Build to Rent Should Feature Large in the London Housing Market if Property Developers Seize the Opportunity Offered by Government Initiatives

What is Build to Rent?

Build to Rent is a government initiative to encourage the building of more purpose-built rental properties in the UK.

Around 3.8 million households in the UK are in private rented accommodation. That’s about 16.5% of the population. There is no doubt that some people choose to rent for the flexibility it offers, or for financial reasons, or because they do not want the responsibility of owning their own property.

In recognition of the fact that private rented housing is likely to continue to be a growing part of the housing market, the government has been introducing measures to boost this sector as well as the house buying market.

  • Changes to Stamp Duty Land Tax implemented in 2011 mean that large-scale investors pay a typical 1% instead of 5% on large purchases.
  • A £1 billion fund for equity finance for house builders and developers.
  • A debt guarantee scheme to support the building of more private rented housing.

Build to Rent Funding

The Build to Rent Fund assists the new development of these purpose-built rental properties. The developer takes out the funding loan, builds the properties and then passes on the loan to a third party investor. This means less risk to the developer and avoids them having to wait to regain capital from rental payments – which could take many years.

The Government hopes that the first round of developments will provide high profile ‘show case’ developments that will be test-beds to prove the model. The theory is that this will encourage more developers to take up the Build to Rent scheme rather than the more traditional one of selling off the development piecemeal, either off-plan or on completion.

The Build to Rent Fund prospectus was launched on 20 December 2012 under the joint banner of the government and the Homes and Communities Agency, and the first 45 projects were confirmed in April 2013.  About a quarter of this housing will be in London, and in total are projected to support the construction of between 8,000 and 10,000 new private-rented homes.

Debt Guarantees for Developers

The private rented sector housing guarantee scheme provides a direct government guarantee on the debt property developers incur when investing in new privately rented homes.

The Government thinking is that by reducing the property developer’s borrowing costs it should increase the number of homes they can afford to provide.

The government application process for direct guarantees focusses on applications that comply with the government scheme rules. Developers are expected to demonstrate a robust rental demand with a viable exit strategy, a solid management structure, and suitable asset cover,

If you are developer who is interested in the scheme you can find out more on the Homes and Communities website http://www.homesandcommunities.co.uk/ourwork/private-rented-sector or email housingguarantees@communities.gsi.gov.uk to discuss a specific proposal.

Private Rented Sector Taskforce

There is an expert panel to oversee the scheme. The Private Rented Sector Taskforce consists of developers, management bodies and institutional investors, who aim to support the expansion of the build to let sector.

The Taskforce is headed by Andrew Stanford, who is the former Head of Cluttons Residential was MD and founder of property and asset management company Stanford Mallinson.

Other Taskforce members are:

Julian D’Arcy of Kirkby Capital, a former regional chairman and proprietary partner at Knight Frank

Joanna Embling, a property consultant and chartered surveyor, specialising in urban redevelopment and a former equity partner at Cushman Wakefield

Tracey Hartley, a specialist asset manager for large scale residential landlord Grainger plc

Dominic Martin, senior analyst at EC Harris and a qualified surveyor

So 2014 could be an interesting place for property developers who are willing to embrace the scheme. For advice on property investment and the rental market please get in touch with Riley Marshall on 0207 394 1160.

Housing Developers Needed as Property Demand Swells in the UK

Help to Buy Numbers Treble

According to a report from RICS (Royal Institute for Chartered Surveyors) the Help to Buy numbers trebled in the last two months of 2013, so will demand outstrip supply in the UK this year?

A report by the NAEA (National Association of Estate Agents) following their recent member’s survey states that during November its members sold an average of nine homes per estate agency branch, and on average two of those were Help to Buy purchasers.

The Help to Buy initiative launched at the beginning of October 2013 and we dealt with the different Government housing market schemes in our earlier blog post.

