Labour’s U-turn on the £303,990,507 Cash-Grab on Ashford Landlords’ Wallets

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Well, with the General Election just over the horizon and having been asked by a number of Ashford homeowners and Ashford buy to let landlords what the different main parties’ policies would do to the local property market, in this week’s article we focus on Labour’s contentious Right to Buy proposal for private tenants. Launched in September, the plan was designed to force landlords to sell their buy to let investments to their tenants who wished to buy them…. at a substantial discount.

Shadow Chancellor John McDonnell told the FT in September that, under a new Labour government, tenants would be given the Right to Buy their tenanted home with a hefty discount – just like the Tory Right to Buy policy for Council house renters that came into force after the 1979 General Election.

Yet it was not certain who would have been expected to pay for discounts on buy to let homes sold to tenants. Four years ago, Jeremy Corbyn advocated using the £14bn of tax allowances that UK landlords had at the time to pay for these discounts, allowing tenants to buy their tenanted home at the same discount as they would a local authority home without leaving the landlord out of pocket.

However, these tax allowances have been substantially reduced with the changes in the way mortgage interest relief on landlords’ mortgages is calculated, meaning that this method of funding would no longer be feasible. In fact, bankrolling a project at a modest 20% discount for the whole of the UK would cost £177.84bn; a lot more than the £14billion quoted by Mr Corbyn. So, what would that policy cost Ashford landlords?

Labours policy of 20% Right to Buy discount could cost Ashford landlords £303,990,507! 

… and if Ashford tenants got the maximum discount of 35% that Council tenants receive with the Right to Buy scheme that would cost Ashford landlords £531,983,387.

However, it appears Mr McDonnell has re-considered the original suggestion and done a (slight) U-turn, stating it should apply only to the richest landlords and not those who only own a couple of rental properties. He was quoted in The Times as saying, “There’s a large number of individuals or families who have bought another property as an asset for the future and we wouldn’t want to endanger that”.

Yet, even this somewhat watered-down account still creates threats to the private rental sector and Ashford’s overall stock of private rented homes. John McDonnell seems to have altered his initial thought to permit all private tenants the right to buy from their landlords to apply only to those with more than a couple of buy to let properties. The shift appears to be aimed at pacifying middle England’s small time landlords who are probably swing voters with smaller property investments and instead, Labour’s focus is on the larger scale buy to let investors. Looking at the stats, and being generous that we are only looking at landlords with 6 or more (not the couple that Mr McConnell suggested) …… 

Of the 4,545 rental properties in Ashford, 1,241 are owned by Ashford landlords with 6 or more properties in their portfolio

If targeted, these larger scale landlords would unquestionably leave the property market in their hordes if their buy to let investments could be so easily destabilised. There would be mass sell offs before the legislation even became law, thus making tenants homeless (and who would then house them?) ..and even if that didn’t happen, it would be very damaging and someone (probably landlords) would have to stump up the £48.54bn national bill (£83,003,789 in Ashford alone).

If Labour really want to fix the property market, it needs long term certainty and confidence, yet their policies would instantly challenge this.

And don’t think I am just Labour bashing here – the Tory 2014 Help to Buy scheme hasn’t really helped either as their scheme, which gave first time buyers (FTB) a 20% interest free loan, if they put down a 5% deposit, has been a cash-cow for home builders.

The Tories announced recently another £10bn of taxpayer’s money will be pumped into a scheme which, quite frankly, wasn’t needed to boost an already decent property market. The banks were already giving 95% first time buyer (FTB) mortgages from 2010 and the Help to Buy scheme was only allowed on new homes purchases, meaning it didn’t help the larger second-hand market.

That £10bn could have been far better spent building Council houses, not helping the large PLC builders line their pockets with Public cash.

Are the Tories Selling Off the Last of the Family Silver? 677 Ashford Housing Association Households & the Right to Buy Their Homes

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In 1979, Margaret Thatcher was voted in on a Tory landslide with the ‘right to buy your own council house’ being a mainstay of Conservative policy. She encouraged people to buy their council flats and houses, although it might interest you to know the council tenant right to buy idea was first proposed in the late 1950s as part of a Labour manifesto.

