Posts Tagged ‘buy investment property’
With a UK property market considered to be at one of its relative lowest points for decades, the hunger for investors to build their portfolios is ever-apparent. One potential acquisition strategy – that is often overlooked due to perceived misconceptions – is to look into properties that have been left empty by previous owners. Please see an interview below with chief executive David Ireland of the Empty Homes Agency with whom we discussed current levels of empty properties in the UK; the effects of the recession on the situation; the housing deficit; the government’s response; what steps can be taken to investigate an empty home; seeking legal advice; available grants for renovating empty properties; getting advice from local authorities; the organisations’ campaign for council tax relief as well as a very worthwhile conference worth attending on May 23rd:
1) Can you explain what the essential role of the Empty Homes Agency is? Empty Homes is an independent charity. We help people create homes from empty property and campaign for more empty homes to be brought into use, for the benefit of those in housing need.
2) How many empty properties are there in the UK at the moment? At the last count there were 650,000 empty homes in England, of which 287,000 were privately owned properties empty for longer than 6 months
3) How is this figure measured? The figures come from local councils’ yearly returns made to central government – the last figures relate to April 2010.
4) Are these figures likely to increase – bearing in mind the ongoing turbulence of the UK housing market? We do not expect to see a significant increase in the TOTAL figure as there is still underlying demand for housing, and government is doing something to tackle the problem. However we do expect that some individual areas will show increases. For example locations where Housing Market Renewal (“Pathfinder”) projects were operating: these have now been halted and many thousands of properties previously earmarked for refurbishment or demolition are now left empty and abandoned with few ideas of what to do about them. The effect of these abandoned areas may well spread beyond the immediate Pathfinder areas as local housing market confidence is hit.
5) Do you think there is a shortage of housing in the UK and, if so, how large to you see the deficit as being? This is always an interesting question. You could argue endlessly about how much housing really is needed for the country’s current and projected population, but that implies you can or should measure what each person actually “needs”. In reality, you cannot calculate housing shortages so easily. There is certainly a shortage of housing in some areas, but taking the country as a whole the shortage argument is questionable.
6) Has this figure worsened as a result of the recession? Figures for empty homes did go up for a few years then came down. Amongst the causes of this, we would not put the recession at the top of the list. What has had more of an impact on empty property was the surge in investment purchases during the “boom years” 2004-2007, where some developments took place in response to investment demand instead of occupiers’ demand. With the result that – especially flats – were sold to investors anticipating capital gain. In that period not enough attention was given to validating what the rental income flow would actually be – you could blame this on slack lending policies, speculators, or over optimism, but it is going to take a few more yearsr for the effect of that period to work its way through.
7) How do you feel the government is handling the issue? Obviously, the current “austerity” period will have an impact on the public sector’s ability to invest in housing. However the coalition government has introduced some welcome measures specifically to tackle empty homes. Notably, the “New Homes Bonus” – which is designed to encourage the provision of additional housing by giving councils a cash reward – this is being calculated to include bringing empty homes back into use. So, if an area sees a reduction in the number of its long-term empty dwellings this will count for the bonus just as much as building a new house will.
8)For property professionals and landlords that are reading this and come across a empty house that could be potentially renovated – what steps would you recommend? A common problem with empty property is the obvious one – that the owner may not be easily traceable or may not be interested. For this reason we have worked closely with local councils over the years – they have the information and, if necessary, the powers most likely to open the door to getting the property back into use. We provide a lot of information and guidance on the processes for tackling empty homes on our website www.emptyhomes.com, so that would be a good place to start before contacting the council or trying to make progress yourself. With the introduction of the New Homes Bonus, if you can go to the council with a proposition to bring a block of empty properties back into use they ought to be really supportive, as you could be earaning for them a cash bonus!
9) Are there any other obligations / risks that people looking into acquiring an empty property should look into? In dealing with an owner of an empty property, they should, like anybody else, have proper professional and legal advice. Once you can get round the table with an owner of an empty property who is interested in seeing their property sold or renovated, then it should not be much different from dealing with any other property project – there will be all sorts of different issues coming up to be resolved. You might be find an owner who is largely disinterested in the property and the details, and is just happy for someone else to sort it out for them.
10) What about grants for renovating empty properties – how easy are these to access in the current climate? The picture varies considerably around the country – each local council sets its own policy for how much – if any – support it can give to bringing empty property back into use. We have put links for grant information at most English councils on our website www.emptyhomes.com/usefulresources/grants.html. Where a grant is given, this will often be accompanied by a condition that the property is made available after the work to someone from the local housing waiting list. There is another significant benefit for owners who are refurbishing empty property – which is not so widely taken up as it should be. This is the VAT concession for building works on property empty for more than 2 years, where the rate is reduced to 5%, or if it has been empty for 10 years or more then the VAT rate is Zero. The details of this can be found in HMRC’s VAT Notice no 708. This ought to be a real incentive for property professionals to tackle empty property.
