Archive for the ‘Buy-to-let’ Category

The newspaper you read will probably have an influence on whether you believe the Housing Market in the UK is:

  • performing better with the Brexit vote or
  • struggling and in decline because of the Brexit vote.

Either way, the market post 24th June 2016 (post Brexit) has been in “wait and see” mode and will probably remain in this state until the new year when there will be a decision on the High Court ruling which take place on 5th December and is expected to last 4 days.  It is the view of Sally Asling, Letting Director at SurreyLets that the Housing market will continue to remain in “wait and see” mode until article 50 is served and negotiations to exit truly begin.

So what is a “wait and see” market?

In real terms it means there is a lack of activity unless there is a real need to make a move. Death, Divorce being the two main ones in Sales and Job Relocation or being served notice are the two main ones in letting. If there is no driving need, people are just waiting to see how leaving the EU  pans out and what the market will do, and this of course becomes a self fulfilling prophecy: a general lack of activity leading to what feels like a market slump because it is slow. This aside, what is actually happening to House Prices?

As I write a week or so into November, the latest statistical information we can draw upon takes us up until the end of August 2016 just 8 weeks after the Brexit decision, which isn’t really providing enough of a time lapse to see how the housing market has been affected if it has at all. However, there are encouraging facts in this data that should restore consumer confidence especially if these trends continue which may serve as some encouragement for homeowners thinking of selling but whom are “waiting to see”

House Prices have been in continual growth in 2016

Housing market indicators for August suggested a period of relative stability during the month. House prices grew by 8.4% in the year to August, up slightly from 8.0% in July.Prices in the UK continues to rise with the greatest increase for the year being the East of England with a 13.3 annual change followed by the South East wit
h a 12.2% rise. England as a whole saw a 9.2 rise.
price-changesI accept that sales agreed, pre-Brexit were possibly just going through to completion, but this is still encouraging. No major price drops as a direct result of Brexit –  which I have seen claimed in some scaremongering newspapers.

Shortage of stock on the market

Its clear that up until June there was a lack of stock on the sales market. Looking at data for June 2016 and comparing it to June 2015  England saw a 32.2% drop in the number of units sold. sales-volumes-by-country

Overall, year on year, June 2016 shows a decline from the previous growing trend of properties being sold.

A direct conclusion therefore could be drawn that whilst there is not the volume of property as in previous years on the market, and therefore not so much competition for your home, this has kept house prices rising.

Housing Demand

In terms of housing demand, the volume of lending approvals for house purchases fell slightly in August compared to July, remaining at levels seen in early 2015. Home sales in the UK stayed stable between July and August but remain below levels seen in 2014, 2015 and before the stamp duty changes in early 2016. The Royal Institution of Chartered Surveyors (RICS) market survey for August reported falling new buyer enquiries over the past three months, with demand from buy-to-let investors falling more sharply than demand from first time buyers and existing owners.

Latest news from Zoopla – for KT24

Zooplas Z-index is the current average Zoopla estimate of home values in a given area, and the Z index report for KT24 is £1,034,686. Zoopla shows a month on month rising trend.

The average house price paid in the last three months 17 sales is £998,703.zoopkt24

Fun housing facts for KT24

Highest value streets Zed-Index
The Warren £2,122,830
Beech Avenue £2,096,434
Woodland Drive £1,996,802
Pennymead Drive £1,834,411
Lynx Hill £1,828,226
Highest turnover streets Turnover
Fearn Close 45.5%
Station Approach 42.9%
Tintells Lane 41.2%
Little Cranmore Lane 36.4%
Parkside Close 33.3%

SurreyLets keep a keen eye on what property values are doing in the area as whilst SurreyLets are not an Estate Agency involved in the sale of property, SurreyLets regularly consult with Landlords who which to withdraw equity on their buy-to-Let investments and assist Investors making smart decisions on their portfolio growth.

If you have a property to Let, are considering Letting out your property or would like help and advise in buying an investment property, Sally Asling would be delighted to have an informal, no obligation discussion with you. Please call 01483 282470 or e-mail info@surreyletsonline.co.uk

Data taken from the UK House Price index summery published 18th October 2016 from UK.Gov’s official statistics and from Zoopla.

