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Stagnant UK Property Market: Buyers Perspective

It has been widely reported that the current market conditions are such with very low volume of transactions, falls in mortgage approvals, and an overall stagnation in the UK property market.

Stagnant

Nationwide reported that house prices rose 0.3% in April but are still down 1.2% on last year.

The number of houses sold in May was up 4.7% on the previous month’s figures and reached the highest level seen since May last year.
House sales were 2.0% fewer than May 2010 but significantly up 14.7% on May 2009 and 18.6% up on May 2008. The recovery was led mainly by activity recorded in the North of England and the Midlands. This is very encouraging.
There was positive news for the number of new ‘For Sale’ instructions received in May. In the UK they were up 1.7% eradicating the -0.5% drop seen in April.

It is important to analyse the factors causing this and the mind set of Buyers, and there finally seems some light at the end of the tunnel.

Just today the UK Base rate was held again at 0.5% for yet another month, all indications suggest that there will be no drastic upwards movement. Therefore many home owners and investors are content with staying with existing properties where they are enjoying very low interest rates often just a fraction over the base rate, if they were to sell off current properties and find new ones, it is almost impossible that they will be able to gain similar rates. They conclude it is better to stay put and use the extra savings to pay off capital rather than buy or sell into new properties.
However with such a low base rate saving rates are also very low, which with current inflation figures mean that real return is actually negative.

PropVestors are better placed to either put extra cash into paying off capital or reinvesting in property rather than having money thats losing money in ISAs or savings accounts.

Investors are seeing much better returns on rentals rather than the negative real return of having money in a savings account.

In other property news today it has been stated that rents in particular in Central London are expected to rise 8-10% in the year to come. Investors are well placed to get great returns. Current renters should also think about becoming FTBs (First Time Buyers)  to avoid high rent increases and instead use the low base rate to get on the property ladder. With these factors there should be upwards pressure on demand and property prices, so what is holding back the market?

The UK mortgage market is still very inactive, even though data is showing a recent increase, from our personal experience and that of our clients the lending criteria is very strict and stringent and only those that fall into a model profile, income base, age, and credit history are the ones where mortgages are being approved. Further to this the LTV (Loan to Value) is still surprisingly low in comparison to boom times.

PropVestment concludes that from a buyers perspective the primary factor why buyers are not as active as they would like to be is simply that the lending is just not available and with prices especially in the South East remaining so high. Even those lucky enough to secure finance, they just can not make the deposits needed to buy when the LTV offered is as low as it is.

LENDERS START LENDINGNext Week : Sellers Perspective
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FirstBuy – Does it help “PropVestors” or just another government gimmick?

  • First Time Buyers

    Help for 10,000 FTBs

  • Shared equity means, shared losses
  • Help only for a few FTB and only New Builds

What is it?

1. FirstBuy will be offered on selected properties across a range of new build schemes following an assessment of offers submitted by developers.

2. Eligible purchasers who need assistance to buy will be offered an equity loan of up to 20% of the purchase price. The equity loan will be funded equally by the HCA and the developer. Potential bidders should note that it is an absolute requirement of the programme that developers must provide matchfunding equity.

3. The maximum property price expected for FirstBuy is £280,000, based on the affordability assessment for purchasers.  On an exceptional basis, depending on location, a purchase price of up to £300,000 will be considered.  We expect that most bids will be for lower priced properties which will be favoured, taking account of location.

4. Purchasers will be required to raise funding, (a mortgage plus any deposit where available) of at least 80% of the purchase price. The buyer’s mortgage loan is secured as a first charge on the property in the usual way and ranks ahead of the equity loan charge.

5. Both the developer and the HCA will take an equal second charge over the property to secure their interest. The equity loans are secured as second charges on the property and are on an equal footing between the HCA and developers.

