Property Alert 26th September 2014

Here we are again with some more news and views for the UK property
market…

Asking Prices – An Update

The latest Rightmove index reveals that asking prices in England and
Wales rose by 0.9 per cent month-on-month in September to take the
average asking price to £264,875. ‘We usually see a price fall at this
time of year as potential home movers are generally still in holiday
mode. However, it looks like there are early signs of a bounce back in
demand after the summer lull, leaving those estate agents with a
shortage of stock at a potential disadvantage and therefore eager to
attract new instructions.’

‘While there is more property coming to market this year, it has been
more than swallowed up by increased sales. There is already 10 per cent
less property available per estate agency branch compared to this time
a year ago, and with enquiries by phone and email to agents up by 16
per cent compared to August last year, and at near record levels, you
can see why there has been an earlier than usual price pick-up.’

‘The ability of potential buyers to remain on-watch and in-touch and
react more quickly is also a factor. While you may be switched off from
work during the summer break, many people’s mobile devices are still
switched on to the internet to see what’s coming to market. So far,
2014 has proved to be the ‘year to move’, with consumer confidence
buoyed by consistently low interest rates and improving economic data.’

BTL Don’t’s

Our friends at Residential Landlord offer five must-avoid mistakes for
first-time BTL investors. Let’s quote a little of each…

Investing Short-Term

Buy-to-let investing is a long-term proposition intended to build
wealth over years of investing. Its main advantage over house flipping
is that it is less dependent on the volatility of retail housing
prices. Do not make the mistake of expecting to get quick rich with
buy-to-let property. If you are going to do it, plan to be in for the
long haul.

Becoming Emotionally Attached

Property can have a strange effect on people in that leads them to
become emotionally attached. This is a mistake for investors. Investing
in buy-to-let property requires you always remember one simple fact:
what you are doing is a business. Avoid becoming emotionally attached
to the properties you purchase, no matter how wonderful they may appear
to you.

Failing to Shop for a Mortgage

One of the biggest mistakes new investors make is not taking the time
to shop for mortgages. Compare mortgage options for that first
property, and then continue comparing every time you purchase a new
house. Do not simply go with the same lender because it’s convenient.

Purchasing from the Retail Market

Perhaps the second biggest mistake among new property investors is
trying to purchase investment properties from the retail market. Why is
this a mistake? Because buy-to-let investing is no different from any
other type of investing in as much as you want to ‘buy low and sell
high’. Buying low is not possible when you purchase from the retail
market. Never forget that retail prices are determined by a combination
of supply and demand along with the profit earned by estate agents and
others.

Failing to Research Locations

The point of researching a location is one of understanding who lives
there, who is likely to live there in the future, and what types of
people your tenants will most likely be. Stay away from any market that
appears too weak to support a long-term investment.

The Market – Where Next?

Going back to Rightmove, their director, Miles Shipside offers an
outlook for us. ‘Speculation amongst economic forecasters on topics
such as upwards pressure on interest rates, availability of wholesale
funding for lenders, and the geographic location of major financial
institutions are potentially destabilising influences on consumer
sentiment.’

‘From a buyer perspective when other home-movers are nervous it can be
a good time to act, as harder bargains can be driven. Those who are
buying and selling in the same transaction may have to drop their
selling price but could be able to make up the difference by paying a
lower price for their onward move.’

‘Locking into a fixed rate mortgage would help guard against any
increased interest rate volatility. The other point to remember is that
waiting and pinpointing the best time to move can leave your life and
future property enjoyment on hold for years, so if the sums stack up
and the property suits your needs then it might be best to ignore the
what-ifs and maybes.

That’s it, see you again soon.

The Auction Listing Opportunity

If you have a camera, reasonable literacy and  photography skills and an Internet connection, you could make money listing items on online auction sites for other people. It’s estimated that 30 percent of all households in the United Kingdom  do not have Internet access, particularly households containing older occupants.  It’s likely these households don’t have digital photography facilities either. You could offer to  photograph and list items either for a fixed fee, a percentage of the final sale price, or a mixture of both.

This is a really simple service to set up and could be of great value to people who Do have an internet connection and digital camera as well. The price differential between a well photographed and described item, and one that is presented poorly, can be huge,  Anyone specialising in this field, will quickly figure out the best ways to present each item for optimal results.

