Buying, selling and letting - Friday, January 12, 2007

The Halifax house price report for December says house prices fell by 1.0 per cent last month. However, prices in the fourth quarter of 2006 were 4.2 per cent higher than in the previous quarter.

House prices increased by 9.9 per cent in 2006, just above the long-term average of eight per cent per year. In Greater London, the average price increased to £287,176 by the end of the year. This puts it above the inheritance tax threshold (or IHT, currently £285,000) for the first time. Halifax again calls on the government to commit to linking the IHT threshold to house price inflation.

The average price in the South West broke through the £200,000 barrier for the first time in in the final quarter of last year, at £200,931. The 10.5 per cent increase in prices in the South West in 2006 represented a recovery following a 1.9 per cent fall in 2005. Similarly, prices in East Anglia also achieved double-digit growth (13.0 per cent) after a small fall in prices (-1.0 per cent) in 2005.

As expected, house price inflation remained modest in northern England in 2006. The North recorded the lowest regional rise during the year (3.1 per cent), the smallest increase in the region since 2000.

It appears that in the current market, it isn’t just the lack of property that is pushing up prices, as would be easily predicted by the most basic laws of supply and demand. The sudden presence of billions of pounds of City money (as outlined above) is bound to have something of a distorting effect on the usual rules of give and take: owners of very high-end properties may find themselves faced with a crop of competitive would-be buyers. And they will be more likely to overcome their aversion to moving if someone makes an offer they can’t refuse.
In locations across London and the South East, the lack of housing stock is the problem estate agents point to. In Clapham, one agent says the effect of the recent City bonuses, as outlined above, is already evident, ‘especially at the upper price ranges’. However, says the agent, ‘There is still a real lack of property for the number of buyers around and multiple bids on good properties is pushing prices up.’

Other similarly wealthy areas echo the complaint about the lack of homes on the market. In Highgate, for example, a spokesperson for Benham & Reeves says, ‘A depleted register means competition for avaliable stock. The highest market remains strong with a severe shortage of property.’ And in Richmond, one of London’s most sought-after spots, Hamptons International reports an ‘extreme shortage of stock which is driving prices up’.

Source: Hometrack

ELECSA partners with WM Training to offer a complete solution for a domestic wind turbine system to help home owners comply with the Building Regulations

ELECSA, the Government authorised no-nonsense scheme for Part P of the Building Regulations announced today that it has formed a partnership with WM Certification to deliver a public schedule course for the installation of domestic Wind Turbines.

With continual increases in electricity bills and Britain having the most consistent wind in Europe, a domestic wind turbine represents a real sustainable, eco-friendly option compared to energy derived from fossil fuels. For homeowners, domestic wind turbines offers them the ability to take part in delivering green energy direct to their home while contributing to the reduction of CO2 emissions and savings off their average annual UK electricity bill. Property owners can apply for grants for domestic wind turbines from the Energy Saving Trust and some local authorities are willing to top this up.

With wind turbines currently falling under the scope of Part P, ELECSA and WM Training have jointly developed a recognised training course and qualification for domestic wind turbine installation which meets the industry standards set for Part P self certification. Successful candidates are awarded "EL4001- Electrical installation of domestic wind powered small scale embedded generators" which is jointly certified by ELECSA & WM Certification. The five day course of the Installation of Wind Turbines which covers the electrical installation, testing and certification of the turbine and inverter and ensures that trainees are able to install correctly and to the standards set down by the 16th Edition Regulations and Part P.

All fixed electrical installations such as wind turbine installations and alteration work that has been carried out must be certified as complying with Part P of the Building Regulations. Legally, it is the responsibility of the homeowner to prove compliance which can be demonstrated in two ways:

·    Obtain approval from the relevant Local Authority and pay for an inspection visit to have them confirm that the electrical installation has approval under Part P the Building Regulations.
·    Have the work undertaken by an electrician/tradesman who is registered with a Government authorised Competent Person scheme such as ELECSA.

