Thursday, 31 March 2016

Which home improvement can add nearly £60,000 to your home?

It's not just the property's location that matters, according to Nationwide.

What's the latest?
Adding an extra bedroom and bathroom onto a property can boost its value by nearly £60,000.
According to Nationwide, these two extra rooms (built as an extension or loft conversion) can add more than 20% to a home's market value. And with the average UK home currently worth £290,919, according to Zoopla, that's a total of £58,183.
Extending a home by an extra bedroom alone can add more than 10% or £29,091, while just an extra bathroom can boost a property's value by a typical 5% or £14,545.
The figures are built on the Nationwide's estimates that a 10% increase in floor space, all things equal, adds 5% to the price of a typical house, while adding space equivalent to a typical double bedroom (to a two-bedroom house) can add around 11% to its value.
Why is it happening?
Robert Gardner, Nationwide’s chief economist said that many householders buy properties they intend to grow into over time as their families expand and - given demographic trends - tend to remain in that home after their children have grown up and flown the nest.
In terms of the impact on the home's value, he explained: "Having more useable space is generally thought to be consistent with better quality accommodation and people are prepared to pay for it."
Loft conversion in Bristol.

Who does it affect?
It’ll catch the eye of all homeowners looking to add value to their properties, in particular growing families in need of more space but keen to avoid the high costs of moving.
Sounds interesting. What's the background?
Gardner added: “Location remains key to house values, but other factors such as the size of the property, including the number of bedrooms it offers, are also important to homebuyers. Home improvements that increase floor area, such as an extension or loft conversion, remain a good way to add value."
Value added2 bedroom to 3 bedroom3 bedroom to 4 bedroom
Terraced10% 10% 
Detached 9% 
Homeowners lacking either the budget or inclination to extend can make their property more attractive by improving its energy efficiency, says Nationwide. Since 1996, the proportion of households with double glazing has soared from 30% to 81%.


Wednesday, 30 March 2016

UK house prices: Oxford, not London, is Britain's least affordable city, according to new study

Shock news from Lloyds Bank: London is not the UK's least affordable city.
An affordability survey by the bank, comparing average house prices with average gross annual earnings, places the capital behind Oxford and Winchester.
The average price of a house in Oxford is £364,429, which is 10.68 times average earnings. Lloyds attributed Oxford's high score in part to its “attractiveness to commuters working in London”.
London's figure was 10.06, but Lloyds said this “disguises considerable variations across the capital with central boroughs being significantly less affordable than the Greater London average”.
And the research found that London has experienced the highest house price growth, with a rise of 53 per cent during the last five years to £437,825. This is ahead of Salford (48 per cent) and Cambridge (46 per cent).

The most affordable city in the UK was found to be Londonderry, Northern Ireland, with the average house costing £113,302, 3.8 times the gross average annual earnings.
The average UK city house price has risen eight per cent, from £196,229 in 2015 to £211,880 this year, Lloyds said. Over the same period, Lloyds Bank's average affordability figure has grown from 6.2 to 6.6.
Andrew Mason, Lloyds Bank mortgage products director, said: “House price rises in the past three years have risen more steeply than average wage growth, making it more expensive to buy a home in the majority of UK cities.
“This has also widened the North–South divide, as house prices in the South have generally seen stronger growth than in the North. Winchester has recorded the biggest gains over the past decade, whilst London, not surprisingly, has seen the largest growth during the economic recovery of the last five years.”
William Turvill is a reporter for City A.M., covering M&A, deals and investment, as well as media and more [..] Full profile

Lenders are charging higher interest rates for development loans for London luxury homes as slumping commodity prices and increased taxes deter overseas buyers, fueling concern the market is oversupplied.
Debt funding construction of the costliest homes has increased by about 75 basis points to 3.75 percentage points over benchmarks since January, said Randeesh Sandhu, chief executive officer of residential development lender Urban Exposure Real Estate Plc. For large projects in central London, financing costs have risen the most since 2012 over the past six months, said William Newsom, a senior director at broker Savills Plc. A basis point is 0.01 of a percentage point.
“Everyone is freaking out,” Sandhu, whose firm has loaned close to 1 billion pounds ($1.4 billion) to developers, said in an interview. “There has been nervousness for a while in the super prime market and there is also now nervousness in prime."
Developers are constructing or plan to build about 54,000 homes in central London, according to data compiled by researcher Lonres last year, just as demand and values fall. Home prices in the U.K. capital’s best districts fell the most since June 2009 in the six months through February, according to broker Knight Frank LLP, as higher stamp duty sales taxes and turmoil in financial markets deterred buyers. The stamp duty for a 7.5 million-pound residence to be used as a second home is now more than 1 million pounds.

