Property Alert

London Hotspots

A good article by Ed Cumming in the newspapers today. He writes, ‘It may not have the same profile as the tube but the London Overground is quietly opening up unloved areas of the capital. As the capital’s property market continues to defy the pessimists, prime London is expanding. Money is spreading out of Zone 1 like an ink blot to less familiar places. They are the areas marked out by the revamped London Overground line.’

Where exactly will we see growth? Ed Mead at Douglas & Gordon takes up the story, ‘The new route will have a huge impact on people’s lives. In particular, the new line has opened up a stretch of south London from Clapham to the City. Previously that whole swathe across to Canary Wharf was a bit of a no-man’s land. It’s refreshing that the Government has shown some joined-up thinking on this. It’s a spectacular advance on the travel network that was there before.’ More to come.

Survey – Just Get One!

I’m always amazed at the number of buyers and investors who buy property without getting a survey or who rely on the mortgage lender’s less than adequate survey (less than adequate from the buyer’s and investor’s viewpoint as it’s simply to make sure the property’s resale will cover the mortgage in a worst-case scenario).

A new survey by RICS suggests some 20 per cent of buyers don’t bother with a survey. Surveyors Dacre, Son & Hartley comment, ‘When mortgage lenders require deposits of up to 20 per cent of the property’s value, which can put home buyers under a huge amount of financial pressure, it is inevitable that some will seek to save money by not having a survey. It is both very unwise and a false economy not to commission a survey, after working hard to save for a deposit. The last thing buyers need are unexpected bills for unforeseen repairs which are not a good introduction to home-ownership.’

Susan Armstrong bought a property on the basis of a mortgage lender’s drive-by valuation. ‘I realised pretty soon after moving in that there was something wrong. The walls ?were wet and there was an awful smell. When I peeled the paper off, the plaster was crumbling and there was black mould. I didn’t discover the remaining chimney breast until I decided to have the attic room properly converted. The builder was horrified when he saw it. He said that if the wood had given way the stone would’ve crashed through the ceiling onto my bed, which is directly below.’ Personally, I have always used a survey to negotiate a better deal so it often pays for itself that way.

Help To Buy Warning

As part of our revamp, we are about to put our property introductions on Rightmove so we were concerned by the latest story doing the rounds that ‘developers selling shared-equity homes under the Government’s Help to Buy scheme are advertising them on Rightmove at four-fifths of their real price.’

What these developers are doing is to remove the 20 per cent, taxpayer-funded share so that a house at £200,000 is priced as £160,000. Rightmove states, ‘We are aware that some developers are making use of Rightmove to advertise an ‘indicative price’ that takes into account the equity loan offered under Help to Buy. We know from previous research that awareness of government schemes among home movers is low and this approach can help raise awareness.’ A spokesperson from Taylor Wimpey adds helpfully, ‘We are trying to help customers understand the scheme and the options available.’ Food for thought.

Property Alert

Property Rent News

According to the latest buy-to-let index from LSL Property Services, every region in England and Wales has seen annual rent rises; the first time it’s happened since 2011. Average rents in England and Wales are up 3.9 per cent on a year ago. As such, ‘the average landlord in England and Wales could expect to make a total annual return of £9,496 per property over the next 12 months’.

David Brown, commercial director of LSL Property Services, makes some interesting points. ‘Landlords across the UK have increased the stock of rental properties by around 10 per cent since 2008 but the more fundamental squeeze is still coming from a lack of new building. Further increases in the rental stock will be dependent on sustained improvements in the availability of finance for landlords.’

‘However, new buy-to-let lending dropped in the first quarter, just as purchase prices are starting to move up more steadily. Price rises can be a double-edged sword for renters and landlords, not just owner-occupiers. On the one hand, landlords have already responded to mounting demand, and capital accumulation has made up more of many landlords’ total return than rental income in some areas. However, if property is more expensive to buy then in the long run it will always be more expensive to live in.’

What’s Your Yield?

Countrywide recently published yield data based on 50,000 properties across England, Scotland and Wales. Three and four bedroom properties achieve average yields of 6.2 per cent and 5.6 per cent respectively. However, smaller properties are seeing better yields and rents rising the most, with one and two bedroom properties seeing a 3.3 per cent year-on year increase.