Maggie’s version was based on massive discounts for tenants and 100% mortgages (no deposit required). However, the real bugbear was that half the monies raised from the council house sales went to central Government coffers with the other half having to be used to reduce local authorities’ debt rather than building new houses – so houses were rapidly being sold but not replaced!

4,752 council homes in the Ashford area have been bought in the last 40 years (an average 119 per year)

Interestingly, in 2012 the Tories relaxed the rules for right to buy and raised the highest discount on a property to £75,000 (it has subsequently been increased further, to £100,000, in some parts of the UK) with 166 council houses sold locally since the rule change, raising £20,946,538 since 2012 alone.

The issue, noted by many existing council house tenants, is that those tenants turned homeowners subsequently sell on their ex-council homes at a huge profit, meaning the demographics of those areas has become ever more transient – more specifically, properties that were once council homes are now owned by buy-to-let landlords renting them out on a short-term basis.

Yet up to this point in time, nothing has been said about the ‘other’ type of social housing – housing association properties. Whilst council houses are properties owned by the local authority providing low cost social housing, housing associations also provide lower-cost social housing for people in need of a home, yet they are private, non-profit making organisations.

The Tories state one of the biggest divides in our British society is between those who can and those who cannot afford their own home, so plan to establish a new national model for shared ownership which allows people in new housing association properties to buy a proportion of their home while paying a lower/subsidised rent on the remaining part – helping thousands of lower income earners get a step onto the housing ladder.

So, what for the tenants of the existing 677 housing association households in Ashford? The Conservatives have said they will work with housing associations on a voluntary basis to determine what right to buy offer could be made to those Ashford tenants, although there are already existing rules which give most housing association tenants the right to buy their home, although with only modest discounts of £9,000 to £16,000 depending on where you live. So, what does all this mean for the current homeowners and landlords of Ashford properties?

The Tories sold off 3,581 council houses in Ashford whilst in power between 1979 and 1997

This really created waves in the 1980s housing market and was a contributary factor to the housing crash of 1987 when Dual-MIRAS tax relief was removed by Nigel Lawson. By selling off council housing in those depressed years they were accused of selling off the family silver cheaply, thus creating the foundations of the buy-to-let boom of the early to mid-2000s because of the major shortage of affordable housing being sold in the previous two decades.

But note this time around, the Tories state it is just for new housing association properties, not existing ones. Also, tenants will only have the right to shared ownership – NOT OUTRIGHT OWNERSHIP. This policy will therefore have hardly any effect … unlike Thatcher’s policies of 1979.

 

Ashford Property Values 0.9% Higher Year-on-Year

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It seems that quite a few Ashford homeowners and Ashford landlords have now become acclimatised to living with the uncertainty of Brexit. Throughout most of 2019,  figures show many of them decided to get on with living life, started reinvesting money into Ashford property and buying and selling their Ashford homes and BTL investments. Land Registry stats confirm this.

Current data shows that…

Ashford property values are 0.9% higher than 12 months ago

Whilst the newspapers were stating prime central London property values were now 17% below the levels being achieved a couple of years, that message seems not to have been heard by certain sectors of the Ashford property market!

Speaking with other property professionals in Ashford, many weren’t expecting the usual autumn rebound after the summer holidays with many anticipating a dormant Ashford property market on the run up to Christmas believing many Ashford home-movers would put off the their home moving activities until the new year, yet in many sectors of the local property market, I have seen (and the stats back this up) that those Ashford property buyers who are able to hold their nerve (whereas others were hesitant) have found themselves in a better negotiating position to get a great property deal. Putting aside the fluff of newspaper headlines, the real foundations of Ashford housing market remain sound with record low unemployment, ultra-low interest rates and low inflation.

Interestingly, there are 20% more homes for sale in Ashford compared to two years ago, meaning more choice for buyers.

However, there are still parts of the Ashford property market that remain stagnant, with some homeowners being slightly unrealistic with their marketing pricing. To them, the property market appears to be slow, as they stare at their ‘for sale’ board for months on end, yet nothing could be further from the truth.

