Wednesday, 21 February 2018

London posh-home lettings hit record high

Six- and seven-bedroom houses in Notting Hill and Primrose Hill were among a record number of properties rented out at £5,000-plus a week in London last year.

Upmarket estate agent Knight Frank reported the number of its “super-prime” lettings rose 34% last year to 137, from 102 in 2016. The vast majority of properties are let furnished.

Brits and Americans each accounted for a fifth of tenancies, followed by Russians, the French and Chinese.

One of them was a six-bedroom house in Clarendon Road in Holland Park, let at £18,000 a week. The property would cost £27-£28m to buy.

The gated house has a garden, off-street parking, air conditioning and underfloor heating; six bathrooms, four reception rooms, a utility room, gym and wine cellar.

Another six-bedroom house, on Prince Albert Road opposite Regent’s Park, was let for £12,000 a week and would cost £15.5m-£16m to buy.

The number of homes Knight Frank rented out for £15,000 a week or more nearly doubled last year to 20, from 11 in 2016.

They included a seven-bedroom house at Kensington Park Gardens in Notting Hill, with six bathrooms, a billiard room, wine room and garden with water features, let for £15,950 a week.

With house prices falling in parts of London, a growing number of wealthy people are choosing to rent – also to avoid hefty tax bills. Following increases in stamp duty, property taxes are the equivalent of three to four years’ rent.

Knight Frank set up a super-prime lettings department in 2015 in response to rising demand. Tom Smith, who runs the division, said: “Demand is resilient due to higher rates of stamp duty and the associated uncertainty over the short-term prospects for price growth in the sales market. A lack of clarity regarding Brexit has also been a factor.”

More developers are offering luxury homes for rent because they are struggling to sell them, to avoid big price cuts, Smith said. Owners of top-end properties are knocking about £1m off their prices to sell them, Mayfair-based property buying agent Garrington reported last month.

The average length of a super-prime tenancy rose to 589 days in 2017, compared with 548 in 2016 and 528 in 2015, says Knight Frank.

Most super-prime renters are drawn to west London. Knightsbridge still tops the list for high-end lettings, followed by Mayfair, St John’s Wood, Kensington, Belgravia, Notting Hill and Hampstead.

Monday, 19 February 2018

Mid-earners 'locked out of buying a home'

The extent to which young people are locked out of the British housing market has been revealed in new figures from economists.

The biggest decline in home ownership in the last 20 years has been among middle-income 25 to 34-year-olds, the Institute for Fiscal Studies said.

In 1995-96, 65% of this group owned a home, but just 27% do in 2015-16, with the biggest drop in south-east England.

Middle earners are defined as having take-home pay of £22,200 to £30,600.

This can be either as an individual or as a couple.

A third of them are university graduates, while 30% left school at 16. Three-quarters of them live with a partner, and around 60% have children.

The proportion of these middle earners owning a home (27%) has moved closer to the likelihood of those with a low income (8%) than those on a high income (64%).

Tom Bourlet pays £535 per month to rent a room in a flat in central Brighton.

"I've been renting it for two-and-a-half years. It really is money down the drain," the 30-year-old says.

"I don't really see much for it - it's not the biggest room."

The location is handy for work, and is close to the railway station, but Mr Bourlet would prefer to have somewhere "to be proud of, and build up myself", he adds.

However, buying somewhere is "completely beyond budget at the moment".

"It's absolute Mission Impossible," he says.

"From rent, to paying for trains... all the utility bills keep shooting up. I mean, I'm nowhere near, I'm not even slightly close. I'm saving every month, but the deposit is so high that it just seems beyond reach at the moment."

Andrew Hood, a senior research economist at the IFS, said: "Home ownership among young adults has collapsed over the past 20 years, particularly for those on middle incomes.

"The reason for this is that house prices have risen around seven times faster in real terms than the incomes of young adults over the last two decades."

Property price rises were significant in the South East of England. As a result, the region has seen the proportion of homeowners among 25 to 34-year-olds fall from 64% to 32% in two decades.

Every region of Britain had seen a 10 percentage point drop over the same period, the IFS said. This will lead to some tough decisions for today's 20 to 30-somethings, according to Iona Bain, founder of the Young Money blog.

"It is really hard to see how we can make this better when we are still seeing a huge demand for housing and that housing demand is not being met with the right number of houses," she said.

