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Alternative ways to revitalise the housing market

It’s still too early to know how hard the housing market will be hit by the COVID-19 crisis, and if a recovery is needed, just how long that might take.

Whilst stamp duty reform could undoubtedly play a part in helping an ailing housing market to recover (a subject I’ve blogged about previously), it’s not the only trick up the government’s sleeve. Some are already planned, but others should also be considered.

Permitted Development Rights (PDR)

Shortly after the budget announcement in March, Housing Secretary Robert Jenrick announced that the government would be bringing forward a series of enhancements to the PDR regime.

A key change will be to allow ‘upwards extensions’ of up to two additional storeys on existing buildings (subject to compliance with building regulations); this will enable a sizeable number of building projects to get underway without having to navigate the often lengthy planning permission process.

Consultation will also begin on a ‘new build’ PDR category, which would allow the demolition of vacant commercial, industrial and residential blocks, to be replaced with new residential units.

This new option could make much more commercial sense for developers on two key fronts. First, the uncertainty and delays associated with seeking permission to convert these buildings to residential units will no longer be there – although the approval process around building design has yet to be clarified.

Second, the demolition and rebuild of buildings is likely to result in a more efficient design than might have been achieved by a conversion – in terms of the use of space, positioning of exits, windows and corridors etc.

Business rates

Such an expansion to PDR might not necessarily be appropriate for high streets, however, which are likely to be casualties of the crisis.

The demolition and replacement of retail units here would fundamentally change the high street and could herald subsequent closures of other businesses which had otherwise survived the crisis.

Different measures are required to revive vacant retail units on the High Street, the most obvious of which is business rate reform.

Minor changes could involve a lengthy rate-free period for new businesses, followed by a period over which the full level of rates is phased in.

In the meantime, existing businesses will need to see the current freeze on business rate payments continue for a significant period.

The stark impact of the COVID-19 crisis on the high street and the demand for office space should be enough to prompt a full-scale consultation on business rates – including a review of the calculation basis (currently achieved by multiplying the property’s rental value by a multiplier), and consideration of whether they should be completely replaced.

Business leaders have long complained about how high rates in expensive areas subsidise lower rates in areas where rental values are lower.

Such reform would also be welcomed by those who pay business rates on office space. These fixed-term liabilities are a burden that drive operational costs higher, and if the economy falters we may start to see demand for office space reduce as businesses struggle to pay their fixed costs.

If business rates were reduced on office space, or at least re-assessed on a fairer basis, demand could actually increase, which would provide impetus for more construction in this area.

Planning Permission

The government also announced plans to bring forward other changes to the planning regime, including investment to encourage greater building in brownfield areas, and greater support for community and self-build housing.

A key part of the announcement was that a review of the Planning Permission system would be undertaken to modernise the process, and speed up approvals.

Policy Exchange, the UK’s leading thinktank, published a 77-page report at the end of January with some sweeping modernisation recommendations including the introduction of a binary, zonal land use planning system – where land designated as a development zone would always carry a presumption in favour of new development.

They also recommended that market forces, and not local planning authorities, should determine what can be built within these zones.

It is worth noting, however, that planning permission reform has been promised by many previous governments. Unless sweeping changes such as those suggested by Policy Exchange are implemented, local authorities will continue to have the final say on all housing development proposals.

VAT breaks, temporary VAT reductions or holiday

The VAT domestic reverse charge, which makes changes to the way that the construction industry will have to handle and pay VAT, was due to be implemented last year but will now be implemented in October 2020.

In short, the new scheme means that those supplying construction services to a VAT-registered customer will no longer have to account for the VAT themselves. Instead, the customer will account for the VAT as if they’ve made the supply to themselves.

The domestic reverse charge will be a change the industry needs to accommodate, but it won’t assist with any market recovery. A temporary reduction in the rate of VAT for construction-related services and supplies, or a delay to the date for VAT bills to be paid, could significantly help ease cashflow concerns, however.

Help to Buy

Further improvements could be made to the Help to Buy scheme. This has already been extended from 2021 to 2023, the extended scheme will be limited to first-time buyers purchasing new-build houses, and regional price caps will be implemented.

