UK homeowners face future of shrinking properties as housing prices continue to rise

By Felicity Hannah
The latest property trend gives ‘downsizing’ a whole new meaning, but do we really want to live like this?

Life size: as prices get bigger, square footage is getting smaller... and smaller Getty

Us Brits may occupy some of the smallest spaces in Europe, but even a one-bedroom flat could soon seem spacious compared to what the future may hold for hopeful homebuyers.

One developer is taking the whole issue of limited space in our city centres to a new level with what’s been dubbed the “micro home” – a one-bedroom flat with a sliding wall so the owner can choose between one bedroom or two really tiny ones.


Inspired Homes, the firm working on the concept, pitches it as the solution for cash-strapped first-time buyers who need extra income from renting out a second bedroom, either for the mortgage, or to get them through the month after forking out in an eye-wateringly expensive market.

Designed for life?

We may each own more stuff today than ever before but Martin Skinner, chief executive of Inspired Homes claims these tiny spaces are likely to play a major role in the future of the British housing market.

“High spec, well-designed micro-apartments are growing in demand not just because they are more affordable but also because of the changing way people live,” he says. “For example, with growth of the sharing economy and more possessions like music and film collections stored in the cloud, it is now much easier to live in smaller apartments than it was in the past.”

Living loopholes

Tiny homes have long been touted as a solution to providing more affordable property but historically the government’s nationally described space standard made it difficult for developers to obtain planning permission, even when there was customer demand.

However, these space standards do not apply for office-to-residential conversions, meaning that home-builders have had greater freedom since 2013 when new rules came into force encouraging such developments.

And the housing White Paper published at the start of the year suggested the government plans to review current space standards as part of ensuring consumers are offered a wider and more affordable choice.

Providing greater customer choice is one thing but this could also be seen as the final slide towards a future in which first-time buyers are forced to accept homes so small that they couldn’t swing a kitten, even if they could afford to give up the floor space to a litter tray.

National issue

London and other big cities are of course particularly affected by shrinking home sizes, thanks to the limited space and almost unlimited property values. Buyers may well prefer a micro-home if the other options are limited to paying rising rents to live in someone else’s property or moving out of the city altogether.

But this isn’t just an urban problem. One study carried out by the University of Cambridge recently found that 55% of UK dwellings fall short of the accepted internal space standard.

In fact, the UK has the smallest homes by floor area in Europe; the average newly built home here is just 76 sq m compared to 137 sq m in Denmark.

The Royal Institute of British Architects (RIBA) has warned that more than half of new homes are being built to a scale too small for families to live in, describing them as “tiny, rabbit-hutch new-builds”.

Jane Duncan, president of the institute declared in 2015: “We urgently need new homes, but building small homes or cutting corners when converting office buildings to flats is short-sighted and fails the people these new homes are meant to serve.

The government must take action to ensure a fairer minimum space standard is applied to all new homes across the country.”

Instead of acting to enforce minimum standards as RIBA demanded, it seems the government is willing to consider doing away with them altogether.

Does it matter?

It could be argued that we need to get real. Space, particularly within cities, is at a premium. And, while Halifax figures suggest that the housing market is beginning to cool, supply issues are likely to ensure prices do not fall far.

So maybe new buyers need to accept smaller homes in order to get a foot on the rung of the housing ladder. Some ministers certainly seem to think so.

In October last year the housing minister Gavin Barwell told the Conservative conference that relaxing the rules on the size of new-build flats could help prevent young buyers from being priced out of the market.

“Now look: most people, given the choice, would like to live in a nice big home,” he admitted. “But I think for many young people – if I was 22 today, I would rather have the chance to own that than be priced out.”

However, some academics argue that space is not simply a ‘nice to have’ optional extra, it is fundamental to our wellbeing.

“A lack of space affects quality of life,” concluded the Cambridge report. “As well as simply allowing people to have a comfortable standard of living, additional space can also reduce stress by allowing members of the same household to engage in different activities at the same time, and ease feelings of claustrophobia experienced in small spaces.”
Desperation is never a good look for buyers but the property market is so seriously undersupplied that there’s huge competition for the new homes available.

