Barclays Family Affordability Plan & Helpful Start for the First Time Buyer

A Helpful Start for the first time buyer

Barclays helping the first time buyer

Barclays has introduced a new mortgage scheme. Helpful Start is part of their Family Affordability plan. It  allows parents to help their children with mortgages in a way not seen before. A parent’s income is also taken into consideration when applying for the mortgage  without them being on the property deeds.

The scheme is available across all of the lender’s mortgage range, including its NewBuy product.
It enables parents to help their children get on or to move up the property ladder through a joint mortgage without giving a lump sum away.
If the mortgage is approved, all parties will be liable for the monthly payments. The parents will appear on the mortgage but they won’t be co-owners of the property.

Helpful Start is however  not available in Scotland and Northern Ireland.

Family Affordability Plan

When considering to lend to a first time buyer, lenders look at three criteria

  1. Affordability
  2. Credit Worthiness
  3. Loan to Value

The Family Affordability Plan and Helpful Start tackles the first criteria, which has significantly made it difficult for first time buyers to get on property ladder. It will not alter the amount the customer can borrow.

When the first time buyer is ready to manage the mortgage on their own, they can remove their parents from the mortgage by remortgaging soley in their name in traditional way.

There has been a reduction in the number of guarantor-type products in the market over the past few years, this scheme is a step in the right direction.

Ash Shah, Crystal Financial Services

PropVestment always recommends clients use a Independent Mortgage broker like Ash Shah or Crystal Financial Solutions. He comments as follows:

This is a excellent move taken by the High Street lender in a difficult market for first time buyers and those wanting to upscale. Independent Brokers like myself have a wealth of tools available to help clients, and the addition the Family Affordability Plan is a excellent addition to my Tool chest.

PropVestment Conclusion

Helpful Start and the Family Affordability Plan is what first time buyers have been calling for, the last few years have been hard for them to get on the property ladder. We welcome such a scheme and hope other lenders see the light and follow with their own schemes.

READ our first time buyer articles:

For a FREE consultation please contact us info@PropVestment.com , we can help all property investors and first time buyers

Trends in the Indian Property Market: Where to invest in India -Part two: SEZs, Special Economic Zones & Jamnagar, Gujarat

As mentioned in part one of this series of articles Trends in the Indian Property Martket: Where to invest in India, PropVestment spent some time recently in India and in particular in Gujarat. We wanted to analyse the Indian property market and find out where to invest in india, for the most secure and profitable investments.

Here are some facts we found out.

What is an SEZ, Special Economic Zone

SEZ Jamnagar: Reliance Refinery

Special Economic Zone is a particular area inside a state which acts as foreign territory for tariff and trade operations. Government provides tax exemption (IT, Excise, customs, sales), subsidised water and electricity.

SEZ helps in the development of infrastructure of the area around the SEZ, provides employment to people, makes the exports more viable. All this will helps the country’s products to become more competitive vis-a-vis providing all round development of region.

If 100 acres are allocated for SEZ, then only 30-35% of area is used for setting up plants. rest of the area is used to provide housing facilities, malls, multiplexes etc.
Tax exemption is for specific period say for 10 yrs or so.


FACT:
Gujarat has developed a reputation as the fastest developing state in India, especially since the reign of Narendra Modi and huge amounts of FDI that has been attracted to the state.
Here in the UK there are many NRI Gujaratis that often try investing back home in the state or wish to have an asset base back home in Gujarat. This is not to say that this is only an investment option for Gujaratis, but rather for anyone looking for strong secure returns on their investment.

 

Where to Invest in India: Jamnagar, Gujarat

WHAT DOES THIS MEAN:

Why Jamnagar is where to invest in India

  • Jamnagar is one of the most significant cities in the state of Gujarat. The city’s real estate sector  has got a massive boost, bolstered by a handsome investment of Rs 45,000 crore in development of Special Economic Zones

  • It is coined as the “Oil City of India” with Reliance and Essar Oil refineries and associated industries.