Whilst the continued inclusion of new-build homes is a boon for the construction industry, the deposit requirement of 5% could be lowered to help those who have had to eat into their savings in order to survive the current crisis. The interest-free element could also be temporarily extended to perhaps 25% (50% in London).

Social housing

Another way the government could feed capital into the construction industry directly would be to provide additional funding for the building of social housing.

The government has recently reaffirmed its commitment to major infrastructure projects such as HS2, and a commitment to additional funding for social housing would both support the construction industry, and help them meet their own house building targets where otherwise they may now be missed.

There are, undoubtedly, a number of other initiatives that could be introduced. We won’t know which ones are appropriate, or should be prioritised, until we have a better idea of just how much the construction industry has been impacted.

By Richard Payne

Source: Mortgage Introducer

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Stage Set For Housing Market Bounce Back

Government measures have set the stage for ‘a strong rebound’ in the housing market once the shock of the current crisis has passed, says Nationwide.

Its latest House Price Index – completed before the current lockdown came into effect – paints a picture of ‘growing momentum’ in the market. Average house prices went up by 0.8 per cent in March; up from 0.3 per cent in February. The annual rate of increase went up from 2.3 per cent to 3 per cent – the highest annual rate of increase since January 2018.

But these figures are hardly cause for immediate optimism now that the housing market has largely ground to a halt.

The medium-term outlook for housing is highly uncertain, said Nationwide chief economist Robert Gardner.

‘Much will depend on the performance on the wider economy.

‘Economic activity is set to contract significantly in the near term as a direct result of the necessary measures adopted to suppress the spread of the virus. But the raft of policies adopted to support the economy, including to protect businesses and jobs, to support peoples’ incomes and keep borrowing costs down, should set the stage for a strong rebound once the shock passes, and help limit long-term damage to the economy.

‘These same measures should also help ensure the impact on the housing market will ultimately be less than would normally be associated with an economic shock of this magnitude’.

Source: Residential Landlord

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Can the UK escape its housing crisis?

Last year research from the National Housing Federation found that 8.4 million people in England were living in an “unaffordable, insecure or unsuitable home”, prompting the government to say housing would be a “priority”.

Low supply, high prices and almost nonexistent real terms wage growth has made it even harder to get a foot on the property ladder.

What can be done to fix Britain’s housing crisis and what impact could that have on people on various stages on (or off) the property ladder?

The Claim

The government’s new policy to fix the housing crisis is called First Homes, which they say will have “life changing” consequences for people trying to get onto the property ladder.

First Homes will cut 30 per cent off the price of certain homes for first-time buyers, with the benefit also extending to military veterans and people coming to fill important jobs in the local area such as nurses, teachers or police personnel.

If the buyer decides to sell up and move on then they would have to sell their house with the same discount to a local resident to avoid people buying the discounted properties and quickly selling them on for a significant profit.

The government expects “tens of thousands” of people will be able to take advantage of the policy to buy a home in their local area.

The policy is going through consultation so it will be some time before the finished article can come into effect but early details suggest councils will be able to apply a “local connection” test to prospective buyers to determine whether they are eligible for the discounted properties or not.

If the government is really serious about solving the housing crisis then it also needs to build far more houses than it has done over the past decade, with affordable housing being a significant part of the new housing stock.

The UK is going through a housing crisis but schemes like First Homes could help people afford homes in their local area and building more houses will mean people actually have more places to live.

The Counter Claim

However, research from Shelter found that even with the First Homes policy 96 per cent of average earners would still not be able to afford a house.

Many people who want to get a home of their own are private renters, almost two thirds of whom have no savings and cannot afford a deposit on a property that would already be very expensive.

There are also warnings that the prospective policy would put social housing at risk and make the situation even worse.

First Homes requires housing developers to cover the costs of cutting prices for certain properties by 30 per cent, but developers already have a planning system they use with councils to ensure a certain amount of affordable housing is built and infrastructure is constructed around it, called Section 106.