"Individuals are having to decide for themselves: do I want to rent and have the flexibility but pay more for it, or do I want make a lot of difficult decisions to get on the property ladder sooner and potentially stay put for many, many years to come?"

Housing minister Dominic Raab said that schemes such as Help to Buy and the removal of stamp duty for most first-time buyers had helped people to buy their first home.

He also said that £45m would be invested into community projects that would help kick-start the building of thousands of new homes.

John Healey, Labour's shadow housing secretary, said: "This research should be a wake-up call for Conservative ministers. After almost eight years of failure on housing, the government is still failing to tackle the fundamental problems with our broken housing market."

He said a Labour government would build 100,000 first-buy homes.

Friday, 16 February 2018

Is custom build the future of housing?

It is Grand Designs on an epic scale. The first streets on the UK’s biggest mass self-build site are now taking shape, as a town of 1,900 homes ranging from naked black box minimalism to extravagantly unique designs emerges in Oxfordshire. Graven Hill is the UK’s boldest experiment ever in self-build and custom build, enabling individuals to design inspiring homes on pre-prepared plots, limited only by their imagination and their budget.

The idea behind Graven Hill is that while many dream about a Grand Designs home, the reality is frustration at finding a suitable plot, battles over planning permission, scrimping around for financing, and the sheer hell of building it. But at Graven Hill, a remarkably entrepreneurial local council has bought hundreds of acres of disused Ministry of Defence land, then created the plots, the street layouts, the schools, nurseries, cycleways and even a pub. The buyer picks a “golden brick” plot – they range from space for a two-bed “pocket” home through to six-bed detacheds – then designs their home and gets it fast-tracked through the planning system.

They can choose to build it entirely themselves, or find an architect and builder to construct it to their own design. They can ask the builder to take it to shell level, then finish it off themselves to save money. Or, in what is becoming the most popular option, they design and customise their own home, which is then assembled on site to a fully finished turnkey level. Graven Hill is also pioneering a “group self-build” concept, where, say, a group of teachers or nurses can form to build a row of houses.

Such is the interest in the development that Kevin McCloud of Grand Designs is on site filming a special six-part series following Graven Hill’s pioneer builders that will be broadcast later this year as the first homes are inhabited.

Karen Curtin, managing director of the Graven Hill development company, owned by Cherwell district council, says the development could “revoutionise the future of homebuilding”. The council has spent £28m buying the land, and hopes to turn a small profit while challenging the way homes are built in Britain. Other councils are queuing up to visit the site in the hope of expanding the concept across the country.

So given a bare plot, rather than the cookie-cutter blandness of most modern estates, what are people designing and building? Craig Strachan of Sylva, a design and build company active at Graven Hill, says their youngest custom-builder is 24, their eldest 73. “Every single one is very modern. People like flat roofs, big glazed areas, modern construction materials and rendering and aluminium windows. They are also much less precious about the number of bedrooms. Nearby you can see a Persimmon development which squeezes five bedrooms into the space that our buyers use for three. People want great design rather than adding more bedrooms for a supposed better resale value.”

But there are limits. Curtin references the city of Almere in Holland as the leader in Europe for custom build, but wanted to bring a more Oxfordshire feel to the project. A prescribed palette of materials means the new community will be “less wild and wacky” than some of the Lego-like, primary colour-style homes in the Netherlands.

What about costs? Until now, Dutch and German makers such as Huf Haus have dominated the UK kit-home market. But a new breed of British start-ups such as Facit Homes is now challenging them with individually designed and digitally manufactured homes made in an east London factory, helped by the fall in the pound since the EU referendum, which has effectively priced out European rivals.

Rhys Denbigh of Facit Homes says self-build and custom build smashes the traditional developer model, where one-third of a home purchase price pays for the land, one-third for construction and one-third as profit. Graven Hill reckons that pure self-builders can save 15% to 20% compared with buying a standard estate home. Hiring a firm like Facit to custom build your own project obviously raises costs, but Denbigh says: “For the same amount of money, you get a bigger place, and with much lower running costs.” All the homes have to comply with eco-standards that are much stricter than regulations on standard sites.

The price list for plots starts at £125,000 and runs up to £310,000. Buyers must also pay for groundworks, such as water and sewage, made to their specifications, which can add another £40,000 before the custom build company erects the home.

