Kate's top 5 stories this week including - Eric Pickles, Property Management Redress Schemes and Private Rents

publication date: Dec 8, 2014
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

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My top 5 stories this week

Story 1 Eric Pickles boosts the UK’s small house builders

Eric Pickles, the Communities Secretary, has made it up to £140,000 cheaper for small house builders to work. Most “Section 106” charges (ie provision of social housing) will no longer be demanded from the smallest house builders, and applies explicitly on sites of 10 homes or fewer (5 or fewer in rural areas), including self-build, extensions and annexes.

The number of small and medium-sized builders has halved from 6,167 in 1997 to 2,832 in 2012 and the new measures are an attempt to boost house construction and jobs in this sector. Builders had warned how Section 106 requirements were destroying house building. Pickles said, “Small builders are being hammered by charges, which have undermined the building industry, cut jobs and forced up the cost of housing.”

Overall the changes will bring six-figure savings to many small developers and also self-builders, who have already been made exempt from community infrastructure levy. There are plans for a new £25 million fund to kick-start construction on sites between 5 and 15 homes by offering loans repaid by developers when homes are completed and sold. This is part of the £535 m Builders Finance Fund Scheme and already 160 small to medium developments that have languished could get workers back onto their sites as a result. To read more, see Pickles cuts stealth taxes.

Kate's thoughts - fantastic news for the small to medium sized builder and for local communities. To date most of our new homes are being provided just by the larger builder, meaning smaller, infill sites which could deliver lots of housing at little change to the local community 'look and feel' have stalled due to a lack of finance and costs.

However, this does mean more grants need to be made available to build affordable homes 'lost' from this policy via housing associations, otherwise it will just reduce the number of reasonably priced home we produce.

Story 2 Property management redress schemes – what leaseholders should know

A new online quiz and guide to help purchasers of leasehold properties understand the contents of key clauses in their lease has been published by LEASE. The guide gives simple and straightforward advice on how to get a copy of your lease, and goes on to tackle ten examples of common lease terms, and clear explanations as to what they mean.

After taking the quiz, the guide explains terms crucial to understanding the lease, and it’s suggested that you then take the quiz again to see how much you’ve learned. It doesn’t promise to cover every eventuality but offers a good starting point for those who feel slightly bamboozled by some of the terminology. For more information, go to Lease Advice.

Kate's thoughts - this is a great idea as leasehold is a difficult concept and should be given to all those who are potentially looking to buy a property which is leasehold so they really understand their rights and responsbilities and what little control they have over property expenditure. 

Story 3 Halifax says supply and demand are in better balance

House prices in September-November 2014 were 0.7% up on June-August 2014 but slightly down from 0.9% in the previous month. Prices September-November were 8.2% higher than in the same quarter in 2013, representing the slowest rate of house price growth since February. House prices grew by 0.4% between October and November, in contrast to 0.4% in October.

Home sales fell below 100,000 to 98,490 in October for the first time this year but housing transactions in 2014 are expected to be over 1m for the second year running, and represents the first time since 2006 and 2007 that home sales have topped 1 million in two consecutive years. Halifax Housing Economist Martin Ellis said, “We expect a further moderation in house growth over the next year, with prices nationally expected to increase in a range of 3-5% in 2015.” To read more, see Halifax House Price Index.

Kate's thoughts - the Halifax index reflects the slowdown others are showing at the moment, but more importantly, they are looking at the number of properties being sold hitting the one million + mark, which helps contribute money to the economy. And it's good news that they are also predicting steady price growth of 3-5% during 2015 rather than the either poor or ridiculous growth seen in London.

Story 4 Oxford, Brighton and Bath overtake London for private rental

The National Housing Federation has published results of new research showing that outside London, Hertfordshire’s Three Rivers is the most expensive area to rent privately, costing more than half of the average wage. Similarly, Oxford, South Buckinghamshire and Brighton cost more than half renters’ salary and are more expensive than Greenwich and Lewisham.

Cost of renting in the PRS is preventing people saving for their own homes, and making it difficult for families, and this is supported by a recent YouGov poll. 21% of private renters in England say housing is a deciding factor in their choice of party in the next election, compared to 8% of homeowners. Rising house prices and stagnant wages are also contributing to their difficulty in covering high rent plus essential bills. The National Housing Federation’s Chief Executive, David Orr, said, “Private renters today are getting a raw deal… We need a long-term plan from politicians to put this right.” For more information, go to Landlord Today.

Kate's thoughts - It's somewhat unfair to 'blame' the PRS for the rents it charges as 20% of landlords (according to a Shelter report) show they make no income at all from renting their property. Having analysed properties in London and 'down south' it's quite clear that it's virtually impossible to make ends meet income wise with less than a 50% LTV, so landlords certainly aren't 'overcharging' versus their costs. A recent Resolution Foundation report showed only in a fiifth of LAs were renters paying more than 30% of their income on renting, whereas buying was costing more in over 40% of boroughs.

The other point is that the majority of people renting aren't doing so because they can't afford to buy, it's because they are students or immigrants or it just doesn't make sense for them to buy just now.

Story 5 Bank of England says home borrowers will cope with rate rise

In a change of attitude on the impact of higher borrowing costs on homeowners’ budgets, the Bank of England has announced that most mortgage borrowers could tolerate interest rate increases of up to 2 percentage points. This points to a possibility of raised interest rates prior to autumn 2015 and earlier than was anticipated.

In its annual survey the BoE found that only 1.3% of households, or 4% of borrowers, would struggle to cope with a 2 percentage point rise in interest rate. Marc Carney said in June that, “History shows that the British people do everything they can to pay their mortgages.” The survey now suggests that every 1 percentage point interest rate rise would decrease spending by 0.5% and would therefore not have markedly strong impact on household finances.

Last year’s survey, by contrast, noted twice the proportion of households who spend over 35% of income servicing debt would be ‘vulnerable’ if rates increased by 2.5 percentage points. A further effect of a rise in interest rates would benefit savers more than borrowers and thus older people rather than younger, besides poorer people, since many pensioners rely on savings. Better-off households were susceptible to higher losses as they often owe more. For more information, go to FT.

Kate's thoughts - I won't be popular in saying this, but it's better to set a date to move interest rates and get started, otherwise people will think they won't rise and won't take the necessary action to help ensure they can afford higher rates. Lets get the first rise through, say in March, have the election and then see whether another rise can be achieved before teh end of 2015.


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