11) Is there advisory assistance available from local authorities? How pro-active are they, from a general perspective? Most local councils are keen to get empty property back into use – some come at it from the perspective of environmental health – where nuisance and damage is being caused to neighbouring property, and others see it as an element of their strategic housing work to improve the supply of affirdable housing in their area. Some councils like to act as a enabler or broker by putting owners of empty property in touch with local builders or developers who can do necessary refurbishment work. Many Councils provide advice and guidance for property owners either in booklet form or on the websites. The actual numbers of people in councils focussing on empty homes will be quite small – a group of district councils may some share one person between them – so don’t expect an unlimited ability to drop in to a council to discuss the general position.
12) Can you explain a bit about your campaign on the payment of council tax on empty properties? Relief from Council Tax on short term empty property is quite rightly allowed, but we do think that giving an ongoing discount for an empty house removes one of the few incentives which might encourage owners to do something about re-using the property. Empty homes can become an increasing burden on public sector expenditure through anti-socail behaviour, vandalism, damage to adjoining property, so there seems little justification for giiving relief from the council tax?
13) Can you please let us know about the up and coming event that the Empty Homes Agency are hosting? The National Empty Homes Conference takes place in central London on 23rd May 2011. The focus this year is on new initiatives to make use of empty housing – both short term and longterm solutions, there is a fantastic range of speakers bringing hands on and practical experience of working on empty homes projects, as well as experts who will explain the new government policies affecting this work. It will provide a good opportunity for private sector operators to network with practitioners in local councils and not-for-profit housing providers. Full details are on our website: Empty Homes Conference 2011.
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Posted in Auction Property Buying, Property Refurbishment, Tips for Property Investing | 2 Comments »
November 2010 Property Investors Factsheet (free membership required)
The base interest rate remained at a record low of 0.5 percent (the longest period since World War 2), with one dissenter – Andrew Sentence – continuing to vote for a marginal rate rise to control inflationary pressures (no further quantitative easing will take place for the time being). The UK´s gross domestic product rose by 0.8 percent in the third quarter and former Bank of England official Deanne Julius stated that chances of a further recessionary dip occurring were ´10 percent or less.´ However, Chancellor George Osborne stated the economy still faced a ‘choppy’ outlook and, whilst several have stated the case against the £81 billion of public spending cuts, he remained firm on the plan insisting that the Coalition would reduce inflation via the means of robust fiscal and monetary policy.
House prices, as predicted by many, have witnessed monthly drops apart from a reported 3.10 percent increase stated by Rightmove (based on asking prices). According to the Land Registry, the biggest drops in the last month have been in the West Midlands by 1.4 per cent, followed closely by a 1 per cent fall in the East Midlands pushing the regions average prices to £128,646. The index also indicated that London average values had fallen by 0.6 percent to £340,344. Property portal Zoopla stated that the number of properties for sale in the UK that have seen at least one house price reduction has climbed by more than 13% over the past three months – with Manchester seeing an average of a 7.15 percent reduction in prices; Newcastle with 7.13 percent and Milton Keynes with 7.04 percent. The general sentiment remains that house prices look set to drop further due to lower demand and a larger amount of properties hitting the market. Such drops are not expected to be rapid due to both the low bank base rate and an increased amount of competitive product availability.
A financial adviser confidence tracker report by Paragon Mortgages illustrated that the availability of buy to let mortgages in the UK has improved. 43 percent of surveyed mortgage brokers said that the number of available deals Q3 2010 has risen. Another 38 percent said they have not noticed any changes in the number of mortgage deals for property investors / landlords, and 19 percent of respondents said the number of available loans fell. The survey also found that 58 percent expect the situation not to change as 2010 draws to a close, whereas 35% expect it to get better. The remaining 7% think the availability of buy to let mortgages will decline. In terms of notable products, the Mortgage Works are the only lender offering 80 percent loan to value (with a 5.89 pay rate fixed until the end of 2013) and the Bank of China are offering a one year variable with a very competitive pay rate of 3.88 percent (1 year variable with a 75 percent loan to value).