The key to a balanced (and healthy) property market is realistic pricing by  homeowners when they place the property on the market, mortgage affordability for buyers (which was discussed a couple of weeks ago in the Blog) and buy to let landlord activity which creates and maintains forward momentum. One measure of momentum is how long a property remains on the market, and interestingly…

The current average length of time an Ashford property remains on the market is 81 days, up slightly from 59 days two years ago

Now the number of properties that have been sold locally is slightly down year on year (even though we had a burst of property sales in the summer locally) and interestingly, Rightmove reported recently that nationally, the number of properties sold  in the UK was only just over 3% less year on year, so a similar picture nationally.

So, what does all this mean for Ashford’s homeowners and landlords?

We have always had issues that appear at the time to be game changers for the housing market; for the last few years it’s been Brexit, 10 years ago the credit crunch, 18 years ago the dot-com crash, the ERM and 15% interest rates issue 27 years ago, dual MIRAS 32 years ago, hyper-inflation 40 years ago, the 3 day week 45 years ago – the list goes on and on –  Everyone needs a home to live in and the local authority just has not got the money to build council houses, so buy to let will continue to grow for the foreseeable future which in turn creates a stable foundation for all homeowners.

Maybe you should use this time, like many in Ashford to take advantage of the property deals to be had locally…

The Cost of an iPhone11 Represents Over 10% of an Ashford First-Time Buyer’s Deposit

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Many mature readers of this Ashford property market blog may well remember buying their first home as 20 or 30 somethings, perhaps in Ashford and many years ago, and read the newspapers now and feel it is all doom and gloom for todays’ first-time buyers.

So, I wanted
to look at the facts, instead of newspaper headlines.

Back in 1995, the average Ashford first time buyers house cost £38,060,
whilst official figures state today it is £181,000

So, looking at today’s property prices, the perception is that owning a home is beyond the reach of most Ashford first time buyers and that renting is the only way for younger members of Ashford society to have a roof over their head .. or is it?

100% mortgages (so no deposit needed) were rife in the 2000’s with Northern Rock famous for their 125% mortgages (i.e. you borrowed 25% more than what you were paying for the house, again with no deposit). Yet when the credit crunch hit in 2008 such mortgages disappeared overnight – ending the dream of homeownership for many. Yet it might surprise you to hear that 95% mortgages (i.e. the first-time buyer would need to save a 5% deposit) have been available since late 2009 and 100% mortgages (i.e. no deposit) were made available in 2016.

It is £167 per month cheaper to buy a typical Ashford first-time
buyer home than to rent the equivalent property.

Prospective Ashford first-time buyers could make a saving
of £2,006 per year on average if they moved from renting to owning. My calculations
assume that first-time buyers raise a deposit of just 5 per cent and make
mortgage payments over 35 years with the Barclays 95% mortgage with a fixed
interest rate of 2.48 per cent interest. At this level…

Today, the average deposit needed by an Ashford first-time buyer is £9,050

Those able to raise that deposit, would pay £638pcm on average in mortgage payments, while the average rent for the same property would be £805pcm and the household income to support such a mortgage would need to be from £38,211 pa.

Of course, buying your first home is a massive financial commitment
and investment with up-front costs to ponder on, yet long-term the financial
benefits can be substantial. With annual savings of £2,006 a year, this can
really mount up over time and, of course, once the mortgage is paid off, one
will have a valuable asset.

Yet, the elephant in the room is that raising of the 5% deposit

Well most first time buyers, even some of you now in your 50’s and 60’s may have used the Bank of Mum and Dad to help with the deposit, yet it’s only fair that most parents still expect their offspring to contribute to the deposit and this is where it comes down to choice. I have spoken to many of my friends and family to reconfirm my initial thoughts that it largely comes down to priorities and choices in life. To save the deposit mentioned above, some sacrifices are required…

According to a survey in 2018, the average millennial goes out two nights a week and spends on average £63.36 per night out, that’s nearly £6,600 per year – an expensive hobby. Nearly a third of millennials surveyed had broken their mobile phone in the last 12 months. Then there is the obsession of having the latest tech, with the need to constantly be upgrading one’s mobile phone. In fact, the cost of the brand new iPhone11, recently released, is just shy of £900. Even those on contracts can expect to pay upwards of £80 per month for the newest upgrade, yet if they kept their old phone after two years, a sim-only deal with the same minutes and data would set them back no more than £25 per month … it comes down to choices – Save for a deposit and reduce your expenditure on socialising and mobiles etc and have a valuable asset at the end of your mortgage or continue as you are.