This means that when property owners install a domestic wind turbine using an ELECSA registered business who has undertaken WM Training's Wind Turbine Installation course, ELECSA will notify the relevant Local Authority and issue a householder certificate which can be used as legal evidence that the wind turbine installation has been self certified as complying with Part P of the Building Regulations and that the appropriate Local Authority has been notified. This is vital since when the time comes to selling a property, the purchaser's solicitor, while undertaking the necessary searches for building work notices, will ask for evidence that any electrical work installed after 1 January 2005 complies with Part P of the Building Regulations.

Commenting on this development Julian Carter, General Manager, ELECSA, said "We are pleased to be working with WM Certification, a leader in electrical training courses to make life easier for electricians wanting to self certify under Part P. ELECSA is proud to be at the forefront for Part P and the training of renewable energy which is becoming increasingly important as a means of reducing carbon emissions to support the Government's goal of reducing the UK's carbon dioxide emissions by 60% by the year 2050".

Steve Andrews, Director of WM Certification said "Alternative energy is the biggest growth area in domestic energy installations that the UK has ever experienced and we are excited to be at the forefront of this exciting initiative with ELECSA. Whether you are an electrician or tradesman wanting to take advantage of this business opportunity, the Installation of Wind Turbine course is offered on a timetabled open access basis twice a month in Chesterfield through it’s sister company WM Training.”

Information on ELECSA and Part P can be found at www.elecsa.org.uk. Companies can contact WM Certification at www.wmtraining.co.uk to book onto a Wind Turbine Installation course. The British Wind Energy Association is located at www.bwea.com.

The deferment rate is one of the most sensitive parts of the valuation as it is the investment multiplier applied to the assumed freehold vacant possession value of the flat at the end of the lease. Mary-Anne Bowring, creator of www.leaseholdersupport.co.uk explains:
When the Aribib case suggested in September 2005 that the deferment rate applied to lease extensions should be 4.75 % (akin to the investment markets) and for freehold enfranchisement cases 4.25 %, leaseholders all over London were stunned. The deferment rate is an investment valuation term that represents the percentage rate by which the right to receive either an income or a future capital value is postponed.  

While this judgement was not prescriptive on valuers, specialists within the industry pushed harder and harder for their freeholders, and deferment rates slowly moved from previous market rates which were around 6 percent  to 8 percent towards 4.25 percent and 4.75 percent. Bearing in mind that the vacant flat could be £150,000 in Tottenham to £6,000,000 for a river front penthouse, the impact was immense. For example on a £150,000 flat with 68 years unexpired at a deferment rate of 8 percent the value to the freeholder is £800, at 5 percent the value would be £5,435!.

During the period of September 2005 to September 2006 valuers had the freedom to negotiate the right capitalisation and deferment rates, depending on the location. Regional variances were emerging nationally and in London post code variances were commonplace.
It was on 15th September 2006 that the market changed again when in the Cadogan vs Sportelli the Lands Tribunal wrote their decision as a directive to valuers to apply a deferment rate of 5% for flats and 4.75% for houses. In fact, every case heard by the Leasehold Valuation Tribunal since has been determined on this basis.

However, there are 13 input factors in a lease extension valuation, some factual, such as the length of the lease and some where a valuer’s skill and judgement is not directed by the Courts. Therefore, there is still no easy answer to an innocent question from a leaseholder who asks, “if I have x years unexpired on my lease and my property is in SW5 approximately how much should the lease extension cost?” The valuer still has a significant role.
With this treatment at a Leasehold Valuation Tribunal it would appear that whether your case was being negotiated informally or whether you had already served a Section 42 notice to claim your right to a lease extension, the Sportelli decision will apply to you. A freeholder will argue that the Lands Tribunal decision is right as ground rent should be looked at as an investment. After all, the Freeholder has a choice of investing in equities (stocks and shares), gilts (government bonds) or property. Furthermore, surely investing in ground rent is no more risky than the former when the alternative to non payment is having your flat re-possessed by the freeholder!