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The proportion of people who own their own home has fallen across every part of the UK since their peak in the early 2000s

The actual number of people in the UK who own their own home hit a historic low last year, when the rise of generation rent meant that fewer people were choosing to buy, instead remaining in rented accommodation and putting strain on the rental market that has been suffering a shortage of supply over recent years. Home ownership in England has fallen to its lowest level in 30 years as the growing gap between earnings and property prices has created a housing crisis that extends beyond London to cities and towns UK wide. Surrey Letting Agent, SurreyLets says this is evident in the number of people renting family homes in the area opposed to buying

“Even with good salaries and healthy deposits, the house prices have risen so much it simply isn’t possible to achieve the multiples on earnings or the large deposits needed to purchase a property in the affluent Surrey villages. It is much cheaper to rent. We are seeing a growing number of tenants renting their main home whilst using their salaries and savings to make wise Buy-to-let smaller investments”

Since the 90’s and into this millennium,   home ownership rose as purchasers were able to take out mortgages with no deposit (or a small deposit) got on the housing ladder.  According to the Nationwide Building society, property was growing at the rate of 20% a year and banks were keen to lend. However, after the credit crunch in 2008 and the tightening of borrowing has seen an end to self certification mortgages, zero deposit mortgages and sensible multiples against salary, properties are simply becoming less and less affordable for people to buy.

To give an example:

A married couple in Effingham, Surrey, solicitors earning 41K each with a take home monthly of 2800pm could obtain a mortgage IRO of £252- 378K av 315K.  Taking a 95% mortgage a deposit of £17500 is needed to purchase a property with a value of 332K if they borrowed 315K.

What 332K will get you in Effingham, Surrey?

At the time of writing there are no properties in this price bracket in Effingham, but if we extend the search a mile we find a one bedroom started house in Edenside Bookham  for £335K  or a 2 bedroom flat in Great Bookham at 335K

Renting or buying?

To rent the one bedroom house in  Edenside Bookham would cost £875pcm a month in rental opppsed to a mortgage on £315K  at a 3% rate costing £1493pm.** The benefit as a tenant is you are not paying for maintaining the property or insuring the buildings. The negative is no equity long term. 
Given that houses  (not flats) in East Horsley start at around £500K a couple moving to the area would need to be earning jointly in the region of 140K **with a 40,000plus deposit to get onto the housing ladder.  However the same couple could afford to rent up to £4,500pcm (according to affordability calculator used by Experian) which may answer why so many families moving into the area are choosing to rent their family home and buy Buy-to-Let properties to get on the housing ladder.

**figures above obtained using the calculator on the money advice service website

Home ownership across England peaked in April 2003, when 71% of households owned their home, either outright or with a mortgage, but by February this year the figure had fallen to 64%, according to the Resolution Foundation.

 

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If you are thinking of letting out your property in Surrey, then one of the questions you may be asking in the early stages are, “What does the Landlord have to pay for, and what generic flatsdoes the tenant pay for”.

One of the most frequently asked questions for those letting flats and apartments is “Who pays the service charge?”. This is an important question especially for those investing in a property to purchase, as the cost of the service charge can greatly impact the return on investment.

A landlord is responsible for:

  • Making any repayments on the property to the mortgage/ Lending company
  • Keeping the structure of the building in good, safe condition
  • Maintaining Buildings and Contents insurance (though only obliged to cover their own contents and not the tenants)
  • Ensuring the property is fit for purpose and compliment with the Landlord ad Tenant Act.

Tenants are responsible for:

  • All utilities. Gas, Electric, Water, Council Tax, TV licence, broadband, phone, oil, septic tank clearing etc.
  • Their own contents insurance
  • The rental
  • Garden maintenance (unless otherwise agreed)

Therefore Landlords, if your property is leasehold, you are responsible for paying the service charge on the building. The only exception to this is in properties for special needs or the elderly where the service charge package includes 24hr safety monitoring or properties offering leisure facilities For more information see below.