Between 40 and 80 per cent of the Section 106 money is expected to go towards First Homes if it launches, meaning there’s less available for building affordable homes.

If there are fewer affordable homes being built and the houses available under the First Homes policy are still out of reach to 96 per cent of average earners then the people in the most need of secure housing will be harmed.

The prospective policy could help those who earn above the average wage or have enough savings to afford a deposit, but paying for it from the same pot of money which goes towards building affordable housing could make things worse for those with below average incomes and no savings.

The Facts

Affordable housing includes social homes, shared ownership schemes and affordable rent properties. Six out of 10 social homes are built using Section 106 money.

The average price of a newly built house in England is £314,000, meaning First Homes would knock £94,000 off the initial price.

The National Housing Federation report into the 8.4 million people in England living in an “unaffordable, insecure or unsuitable home” found that 3.6 million people were living in an overcrowded home while 2.5 million couldn’t afford their current rate of rent or mortgage.

A further 2.5 million people are living in “hidden households” they can’t afford to leave including house shares, living with parents or living with an ex-partner. 1.7 million are living in “unsuitable” homes, which includes the elderly in homes they can’t move around in and families in homes with no outside space.

Some 1.4 million are in poor quality homes which aren’t in a good condition for human habitation and 400,000 people are either homeless or at risk of becoming homeless as they sofa surf, sleep rough or live in temporary accommodation.

The government is now on housing minister number 10 in as many years, with Christopher Pincher replacing Esther McVey in the reshuffle last week. Long-term government plans are being hampered by the regular turnover of ministers.

A report from Shelter last year found that England would need three million new homes built over the next 20 years, while the Scottish and Welsh governments are committing more money to building new affordable houses.

One in 10 new homes built since 2013 have been constructed on land with a high risk of flooding, with over 84,000 new homes considered to be at risk from extreme weather the UK is currently experiencing with Storm Dennis.

A shortage of housing stock and a low number of new houses being built over a long period of time has contributed to the UK’s housing crisis and it will take a long time to compensate for years of issues.

By Joe Harker

Source: Kent Live

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Resolution to the housing crisis in Ireland

There has been much focus on the UK property market and whether house prices are rising or falling and whether this may or may not be due to Brexit.

What we hear less about is what is happening with property prices with our closest neighbor, The Republic of Ireland.

Ireland is most often quoted these days purely in relation to the potential backstop. What few papers report on is the current housing crisis in Ireland.

Just a few years ago Ireland had one of the world’s highest rates of homeownership, but this ownership has dropped and both property prices and rents have risen dramatically.

In fact, in May of this year, research by Deutsche Bank declared Dublin in the ‘Top 10 most expensive places to rent in the world’.

The shortage of affordable homes is a huge issue, with Ireland’s Department of Housing, Planning and Local Government in August announcing €84m in funding for 25 local authorities providing 1,770 affordable homes nationally.

As a long-term solution, this is fine, but how does Ireland deal with this issue in the short-term?

It is estimated that 685,000 houses were built in Ireland in Celtic Tiger years, between 1997 and 2007. Where have all these houses gone?

Figures by the Department of Finance back in March of this year revealed that €24bn of loans, including many substantial buy-to-let portfolios have been sold to funds at an average discount of 52%.

Many of the sales were completed without the consent of mortgagees.

Most of these were non-performing loans and the purchasing fund often wastes no time in foreclosing on the loans.

This cycle still continues with Ulster Bank announcing the sale of 4,000 loans worth €900m as recent as July of this year.

How can short-term lenders relieve this pressure?

The answer is simple, they fill the gap where mainstream lending is simply not available.

For example, Fiduciam has provided numerous loans which have allowed borrowers to buy their old portfolios back from the funders.

The borrowers can negotiate with the funders directly, safe in the knowledge that they have a reliable funder supporting them through the process.

The properties are then brought back on the market and rented out or sold.

Loans such as these have also enabled borrowers to complete outstanding development works on “ghost estates” that have been sitting dormant since the collapse of the housing market.