  • Jamnagar real estate is expanding with ground breaking projects, which makes the city an ideal place to invest and live in. Noticing the promise in Jamnagar, a multitude of property developers are eyeing the plots in Jamnagar for construction purpose.

  • Rental returns are equally healthy in the city which can range from Rs 8,000 to Rs 15,000 per month for 2BHK (two bedrooms, hall and kitchen) & 3BHK units.

  • The increasing employment opportunities in the city are also pushing up property values in rentals in Jamnagar.

  • Gujarat is also grabbing attention from the NRI populace settled in different overseas locations. The property developers in Jamnagar are designing exclusive schemes, and establishing overseas marketing offices to tempt the deep pocketed NRIs

  • Jamnagar is seeing breakneck industrialisation which has sent the rates for commercial and residential land in the city rise dramatically. Areas on the outskirts of the city like Khambhaliya Road and Lalpur Road are talking of land prices in the range of Rs 500 per sq metre — a 100 per cent jump in a year and still rising.

  • Residential property prices in Jamnagar have doubled in the past 18 months. The surrounding areas of the city will also boom.

  • Residential property in the city boasts of an exceptional “quality of life” for the residents. This is one of the reasons why it is selling fast. The rental market in Jamnagar is also looking promising.

CONCLUSIONS

Like many other cities in Gujarat, Jamnagar is a very promising prospect especially due to the economic progress made due to the SEZ and the major oil refineries. However with most developments in India you must take caution and vet the project appropriately.

Many UK residents do have links in the region so that is advantageous too.

When looking at a project analyse the future development prospects, proximity to transport links and employment opportunities.

Also maybe some part of Jamnagar, its a little too late, the capital appreciation has already occurred, look out instead for neighbouring areas, or other towns where huge infastructure or industrial projects are getting approved.

Like Jamnagar there is also great opportunities in Rajkot, Vadodara, and in particular Gandhinagar where it is dubbed as the new capital of Gujarat.

READ our Part One of this Series : Where to Invest in India: Satellite Urban Villages

First time buyer FAQs: What sort of costs involved in buying a property

This is a complex question but the easiest way to get a decent estimate is to go via the purchasing process. There are many hidden costs that a first time buyer may not be aware of.

£0 Sourcing Fee
£0 Mortgage Arrangement fees (if there are then usually added to loan)
£2000 Stamp duty ( 1% of example £200k property)
£1000 Legal & Search fees
£2000 Refurb
£5000 Total

First Time Buyer Costs

More Details:

Sourcing Fee

Most agents do not charge a property sourcing fee, well not the high street lenders. If it is a private deal or from a specialist they may ask for a fee however in these cases they should justify their charges by the extent of savings made. If this is a case and you are getting a better deal than the market you do not need to budget this as the saving will balance the fee and more.

Mortgage Arrangement fees

These typically vary from lender and even with lenders depending on the products. Sometimes the better the interest rate or higher LTV the higher the arrangement fee. In many circumstances the fee balances out savings in the fixed term.
However these are almost always added on to the loan amount so will not impact your immediate cash flow.
Occasionally the lender may ask to pay a surveyors fee

Stamp Duty

As of 24th March 2012 the stamp duty holiday is over for first time buyers. For property up to the value of £250,000 (most first time buyers will fall into this bracket) the stamp duty is 1%. Stamp duty is payable up on completion and will need to be sent via your solicitor.

Legal & Search Fees

You will need to keep aside about £1000, usually sent prior to your solicitor before they will carry out any work for you. The searches are for your benefit and will uncover potential problems in the property or surrounding area. Some of the fees go to the solicitor for their time and some for expenses such as telegraphic transfer fees for transferring funds in and out of their client accounts. Remember the cheapest solicitor is not always the best, go with a reputed individual that works efficiently and spots errors in documentation.