Nationally more than 2000 people took advantage of Help to Buy in the first month after launch – by December that figure nearly tripled to 6000. These new mortgages will equate to around £1 billion of new lending to homeowners who may have been deterred or prevented from borrowing because of the need for a lump sum for their deposit before a mortgage company will lend money.

David Cameron Comments on the Increased Demand for Housing

Prime Minister David Cameron hopes many more people will be persuaded to get on the property ladder in the New Year, giving the property market and the wider economy a welcome boost

RBS, HSBC, Lloyd’s, Virgin Money and Aldermore are already offering these mortgages but they will soon be joined by Barclay’s and Santander who plan to introduce their own Help to Buy products this month.

The property market will no doubt continue to heat up as we head towards one of the busiest times of year and Cameron observes:

“. . . too many people have found themselves frozen out of the market in recent years as a result of the size of the deposit required.

That is why as part of our long-term economic plan we introduced the Help to Buy scheme, so hard-working people with sufficient earnings can get on, fulfil their aspirations and enjoy the security of owning their own home.”

UK Economic Growth Relies on a Booming Property Market

The UK economy is so dependent on a raising property market that the Government is always under pressure to find ways to keep the figures rising upwards, but if the market gets too hot it could cause a bubble that would be very painful for our recovering economy if it should burst.

RICS senior economist Josh Miller warns:

“The pace of demand is exceeding that of supply in every part of the country. Clearly the momentum in the market is growing. Help to Buy, funding for lending, and the clear commitment to keep interest rates low for a long time, all three are having an effect.”

Build More Housing to Stabilise Economic Growth

The best way to stabilise the market is to increase supply so that it tracks this increased demand. Providing that buyers can afford to purchase we are unlikely to ever have a situation where available housing stock outstrips demand in London. Therefore building more housing is the answer to increased, gradual and sustainable economic growth in the Capital.

The Shadow Housing Minister Emma Reynolds comments that:

“Any help for first-time buyers struggling to get on the property ladder is to be welcomed.

But rising demand for housing must be matched with rising supply if this scheme is to bring the cost of housing within the reach of low and middle income earners.”

It is certainly true that without a reliable release of new more affordable housing onto the market that the housing ‘bubble’ will stall and even burst, if house prices rise sharply in response to this increased demand. This could spell economic disaster for all of us.

Development Jobs Set to Boost Housing in East London

The Royal Docks is to become home a New Business District - the Biggest UK Development to Date

East London’s Royal Docks have attracted Chinese business Investment to Develop the Area (Image courtesy of the Royal Docks Trust)

The London borough of Newham is set to become the next property hotspot following an announcement by the Mayor Boris Johnson of plans to develop the land north of the Royal Albert dock as a business district set to be worth £6 billion to the UK economy. The site will be developed by ABP China (Holding), a successful commercial developer, who have estimated creation of 20, 000 jobs in this region in what will be the biggest shift east since Canary Wharf was built in the 1990’s.

The development land, which comprises some 35-acres, is situated in the heart of Royal Docks Enterprise Zone and is owned by the Greater London Authority. ABP will be aiming the majority of the business at Chinese and other Asian businesses looking to establish headquarters in our capital as a gateway to Europe. It is the first direct investment by a Chinese developer in London. When it is completed it will provide over 3.2 million square feet of work, retail and leisure space.

Mayor of London, Boris Johnson, said: “For centuries the waterways of east London were the throbbing arteries of UK trade and commerce. This deal symbolises the revival of that great era, continuing the re-invention of this once maligned part of the capital into a 21st century centre of trade and investment.

Creating a third financial district in the capital, this development will act as a beacon for eastern investors looking west, bringing with it tens of thousands of jobs and billions of pounds of investment for the UK economy.”

This will make it the largest UK development of its kind, which is great news for the borough, which has also benefited from the successful and on-going regeneration of Stratford, following the Olympics in 2012. The hope is that the site will boost local employment by some 30% and generate around £23 million in business tax alone, and in addition it is expected to act at a catalyst for further development in the area. It is certainly likely to see an increase in new homes developments to service the area as it grows.

