Overseas Property Investment Consultancy & UK Property Investment Consultancy

Landlords have raised their rents for the sixth consecutive month as demand has increased and supply is squeezed a recent survey has found.

The poll, carried out by LSL Property Services reveals that rents increased by 0.5% in July alone and are now 2.3% higher than a year ago. The average monthly rent now stands at £676 according to the survey, although this varies greatly from region to region.

Commenting on the results LSL Property Services Estate Agency MD, David Newnes said: “Rents are still heading upwards towards their peak level two years ago, and yields are at their highest this year. The current market presents a golden opportunity for property investment before house prices resume their long-term upwards march. The underlying fundamentals that underpin sound property investment – demand and rental income – look set to remain strong. With a sensible investment model, a landlord can expect to see healthy returns, with any future capital appreciation a bonus.”

Results from our latest survey reveal some interesting differences between the generations. Although the vast majority of people who took the survey are of the opinion that property prices will not fall over the coming year, there are large differences in opinion between the generations with the 45 – 54 age category showing the greatest confidence.

60% of respondents within both the 45-54 and 55-64 age group expect prices to rise in the next 12 months versus just 23% of the 35-44 age group. What’s more a huge 100% of 45-54 year olds believe that right now is a great time to buy UK property with 90% of the opinion that the current market also offers excellent opportunity overseas; indeed 80% are currently considering buying an international property. This is in stark contrast to the under 25’s where just 50% feel that today is a good time to buy a property in the UK.

Interestingly, less than half of all respondents are of the opinion that interest rates will increase over the next 12 months with 7% actually expecting a further reduction. On the subject of investments a huge 75% said that property offered the best investment potential of all major investment options.

It is interesting to see how different groups have differing opinions regarding the property market, but actually not that surprising. Property prices may seem very high to the younger generations where many are still looking to buy their first homes. However, affordability has dramatically improved over the last few years and if our survey respondent’s interest rate predictions are correct this will remain the case for quite some time.

Confidence in property as an investment continues to ride high as it offers great stability when compared to other investment categories and can provide much greater returns and safety in the long term. Interestingly shares didn’t receive even 1 vote.

As it’s lunchtime I thought I would check the London stock exchange and see what has been happening this morning, and to be quite honest I’m very glad I did, because what I saw was incredibly positive.

Of the top six best performing companies this morning 4 of them were property developers. Barratt developments, Persimmon, Bovis homes group and Taylor Wimpy were all listed, with Taylor Wimpy heading the table with a massive 9.15% increase.

So what does this show us?

My view is that the market is of the opinion that demand for housing is set to increase and therefore it goes without saying that the construction of new homes will also need to increase. We are currently in a position where the supply of property for sale is greater than demand, but with a general shortfall of housing in the UK and increasingly positive signs of economic recovery this situation will undoubtedly reverse quickly, and the market knows this.

Increasing market confidence in the home building sector is a strong indicator that things are starting to pick up in the property sector.

Last month, a member of the Bank of England’s Monetary Policy Committee (MPC), Andrew Sentance voted in favour of raising the interest rate by 0.25%.  He is the first MPC member to have voted in favour of raising interest rates since August 2008, and he did it again this month.  Could this be the beginnings of a growing trend?  and if so are we looking at imminent interest rate rises?

I believe not.

Interest rates have now been at a historical low of 0.5% since March 2009.  This is an astoundingly low level and in fact one that has never before been reached.  To bring it into context, the lowest base rate level reached during the last 100 years was 2%; it remained for 7 years between 1932 and 1939.

The MPC are involved in a complicated balancing act.  On one side they have the threat of increasing inflation whilst on the other they have the risks attached with fledgling economic recovery. Although stability is returning to the housing market and wider economy, this recovery is fragile and carefully economic management is required to keep it on track and allow it to strengthen.

Inflation, although significantly above the Bank of England’s 2% target is on a downward trend and generally the committee is of the opinion that this will continue.  If this is the case, then the pressure to raise the base rate in order to curb inflation diminishes.  Interestingly, the Consumer Prices Index (CPI) stood at 5% in September 2008, considerably more than the current 3.2% level.