In other landlord related news, as figures published the Office of National Statistics reported the one in eight Brits are living in a workless household entirely reliant on benefits – the British Property Federation (BPF) requested the Conservative peer and former investment banker Lord Freud to retract a claim that property owners increasing their rents was the main factor in creating a higher welfare bill for the taxpayer. Its analysis of figures from the Department for Work and Pensions (DWP) shows rising average payments in the private sector accounted for around 13.2 per cent of the growth in housing benefit costs. According to the BPF, by comparison, 70 percent of the rise was attributed to new claimants coming into the system, mainly because of unemployment linked to the recession. Lord Freud also recently responded to critics of housing benefit reforms as “scaremongering” insisting the cuts would not lead to a substantial increase in homelessness, stating: “it’s immensely unhelpful when people and commentators stir up fears using somewhat arbitrary figures about potential homelessness because it frightens people. We are not expecting any significant increase in homelessness as a result of these changes and are expecting a large number of people who see less housing benefit to be able to negotiate their rents downwards.”
Tags: ARLA, Association of Residential Lettings Agents, auction property market, auction property statistics, bank base rate, bank of china buy to let, bank of china mortgages, bbr, buy investment property, consumer price index, CPI, credit, debt levels, economics property, Halifax house prices, house prices, how to invest in property, inflation, invest in property, Land Registry house prices, latest buy to let mortgages, Lloyds buy to let, Lloyds TSB lending, Mervyn King, Monetary Policy Committee, mortgage approvals, MPC, Nationwide house prices, october 2010 property, property economist, property invest, property investment tips, Property Investor Factsheet, property statistics, real estate facts, real estate statistics, repossessed houses, Repossession houses, repossession levels UK, repossessions, retail price index, RICS Housing Survey, RICS surveyor, Royal Institute of Chartered Surveyors (RICS), RPI, the mortgage works buy to let, tmw buy to let, unemployment UK, value invest
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As one of the leading and influential bodies on the UK housing market, the British Property Federation has some of the country´s most prominent organisations and institutions as members. Please see an interview below with spokesman Patrick Clift where we discuss a variety of issues related to the private rented sector including the importance of landlords post-credit crunch; the need of professional standards in the industry; what the BPF are doing to encourage the sector; tax incentives; reforms to the Local Housing Allowance (LHA) system / social housing policy; UK infrastructual improvements and the future role of the organisation.
1) Can you outline the essential role of the British Property Federation (BPF)? The British Property Federation is a membership organisation devoted to representing the interests of all those involved in property ownership and investment. We aim to create the conditions in which the property industry can grow and thrive, for the benefit of our members and of the economy as a whole. BPF have three objectives. Firstly, to raise the profile of the property industry with political stakeholders, the media, and the public. Second, to improve legislative, fiscal and regulatory conditions that affect our industry and so enhance the benefits the industry can bring to the UK. And third, to encourage best practice within the industry as a means of increasing long term value and improving stakeholder perception.
2) Who are some of your main recognised members? Among our largest and most active members are Allsop, Argent Group, Bank of Scotland Corporate Banking, Big Yellow Group, The British Land Company, Cadogan Estates, CB Richard Ellis, Credit Suisse, Crown Estate, Derwent London, Development Securities, Dorrington, Grainger, Great Portland Estates, Grosvenor, Hammerson, Jones Lang LaSalle, Land Securities Group, Legal & General Property, Lend Lease, Miller Developments, Morgan Stanley, Segro and Westfield Group.
3) How important does the BPF see the role of landlords in the future of the housing industry? The private rented sector has provided 1.1m additional families with a home since 2000, accounting for nearly all housing growth in that time. However, with almost 5m people languishing on council waiting lists it is clear that more new homes are needed. The private rented sector is vital to delivering flexible tenure for a mobile workforce and providing housing where social renting or home ownership is not applicable or affordable.
4) Do you think that there are enough professional standards within the buy-to-let sector? The government recently decided against regulation of the private rented sector, and we would agree with ministers that rather than introducing new powers, local authorities have got to show they can better use what already exists.
5) What kind of actions are you taking to encourage the private rented sector? The BPF has promoted the sector every step of the way – increasing its profile, establishing it as a key sub-sector of the housing market and devising policy solutions to increase investment in it. The BPF is in dialogue with the department for Communities and Local Government, the Treasury and the Homes and Communities Agency to promote PRS and change policies to help encourage institutional investors. Earlier this year, as part of the Property Industry Alliance, we produced a joint consultation response with the Council of Mortgage Lenders and the Association of Real Estate Funds into a Treasury consultation into increasing investment in the private rented sector.
6) You have long lobbied for tax incentives – particularly for the institutional investor – what kind of progress has been made? Disappointingly, the new government has decided not to pursue this. The BPF has long argued that a simple and relatively cheap tax incentive would be to disaggregate stamp duty land tax on the bulk purchase of homes. At present, an investor has to pay SDLT on the total cost of a portfolio, as much as 5%, even if the homes would only have been charged at 1% if bought individually.