The Service charge will normally include the buildings insurance, cleaning of communal areas, repairs to communal areas, repairs and maintenance on the building.  The service charge is normally set and agreed at an AGM held by the managing agents for the block or in smaller units will be agreed by all the residents. Normally there is a saved “pot” as a contingency. The amount may be fixed annually, but in the even of major work needed may have to be topped up. Therefore if considering purchasing a leasehold property its important to get a surveyor to advise you on the buildings condition so you are aware of any potential forthcoming costs and speak to the managing agents about the plans for the building.

Elderly / Special Needs / Assisted Living

In catering for those with special needs, some specific blocks include into the service charge, 24 hour assistance in the even of a fall. Some cater for communal activities. Where this is the case, the managing agents should be able to bill you with the areas of spend broken down. The Landlord would pay for anything related to the building, but a proportioned amount for the care should be met by the tenant.

Leisure Facilities

In properties where there is a gym / pool etc, the same applies and the tenants should pay the additional cost towards these facilities.

If you would like further information regarding this, please contact Sally Asling,  SurreyLets, the letting specialists on 01483 282470

If this information has been helpful, you may be interested in other articles from SurreyLets. Please visit our blog site. 

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I write this with a child in year 6 in the oversubscribed, increasingly popular and highly sought after academy that is The Raleigh School in West Horsley. I count myself as privileged and increasingly fortunate. As I write, I am, like a few hundred other parents, waiting to hear if my son has got into The Howard of Effingham School in September. That said, like many others before me, I moved a matter of just one road to be certain of catchment areas for the schools.

Last week I took on a property “To Let” very close to the school and immediately went under e-mail attack. It felt akin to how I imagine Simon Cowell feels at the auditions for the  X-Factor; each  excited applicant streaming “pick me first” and offering on a property before I had even got the key.

It doesn’t matter how you cut it. Its dog eat dog in the world of housing and getting your child into a school.

There is a 5 deep waiting list for most year groups at The Raleigh. To get to the top, after siblings and looked after children ,it all becomes a matter of geography. Roll of the dice, the closer to the school the more chance you have of securing a place. So when a house a stones throw away from the school comes on the market, the stampede starts.

Homes close to the school sell  and let quickly and at a premium. They are sought after. So, when I saw this property come on the market with Curchods this week with an asking price of £775K, potentially giving a potential gross ROI of 4 % I thought it was worthy of a mention as this is a good ROI for this area. You can download the brochure here. Oh, and it really is a “stones throw” away, even with my poor attempt with a pebble! low res drive

 

Located within the popular village of West Horsley, literally a moments walk of the sought after Raleigh Primary School, this immaculate home really does offer everything a family could need.

 

 

The property would realistically let out IRO £2750pcm.  There is 1555q ft of property, making it not a super large home, but the fact that its divided into 5 bedrooms could suit a larger family, and after all, its a larger family who will have the need for the school. The one thing is certain, whilst the school is situated here, this property will always be let!

However, I would be tempted to advise a  would be investor to ditch bedroom 5 and add another bathroom (en-suite) and have it as 4 bed 2 bathrooms opposed to 5 bed and 1 upstairs bathroom. Given we have property only a short way down the road that rents at £2500pcm and lacks the office, this property I believe would rent quickly. We are seeing rentals in the roads surrounding the school average at 30 months which is perfect for long term investors.

If you would like to view this property call Curchods on 01483 281010. If you would like to discuss buying this property to let and would like some impartial free and without obligation advice, then call Sally Asling at SurreyLets on 01483 282470 

 

 

 

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Lets look for a moment at the future for “generation rent” and  investor generationrent-800x333activity in the Buy-to-Let market. Lets also question why so many empty homes are not being put into use – so many aspects of this “Housing Crisis”

An interesting report from business consultancy PwC who look at the young non-owning segment of adults has stated that young adults are ” at risk of being locked out of the housing market due to high prices, high deposits and rising interest rates.”   As the rental sector booms it is thought that only one young person in four will own their own home by 2025

Only 26 per cent of people currently aged 20 to 39 in England will live in a
home they own by 2025 while 59 per cent of them will be privately renting.
The report indicated  that by 2025, 59 per cent of 20-39 year olds will be renting privately, up from 45 per cent in 2013, when a similar survey was
undertaken.