This brings more properties into the market which, in turn, eases the property supply issues.

Borrowers can then refinance with a mainstream lender when their properties have been modernised and rents have been normalised.

Ireland’s businesses are also crying out for lenders to help them get out of a position where they might lose everything by restructuring their loans.

This affords borrowers an opportunity to re-establish their business with a viable exit via mainstream finance, or the sale of the assets on the open market.

Such short to medium-term loans provide the perfect ‘pit-stop’ for borrowers.

In essence, providing ‘mid-stream’ lending prior to the subsequent exit with a mainstream lender.

Loans for such purposes are relatively new in the Republic of Ireland, but they can be a positive life saver for borrowers whose loan has been sold and who are consequently at risk of repossession.

By Kenneth Duffy

Source: Mortgage Introducer

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More than eight million people in England ‘directly affected by housing crisis’

An estimated 8.4 million people across England are living in unaffordable, insecure or unsuitable homes, according to the National Housing Federation.

People within this group face issues ranging from homelessness and serious debt to overcrowding and ill health, and many children are missing out on a fair start in life.

The Federation used data from the “understanding society” survey – an annual survey of 40,000 people carried out by the University of Essex – to make the calculations.

The figures were scaled up to reflect the whole population of England.

Research was carried out by Heriot-Watt University on behalf of the Federation.

Looking at how people are affected differently, the calculations estimated that:

– 3.6 million people are living in an overcrowded home.

– 2.5 million are unable to afford their rent or mortgage.

– 2.5 million are living in “hidden households” they cannot afford to move out of – such as house shares, adults living with their parents, or people living with an ex-partner.

– 1.7 million are living in unsuitable housing such as older people stuck in homes they cannot get around and families in properties which have no outside space.

– 1.4 million are in poor quality homes.

– 400,000 are homeless or at risk of homelessness, including people who are sleeping rough, sofa surfing or have been discharged from a hospital or other institution with nowhere to go.

The Federation said some people may have more than one of these housing problems.

People were considered to be living in overcrowded homes based on the “bedroom standard”.

This was contravened if a child had to share their bedroom with two or more other children, sleep in the same room as their parents, or share with a teenager who was not the same sex as them.

It was also contravened if an adult has to share with someone other than a partner.

The report also calculated that around 3.6 million people with housing problems would have their needs best met if they were in social housing.

Social housing rents are on average 50% cheaper than from private landlords, contracts are more secure and many properties are designed specifically for older people with mobility issues, it said.

Urging “a return to proper funding for social housing”, Kate Henderson, chief executive at the National Housing Federation, said: “From Cornwall to Cumbria, millions of people are being pushed into debt and poverty because rent is too expensive, children can’t study because they have no space in their overcrowded homes, and many older or disabled people are struggling to move around their own home because it’s unsuitable.

“This crisis cannot be solved by tweaks around the edges of the housing market.”

By Vicky Shaw

Source: Yahoo Finance UK

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Tax break to help the housing crisis is making things worse

New figures released today by leading flat and house share site SpareRoom, reveal that the Rent a Room Scheme tax threshold increase, introduced in 2016 to encourage more people to let out their spare rooms to lodgers, has actually done more to boost the short term lets market.

The Rent a Room Scheme tax threshold was increased from £4,250 to £7,500 per year on 6th April 2016, following a six-year campaign by SpareRoom, backed by Shelter, Generation Rent and the National Landlords Association. There are around 19 million empty bedrooms in owner-occupied properties in England alone – if just 3% of these (570,000) were let out on a residential basis, it would unlock housing equivalent to a city the size of Liverpool.

Yet the failure to restrict the scheme to residential lets has meant a boost in short term lets rather than residential. According to SpareRoom data, there were 68,604 new lodger adverts in 2017 – 8% lower than the number in 2016 (74,684). This decline, which came on the back of seven years’ consecutive growth, continued into 2018, as demonstrated in the table below.

At the same time short term lets via holiday sites like Airbnb have seen a huge spike, rising 200% in ten UK cities between 2015 and 2017[1]. In London particularly, there has been a fourfold increase in Airbnb listings since 2015, this reduces residential housing supply and pushes up rents for people looking for long-term homes[2].