7) In terms of the recent changes that were put in place to limit the levels of Local Housing Allowance (LHA) receipts – with the government saying that one of the main reasons is to encourage people to get back into the employment market. With the economy in the state its in, how realistic do you think this is? Do you think the problems are going to be exacerbated? We agree that the housing benefit system is in need of reform. However, the government seems to assume that all claimants are long-term and need incentives to return to work, when in fact many have lost their jobs recently as a result of the last recession. By contrast, we would argue that the welfare system should seek to support a person remaining in their home in the early stages of unemployment because that will greatly assist their ability to quickly find another job.
A major issue will be linking housing benefit rises to CPI, rather RPI at present. Over the past decade rents have risen at about 4.5% per annum. CPI on the other hand, is the explicit focus of the Bank of England Monetary Policy Committee, which has a target to maintain it at 2% per annum. This will have a devastating effect. The mismatch between 2 and 4.5% will be that the pool of property notionally available to claimants will be constantly being eroded by the diminishing purchasing power of their benefit.
The Chartered Institute of Housing analysed the long term effect of this change for different property sizes. They conclude that in some areas, within two years of the change coming into effect, it is projected that no properties will be available that can be fully paid for with LHA. The consequences are stark. Either that household will build up rent arrears which consequently might lead to eviction, or they must cut back on income intended for other necessities.
8)Related to this – statistics have proven the country’s ongoing demand for social housing – but how are property buyers attracted to this sector to be encouraged with the government imposing stricter rules (such as the increase in LHA)? Powers exist to open up social housing for private investment, particularly by pension funds and other institutions, and that is something that we would be keen to explore with government.
9) On a general level – what about the infrastructural development of the UK (roads, city regeneration, transport) – what can investors expect to see in the coming years? Tax increment financing, an innovative method of funding that the BPF has campaigned for since 2005, was adopted as policy at the Liberal Democrat conference last month. This is fantastic news for the provision of new infrastructure, particularly in areas where new infrastructure is needed for property development to go ahead. TIF allows councils to forward-fund infrastructure through prudential borrowing. The loan is then re-paid through the business rates generated by the development unlocked by the new infrastructure. It is a very elegant solution, and if done property will cost tax-payers nothing.
10) What kinds of plans does the BPF have in the short-medium term future of interest to property investors? We will continue to lobby for the private rented sector – both for new investment and against the more damaging aspects of housing benefit reform. The BPF will continue to work with government to create a “local” planning system that works, and to promote ways in which central and local government can use public sector assets as a catalyst for regeneration and renewal.
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Posted in Local Housing Allowance (LHA), Tips for Property Investing | 1 Comment »
October 2010 Property Investors Factsheet (free membership required)
As it was decided that the UK bank base rate will remain at 0.5 percent, further disagreement was seen amongst Monetary Policy Committee members – not only from Andrew Sentance (who has called for a 0.25 percent increase for some time) but also Adam Posen, an internationally respected expert on Japan’s ‘lost decade’, suggested that more, not less, monetary stimulus was needed: “it is right for both long-term stability and short-term performance for central banks to do more now…”
Halifax’s September report of a 3.6 percent monthly drop as a ‘beginning of a sustained period of declining house prices’ was described by Howard Archer of Global insight as ’shocking’: “while a drop in house prices always seemed probable in September after Halifax had reported price rises in August and July that conflicted with other surveys, a plunge of of this size was off everybody’s radar.” The RICS Housing Survey this month also showed only 7 percent of surveyors seeing a rise in prices (compared to last months 11 percent) and 38 percent seeing falls (compared to 25 percent last month). A survey by Zoopla reported that homeowner confidence had fallen amid concerns over the availability of mortgage finance: 63 percent of homeowners now expect property prices to rise over the next six months, compared to 78 percent of homeowners in June. However, positive news for property investors was announced by ARLA (Association of Residential Lettings Agents) that the number of tenants seeking rental properties has reached an eight year high – demand is highest in the south east of England where 81 percent of agents reported that there are more tenants than properties compared to 67 percent in the rest of the UK and 73 percent in Central London. A Markit / CIPS survey of construction industry purchasing managers showed an unexpected pick in the level of activity – although doubts remained as to how demand will fare in the next few months.
The lending markets have also seen some encouraging signs with Legal & General (in its third quarter adviser confidence index) reporting that 85 percent of advisers predicting that business will improve or at least stay the same over the next 3 months despite the current undertone of negativity. Buy to let product wise, the Mortgage Works (TMW) have positively revised their product range – sending us the following information:
- New one and two-year tracker mortgages at 70 percent LTV, with rates starting at 3.39 percent;
- A two-year fixed rate option with 0 percent arrangement fee now available at up to 70 percent LTV;
- The expansion of the longer term product range with the introduction of a four-year fixed rate (up to 75 percent LTV) and a five-year fixed rate (up to 80 percent LTV);
- The introduction of a £1,000 cashback option for HMO applications;
… as well as some enhancements to the buy to let range including:
- One-year fixed and tracker remortgages options at 70 percent LTV, now available at 3.99 percent, with free standard valuation and standard legal fees;
- Tracker rates improved by up to 0.15 percent across the range;
- A free standard valuation option available for house purchase customers when they select: TMW’s two-year fixed rate mortgage at 60 percent LTV with a 0 percent arrangement fee;
- Significant rate improvements across all HMO and Limited Company products.
