I recently had a Damacean moment when I realised that my 30 years in the property business had been wasted because all I really needed to do was read 2 pages of the Money Mail on Wednesday 29 May. As a regular reader of the Daily Mail and any other property section in any other paper, I never fail to be surprised by the journalists who offer expert advice on how to become a millionaire – for the price of a newspaper – who don’t leave the world of the Fourth Estate to develop their own empire. Every page that you read, is buy-to-let, buy-to-let and the money will come rolling in. It may well do, but it isn’t as simple as buying a newspaper. The latter may well encourage people to enter the buy-to-let market, which can only be a good thing for estate agents, but the professional experience of these agents is what will assist someone in becoming the next Donald Trump. Don’t be afraid to ask. Of course there are some unscrupulous agents who will charge you for walking through the door, but there are many agents who will view your enquiry as the chance to develop a long term business arrangement and will gladly offer you advice. Anyway, I have to sign off as I am reading an article on brain surgery with the plan of booking in my first patient a week on Thursday.
The perfect tenant? Someone who is impeccably tidy (OCD possibly), uncomplaining, who has no plans to move and happily accepts large yearly rent increases. Back to reality, we all know that tenants fall into several categories: students, young professionals, families and housing benefit recipients. I was amused to read on the weekend that there is now another category embracing the super-rich. The Van Han Agency in Mayfair says that landlords prefer tenants who are, “similar to them in terms of profile and values” (sic). This relates to a case of a Kensington mansion that rents out for £20,000 a week. Yes, that is a week. You don’t get many of those round these parts. The owner is in the art world and the tenant is a senior fund manager who were introduced and apparently built an excellent rapport. Monetary value aside, this situation has ended well and does raise a valid point. Potential tenants, likeability acknowledged, must reference well. There are many people who I would happily sit down and have a drink with who I would not entertain taking on board as a tenant unless they met all the referencing criteria. I’m an estate agent and sometimes even I wouldn’t rent to me or indeed one of my fellow estate agents.
After a recent report by the Royal Institution of Chartered Surveyors informing us that demand for houses rose to its highest level for more than three years after the April launch of Help To Buy, one has to ask what is exactly fuelling this sudden enthusiasm? We may have the answer. It appears that some developers are advertising properties 20% below the correct asking price, implying that the equity loan is a discount or free gift. The latter phrase really gives me the Donald Trump; by definition, a gift is free, just as something cannot be ‘new and improved’. It is either new, or improved, not both. Anyway, back to the subject matter. The worry is that people will take on debts that they do not understand or be encouraged to buy a house that they cannot afford. These schemes were designed to help those at the very bottom of the property ladder to make a start, not to buy houses that take them out of their budget comfort zone. Even Rightmove have acknowledged that their portal has been used to advertise an “indicative price”. This type of nefarious activity comes as no surprise to those of us who have sold a property only to see it included in another agent’s sales figures. Again, back to the subject matter. If you are thinking of taking advantage of any of the recently launched Government schemes, ensure that you establish the true cost of the property. Remember that during the boom years, some of the shenanigans of our industry left mortgage lenders nursing big losses and some people without a home.
As the property market makes a small move from the torpor of the last five years, as always the key players are the first-time buyers. Mortgage lenders are now going all out to attract first-time buyers to become first-time borrowers. There is now a plethora of mortgage deals hitting the market. Even though rates are becoming more competitive, the big question for new borrowers is, do they fix, or do they track? For the more mature amongst us, this is not a reference to the latest dance craze, but a question of whether you choose to set your repayments for the next few years or do you gamble on a tracker rate that may see your payments decrease, but also, possibly increase. The Telegraph Money page on Saturday 18 May reported that the money markets in the square mile (that’s London, not Aberbargoed), are, “now pricing the first increase in bank base rates for late 2016” (sic). If this proves to be correct, interest rates can hardly get any cheaper. In my opinion, the obvious answer to the title question, is, fix now. If choosing a tracker rate mortgage, the lender can increase their rate at any time, simply because the small print says that they can.
