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The latest property news from Pygott & Crone
Welcome to our first newsletter of the year! We thought it would be great to kick things off with our property market predictions for 2020, which looks to be a strong year!
Next we share our knowledge on shared ownership as an option for first time buyers and provide an update on the abolition of section 21 evictions. Further on, we look at what it takes to become a buy to let landlord, and end on how to prepare your property for a 2020 sale. We hope that you enjoy this months edition!
Multiple gold awards won at the annual negotiator awards
We are delighted to announce that a very successful year for us has been recognised at the annual Negotiator Awards, the property event of the year. We were shortlisted in four categories and are delighted to have achieved three gold awards. Click here to read Multiple gold awards won at the annual negotiator awards .
Property market predictions for 2020
Now that 2019 is over, it is time to look to the year ahead and what is expected to be a strong year for property. Now that there is a majority government and uncertainty around Brexit seems to be assuaged, the outlook for 2020 is strong – read on to see what’s in store.
2019 proved to be a year of resilience for the property market, with prices maintaining steady growth, and a resurgence in the first-time buyer market evident for all to see.
The first key factor in property and the wider general economy for 2020 is, of course, Brexit. With the Prime Minister’s Brexit deal now passed by MPs, the UK is due to leave the EU at the end of the month with a withdrawal agreement – effectively meaning there will be a transition period as the UK truly cuts its European ties until 31st December this year. For property, this means additional certainty – with a majority government and a conclusion to the Brexit saga, buyers and sellers who have been hesitant to enter the market are predicted to jump in, creating something of a surge.
Kate Faulkner, housing expert and founder of propertychecklists.co.uk, says: ‘One of the things that has held the market back over the last 12 months is the uncertainty of Brexit and latterly the election.
‘Now both of these questions are settled and as people have ‘hung on’ for some time, it is likely there will be a bit of a Brexit bounce in activity at the start of 2020. As a result, I would expect more people to put properties up for sale and more buyers coming into the market. In some areas this may result in a short term rise in prices as people compete for quality properties in good locations which are likely to still remain in short supply.’
Widely predicted to be announced next month, the government’s Budget statement will have a steer on the property market for both sales and lettings. We have already had an idea of what is in store thanks to the Queen’s speech in which there were allusions to a stamp duty surcharge to overseas buyers, first-time buyer incentives and further lettings legislation reforms. With the Budget predicted to be announced in February, this could be a catalyst to further spring activity in the property market.
In terms of the lettings market, 2019 proved to be a key year with new legislation introduced, most notably the Tenant Fee Act. Throughout last year we saw the demand for rental properties growing, however the supply being somewhat limited which presented landlords with the ideal opportunity, as long as they are adhere to the new legislation.
David Cox, chief executive of ARLA Propertymark, said “Looking ahead to 2020, we hope the Government recognises the importance of increasing supply for tenants and uses it as an opportunity to make the market more attractive for landlords. This will encourage more landlords back into the market as well as ensure that tenants, including those who are most vulnerable, are not at a disadvantage in being able to find a suitable and affordable home to rent.”
Another key player in the health of the property market this year will be mortgage rates – in 2019 we saw record levels of first-time buyer mortgages thanks to a greater selection of available mortgages and rife competition amongst lenders. If we see these favourable rates continue this year, then the first-time buyer sector can be expected to endure and potentially even grow thanks to the forecast influx of available properties, providing more choice.
Overall, 2020 is set to be a more fruitful year for property thanks to the greater levels of political stability and the continuing favourable mortgage rates and saving schemes.
Young people and shared ownership
With the wealth of options out there to help people onto the property market, it is no surprise that the number of first-time buyers has steadily been increasing, with numbers currently at an 11-year high. However, outside of the government’s Help to Buy scheme, it seems that young people do not understand their other purchasing options – chiefly that of shared ownership.
What is shared ownership?
Research carried out from YouGov found that although three quarters of people in the UK have indeed heard of ‘shared ownership’, only 40% of 18 to 24-year olds were aware of the scheme. Furthermore, of that 40%, half of them revealed that they had no knowledge of shared ownership whatsoever, other than having heard of the name.
The scheme explained
Aimed mainly at first-time buyers, The Shared ownership scheme is a cross between buying and renting. Essentially, you buy a share of the home – between a quarter and three quarters – and rent the remainder at a reduced rate, with the option to buy a bigger share in the property at a later date. All shared ownership homes in England are offered on a leasehold basis, and the majority are newly built; however, there are some properties which are being re-sold by housing associations. At its core, the scheme is intended to help first-time buyers onto the market, but those who earn a household income (combined) of less than £80,000 or are renting a council/housing association property can also buy through the scheme.