That doesn’t just drive up prices; it can affect standards as well. Recent months have seen concerns expressed over some of the major builders’ quality and the selling of leaseholds to investment companies that force up ground rents.

The fear now is that adequate space is yet another standard that will fall by the wayside if the UK keeps failing to build the number of homes we need.

http://www.independent.co.uk/money/spend-save/uk-homeowners-smaller-properties-prices-rise-housing-marking-future-downsizing-a7739926.html

Where to buy in Hertfordshire:four villages for London commuters, with good schools and 30-minute journeys to the capital

By Ruth Bloomfield
Great transport links, grammar schools and good-value family homes make Hertfordshire a sound lifestyle investment.

The top-performing towns and villages in the lovely county of Hertfordshire share one huge advantage — great transport links. A new study today finds the areas that have seen the greatest price growth over the past five years are those where the commute into London is half an hour — or even less.

The research by Savills analysed the property price performance of every Herts town and village within a maximum 65 minutes’ travelling time of central London, and found many journeys shorter than travelling in from Zones 3 and 4. Leading the pack is Chorleywood, a slightly suburban sort of village just beyond the M25, at the tip of the Chiltern Hills.

CHORLEYWOOD

Average home prices in Chorleywood have increased by 53 per cent in the last five years to £749,806. The village is just on the Tube network, with rush-hour Metropolitan line trains to Marylebone taking 31 minutes. An annual travel card costs £2,616 — comparatively modest by commuter standards. There are several good primary schools, along with the Ofsted “outstanding” St Clement Danes School for seniors.

Adam Salem, manager of Hetheringtons estate agents, says Chorleywood is not a chocolate-box village, “but it does have a real sense of community. People get involved in the schools, in the summer fête. And the country pubs are lovely. The Gate is the locals’ favourite.”

Buyers should expect to pay from £900,000 for a four-bedroom post-war house, or about £550,000 for a two-bedroom Victorian cottage, Salem says. “We have just sold to a family who got £700,000 for their London flat and were able to buy a big a four-bedroom house at just over £1 million.”

TRING

The market town of Tring is another strong performer. Average property prices have expanded 52 per cent in the last five years, to £481,851. Trains from Tring to Euston take 37 minutes, and an average season ticket costs £4,060.

£600,000: a four-bedroom cottage in Henry Street, Tring, with a private rear garden. Brown & Merry (01442 738 033)/

This affluent town has a predictably strong crop of primary schools and popular Tring School, for seniors. Parents with brainy offspring are within catchment for the grammar schools of Aylesbury, and would-be stars of stage and screen could audition for the independent Tring Park School for the Performing Arts.

Caroline Murgatroyd, director of Hunters estate agents, says families can enjoy the many lovely acres of the National Trust-run Ashridge Estate, teeming with bluebells at this time of year. She finds the typical Londoners arriving in the town are “couples with kids about to start school” who often lived in north London. “Tring is like a mini Crouch End,” she explains.

They could buy a four-bedroom detached house from about £600,000 or a period Victorian villa of a similar size for between £750,000 and £800,000.

WELHAM GREEN

Just south of Hatfield, Welham Green has equalled Tring’s price performance, with prices also up 52 per cent to an average £325,937. Its nearest primary school is North Mymms which “needs improvement”. There are other options in neighbouring Brookmans Park, while Hatfield is a good choice for senior school pupils. Trains to King’s Cross take 37 minutes, and an annual season ticket is £2,368.

£650,000: a three-bedroom cottage in Walton Street, St Albans, part of the Bernard's Heath conservation area, Hamptons (01727 629 096).

ST ALBANS

Perhaps Hertfordshire’s best-known commuter destination, St Albans has also performed well with price rises of 49 per cent to an average £565,239. This lovely cathedral city, with its boutiques, restaurants and bars, great schools and buzzing town centre, is ever-popular thanks to its 19-minute rush-hour commute to St Pancras International. Season tickets are priced from £3,380.

http://www.homesandproperty.co.uk/property-news/where-to-buy-in-hertfordshire-four-villages-for-london-commuters-with-good-schools-and-30minute-a110506.html

Get the airy, industrial look with Crittall windows at home

By Tory Kingdom
November 21, 2016

Bakery Place, a former Victorian bakery in Battersea (prices from £625,000 with Savills) CREDIT: DAVID BUTLER

The most common feature of modern property design in recent years has undoubtedly been the open-plan layout: the desire for large multi-functional spaces flooded with light rather than smaller, separate rooms. There is, however, a limit to the number of walls that can be demolished before your home starts appearing like the Tate Modern’s Turbine Hall. Appealingly spacious? Yes. Liveable in? Perhaps not.

