The property market in 2010

January 11th, 2010 No comments »

It is going to be an interesting year, over the coming months the political parties will unveil their budget plans, and then there will be a general election, following which some of the market uncertainty will start to unfold. Only then will there be some clearer views on what this could mean for property prices.

There are many factors at play.  Firstly we could see unemployment remain high for a prolonged period should there be significant cuts in public sector.  There is almost certainly going to be higher taxation, depending on the levels of tax and where it is targeted it could significantly reduce the disposable income per capita. Such actions will naturally feed into the property market.

As we blogged earlier, there is the current false property market where lack of supply exists in part due to a large number of people being on very low interest rates, unable to move property as new mortgages would be on higher rates.  This effect will unwind itself as banks start to increase their SVRs (we blogged earlier, this looks highly likely in 2010).

The bottom line is that the property market in 2010 is going to be volatile, a key fundamental will be the new Government and the action it takes to deal with the current economic problems.

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Mortgage interest rates set to rise in 2010

January 7th, 2010 No comments »

Market analysts are now predicting that even if the Bank of England base rate is not increased in 2010 many lenders are likely to increase their rates. Some analysts such as Stephen Noakes, Lloyds Banking Group, are looking at the market consensus on bank base rates, the view was “Bank of England will first raise interest rates in the middle of the year and that base rates will end up at 1.5% by the end of 2010”

So either way it would seem that all those with variable or tracker mortgages will see increases before the end of 2010.

One of the issues for lenders is that they are currently making losses by lending on low rates when their true cost of borrowing is much higher.  This is a situation that cannot last.

For those with buy to let tracker mortgages at rates of 3% to 4% over BBR this could see them paying as much as 6% by the end of 2010 with further increases in 2011.

It looks like 2010 is going to be an interesting year for the property market!

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Posted in Buy-to-Let, Mortgages

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Future house prices – beware

January 4th, 2010 No comments »

A reason why we should be more cautious regarding recent house price increases and what this could mean for future house prices.

Acording to the  Council of Mortgage Lenders (CML) around two thirds of residential mortgages are linked to bank base rates, e.g. “tracker” or “variable rate” mortgages.  After the sharp fall in SVR and tracker rates over the last year the vast majority of these mortgage holders will be paying less than 3% on their mortgages, in some cases closer to 1%. 

And here is the dilemma …

You would like to move home but it means getting a new mortgage, and in the current market this means mortgage rates higher than 3%.  In effect anyone moving home would end up paying more on the new mortgage even if they borrowed less money!

Here is an example …

Homeowner has a property with a £150,000 mortgage on a base rate + 1% tracker.  Their actual mortgage interest payments are currently £2,250 p.a.  BUT if they move and take out a £150,000 mortgage on their new property the mortgage rate would double to at least 3%, making their interest payments £4,500 p.a. And even if they took out a £100,000 mortgage it would still cost them £3,000 p.a., that it £750 p.a. more than their original £150,000 mortgage!

So what we have here is a false property market where prices are increasing due to the shortage of properties available (many analysts have already made these comments).  When base rates get back to “normal”, e.g. 4% or higher the differential on new mortgages will largely disappear, e.g. a new mortgage should then be similar to existing trackers of base rate + 1.5%. 

The key question is this, when people are no longer constrained by the increased mortgage costs of moving will we find a surge in properties for sale and thus a fall in property prices as supply starts to exceed demand?

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Posted in UK House Prices

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Adding £1000s to the value of a house

December 23rd, 2009 No comments »

One of the key factors in selling a house is “kerb appeal”, this is making the house look good before you set foot inside. However many people often overlook this, and in doing so they not only risk losing out on a quick sale, they also potentially lose £1000s on the selling price.

Enhancing kerb appeal can be considered in several key areas; garden, elevations, and roof.

Gardens: This is the simple one to deal with, just a few hours work can transform a garden and it makes a huge difference. For an average front garden of a semi detached house you could get a gardener to do a makeover for less than £200 including a few shrubs!

Elevations: The main area to focus on is paintwork, if you have pvc double glazing already then all you need to do is make sure the walls look in good condition. In most cases refreshing the paintwork, if you have unpainted brick or stone make sure that any bits of missing pointing are filled. It may be that you have moss or other dirt on the foot of the elevations, this can be simply removed with a power washer. Overall the cost of refreshing the elevations should be just a few hundred pounds.

Roof gutters: An area often overlooked because people think it will cost too much, but beware, any buyer is likely to think the same! One area of roof maintenance if cleaning the gutters, fascias and soffits; ensuring there is no grass growing out of the gutters and no unsightly moss/fungi on the fascias. The cost of this type of work should be less than £200 for the average semi, a small invesmtent for the benefits.

Roof tiles: Roof cleaning and roof moss removal can have a huge benefit. Green algae and roof moss not only looks unsightly it can damage some roof tiles in the longer term. A professional company such as “UK Roof Cleaning” can clean the roof of an average semi from around £1500.

So in total, if you need the full external makeover including garden, elevations and roof the costs should be no more than £2000. It may seem a lot but for a house selling at £200,000 it is just 1% of the value, much more than this will be lost in the sales negotiation!

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Posted in Property Maintenance

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TOP 5 INVESTMENT TIPS FOR THE NEXT 10 YEARS?

December 17th, 2009 No comments »

A survey of investment advisors carried out by the Sunday Times has identified areas of investment opportunity for the next 10 years – and property is not one of them!

The survey identified the following (not in order of priority):

Emerging Markets – Population growth is expected to realise a 50% increase in the next 40 years, with this there will be huge growth opportunities for investment in countries expected to see the greatest population increases; such as Brazil, Russia, China and India.

Healthcare – This is a demographic time bomb due to aging populations in many western countries. Healthcare services and products targeted at the aging population is considered a high growth area.

Agriculture – It goes without saying, the global population growth will have a huge effect on agriculture ranging from the cost of food production through to technologies related to food production.

Energy – Again the impact of population growth will increase demand for energy. Everything from energy production through to energy saving technologies will become far more attractive for long term investment.

Green Technology – The increasing focus on environment and carbon emissions will drive greater investment opportunities in technologies related to this area.

So why is property investment not in this list? Maybe because those surveyed did not see property as a high growth area for the next 10 years. That said with the forecasted growth in population there will be an increased demand for property, and in particular areas where land for new build is in short supply.

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Posted in UK Economy

Property market – house price recovery on the way?

December 14th, 2009 No comments »

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.

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Posted in UK House Prices

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Retail Loss Prevention Limited & Civil Loss Recovery

December 9th, 2009 No comments »

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.

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Posted in Civil Loss Recovery

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What is Civil Loss Recovery?

December 9th, 2009 No comments »

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.

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Posted in Civil Loss Recovery

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Bank bonuses and windfall taxes

December 8th, 2009 No comments »

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.

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Posted in UK Economy

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Property Roof Cleaning and Maintenance

December 3rd, 2009 2 comments »

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 roof cleaning is something you are interested in we suggest trying a company called UK Roof Cleaning, they have set up to focus specifically on roof cleaning and maintenance.  You can find out more from their website .. ukroofcleaning.co.uk   This company is also for a specialist company for removal of moss of roof tiles.

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Posted in Property Maintenance

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