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Stamp Duty

Stamp Duty changes: #AS2014

#SDLT (Stamp Duty Land Tax) has been totally reformed in the Autumn Statement by George Osbourne. First time buyers gain, and buyers of property over £937,500 lose out.

98% of people who will be paying Stamp Duty will pay less

Under the new rules Stamp Duty will follow a scale similar to income tax, with thresholds where the rate is due proportionally.

New Stamp Duty

What is the impact on First Time Buyers or regular home owners?

First time buyers will benefit. Under the new rules first time buyers will pay on average £400 less. The average price paid for a first home is £210,000. Under the old system the rate was 1% on the whole amount therefore £2,100. However under the new system only amount above £125,00 so ££85,000 is taxed at 2% totaling £1,700.

What is the impact on Property Developers?

For property developers the new is not so good. With so many sites coming in over the £1m mark, property developers will be hit hard. In Particular those in London and the South East where even the smallest sites come in over the £937,500 threshold from which point the effective rate is higher under the new system.

SDLT Autumn Statement

The critics are calling this move George Osbourne’s own engineering of the Mansion Tax. However this will definitely help smaller, less affluent families and most of all first time buyers. The upper end rates are really quite high and will impact small developers more, who operate on a smaller scale and rarely get other subsidies like the larger ones.

It must be noted that these rates and changes do not affect commercial property, therefore many developments may not be harmed that much.

Will this reduce or increase the net proceeds to the treasury?

In conclusion, this is a positive move by the Chancellor, it just waits to be seen how this translates for first time buyers and conversely with property developers in reality.

budget buying a property

Hidden costs of buying a property

Cost of buying a property go well beyond the deposit required

Many new buyers often make the miscalculation that the money they have saved up, is the amount they should budget for buying a property or putting down a deposit. There are many other costs that arise that new buyers should be aware of. Here are just a few examples.

Legal costs of buying a property

Legals fees are a must, remember you get what you pay for. Use a reputed conveyancing firm. Depending on the complexity of your deal typical costs could vary from £500 to £1000. In some cases you can get the lender to contribute to some of these costs, however beware that they do not cover this by charging else where.

Stamp Duty costs of buying a property

Considering very few property purchases are below the £125,000 threshold most people will have to pay stamp duty. This is a tax an is payable on completion, therefore must be budgeted into your calculations.

Purchase price of property Rate of SDLT
(percentage of the total purchase price)
£0 – £125,000 0%
£125,001 – £250,000 1%
£250,001 – £500,000 3%
£500,001 – £1 million 4%
Over £1 million – £2 million 5%
Over £2 million 7%

Source: https://www.gov.uk/stamp-duty-land-tax-rates

Check out this easy stamp duty calculator.

Survey costs of buying a property

Surveys can typically cost £400 to £800. This must be paid regardless if the purchase goes through, so do your own research before instructing a survey. Make sure the value stands up and the purchase is not too risky for the lender. Sometimes the lender covers the cost of the survey or adds it to the mortgage.

Valuation fees when buying a property

Mortgage lenders will charge a valuation fee, that can vary from £300 to £500. They sometimes cover the cost or give you the option to add it to the mortgage amount. Look at the fine print and get clarification.

Mortgage arrangement fees

Lenders have become smart and crafty. Often as the interest offered on a mortgage goes down, the arrangement fees go up. In reality this is a pointless fee but they do charge it. It can be over £1000 in some cases.

Moving costs & repairs

Moving costs if you are hiring help can run into over £1000 for a single day. Calculate how much you have to move and plan the move well.

When you view your property before completion check things thoroughly, the last thing you want is a boiler failing, the roof collapsing as soon as you move in.

How can PropVestment help?

budget buying a propertyWe can provide you with a walk through of purchasing a property and put you in touch with our preferred and vetted financial advisers, solicitors, and moving team. Contact us today for a no obligation chat.

Image courtesy of Stuart Miles / FreeDigitalPhotos.net
Mortgage Market Review

#MMR : How will the Mortgage Market Review affect you?