This is why traditional Crittall is staging a comeback – and not just as windows, but as walls and doors too. Developers, designers and canny home owners are using these steel-framed partitions to create floor plans that feel both light and inclusive but retain an element of separation.

The sturdy, slim-profile frames, as well as looking rather good, tap into the current trend for all things industrial. The manufacturing technique was introduced in the mid‑19th century when Sir Henry Bessemer developed a process for hot-rolling steel. It was in 1860 that Francis Henry Crittall, an ironmonger in Essex, first used this method to create steel-framed windows. Crittall was trademarked and continued to expand into manufacturing in the United States, China and Europe.

A home in Islington designed by architects Blee Halligan CREDIT: ROB B

The strength and durability of the metal frames trumped traditional wooden ones for industrial buildings. The malleability of the alloy also meant that, by the Thirties, Crittall was being used in a variety of different buildings, adapting to more innovative art deco and cubist designs.

Crittall was used on the Titanic and can still be found in the Houses of Parliament and the Tower of London. The look is by no means new. But it is enjoying a moment back in the spotlight, as is evident from a number of refurbishments and developments. At Bakery Place, a former Victorian bakery in Battersea (prices from £625,000 with Savills) a Crittall-type system has been used to divide spaces and create rooms within rooms.

“You can go into studies or other rooms that are entirely steel-framed and get some peace and quiet. But you’re still part of the flat and you still benefit from the natural light that flows through the space,” says Will Hermann, the developer behind Bakery Place. “You can zone things without locking them away.”

In a four-bedroom house in Pavilion Road, Knightsbridge, on the market for £5.25 million with Knight Frank, a Crittall screen separates the entrance hall and the kitchen/dining room. This works well, says Hermann.

Crittall enclosed courtyard in a Chelsea town house, for which Knight Frank is asking £37.5 million

“You have a space for hanging coats and putting away shoes, but you still get that feeling of walking into a large, open-plan space when you walk through the front door.” The buzzword for layouts like these in development terms is “broken plan” – not open but still segmented in some way.

As well as being used practically to delineate spaces and allow for a greater flow of light, steel-framed constructions are being adopted as a design feature. French doors can be replaced by Crittall walls for an art deco aesthetic and installing steel windows can create a more urban look. A Crittall construction can even be used as a shower enclosure to create a feature in a bathroom.

“Crittall references a more interesting property that might have had a previous life as a factory or an industrial building,” says Dara Huang, founder of Design Haus Liberty, a design and architecture practice based in Clerkenwell, who frequently uses Crittall in her work.

Of course, in Clerkenwell and other once industrial areas of London, original versions of the feature can be found in abundance. Savills is selling a former Victorian warehouse in Shoreditch for £2.5 million. Its authentic steel-framed windows and doors, combined with its open layout and exposed brick walls, will no doubt form a large part of its appeal.

A Crittall roof lets in the light in a north London extension designed by Blee Halligan Architects CREDIT:  ROB BATTERSBY

Modern London’s love affair with loft conversions and warehouses has contributed to the popularity of the feature elsewhere. In a less likely setting – a £37.5 million town house in Cresswell Place, Chelsea, for sale with Knight Frank – a Crittall frame has been installed around a courtyard at the centre of the house.

The design trend is unlikely to fall out of favour anytime soon. Striking but minimalist, the look complements other trends, from mid-century modern to Scandi-style, both of which show no sign of abating. What’s more, the architectural feature has good eco-credentials, with recycled steel being widely used in production. Whether in windows or partitions, it is also strong, durable and thermally efficient.

“Young buyers and even the older generation of home owners who appreciate the idea of a less traditional, more inclusive way of living are drawn to this look and feel,” says Huang.

“Crittall is not only practical but looks great. It’s lasted this long behind the scenes. I think we’re likely to see more and more of it.”

http://www.telegraph.co.uk/property/uk/get-the-airy-industrial-look-with-crittall-windows-at-home/

Is Buy-to-Let still "worth the candle"?