Matt Hutchison, SpareRoom Communications Director, comments: “These figures clearly show that the benefits we hoped to see from the government’s Rent a Room Scheme have been undermined by a new surge in short-term rentals. Given the fact we’re not building new homes in anywhere near the numbers we should, we have to do more to better use existing stock. The UK has a housing crisis, not a hotel room crisis.”

A chart showing the changes in the number of listings on SpareRoom from homeowners looking for a lodger

[1] According to the Residential Landlords Association, Airbnb listings in ten UK cities increased by almost 200 per cent between 2015 and 2017 https://www.citymetric.com/business/regional-english-cities-are-suffering-rise-short-term-rental-services-airbnb-4177

[2] https://www.theguardian.com/technology/2019/may/05/airbnb-homelessness-renting-housing-accommodation-social-policy-cities-travel-leisure

Source: Property118

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England’s housing crisis: Is a distracted government the last to listen to obvious answers?

Chris Bailey of Action on Empty Homes asks if in England’s housing crisis, is a distracted government the last to listen to obvious answers?

In England, it is often said that debate amongst national policymakers is out of touch with reality on the ground (let’s leave Brexit aside for a moment on the reality question). In recent years successive governments have been lambasted by social action and charitable lobbyists over the impact of what has officially been labelled ‘austerity’ and unofficially is more commonly referred to, at least by demonstrators against the policy, as ‘CUTS’.

It is partially to sidestep this binary debate that so many of us now talk the language of investment rather than expenditure. The Coalition for Community Investment (1) is thus in this space, arguing for central government to re-engage with the regeneration of areas of England variously described as ‘left-behind or ‘in decline’ – naturally we prefer the term ‘under-invested’ because we know that it is investment which always makes a difference, short-term, long-term and social impact-wise.

The Coalition for Community Investment draws together organisations from across the housing world. Members include private landlords groups, such as the Residential Landlords Association; social and affordable housing providers like the National Housing Federation, Northern Housing Consortium and National Community Land Trusts Network; and campaigning organisations like Action on Empty Homes, Crisis and Shelter; as well as representative bodies, such as the Federation of Master Builders and Locality.

In looking at these ‘under-invested’ areas of England, some commentators also draw comparisons between industrial decline, low-value property markets and Brexit support. They use this to create a narrative of ‘left behind’ or alienated protest voting. But this is by no means clear-cut; not least because in the last year two-thirds of English councils experienced rising numbers of long-term empty homes. And oddly the subject of Brexit didn’t come up when our research team visited areas of decline blighted by large numbers of empty homes. Paradoxically these are also areas experiencing housing need and with high levels of street homelessness (for all that many of these areas did vote decisively ‘Leave’, some argue as a kind of protest against marginalisation or ‘austerity’ itself).

Writing this on the day that a Cabinet Minister told Parliament that government policy was, in fact, responsible for a rise in the use of food banks, an admission variously described by commentators as ‘bonkers’ and ‘cynical’, it is striking to reflect that we are in the grip of a national housing crisis yet are building fewer social homes than at any time in recent history (or the last 70 years at any rate) (2) and have cancelled all national programmes to invest in bringing empty housing back into use.

It is not wholly unreasonable to assume that the fastest rise in numbers of long-term empty homes in England in a decade is related. Absentee investors soak up huge amounts of property in both high and low-value markets in England, yet incentives to house people in these homes are few and far between. Public policy relies on recently introduced punitive taxation but emasculates much of its impact through three factors:

  1. A two year wait for empty home tax premiums to kick in after it is established that a home is empty for no good reason (owners in care, homes caught in probate disputes, and other reasonable explanations being sensibly excluded from enforcement; and therefore not causing the enforcement clock to start ticking)
  2. A very low level of taxation on residential property due to the unwillingness of any government to grasp the nettle of revaluation of private housing stock in England, for nearly thirty years (since 1991) – years which have seen historically significant rises in value, coupled with increasing shortages of supply.
  3. A wide range of potential evasion routes coupled with under-resourced enforcement. For example, housing declared to be ‘second homes’ can be left unoccupied with no Council Tax Premium payable. At 252,000 these currently out-number England’s 216,000 long-term empty homes – yet many hard-pressed council officers suspect some will, in fact, simply be empty homes, though this is difficult to prove. Given that the identification of empty homes is the council’s responsibility, the one benefit of recent rises in tax premiums may be to gradually incentivise this work and even fund it: though there is no guarantee that income will be ring-fenced for such work.