A viable option?
Many of those questioned in the YouGov survey thought that shared ownership meant quite literally sharing the property purchase with friends, family or a partner. When the scheme had been properly explained, almost a quarter of the 18 to 24 year olds stated that they would be “very likely” or “fairly likely” to use the initiative in the future, the highest out of all of the age groups questioned – showing that the scheme appeals directly to the target market, with just the awareness of the scheme limiting participation numbers.
“Shared ownership as a method of purchasing has been around since the 1970s and offers a realistic way of getting onto the property ladder. It’s a proven formula that helps people secure a home, even where a traditional mortgage is not affordable, and its longevity is testament to its success,” said Jaedon Green, director of product and distribution at Leeds Building Society.
“The method is becoming increasingly popular for first time buyers as it reduces the need for a significant deposit, which can be difficult for some to manage. The scheme also permits first time buyers to combine it with a Lifetime ISA, maximising any deposit,” he noted.
Awareness limiting efficacy
The YouGov research has shone a light on the fact that almost a quarter of those aged 24 or under would consider shared ownership as a way to purchase property, once they fully understood what the scheme consisted of. With so many potential buyers being put-off from buying a property simply due to lack of awareness it is clear that the onus is now on educating the wider public, and specifically 18 to 24 year olds, to the benefits of the scheme in order to continue to grow first-time buyer numbers and support the property market as a whole.
Section 21 evictions
2019 was filled with talks of abolishing Section 21 “no fault” evictions. The Government initially announced the abolition in April 2019, which was followed by a consultation process from July to October 2019. With the political uncertainty throughout the year that has recently settled, the Queens speech has confirmed that the abolition proposal is still intended as we move forward into the new year.
What exactly is a Section 21 eviction? Included in the Housing Act 1988, Section 21 is the recovery of possession on expiry or termination of assured short hold tenancy. This essentially allows landlords to evict tenants from their properties with two months’ notice, without any reason given.
Why is this being abolished? The ability that landlords have to evict any tenants without reason has been argued to have negative effects on tenants’ well-being and cause huge disruption to their lives. This can disrupt the lives of good tenants who may have done nothing wrong in relation to their tenancy agreement. It can also be extremely unsettling families who may have children settled in local schools and communities.
What impact will the abolition have for tenants? The abolition of section 21 of the Housing Act 1988 will provide some protection for tenants by assuring them that their tenancy agreements will be upheld for the duration of their contracts. This is providing that they do not breach this. The abolition is a positive step for tenants; especially families who are renting on a long-term basis as it reassures them that their housing requirements are met allowing families to settle.
What impact will the abolition have for landlords? It could leave landlords vulnerable to tenants who may abuse their home, leaving them with less power to regain possession of their property and making this process longer. Without an updated alternative provision to support landlords to protect their property, it could deter them from offering their property on the rental market. This could contribute to further demand for rental property, but with a reducing supply; driving rental asking prices to increase. To address this, the Government has proposed to strengthen Section 8 of the Act, which allows eviction due to the tenancy agreement being broken. This would ensure that the landlords needs are also protected with effective channels for them to use in the event of undesirable circumstances.
The Policy Director for the Residential Landlords Associations explained that it is crucial to also reform the way repossessions take place to avoid a rental crisis. A new system is required for landlords as well as tenants so that it is fair market for all. There must continue to be a lawful procedure to protect landlords in legitimate circumstances such as anti -social behavior, and tenant rent arrears.
What to consider when becoming a landlord
The process of becoming a Buy-to-Let landlord may not seem straightforward, with a complex set of regulations understandably a deterrent for investors and letters looking to jump into the market. But a look beyond the paperwork and red tape provides clear benefits for anyone wishing to invest and let out their own property in 2020.
The benefits are there to reaped, however; BTL mortgage rates fell in the third quarter of 2019, with the interest on both two-year and five-year fixed loans both cheaper for buyers; £144 less than it was in June for the former and an attractive £324 cheaper than 12 months ago for the latter, respectively.
Lenders are keen to massage the market and offer lower rates in an effort to encourage landlords both old and new back to market due to tighter rules and fears over the effect that Brexit could have on house prices. But caution must still be preached, as you’ll find in our tips below:
Invest carefully It might seem obvious, but your rental income has to be enough to pay your buy-to-let mortgage. Lenders will use stress rates to help to calculate affordability, which covers the following aspects; the ability of a landlord to pay a higher rate of interest on the borrowed money, the cover ratio of interest, minimum income requirements and the rental cover rate.