Further to last week’s blog, there has now been increased debate on the recent and possibly encouraging movement in the housing market. The Council of Mortgage Lenders (CML) reported that loan approvals in March were a 14.8% increase on February. In addition to this, the Royal Institute of Chartered Surveyors (RICS) said that a majority of its members reported a rise in prices for the first time since 2010. The director general of the CML said, ‘more borrowers are taking out higher loan-to-value mortgages than at any other time in the last 4 years’. He further commented that, ‘that this is a sign that lenders are open for business and that borrowers – even those without a large deposit – are increasingly able to get a foot on the property ladder’. Good news you may think. However, Fathom Consulting, whom we have now discovered are a forum of Bank of England economists (so one would hope that they know what they are talking about…), make a very valid point; tempering the enthusiasm of both the CML and RICS. Under the plans unveiled by Chancellor Osborne, the Government will either provide a loan or guarantee the top 20% of the value of a new property. This is in addition to the borrower’s 5% deposit. If someone is purchasing a £100,000 property, the lender’s exposure could only be £75,000. The concern raised is that at this new reduced level of exposure, lenders may be encouraged to slacken their underwriting criteria and revert to the somewhat gung-ho practices of the early 2000’s. Of course everyone wants movement, but nobody wants a boom in the housing market; what goes up, must come down, and a boom is programmed to be followed by a bust. Steady growth is far more desirable and sustainable in the long-term.
Having read a recent Mail Online article about the expected surge in the housing market, I have decided that I now want to be a consultant. The article quotes the experts from Fathom Consulting – whoever they may be – who now predict that the average home in the UK could cost £300,000 due to price inflation caused by the Government’s home buying scheme. These consultants are very keen to use sound bites such as, “reignite the housing market bubble”, (I would love to know how you reignite a bubble). What the £$!K are they talking about? Why don’t we just wait and see what happens when the scheme is launched in January 2014 and let us report what actually has taken place as opposed to what the consultants have chosen to predict. Even though these predictions if true would be advantageous to estate agents, I have not yet placed my order for my Mercedes SEL.
As most of us here in Cwmbran will have read the content of the Queen’s Speech, analysed and cogitated upon it at length, I wonder if the Government are going a step too far? There are two things that jump out straight away: are hardworking medical professionals as well as treating the sick and infirm (that’s if you’re one of the fortunate ones in the Royal Gwent)going to have to check whether their patient is entitled to the care of the NHS? Is the Government at risk of turning our health service into a branch of the immigration police? As those of you follow my blog are aware, during my illustrious military career, I saw much action. I can remember fighting in the bhundoo and having one minute been trying to kill a native in the name of Queen and country and then later that evening carrying him to a field hospital after he had trodden on his spear. I made no reference to his national insurance number or his passport details. This leads me onto my second observation of HM’s speech: private landlords (no mention of agents) will now have a legal responsibility that they only let properties to people allowed to be in Great Britain. As we all know, letting agents do very stringent checks that include NI number, proof of address, passport details etc. etc. However, private landlords who sometimes specialise in renting to non-locals (let me clarify, in Cwmbran, that means you are from Newport), do provide a valuable service. Landlords do not discriminate and currently neither does the law, between local non-payers and non-local non-payers. Being in arrears is the same whatever country is on your passport. This latest legislation would appear to be yet another example of the government asking society to step in where the immigration service and the policing of it have failed.
Ignoring recent meteorological conditions, the ice age that has befallen the housing market for the past 6 years, is showing tentative signs of thawing (according to some recent newspaper reports). Is it? I read with interest that Savilles Estate Agency has put forward its mainstream forecast of a 0.5% rise in house prices this year under review, whilst the Royal Institute of Chartered Surveyors is looking at whether its should scale up its predictions of 2% growth in 2013. The article gave cause for thought because it was full of addresses and postcodes that have no relevance to a family living in South Wales. I am not surprised that estate agents based in Kent had three viewings on a new instruction on the first day of listing; when they point out that the recent opening of the high speed rail link to London had made a huge difference, bringing the property into the commuter belt. Fulham, Battersea, Clapham, Oxford, Folkestone and Northumberland bear little resemblance to Pontypool, Bettws, Ringland, Greenmeadow or even the more up-market parts of Newport. Here at Cheshire and Co we have definitely seen more activity but properties with a £4 million asking price are not representative of the housing market as a whole. As always, the right property, in the right location, at the right price will find a buyer.