Property Alert 24th September 2014

Here we are again with some more news and views from ‘Mr Mortgages’,
Peter Faulkner at advisor@mortgage-market.co.uk…

Mortgage Market News

Many lenders have reduced their fixed interest rate mortgage products
and reduced their charges and fees. This is a response to low levels of
lending since the introduction of the MMR affordability rules coupled
with forensic underwriting.

Stories of first time buyers sitting through three hour interviews with
bank mortgage advisors are becoming common.  The focus has shifted
heavily to budget lifestyle spending commitments as well as analysing
the applicant’s bank statements to evidence what they spend their money
on to define levels of disposable income.

Some lenders are now asking for credit card statements as well as bank
statements to identify where the monthly spend goes.  Many lenders have
tightened their internal scoring systems resulting in more declines for
direct applicants.

By the by, mortgage brokers are now providing 56 per cent (up from 52
per cent last year) of mortgage business to lenders with brokers
carrying out the bulk of pre-assessment, regulated advice and
recommendations, packaging client information and providing
administration and client support.

Property – The Ripple Effect

We are seeing signs of the much delayed ripple effect in property
values. Average property prices over the last year have increased in
London by 19 per cent, for the UK as a whole the increase has been 12
per cent which translates to some regions seeing prices rise by 6 and 7
per cent although some locations have stood still or even declined.

BTL rents have increased by 5 per cent on average in many parts of
London with many landlords now looking to increase yields. It is always
a trade-off between having a good long term tenant and setting rents at
the market level.  However, rental demand is increasing and landlords
need to look at increasing rents to cover increased costs and falling
yields

Interest Rates – Where Next?

The Bank of England’s Monetary Policy Committee (MPC) provides forward
guidance on interest rates in their latest inflation report.  The Bank
of England’s Governor, Mark Carney and three members of the MPC,
clarified at a Parliamentary select committee meeting last Monday that
they do not expect interest rates to rise before February 2015 and that
when rate rises take place in the spring and summer of 2015, they will
be in small amounts with gradual increases over the following couple of
years and will eventually should rise back to the BoE historic average
norm of about 5 per cent. The Eurozone is extremely weak and this in
itself may delay interest rate rises as well as significant changes in
other factors, such as unemployment and inflation.

Thank you, Peter, at advisor@mortgage-market.co.uk. If you’d like to
chat to Peter, please do email.

Old Food

Perhaps fuelled by TV, there’s more interest in food and cooking than ever before. This has led to an explosion in the range of new products available in supermarkets and specialist shops. And in order to create something new, some companies are looking way into the past.

U.S based The Scrumptious Pantry, went back in time about 200 years to track down heirloom regional recipes for pickles, ketchup’s and dipping sauces that could be updated to appeal to contemporary palates. The company uses ingredients that grow in abundance in the Midwest — such as cranberries from Wisconsin, and puts photos of the farmers growing the mostly organic ingredients on the packaging to show that real people are involved in the small-batch formulas being created.

I don’t have to tell you that the U.K has a much longer culinary heritage than the United States, and there are many regional variations – even today.  It seems to me that there’s an opportunity for someone to create a USP for themselves in the food market by tapping into the Nations food heritage in the same way that The Scrumptious Pantry has done in the U.S.

Property Alert 23rd September 2014

Meant to ask; have you read this month’s international property
newsletter? If not, email back and we will send it to you. Meantime,
some overseas property news and views…

Brazil Heads-Up!

Good to see that RICS, The Royal Institution of Chartered Surveyors, is
to become more active in Brazil. ‘It is only natural that stakeholders
from abroad who want to invest in the country need valuations carried
out in accordance with international standards. When an investor is
purchasing portfolios across the world, they need to use a common
language.’

‘Whenever RICS opens an office in a new country, there is some give and
take, what the organisation can give to the country and vice versa. The
professional bodies understand that we are here to contribute. RICS has
relationships with the Brazilian Institute of Valuations and Building
Inspections (Ibape), the Brazilian Association of Facilities (Abrafac),
and the São Paulo State Housing Syndicate. More to come; meantime, do
let us have feedback on your Brazil investments.

