Monday, 26 June 2017

Frustrated homebuyers in a fight to the finish with Bovis

By Julia Kollewe
Housebuilder has admitted it let buyers down on quality and service but six months on, some are still battling to get problems fixed

Bovis has admitted it built homes too quickly. Photograph: Bloomberg via Getty Images
At the Bovis annual meeting in May the chairman, Ian Tyler, apologised to homebuyers for “letting them down” and admitted the company had been cutting corners to reach ambitious targets. Quality and customer service had suffered in the past two years, he said. Tyler indicated that hundreds of homebuyers had suffered. “We absolutely got it wrong. We have compromised along the way ... We built too quickly. We started sites too early and handed over too early.”

Bovis had used subcontractors that “may not have been of the highest quality”, he said, but added that most customer complaints had been resolved.

This was news to Rob Elmes and his wife who moved into a £320,000 three-bed Bovis property in Inkberrow, Worcestershire, in February. He turned down a £3,000 cheque from Bovis to complete by 23 December because, he said, the property was riddled with problems. Five months on the couple were still battling to get them fixed.

“The main issue is the speed at which things are being fixed and the lack of communication. It is a case of one step forward, several steps back. This shouldn’t happen with a brand-new house,” Elmes says, though after Money intervened his problems were resolved.

Stung by such accusations, Bovis has retrained 90% of its 1,100 staff and appointed a new customer experience director. The firm also set aside £7m to rectify build issues and, in a few cases, pay compensation after it emerged homeowners were pressured to move into incomplete homes before Christmas. It issued a profit warning in late December and its then-chief executive, David Ritchie, quit not long after.

The new chief executive, the ex-Galliford Try boss Greg Fitzgerald, will unveil changes to the business in September.

Tyler said Bovis had slowed down production by adding a three-week “noncompressible” period between final inspections and handover to customers to iron out any issues. The firm is aiming to build 1,500 homes between January and June, which means output this year will be 10%-15% lower than in 2016. It will issue a trading update on 6 July.

There are reports on the 2,200-strong Bovis Homes Victims group on Facebook that buyers are again being pressured to complete on unfinished homes. Bovis denies this. Some allege they are not being allowed to have a “snagging” survey before moving in. Bovis says it will “accommodate inspection requests where it is practicable to do so”.


The National House Building Council, the standard-setting body and main home construction warranty provider for new-builds in the UK, carries out spot checks at key stages of the build process but has been criticised for signing off homes riddled with “snags”. It says its inspections significantly reduce the number of defects: “Our inspectors are not on site at all times and it is ultimately the builder’s responsibility to ensure that homes conform to the building regulations and NHBC technical standards.”

Other allegations on the Facebook group include shoddy painting or plastering, faulty plumbing, cracks in tiles or brickwork, the wrong fittings being installed, creaking and moving floors and more serious structural issues.

Dave Howard and his wife, Ann, set up the group in January 2016. They say it took them two-and-a-half years to resolve all the issues at their home in Bicester, Oxfordshire. “We are working constructively with Bovis, having resolved all the problems to our satisfaction with our property,” Howard says. He is one of five members from the Facebook group who are joining the company’s 12-member homebuyers panel, which will have an advisory role.

While things may have improved for some new buyers, Howard says “existing owners with problems are still being given the runaround and are not being treated with the respect they should be as customers”. He says the carelessness displayed by contractors sent by Bovis to fix defects was shocking.

A couple in Norwich were among more than a dozen Bovis homebuyers who have contacted the Eastern Daily Press. James and Rachel Hipperson told the local paper that there were holes in the wall, fittings and parts of the conservatory missing, cracks in the floor and problems with drainage.

Industry experts have called for closer supervision, especially at bigger sites, and a change to work practices.

A recent customer satisfaction survey from industry body the Home Builders Federation showed Bovis dropped down a notch from last year to a two-star rating, putting it at the bottom of the league table of 34 builders. Rival Persimmon was stuck at a three-star rating, and of the major housebuilders only Barratt and Bellway boasted a five-star rating.

A survey conducted by homelessness charity Shelter found homebuyers’ satisfaction with the condition of their new homes on moving in has declined by 10%, to 78%, over the past five years. It found 38% experienced more problems than expected, up from 27% in 2012, and 69% reported six or more issues to the builder, up from 56%.

Confidence in buy-to-let market slips due to tax hikes

By Marc Da Silva

Recent changes to tax for buy-to-let property has dented confidence among landlords with new research showing many are set to revise their situation and implement new strategies, with some consolidation expected among smaller investors.

The sixth edition of the Kent Reliance Buy to Let Britain report has launched revealing that just 41% of buy-to-let landlords currently hold a positive outlook for their portfolios, down from 67% three years ago, as investors face the prospect of higher tax costs and weakening property prices.