A recent UCL study covered only a third of Britain but found what it called 340,000 under-used homes and proposed that simply supporting new build was unlikely to end the housing crisis. Summarising the study’s findings the Daily Telegraph reported:

“Housing worth £123 billion is barely used in Britain, researchers have calculated, and have called for a 1% tax on second homes to dissuade people from keeping hold of a mothballed property.

“A new study by University College London (UCL) concluded that building new homes is not the answer to Britain’s housing crisis as they are likely to be bought up as second homes or investments in the most popular areas. Researchers collected information from around one-third of local authorities in Britain covering 40% of the population.” (3)

The dedicated government empty homes funding which ended in 2015 was a £200 million programme which ran from 2012 and included both funding channelled both through local authorities and directly to community-based housing providers. Overall this programme brought nearly 10,000 properties into use for around £24,000 public investment per home. (4)

With all this in mind, The Coalition on Community Investment decided to poll MPs on their attitudes to the housing crisis and the growing blight of empty homes. We also asked their opinion on a range of policy interventions, many of which have already been road-tested by successful but now cancelled government programmes. (5)

Action on Empty Homes can also call on learning from its national programme of effective demonstration projects demonstrating that with financial backing empty homes can provide valuable housing for those in housing need. These community-led projects deliver housing in even the most challenging environments. These are areas the government often calls ‘low demand’, despite their lengthy social housing waiting lists and large numbers of residents housed in property, acknowledged to be inadequate or over-crowded; and often funded wholly or partially by state benefits.

The results of our MP polling were striking, at a time when homeless families in temporary accommodation have hit a ten-year high of over 82,000 (including 120,000 children); while rising levels of street homelessness are a source of national concern.

And as with some other major current policy debates we could mention, we see a striking dichotomy between national government policy and the views of Members of Parliament across the house, regardless, in most cases, of political affiliation.

ComRes polling of MPs commissioned by Action on Empty Homes for the Coalition on Community Investment shows huge cross-party parliamentary support for action on empty homes:

  • 86% of MPs polled agreeing that the government should place a higher priority on tackling empty homes.
  • 72% rank action to bring England’s 216,000 plus long-term empty homes back into use as one of their highest two priorities for combatting the current housing crisis.
  • Over 80% also supported targeted funding for local authorities, charities and local organisations to buy, lease or refurbish empty homes.
  • 68% believe landlords who own empty homes which have been vacant for more than a year should be required to bring them back into use.
  • 77% support charging a council tax premium on empty homes after they have been empty for a year, rather than the current two years.

At Action on Empty Homes and the Coalition for Community Investment, we support a mixed economy approach to solving the empty homes problem. We believe in using both enhanced powers of enforcement and in funding action at local level. We call for significant targeted investment (of around £450 million) set against initial targets for delivery of 20,000 empty homes returned to use and for significant improvements in the worst-hit communities.

Action on Empty Homes also support calls for a major national programme of social housing construction but believe that returning empty homes to use is a potentially easy win for the government, not least now. As the government looks to ameliorate the impact of past decline and current uncertainty on England’s most vulnerable communities. The public agrees with us. Recent polling shows levels of support for action at similar 80% plus levels to those amongst legislators. Now we hope that the government will listen too.

Source: Open Access Government

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Affordable housing finance scheme relaunches to help people at risk of homelessness

A Community Benefit Society working to end the housing crisis by providing affordable and emergency housing to people who need it most is launching the second round of its secure property-based financing arrangement.

