.6 per cent over November, up from October’s 0.4 per cent figure. The annual rate of growth is now 5.3 per cent, the highest since August 2004.
Richard Donnell, Hometrack’s director of research, says, ‘Buyers may have shrugged off the August interest rate rise, but the prospect of a further increase in November seems to have forced those who were thinking of moving to actually do so. The result has been a sustained increase in market activity over the last two months. But set against a background of dwindling supply, house prices have continued to rise, a trend that has now spread beyond London and the South East.’

After a modest slowdown in market activity over the summer, the volume of sales agreed by agents has now reached levels similar to those seen in the late spring and early summer. Sales agreed over November, compared to October, were up 4.8 per cent with the greatest increases in the Eastern region (10.7 per cent), the South West (12.3 per cent) and London (7.1 per cent) – albeit, in the case of the Eastern and South West regions, off a low base.
The market movement has little to do with first-time buyers, however, says Donnell, as ‘the majority of property transactions being carried out by those that are already on the housing ladder or are being assisted in some way. However, we do expect the recent increase in interest rates to impact on levels of activity in the months ahead with the market likely to experience a seasonal slowdown over December.’
Hometrack forecasts 2007’s annual house price growth to be four per cent, he says, with ‘London and the South East expected to remain the primary engines for growth, with prices being driven by a continuing supply/demand imbalance.’

House prices approach ‘tipping point’
Asking prices for UK homes took a 1.3 per cent leap in November, according to the latest Asking Price Index report from Home.co.uk. This means that nationally, average house prices have increased for three successive months - a sure sign that sellers’ confidence is growing.
A rally in asking prices signals an uplift in market sentiment and a new upward trend. But, says Home.co.uk, the timing could not be worse.
These asking price rises come in the wake of August’s interest rate hike by the Bank of England suggesting this initial inflation-fighting measure was unable to tame inflationary pressures faced by the economy, according to the report. Earlier this month, the Bank raised rates again. Asks the report: ‘Will this second hike have the desired gentle braking effect on the runaway train that is the UK property market or will it stop dead in its tracks?’
Home.co.uk’s view is that ‘the combination of rising asking prices and interest rates is taking the UK property market into dangerous territory’. In the first quarter of 2005, the report points out, high asking prices caused the number of monthly transactions to drop, causing a market ‘wobble’.
‘The market looks set to wobble again. Increases in the cost of borrowing coupled with rising asking prices are likely to slash transaction volumes and drive the market toward a “tipping point”.
If the housing market retains some fluidity, the short-term outlook for first time buyers is bleak,’ the report concludes.
Doug Shephard, director of Home.co.uk, says, ‘Since 2004 we had observed a slow downward trend in house prices - it looked as though the affordability gap for first-time buyers was closing as the “froth” melted away. Over the last six months, the opposite trend has emerged. With sellers’ confidence in the market on the rise and increasing interest rates, the affordability gap for first-time buyers is rapidly widening.’

No cooldown for market
The housing market is showing no signs of cooling down as we head into the winter months, according to Assetz. The company’s index of the six major price indices shows that the continuing price rises are driven primarily by the continued imbalance between supply and demand, as opposed to interest rates.
Assetz stands by its original prediction of seven per cent annual house price inflation by the end of 2006, with eight to 10 per cent growth for 2007 and 2008, allowing for an additional interest rate rise in January.
The Bank’s decision to raise interest rates this month to five per cent to combat inflationary fears could in fact help deliver inflation, claims Assetz, by driving demands for higher wages through perceptions of an increased cost of living. House price growth is driven almost entirely today by the growing need for new homes, it says, a result of the government’s immigration policy and the huge rise in single-person households, along with severe planning restrictions which prevent housebuilders from responding to demand.
Stuart Law, managing director of Assetz, explains: ‘The Bank of England is perhaps looking too closely at house price rises as part of the inflationary mix, still believing rises to be interest-rate led. In fact, the growing demand for homes, driven by high immigration and the forthcoming expansion of the EU to include such countries as Bulgaria, Poland and Romania, will be the main source of house price growth over the next few years, rather than low interest rates which primarily drove price rises up until 2005.’