The Mortgage Market Review (MMR) was brought in by the FCA and is in practice from 26th April 2014. The aim is to avoid a repeat credit crunch caused by over and responsible lending in the mortgage market.

What is the Mortgage Market Review?

It means that Financial Advisers will not be able to provide services on a Non-Advise basis. All IFAs will need to hold a relevant qualification. This means there will be better qualified IFAs, and the lack of competition should make this service profitable and worth it for the best IFAs. Overall this is better for people buying property as they will get better advise.

For Lenders: They are now fully responsible for assessing someones ability to pay back a mortgage and affordability. Therefore they will scrutinise income and expenditure to the finest detail.

Mortgage Market ReviewFrom the FCA:

They will look at your spending in three categories:

Essential expenses

This is what you regularly spend on the things you cannot do without, such as:

  • food
  • household cleaning and laundry
  • gas, electricity and other heating costs
  • water bills
  • telephone
  • essential travel (such as travel to work or school)
  • council tax
  • buildings insurance (it is usually a condition of your mortgage that the building must be insured)
  • ground rent and service charges (for leasehold properties)

Basic quality of living costs

This is what you need to spend on occasional essentials, with some allowance for leisure costs, including:

  • clothes
  • household goods (such as furniture and appliances) and repairs
  • personal goods such as toiletries
  • basic leisure costs, including non-essential transport
  • TV licence
  • childcare

Repayments and other commitments

This covers other payments you know you will have to make, including:

  • debts you are paying off, like credit card bills, loans or hire purchase payments
  • child maintenance and alimony payments

The exact details you are asked for will vary between lenders, but you should expect to discuss your regular spending in all these areas.

MMR could be responsible for the surge in the housing market in recent months. Due to the fact that the lending process will be longer and more indepth, potential buyer will have rushed buying to get their transactions complete prior to these new rules coming in place.

What does MMR mean for Buy to Let?

It is still unclear if these rules are applicable for Buy to Let investments, especially as in most cases the loan to value is lower and mortgage payments are intended to be paid with the rental income.

Please comment if you have any further information in relation to Buy to Let impact.

Property Tribes has some interesting points here:
http://www.propertytribes.com/start-preparing-now-big-changes-coming-btl-lending-t-9621.html 

– Thanks Vanessa Warwick

Conclusion

Although the point of MMR from the FCA is to make sure mistakes of the past do not happen again it will damage the property market especially for those responsible lenders, IFAs and investors.

Immediately we will see a drop in market transactions and decrease in first time buyers on the market. The seasoned investors should remain mostly unaffected.

#Budget2013 : Help to buy – impact on UK property market

Will the “Help to Buy” scheme help home buyers?

Budget 2013 Help to BuyThe Chancellor, George Osbourne has announced the budget for 2013 and beyond. Overall the budget covers all aspects or work and life in the UK, however we are concerned with property.

The head line for property has been the “Help to Buy” scheme.

There are 2 options, one for new buyers and new homes only and one for all property and buyers.

The below options breakdown are provided by Zoopla blog on the budget

Option 1: Help to buy – Equity Loan

-Is it applicable to any property?
No, just new build only

-Deposit required?
Yes, minimum of 5% deposit

-Do I have to be a first time buyer?
No, this scheme is available to all, not just first time buyers

-How does it work?
The Government will lend you up to 20% of the value of your property through an equity loan, which can be repaid at any time or on the sale of your home…so you will only need to secure up to a 75% mortgage from a bank or building society. It is interest-free for 5 years

-When does it start?
The scheme is available from 1 April 2013. It will run for 3 years and provide £3.5billion of additional investment

Option 2 – Help to buy – Mortgage Guarantee

-Is it applicable to any property?
New build and existing homes

-Will I need a deposit?
Yes, you’ll need a minimum of 5%

-Is it only open to First Time Buyers?
No, it is also open to existing homeowners

-How does it work?
You’ll need to secure a mortgage for your purchase. The Government guarantee should help encourage lenders to offer better access to low-deposit mortgages

-When does it start?
Available from January 2014, this scheme will run for 3 years

-Is there a maximum purchase price?
Maximum value £600,000

 Other points from the Budget 2013:

  • Budget 2013 help to buy21 % corporate tax rate – potentially beneficial to buy rental properties into a company rather than private names
  • Encourage to convert unused commercial space into residential

London Mayor, Boris Johnson has also secured £750 million for new build housing in the capital. This will boost affordable housing for middle income Londoners.