With this in mind, researching in your local area is vital. Using the nation’s capital as an example, London Money broker Catherine Beaumont offers the following advice: “Research the area in which you are investing. Currently for many properties in London, the rental income isn’t enough to service the mortgage.”
Stamp duty also comes into the equation, with the purchase of a second property incurring a charge of 3%. This must all be taken into account when it comes to choosing to invest.
Tax breaks will soften financial blows Whilst the aforementioned stamp duty charge, designed to stall the market and make buyers reconsider their purchases, has acted as a deterrent to some due to the requirement of a larger outlay of cash, there is some relief for potential and current landlords in the form of tax breaks.
“Repairs, service charges, utilities paid by the landlord, and letting agent fees are all claimable against your taxes,” advises Gorge Parker, assistant manager at Blick Rothenburg. “Likewise, the cost of replacing items, such as sofas, beds, tables and any moveable items, is allowable, but, importantly for first-time landlords, the initial outlay on new items is not.”
Thankfully, cuts to mortgage interest tax relief will occur in 2020, with a 20% income tax deduction added instead.
To go fully managed or go solo? This is always a big question for first-time landlords and a huge factor can be the time you have available to manage your rental property. Many taking their first steps into letting a property may benefit from hiring an agent to manage their home and deal with the tenant directly while others living closer to the property in question may be perfectly placed to manage things themselves.
“For a fully managed service expect to pay between 8 per cent and 20 per cent of the rental income plus VAT,” offers Jeni Brown, sales director for Mortgages for Business. “In my experience, the fee feels very expensive until you have an issue, and then the ability to leave it to the agent becomes priceless.” Weigh up your options; if you cannot afford the cost of a fully-managed letting service then you need confidence in your rental agreements and plans with your tenants to make sure you don’t miss out on any mortgage payments.
As with taking any big step in the property market, the key is to property educate yourself prior to making a decision about becoming a Buy-to-Let landlord. Research your local options, get the lowdown on the local market, get your finances in order and if you have tenants ready to move in, make sure you’re prepared to deal with any potential bumps in the road.
Preparing your property for sale in 2020
Time to pack up the decorations, take down the tree and munch down the rest of those leftovers; Christmas is over and 2020 is here! If you’re preparing to sell your property in the New Year, then you might be feeling a little overwhelmed at the amount of work your home requires before taking it to market. But don’t fret; we’re here with a list of top tips to help get you ready to show off your property.
How to nail the first impression Almost all of the people with an interest in your property will get their first glimpse of what your home can offer in the form of pictures, either in an agent’s window or online. Not only that, but some buyers will drive by your abode to scope out its location and get a feel for it from the outside. With that in mind, making sure your home is visually appealing and attractive will be your biggest priority in preparation for listing.
With that in mind, we’d strongly consider that you take the following into consideration:
• Clean your windows – it’ll be easy to notice if you haven’t! • Give your front door a lick of paint to freshen it up and make your entrance feel more welcoming, along with a new doormat if yours is looking a little tired • Tidy up your entrance hall of any post and flyers • Clear out weeds from your paths and tidy your garden • Make space on your driveway for visitors to park • Be honest – hiding less-than desirable features under blankets won’t help you as potential buyers will see defects when they view your home
Upping your Presentation The above tips will certainly help to give your property a tidier feel, which is key; an organised home can give buyers a vital opportunity to picture how they will fit into the living space. But if you want to present your home in its best possible light, then consider how you present your home.
• Declutter – a simple suggestion but one that can have a massive impact. Removing large bulky items from view, if only temporarily will have a massive effect • Let in the light – keep the curtains open, windows clean and any natural sources of light clear to give your home as bright a feel as possible • A warm place – make sure all rooms are heated prior to viewings, even those you don’t use often • Bathroom spaces – keep your bathroom and toilets clean, free of mould and tidy, and make sure your toiletries are kept to a minimum.
Time-consuming as it may seem, keeping your home tidy, organised and welcoming will put you in good stead for when those viewings start. Remember; visitors need to imagine themselves in your home!
Aladdin
From now until Sunday 19 January
Performances at the Riverhead Theatre Click here to read Aladdin.
Toy Collectors Fair
Sunday 26 January
Family friendly jam packed Toy collectors fair at the Epic Centre Click here to read Toy Collectors Fair.
Dog Friendly Day
Saturday 8 February
Unlock 1,000 years of history with your furry companion at Lincoln Castle Click here to read Dog Friendly Day.
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