“With the majority of 20-39 year olds living in the private rented sector by
2025, policy will need to adapt. This could include encouraging a better
quality of private rented accommodation including longer tenure periods, and more rental properties designed for families” says Richard Snook, senior economist at PwC.

“Demand for housing in the UK has outstripped supply for more than two
decades. Changing the outlook for ‘generation rent’ will require us to build more houses than needed just to match population growth in order to make up the past shortfall between housing supply and growth in demand” he says.

Sally Asling from SurreyLets, a large hybrid online letting agency in Surrey, states that “policy in the housing markets needs to be critically examined and rethought if the UK is to get to 2025 without a housing crisis. “Many Buy-To-Let Landlords are currently feeling put off investing by constant demands, taxes and charges that are being placed on them.

With the recent government’s reduction of mortgage interest tax relief on buy to let properties in a major factor for 50 per cent of landlords considering selling up, the tax reforms influencing their decision more than any other factor.Many of our landlords have reported that they fear the letting investment is becoming less profitable and will continue to be less profitable come 2017 when the reforms kick in.

SurreyLets has a large database of Buy-to-Let landlords and whilst many are in it for the long term, these changes are really affecting their zeal for continued investment. Many believe the whole process is just getting over complicated and over full of legislation that is ever changing.”

Regrettably, many potential Buy to Let landlord are being put off investing out of fear that is is over complicated. However Sally Asling states “Here at SurreyLets we advise Landlords what they need to be doing and how best to address the letting and management of their investment property.”

If the predictions from PwC are correct, the continual increase in tenant demand for rental properties is not going to be met unless there is serious investment in the private rental sector. The government need to be encouraging investments and making it more attractive, not imposing more taxation and legislation onto it. As the government have been unable to thus far present solutions to the housing crisis that is building, they need to acknowledge the part the PRS is going to play.

Sally Asling from SurreyLets also comments “What irritates me is the fact that the government are not really tackling the empty homes situation. The Office of National Statistics last reported figures in 2008, but at that point there was 412,709 empty dwellings in the UK.  49,860 of these are in the South East. over twenty thousand of these in the South East alone are classed as long term vacant dwellings. The government empowered local councils to put property suchlike this into good use with the EDMO (Empty Dwelling Management Orders) legislation, which thus far has been a failure due to a lack of investment into this sector of councils to pursue what is often a long process. It appears building more home, endangering more greenbelt is preferential, which in my opinion is wrong.”

 

 

 

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Another day, another conversation with a first time “investment” Landlord.

“I’m really sorry to have to ask you, you must think I’m a real idiot, but…………”

Firstly, you don’t need to apologise, and secondly, no, I would not think you are an idiot.

Really. I have more respect for people that go into things after extensive research rather than those that claim to know it all and then want to blame people when it all goes wrong!.

I know the lettings market inside out and backwards, but whatever your profession is I’m likely to not know that. I would come to you for help in your profession, which is why you have come to me. I am (to coin the phrase on an Asda badge “Here and happy to help”

Firstly, you are probably worried. How does it work? What are the laws? Do I need to be qualified? What about all the nightmares I have read about? They were just some of the questions that I get asked but the one that is only occasionally voiced is.  What if I lose it all? What if it all backfires? What if it doesn’t rent and I cant afford to pay the mortgage? 

I understand that investing in property is scary. That’s why I am happy to spend time with investors to ensure the right decisions are made and its a happy (profitable) experience. landlord

We have all seen other people do it, make it look simple, even made a tidy profit. It looks and sounds easy. But when we are dealing with our own cash, suddenly there are a lot of questions and a need to confide in someone that understands and can eliminate the fears.

Before starting to jump in, make sure you are in this for the long haul. If you’re looking to invest your money into a medium/long term investment scheme (7+ years minimum), then property investment is one of the most solid and reliable vessels available. History dictates that property prices increase over the long term. Everything that happens in between is generally part of the cycle, and that includes the highs and the lows.