Official details can be found here: HM Treasury – pages 38 & 71

PropVestment’s thoughts

Overall we believe that the budget is progressive for the UK Property market, however it could have done more. However it seems that Help to Buy is more universal and will help more of the population. It is now for us to see how it filters through in reality. Many other schemes like NewBuy and FirstBuy have been less successful

 

Contact PropVestment today for a chat, we advise on all property investment queries. Lets make money from property

 

Lending holding back property investment in London

Stringent lending stopping property investment

Property Investment stopped by lending

It has been a long standing observation that one of the main reasons the UK property market is struggling is due to the lack of funding in the market place.

We have had a series of funding schemes proposed by the government and other institutions to encourage property investment. These include the likes of NewBuy, FirstBuy, and Funding For Lending.

Funding for Lending is the latest scheme to encourage lending where the banks can borrow cheaply provided they lend it out to the public, be it as mortgages or commercial lending.

FirstBuy and NewBuy is primarily restricted to new builds, which benefit constructors but represent a very small proportion of the property on the market.

Over the last few weeks at PropVestment we have been working on a deal for a young professional first time buyer. However we have it a brick wall with strict, inflexible, non-subjective lending criteria by all the major lenders.

*Due to confidentiality and to protect our exclusive property sources, details on this article will be disguised
 

The investment property

Property Investment in Elephant & CastleLOCATION – Elephant & Castle – Zone 1 – London

  • Elephant & Castle has £1.5 Billion being spent for regeneration.
  • 2 mins walk to the London Underground and Bus stations.
  • Opposite the famous “Strata Building”

 PROPERTY

 

2 Bed Duplex in Ex-council block, currently under full refurbishment.

  • Each leaseholder has spent almost £40k for new concierge, lifts, windows
  • Elephant & Castle - Property next to Strata20th floor with views of London, from the Gherkin, Canary Wharf, O2,  Shard, all the way to Crystal Palace.
  • Large Balcony. Full wall to wall windows across all rooms.
  • 118 Year Lease

Rental expectation – upto £1500 per month currently. PropVestment predicts this will hit £2000 in 5 years. Strata building demands this level for smaller compatibles.

Asking price – £220,000

Gross Yield is over 8%

If lending 75% Purchase Price, there for deposit £55,000
If mortgage at 4% repayment over 20 years £1011 installment per month
Surplus for Buyer after mortgage £5868 per annum.
10.7% return on cash invested annually

 

The First Time Buyer

  • Mid twenties
  • £50,000 savings, plus £10,000 promised contribution from family
  • £40,000 a year salary before bonus.
  • Over £2000 monthly saving after expenses
  • City working professional, currently living with parents
  • Buying either to stay in and share or rent out fully.

Why the banks won’t lend?

  •  Ex-council
  • Concrete & Steel Construction

If the councils have approved a £40 million refurbishment of the block, clearly there is no risk to the building. Considering most of the block is still council owned they would not put so much of their own money in an unsafe building.

Being Ex-council ensures that maintenance is always prompt and reasonably costed.

The banks have very little risk here because the rental will cover the mortgage repayment by 135%, the usual criteria for Buy to Lets is currently 125%.
The buyer has £2000 disposable income every month, for any major shortfall or unforseen circumstance.

PropVestment’s Thoughts

After all this and almost a model buyer, why are the banks not lending?
Banks are given cash via the Funding for Lending scheme and still are not making it available to the public.