‘On Its Knees’

The sales market for homes valued at 2,500 pounds a square foot or more “is on its knees,” said Mark Posniak, managing director of Dragonfly Property Finance, a lender which has advanced almost 2 billion pounds to borrowers since 2008. “When you start talking about stamp duty going over 1 million pounds on a property, it cripples the market.”
Dragonfly is now avoiding financing the development of the largest and the most expensive luxury homes, Posniak said in a telephone interview. It has also reduced the amount it will lend for the construction of a luxury homes project from around 85 percent to 80 percent, he said.
Pluto Finance (UK) LLP, the specialist high loan-to-value lender backed by funds managed by Blackstone Group LP, has avoided advancing credit for projects in central London since 2013 because of oversupply fears and the market’s dependence on overseas buyers, co-founder Justin Faiz said in a telephone interview.

‘Brexit’ Threat

“The mainstream lenders appear to be very cautious and I think with ‘Brexit’ on the horizon no one wants to push the boat out too far,” said Dragonfly’s Posniak, referring to the U.K.’s vote in June about leaving the European Union political bloc.
Land values in central London’s best districts fell 0.2 percent last year compared with a 24 percent gain in 2014, according to Knight Frank. Sales of homes under construction in the U.K. capital dropped 19 percent to about 5,216 in the fourth quarter from a year earlier, data compiled by researcher Molior London Ltd. show.
Average interest rate margins for U.K. housing developments fell to 381 basis points from 453 basis points in the 12 months through June, according to a survey of lenders by De Montfort University.

Reduced Appetite

Some U.K. banks have a reduced appetite for development loans because they are required to hold significantly more capital against that type of credit compared with investment property, said Ion Fletcher, finance policy director at the British Property Federation. 
Barclays Plc is continuing to lend to high-end developments based on each project’s merits, said Brendan Jarvis, a managing director and head of real estate for Europe, the Middle East and Africa at the bank. Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc declined to comment.

At least one small lender views the reduced competition as an opportunity. Fortwell Capital, a company backed by Christian Candy’s CPC Group Ltd, is hiring three staff to lend money to the luxury residential development market, according to spokesman Bob Burgess. Candy developed the One Hyde Park apartment project in Knightsbridge as part of a venture with closely held Waterknights.


Monday, 28 March 2016

Sunday, 27 March 2016

Progressive Property's MSOPI: The Gateway to Financial Freedom

Have you been to one of Progressive Property's MSOPI event? Let me know your thoughts.

What the Budget means for property

Property developers and landlords

The Chancellor previously announced two measures which caught investors by surprise but there were no further kicks in the teeth this time around.
Firstly, the cut to mortgage tax relief (relief they can claim on mortgage interest will be set at the basic rate of tax – currently 20%) and secondly the 3% stamp duty surcharge on investment properties and second homes from April 2016.
Although landlords will be subject to higher tax payable on their rental profits, it is unlikely that the above two measures will significantly affect the buy to let market as property investors main objective is to invest for longer term capital growth.
More welcome news for commercial property investors is that the Chancellor announced a reduction in capital gains tax rates from 28% to 20%. Whilst this will not apply to residential property, the sale of commercial property will now be taxed at the lower rates and this will undoubtedly mean a surge in commercial property sales.

For those purchasing commercial property, the stamp duty rates will change with effect from midnight tonight (subject to transitional provisions) which will mean that although the highest rates will increase to 5%, the method of calculating it includes the lower bands. A good incentive for individuals, as well as companies, to invest in commercial property.
Good news for landlords wishing to rent out homes via the internet as they will receive a £1,000 tax free allowance.

Business rates

The changes to business rate thresholds will mean local authorities and landlords can be more competitive and flexible to attract investment. Businesses will be more likely to want to move and upgrade their premises as their business expands.
In addition, commercial property investors should welcome this change as there is less likelihood their tenants will struggle to pay these bills.

Annual Tax on Enveloped Dwellings.

There was no further update on the simplification of the administration of ATED, in particular for property businesses eligible for reliefs.
ATED (Annual Tax on Enveloped Dwellings) was first announced in the 2014 budget to tackle tax avoidance and to ensure that those wrapping residential property in corporate and other ‘envelopes’ and not using them for a commercial purpose, such as development or renting them out, pay a fair share of tax.
Although there are reliefs available where residential properties are being used on a commercial basis, the administrative and compliance costs of filing the ATED returns will still be extremely onerous to many.

Capital gains tax

There was no further information provided such as whether there will be any reliefs for capital losses made prior or after the disposal, whether the annual exemption will remain unchanged and able to be utilised. In addition there is still a question mark as to whether any capital gains tax paid will be able to be reclaimed in the future once the final tax returns have been submitted and if there are available losses.

Stephanie Levin is a partner at Shelley Stock Hutter