Research Research Research – do NOT follow the selling agents advice or associated rental departments advice on rental. They are after a sale. Remember, the client is the one that pays their fee –

Leasehold vs Freehold. Leasehold can have “hidden variables” such as the services charges that could rise and restriction on letting. Freehold has responsibilities to continually maintain the property, although at last this is under your control. Work out your rental yields on 11 months of the year and at the lowest price you are quoted. That way if the figures stack up you could get a pleasant surprise, when it lets for more and with no voids.

Take into consideration Agents finding fees, add in the costs of your legislation duties such as gas safety checks, cleaning, inventories, legionella testing, electrical testing, possible redecoration, cleaning etc. Also factor in saving 10% to off set against wear and tear and essential maintenance, if not more if the property is freehold.

How are you financing this project? I have many landlords ask if they can take a residential mortgage and just not tell the lender, but be very careful here. This is mortgage fraud and its illegal. It may seem a “safe” risk (if that’s not an oxymoron) but if an accident happens and you find yourself uninsured, you will be left with a huge problem. I know some brokers suggest its a safe gamble, but I really wouldn’t go further with them, they are not looking after your best interests at all. There are many good brokers out there who will source you a decent Buy-To-Let mortgage on a variety of terms and deals, so shop around. Don’t borrow to the max on a property either. I personally suggest a 60/40 split is wise and certainly the minimum I would advise landlords to put up is 25% deposit. You get the better deals and it becomes affordable. Even if the tenants stops paying rental or the property is empty on a void, the mortgage has to be paid. One pit falls I see Landlords make is to simply bite off more than they can chew.

Now to you. Do you have the personality to be a “hands on” Landlord? Are you confident, good with people, practical, sympathetic, firm, patient, respectful, understanding, calm and tough?  If you are renting privately and intending on managing the property you may have to be at one point or another all of these things. You may get tenants that play on your emotions and vulnerability if you let this side of you  show. If you are unsure about dealing with tenants directly, use an agent – they should be your eyes ears and mouthpiece though the let. You need to understand that you’re effectively running a business, and that means you’ll be dealing with all sorts of people. That’s when you’ll need to make some tough decisions with conviction. Of course, there are pleasant people too, which you will also need to manage appropriately. Above all maintain professionalism with the relationship.

What can go wrong?  Well, the truth is there are lots of things that can go wrong. I don’t want to scare anyone from investing but lets be frank, lots can go wrong if its not done correctly. I advise Landlords to have a belt and wear braces. Have your tenants properly referenced, that’s after you have met them and got a good “gut” feeling, take as many checks as you need to feel comfortable and then take out a rental guarantee and legal cost insurance policy to cover the areas “at risk ” (ie non paying tenants and the cost of eviction). Ensure you insure the buildings and contents properly. Another thing that can go wrong, is your letting agent. From a personal relationship breakdown, staff turnovers through to misappropriation of client funds through to sudden closure. You do need to ensure that the letting Agent is signed up to the voluntary licensing via organisations such as ARLA or NLA and that they are protecting your tenants deposits correctly. It is an unlicensed business although its slowly becoming tighter by legislation ensuring all agents sign up to an independent redress scheme, such as The Property Ombudsman. Just check who you are dealing with, their background and that if they are managing the property you have a good rapport and relationship with them.

On the subject of Letting Agents, there are three “breeds”. The High Street Agent, which charge around 10% of the rental for a tenant find service and up to 17% for full management. They advertise in the window and have some walk in trade, and a highly visible presence. In my opinion though, you are paying for the office and location in your fee. There are “hybrid” Online letting agents (Such as SurreyLets Ltd) who offer client’s the full services and personal service to local clients but are relatively cheaper than the high Street agents, with rates typically starting from 5% plus VAT for Tenant Finding and 10% plus VAT for Full management. The there are pure online letting agents who normally are national call centres who will market your property from as little as £49.99. However you tend to have to do the rest of the work and there is minimal service. The choice is down to the individual Landlord, but a Landlord new to the business should ensure there is a degree of hand holding and support in the process.

Still ready, willing and able to become a Landlord? Great.  The next steps which I will cover in the next blog are all the things that take place after the purchase.

If you are thinking of buying-to-let and want to chat through some options I would be delighted to chat with you.  Our advice is free, confidential and independent.  Please call me, Sally Asling on 01483 282470 for free, impartial advice.

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