Sir Robin Wales, Mayor of Newham said: “The Royal Docks Enterprise Zone offers an unrivalled investment opportunity and this deal further strengthens Newham’s growing reputation as an ideal destination for international business.

We welcome ABP’s ambitious vision for the Docks which are already home to London City Airport, the University of East London, the Siemens Crystal and the Excel. ABP’s proposals will bring further investment from abroad and unlock future development. It will also create benefits for local people by providing thousands of new jobs and further enhancing the waterfront for people to enjoy.

Newham will work closely with ABP and their UK development partner, Stanhope, to ensure that as many of these jobs as possible are accessible to local residents. Our successful Workplace jobs brokerage scheme is ideally placed to ensure this happens.”

Developers, ABP, have recently completed a large development in Beijing, and they are currently working on a 75 million square foot development in Shenyang in north-eastern China. They will be working with UK developers Stanhope and architects Farrells, and they predict the first occupiers will move in in 2017.
It is the latest in a string of investments in the area including exhibition space at the Siemens Crystal Centre, Emirates Air Line – the UK’s first urban cable car, and new homes development along Great Eastern Quay, and Silvertown Quays. There are also future plans to create the UK’s largest floating village at Royal Victoria Dock. Transport links to the area will be enhanced by the new Crossrail station coming to in 2018.

Chairman of ABP, Mr Xu, said: “I am very pleased and very proud that my company ABP has reached this agreement for the Royal Albert Dock with the Greater London Authority. This project will be hugely significant for both the Chinese and UK economies.

My vision is to develop a world class international business district which will initially target Asian businesses to help them secure a destination in London, which in China is seen as the gateway to both the United Kingdom and the wider European economy.  Our plans aim to strengthen trade between east and west, provide new local jobs and deliver benefits for the wider London and UK economy.”

Does Your Estate Agent Offer Tenant Screening Services?

Visas and Passports

Private Landlords, Letting Agents and Estate Agents Should Check Passports and Visas to Stay Within New UK Immigration Control Legislation

UK Private Landlords to be Responsible for Border Controls

New legislation announced in the Queens speech last month outlined an immigration control measure which obliges Landlords to ensure that their tenants are legally entitled to be in the country.

Most landlords will be carefully checking their tenant already. Including ensuring that their tenant is in employment, that they are who they say they are, and that they have good references from previous landlords, to protect their own interests in terms of getting the best tenant for their property.

However what is not clear is how much responsibility the Government is going to expect the average landlord to take, when checking the legal status of tenants and their rights to be in the country.

As a responsible Letting and Estate Agent Riley Marshall is already checking that they only deal with legitimate tenants. We have used our insider knowledge to put together these guidelines to help you stay within the law when it enters the statute books. To help you we examine what is best practice when finding and vetting tenants for your property.

If you are not using an estate agent how are you getting references for your tenant?

An agent will often use a specialist reference agency to provide a rounded profile of the tenants background and credit history which should also include checking their status in terms of their right to be in the country and to work legitimately. You can find out more about how a good estate agent will help you with references and other rental processes of finding and vetting tenants who will be right for your property, in our series ‘What your Agent Does for You’.

So what documents should landlords be checking?

Ask to see a passport

  • Check the photo and the dates appear to be legitimately linked to the person you have in front of you,
  • Take a copy and file it safely.

Check for a work Visa

  • If the person is moving here from abroad they may need a work Visa – Using their passport to identify their nationality check on the UK Border Agency Website to see what documentation they need.
  • Most citizens of EU Countries do not need a Visa or Permit to work in the UK but Bulgarian and Romanian citizens do need authorisation at the moment – this is likely to change though so it is best to check the website.
  • People coming into Britain from the European Economic Area and Switzerland do not need permits or Visas to live or work here (except for Bulgaria and Romania as mentioned above). This area covers most EU countries but includes some that are not in the EU and excludes some who are – Iceland, Norway, Finland, Sweden, Ireland, United Kingdom, Denmark, Germany, Netherlands, Belgium, Luxembourg, Austria, Portugal, Spain, France, Italy, Greece, Liechtenstein, Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia, Slovakia, Bulgaria, and Romania.