The Bank of China have continued to seek a wider share of the UK buy-to-let market with a 1 year 75 percent LTV product with a 4.1 percent payrate. Cuts have also been seen in the broader residential lending – for example by HSBC (with a reduction of 0.4 percent on all its 80 percent LTV mortgage products) and Lloyds TSB (with the introduction of a 70 percent LTV fixed rate with interest at 3.39 percent).
In related news, despite marginal growth last month, a survey of 400 agencies by the Recruitment and Employment Confederation (REC) and KPMG pointed to an increased risk of a ‘double dip’. Kevin Green, the REC’s chief executive, stated to the FT: “I think the labour market is in for a real bumpy ride – unemployment, currently 2.47m or 7.8 percent of the workforce, could rise again to 2.7m by the middle of next year.”
Tags: ARLA, Association of Residential Lettings Agents, auction property market, auction property statistics, bank base rate, bank of china buy to let, bank of china mortgages, bbr, buy investment property, consumer price index, CPI, credit, debt levels, economics property, Halifax house prices, house prices, how to invest in property, HSBC mortgage lending, inflation, invest in property, Land Registry house prices, latest buy to let mortgages, Lloyds buy to let, Lloyds TSB lending, Mervyn King, Monetary Policy Committee, mortgage approvals, MPC, Nationwide house prices, october 2010 property, property economist, property invest, property investment tips, Property Investor Factsheet, property statistics, real estate facts, real estate statistics, repossessed houses, Repossession houses, repossession levels UK, repossessions, retail price index, RICS Housing Survey, RICS surveyor, Royal Institute of Chartered Surveyors (RICS), RPI, the mortgage works buy to let, tmw buy to let, unemployment UK, value invest
Posted in Economics for the Property Investor, Property Investor Factsheet | 1 Comment »
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Posted in Business Management, Lease Options, Tips for Property Investing | No Comments »
In addition to his angel investment activity, James Caans’ interests in property are well recognised and look set to continue to grow in the coming years. Please see an interview below with Faisal Butt, James’ ‘right hand man’ within the property operations of Hamilton Bradshaw where we discuss the company’s current strategy; due diligence methodology; the current market; barriers that are being faced; value-based investment amongst other topics.
1) How long has Hamilton Bradshaw Real Estate (HBRE) been established for? James’ interests in property are well established but the residential real estate arm of Hamilton Bradshaw has been in place for 7 months.
2) Do you focus on a specific type of property asset class (residential, commercial, industrial) – or do you think it is good to have a spread? Today, the group’s new investments focus in residential property. Our portfolio has recently been launched and will be geared towards the high-end luxury real estate market (£5m+) in Knightsbridge, Belgravia, Mayfair, Chelsea and South Kensington.
3) How would you describe the company’s mission statement and how you operate (on a general level)? Our residential real estate arm was born from our vision shared between James Caan and Kam Babaee of K10 Developments (a well established high-end residential property development firm) to be seen as a market leader in luxury London property. The partnership’s mission is to create exceptional value by identifying, analysing, and executing investments in central London luxury residential real estate stock. We are in the advantageous position of being led by James’ high level entrepreneurial profile combined with the property development knowledge of Kam Babaee of K10 Properties (an already well established company recognised for its outstanding quality in residential finishing). The investment philosophy of HB Real Estate can be summarised as follows:
- We bridge the gap between London dwellers ever-rising demand for modern and luxury interiors and seek properties which have the potential to meet such needs;
- We invest in properties between 2,000 to 10,000 square feet;
- Our residential refurbishment plans incorporates the very best in quality fixtures and fittings including high technology multi-media music systems and digital mood lighting as well as adding lateral living space through basement dig-outs wherever possible;
- Our business model is based on generating of 50-100% ROE or project margins in excess of 20%;
- Our residential real estate development projects typically take 18-24 months from acquisition to exit;
- Funding is arranged for each deal through a combination of equity, mortgage finance, and construction finance.
Some examples of recent projects we have been involved with can be viewed by clicking here and a case study of one of our developments in Knightsbridge here.