This reduction in pressure to increase rates is reinforced by the results of our most recent monthly survey.  The number of people who believe that rates will increase during the next 12 months has reached its lowest level since January (63%).

I believe that raising interest rates at this stage is unnecessary and could cause some destabilisation of the housing market and reduce consumer spending, which in turn could have further reaching effects on the UK economy.  Although I appreciate that the base rate will need to increase at some point, I think this is unlikely to happen before the effects of the VAT increase early next year have been assessed and economic recovery has become more established.  Therefore, although I am of the opinion that rates could increase within the next 12 months, this is most likely to be towards the back end of this timeframe, and even then by only small increments.

If this scenario is correct then we have many more months to enjoy interest rates at levels that have never before been experience.  What a great time to invest in property.

Latest results from our monthly confidence tracker survey show that a huge 75% of respondents would choose property as their first investment choice. In contrast, just 2% of people who took part in the survey during June said that they would put their money into shares. Interestingly, gold received 17% of the vote.

When asked if the current historically low level of interest rates has increased their desire to buy a property, two thirds (67%) said yes with 79% of the opinion that right now is a great time to buy a property in the UK. 65% of respondents share the view that property prices will continue to rise over the coming 12 months, with 4% believing this could be by as much as 15% – 20%.

On the subject of overseas property a very respectable 65% believe that this is currently a good time to buy a foreign property with 62% actively considering a foreign property purchase. Once again the region attracting most attention from potential property purchasers is the United States, particularly Florida. A number of European countries including Spain, France, Italy and Cyprus also ranked highly amongst those people looking for a second home.

Although the stock market has been performing rather well over the last 12 months, in more recent weeks it has taken a bit of a tumble with the FTSE 100 losing nearly 1000 points between Mid April and the end of June. In comparison the property market has demonstrated far more resilience to recent global economic shocks and has already regained a great deal of the value that was lost over the last few years. The results of this survey clearly demonstrate the confidence that the general public has in the property market.

For the 16th consecutive month, The Bank of England Monetary Policy Committee (MPC) have voted to keep UK interest rates on hold at 0.5%. Although this was widely expected there have been growing calls for the base rate to be increased in an effort to curb inflation.

Last month MPC member Andrew Sentance voted to increase the rate by 0.25%, becoming the first committee member to vote for an increase since August 2008. Mr Sentance is of the opinion that the rate needs to be raised in order to bring down inflation which remains stubbornly high. In April the Consumer Prices Index (CPI) reached 3.7%, the highest it had been for 17 months and well above the government’s 2% target. Although this has fallen back a little, the rate still stands at 3.4%.

In 2 weeks time the minutes of this month’s meeting will be released. It will be interesting to see the voting figures. General consensus is that the current historically low rate level will remain for the remainder of this year at least.

The members of the MPC have to manage a balancing act that is as tricky as it has been in a long while. Even when change does come it will most probably be in the form of small 0.25% increases, so for the short term at least interest rates will remain low.

The new Conservative/Liberal Democrat coalition government has now been in place for over a month. This got me thinking, with all their manifesto pledges regarding property what have they actually done so far? The answer is – quite a lot.

Almost immediately it was announced that Home Information Packs (HIPS) would be abolished. It is widely believed that these packs have achieved little more than reducing the number of properties coming to the market as well as the time taken to bring a property to market. The Energy Performance Certificate (EPC) will however remain. I believe this is the ideal compromise as although HIPS were undoubtedly a bad idea, a whole industry has built up around the EPC’s and it would have been wrong to destroy peoples businesses, especially given that EPC’s are actually a good idea.

Of course, with compromise in the air some manifesto pledges had to be forgotten and one of these was the conservative’s plans to increase the inheritance tax threshold. With huge increases in property values over the last decade or so, the current threshold is a great deal lower than it should be if it were to have kept pace with the increases. Shelving the Conservative’s plans unfortunately means that property owners in particular will not be able to pass on as much as perhaps they would like to, free of tax.

Also of impact to property investors is the announcement that Capital Gains Tax (CGT) will be increased to 28% for higher rate tax payers. There has been a lot of uncertainly and fear surrounding this in recent weeks but in reality the increase was nowhere near as high as was expected.