Refurbishment

Typically this will vary vastly with every property but going along the lines that the property is in a livable condition, it is usual that the very least you may want to give all the walls a coat and put in the basic furniture to make it live-able to your standard or into a rent-able condition.

First time buyer CONCLUSION

There are many hidden or non obvious costs, do your research, ask the right questions to the right people, and most importantly do not over commit.

See our article on Mortgage advice for first time buyer

Allsop Residential Auction February 2012: Results, Analysis & Conclusions – PropVestment

PropVestment provides a brief but insightful analysis of the results from Allsop Residential Auction in February 2012. We spent some time attending on behalf of a client looking to make a cash investment.

Allsop Residential Auction Headlines

  • 90% success for all lots in London and South East.
  • AST (Assured Shorthold Tenancy) yields over 10% 
  • Northern England struggling
Allsop Residential Auction

90% success rate at Allsop Residential Auction for London and South East

As you can see with the above chart, London as shown by the M25 statistics shows that over 90% auction success with an average price of £324,074. South East and South West also sold well with almost similar success rates however the values were significantly lower.

The worst success was the North East and Northern Ireland. The North East had the lowest success and the lowest average value for the Mainland. This means that this part of the country is the worst effected and the limited activity shows that even bargain hunting investors are staying well way.
The Northern Ireland results could be attributed to problems in mainland Ireland, however with only 6 lots that all sold, the data set is very limited.

Rental yields above 10% , investors market

The main information to be taken from these statistics is that most sales are investments for rental yields, with ASTs demanding lower prices but therefore higher yields. This can be attributed to risk factors.

An interesting stat is that sites with planning permission had a very low success rate, there are buyers there but sellers are keeping a high reserve on these.

CONCLUSIONS

As with previous auction articles like Auctions are for sellers we see similar stats here, majority of lots in London and South East sell well at high prices, however the rest of the market is struggling.
Auctions are for experienced investors and sellers, and not currently for first time buyers. 

*Graphics from www.allsops.co.uk Allsops Residential Auction

Auctions are now for selling rather than buying property

On Monday 6th February 2012 PropVestment paid a visit to Barnard Marcus residential property auction at Grand Connaught Rooms in London. We were in for a surprise as we were there as a buyer but soon found auctions are now for selling.
This was the first major property auction of 2012 in London. Thus it was pack out, many experienced and new property buyers in the hall.

Auctions are for buying not selling now

Lot 1 had guide of £800,000, a four bed house in Battersea, it went for £1.28m + 2.75% fees. This was the story of all the first twenty or so lots.
All the first 23 lots were in London, the average winning bid was over 30% above the guide price, taking out 5 where even at this level the Reserve was not met, the other 18 properties sold at over 36% above guide price.

A few other key high lights from this auction:

  • Most land only deals did not sell, reserve not met
  • A piece of land without planning permission for a possible 8 units went for £860k, that’s insane for the area, almost £110k land cost then planning then construction.
  • Most of the lots on by order of Mortgage companies got bids over guide however did not sell due to Reserve Not Met (RNM). This can only be the case as the lenders have over valued in the past and now face negative equity. Failures.
  • Properties in North England and Wales were the hardest sale, many RNM and a few with highest bids well under guide prices.

PropVestment Conclusions: Auctions are now for selling

Property Auctions have changed now, its a much more public affair and it seems that its no longer a place where you can pick up a bargain. The sellers use it to sell properties that otherwise will not fetch a similar price through traditional means such as local agents. This tell us something about the quality of the properties and legalities of them. There were many amendments to the information provided with particular importance on certain higher rentals, those properties were on the day changed to vacant possession. Therefore the guide rental was incorrect, how is one to know what the real rentability of a property is without doing thorough research.
Due to these pit fall, an auction is no longer a place for inexperienced or first time buyers to find a property to buy. Auction are now for selling.
Rather it is a place where landlords can easily offload not so good properties and rely on the ignorance or lack of research of bidders.

