Monthly Archive for June, 2008

Releasing Equity From Your Property

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Property Know Team
on June 22, 2008
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From all previous posts I don’t think we at property know have ever talked about property for the older generation. If you’re over the age of 54, your property is most likely to be your biggest asset, if some of you readers are living in the UK you may have seen advertisements about releasing equity from your property, these sorts of advertisements are getting ever so popular recently. Now you might be asking what is equity?  Equity is the market value of ones property minus the liability attached to the property which is generally a mortgage. Nowadays homeowners are given an opportunity to use equity release schemes to enable them to gain access to the equity in their property and then they can spend that money. The money can be paid as a lump sum, spread out over a period and used as a monthly income or used to buy annuity that will pay an income for life (for older homeowners looking for retirement). Providers of the schemes are fully regulated by the financial services authority, as are the brokers who give advice about equity release. The schemes available are home reversion plans and lifetime mortgages. Whichever scheme is chosen, you will be guaranteed the right to reside in your property until you sell the house, move into long term care or you die.

A lifetime mortgage is a mortgage secured against your property with no repayments to make until you move out or die. The advantages of using this is that you and your spouse (I am not to sure on civil partnerships at the moment) still own your property and will benefit from any increase in property value. Also if a “no negative equity” guarantee is implemented this ensures that regardless of what happens to house prices or interest rates, the final debt that needs to be repaid will not exceed the sale value of your property. But the downside is because none of the debt will have been paid during your lifetime, the interest will roll up for as long as you live in the property. The interest and original sum of money you borrowed will eventually have to be paid back by your property.

A home reversion plan unlike a lifetime mortgage is not a loan. You yourself will actually sell or a share of it to the equity release provider while at the same time retaining the right to live in the property rent free for the rest of your life. The advantage of this is that as it is not a loan there is no interest to pay. When the property is sold, the company will take a percentage of its value, if you sell 50% of your property then your estate is guaranteed to receive the other 50% of the property value as inheritance. The downside to his is since you will be still living in the property the scheme provider will not offer full market value for the percentage you are selling. If you die immediately after taking out the scheme you will have sold your home for far less then its worth. The amount offered for your share of the property will depend of your life expectancy. The greater your life expectancy, the less you will receive.

Making money from your property? – Part 2

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Property Know Team
on June 21, 2008
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Let’s start off where we left off last time, as you know tax can be very taxing, bad joke I know. Making money from your property? – Part 2. Today we shall try and get through HMO’s, letting agents and student lets.

On the 6th of April 2006 it became mandatory that landlords acquired an HMO license if the accommodation they were letting fit into a certain criteria. A HMO License is a House in multiple occupation license, this change was under the Housing Act 2004 and it applies to any letting property which is

“•    An entire house or flat which is let to three or more tenants who form two or more households and who share a kitchen, bathroom or toilet.  a house which has been converted entirely into bedsits or other non-self-contained accommodation and which is let to three or more tenants who form two or more households and who share kitchen, bathroom or toilet facilities
•    a converted house which contains one or more flats which are not wholly self contained  (ie the flat does not contain within it a kitchen, bathroom and toilet) and which is occupied by three or more tenants who form two or more households
•    a building which is converted entirely into self-contained flats if the conversion did not meet the standards of the 1991 Building Regulations and more than one-third of the flats are let on short-term tenancies
•    in order to be an HMO the property must be used as the tenants’ only or main residence and it should be used solely or mainly to house tenants. Properties let to students and migrant workers will be treated as their only or main residence and the same will apply to properties which are used as domestic refuges
A HMO license is there to make sure that properties are suitable for occupation by the specified number of people. The licenses themselves are given by local authorities and they will want to check there are enough toilets, bathroom, cooking facilities and that the property is properly managed.”  -UK Government Communities website

Student lets is a very popular first step into the buy to let world. These past years it has proven that these can be very good investments. Most of the time students are not as fussy when its comes to quality finishing’s, this means that if a landlord is intending to let to students they will not have to spend as much for the quality finishing’s and save a lot of start-up capital. But location and size is extremely important if your property is to succeed in the student market. Properties generally have to fairly close to campus and of decent size. Students like living together and bigger houses with 4-5 bedrooms are in high demand and go just as fast as small houses and flats. Another way to save money is the huge amount of advertising the universities and the local student unions do for student accommodation. As a landlord you will be able to advertise your property as a student let without even stepping foot into a estate agent or letting agent’s door step.