Canada – Beware Averages

We always warn members not to set too much store to averages; they
rarely reflect what’s happening in regional and local markets. Canada
is a good example of a market which, like the UK and London, is skewed
prices-wise by city figures.

According to the latest index from the Canadian Real Estate Association
(CREA) sales and prices in Canada continue rising. Sales rose by some
2.0 in August compared with July and are up 5.3 per cent year-on-year.
Prices-wise, the national average price of a home in August was
$398,618, and that’s a rise of 5.3 per cent over the year.

‘Sales picked up in some of Canada’s most active and expensive real
estate markets which fuelled another national increase. Even so, the
national increase in sales does not reflect local trends in many
markets across Canada. Listings and sales this spring were deferred due
to unseasonably harsh weather, which subsequently supported activity
once the delayed spring home buying season got into gear. This trend
was reinforced by a decline in mortgage interest rates.’

‘The boost from deferred sales is still expected to prove transitory.
While national activity has yet to cool, sales were down from the
previous month in the majority of Canada’s local markets, which may be
early evidence that the transitory boost is fading. That said, low
interest rates will continue to support housing affordability and sales
activity.’

Spain – More Positives

The Estadística Registral Inmobiliaria reports that property prices in
Spain are up 0.97 per cent year-on-year in the second quarter of 2014
and rose 1.53 per cent from the first quarter. Andalusia, 15,583,
Catalonia, 11,980, Comunidad Valenciana, 11,591, and Madrid, 10,522,
saw the most sales.

‘The home purchases by foreigners has become one of the main drivers of
the Spanish property market. They are attracted by our good living
conditions and the great opportunities offered by the sector, as
housing has devalued by 41 per cent from the highs reached in 2008.
This percentage rises to 53 per cent in many areas of the Spanish
coast, the main attraction of foreigners who want to buy homes in our
country.

‘British and French nationalities are still leading the ranking of
purchases by foreigners, but those who spend more money on the coast
are Russian citizens, followed by the Germans. Most of the purchases
were made in Alicante, Málaga, Santa Cruz de Tenerife, Islas and
Girona. Russians and British buyers favour the Alicante coast, but
there housing preferences are different.’ More to come.

All for now, see you again soon.

The Closed School Shop

All the schools I attended are still standing, but that’s not the case for everyone. When Michael Williams old school in Detroit was demolished, he went along to pick up a souvenir, only to find other old students doing the same thing. Inspired by the experience, he set up School Shirt Shop, a shop that sells posters, T – Shirts and plaques featuring closed or demolished schools in the United States.

Might this work here in the UK?  Post baby-boom, hundreds (if not thousands) of schools have been closed or demolished. If there’s a market for memorabilia in the U.S, why not here?

Property Alert 22nd September 2014

Welcome to today’s UK property news and views…

UK Supply-Demand Reminder

It’s not rocket-science – short supply and high demand means, all else
being equal, prices rise. You should, when investing, have at least
half an eye on the supply-demand mix locally now and, so far as you can
see, into the future.

Talking property generally, we note today that the CBI, the
Confederation of British Industry, states that the UK must ‘build
240,000 homes a year to keep up with the growing number of households’.
The CBI has called on the government to create 10 new towns and garden
cities by 2025 and to double the number of new homes being built a year
from the current 120,000.

‘A perfect storm is brewing in the housing market. With demographic
changes and demand currently dramatically outstripping supply, now is
the time for action. Political parties of all colours have made the
right noises on the need for more homes but without serious action the
ambition to own a home will become more and more out of reach to
ordinary people. Will it happen? Put it this way. The UK has failed to
build more than 200,000 homes in 10 out of the last 14 years.

London – A Reminder

If you are buying in London, you need to know what’s happening there.
That’s why we are running an October get-together. You can also chat,
no obligation, to Adam who sources property there. He’s been a
chartered surveyor in London for some 25 years and can pretty much call
it as it is in any postcode you care to name.