How much might you then pay for an architect and builder to put up your home? It partly depends on how much of the work you want to do yourself. For example, Beattie Passivhaus has off-the-shelf designs at Graven Hill, where it will deliver you the shell of a four-bed home for just £73,904, rising to £114,800 for a big 195sq m home. If you want it finished to turnkey standard, then the prices rise respectively to £188,820 and £272,611.

That suggests an all-in cost starting at £300,000 for the shell of a four-bed home, rising to around £350,000 for a turnkey home.

Sylva’s price list starts at about £72,000 for the shell of an 80sq m home, through to £325,000 for a fully finished 250sq m property. Further upmarket, the Marsdale family will be spending about £800,000 for their 250sq m home built by Facit once plot and groundwork costs are added.

How do prices compare with homes on conventional developments nearby? Graven Hill is in Bicester, within walking distance from the designer outlet centre the town is best known for, and another 11,000 homes are planned and under construction in what is effectively Britain’s biggest new town. It is 40 minutes by train to London and 15 minutes into Oxford. The next development along from Graven Hill is Kingsmere, where three-bedders from Linden Homes go for £349,000 and five bedders from Belling are on sale at £599,000. But those prices mask the build size; the internal floor space for equivalent Graven Hill homes tend to be much larger.

The Marsdale family, originally from the US, will be among the first to move into Graven Hill later this year. Keen fans of Grand Designs, they wanted a home with individual flair and character that met the needs of their growing family, but with busy working lives they could not find the time to build it themselves.

They bought a plot in October, then chose the design and the builder. “We have watched Grand Designs over the years, but we work in London and it’s so difficult to find suitable plots of land in the south-east within commutable distance.

“We started looking at Graven Hill a year ago as a very interesting project. They do a lot of the heavy lifting for you; finding the land, handling the planning but at the same time giving you design flexibility.”

Their plot allows for a 250sq m home – or about twice the size of a typical British three-bed semi. “We wanted a very open-plan look so we opted to have the lounge, kitchen and dining room all in one space. We could have had the upstairs as just two huge bedrooms if we wanted. We have gone for four bedrooms plus a study space that could be converted to a bedroom later.”

They used Facit Homes as architect and builder as it offered an all-in package. “If we wanted to, we could have had our own architects, but we liked the idea of a one-stop shop.”

‘Do your numbers very carefully’

The big challenge – or headache – for many people considering going down the self-build/custom build route will be financing their project.

This is a specialist area, and there are only a limited number of players offering mortgages. Also, these deals work in a different way to standard home loans, with the funds usually released as specific stages of the project are reached, rather than in a lump sum at the beginning.

“It’s crucial that borrowers ensure they do the numbers carefully,” says David Hollingworth at broker London & Country Mortgages. “Staying in the current home throughout the project may mean that not only is equity tied up in their home, but also that they will need to demonstrate affordability of the new and current mortgage.”

Lenders offering self-build and/or custom build options include a number of building societies, such as the Mansfield, Hanley Economic, Newcastle and Furness. Meanwhile, Virgin Money last year announced its support for custom build, and on our visit to Graven Hill appeared to be the most active lender.

Another potentially useful port of call is BuildStore, which specialises in arranging finance for such projects. “It can also offer some deals that will enable funds to be released upfront rather than in arrears, and make deals available via brokers,” says Hollingworth.

Borrowers shouldn’t expect to see the same rates as those available to standard borrowers. For example, Newcastle building society is offering a two-year fixed rate at 5.15% up to 80% loan-to-value with a £199 reservation fee, plus a £995 arrangement fee. Hanley Economic offers a two-year discount at 4.49% up to 80% of completion value, with a fee of £1,000.

Monday, 12 February 2018

London should build 66k new homes

London should build 66,000 new homes every year, including 40,000 that should be affordable. But these targets are still nowhere near being met.

Fewer than 7,000 affordable homes were completed across the capital in the last year, with more than a third of boroughs offering under 100 new homes for struggling Londoners who cannot afford to buy or even rent.

The Government figures fall far below official estimates of the number of subsidised homes needed.

According to City Hall, London should build 66,000 new homes every year to keep pace with demand and some 60 per cent of these properties — about 40,000 — should be affordable.

The worst-performing councils of the year include Kensington & Chelsea, where just seven affordable homes were completed in the 12 months to September last year according to the Government’s new homes bonus allocation report, which calculates funding for new housebuilding.