4) Can you give us a brief outline of your fundamental due diligence methodology? We employ a heavily scrutinised investment analysis model focused on a stringent set of private equity processes in every stage of the investment cycle from origination through to execution.
5) What are the processes behind the ‘private equity’ approach? Our PE methodology for due diligence simply entails following our internal process when looking at real estate deals. The steps in our PE process are: (i) Origination, (ii) Due Diligence, (iii) Negotiation, (iv) Execution, (v) Portfolio Management and (vi) Exit. These same 6 stages are relevant to real estate investment, but the terminology is a bit different.
6) What are the main benefits of investing at a time like now? Our view is that the real estate market has bottomed out, valuations have settled and there are opportunities to be had (across the UK). Demand for houses at the top end of the prime London market is diverse, robust and global. In the £5m+ category, we have found that 60%+ of the demand comes from overseas, and as developing countries get richer, high net worth individuals and their families aspire to have a London holiday home. These families are also attracted to the lifestyle advantages of London, the healthcare system, and the excellent schools for their children. Supply is limited for modernized houses that are fit for the end users described above, hence market dynamics look strong in the current market. More recently, weakness in the pound sterling has propelled international demand, as overseas buyers aim to take advantage of the currency discount currently available. Domestic demand in London is looking promising as banking bonuses make a comeback in the years ahead.
7) What are main obstacles that you and indeed investors as a whole are facing at the moment? As mentioned above, for us, the main issue is the double edged sword of London property is its limited supply – whilst this has assisted keeping the market buoyant, from a development perspective, good unrefurbished properties are difficult to come by, so deal flow remains a constant challenge. On a general investment level, the main issue is around finance – the banks are still hurting after the effects of the credit crisis and the UK market is, in reality, only open to those who are able to meet the stringent demands of the lenders.
8)Will these hurdles disappear any time soon particularly with the increasingly austere measures by the regulatory agencies? It is fair to say there will not be a property boom as was witnessed in the first five years of the 21st century in the UK for some time. This, of course, does not mean there is not money to be made – more detailed analysis is required and focus on fundamental investment principles and not speculation (as was becoming increasingly characteristic in the market prior to the recession).
9) What are the company’s expansion plans for the short, medium and long-term? We are in the process of raising a £100m fund targeting high end residential properties in prime London. We aim to buy and develop 10 properties over the next 2 years.
10) How important is the concept of value investing HBRE property investment strategy? We aim to add value in every property that we invest in, that is the central tenet of our investment plan. We usually do not adopt a buy and hold strategy here as HBRE which is perhaps where a value investment model would be of more significance. However, despite our projects following a short term cycle, our strict due diligence enables us to foresee risk and manage project costs (and therefore cash flow) accordingly.
11) Do you have a standard yield level you adhere to? Under what circumstances, if any, would this level be deviated from? We gauge properties more on price per square foot valuations, relative to market levels.
12) And what about gearing and yield levels? Our aim is to get up to 60% LTV on our development projects. For new investors who are looking to enter the property field, what would be you essential recommendations / suggestions? Be very cautious on estimated end values when entering any development project. You’re always safer forecasting end values conservatively, and then working backwords from there. Team up with a very good surveyor who can help you project manage and monitor the costs of your developments.
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September 2010 Property Investor Factsheet
Please click on the link above to access this months property investor’s news and information factsheet (note you will have to be a member of the Property Investor Hub which can be done quickly and easily here).
Despite two of the major house price indices pointing to rises, the general consensus has been to expect a market slowdown in the coming months (Halifax’s house price index reported slower growth in August as compared to the month previous). 12 percent less of RICS surveyors are reporting an increase in prices compared to the previous month and the average discount at property auctions across the UK dropped by 1.6 percent. Data from the Homebuilders Federation showed that construction orders – a forward-looking measure – fell in the second quarter by the sharpest amount since 1974. National Housing Federation (NHF) estimations also pointed to negative equity remaining in the market until 2014 – especially for properties bought in 2007 prior to the onset of the credit crunch. The Survey of English Housing statistics showed that between 2003 and 2009 the proportion of owner-occupiers fell from 70.9% to 67.9%, representing the first decline in home-ownership for a century.
Whilst mortgage approvals increased by 1,079 (with totals reaching approximately half their pre-crisis levels), the Bank of England reported that lending to private non-financial companies fell in July for the 11th month in a row. Nevertheless, in the wider mortgage market, lenders have been offering increasingly competitive rates – including the Halifax’s announcement of the ‘Great Rate Cut’ (up until 3rd October), an intermediary fixed rate from the Abbey; Norwich & Peterborough Building Society offering a 4.49 five year fixed rate (80 percent LTV) amongst others. In the buy to let sector, whilst rates and LTV ratios remained broadly in line with last month – The Mortgage Works (TMW) introduced a one-year tracker with no ERCs, offering landlords more flexibility with the potential to repay early without any supplementary charges.