Providing an “ethical alternative to buy-to-let”, Reap from Equfund sees ethically minded investors lend their money to provide decent, safe, and affordable housing for people at risk of homelessness.

Reap invests in property to provide affordable rental homes for people in housing need. Every acquisition is rigorously assessed to ensure it can provide a durable and reliable cash income stream for investors. The management of the property is handled entirely by Equfund.

With a minimum investment of £15,000, investors will receive a fixed monthly income (from the rental income) with a flat interest rate of 3% per annum without the associated risks, responsibilities and inconveniences of being a landlord. 100% of the original lump sum is returned to the investor after five years, and the invested amount and their monthly income is unaffected by voids or (maintenance costs) if the property requires maintenance.

The first round of Reap raised over £3,750,000 when it first launched in 2015, double the target amount. In this second round, Reap has transitioned from primarily investing in and refurbishing long-term empty homes to acquiring properties that are ready to move in. This transition, which was brought about by the worsening housing crisis in the UK, allows the company to act with greater speed in providing housing for those most in need and to allocate more investors’ funds against property.

Reap protects investors’ money by only borrowing 85% of the property value and the loan is registered against property at HM Land Registry much in the same way a mortgage is

Unlike many other property schemes, there are no fees involved and Reap guarantees to secure the investment against UK property and does not rely on property price growth to generate an income for investors. Each property has its open market value assessed by an independent chartered surveyor, and investors can arrange to visit a property prior to allocating their funds against it. For further security, and to limit exposure to any single property or locality, investors can request to have their money split and lodged against more than one property.

Reap actively rents to tenants in receipt of Local Housing Allowance or Universal Credit, with the belief that doing so is an important step in breaking the cycle of housing poverty caused by rampant discrimination of people in receipt of housing benefits. Reap goes as far as to assist LHA tenants with the paperwork required to claim their correct allowances and will help to submit this to the local council on their behalf.

Andrew Mahon, director at Equfund, said: “With the government seeking to gain more control over the private rented sector, the buy-to-let market has become progressively complex over the last 12 months, and the next 12 months will see yet more considerable changes to the sector. Investors no longer see much sense in putting their hard-earned money into a market that increasingly offers less rewards and more headaches and exposes them to great risk if they’re not fulfilling all of the new regulations.

“With Reap we’re offering a viable alternative to this broken system that not only tackles the growing housing crisis in the UK with a long-term solution, but also provides a stable and predictable income for socially responsible investors who still want to have a slice of the property market.

“We’re proud of the work we’ve done. We have a proven track record over the last decade in addressing the housing crisis with ethical and sustainable solutions. This second round of Reap will turbocharge the all-important work we do of putting a roof over the heads of those who most need it.”

Source: Scottish Housing News

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Is the great property market crash of 2019 almost upon us?

I’ve seen one or two speculative headlines lately exploring the possibility of a crash in the property market, perhaps by as much as 50%, they scream.

Well, that would be nice, wouldn’t it? If we see the cost of homes plunging to half their value now, I’d make some drastic changes to my investing strategy. I’d pile into property and property-backed investments because the great disconnection between prices and affordability will have mended. Once again, property would be affordable, and I think that would sow the seeds for the next bull market in real estate.

The two-decade property bull
I can remember the last time that prices dropped so low that property investing seemed like a no-brainer. It was around 21 or 22 years ago, and it’s etched in my memory because I did well in property in the following bull market myself. Some friends of mine recently sold a property they bought back then too. I did a quick back-of-a-fag-packet calculation and worked out that the price at which they sold was around double what they ‘should’ have made if the value of their home had merely kept up with inflation over the past couple of decades.

I think my rough sums help to illustrate that something is out of kilter in the property market. And, oh, how many of us have been willing prices to plunge. Prices have been so high for so long that a whole generation has almost been locked out of affordable property.