Letting Agents is like the easy mode for being a landlord. Letting agents take a lot of the hassle of being a landlord away at a price. Letting agents will usually help find a property to let. They will also do all the work when it comes to tenants and do all the required financial and tenant checks with all the appropriate references, prepare watertight tenancy agreements and draw up an inventory of the letting property contents. Usually lettings agents will charge a percentage of the rent as a finding fee and also an administration fee. Depending on the price, some letting agents will even collect the rent, arrange for repairs but not pay for them and carry out regular inspections on the property. They can be a good first choice if you are inexperienced and need a helping hand when it comes to your first rental property or just find that you can not handle everything that comes with being a landlord and just want someone to take the stress away from you. If you do decide to go with a letting agent make sure that they are a member of the Association of Residential Letting Agents (ARLA). That’s all for now on buy to let, hope to see you all soon.

Making money from your property? – Part 1, TAXATION

Published
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on June 13, 2008
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From previous posts we have mentioned buying to let is an option that people should consider getting into. But becoming a landlord can be a scary and complicated procedure. The main worries when becoming a landlord are things like tax, HMO’s letting agents etc.

When tax is involved in anything it worries most of us, unless you use an accountant people are generally unsure about tax and when letting is involved it is no exception to tax. As a landlord you will be liable to pay income tax on the income received from renting . The tax you will be charged will be at the highest rate of income tax you pay. But there are ways to deduct the amount of rental tax you are required to pay as landlord.

•    Fee’s (Letting Agents, Accountants)
•    Insurance (White Goods, Gas Boilers, Plumbing)
•    Advertising Costs for the property
•    Cleaning Costs
•    Maintenance Costs
•    10% of the annual rent after council tax, for maintenance
•    Interest payments on the letting property
•    Service charge, buildings and contents insurance during tenancy period

All the above can be deducted from the income made from the rent, this then in turn reduces the amount liable towards income tax.

Another tax that a landlord is liable to pay is CGT. Capital gains tax is a tax which is applied when a non inventory asset is sold for more then its bought price, in our case property. You would be CGT exempt if the let property was formally your former residence, but the property must be sold within 3 years it was turned into a rental property. CGT is calculated by taking away the original price from the sale price, you are only liable for CGT on “the gain” of the sale. (The gain is the profit made from the sale of the property, the part which is liable to be taxed by CGT) The proportion which the gain is taxable is dependant on the length of time you have owned the property. You would be liable for 100% of CGT on the gain if the property is sold within 3 years of acquisition. After the 3 years the proportion of CGT you are liable for is reduced by 5% per year. So after 3 years you would pay 95% CGT and after 4 years it would be at 90%. This will carry on going down until you have owned the property for 10 years , you will then be liable for 60% of CGT regardless of how many more then 10 years you have owned the property.

This is the end of part 1 of making money from your property stay tuned for part 2. Where we will talk about HMO’s, what you need to know about letting agents, student lets and more.

Westfield London - Part 1

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Property Know Team
on June 11, 2008
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Surprisingly many people in the United Kingdom do not know about the Westfield Development (The White City Redevelopment). A survey conducted found out that only 52% of surveyors had heard of the development. its surprising because it is going to be one of London’s and UK’s biggest development as of present. The Westfield London is a new and exciting shopping centre development in Shepherd’s Bush, London. The centre is being developed by the Westfield Group, at a cost of an estimated £1.6billion.