In related news, the employment market is currently growing at its slowest pace in 10 months (although the Recruitment and Employment Confederation reported shortages were emerging in certain sectors and increased demand looking likely for nurses, chefs and engineers to name a few); a survey by LSL Property Services reported fewer rental arrears with only 16% seeing an increase in unpaid rent in the last 12 months and the British Property Federation (BPF) publically announced that proposed cuts to Local Housing Allowance payments are a “recipe for destitution” that would hamper economic recovery across the country.
Tags: auction property market, auction property statistics, bank base rate, bbr, buy investment property, consumer price index, CPI, credit, debt levels, economics property, Halifax house prices, house prices, how to invest in property, inflation, invest in property, Land Registry house prices, latest buy to let mortgages, Mervyn King, Monetary Policy Committee, mortgage approvals, National Institute of Economic and Social Research (NIESR), Nationwide house prices, property economist, property invest, property investment tips, Property Investor Factsheet, property statistics, repossessed houses, Repossession houses, repossession levels UK, repossessions, retail price index, RICS surveyor, Royal Institute of Chartered Surveyors (RICS), RPI, unemployment UK, value invest
Posted in Miscellaneous | 1 Comment »
With so many housing analysis property portals on the web, it has become difficult to really know which one really
isthe best at providing truly impartial information to enable property buyers to make the right decisions. Whilst a relatively new service, Zoopla has made great strides in its analysis and research methods as well as developing one of the UK’s first online auction platforms. Please see an interview with spokesman Lawrence Hall where we discuss the organisation’s new auction tool as well as the growth of the organisation, property valuation, and the future of buying property amongst other topics.
1) Firstly, can you give us a short explanation of what Zoopla is and how it can serve the needs of UK property investors? Zoopla.co.uk is the UK’s most comprehensive residential property website, focused on empowering users with the data they need to make better-informed property decisions. We combine property listings with market value data, local information and community tools.
2) Our readers would be aware of several online portals – what makes Zoopla particularly unique? Most online property portals are focussed on property ‘search’, helping users find homes currently on the market for sale. Zoopla.co.uk combines that service with property ‘research’ providing free, instant value estimates on every UK home, sold prices going back to 1995, local value data and trends and a number of other tools to help all buyers, including investors, do their homework.
Our recently launched online property auctions (see below), which are held every two weeks, also provide a unique opportunity for investors and are helping to transition the traditional model away from ballrooms to the internet, as investors can now bid from the comfort of their homes.
3) How has Zoopla.co.uk grown and changed since its initial inception? Zoopla.co.uk has grown at a faster rate than any other property website over the past two years since its launch and has become the second most-visited property website in the UK, with almost 5 million visits per month. We continue to lead the innovation in the online property space and remain focused on making the market more transparent and efficient for all parties concerned. Our mission is, and has always been, to provide the most useful online property resource.
4) How is the site maintained and kept current? We add thousands of new properties to search for and data points to research every single day – our data comes from a variety of sources including estate agents, the government and our users amongst others. Our value estimates are calculated using a proprietary algorithm (formula) that analyses millions of property data points including historic sales, current asking prices and property attribute data which are updated daily. We are constantly adding new features and services to make our service more useful and we recently added new search sort options along with the listings history of any properties listed for sale.
5) Many prominent housing industry commentators have, in recent times, stated that the presence of online agencies and portals is becoming increasingly important. What are your thoughts on this and do you believe that face-to-face contact between agents and buyers/sellers needs to be maintained and never out phased? Agents generally provide a highly valuable service to consumers and we see the agent intermediation of property transactions as an essential part of the process. How agents interact with buyers/sellers has and may continue to change as more and more information is readily available but there is no substitute for the knowledge and expertise of a local agent. We also see property portals as fulfilling an essential service in the buying process. With 9 out of 10 buyers starting their search online and not wishing to hunt in multiple places to find out what is available, portals continue to be the most effective and efficient place for buyers to search and source of leads for estate agents.
6) With your home values page, can you breakdown your criteria for how you deduce this figure – particularly as it is currently very difficult to find solid house sales due to the current low activity in the market? Our valuation estimates are our assessment of the market value of a home on any given day, using a proprietary algorithm that continuously analyses millions of data points relating to property sales and home characteristics throughout the UK. Our estimates are constantly refined, using the most recent data available and a variety of methodologies, in order to provide the most current information on any home. More information on our Zoopla estimates can be found here.