The new government then turned its attention to new developments. Firstly they reversed a Labour decision to classify gardens as brown field sites, giving local authorities greater powers to block proposed developments based on local objections.

Next they looked at housing density and abolished the ‘minimum density targets’ for new developments set by the previous government. The policy which dictates that at least 30 homes are built on every hectare of development land has been blamed for a profusion of apartments as well as threatening the existing character of towns and cities in addition to more traditionally green and open areas. There have also been signs that an existing policy which details that new developments must contain a set amount of social housing may also be reformed or scrapped.

Most recently has been the announcement that the Financial Services Authority (FSA) is to be scrapped and more power given to the Bank of England. Many will see this as a good move given FSA failures during the recent credit crunch and subsequent recession.

So there we have it, one month down and some major changes already in place. As property investors will we be affected? In a word, yes.

The new government has certainly hit the ground running and without doubt some of these announcements are good news, unfortunately some are not so good for us, but time will tell whether the positives will out way the negatives. One thing is always certain though; property investment is a great route to wealth and financial independence and right now offers some incredibly exciting opportunities and we have some of the best. Grab them while you can, with economic recovery in the air they may not exist for long.

New figures from The Department for Communities and Local Government (DCLG) showed April house prices were 10.1% higher than a year ago.

This represents the strongest rate if inflation since October 2007. The report indicates growth of 0.4% during April, broadly in line with other market reports.

Wales has recorded the highest annual growth at 11.3%, whilst England trailed slightly behind at 10.9%. Scottish house price growth was considerably lower at 2.2% but Northern Ireland saw average prices falling by 8.9%. The Council of Mortgage Lenders (CML) says that lending is 15% higher than a year ago.

RICS
Meanwhile, the most recent survey from the Royal Institution of Chartered Surveyors (Rics) shows a “sharp increase” in the amount of property reaching the sales market.

The report says that 22% more surveyors reported a rise in prices than reported a fall in the three months to May. RICS spokesperson Ian Perry said: “Surveyors are generally confident that sales will continue to pick up over the summer months. The increase in supply as a result of the abolition of Hips is helping to support this optimism.”

The results from our latest survey are now in and they reveal that confidence in property both in the UK and overseas remains high.

84% of respondents to the May survey say that right now is a great time to buy property in the UK. 68% said that now is also a good time to buy overseas property with 53% currently considering buying in a foreign country. The United States and the Caribbean still topped the most favoured overseas locations with Turkey and Spain also scoring highly.

Looking at the results in more detail only 6% said that they expect UK house prices to fall over the coming 12 months, the lowest figure since the introduction of the survey nearly a year ago. Whilst almost 3 quarters expect interest rates to increase within the next year 61% say that they are still feeling the benefit of historically low rates, with 49% indicating that current levels have increased their desire to buy UK property.

At a time when the media seem to be re-focusing their attention on economic doom and gloom the results of this survey are very encouraging. At a time when stock markets have experienced such enormous volatility the housing market has fared rather well, recording significant growth over recent months. The UK housing market is very resilient and it is this factor that makes property such a great place for people to put their money.

There are calls for the rules surrounding leasehold homes to be clarified amid claims that some freeholders are charging too much for contract extensions.

Several cases have seen leaseholders charged tens of thousands of pounds to extend their contracts in addition to ground rent and legal fees.

In England and Wales around 3m people live in leasehold properties and technically never actually own them. The problem is that many leaseholders simply do not understand the system and a small number of free holders are taking advantage of this.

In a leasehold situation, even though the leaseholder can hold a mortgage on the property, it is the free holder who owns the land. If the remaining time on the lease falls below 80 years, the free holder can ask for a cash sum to renew it.

If a leaseholder feels that they are being asked to pay too much they can take the case to a legally binding tribunal. However, before reaching this point, the leaseholder should attempt to negotiate a fairer price with the free holder. There are a number of online calculators that can work out a fair price based on a number of factors, such as, the lease length, ground rent, and when the property was purchased. An independent valuer may be able to work out a more accurate price and lend further weight to negotiations.