Have to say there is a high degree of, what’s the most diplomatic word
I can use here, lack of know-how, ignorance and rank stupidity amongst
some would-be investors when it comes to London. These investors
invariably want something substantially BMV (40 per cent off!),
low-money down (I’ve almost £5,000!) and with double digit yields (At
least 20 per cent!). If that includes you, you’ll benefit from reading
my ‘Where Are You On The Berk-O-Meter?’ editorial I am writing for the
next newsletter. Mind you, if you think you can get BMV, low-money down
and double-digit yield investments in London, I can give you the answer
now – you’ve blown the Berk-O-Meter to bits. More to come.

More BTL Mortgage News

Looking for a BTL mortgage? Email back and have a chat with Peter
Faulkner. Meantime, we note that Coventry Intermediaries has a new
buy-to-let range which includes:

3.19 per cent fixed rate until 31.10.16, 75 per cent LTV, £250 booking
fee, £1,749 arrangement fee, early repayment charges (ERCs) payable to
31.10.16.

3.49 per cent fixed rate until 31.10.16, 75 per cent LTV,
£250 booking fee, £749 arrangement fee, ERCs payable to 31.10.16.

2.99 per cent Flexx for Term, variable rate, 75 per cent LTV, £250
booking fee, £1,749 arrangement fee, no early repayment charges (ERCs).

Email back and we will put you in touch with Peter Faulkner to talk BTL
mortgages.

Letting Agent Check

The latest Property Academy annual survey reveals that some 55 per cent
of landlords who use letting agencies know whether the agents are
members of a professional body or not. Is yours?

That’s an astonishing figure and suggests that many investors simply do
little or no due diligence on their letting agents – ‘They’re the
cheapest, I’ll go with them!’ – and that is worrying. How do you know
they’ve taken up the references they’ve said they have? Issued a
legally sound contract? Aren’t going to run off with your money? More
to come on this.

All for now, see you again soon.

Property Alert 19th September 2014

Hello again, and we have some overseas news and views for you today. As
ever, if you are active in these markets, let us know. We have lots
more material for you!

Turkey – Tax Update

Berk Çektir, a lawyer focusing on the legal aspects of living and doing
business in Turkey offers some words on the current tax situation
there. ‘Turkish property tax is a long and tortuous road which
regularly changes course in amazing and unbelievable ways. The most
recent change concerns an enormous rise in benchmark values determined
by the authorities against the real life prices for properties. This
means that whatever the property price you sell or buy, the value to be
declared to the Land Registry Office and Tax Office cannot be lower
than the price determined by the authorities. The problem is that this
benchmark price set by the authorities is sometimes much higher than
the market price. This places a false and unjust tax burden on the
seller of a property in which the market price is lower than the
official benchmark price.’

‘For example, you buy a property for TL 100 and later decide that you
would like to sell it. Now you have a buyer for TL 150; this is
apparently the market price. However, the benchmark price set by the
authority is TL 300. What is the impact of this extremely high
benchmark price? You now have to declare this benchmark price as the
actual sales price; you are forced to declare it, otherwise the officer
will not commence the proceedings. The system probably does not allow
the Land Registry Officer to put a smaller value than the benchmark
price in the system for this property.’

‘This whole thing ends up with the seller paying more tax. If we take
the capital gains tax as 35 per cent, the seller, considering the
example above, would pay only 35 per cent of the gains, i.e., TL 50.
However, the gains now seem to be higher since the seller now has to
register the sales value as TL 300 and now the seller has to pay 35
percent of TL 300, i.e., TL 105 as capital gains tax. Is there any
profit in this business? Yes, of course; there is no profit for the
investor who believed in the Turkish property market and invested in
it, but there is a fantastic profit for the Treasury.’

Golden Visa Update

Agents Lucas Fox offer an update, ‘The Spanish Golden Visa has been in
force for one year and so far has under-performed when compared against
the similar scheme in Portugal – approximately 100 successful
applications in one year compared with approximately 1,000.’

‘The biggest take up in Portugal has been from Chinese clients and this
is largely down to the fact that the Canadian visa scheme closed at the
same time as the Portuguese scheme opened and Chinese immigration
companies diverted their clients to Portugal.’

‘So far in Spain the main interest has been from Middle East clients.
We have successfully processed applications for Far East, Russian,
Indian, American and South African clients. There is growing interest
from China and a number of Chinese immigration companies have started
to establish a presence in Madrid and Barcelona.’

