December 14th, 2009
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The new build market has seen some increased activity with prices rising to reflect increased demand. For October 2009 new build prices were reported to have increased by 1.3%, but is this a sign of recovery?
Looking at other data sources suggest there is some cause for optimism with mortgage approvals for buy-to-let investors increasing. In Q3 of 2009 the number of buy-to-let mortgages approved totalled 23,700, and increase of 9.7% over Q2. That said mortgages approved are still at historically low levels.
The key indicator for buy-to-let mortgage approvals is investor sentiment, the increase in investment activity for the buy-to-let market suggest that investors are starting to see the residential property market as a good place to invest.
Whilst these are positive signs there is also reason for continued caution. We have yet to see the economic effects of “budget cuts” after the 2010 general election. An increasing number of commentators are predicting a slump in 2010. This sentiment is captured in a statement from Howard Archer, an economist at HIS Global Insight: “… the firming of housing prices seen since March / April will fizzle out before long and house prices will suffer a relapse in 2010.”
Our view is that as an investor focus on the net rental yield from a property to generate cash flow in excess of the mortgage costs. As long as a property is making a rental profit then you can ride out fluctuations in property prices. If you are buying for capital gain, then the signals suggest extreme caution for 2010.
December 9th, 2009
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Retail Loss Prevention Ltd (we will refer to them as RPL) provides a service to retailers (and others) who have suffered a loss, often through theft by shoplifting. Most people would agree that shop lifters need to be punished for crimes committed, and also many people would agree that the police are over-burdened with more serious crime and do not have the time to deal with every shop lifter. Enter, RPL Ltd, the retailer’s answer to the shop lifter.
The retailer is entitled to compensation equal to their loss. So if a bottle of perfume is stolen then the retailer is entitled to claim reasonable costs for their loss. But chasing someone for a £20 bottle of perfume is not cost effective, this is why companies such as RPL are employed. The problem is that RPL also have costs and these are also added to the original loss of the retailer. The bottom line is the £20 bottle of perfume can soon cost the shop lifter £200 or more. Now if the shop lifter is “guilty” then maybe we do not feel sorry for them. But what if there is an error, maybe the theft was not so black and white?
Take for example someone with their young child who accidentally takes an item from a shop, is it fair that the escalating charges from employing a civil loss recovery company are now sought from the child’s parent? Most of us would say no.
Many people being pursued by companies such as RPL to do know their rights, they feel intimidated and simply pay up. What we would suggest is that anyone in this situation seeks advice of the CAB to respond to RPL (or other loss recovery company). The bottom line is do not feel intimidated, if you have done no wrong then stand up for yourself, it could save you a lot of money.
December 9th, 2009
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In the last few years there has been a huge growth in loss recovery on behalf of retailers and other companies to deal with relatively minor cases not addressed by the criminal justice system.
Take for example someone (reportedly) stealing a packet of biscuits from a retailer. In minor cases such as this the police will not want to get involved, they simply do not have the resources. The retailers who experience multiple items of theft from a multitude of people on a daily basis simply cannot afford to do nothing. This is where Civil Loss Recovery comes in.
Companies have now been set up to recover the losses of the retailer. Clearly chasing someone for a £1 packet of biscuits carries with it a huge overhead, so these loss recovery companies add on hefty charges, mostly to cover “their costs”. The upshot is the £1 packet of biscuits could end up costing as much as £100 in recovery costs.
If the “accused” does not pay up then threats are made such as blacklisting in databases that may be seen by employers, or at least that is the threat. However if the recovery amount is quite large, let’s say £500 or more, then it is also likely that the loss recovery company may then used the small claims court system, which will add further costs and if these are not paid the “accused” will end up with a CCJ against their name.
Whilst a cost effective loss recovery system is good for retailers and consumers alike, it is only going to be effective if there is some degree of accountability and regulation to ensure that innocent people do not become trapped into paying debts that are not rightly theirs.
December 8th, 2009
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It is a hugely emotive subject, after vast sums of tax payer’s money being used to prop up major banks such as RBS and Lloyds TSB, people are understandably asking why are these banks paying out such large bonuses?
It is particularly galling to those who have lost their jobs and a struggling to repay mortgages under the threat of repossession from these banks. Overall it is a real mess, morally such huge bonuses should not be paid whilst so much tax payer money is being used to support these banks. But maybe we have no choice but to pay these bonuses?
The problem is that the banking system is global, if UK banks do not pay the bonus to staff that other non UK banks offer then they will lose many of their staff to the competitors, ultimately it could see a big fall in the banking sector within UK and ultimately a fall in tax revenues.
So what is the solution? Maybe we are too focused on the symptoms and not the cause, the bonus payments are just a symptom of an underlying banking system that needs to be “cured”. As we stated in an earlier blog about bank bonuses, the focus must be more on making the cost of bank failure high to the share holders.