When completed in late 2008 the centre will boast a retail floor area of 150,000m². Consequently, it will take the crown of the largest shopping mall in Europe within an urban area from the Manchester Arndale, and be the third largest shopping centre in the UK behind MetroCentre and Bluewater. The completed centre will feature around 270 stores, including House of Fraser, Marks & Spencer, Debenhams, Waitrose, Next and a Cinema de Lux multiplex cinema.

This means that the whole of W12 is currently going being redeveloped to accommodate the shopping centre. New transport links (ranging from; taxi’s, bus stations and underground stations) are being built and refurbishments of general public areas. This is a joint effort between the Hammersmith and Shepard’s Bush Council and The Westfield Group. Planned completion is by October of 2008.

Our full views on the impact on surrounding Property Market post completion will be in Part 2, next week.

Curbing the Problem?

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Property Know Team
on June 9, 2008
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Whilst being a keen traveller, recently whilst popping into Sheffield for a day to visit friends, I had the worse time driving around the streets of Sheffield for places to park. Seems as Sheffield is now in the process of a facelift and total regeneration of its streets and roads, side street parking is becoming ever harder to come by.

Sheffield has been trying hard to tackle the high volume of cars parked on residential streets. That is why Sheffield City Council have introduced permit parking schemes to curb this problem, excuse the pun.  This is very much welcomed and praised by local residents who live in these areas. Although only a few areas in Sheffield have it, places like Sharrow Vale, while Crooksmoor and Broomhill will soon be enforced. The only problem around those areas is the high number of business located in these areas and the high volumes of cars these businesses bring with it. Before the scheme came into effect, cars would be roaring their engines from the early hours to park on these ever so popular side streets as its only short distance walk to their place of work to town centre or the local tram stops.

One distinct advantage is that homeowners around those areas will have a good chance of parking near their homes and reduce cars obstructing their driveways or paths ways. In a recent survey it has been pointed out that one of the key factors with buying a new home is the availability of a parking space. But this benefit comes at a price, so for those homebuyers planning on moving into the area is wary that your first vehicle can cost from £36 and an additional vehicle costs £72 every year for residential permits. We must remember these may change every year according to inflation.  Owning a vehicle has always been an ordeal in terms of expenses to actually keep one running but with parking schemes in place, residents are feeling the pinch in their pockets as well as petrol prices. With this additional cost when buying a new home it could reduce the value of the property in parking schemed areas. While the scheme was originally designed to reduce volumes of cars and give property owners their parking spaces back it could actually have an adverse affect for potential buyers.

The Cost of Permits (relating to sharrow vale) -

* Resident - First permit £36, second and additional permits £72
* Business - First permit £72, second and additional permits £144
* Visitor - £5 for a book of 25 daily permits
* Trade - £25 for a book of 25 daily permit
* Special (health workers) - £5 per year
parking schemes for side street parking

Source - http://www.sheffield.gov.uk/roads-and-transport/parking/permit-parking

Are Housing targets going to be met?

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Property Know Team
on June 8, 2008
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In recent news it has been pointed out that the targets set for housing will not be met. The government has set a target of 3 million new homes to be built by the year 2020. It will approximately need 240,000 homes built a year to meet the target that was set, last year just over 200,000 new homes were built. Unless changes are made now it will be more then likely that the target set will not be met.

Home builders have recently decided to cut back on the new builds due to the reduced demand from the falling market. Mr Nickell, who heads the national housing and planning advice unit said “Unless local authorities are given a strong incentive to allow house building in their locality, it seems to me very unlikely that we will hit the housing targets………And if you don’t keep building these houses the prices just keep going up relative to people’s incomes” Mr. Nickell believes apart from the credit crunch affecting consumers, local authorities and councils are not offering enough incentives to encourage the building of new homes.