Higher costs are leaving many landlords with little alternative but to increase rents, which now stand at an average of £889 per month across Britain, up 1.9% year-on-year, according to the research.

Kent Reliance forecast that rents will rise further as the mortgage tax changes bite, with one third of landlords expecting to increase rents in the next six months, compared to just 3% who expect them to fall.

With rents rising, and house prices falling in the past two quarters, yields have edged up to 4.5%.  Across the PRS, steady growth in the number of households and monthly rents means landlords are collecting a record £4.9bn per month in rent.

 Overall, the value of the sector has risen by £68bn in the last year, climbing to a record of £1.3trn, up 5.5% on annual basis, although this is just half the level seen a year ago, owed in part to the slowdown in house price inflation.

 In total, there are now 5.5 million households in the PRS, but annual growth of 2.3% is now only a third of the level seen three years ago.

Tenant demand is still growing, albeit more slowly, with 27% of landlords seeing tenant demand increase in the last quarter, more than saw it decrease, but this was down from 39% a year ago, as first-time buyer numbers continue to recover.

On the supply side, there is a noticeable change too. In the first quarter of this year, the number of landlords expanding portfolios only slightly outnumbered those reducing them.

Some 19% of landlords now expect to reduce their portfolios, compared to 13% increasing, as amateur landlords leave the market in response to the new tax rules affecting higher rate taxpayers.

Additional pressure on supply has come from the Bank of England’s Prudential Regulation Authority’s new underwriting standards, introduced in January, with 24% of landlords who have sought mortgage finance this year have found doing so more difficult, with a further 6% seeing their application rejected altogether.

While there is likely to be consolidation in the market as tax costs rise, many landlords have  unsurprisingly reacted to tax changes and rising costs through not just rent rises, but also incorporation.

Running properties via limited companies means landlords are taxed as a company, rather than an individual, and can continue to offset all finance costs against rental profits.

Kent Reliance’s data shows six in ten applications for buy-to-let mortgages were via limited companies in 2016. Demand for limited company lending has not yet hit the heights seen last year, but limited company applications have still accounted for more than four in ten loans so far in 2017.  With 24% of landlords considering transferring their portfolio to a limited company or a partner or spouse, demand will strengthen in the long-term.

Andy Golding, chief executive of OneSavings Bank, which trades under the Kent Reliance and InterBay brands in buy-to-let, said: “A perfect storm of weakening house prices, higher taxes and lending restrictions have knocked investors’ confidence. On top of this, investors are now being buffeted by the winds of political uncertainty following the election, and its impact on the economy.

“Uncertainty will pass, but the impact of changes to mortgage tax relief and underwriting standards will leave a more indelible mark on the sector. We believe these changes will alter the mix of landlords, creating a more professional and stable sector in the long-term. There are already some signs of consolidation, with highly geared amateur landlords most likely to leave, and we are also seeing investors take action to protect their margins.

“The fundamentals supporting the PRS have not drastically changed. Yes, first-time buyer numbers have been recovering, but there is still an underlying supply and demand gap across the country. Given the inability of any party to win a clear majority in the election, the implementation of a strategy to create a necessary housing boom seems unlikely. Affordability issues will therefore remain, and rental accommodation will retain its importance to those unable to take their first step onto the property ladder.”

Friday, 23 June 2017

Homes at Battersea Power Station:blow for first time buyers as affordable housing target at luxury development quietly slashed

By Ruth Bloomfield
636 homes were earmarked originally for first-time buyers and renters but the Battersea Power Station Development Company now wants to offer only 386 affordable homes.

Disappointment: the Battersea Power Station Development Company wants to offer 250 fewer affordable homes than originally proposed
Hundreds of first-time buyers promised cut-price homes at Battersea Power Station will no longer be able to buy into London’s most-hyped regeneration zone, we can reveal.

Originally, 636 homes were earmarked by the Battersea Power Station Development Company for first time-buyers and renters unable to afford the mega prices asked for the 4,239 luxury homes on the power station site.

Now the development company says the entire project may become financially unviable if it is forced to stick to the 2011 promise to include so many affordable homes. It says it made the undertaking when London’s new-build market was booming and construction costs were lower.

Instead it wants to offer 386 affordable homes — or nine per cent of the total. The remaining 250 affordable homes would only be provided following an “end of scheme review”, a complex financial assessment of the profits the development company will make.

Exactly how much profit the development needs to be deemed “viable” has yet to be decided, but a report by council planning officer Dan Taylor, to be considered by Wandsworth’s planning committee, suggests between 15 and 20 per cent. The proposals are expected to be rubber stamped by the council.