PropVestment Auction Advice
Buyers – Do your thorough research and get someone to look at the legal documents prior to bidding.
Sellers – Use auctions to sell unwanted properties, especially in London, everything sells

Have a read of our observations last year at Savills here

Short Lease: Good Investment or Bad Investment?

Came across this Short Lease listing today (below). Is it a worth while investment? £100k guide price.

The Short Lease listing

LEASEHOLD MAISONETTE VACANT POSSESSION
By Order of the London Borough of Enfield
Situated in a popular residential area, close to Trent Park and local shopping/ travelling facilities including Oakwood Underground Station (Picadilly Line).

A Self-Contained Purpose Built First Floor Maisonette with accommodation comprising:
Living Room
Bedroom (One)
Bedroom (Two)
Kitchen
Bathroom/WC
Leasehold for a term of 99 years from 25th December 1959 at a ground rent of £15 per annum.
Entire Vacant Possession upon completion

Short Lease

Short Lease, no problem

 

The maths

Its no secret that with only 46 years on lease most normal lenders will not lend.
So cash invest it.
£100,000 invested (if can buy for guide)
Rent: £13200 (based on asking rental for same flat few doors down)

46 years means over £600k income
Take out your £100k with saving account interest over first 8 years

Leaves £500k, yes half a million for not doing anything

The twist 

Call PropVestment and we will show you how to pull out your full £100k in 6 months and keep the property forever. Free lifetime Income

RESULTS – Short Lease
After publishing this article, one of our most read articles of all time, the property ended up fetching £187,000 in the auction and the buyer could extend the short lease to a whole 125 years for another £36,000.
Overall this ended up being a high price to pay for an property of this type however the buyer saw the future scope and realised that short lease should not stop you picking up a good property.

 

Taking out a mortgage – Details for the first time buyer

First Time Buyer Mortgage

In the recent years taking out a mortgage for the first time has become more of a difficulty. With the slowdown of the economy, the rules have tightened and become more stringent. The lenders too have become more particular regarding to whom they are going to lend. So, it would be better for you to buy a newly built home or a park home as these can cost you less. If a home costs you less, you may also be able to do with a small mortgage amount. So, in such a situation getting the first time buyer mortgage won’t be a tough job for you.

First time buyer: Taking out a mortgage

The things that you would require to take out first time buyer mortgage are:

*    High affordability – In order to take out a mortgage even if it is a first time buyer mortgage, it is important for you to have high affordability. This will mean that if you have high affordability, you will also be able to manage to make the timely mortgage payments. Lenders prefer people who have at least more than average or high affordability.

*   High credit score – It is important for you to have a high credit score so that you can get a mortgage with low interest rate. Without a high credit score, you may not be able to get low interest mortgages.

*     Clean credit report – In addition to high credit score, you should also have a clean credit report with no missed payments. When you apply for a mortgage, lenders pull your credit reports. If you have missed payments, lenders tend to believe that you are not a responsible borrower. Thus, your loan application may get rejected.

*     Low debt to income ratio – In order to take out a mortgage, you are also required to have a low debt to income ratio. This too is checked by your lenders to decide if you are a responsible borrower.

Other than having these, in order to obtain a mortgage, you will be required to:

  1. Check out different offers – In order to take out a mortgage, may it be for the first time or second, it is important for you to check out the different offers by various lenders. You will have to compare and then decide which the best offer is for you.
  2. Use a mortgage calculator – In order to decide on the cost of a mortgage, you can use a mortgage calculator. This can help you in determining which mortgage you can afford to take out.
  3. Get pre-approved – It is good for you to get pre-approved for a mortgage as this can help you to obtain a loan easily enough.

So, these are the things that you will be required to do in order to take out a mortgage so as to buy a home for the first time.

CLICK HERE Now, Free FTB Consultation

For fantastic mortgage brokers check out our “The Prime” for highly recommended brokers.