The need to extend leases is increasingly becoming a necessity as one thing is certain every lease is getting shorter. Most selling agents will report an impact on sale prices and a reduction in the number of available and willing purchasers once the lease falls below 85 years. Of course if you live in an area where a short lease is commonplace and therefore the only option, buying a short lease may be a factor when choosing to live in that neighbourhood.
Recent case law decisions and changes to the market should not be seen as all doom and gloom as there have been significant benefits delivered to lessees over the years since the right was first established in 1993. These being:

a.    The landlord cannot claim more than 50 percent of the marriage value (the difference in value between the flat with a short lease and the flat with a long lease).

b.    In 2002 marriage value was reduced to Nil for all leases with more than 80 years unexpired.

c.    In 2002 the residency requirement was abolished (formally you had to live in the flat for three consecutive years or three years out of the last ten).

d.    It is now possible to claim a lease extension even if you are not UK resident or if the flat is owned via a company.

To qualify for a leasehold extension you will need to have owned the flat for two years. If you are contemplating buying a flat with a short lease and your negotiation skills are strong enough by virtue of Section 56 of the 1993 Act, you can get the seller to serve notice for you so you don’t have to wait two years. This could be critical if the lease has around eighty years unexpired, and marriage value is about to kick in. Clever use of this mechanism could save you thousands.

To understand more about each of the valuation factors you can visit the step by step guide at www.leaseholdersupport.co.uk

About Mary-Anne Bowring

Mary-Anne Bowring, Founding Director of Ringley Chartered Surveyors is a Member of the Royal Institution of Chartered Surveyors and a Member of the Association of Building Engineers. Since the Housing & Urban Development (Leasehold Reform) Act 1993 Mary-Anne has been advising in this specialist field and has presented cases to the Leasehold Valuation Tribunal (LVT). Mary-Anne has extensive detailed knowledge of building law and the Landlord and Tenant Acts. For the last 10 years Mary-Anne has managed the development of Ringley Chartered Surveyors building an Estates Department which manages 5,000 leasehold properties, a Survey and Valuation Department which has provides valuations to over 10 top banks and about 300 leaseholders/potential freehold enfranchisee’s annually. . Frustrated by the mysticism surrounding property and the absence of simple tailor made solutions Mary-Anne’s latest development is the launch of two web based products (www.leaseholdguidance.com and www.leaseholdersupport.co.uk) which are dedicated to supporting lessees through both legal and valuation procedures and providing knowledge, and financial administration for small blocks of flats.

Streatham is an area of south London that wears its urban identity proudly, yet balances it with natural beauty. With a High Road that winds for two miles and its proximity to a wealth of leisure activities, it's a busy, buzzy place. And with a wide choice of excellent open spaces nearby, it is easy to escape the metropolitan madness and relax with a leisurely walk.

Its name literally means 'hamlet on the street'. But however much the High Road seems dominant here, the true emphasis is very much on residential areas. Leafy streets are dominated by families, while there is also a considerable population of single people, attracted by the reasonable property prices and the quick links with central London.
Property in the Streatham area is much sought-after. The locale offers everything from Victorian and Edwardian terraces to elegant mansion blocks above commercial premises, from stately detached villas to between-wars bay-windowed semis. Buyers in this locality will find an excellent selection.

Entertainment is well catered for – in fact, with Streatham's ice rink and bowling lanes, nightclubs and nearby open-air lido, it is very much a destination for those from throughout south London and beyond. The tennis courts at Tooting Bec are also very popular.
Residents will find a good selection of the latest films at the Odeon cinema in the High Road, and there is a choice of blockbusters and art house films at the nearby Clapham Picturehouse and the Ritzy in Brixton.

Shopping is diverse and plentiful. All the big names can be found, along with smaller, funkier specialist shops and boutiques. For markets, Tooting and Brixton are famous nearby examples. Supermarkets large and small can be found, from Streatham Hill down to Norbury.
Good restaurants include Pizza Express and the Oriental stylings of Slurp. Many other cuisines feature, from Mexican to top-notch Indian food.
Transport is handy, with a choice of mainline stations including Streatham Hill, Streatham, Streatham Common and Norbury. From any of these, there are trains to both Victoria and London Bridge stations, making commuting particularly straightforward. Also, a wide selection of bus routes serves the area, placing such neighbouring areas as Brixton, Mitcham and Clapham within easy reach.

