Housing experts: Tory plans neglect those who need affordable homes

 

David Cameron outlines plan to offer starter homes at 20% discount by exempting builders from obligation to build social housing

 

Housing experts have accused David Cameron of offering cheap new homes for middle-income earners at the expense of those on low pay after the unveiling of his manifesto on housing.

Outlining his promises in the fast-growing town of Colchester, Essex, the prime minister pledged to solve Britain’s housing shortage at the same time as protecting the green belt. He even claimed the Conservatives would be building 200,000 homes a year by 2017 – three years sooner than Labour.

Central to his offering was a pledge to double the number of discounted starter homes for first-time buyers – a message designed to appeal to younger swing voters. Cameron said developers would be able to afford to build 200,000 of these if they were exempted from requirements to build affordable housing and local infrastructure.

However, he immediately faced criticism from Labour and some housing groups for only vaguely spelling out how his targets would be achieved and paid for.

The charity Shelter accused Cameron of trying to solve an affordability crisis by getting rid of affordable housing.

It said: “The 200,000 homes over the course of a parliament sounds good on the surface, but in reality this is giving with one hand and taking with the other.

“Removing the requirement on developers to build affordable housing is extremely worrying, and won’t help those currently struggling with sky-high housing costs.”

Gavin Smart, interim chief executive at the Chartered Institute of Housing, said the Tory plan “smacks of building for one group of people at the expense of another.

“We are very concerned about these sites being exempt from section 106 agreements, which usually require social or affordable homes to be built as part of a development, for people on lower incomes ... Social housing is critical if we are going to solve the housing crisis – there are always going to be people who can’t afford to buy and we must provide decent, affordable homes for them too. If all the focus is on home ownership, we are never going to build mixed communities.”

Labour said Cameron’s housebuilding plans had been rushed out in a panic before the general election.

Speaking in Hove, the Labour leader, Ed Miliband, drew attention to his party’s plans to increase the number of new homes built every year to 200,000 by 2020, saying housing would be “the biggest priority for the next Labour government”.

Miliband said that both Labour and Conservative governments had failed to do enough to tackle the housing crisis, but that the coalition had presided over a fall in housebuilding to the lowest level in peacetime since the 1920s.

Labour has pledged to give local first-time buyers priority access rights when newly built houses go on sale. The party also plans to legislate to give renters three-year tenancies, to cap rent rises during that period and to abolish fees imposed on tenants by letting agents.

Miliband said: “Yesterday the Conservative party chairman [Grant Shapps] went on TV in an effort to convince people they had a plan for housing. But instead, he couldn’t answer basic questions about where the money will come from or how their latest pie-in-the-sky scheme will work.”

Labour said Shapps’s claim that the coalition had delivered 220,000 homes for social rent did not hold up against the government’s own figures, which show that 105,090 have been built since 2010 – many of which they say were the result of commitments made by the last Labour government.

Cameron’s starter homes would be sold at a discount of 20% and the purchasers would not be allowed to sell them at full market value for at least five years, although they may be entitled to rent them out. They would largely be built on brownfield sites, previously used for industrial or commercial purposes and not already earmarked for housing.

On Monday, the Tories said 31,000 people had applied to benefit from the scheme over the weekend.

Housing professionals have challenged the first version of the scheme, describing it as “Ryanair housing” that will reduce still further the already depleted number of social homes in England.

The Conservative plans states that house builders can afford to sell the homes at 20% below the market price because they will be exempt from the community infrastructure levy, used to pay for services such as roads and sewers, and from section 106 obligations, which require social housing to be included in building schemes or for a payment to be made in lieu. They will also be exempt from the zero carbon standard, designed to ensure they emit no carbon. The homes will only be available to households aged under 40, the age group least able to afford to buy their own homes.

Shapps, a former housing minister, was unable or unwilling to explain in greater detail how house builders could afford to offer homes at 20% below market prices or how the shortfall could be financed, when he appeared on Sky News’ Murnaghan programme on Sunday.

The government is proposing to set up a Design Council to encourage and promote good design in starter homes, but it will have no powers to enforce the highest standards.

Labour has warned that the planned homes may be stuck on the edge of town, away from bus services and schools, and tagged on to business parks or industrial estates.