UK Property Market in 2012, the Investors’ perspective: Part Two – Market Activity

– Public Confidence

– Lending

Public Confidence

Market activity is dependant on a few things, firstly public confidence, this has seen a recent resurgence with many agents claiming great interest and newly registered clients in the post Christmas period.  People property search in agents as certain sectors start to turn around or the fact that the public know that interest rates are likely to stay low for the near future, houses start to seem affordable again. Together with the fact that many news sources are predicting higher rents on the market this year, a general upward trend is only exaggerated due to the Jubilee and Olympics.
Therefore buying sounds like a good option.

According to estate agents, the typical number of house hunters registered per branch in December was 294, 32 more than the average figure for November, with viewings continuing right up until the Christmas break, the National Association of Estate Agents (NAEA) found.
The percentage of first-time buyers also rose to 21% , continuing the increase since this section of the market hit its lowest proportion in nearly three years last autumn, although first-time buyers made up a quarter of the market during the same period last year

London was the only area to see price increases in December while respondents in the West Midlands and Yorkshire and Humberside reported the biggest drops.
At the same time, new instructions edged up for the third consecutive month during December, with 12% more respondents reporting rises in homes coming onto the market.
London saw the greatest increase in supply, with 38% more surveyors reporting a rise – the highest figure since January 2005

Lending

However there is a second all important component of buying a new property as well as confidence and interest is mortgage aspect. New lending is still very low and the stricter criteria means that even though people want to buy and sell, this is becoming the stumbling block, and as a result the sales are at one of the lowest points at the moment.

Transaction levels are likely to see a slight resurgence in 2012 and climb back to around 880,000, roughly the level of activity recorded in 2010. However, to put this in context, total sales in 2006 were almost double this amount at 1.67 million.

The weak economic picture anticipated for the next six months, along with the prospect of increased unemployment, means that demand to purchase property is unlikely to see any significant increase and will remain relatively flat.

Commentators and analysts expect sales to stay low – perhaps even lower than they have been in the past year. That means 2011’s eventual total might even be lower than 2009’s figure of 859,000 sales for the whole year – the lowest since modern transaction records began in 1978.
Even the reluctance of lenders to repossess many of the borrowers who are now in arrears has played its part.
With tens of thousands fewer homes being repossessed than lenders had predicted just a couple of years ago, the market has been deprived of the cheap homes that would otherwise have been put up for sale.

PropVestment Conclusion

The public are ready, investors are ready, the financial institutions are holding the property market back.

People are looking to buy a house?

Sources:
http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/9024366/Property-sales-fall-to-lowest-level-for-a-year.html
www.bbc.co.uk
www.homemove.co.uk

Business property values slow in November, but insurance lenders will make a difference

Research by the CBRE, one of the world’s leading commercial property advisers, suggests that commercial property values have ground to a halt in November, but that the increased involvement of insurance companies might make a difference.  According to the CBRE’s latest monthly index, last month’s capital value returns registered at only 0.4%. This makes total returns for business property at 7.6% for 2011, with capital growth of 1.9%. Central London property has performed consistently, although the wider picture has seen only shops and retail warehouses avoid falls this month. London office and retail performance has offset falls in rent elsewhere to ensure that rents remain flat across the board.

Nick Parker, senior forecasting analyst at CBRE, described the results as unsurprising given the signs of deterioration, and noted that investors were becoming ever more focussed on prime property:

“November was the first month this year where more widespread weakness started to creep into the UK property market performance with more real estate sub-sectors seeing capital value falls than gains.  “Given the wider economic uncertainty caused by weak fundamentals in the UK economy plus the growing threat posed by the Eurozone, it now seems that investor appetite has once again become more narrowly focused on the super-prime end of the quality spectrum at the expense of assets further up the risk curve.”

However, the competitive presence of insurers, CBRE notes, offering better loan-to-value deals and better margins, has propped up real estate activity and could account for as much as 20% of commercial property lending in the future.