‘The Portuguese scheme took approximately a year before it generated a
higher volume of applications and the signs are that the number of
applications in Spain should start increasing through the remainder of
2014 and into 2015 as the property market improves.’

US Foreclosures Update

Andrew Batty’s articles on foreclosures have certainly sparked members’
interest in all things BMV in Florida. (Missed the articles? Email back
for them). Talking foreclosures, we’ve some new figures in from
CoreLogic. Main headline? ‘US foreclosures down 20 per cent
year-on-year’. Florida, at 120,479, has the most completed
foreclosures, followed by Michigan (44,000), Texas (38,000) and
California (32,000).

‘The stock of distressed debt continues to rapidly decline, especially
in western states. The number of seriously delinquent loans fell by
more than 25 per cent from the prior year in 10 states and seven of
those states were in the west. Based on current trends, the overall
foreclosure inventory could trend down to as low as 500,000 homes by
year-end, which is very positive news for the housing market.’ Looking
to buy one of these properties? Sooner rather than later!

Stay In Their Minds

It’s not enough to provide a great product or service. If your potential customer doesn’t think about you when the time comes to buy, you won’t make the sale. It sounds obvious, but I can recall numerous occasions  when I’ve failed to buy something from a supplier or retailer simply because I’ve forgotten about them. This is a particular problem for companies that supply products and services which aren’t purchased regularly. So what do you do?

Well even if  a customer is only likely to need what you sell every few years, keep in touch. Make sure you have their contact details so you can mail or email them,  and  that they are subscribed to your social media, blogs or newsletters. Send them interesting information and maybe even free gifts (if appropriate) from time to time. Make sure that when the time comes to buy, you’ll be at the forefront of their mind.

Property Alert 18th September 2014

Here we are again with some UK property-related news and views for you…

HMRC Heads-Up

A new HMRC taskforce has been set up in North-West England and North
Wales to target those who have sold one or more properties and have not
declared rental income or paid any Capital Gains Tax that’s due.

HMRC’s Jennie Granger, Director General of Enforcement and Compliance,
says, ‘HMRC taskforces are deployed in sectors and areas where we’ve
detected a high risk of tax evasion. For example, in a previous
property taskforce in London in 2013 we uncovered a barrister who had
evaded £471,512 in unreturned capital gains.’

‘The people being targeted by our taskforces have no intention of
playing by the rules and could end up facing a heavy fine or even a
criminal conviction. A Hertfordshire property consultant who failed to
declare or pay Capital Gains Tax and rental income on a number of
properties was uncovered by an HMRC taskforce in 2013 and, as well as
paying the tax and interest due, now has a criminal record. If you
haven’t declared all your income, we will find you and investigate.’
Just so you know.

Accidental Landlord?

In the run up to the EU Mortgage Credit Directive coming in during
2016, there is talk that ‘accidental landlords’ -those who rent their
old homes – will face regulation. Have to say that this is a vague
heads-up at this stage but that we will have more shortly on this and
other upcoming EU legislation and how it may impact on investors.

Paul Smee at The Council of Mortgage Lenders says, ‘With the Mortgage
Market Review out of the way, we now enter round two of regulatory
change as a result of the European Mortgage Directive. We are hopeful
that most of the impact should be modest, as much of it was anticipated
and helpfully built in to the new rules in the first place.’

‘It is frustrating though that, despite earlier assurances, the
buy-to-let position turns out not to have been adequately resolved,
resulting in a new proposal for regulating part of the buy-to-let
mortgage market. The regulatory regime now being proposed is based not
on any evidence of a need for additional consumer protection, but
purely on ensuring that the European legal requirements are met.’ More
to come.

Tell The Taxman

Worcestershire accountants Ormerod Rutter have issued a note of warning
to property investors. They note that ‘fewer than 500,000 taxpayers are
registered with the tax authorities as owning a second property yet the
real number could be as high as 1.4 million’.

‘HMRC are being very proactive, approaching letting agents for lists of
landlords and cross-checking taxpayers’ records with Land Registry
information, and if any tax is due the penalties can be severe.
However, it’s also worth considering that if your property has made a
loss, then that can be offset against future profits. Landlords who
have not yet declared their income are welcome to contact us and there
is also plenty of useful information on the HMRC website. More to
follow? You tell us. We have some material coming in.