A 20% discount will save the average first-time buyer £43,000 on a £218,000 home (the average cost paid by such buyers), which would leave a revenue shortfall of £8bn from income if current regulatory obligations had been retained on the 200,000 homes.

Scepticism about the sincerity of coalition parties to commit seriously to a housebuilding programme has been expressed by the outgoing Liberal Democrat MP Jeremy Browne.

Speaking at the Policy Exchange think-tank last week, he said: “Both governing parties travelled on the train from Waterloo down to the Eastleigh by-election in 2012 and argued to the local electorate that they would be the ones that were most effective at stopping any new housebuilding taking place in Eastleigh, and then got on the train and came back to Waterloo and made speeches here in Westminster about why we need more housebuilding.

“I said to Nick Boles, who at the time was the planning minister, ‘Have you been down to Eastleigh yet?’ and he said, ‘I’m told I’m not allowed to go down in case it inflames the whole housebuilding issue.’”

Browne added: “The public, whether it’s the NHS or housebuilding, detect that gap, and you will see it now at constituency level with quite debased leaflet-based campaigning about what the parties are going to stop at local level, which is almost completely at odds with the macro-level speeches that the leaders are making up in Westminster.”

 

How would labours rent reform effect you?

Ed Miliband proposes to put a stop to families being “ripped off” by private landlords by introducing three year tenancy agreements in the private sector. The proposal includes limiting the amount of rent increases and a ban for letting agents charging tenants fees. The new three-year tenancy agreements would start with a six-month probationary period, at the end of which the landlord would be able to terminate the contract if the tenant was deemed to have failed the probation – for example, if there were rent arrears or there had been anti-social behaviour. This would then be followed by a two-and-a-half-year term during which tenants would be able, as they are now, to terminate the contract with one month's notice. Landlords would only be able to terminate contracts with two months' notice (Section 21) if: • The tenant was behind with their rent, was guilty of anti-social behaviour or breached their tenancy agreement • The landlord wanted to sell the property, needed it for their own use, or required it for their family • The landlord planned to refurbish or change the use of the property "Landlords would not be able to terminate tenancies simply to put rents up," says Labour. There are exceptions such as landlords with buy-to-let mortgages taken out prior to the legislation taking effect to continue using shorter agreements where the mortgage small print does not cater for longer tenancies. There would also be provision for new tenants such as students or workers on temporary contracts to request shorter-term tenancies, subject to the landlord agreeing to this. The legislation would place an upper ceiling on rent increases. Labour says this would be based on a benchmark such as average market rents. It may or may not also be linked to inflation. We imagine Landlords with buy-to-let mortgages would argue that any limit should also take mortgage rates into account.

Is there a reluctance to sell property in Leigh?

 

Apathy has hit the Leigh housing market as sellers await the outcome of the general election and stricter mortgage regulation suppresses buyer demand. This is mirrored around the UK as Rightmove reported the number of homes registered for sale per estate agent fell to its lowest level for five years in December, with available stock 10 per cent lower than in the same month a year earlier.

Looking at Leigh, in the summer of 2014, each estate agent in Leigh had on average 45.7 properties on its books (as there were a total of 777 properties up for sale in Burton at the peak in the summer just gone). Our research shows that number has plummeted to 38.5 per agent in December and looking at first three weeks of January, this number will lower by the month’s end.  While the lack of new properties coming onto the market in the later months of 2014 in Leigh  pushed asking prices up slightly from November to December, traditionally a quiet season for the housing market, property sellers will need to work hard in 2015 to complete a sale.

The length of time a property takes to sell has increased over the last few months. Two bedroom properties in Leigh are now taking 94 days to sell, three bedroom 72 days, four bedrooms 97 days, but here an interesting figure, one beds are taking on average 137 days to find a buyer

2015 will be the year of the selective mover. With only 315 brand new properties a year being built in Leigh since the turn of the Millennium (we should be building 610 per year if we took our equal share from around the UK), this woefully low and insufficient number of new buildings in the town over the past few decades and a systemic change in the type of properties homeowners want (with families splitting etc so we have too many larger houses and not enough smaller ones), buyers are becoming dissatisfied with, and therefore dismissive of what is up for sale.