Despite the government’s insistence that it wants to “create a bigger, better and safer private rented sector”, it would seem pretty obvious to any casual observer that things are going to get a lot more difficult for the small-scale buy-to-let landlord in the future. 

With a whole host of new regulations affecting safety and tenant evictions in England, punitive tax changes and restrictions on mortgage approvals, you would be forgiven for concluding that the aim is to discourage investment in rental housing, not the reverse 

Despite this, in the run-up to the end of the tax-year, buy-to-let has seen investors confound expectation by rushing in to snap-up rental homes before April’s buy-to-let stamp duty changes – the 3% surcharge the Chancellor has placed on all buy-to-let and second home purchases. 

Estate agents across the country have been reporting a huge appetite among buy-to-let investors to buy-up property before the new surcharge comes into force on the 1st of April, and this has been the case throughout an unusually buoyant December and January market. The Council of Mortgage Lenders (CML) figures show a significant increase in the number of buy-to-let mortgage loan applications. 

The British Bankers’ Association (BBA) Chief Economist Richard Woolhouse has said that the volume of mortgages approvals is up 27 per cent year-on-year. “

The start of the year has seen a significant rise in mortgage borrowing. It seems that this has been driven, in part, by borrowers wanting to get ahead of the increases in stamp duty for buy-to-let and second home buyers scheduled to come into effect in April” Reflecting the government and the Bank of England’s concern about the volumes of buy-to-let lending amid fears over a new UK property crash, a new report from the Bank will assess ways to rein-in this booming landlord lending market. 

The Bank has been watching and reporting on the buy-to-let market for some time as it is increasingly concerned about the amount of money being pumped into the market and its effect on the lending banks’ vulnerability should there be even a small increase in borrowing costs. Threadneedle Street’s regulatory arm, the Prudential Regulation Authority (PRA), has published a report on underwriting standards for buy-to-let mortgage lenders alongside scenarios for testing the financial strength of Britain’s banks. The Bank is concerned that lenders have relaxed their standards for landlords, creating conditions for a property crash. Potential measures to rein in the market include limiting the percentage of buy-to-let mortgages for each lender, tightening the terms of such mortgages or forcing lenders to use more capital for their loans. The Financial Policy Committee (FPC) reporting this week said: “The FPC remains alert to potential threats to financial stability from rapid growth in buy-to-let mortgage lending.  The outstanding stock of buy-to-let mortgages has risen by 11.5% in the year to 2015 Q4.  

The macroprudential risks centre on the possibility that buy-to-let investors could behave pro-cyclically, amplifying cycles in the housing market, as well as affecting the resilience of the banking system and its capacity to sustain lending to the wider real economy in a stress.  The FPC welcomes and supports the Supervisory Statement issued by the Board of the PRA to clarify its expectations for underwriting standards in this market, including guidelines for testing the affordability of interest payments” Although the FPC thinks “growth of buy-to-let mortgage lending is likely to slow in Q2 as changes to stamp duty take effect”, future restrictions are likely to include a loan-to-value (LTV) cap (most are in the region of 60% though up to 90% has been recorded), debt-to-income limits, where landlords could face tougher assessments of their own finances (income) before being granted a buy-to-let mortgage, rather than just on the property value, and rental income covering 125 per cent of interest payments, and a restriction on overall lending limits – the total amount of buy-to-let mortgages the lending banks are allowed to hold on their balance sheets. 

The bank will want to make sure that lenders do not become too exposed to the rental market, given that it believes landlords are more likely to face financial distress and sell their properties than owner-occupiers in the event of economic instability, and it would want to make sure that landlords can still make their repayments should interests rise to a theoretical norm of 5.5% From a slow start twenty years ago, buy-to-let grew to provide double-digit returns for investors, when in a low interest environment alternatives were sparse – it outperformed all major asset classes over the past couple of years, with average total annual returns from buy-to-let around 12 per cent in 2015. But, as the saying goes, what goes up must come down: clouds on the horizon point to the growth phase of buy-to-let investing coming to an end, at least for the time being. 