By the banks not lending, we, as in property professionals, end up having to offer such properties to cash buyers from abroad.
Ideally we want young property owners from the UK, however due to the circumstances the only investors that can afford to pay full cash are foreigners. This means that the profits also get taken out and do not recirculate in the UK economy.

The government must do something to ensure banks lend to boost UK home grown property investment.

For any property investment advise, analysis, deals or thoughts, contact us today for a no obligation chat. Sharing thoughts and ideas is how we progress.

 

UK property market HS2

#HS2 – High Speed 2 implications on the UK Property Market

UK property market HS2With the announcement of the HS2 today, there has been much in the media, with a lot of criticism. We at PropVestment want to focus on the implications of HS2 on the UK property market.

Economically this will create jobs and provided technology is sourced within the UK will benefit us in the long run.

In terms of the thousand or so homes effected, we believe they have been offered 110% the market value of their property prior to plans announced. Home owners have got a good deal, especially in some northern reaches where the UK property market is almost non existent as UK potentially drops into a “triple dip” recession.

How does HS2 effect the UK Property Market?

  •   HS2 impact on UK Property MarketReduce Pressure on London
    As commuting becomes easier with journeys under an hour from Birmingham to London, similar to a journey from Zone 4/5 to Zone one within London. Therefore many will choose to locate outside London. Benefiting from lower property prices and potentially larger homes.
  • Revival of Northern Property Markets
    As from locations will be commutable to the major cities and London. Hence more people will choose to locate in those towns, boosting house demand and rentals too. Landlord’s and investors will find these areas as more attractive places to invest. First time buyers and young professionals out priced by London have the option of settling in Manchester, Sheffield, Leeds or Birmingham and able to travel more easily.
  • Revival of UK Construction
    It is inevitable that there will be need for new home and in the areas surrounding the HS2. Primarily for the construction workers and secondary for the end users who look to make use of the HS2 rail link.

 

Where to buy UK Property Top Tip: Totan, Nottinghamshire

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First time buyers face scarce supple due to council property

London’s housing problem for First Time Buyers

Why First Time Buyers find it hard to buy in London

  • High Prices
  • Shortage of Properties
  • Difficult lending
  • SOLUTION – Sell council properties in Zone 1 & 2

This article discusses the various issues in the London housing market, addressing high property prices, housing shortages and high rentals. Linking these factors to the reasons why first time buyers are facing an uphill struggle.

I have lived in London my whole life and professionally work in the property industry with my company PropVestment. The aim is to provide information, analysis and property related services for investors. From my experiences in this field and from living in London my whole I make some observations.

First Time Buyers Problem:

Too high prices and shortage of properties

First time buyers should be able to buy ex- councilThe first thing that caught my eye this week was an article titled “London councils breaking B&B stay limit for families” on the BBC News website. The main thing I understood from this article is that Westminster council has broken the law by not housing 134 families into housing and not B&Bs within 6 weeks. The main take on the article as reported is housing shortage.
However, why are there so many demanding housing in Westminster, arguable the most expensive borough. Surely if you are in need of accommodation you should take or be given where available and not be given location preferences.

Read more

Property Investor London

London Property Market: McHugh & Co Auction October 2012

London Property market is active but tentative.
Investors want the right deal.

London Property MarketOn Wednesday 10th October, PropVestment attended the McHugh & Co Auction in London’s BAFTA with a client and prospective bidder. We observed some interesting trends from the lots and bidders.

There were a total of 32 lots, however only 19 were sold on the day or prior. So there was only 59% success rate. This shows that where sellers are keeping prices too high and investors are smart enough to hold back. This is contrast to a year ago when it seemed that almost anything was selling in the auctions. PropVestment wrote that auctions were for selling rather than buying. 

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October Below Market Value Property Deals

London Investment Property Deals : Below Market Value High Yield Properties

London Investment Property Deals

Dear PropVestor

With Autumn coming along there has been a slight revival of the property market, albeit not a substantial one.

Nevertheless being in touch with the right sources there is always a DEAL available for you. Here is a selection of investment deals for you, just a few we have on our books right now.