I would confirm the heat has gone out of the Leigh property market and I anticipate a moderate reduction from the high transaction volumes seen in 2014. That might mean Leigh landlords could bag a bargain during this period of uncertainty, especially if the financial markets do not like the election outcome. Markets and buyers do not like uncertainty, but savvy Buy to let landlords know buy to let is a long term game, and irrespective of short term apathy, reduction in the quality and quantity of stock for homeowners to buy  or the election, if people don’t buy property they rent. Southend Council are building anymore properties, the council house waiting list is decades, not years for the better type of property. The only other place to get a roof over your head.. Rent a property! Good old Bricks and Mortar!

Therefore, if you are considering buying a property for investment in the near future, as I don't sell property, I am always happy to give you my considered opinion on which property to buy (or not as the case may be) to give you what you want from your investment.

 

House price growth continues to slow - but the average home still earned a respectable £788 in March alone

 

• Average house is now worth £182,970
• Prices rise by 0.4 per cent in March
• Number of properties coming on to the market remains low
• Short supply of homes for sale fails to meet demand

House prices inched up another 0.4 per cent in March as the supply of new homes on the market remained tight ahead of the General Election.

The average house price now stands at another record high of £192,970 – up another £788 over the past month alone, the latest figures from Halifax reveal.

Although prices have cooled considerably from the frenzied months seen last year across the country, demand remains high thanks to rock-bottom mortgage rates and last December's stamp duty changes.

Many families are enjoying a return to real earnings growth for the first time in several years, which is also increasing demand in the housing market.

Inching up: House prices are up another 8.1 per cent over the past year, according to Halifax

Viewed across the year prices were up by 8.1 per cent on average, which is still a very strong rate of growth although slightly down on the 8.3 per cent seen in February and comfortably below last July's peak of 10.2 per cent.

Halifax predicted that in time other factors will start to weigh on the market, such as an unsustainably growing chasm between average earnings and house price

If you would like some advice about buying to let, be you a landlord with a portfolio or someone thinking of investing in the rental market for the first (second or third...) time, please pop in and see me at our office in Broadway west in Leigh or call me for a chat 01702 477754

How Radical Reforms To Pensions Will Impact The Property Marke

We’re just weeks away from the most radical changes to Pensions in almost a century and already the vultures are circling. If you haven’t noticed them already, you will see a huge proliferation of  advertising from an assortment of players in the pensions and property industries, all seeking to earn fees/commissions from your new found ability to liberate your pension.

From April 6th  if you’re over 55 and have a defined contribution pension suddenly the world becomes your oyster. Chancellor George Osborne said in his Budget, “This government believes in the principle of freedom. Individuals who have worked hard and saved responsibly throughout their adult life should be trusted to make their own decisions with their pension savings”. So in the blink of an eye, instead of being forced to purchase an annuity you can take up to 100% of your pension pot in cash and spend/invest it in whatever you want. Doubtless they’ll be an upsurge in sales of new BMWs or Mercedes but it is expected that most people having saved for years are not going to go too much off the rails. But this is an opportunity that could tempt many to plunge their lifetime savings into the property market and become buy-to-let landlords.

For those wealthy enough to drum up a big enough deposit or buy outright, this is a very popular way to generate an income and potentially make capital gains in the longer term as house prices continue to rise in many parts of the country. Newly-flush pension savers might well jump at the chance to join Britain's growing army of landlords, given that interest rates remain stubbornly low and shares are volatile - notwithstanding the FTSE 100 recently hitting a record high.

Despite the various initiatives to help first time buyers on to the property ladder (including the yet to be tested Help To buy ISAs)  the numbers of first time buyers have still not risen appreciably, yet at the same time, property prices at the bottom end of the scale are very much bubbling upwards. This means the lower end of the market is being dominated by Buy To Let investors and, if the wave of pension money washes into it, as expected, prices will rise further and first time buyers will continue to be thwarted. In this scenario, the only thing that will keep prices from increasing (absent political interference) is if the UK’s House Builders can dramatically increase the supply of new housing stock to balance demand. Given the volumes they would have to build per annum, this is about as likely as being able to pour hot tea from a chocolate teapot! Of course, there is the small matter of the forthcoming General Election to be settled, which I would expect to hold back the wave of pension money crashing over the property market for the next few months, at least. However, depending on the political hue going forward, it is likely to be full steam ahead.