Insurance companies have progressively increased their share of real estate lending after retail banks began showing signs of reluctance. With the number of business property lenders actively lending down in 2011, it is hoped that the impact of insurance companies evolves beyond the prime end of the real estate market, which is where their lending capacity is largely based at present.

Author

Carlo works in the real estate sector and writes about investments and commercial property in London and in the UK. He likes industrial architecture, nature and traditional british food.

UK Property Market in 2012, the Investors’ perspective: Part one – House Prices

Looking at various property professionals and organisations we analyse the UK Property Market in this series of articles.

-UK property prices expected to fall up to 3% in 2012RICS

-House price Stagnation remainsNationwide

-Up or Down? Depends where you arePropVestment

House prices are always the primary topic when it comes to analysing the the UK Property Market. 2012 is no different. The question remains what component of house prices should be used in analysis, is it the asking price, is it the RICS or bank valuation or is it the selling price.

In my opinion it is the selling price that is all important taking in the UK property market in all dimensions without any bias. This is house prices, the real deal.

RICS:
Sales of UK residential properties may rise a little in 2012 but prices will struggle to follow suit. Prices at a headline level will edge lower by around 3% across the UK. However, the low level of supply should continue into the coming year, stabilising prices and preventing significant declines.

Nationwide:
“The average home rose in value by 1% in 2011 to £163,822, but fell by 0.2% in December compared with the previous month.
The economic climate was likely to lead to a similar situation for the housing market in 2012. There were geographical differences. Prices in Northern Ireland fell sharply by 8.7% in 2011 but rose in London by 5.5%.

Not enough homes are being built. In 2011 just 107,000 new homes were built. The government has forecast that every year from 2013 to 2023 an extra 240,000 new households will be formed, mainly due to the growing population. This means upward pressure on UK house prices.

However house prices are not only determined by the balance of supply and demand, but by how much money lenders are willing to lend. If prices were to start falling sharply, banks would be even tighter and there would be less and less mortgages approved and therefore less completions.

There may be eventual increases in interest rates further down the line, and no return to the days of easy lending, mean that house prices will fall for several years to come.
House prices have to keep falling until they get back to long-term norms of about three or four times earnings, they are still about seven or eight times earnings – they still have a long way to go.

Is London special?
Central London has been an exception to the rule, along with prosperous parts of the South East. Here house prices  have rise in the past couple of years and are now back to their peak levels. Property prices in London rose by 5.5% in 2011
Firstly many of the new jobs created in the past year or two have been in this part of the UK.
More interesting though is wealthy foreigners who looking for a safe home for their cash by buying a flat or house in central London, as well as your expected Middle East and Asian Investors there has been a significant rise in investors from Greece and Italy who are desperate to get their cash out of their country.

The BBC did a survey among experts, listed below, as you can see not a single individual is predicting an increase.

Property price predictions 2012

  • Ray Boulger – down 4%
  • Bernard Clarke – “a broadly flat market”
  • Jonathan Davis – down 10%
  • Martin Ellis – “unchanged plus or minus 2%”
  • Robert Gardner – “flat to modestly lower”
  • Henry Pryor – down 10%
  • Simon Rubinsohn – down 3%
  • Ed Stansfield – down 5%

PropVestment UK property market House price summary

House prices are a result of multiple market factors, interest rates, mortgage availability and amount, demand and supply etc… from all the data analysed there is not an optimistic outlook for 2012. However there is always opportunity, I very much doubt any significant falls in the South East and London. A drop on prices else where means for affordability that may kick start the market. From an investors perspective rents are also a vital part to any investment so keep watch for the other parts in the series.
Overall prices probably will not rise much but won’t fall significantly either, worry is if the Euro collapses what will happen to our mortgage market? How will our banks react? This is in my opinion the most important factor to keep the market ticking over.

Sources:
http://www.propertywire.com/news/europe/rics-property-prices-uk-201112225903.html
http://www.bbc.co.uk/news/business-16288438
http://www.bbc.co.uk/news/business-16356568