Recent government figures have showed that new building of new homes have been down 5% compared to the same time in 2007. A statement from the Home Builders Federation has predicted that the building of new homes is not expected to rise.
“Right now the credit crunch is stopping people from getting the finance that people need to buy homes……… Longer term we need a better business environment and less regulatory cost to get the industry moving” This statement from the federation is backed up by recent news of big players in the industry, Barratt Developments and Taylor Wimpey to be in huge amount of debt. These two major players carry between them a total of £2.5 billion debt which is significantly more then their total market value. The credit crunch not only has affected consumers but the industry itself, the pinch felt by members of the industry has already forced one of them to put a halt on the building of new homes.

building new homes

Edinburgh UK’s Best Place to Live

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Property Know Team
on June 8, 2008
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The Property Know Team personally love Edinburgh as a city and we were pleased to hear that Edinburgh is UK’s Best Place to live in. Channels 4 - 4Homes 2007 “Best and Worst Places to Live” has ranked and rated the beloved Edinburgh as the number one city to live in.

For those worried about the current UK Property Market, our personal advice is to stick with Edinburgh and London. They are investing over £20 million to redevelop the city’s “Old Town” (refer to The New; Old Town of Edinburgh) and are regenerating Edinburgh’s Northern Waterfront (refer to Edinburgh’s Waterfront - Granton Project). The Northern Waterfront named, the Granton Project, encompasses over 120 hectares of land to be redeveloped!

An excerpt from the 4Homes Guide of Edinburgh - it covers the redevelopment of the “Old Town”:

Edinburgh’s beloved Old Town, with its medieval road plan and Reformation era buildings, is a UNESCO World Heritage Site. But a £20 million regeneration programme announced in June 2007 will see a series of rundown buildings between the Royal Mile and Market Street transformed into a brand new quarter, set to include 80 flats and a budget hotel. Locals aren’t pleased, but if you’re planning to move, you could snap up some brand new housing in the picturesque heart of the city.

The South side, Edinburgh’s less famous and primarily residential district, can nevertheless boast famous residents: if you like the sound of having authors J. K. Rowling, Ian Rankin, and Alexander McCall Smith for neighbours, this is the place to be. To the east, the port of Leith was controversially merged with Edinburgh in 1920 and has enjoyed a growing profile since the 1980s as an excellent environment for white-collar workers.

The Financial Hub And Property Prices

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Property Know Team
on June 2, 2008
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A visitor site posted a comment on the article (London Property Prices: Are they dropping?), about our views of why the London Property Market is still strong and why it will always be.

“London is the financial heart of the European Union (EU) and capital of one of only four trillion dollar economies in the EU with an infrastructure to match. The business infrastructure is being improved even further, because of London being selected as the venue for the ultimate global sporting occasion.”

So we are going to expand on the comment raised, and look at several points on why London is a financial hub. We will cover the “ultimate global sporting occasion” i.e. the Olympics 2012 later. London is one of the worlds Financial Hubs, even though there is a big uproar about the credit crunch and fears of a looming recession. Estate Agent Savills, estimates that £2 Billion will be spent from the “City Crowd” for 2008. This means that desirable areas in London such as South Kensington, Kensington High Street, May Fair etc will still be in high demand, even though there is a great deal of speculation and dropping property prices with the overall UK Property Market.

London has become a strong financial hub in the EU, due to its strength in Banking and Finance. Areas such as Canary Wharf, and more traditionally “The City” (Bank, Liverpool Street etc) have been centres of Banking and Finance for decades. And with the strength and stability of the UK Sterling (£) it has many advantages over other countries when it comes to the Exchange Rate and Forecasting.

Looking at London, and why companies like to conduct most business in London. We are going to take a simple look at Time Zones. The world has now become so small and to do business internationally is becoming increasingly easier. London is GMT (Greenwich Mean Time), and if a business has to call Asia it is only 6-8 hours ahead and if the company has to call North America it is only 5-8 hours behind. However if you are in Asia and want to do business with North America, it is roughly 12 hours ahead/behind - and vica versa. So if you wanted to contact your business associate in Asia and you were in America at 9am, that would mean that you would have to be in the office at 9pm however if you were in London/UK you would have to be in the office at 2pm-4pm, which is within normal working hours. Something as simple as that has a big impact on why many companies want to base their Head Quarters in London.