6. The form of equity mortgage will be prescribed by the HCA (and will follow the form of equity mortgage used for HomeBuy Direct, which is familiar to lenders and solicitors, and to the market).  Both the developer and the HCA will lend on the same terms.  The use of a standardised charge will simplify the conveyancing process, make the product more attractive to lenders and help with marketing the product to individuals. Each equity loan term is 25 years but repayment is required on sale of the property. Read more

How to be wary of ROGUE Brokers

PropVestment

Over the last few weeks some of you may have noticed the Sub Prime page disappeared from the site, as with every unusual occurrence there is an interesting story explaining it.

The story begins in early 2010 when I was trying to expand my business and needed some finance. I approached a broker (who now I can not name for legal reasons) who got one of my associates a very good deal and unsecured finance many times more, than the menial sum I was trying to raise using the  EFG, Enterprise Finance Guarantee Scheme.

So we went through all the usual protocols and credit checks and as promised I received a principle letter of offer, and I sent the broker his fees. The deal was a go.
If only business was this easy, and as I have been told many times, if it seems too good to be true, it probably is. When it came down to the nitty gritty and actually receiving the funds to complete my deal, the broker disappeared.  Numerous ways of contact failed, emails, calls to an office line, mobile, text messages and I even got my solicitor to write.
A few weeks of this and the vendor of the business I was trying to buy from understandably got frustrated, kept my deposit and sold to another prospective buyer.

Now I was in a real situation, No Deal, No Finance, No Broker.
I instructed my solicitor to proceed with legal action against the broker, after a few letters were sent and the broker emailed, with apologies and saying he will send my fees back once he’s back from holiday. That day never came, and soon I was advised by my solicitor not to proceed further as my legal costs were building up to similar levels of the fees.

Devastated and angry I felt that the business world had failed me, I even thought of reporting him to the FSA, but then found out they would be of no help as they do not regulate commercial brokers.
That’s when I was in the developing stages of this site, I thought wouldn’t it be great to advise all of you PropVestors, fellow Landlords and Investors about the best and worst people in the market from our experiences. This led me to set up “The Prime” and “The Sub Prime” section on the site.
Naturally I listed this broker in the Sub-Prime section. We do not want people like this in the industry.
Over time the Google spiders came crawling and found this broker’s details on the site and ranked PropVestment.com accordingly in their search rankings.

I received an email from this Broker about a month ago threatening the owner of the Site with legal action, at this point he did not know the owner was me. I spoke to my solicitor once more and he advised me to remove the content before this matter escalates and I’m forced to shut down the whole site.
Being the stubborn PropVestor I am, I decided instead to fight my cause and emailed the Broker saying that I would remove all specified contact as soon as I received my fees owed to me. After some deliberation and claims that PropVestment had caused him to lose deals in excess of ten times the initial fees and a Google search of number 4 when you searched his company. All searchers were being exposed to my claims of his dishonesty.  If I delisted the page he agreed to send the fees back.
Even at this stage it took his bank two weeks to send me the fees, I mean what bank in the UK when you are in the financial industry takes two weeks to send a small online transfer. This may be why his business is slow. So the unprofessionalism continued, but in the end I did get my fees back.

Pointers to take away:

  • PropVestors are not well safe guarded by the UK legal system against rogue brokers,
  • the power of the Internet is such that any individual can have a big impact.
  • So beware of who you upset and for those fellow PropVestors use the tools we have to make a stand.

PropVestment recommends Ash Shah of Crystal Financial Solutions, here’s what he advises:

“It is always beneficial to use an Independent Financial Adviser (IFA) and Independent Mortgage Broker. Not only will they obtain the best deal from you on the market based on your circumstances, they can also take away a lot of the hassle and headaches involved in transactions. Being professionals they know niches and can save you money.

Personal recommendations for advisers and brokers from friends and families go a long way….And if you do use one who has helped you, spread the word…We need more decent  IFA’s and Mortgage Brokers in the market.

 

Nirav Shah

Sites like www.ubiased.co.uk can help find the right professional.”

The Sub Prime section will be back soon, just awaiting legal advice to protect PropVestment, any help on this is welcome, email info@PropVestment.com and also send us your Prime and Sub Prime candidates.