The true jewel of the area has to be its parkland. Not only is there Streatham Common, with its large areas of green space and beautiful Rookery, but lovely Tooting Bec is great for walking, open-air swimming in the
summer,tennis or just sitting and relaxing. Its variety and beauty attracts visitors from far and wide, mirroring the appeal of the Streatham area itself.

Cash-rich City workers are ready to put a chunk of the estimated £8.8 billion bonuses into the London housing market, according to haart estate agents. As a result, there is expected to be vastly increased demand for large family homes priced over £800,000 and high-spec one- to two-bedroom flats.

Haart has recorded a 25 per cent increase in registered buyers in the prime areas of London, where City workers are primed to spend their windfall.

Prestigious family properties in the capital are in high demand and as a result prices for family homes are set to continue to soar in locations such as Bedford Park in Chiswick, the Peterborough Estate in Fulham and ‘Between the Commons’ in Clapham. Canary Wharf will also see increased market action, as its location combined with its ready supply of high-end, low-maintenance apartments in exclusive developments such as Pan Peninsula, are just what the banker ordered.

The Olympic Village area is also set to soar, with the Icona development, due for completion next year, emerging as the area’s most sought-after investment opportunity.
Russell Jervis, managing director of haart estate agents, says, ‘There has already been a higher than usual number of buyers registered for this time of year as a result of the expected bonus bonanza. City bonuses have commonly been invested in bricks and mortar and we expect it to be no different this year. However, the flood of extra money will have a direct impact on the value of properties, particularly the properties ideal for buy-to-let investment, which command high rental yields, and grand family homes.’

Hallways are one of the most important spaces in your home, but their design and decoration is often overlooked compared to the rest of the house. The hallway gives an instant first impression of a home for visitors and is crucial in conveying the day-to-day tone of life to the home’s residents. And those who are trying to sell their home should make sure this important focal point is seen to its best advantage. Here are some recommendations.

1 Choose a front door with glazing

Hallways should be light and welcoming. By choosing a glazed front door you are allowing the light to flood in and creating a lighter, more airy and spacious feel to the home as soon as you enter. There is a wide choice of glazed doors available, with many different glazing designs from coloured to contemporary, plus toughened glass ensuring enhanced security. Sidelights are a great way to add even more light at the entrance to the home. They can be chosen to complement the style of the door and frame, adding character and distinctiveness.

2 Let the light into your hallway

Another way to maximise the amount of available light is by locating a window above an entrance door. There are a range of different styles available, such as attractive arched-head or semi-circular designs that really do exude style and elegance. Inviting light not just through the front door, but throughout the hallway is a good idea, so choose glazed doors for the rooms that lead from your hallway to enable the maximum amount of light to filter through. Many manufacturers now offer stunning internal glazed doors in a variety of colours and designs, that complement the style of a home, whether traditional or contemporary.

3 Paint your hallway light colours

Keep you hallway light and bright using neutral shades. However if you are a fan of colour then yellow is a great shade to choose as it has a warm appeal all year round. It is best to choose consistent colours leading from the hallways to adjoining rooms, which makes this important space feel an integral part of the house and ensures design continuity throughout your home.

4 Choose an appropriate light

Lighting makes all the difference in an enclosed space such as a hallway. A modern arty ceiling light or dramatic chandelier is a perfect way to complement a front glazed door as well as introducing that all important spacious feel to the home. Alternatively you can accentuate your stairs and glazed doors by choosing softer pools of light from wall lights, lamps or, if you have the space, a standard lamp. Lighting really is a relatively small investment but one that makes all the difference to your new look hallway.

5 Replace closed riser stairs with open risers

Stairs are an important feature of most hallways and you should consider the opportunities for the staircase to make best use of available light. Many modern staircases have open risers, which enables the light to shine through into the space below. Stairs with open risers also enable you to create extra room underneath them, which is great for locating a telephone, coat hook or shoe rack.