Check the status of all tenants

  • If one tenant is coming over to work and their family is joining them ask for their passports too.
  • Check with the Border Agency website what rules will apply to them when they are in the country.

Ask to see proof of previous addresses in the UK

  • This is not a fail-safe measure of being legal in the country but it helps build up a picture of whether they are legitimate or not.
  • A recent Council Tax or Utility Bill will prove that this tenant has been a resident in the country prior to moving into your property.

Ask for previous Landlords References

If there is any doubt about how legitimate a previous landlords reference is then you can always ask for earlier landlords references. This can be useful because they have no axe to grind in terms of being totally transparent about their dealings with a tenant.

However if your tenant has just moved here from abroad this may prove difficult in terms of being able to contact the landlord and verify who they are.

One Final Note of Caution

Employers are already expected to check these conditions before employing overseas workers, but just as they are not allowed to discriminate between workers because of where they come from, there is little doubt there will be similar expectations of Landlords when this legislation becomes concrete.
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The great council house sale – news now in

1

Council Houses are sold off by the Government

The government has announced that the “Right to Buy” sales of council houses to tenants are at their highest level since 2007.

In April it will be 12 months since the government set out measures to encourage tenants to buy their council homes. The scheme introduced by the coalition raised the potential discount for tenants from £16,000to £75,000 in some areas. This has led to sales of nearly 3,500 homes, an increase of 30% on the previous financial year.

The ‘Right to Buy’ scheme offers tenants discounts of up to 60% of the value for a house and 70% for a flat, with a maximum discount of £75,000.

The final quarter of last year saw the biggest rise in the rate of sales – with tenants buying 2,010 properties between October and December 2012, double what was sold in the previous quarter.

Thatcherite legacy

This mass sell-off of council properties was last seen in the Thatcher era, and many people are worried that the policy will lead to a shortage of council and other affordable housing, however the government deny this.

According to the Government the resulting income of £210 million will be ploughed back into providing affordable rental housing.

The Market is picking up

The housing market has started to see some general improvements recently as lenders have been offering some of their lowest ever mortgage rates.

The New Buy scheme, launched last Spring, has helped to boost the housing market. In fact more than 3,000 homes also been reserved under the scheme which allows first-time-buyers to buy with just a 5% deposit.

The availability of mortgages has also increased since the ‘Funding for Lending’ scheme was initiated by the Government in August 2012. This basically gives lenders access to cheap finance in order to help borrowers to gain a mortgage.

This Government do seem committed to using the Housing Market to drive the economy forward and out of recession.

NEW BUILD SHORTAGE STRENGTHENS PROPERTY PRICES

National Home-building figures seem to be in danger of missing this year’s new build target

Government House new build report

While the building industry is thriving in the south – all the way from London to Devon, and up towards Worcestershire, the building industry is keeping up with demand for new build properties, however in the North of England, Wales, and Scotland, the picture is less busy.

The official figures on new builds were released by the Government last week, and they show a decline of some 11% in ‘annual starts’ – the point at which a developer begins working on a building plot. See the full report here.

This is embarrassing for the Government, after they promised to ‘get Britain building’, to ensure adequate housing, and to boost the economy by building our way out of recession.

Shelter’s chief executive Campbell Robb commented:
“The slump in our construction industry is one of the main reasons we’re facing the threat of a triple dip recession. We can build our way of out of this, but the government has to use next month’s budget to unlock the finance to deliver more genuinely affordable family homes. Unless action is taken now, it’s hard to see our housing crisis improving any time soon.”