Merton managed to produce nine affordable homes in the same period. The most productive borough was Tower Hamlets, where 1,085 were delivered.

Across London, the report found the total number of affordable properties delivered was 6,762 — an increase of almost 18 per cent compared with the 5,734 during the same period a year before, but still far below what’s required to solve the city’s housing crisis.

Affordable homes are either built or bought by councils — and companies set up by councils — or housing associations, or provided by housebuilders as a planning condition for being able to build new homes.

London Mayor Sadiq Khanwants developers to designate half of new homes as affordable.

In reality, councils attempt, with varying degrees of success, to squeeze them to provide about 25 per cent. Often, pleading poverty, developers are able to offer far fewer homes than council targets require.

A report by the council’s planning department has recommended the offer be accepted because the development would include a new headquarters for ITV and council officers believe that the benefits of the company returning to the area would outweigh the lack of affordable homes.

This week Lambeth council is expected to approve the redevelopment of the former London Television Centre on the South Bank. This high-profile multimillion-pound project will include 213 luxury riverfront apartments, of which just 22 homes would be ring-fenced for Londoners priced out of the housing market.

​ITV would also make a £3.7 million payment to the council to be spent on affordable housing elsewhere in the borough.

In Tower Hamlets, where the house building pipeline is particularly large, deputy mayor Sirajul Islam said it was crucial boroughs offer affordable homes to local people.

“As new residents arrive, we must ensure that those who have long called the borough home are not priced out,” he said. “We can be proud of our record in delivering genuinely affordable homes … we are not just the best-performing council in London but the whole country.”

Both Kensington & Chelsea and Merton council dispute today’s figures. A spokeswoman for Merton said the council had actually seen 74 units, 19 per cent of the total homes built in the borough in the last year, and claimed the Government data could be out of date compared to the council’s own figures.

Whichever figure is correct, it is still a small number compared to demand. There are almost 9,000 households on the council’s housing waiting list.

The spokeswoman blamed developers using new planning laws to convert offices into flats without the need for planning permission, and thus without having to provide any affordable homes.

Friday, 9 February 2018

UK housing market gets off to subdued start in 2018, estate agents say

Sellers of £1m-plus homes in London struggled the most to find buyers in January, survey finds

Britain’s housing market got off to a subdued start in 2018, with sellers of £1m-plus homes in London finding it toughest to find buyers in January, according to a survey of estate agents.

Across the UK as whole, the number of sales, new buyers, and properties coming onto the market all fell in January, the Royal Institution of Chartered Surveyors said.

New buyer inquiries fell for a 10th successive month and the number of properties coming on to estate agents’ books slipped back to the record-low levels seen around the middle of 2017, signalling there will be no imminent pick-up in activity.

“The latest Rics results point to housing transactions remaining pretty subdued over the coming months despite some more positive comments from contributors to the survey,” said Simon Rubinsohn, chief economist at the Rics. “Lack of inventory on agents’ books continues to provide a major challenge with the number of valuations being undertaken not suggestive of a pick-up in new supply anytime soon.”

House prices edged upwards at a national level according to the survey, but sellers of top-end homes in particular were struggling to achieve asking prices, the Rics said.

Of the estate agents surveyed, 67% said the sales price achieved on homes priced at £1m or more had come in below asking price. The figure dropped to 56% of agents for properties listed between £500,000 and £1m.

The biggest price falls continued to be in London, but they also dropped in the south-east, East Anglia and the north-east. On the flip side, the north-west of England, Northern Ireland and Wales posted the strongest price growth compared to the rest of the UK.

“Divergent regional trends remain very much to the fore with the market in many parts of the country still actually behaving in a solid if unspectacular way despite the downbeat headlines,” Rubinsohn said.

“Affordability issues continue to play a key role in explaining this pattern with those areas where house price earnings are most stretched seeing the softest markets.”

For the UK overall, agents are expecting house prices to be roughly flat in the coming three months.

The Rics report was published a day after Halifax reported house prices falling for a second consecutive month in January, as consumers struggling with shrinking disposable income put major spending decisions on hold.

The average price of a home in Britain fell 0.6% last month to £223,285, according to the mortgage lender’s own data. It followed a 0.8% drop in prices in December, and drove down annual house price growth to 2.2%, the slowest rate in six months.