DEAL ONE: 2 x two Bed Maisonette in Enfield

Read more

PropVestment in Telegraph Property

Ex-council homes: how to buy a bargain – Telegraph

PropVestment mentioned in the Telegraph Property section: Why Council homes are a bargain

By  7:00AM BST 03 Sep 2012

A new proposal to sell off council housing in some of Britain’s best postcode areas could be a once-in-a-lifetime investment opportunity. It is no time for snobbery, says Graham Norwood.

Ex-council house in Essex

This 17th-century former hunting lodge in South Ockendon, Essex, used to be three council homes, and is today a six-bedroom house. It’s on the market through Fine (fine.co.uk) for £449,995.

It is one of the biggest property stories of the year, and an opportunity for bargain hunters like no other. When the Telegraph published an article about selling off council houses, by Neil O’Brien, the director of Policy Exchange, it had no idea what a storm it would create.

Last week’s report argued that if councils sold all the homes which become free in an average year, they could raise £4.5bn in revenue. This money would then be ploughed back into 170,000 new-build properties in cheaper parts of the country. The story provoked plenty of debate. Grant Shapps, the Minister for Housing, called the idea “blindingly obvious”. David Cameron said the proposal was “certainly something [councils] should look at”. Not everyone was happy: some Labour MPs warned that it risked creating ghettoes and ruining local diversity.

But aside from the political to-ing and fro-ing, what does it all really mean for homeowners? If cheap houses become available in some of Britain’s best areas, it could provide golden opportunities for canny investors. Certainly, it is time to end the snobbery and acknowledge the truth. Many local authority homes are fashionable, built to last and brilliantly located. For every hideous tower of cheaply built flats requiring demolition, there are spacious low-rise mansion blocks. These date from the public sector heyday of the Thirties, now considered retro-chic.

Then there are thousands of Victorian and Georgian houses, originally built for private sale. Councils bought them as part of grandiose regeneration schemes, many of which came to nothing. But a sprinkling of 21st-century TLC would return them to their former glory, or even better.

There are substantial profits to be made, as has been seen in areas where council properties have been sold in the past. Camberwell is a good example. A two-bedroom council flat bought here for £44,000 in 1994 recently sold for £214,000. During the intervening years, the area has come up in the world. Where once it was slightly grubby, it is now a fashionable village, home to the musician Florence Welch, as well as actresses Lorraine Chase and Jenny Agutter. If a new sell-off becomes policy, there may be thousands of homes coming on the market in the most desirable parts of the country. Often at bargain-basement prices.

In the London borough of Kensington and Chelsea, for instance, the average flat costs at least £967,000 and a typical semi-detached house costs more than £12.5m, according to Land Registry figures. Even in this salubrious enclave, however, a quarter of homes are categorised as social housing: owned directly by the council or through housing associations. In Brighton and Hove, there are similar opportunities. A typical detached house costs almost £461,000, and a flat will set you back £197,000. Yet one in every seven properties is in the social sector. Here and elsewhere, a sell-off would mean ex-local authority properties being marketed at prices lower than those for comparable private homes. There would be rich pickings, for those in the know.

“Even in prime condition, ex-council properties sell for 20 per cent less than a similar home next door because of the stigma,” says Geoff Tanner, a private property consultant based in Cambridgeshire. “If it is in poor condition, it could be 30 per cent less. The proposed sell-off would represent a great deal for buyers who get in quick.” Some councils are already encouraging tenants to free-up larger properties. In Devon, more than £700,000 worth of cash incentives have been paid to tenants. This has released 330 homes in areas such as Exeter, Plymouth, rural Devon and the coastal South Hams.


This one-bed, ex-council flat is in Drury Lane in Covent Garden. It is being sold for £437,000 through Chesterton Humberts.

Westminster Council, in central London, has set up CityWest Homes Residential, a service specialising in marketing council homes. Its website, cwhr.co.uk, advertises flats to rent in areas such as Bayswater and says homes for sale are “coming soon”.