7) Can you give our readers some information as to how your auction service works? Our online auctions are transformational and have created a new way for buyers and sellers to transact openly. We hold live, online auctions every two weeks at Zoopla.co.uk/auctions and they run from a Thursday afternoon until the Sunday evening. Prospective buyers are able to view the property details several weeks in advance of the event, arrange viewings with the relevant agents and then place bids online during the event, at the end of which, the successful bidders exchange contracts, all online.
8)How would investors be able to engage in due diligence prior to bidding on the property? Our auctions are no different than traditional property auctions, except that they are online instead of in a ballroom. Since the property asset is not in the ballroom to be inspected in traditional auctions and any inspection and due diligence is conducted prior, the ballroom itself is somewhat obsolete. Investors can visit and inspect the properties in advance and also review any related information on our website including the legal pack and disclosure documents that can be found on the relevant property auction page.
9) How can the risks of buying an auction property online be minimised? Much the same as any other auction, the risks are reduced having done research in advance and understanding the asset you are bidding on. This is one of the advantages of Zoopla.co.uk, which provides access to much of the information necessary to determine fair market value and similar transactions.
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Posted in Auction Property Buying, Due Diligence, Tips for Property Investing, Viewing a Property | 1 Comment »
August 2010 Property Investors Factsheet
Please click on the link above to access the latest facts and figures relevant to UK property investors (note you will have to be a member of the Property Investor Hub which can be done quickly and easily here).
The majority of house price indices have pointed to small drops in prices (with the Halifax being the only exception, reporting a 0.6 % increase for July). Whilst Land Registry statistics have also indicated a slight increase in average house prices, this is widely viewed as a balancing out due to the 0.2 percent drop that was seen in May. Additionally, the number of RICS surveyors (who largely rely on Land Registry data) reporting a rise in house prices has decreased by 9 percent since last month which generally adheres to the professional consensus that house prices are set to continue to fall marginally in the coming months. The discount on auction properties has widened by 1.6 percent on the month representing a total of 17.6 percent, according to Fathom Consulting.
Mortgage products available have slightly lost their competitively when compared to previous months with TMW (The Mortgage Works) increasing the pay rate of their 80 percent loan to value product to 5.49 percent (previously 4.69) – attributed due to a rise a demand for what is currently a rare borrowing level. However, results from the banks quarterly reports showed some encouraging signs with Northern Rock demonstrating it is sitting on a cash pile of more than £7 billion; HSBC revealing that its profits for the first half of 2010 had more than doubled to £7 billion (the bank recently announced a fixed 3.95 percent rate for residential property, widely predicted as a result of increased pressure by the government to begin expanding its loan book) and Barclays announcing that their profits have risen by 44 percent to £3.95 billion (they have subsequently initiated rate cuts as a result).
Whilst the bank base rate remained at 0.5 percent, broad ranged predictions with regards to its increase continued to be debated with former Bank of England deputy-governor, Sir John Gieve, stating that it will have to rise earlier and more sharply than expected to keep inflation under control (to 2.5 percent by July 2011) whereas the Ernst & Young ITEM Club predicted that they would not rise at all until the end of 2013 (assuming impending spending cuts come to fruition). A poll by the Fair Investment Company illustrated that 67 percent of respondents thought the base rate would be higher than 0.5 percent by July 2011, with 30 percent predicting a half point increase to 1 percent and 29 percent believing it would hit 1.50 percent in 12 months time. The Bank of England’s inflation benchmark, the Consumer Prices Index, is slowing from the high periods reached earlier in the year – but concerns prompted as to the effects of the impending VAT increase in January 2011 when the British Retail Consortium (BRC) predicted upward pressure on prices in the months ahead looking more likely.
Some other interesting statistics include a daily average of £23.35 million of loan write offs being undertaken by UK banks and building societies; slight decreases in the level of personal and household debt levels as well as a drop in the amount of interest being paid daily (full lending statistics available on the factsheet). Whilst unemployment was reported to have dropped (to 7.8 percent), supplemetary statistics have shown that there are also approximately 5.87 million people who are on the dole in all but name (the Office of National Statistics figures only point to people who are looking for work).
Tags: auction property market, auction property statistics, bank base rate, bbr, buy investment property, consumer price index, CPI, credit, debt levels, economics property, Halifax house prices, house prices, inflation, invest in property, Land Registry house prices, latest buy to let mortgages, Mervyn King, Monetary Policy Committee, mortgage approvals, National Institute of Economic and Social Research (NIESR), Nationwide house prices, property economist, property invest, property investment tips, Property Investor Factsheet, property statistics, repossessed houses, Repossession houses, repossession levels UK, repossessions, retail price index, RICS surveyor, Royal Institute of Chartered Surveyors (RICS), RPI, unemployment UK, value invest
Posted in Economics for the Property Investor, Property Investor Factsheet | 1 Comment »