The silver lining for landlords perhaps is that demand for renting still keeps on rising as it’s still almost impossible for a large proportion of the younger population to buy. The Association of Residential Letting Agents (ARLA) report that “In February, demand for rental properties grew to an average 37 per letting agent branch – the highest since February 2015, as supply increased marginally… Over half of UK letting agents believe the new buy-to-let stamp duty reforms will push up rent costs” Some of the other changes which will affect the profitability of buy-to-let in the future include: Tax relief on mortgage interest allowable will no longer be treated as an expense item of the property but as a reduction on tax liability, reducing over four years to a maximum of 20% of... the interest payable. The effect of this will be that landlords will be trying to keep their income including rent and other sources within a tax threshold boundary. The 10 per cent Wear and Tear tax relief for landlords who rent out furnished homes will be abolished from 1st April, which means landlords will no longer have the annual 10% reduction but will claim for the amount that they have actually spent. A change to Capital Gains Tax (CGT) rules means buy-to-let landlords will, from April 2019, have to pay CGT due on a sale within 30 days, rather than waiting until the end of the tax year, as they do at present, and the reduced rates of CGT (10% on the 18% & 28% rates) announced in the March 2016 budget will not apply to rental property sales. 

Add to all this the tougher rules on health and safety; smoke and carbon monoxide alarms, legionella risk assessments, the new Right to Rent, and the new Section 21 regulations, plus the “retaliatory eviction” legislation for buy-to-let, and it becomes a less attractive proposition than it was. However, given the continuing healthy demand for renting and returns likely in rental property for the foreseeable future, changes will not necessarily spell the death knell for buy-to-let; they will however demand a methodical approach to managing buy-to-lets profitably. But higher and additional rate taxpayers who acquired highly geared portfolios of buy-to-lets will as a consequence of the tax changes have to pay quite a bit more tax. 

The overall effect could be to cool the market as the government appears to want; it could benefit the smaller investor in buy-to-let as more properties come onto the market and letting agents may feel the effects as more landlords decide to save by managing their own properties. As with all changes in the economy, longer terms effects are hard to predict. But if the changes prompt a proportion of landlords decide to exit the market, and/or deter others from entering it, then fewer buy-to-let properties will be available to meet the demand. The inevitable result is an increase in rents as the supply / demand situation reaches a new equilibrium. The changes outlined above will undoubtedly change the structure of the market, particularly in the short-term, but many experts are predicting that it will return to normal in short order as landlords adjust to the changes; this is especially if investment returns continue to look attractive relative to other asset classes. 

The prospects of higher rents and continuing house price growth, with a resulting supply-demand imbalance in the market, should mean that capital returns will remain attractive. Even with a significant rise in interest rates it is expected that buy-to-let returns will still look attractive and could easily outperform ISA savings accounts. There will still be opportunities in this market if investments are made using sound investment criteria: although many landlords have found themselves in something of a bind, claiming they will lose vast sums of money, perhaps one might question their approach placing so much on trust and taking on risk, and it leaves open to question the true viability of their investment strategy. 

The projected increasing tax allowances will help those in the lower rate tax band, but it is clear that individual landlords in the 40% and 45% bands will pay more tax as a result of this change. Some in this situation may consider setting-up a company for their property investments, and indeed it has been reported that a growing number of landlords are doing so. Such a move could potentially halve a higher rate taxpayer’s tax bill as they will then pay corporation tax, rather than income tax, which is to be 19 per cent from 2017, and falling to 18 per cent by 2020. Income can also be taken out flexibility as a wage or via dividends, and this may suit some taxpayers allowing them to protect their personal allowances. 

There are of course other implications to transferring existing properties into a corporate structure such as stamp duty and CGT liabilities and tax on dividends. Incorporation is not going to be the right choice for everyone, but for some it will be a good solution. Seek professional advice before making any decision on this. 

There are estimated to be around two million landlords in Britain own something like 4.6 million rental properties worth just short of £1 trillion. This represents 20% of the country’s private housing wealth and rivals major industries in size. The government and the Bank of England want to cool the market yes, but rental property is too important to the economy for them to want to “kill it” as a viable enterprise; ultimately, bricks and mortar will remain a safe long-term investment, even if these changes bring about a short-term up-set in the market.

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