However, through 2018 there were signs that the property market could be topping. At the very least it seems to have paused its meteoric rise. Could 2019 finally be the year that we see prices fall in a meaningful way? Maybe. And one thing that seems to be dragging on buyer and seller confidence is the long-running Brexit saga. Of course, we’ve still got to pass the official EU leaving date of 29 March, and any extension period if one arises. Then, after that, we need to settle into the new post-Brexit environment. I think the whole Brexit-thing has the potential to dampen enthusiasm in the property market for the rest of 2019.

Two ways for affordability to be restored
Overlay the affordability issue, and it won’t take much to get the market sliding, in my view. How about recession in Europe after Brexit? Or rising interest rates making mortgages more expensive to service? It might feel like fantasy given how low interest rates have been for so long. But look at the economic indicators Britain is throwing off at the moment: massive employment, wages rising faster than inflation, and the biggest budget surplus on record in January. Indeed, the UK is trading well and things could keep on getting better, which could push inflation higher. The traditional damper for inflation is higher interest rates.

Then again, with wages on the rise, perhaps we’ll see more stagnation in the property market allowing affordability to catch up, rather than a dramatic plunge in property prices. Either way, I see the buy-to-let investment proposition as unattractive until property is affordable again. Yet there’s a massive opportunity to invest in the stock market, and the uncertainty of Brexit could be helping that situation. Dividend yields, in general, are higher than they’ve been for years, so that’s one market I would pile into.

Source: Yahoo Finance UK

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A Brexit-induced price drop won’t fix the housing crisis

The average home has leapt from £81,536 in 1988 to £473,882 in 2018 – that’s a 481 per cent increase.

If the cost of a pint of milk (26p in 1988) had jumped up at the same pace, it would now cost a whopping £1.52 – three times the current price.

Anyone who has watched the news or read the papers in recent years will know that we are neck-deep in a housing crisis, and it extends way beyond the capital. Half of young people in the country have no chance of ever buying a home, and private renters on lower incomes spend an average of 67 per cent of their earnings on rent.

Already the situation is out of control, and that’s before we factor in Brexit, the harbinger of economic instability.

Many have blamed Brexit for the recent slowing and occasional fall of house prices in London – but could this actually be a blessing in disguise?

Could falling prices mean that a few more young professionals will be able to climb onto the first rung of the housing ladder?

As they move into homeownership, will that free up rented homes, causing private rents to fall? Will those on lower incomes then be able to afford their rent again? Will the whole market become more affordable, suddenly meaning that – hallelujah – the housing crisis is over?

Alas, I’m afraid not. And here’s why.

First, falling house prices are often a symptom of an economic downturn or recession. This affects people’s spending power, whether they are first-time buyers saving for a deposit, or homeowners who see the value of their existing property stall or fall into negative equity.

That will make houses harder to either buy or sell in relative terms.

Second, inflation is expected to go up after Brexit, which means that people’s incomes will be squeezed regardless of their homeownership ambitions. And banks are generally less keen to lend when house prices are heading downhill.

And finally, house prices are still at historic highs. In London, the average property is 13 times the average wage.

House prices may fall, but it’s the fundamentals of the London market – volatility resulting from under-supply – that causes these problems.

A drop in house prices is yet another symptom of the crisis, not a cure for it. We have a severe and worsening housing shortage in this country, and in particular a shortage of homes at the more affordable end of the market.

There are more than a million households on the social housing waiting list, but the government only delivered 6,000 new social homes in the whole of England last year.

The sadness we all feel at the number of rough sleepers on the streets turns to dismay when we realise that this is just the tip of the iceberg: almost 280,000 people in England are currently homeless.

To truly solve our housing crisis, we must build a whole raft of homes that are affordable to a whole lot more people. That is why Shelter is calling for 3.1m new social homes over the next 20 years.

Some naysayers will claim that it’s impossible to do, but we’ve done it before – after the Second World War – to great economic success and public acclaim. We can do it again.

Our vision for social housing would offer the chance of a stable home to millions of people who fail to qualify under the current system. It would provide much-needed security and a step up for younger renters desperate to get on in life and build a brighter future for themselves and their family.

The current housing situation amounts to a national emergency. Brexit-induced price falls won’t solve the problem. Building more will.

Source: City AM