Gloomy Outlook

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Property Know Team
on June 1, 2008
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In previoius posts, it was said that prices were the lowest they have been for the past 30 years. The UK housing downfall has started prices are down 4.4% since last year and there are no signs of it slowing down. In the US despite attempts to slow down the drop, house prices continue to drop continually. The reason why the recession as some believe it to be is happening is quite well known. But the complications with house pricing are less obvious. Buyers and sellers should be careful of what’s ahead. However housing markets are not your average markets, they are not as volatile as other markets like oil. Houses just do not prove to be great assets anymore, people have to live in them and can not just sell when they feel that they can get a good price for it and neither can they just go and buy a property when it is cheap. Not to mention the all the other processes involved solicitors, tax and estate agents. The good points of a slow housing market is their prices adjust slowly and once they start to move they tend to keep moving in that direction for some time. This decline will not end anytime soon.

With that said, during a decline, prices are not the best way to determine the exact situation. With people being reluctant to move, anyone who does not have to sell stays where they are and people with the choice to buy wait to see if prices will fall further. The few transactions that do go ahead are like lagging indicators of the prices that would clear the market. A much better guide to the market is the transaction volumes concerned, the 30% drop said earlier in previous posts shows that the market is in a situation. Prices may seem stable but during a decline unless volumes have reached previous levels, beware of quicksand.
During declines bring confusing times, is how different areas and places can be so different. Prices in one location can be low while the other can have the sky as the limit. There can be many reasons for this but do not be fooled, nowhere is invulnerable to shifting house prices.

house prices falling

Cranes, Construction, New office Buildings, final product The GATEWAY

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Property Know Team
on June 1, 2008
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Sheffield is undergoing a huge transformation, developers and businesses are investing heavily, on a city based on knowledge and technology, where culture and services are thriving. Travelling round the busy streets of Sheffield, we may have all noticed cranes and impressive high rise buildings across the Sheffield skyline. Sheffield is very popular among businesses; all these new buildings are creating new business in the area, which means more money ploughing into Sheffield’s people and further job opportunities. With all the essential amenities right in the city centre, such as Ponds Forge International Leisure facility, Crucible famous for its World Snooker, one of Europe’s largest shopping centres Meadowhall, Ice Sheffield for all you ice skating/ ice hockey fans, English institute of sport have invested into Sheffield as one of the major sporting Cities in the UK, where they have invested in a huge gym, and a brand spanking new building with excellent leisure and entertainment facilities, everything to accommodate all your sporting needs. I have also been into this building and I must say I have been profoundly impressed by the facilities, it is certainly world class.

building of sheffield gateway

As you enter Sheffield City Centre, there are a number of new developments under construction. What used to be a disused car park has now been transformed to one of Sheffield’s finest office blocks. This is known as the Gateway Grade A Office Blocks, Parkway, which is situated in a superb location in the heart of the city, just off the busy Park Square roundabout within close proximity to Victoria Quays where a number of extremely reputable companies are already well established there such as Hilton Hotels and HBOS to name a few.

finished gateway

These office blocks will consist of 5 floors, taking in the breath taking views across the city, just imagine having a hard days work and then to take in the view of this beautiful city all your problems will just drift away. All of these companies are within easy access to the transport links, as there are very good motorway links for businesses as Sheffield is in the bang in the middle of the UK it is within easy access from all borders of the UK, there are also super trams, trains and frequently running buses. These office blocks will provide “flexib

le efficient accommodation with a central light well and floor to ceiling glazed feature elevations, creating open plan naturally lit space.” Not only businesses will be establishing there but also there is room for spacious residential apartments. The rest of the development will provide quality homes for students and professionals. With a rise in student numbers every year and highly educated professionals carving a career, they will have very keen interests in addition landlords and first time buyers will all be competing for this incredible development.