Halifax’s Russell Galley said house prices fell despite a backdrop of rising employment in Britain and the government’s decision to scrap stamp duty for first time buyers on homes selling for up to £300,000.

“Although employment levels grew by 102,000 in the three months to November, household finances are still under pressure as consumer prices continue to grow faster than wages,” Galley said.

Last week another leading mortgage lender, Nationwide, reported month-on-month house price growth of 0.6% in January, saying that the lack of new properties coming on the market was supporting the trend.

Wednesday, 7 February 2018

Buy-to-let for parents: can you rent a property to your kids?

A new mortgage deal offers parents the option of letting a property to their children for below market value – but is putting the ‘rent’ into parent a good financial move?

Mansfield Building Society has launched a new mortgage deal that allows landlords to rent a property out to a close family member, without the need to meet strict lending criteria that would otherwise apply to buy-to-let.

Here, we take a look at how you can keep buy-to-let in the family, and the effect it could have on your finances.

Mansfield mortgage offers ICR cut

Normally, to get finance on an investment property, landlords must prove the property has an interest cover ratio (ICR) of between 125% and 145% – meaning the rent is at least 25% to 45% higher than the monthly mortgage payments.

The new Family Buy To Let mortgage from Mansfield Building Society allows landlords to let a property to a close family member with an interest cover ratio (ICR) of 100%, so that rent just has to cover payments. Landlords can instead use their earnings to make up the ICR shortfall.

Mansfield says the new product allows landlords to ‘choose a property that is appropriate for their family needs without having to charge excessive rental payments purely to meet strict ICR calculations’.

Do other lenders offer similar deals?

While the new deal from Mansfield might seem like it fills a gap in the market, some other lenders offer solutions that focus primarily on your income, taking the focus away from ICRs.

David Blake of Which? Mortgage Advisers says: ‘There are a few lenders that consider this type of situation, with Virgin being the most well known’.

But, unlike the Mansfield offer, these mortgages will be considered residential, rather than regulated buy-to-let products.

Mr Blake says: ‘Often with these cases, lenders treat the application like a residential property, as they understand the tenant will be paying a reduced rent. They therefore like applicants to have income of their own to sustain the mortgage.’

Why is family buy-to-let attractive?

There are many reasons why you might want to let a property to a family member.

One of the most common is if your child is moving to university and you want to ensure they live in quality accommodation they can afford without having a regular income.

Alternatively, if you’re downsizing to a smaller home, you might want to keep a property in the family that you would otherwise look to sell.

Your obligations as a landlord

Letting to a close family member throws up its own risks. You might overlook some due diligence you’d undertake when letting to a stranger, and the emotional stakes are higher if your child fails to pay the rent.

Although you might be unlikely to run a credit check on your own children, it’s important to carefully consider their financial situation and whether they will be able to meet their payments.

It’s also advisable to draw up a tenancy agreement to set out the terms of the let and as proof of their right to live in the property.

Your obligations as a landlord remain, too – regardless of who you’re letting the property to. You’ll need appropriate insurance, will have to keep up to date with gas safety checks and, if a deposit is paid, you’ll need to place it in a deposit protection scheme.

Tax implications of letting below market rate

If you’re letting your property to a family member for below market rate, you’ll need to consider the tax implications of doing so.

For example, you might not be able to claim all expenses on the property as you could struggle to justify it being ‘wholly for business purposes’. In some cases, there could also be inheritance tax obligations.

With this in mind, we would strongly recommend speaking to a financial adviser before rushing in.

Stamp duty implications of buy-to-let

If you’re considering buying a property to rent to your child, rather than using an existing home from your property portfolio, you’ll need to factor in the 3% stamp duty surcharge for people buying investment properties and second homes.

This expense can make a big dent in your budget, with an investment property worth £275,000 costing you £12,000 in stamp duty. By comparison, a first-time buyer would pay no stamp duty at all to purchase the same home.

This means it’s worth also considering your child’s longer-term options away from a family buy-to-let.

With stamp duty abolished for most first-time buyers and bonuses being offered through Lifetime Isas, helping them save for a deposit be a better move in the long run? 

Tuesday, 6 February 2018

Interview with Nicole Bremner

From Mum at home to head of £120 million pound property empire. Coming soon my interview with Nicole Bremner .