With all this activity already ongoing, it’s no surprise that estate agents have greeted the prospect of a sell-off with open arms. They highlight the advantages of council-owned buildings compared with those which have been squeezed by the private market. “Council properties are often well-built with good-size rooms and communal gardens,” says Christopher Saye of Chesterton Humberts. “Red-brick period blocks don’t even look like council properties and generate plenty of interest. They are cheaper than comparable private developments, with far lower service charges.”

During the Eighties, Margaret Thatcher’s Right To Buy initiative allowed tenants to purchase their homes with a discount of up to 70 per cent, if they had lived there for two years or more. Many councils also offered 100 per cent mortgages to encourage buyers. The scheme boosted Britain’s home ownership level from 57 per cent in 1980 to 68 per cent in 2000.

But the sort of sell-off proposed by Policy Exchange would be even more dramatic. It would be an open field, with anyone entitled to buy the flats. Not just those already living in them. “It’s simply good asset management. Some local authorities do this already. We’ve sold properties in high-value areas at auction on behalf of authorities,” explains Yolande Barnes, head of research at Savills and one of Britain’s leading housing experts.

Clearly, there is no shortage of enthusiasts for the quality and good value offered in ex-local authority housing. Nirav Shah, 24, bought a three-bedroom apartment in Waterloo, central London, in 2008 when he was a student. “My father and I looked at lots of properties and none even came close to the former council flat for location, space or condition,” he explains. He now runs a property investment firm called propvestment.com. “I no longer live in the flat, but I rent it to other students. It has been let permanently since I left. Ex-council is a perfect investment,” he adds.

His apartment was one of many built to Parker Morris standards, a planning regime which until the Eighties imposed minimum sizes on public-sector architects and builders. Parker Morris stated that a one-bedroom council flat built for up to two people should have a minimum of 495 sq ft. Try finding that in a modern private flat today. The standards have even got a thumbs-up from London Mayor Boris Johnson, too. After taking office, Johnson promised to “re-establish space standards promoted by the visionary planner Sir Parker Morris”. He argued that this was the only way to “build for the long term. Buildings that people will want to keep for 100 years and not tear down in 30.” Space, location and value: the council-house dream seems almost too good to be true.

But while many are in favour of selling council homes, there are still issues to resolve. “One concern might be tenant displacement,” says Jennet Siebrits of CBRE, a consultancy advising developers and public bodies on housing. She fears new homes built with money from a sell-off would have to be in cheaper areas. “We would need careful analysis about which parts of the UK have the highest demand for social housing,” she says.

There are also concerns that moving council tenants away from their places of work could create pockets of unemployment, and ruin the mix of people which makes Britain so vibrant. Policy Exchange believes, however, that these short-term problems would be outweighed by the benefits of creating half a million new homes in three years.

So will it actually happen? With a Cabinet reshuffle imminent and a relaunch of the Coalition likely at this month’s party conferences, there is an appetite for radical initiatives. And no sector needs them more badly than housing. A boom of new construction would create homes for the needy and jobs for builders, as well as opportunities for people looking to get on the property ladder.

A social housing revolution may be just the economic shot in the arm the country wants. And for keen-eyed individuals, it could be the investment of a lifetime.

Buying an ex-council property: the pros and cons

Pros: 
Price – they usually sell at 20 per cent less than comparable private properties, says the Royal Institution of Chartered Surveyors.
Investment – ex-council houses are good for buy-to-let landlords wanting more for their money.
Location – ex-council property is often very central, perfect for transport and nightlife.

Cons:
Outside – tower blocks can look daunting from the street.
Communal areas – there can be disputes over charges and responsibilities if some flats in a block are publicly owned and others private.
Ceiling price – until the stigma dies, ex-council homes will sell at a discount compared to private homes.

Original article link http://www.telegraph.co.uk/property/9508685/Ex-council-homes-how-to-buy-a-bargain.html

OTHER MUST READS: PropVestment in Daily Mail