‘We wanted to produce this data to show landlords and investors what sized properties are achieving in terms of rents and yields. As our data shows, one and two bedroom properties are providing greater yields than larger properties for landlords, 6.8 per cent average yields for one bedroom properties, means there are some really good opportunities for investors with relatively low budgets.’

‘For example, a one bedroom flat in Nottingham recently sold for £51,000 and is providing a rental yield of 6.9 per cent.  With rents rising, arrears falling and some significantly improved buy-to- let mortgage products compared to those available in the last two years, the findings are very encouraging for investors who are looking to start or expand their property portfolio this year.’

Commercial Property Update

Don Jordison of Threadneedle Property Investments – yes, noted – draws attention to commercial property investing. ‘While the investment case for commercial property may not hold the same excitement it commanded in the heady days of the rebound, observers anticipate good income returns, making the asset class attractive in the current environment.’

‘Historically, commercial property has tended to have a low correlation with equities and bonds, because the asset class does not necessarily react to market or economic conditions in the same way. Within property itself, there is scope for diversification because each sector has its own drivers and opportunities, while different locations, property types and tenants provide further opportunity to spread risk.’

‘The yield advantage of property over gilts represents a buying signal. For an asset-backed, relatively low-volatility investment, property offers a very attractive level of income. Over the long-term, income is by far the most important component of performance and is particularly appealing against a background of extremely low interest rates that look likely to remain that way for some time to come.’

That’s all for now – we are off to Bristol to take a look at a new student accommodation deal coming up there. It may be the best yet! If you are interested in student accommodation and have the funds to invest, do drop us a line to pre-register your interest.

Property Alert

Welcome to today’s news and views…

US – More Good News

According to the latest quarterly report from the National Association of Realtors (NAR) in the US, the median existing single family home price rose in 133 of 150 metropolitan areas in Q1 2013. ‘The supply/demand balance is clearly tilted toward sellers in a good portion of the country. Inventory conditions are expected to remain fairly constrained this year so overall price increases should be well above the historic gain of 1 to 2 per cent above the rate of inflation. If home builders can continue to ramp up production, then home price growth is expected to moderate in 2014.’

‘Some of the previously hard-hit markets like Phoenix, Sacramento and Miami continue to experience a dramatic turnaround, while a new set of areas like Atlanta, Minneapolis and Seattle have begun to show strong signs of upward momentum. Even with rising home prices, there is still plenty of buying power in the market. Historically low mortgage interest rates and home prices that remain well below their peak mean most buyers can purchase well within their means, assuming they meet ongoing stringent credit standards.’ More to come.

Hot Tipped Markets

Talking commercial real estate now, we note that CBRE is stating that Dublin, Madrid and Milan are ‘the real estate markets to watch…as international investors search for higher yields’. CBRE predicts that ‘safe haven’ markets such as London will see total returns of between 3 to 8 per cent a year over the next five years. Recovering markets such as Dublin, it says, should see total returns of more than 9 per cent a year over that time. These markets are suited, please note, to ‘investors with the appetite to take on incremental risk’.

‘For some time there have been mentions of the ‘wall of money’ waiting on the sidelines for real estate. 2013 is likely to be the year where we see investors coming off the fence and deploying capital into locations such as Dublin and, further down the line, potentially Madrid as well. Over the next five years, we expect returns on prime assets in recovering markets and even good quality secondary in places such as the UK to exceed those in safe haven markets.’

Asia Prime Properties

A new report from Jones Lang LaSalle suggests that prime property prices in Asia, with the exception of Hong Kong and Singapore, are rising. Prices across the nine markets were up 2.2 per cent on a quarter-on-quarter basis and 6.1 per cent year-on-year. Indonesia led the way with prices in Jakarta rising 8.7 per cent between Q4 2012 and Q1 2013 and 32.9 per cent year-on-year.

Take note though that ‘falls are coming where governments have introduced measures to dampen market prices’. Prices are expected to drop by some 5 to 10 per cent in Hong Kong and Singapore this year. Jones Lang LaSalle in Hong Kong reports, ‘Unfortunately, with the current government continuing to adopt a heavy-handed approach in setting policy, volumes and prices are likely remain under downward pressure over the short-term.’ More to follow.