“The applicant considers that the introduction of a review mechanism would ensure that the maximum reasonable amount of affordable housing is determined at a point in the project when actual costs and values are known, and many of the uncertainties currently facing the project have been settled,” explains Taylor.


Because the change has not been submitted as a new planning application but as a “deed of variation” to the existing planning consent, there has been no public consultation on the proposal – though “notices were put up around the site”.

Wandsworth council alerted the Greater London Authority to the proposal. The GLA chose not to intervene.

If the housing market improves the homes could be saved, and possibly extra funding offered towards more affordable housing elsewhere in London. However, financial advice given to the council by consultants BNP Paribas warns that it is “very unlikely” the 250 homes will be provided, let alone added to.


Recommending the changes be allowed, planning officer Dan Taylor points out that the power station scheme will have benefits for the borough beyond affordable housing.

“Officers appreciate the level of stress a scheme of this size and complexity has,” he says. “The main priorities of the scheme have been the conservation and redevelopment of the listed power station building, the delivery of the Northern line extension and new Underground station and the jobs to be created as part of the new town centre.”

Reuben Young, head of policy & communications at PricedOut, the campaign for affordable house prices, says: “Just because there is a stall in house price inflation does not mean that developers should be allowed to scale back the affordable housing commitments they negotiated during planning.”

A spokeswoman for Battersea Power Station says “technical issues” around renovating the Grade II* building and the weakening pound have pushed building costs up on the site, adding that sales of commercial property remain strong, and the company is hopeful that the 250 homes will still be provided later in the project.

Government policy allows for “flexibility”, she says. “Policy requires developers to provide the maximum reasonable amount of affordable housing. This is what the Battersea Power Station scheme is delivering, as well as restoring a decaying national monument … contributing £211 million to the Northern line extension, opening up 18 acres of public realm, creating 20,000 new jobs and enabling £20 billion of investment into the UK economy.”

easyProperty and Guild deal ‘driven by desperation’ and ‘unlikely to succeed’, claim

By Rosalind Renshaw

The ‘merger’ between easyProperty and the Guild of Property Professionals and its sister brand Fine & Country has been described as either “an unholy alliance or a godsend”.

The deal, touted as being worth £60m, is set to finalise next month and has now been scrutinised by proptech experts Eddie Holmes and James Dearsley.

The pair claim the deal “could eventually be seen as one of the worst knee-jerk responses by a traditional firm to the threat of digital transformation”.

Looking at easyProperty, when it launched it promised “big things”, say the pair.

It promised a profit in the year to last September of £2.9m based on a turnover of almost £24m. However, it recently announced a loss of £11.3m on a turnover of £875,000 in that period.

The company had expected to be listing 4,000 to 5,000 properties each month by 2016: “Two years later, the reality is around 80 properties per month.”

Then there was the ‘funeral’ parade stunt in London, marking the ‘death’ of high street agents.

But what of the deal itself?

Holmes and Dearsley allege: “We have it on good authority that the deal rests on the release of approximately £15m cash by Tosca Fund (one of the main backers of easyProperty).

“Of this, we are told that the vast majority has been used to buy out Guild shareholders, leaving a smaller proportion available for operational or marketing costs associated with easyProperty

“This begs the question – why is the transaction being described as a merger if it is in effect a purchase of the Guild by easyProperty’s main funders?

“The organisation structure put forward by the Guild certainly shows this to be the case.”

The pair also say that when Tosca invested, easyProperty was valued at £78m: “Therefore this deal has slashed 70% from its ‘value’. Astonishing.”

Holmes and Dearsley say that for Rob Ellice, founder of easyProperty, the deal is a salvage operation; for Tosca, they claim it is a “Hail Mary” salvation attempt to rescue some of their initial investment.

And for the Guild, they say it is seen as a defensive move against the rise of online agents, as opposed to the option of standing back and doing nothing.

Holmes and Dearsley describe the rationale for the deal as “driven by desperation”.

Describing the disparity in brand values, they say that easyProperty’s are about value, volume and taking on the big boys.

Fine & Country – currently promoting polo events – is about prestige, money and lifestyle.

Holmes and Dearsley say it is “unfathomable” how the difference can be turned into a workable strategy for Fine & Country agents.

The pair conclude: “All things considered, we therefore doubt that this transaction is likely to deliver either outcomes of a successful digital transformation for the Guild or help easyProperty find a sustainable business model.

“One rider, however. The project is under the stewardship of a well respected and experienced agent, Jon Cooke. It will take someone of exceptional ability to pull this project off.”