But there are pitfalls to accessing buy-to-let in this way, first and not least the huge tax bill you could face if you withdraw all or a large portion of your pension to buy a property - a move that could easily propel you into the higher 40 per cent or even 45 per cent tax bands. That's before you even embark on the process of finding and acquiring the right property, filling it with suitable tenants, and dealing with the administrative hassles of being a landlord.

And, as with any bandwagon jumping opportunity, the purveyors of snake oil will be out in their droves and would be landlords will need to take great care with whom they engage.  Purchasing a buy-to-let property can be daunting. It's a decision with long-term consequences and, apart from your own home, is likely to be your largest financial commitment.  At castle estate agents, Leigh on sea we understand the pressures that you will feel in getting this decision right, so whether you're a first timer, or a seasoned buy-to-let investor we are here to help you. If you're currently considering buying to let, give us a call on 01702 477754 or pop in to see us at 91 Broadway west and we'll talk you through the pluses and minuses of different locations, property types, yields etc. We're specialist Letting Agents and we'll tell you the real story. No snakes, no oil.

Leigh on sea Landlords invest £1.29 billion in the Leigh Property market

South East property asking prices jumped by more than £6,400 to £363,992 in February according to Rightmove, an increase of 1.8% from January and 8.1% higher than a year ago. After the traditionally quiet months of January and February, the property market has started to warm up, but talking to some Leigh on sea Estate Agents, they are reporting their lowest ever stocks of quality property for sale. However, asking prices have no relation to what property sells for (i.e. their REAL value), is the issue a lack of supply?

Putting aside Leigh on sea’s continual housing supply shortage, (we only built 5,187 properties in the last decade but the population of Leigh grew by 15,867), this is now, according to some people, being exaggerated by an increase in homes being owned by buy to let investors, who tend to be buying a property as part of a long term pension plan and are more likely to keep it for longer than an owner/ occupier would. I have also seen unwillingness among homeowners looking to move, to put their own property on the market as they can find few suitable properties to make it worth their while going through the whole moving process.

Talking to some Leigh on sea’s landlords only last week, I said that I believe this is the new norm in the Leigh on sea property market, and is the consequence of over 35 years of not enough homes being built to meet the escalating growth in household numbers, resulting in a lack of quality homes for sale in many popular areas of Leigh.

When one looks at the historic data, in June 2008, there were 603 properties on the market in Leigh compared to today’s 271. Should we be worried?  Well in January 2010, there were only 253 properties for sale in Leigh on sea, but seven months later in August 2010, this had jumped to 583 properties, for it to drop to 273 properties in January 2014. The number of properties on the market is a cyclical thing in Leigh on sea, it always has been and always will be. As we go into the Spring of 2015, the number of new properties coming onto the market will increase ... just as the daffodils will flower.

So are landlords to blame? Well, on one side of the coin, yes they are. If they buy a property to rent out, that means someone can’t buy it to live in. However, it doesn’t matter if someone wants to live in a property if they can’t afford the deposit and upkeep.. And the youngsters of Leigh still need a roof over their head. So on the other side of the coin, if the Council aren’t building any properties and people can’t afford the large deposit for the mortgage, then Leigh landlords have stepped in and bought property to rent out to them. Leigh landlords have bought 4,541 properties over the last decade (investing approximately £1.296billion buying those Leigh rental properties), meaning there were at the last count, 17,278 Leigh properties being privately rented out to tenants. Leigh tenants are in fact getting a good deal as well, as average rents in Leigh are 5.9% above where they were seven years ago. That sounds like a win-win situation for everyone to me. Stop blaming landlords and start building more properties in Leigh.. That is the only answer.

In the meantime, the demand from tenants for Leigh property is only set to rise over the coming years. If you want some advice and opinion on where (or not) to buy, please visit the Leigh Property Blog where we discuss such matters in greater depth www.leighpropertyblog.com 

Weekly Monday's tax tips. Number 3.

Maintenance costs are on the most frustrating things as a landlord but keeping on top of your maintenance will look after your property over the long term and look after your investment.

Most maintenance costs can be claimed against your taxable income so don't worry too much about spending the money!

As always, talk to a qualified accountant to find out what you can or can't claim.  If you don't have one then I can suggest a couple of good ones!