6 Make a feature of your stairs

It is surprising how important a staircase is not just to the hallway but to the home in general. Not only does it receive heavy use but it can also create a focal point to the home. If you are lucky enough to have stairs made from solid timber, they can be stripped back to the raw woodgrain and varnished or stained to allow the natural beauty of wood to shine through. If you are looking to change a stair carpet, it is worth considering the properties of lighter textured designs, which reflect the light as well as providing resistance against muddy footprints. Alternatively, you could continue a carpet runner style up the centre of the stairs and paint each side of the tread a soft cream colour to co-ordinate. If the budget is available, you could add smart brass stair rods to each tread to accentuate the overall look and feel.

7 Choose open spindles

Stairs with open spindles leading from the baluster make a hallway feel more airy and spacious, whereas traditional panelled-out staircases can feel enclosed and act as a barrier to natural light. Available in traditional and contemporary designs, spindles can add character and a decorative touch to your hallway. Elegant accessories can be chosen that add interest and appeal, for example there are a range of eyecatching newel posts and caps available that give the home a luxurious feel.

8 Add a mirror in the hallway

Mirrors double the perceived size of a room so are a great way of making your hallway appear much larger. A great trick is to hang the mirror lengthways, as most hallways are long and narrow, this gives a greater sense of dimension. They are also a great way of checking that you are ready for the world every time you leave your home!

9 Remove the clutter

Small areas such as hallways can soon look cluttered so make the most of the space you have available. Clear the clutter, keep shoes and boots out of the hallway or ensure they are kept tidy on a rack. A stylish coat stand, shoe storage system or just a well placed easy chair in the hallway creates the impression of calm and organised living.

10 Make it personal

Hallways can be very impersonal as we tend to keep our personal effects in other rooms, so add your own unique stamp by displaying a favourite collection of paintings or photographs here. The hallway should give a flavour of what lies beyond, drawing the visitor to be intrigued and inspired about the person who lives there.

Tips courtesy of JELD-WEN. For more information on doors and windows or a copy of their catalogue contact the sales office on 0870 126 0000 or visit jeld-wen.co.uk

The beginning of a year is when most of us make life-changing decisions such as selling up and moving on. This year, while pondering the prospect of making this type of change, it is worth keeping in mind that buyers and sellers are about to see the biggest change to the home buying and selling process ever.

The introduction of the Home Information Pack (or HIPs, as they are commonly known) has been controversial to say the least. But where did the policy come from and what will it mean for the purchase of property when it is made mandatory in June?
A provision included in the Housing Act 2004 stipulated that all homes to be put up for sale must have a Home Information Pack (formerly known as the Sellers Pack) before marketing of the home commences. This means that the seller has to make a financial commitment when marketing their property, although they may not have to pay immediately. However, let’s look at what this mean in practice.

The HIP is an opportunity for interested purchasers to find out as much relevant information about the property in which they are interested, prior to making an offer. In practice, they will be able to see whether there are any onerous planning applications that might affect the property value, from the local searches, and also see the status of warranties/ guarantees for electrical work or replacement windows for example. Crucially, when the subject of climate change is on every politician’s speech, buyers will also be able to understand how energy efficient the property is. This will help buyers to understand how their fuel bills will be affected and how they can improve their efficiency rating. Not only will that action potentially reduce monthly costs, but it may also enhance the property valuation when selling, as a home with greater energy efficiency may become more attractive.

So what are the steps for those homeowners thinking of selling in 2007? Firstly, I would suggest that the homeowner ensures they have a record of all works that might have been carried out on the property since taking ownership (and any historical information would also be helpful). If your property is leasehold, then getting a copy of your lease, plus the latest service charge information and name and address of the managing agents/freeholder will also be helpful. Finally, a copy of recent fuel bills will help as well.