If the cost of failure is high enough then shareholders would prevent banks from taking excessive risks. If banks perform in a way that is risk free to a country’s economy then they should be free to pay whatever bonuses their shareholders agree to.
December 3rd, 2009
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An area often neglected is roof cleaning and gutter cleaning, the result can be a build up of moss on roofs and debris in gutters ultimately leading to rain water overflowing and creating damp and decay problems to properties.
As a DIY job it is a bit scary climbing onto roofs, not recommend for anyone who does not have experience in working off ladders. That said finding someone for the smaller jobs of gutter cleaning can also be difficult, few builders will want to come out to quote on a job for £70 or £80 to clean out the gutters.
Roof cleaning is much more costly than gutter cleaning, usually because it involves erection of scaffold to provide safe access to the roof. The actual cost will vary according to the size of the roof, the price can be anything form a few hundred pounds to over one thousand pounds for a larger detached property.
If gutter cleaning or roof cleaning is something you are interested in we suggest trying a company called Sams Gutters, they have set up to focus specifically on gutter and roof cleaning and maintenance. You can find out more from their website here .. www.sams-gutters.co.uk. Also for a specialist company for removal of moss of roof tiles, try UKRoofCleanng
December 1st, 2009
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A question we would all like to know the answer to however the fact is no one knows for certain, but there are some signs of caution suggesting a fall in house prices is possible.
Firstly builders have been offloading stock at discounts, it may be that their liquidity position requires them to raise cash quickly, but it could also be that some may see the market getting a little difficult in the coming months.
Many banks also introduced stricter lending criteria at the end of November, some of the best-buy fixed rate deals were withdrawn and replaced with new products at a higher rate of interest. RBS also increased the deposit requirements on its key tracker product (currently with a rate of 2.89%) from 20% to 25%.
Some views coming from analysts are suggesting that the banks do not have confidence in the property market and some are now anticipating a “double dip” in house prices in 2010. Interestingly the Nationwide’s Chief Executive (Graeme Beale) was quoted as saying “The growth in house prices over recent months appears to be driven by lack of supply” and further … “growth in unemployment throughout 2010 will inevitably exert downward pressure.”
Going back to our heading, are house prices going to start falling? Our view is that it is likely we will see a fall in house prices in the coming months, but in the medium term we feel the market will start to recover on a more permanent basis.
November 26th, 2009
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In many Northern cities of UK developers have been offloading new build units at discounts of up to 15% or more. The discounted properties have resulted in much interest from new landlords and existing landlords, but are these properties good investments?
Firstly it seems the developers are only giving the big discounts to those with cash to invest, so one view could be that if you have a large amount of cash sitting in a bank account earning 3% or so then maybe the rental yield is more profitable.
But there are some real risks. Some city areas have been “over developed” and thus creating excess supply over demand. The upshot is that it may take a considerable time for some areas to see a recovery in property prices. Combined with this is a potential over supply on the buy to let market, thus depressing rental yields and increasing rental voids.
The advice for anyone considering investing in new build units being offloaded by developers is:
1 – Research the local rental market, be realistic about rental yields and rental voids when calculating your likely rental income.
2 – Take account of ongoing service charges that will apply to some new builds, these can sometimes be a significant proportion on rental income.
3 – Do not take the developer’s word on valuation, use an independent RICS valuation surveyor to understand what the “true” open market valuation is.
4 – Don’t expect short term capital gains, focus on cash flow and net rental income as the motivation for investing.
November 19th, 2009
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According to government statistics the number of self employed people is approaching 4 million, and there is an increasing trend of self employed. But now we have a situation where around 4 million self employed people are struggling to get a mortgage, so why is this?
Put simply the new FSA regulations place more stringent tests on lenders to assess the affordability of a mortgage by new applicants. For self employed this involves such checks that make it almost impossible to obtain a mortgage, for example:
- Self employed accounts going back several years – but what if you have only been self employed for 1 year?
- Those working in partnerships or directorships need to show evidence of turnover and profits for the last 3 years.
All of this is really quite absurd. For example, as a business owner I may choose to live off a lower income and “invest” what would have been my income in new employees to grow the business. Those employees can apply for mortgages after a few months evidence of salary, but as the owner you cannot, for some reason you are a higher risk than the people you are employing. The logic does not add up.
To coin a phrase often used by financial firms as mandated by the FSA [past financial performance is not and indicator of future financial performance] it is also true to say that “past employment is not an indicator of future employment”. The PAYE employee could apply for a mortgage today and be made redundant tomorrow.
The reality, it appears, is that the FSA are “over regulating” mortgage lending, the result will mean unnecessary hardships for some and an adverse impact on the property market as some homeowners simply cannot afford to move as they are unable to get a new mortgage.
November 16th, 2009
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Details removed awating outcome of final investigations, updates to follow later
November 13th, 2009
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Advice on how to avoid becoming a victim based on a real case study to be published later.