These new starts figures show annual starts at a little over 98,000 for the year, which is the worst figure since 2009. This was the very worst year of the current recession, and was the only other time that the annual starts figure dropped below 100,000 since records began, 30 years ago.

Simon Rubinsohn, RICS Chief Economist, said:
“These figures demonstrate the scale of the problem facing the country in delivering sufficient homes to accommodate a rising population. In the final three months of last year, less than 27,000 new houses were started in England alone. Weakness was visible in all sectors although the biggest decline was from housing associations which saw a drop in starts of more than 20 per cent.

This shortfall in new build property will make it very difficult for first-time buyers to get on the property ladder. However this imbalance between supply and demand in the housing market will continue to support house prices, and rental values, so it is not necessarily bad news if you are already on the property ladder, or if you are an investor landlord.

Go to Riley Marshall property search  If you are looking for new build property in South East London Riley Marshall has links with local developers and we are always updating our property portfolio, click to go through to our property search.

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Mediation and Flat-pack furniture makes divorce easier

children of divorced parents need room in both households

Bunk beds in bright colours make a great space saving solution at a reasonable cost.

Source

People move house for lots of different reasons, and sadly divorce is one of them.

If our title seems flippant it is not meant to be, it is simply a trend we have noticed emerging, when Dad moves out (it’s often but not always Dad). Now he usually wants a better environment, and to include the children into his daily life following separation.

Divorce figures released today
According to figures collected by the Ministry of Justice the Greater London area has the highest number of divorce petitions in the country, which is not surprising given the density of the population. The next highest number of divorces are in Midland cities with Birmingham being the highest outside London. Leicester is in third place behind (of all places) Weston Super Mare. Quite why this popular tourist hotspot should be so high in the divorce steaks is unclear

The figures cover the period from 2011-2012, and it is expected that numbers will continue to rise as austerity measures kick in, causing financial strain on families.

Mediation rather than litigation
In order to lessen the financial burden of paying for legal proceedings The Government wants to encourage families who are separating to use mediation. Reaching  agreement over child maintenance and access agreements through mediation is far less costly than court proceedings.

According to a release from the Ministry of Justice today the average cost of resolving disputes over money and property after separation is approximately £500 if dealt with via mediation. A similar claim settled through the courts averages £4,000 for a publicly funded client. The average time for a court settlement to be reached is 435 days compared to 110 days for non-mediated cases.

If agreements can be reached via mediation they are often far less stressful for all members of the family, and mediation allows for a more sensitive and flexible agreement to be made than those laid down in a court of Law.

Family Justice Minister Lord McNally said:

‘All too often I hear stories of families going through expensive and traumatic court hearings but we know that when working out how to split assets and arrange time with the children, mediation is a far simpler and cheaper approach for everyone and leads to better outcomes.

When families split it is important for children to keep contact with both parents. So wherever possible, it makes sense for the non-resident parent to have enough space for children to visit and sleep over. Having their own space, in both homes, will help to make them feel more settled and comfortable when they spend time away from the resident parent, especially if they are very young.

The Modern Family
The stereotypical scenario of dad having to move into a bedsit, while mum and the children live in the family home does still happen but as separated families become more and more normal the ways that people choose to split their time and their assets can be much more creative. There is no need for dad (if it is dad) to move into a empty flat and eat his meals of a packing case.

While it may seem a trivial social change the rise of popularity of cheap furnishing shops can make this transition between homes much easier. The partner who moves out is now able to, relatively cheaply, set up a new home using cheap and cheerful flat-pack furniture to brighten up the second home. They can cheaply and attractively provide enough beds and bedding to house a couple of kids – utilising bunk beds, folding beds or a sofa bed at a price that wont break the bank.

At Riley Marshall we are also able to offer full furnishing packs at very reasonable prices, and these are available to landlords, tenants, or householders who need a quick and price-effective solution to setting up a second home.

Click here to find out more about our Furniture Pack Service.