If all this sounds familiar, then it’s not surprising as it’s effectively the same process that a car owner would go through when preparing their vehicle for sale. In essence, the HIP can be viewed as the home’s log book. After all, once the property has been sold, the HIP is passed onto the new owner, allowing them to benefit from the information. As the property goes through various owners, each HIP will build up a picture of the history of the property.
However, one of the main elements of the current process, that of the survey, is not a compulsory part of the HIP. This was originally re-titled as the Home Condition Report (HCR) and proved the most contentious part of this change. It provides a transparent view of the property and would have been applied to 100 per cent of properties being marketed. As the current process stands, only 20 per cent of homes purchased have a homebuyer’s survey, as opposed to a mortgage valuation.
This means that a large majority of buyers do not have a true understanding of the condition of their greatest and most expensive asset, before they buy it. The reason cited by the government for downgrading the HCR from compulsory to elective was that they did not believe that there would be enough Home Inspectors (a new qualification) ready, though this was heavily disputed by the fledgling HIP industry. There was also some fear from Lenders that without the valuation element of the HCR, it’s worth would be diminished, although there is a feeling that this was a knee-jerk reaction from the Council of Mortgage Lenders at having their cosy arrangements changed for them instead of by them.
Of course, there is an opinion that those homeowners who wish to achieve a quick sale or indeed have a property which may throw up questions surrounding construction or extensions will commission an HCR anyway. This could lead to a two-tier market for those properties where an HCR is included in the HIP and those without. For buyers that may make the choice easier. After all, if there are two properties vying for your money and one will cost you in excess of £700 for a valuation and survey, as opposed to just £200 for a pure valuation, then that might be the deciding factor.

Future discussions include the legal aspects to the HIP, how to ensure that you have an official pack and how to deal with the issues that may arise from the discoveries brought to light. In the meantime, if you’re contemplating selling, don’t throw out any paperwork until you’ve checked whether it’s relevant.

If you have questions or concerns regarding HIPs, email Keith Gould at hotproperty@hip2sell.co.uk or visit stratify.co.uk

Like a lot of people, I have zero chance of getting on to the property ladder without borrowing money from my parents. They’ve offered to lend me £20,000 – and I’m grateful but also a little nervous about this. I know people who have fallen out with family members over money. How can I make sure I don’t let this create problems?

To put it simply, get it in writing. Just because they’re your parents doesn’t mean you shouldn’t keep this arrangement on a sure legal footing.
It would be a good idea to seek advice from a solicitor who deals with tax and inheritance issues. Your parents should be aware of any tax implications and the solicitor will spell these out. With his or her guidance, draw up an agreement, spelling out the time frame for repayment and outlining what is to happen should you not honour your part of the deal. Make sure to provide for every eventuality, including the deaths of any and all of you.
Also, think about making a will, as anyone who owns property should do. This can be done along with the agreement at your solicitor’s office – or if you are concerned about cost you may want to look at using one of the new breed of online will services.
Keeping this agreement as dispassionate and businesslike as possible – and sticking to it – is the best way to avoid a family feud.


Disclaimer:
The advice given in this column is for the purposes of general information only. Always consult a solicitor before entering into any agreement.

I am moving in with my boyfriend and have decided to let my flat instead of sell it. I don’t see the point of paying a letting agent to collect the rent etc but don’t want to spend a lot of time looking after the property. What should I be aware of?

The two main factors that you need to look at are time and money. How much time you will have to look after the property day to day? Be realistic about what you will be able to do. Think carefully about what letting a property involves: finding tenants and collecting rent, dealing with problems quickly and more. Are you prepared to do that? Geography plays a part as well; if your new home is nowhere near your rental property, you should not even think of handling this yourself.
There are two levels of service in this field: a letting agent will simply find tenants and collect the rent, while a managing agent offers a more comprehensive service, including taking care of emergencies and keeping the property in good generation condition. For the latter, of course, you will pay a higher percentage of your monthly rental income.
Money-wise, keep in mind that one important function that a letting agent performs is keeping void periods to a minimum. Your rental property is there to generate income, so it is worth paying a percentage of that income to keep it flowing in a predictable, reasonably trouble-free way. An agent can also vet tenants to make sure they are reliable.
The question you should ask is not whether to use an agent but which one. Speaking from personal experience, having a bad managing agent is worse than not having one at all. Get recommendations from friends or work colleagues and talk to any prospective agent in detail about what each party can expect from the other.

Disclaimer:

The advice given in this column is for the purposes of general information only. Always consult a solicitor before entering into any agreement.