This is a fascinating analysis, with more here:

Coming soon, second part of my interview with Martin Skinner

Coming soon, second part of my interview with Martin Skinner, as he describes his journey from bankruptcy to one of the most successful developers in the country

Wednesday, 21 June 2017

New Housing Minister urged to reform residential leasehold system

The Legal Sector Group, which represents conveyancers in the UK, has written to new Housing Minister Alok Sharma to push forward with a programme of change to improve the current situation for owners of leasehold properties.

Concerns have been voiced that home owners have been left unaware of what they are buying. In particular, thousands who bought new build leasehold homes have been left with properties that are virtually unsalable as the result of bad ground rent terms attached to their lease, many of which see ground rents double every 10 years.

This has led numerous leaseholders to conclude that the only option is to buy the freehold of their home to remove the onerous ground rent clauses, but many are confused about how to acquire their freehold and unaware of the dangers and pitfalls involved.

Earlier this month the Nationwide Building Society announced that it will no longer provide mortgages on homes with onerous ground rent clauses. According to Louie Burns, managing director of leasehold enfranchisement specialists Leasehold Solutions, other major lenders are likely to announce similar policies over the coming months.

In recent months the LSG has been consulting with a wide range of interested parties to put together proposals to make the sector more transparent. It is calling for the Housing Minister to work with the Law Commission and others to put reforms in place.

‘We are now urging the powers that be to put in place a programme of change in order to provide both sellers and buyers of leasehold property with certainty, peace of mind, reasonable costs and a much greater degree of clarity in terms of what they are signing up to, and the responsibilities that are shared amongst those involved in their leasehold property,’ said Beth Rudolf, director of delivery as the Conveyancing Association.

According to Martin Callan, president of the Chartered Institute of Legal Executives, the proposals will ensure fairness to consumers, speed up the sale and purchase of residential leasehold properties and lead to less abortive transactions and loss of fees.

Burns explained that problems can arise when owners of leasehold properties get involved in so-called ‘informal’ deals which are negotiated directly with freeholders. ‘Leaseholders have the legal right to buy their freehold under the Leasehold Reform Act (1967). Here there is a legal process to follow, with a statutory valuation method set down by law,’ he said.

‘If the freeholder will not agree to negotiate fairly, home owners have a legal right to force them to and are offered legal protection on the terms of the freehold purchase. To many people this process may seem daunting and uncertain, and understandably people shy away from it,’ he pointed out.

They can end up seeking an informal deal which he believes is the worst thing to do as they have no legal protection whatsoever under statutory legislation. ‘We regularly see freeholders asking for up to 50 times the current ground rent on the property, which can be double or sometimes even triple what the valuation would be using the statutory method. We regularly see people who have bought their freeholds informally and paid up to £25,000 more than they should have done, simply because they accepted an informal agreement,’ he said.

‘In addition, an informal deal often won’t remove some of the costly terms that can be included in the lease, meaning home owners will continue to pay fees to the freeholder for permission to alter their own homes, even after they have purchased the freehold,’ he added.

Tuesday, 20 June 2017

Why Britain has turned into a nation of storage keepers

By Rhiannon Bury

Britain is now home to almost half of all of Europe’s self-storage units CREDIT: CUSHMAN & WAKEFIELD
UK residents rent four times more self-storage space than the French, and nine times more than people in Germany, causing a boom in Britain’s storage sector.

Britain is now home to almost half of all of Europe’s self-storage units with almost 42.2m sq ft of space in total, according to a report from property advisory company Cushman & Wakefield, while growth in demand is continuing to outstrip supply.

Last year, 24 new self storage sites opened in the UK in 2016 – the greatest number in any European country. Occupancy increased by almost three percentage points in the last 12 months, to 75.8pc, despite more units being built.

Cushman & Wakefield’s report found that large self storage brands in particular have been expanding rapidly in recent years to ensure a larger chunk of the £540m UK market.

Safestore said last week that record enquiries for its space continued to boost its profits, while Big Yellow has spoken of expansion across the South East in particular.

81pc of self-storage users are between 35 and 70 years old CREDIT: CUSHMAN & WAKEFIELD
Two thirds of self-storage customers are aged between 40 and 65 years old, and 81pc are between 35 and 70, showing that younger people are the least likely to use storage facilities. This fits with the general trend among so-called millennials to settle down later in life.

Divorced or separated people are also more than twice as likely to use self storage as a single person.

Rents in London, which sit at £29.45, are almost twice that in the East Midlands and the North. Scotland, however, has shown the greatest increase, rising 23pc from £18.29 to £22.49 in the year, whilst the South East, East Midlands and the North all experienced a decline.

Rennie Shafer, chief executive of the UK Self Storage Association, said: “The longest standing customer in the survey began renting their unit in 1987. While that’s exceptional, 44pc of business customers have stayed for three years or more, compared with 31pc for personal customers.”