I am not here to make judgement – we are all free to make our own choices in life – all I am doing is highlighting the real situation – so you are aware of the full story.

Is This the End of No-Fault Section 21 Evictions for Ashford’s 11,678 Tenants?

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In late spring, the Government announced that they were planning to end no-fault evictions for tenants living in private
rented accommodation.

I have since had a number of Ashford landlords contacting me anxious that removing a tenant from their Ashford buy-to-let property in the future had possibly become a lot more problematic. Yet, at the launch of the consultation on the changes to the piece of legislation relating to no-fault evictions (the Section 21 amendments), the Government wanted to assure British landlords that they would be protected by a bolstering of the existing Section 8 legislation: The current Section 8 already allows landlords grounds for recovery of their properties for reoccupation by the landlord, non-payment of rent and other legitimate factors.

4,545 Ashford landlords are affected by this potential change in the law

Comforting for both Ashford landlords and tenants is the fact that competent letting agents very rarely have to evict a tenant. In the event a tenant needs evicting it is normally because rent hasn’t been paid or because the landlord is either selling their buy-to-let investment or moving back into their property themselves – Looking at the consultation – it has been indicated that those grounds will not be removed from section 8 powers during the government’s consultation and the word is they will be bolstered and improved. To put the removal of Section 21 notices into some context…

Only 22,527
section 21 notices made it to Court last year, out the 4.5million private
rented households

Scotland banned no fault evictions (i.e. their own version of a Section 21) two years ago, and the model suggested by Westminster is similar to that of the new Scottish system. Landlords, tenants and agents have accordingly had to adapt north of the border, and there hasn’t been a mass exodus of landlords from the Scottish market.

The call throughout the lettings and legal profession is simply: if the Government is intent on making these changes, we need well-funded courts which specialise in housing and tenancy matters (as there are for family law).

Especially when the landlord manages the property themselves (without an agent), the issue of eviction often comes about from a breakdown in communication between landlord and tenant. The courts could use their mediation skills to make it simpler and faster for tenants and landlords to obtain quick and accessible justice instead of the existing drawn out procedures under Section 8, which helps no one (not even the tenant). This is important as the demand for Ashford rental properties is growing and growing and people need homes to live in:

Ashford needs an additional 216 buy-to-let properties per year for the next decade to meet the demand from Ashford tenants

As an agent in Ashford, I know most Ashford landlords consider buy-to-let as a long-term investment, with the average landlord looking to retain their buy-to-let property for at least 10 years or beyond. Talking to other agents around the country, over 90% of Section 21 notices are made by the tenant, not the landlord. Removing the Section 21 notice could thus affect tenants far more than landlords.

Replacing Section 21 with a system that requires a landlord to firstly have a good reason, and secondly to go through due process, will likely remove the more unprincipled amongst landlords from the property market. That is great news as those landlords will either sell their properties to new or existing buy-to-let Ashford landlords, or to tenants who want to buy them. So, it could be a small win for people looking for a new Ashford home, and a disappointment for landlords simply looking for a cash cow investment who have no care about their property or tenant!

If you are an Ashford landlord and want to know more, whether you are a client of ours, an Ashford landlord with another agent or a self-managing landlord, feel free to either drop me a line ( robert@taylorslettings.co.uk ) or pick up the phone (01233 663266) to chat about the implications of this and other legislative changes on the horizon.

Mending the Broken Ashford Property Market

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The long-lasting issues of the Ashford property market are laid bare as the final 2018 property transaction figures have just been published and they continue the post credit crunch trend of less people moving.

26.8% less Ashford people are selling their homes annually since the credit crunch compared to the post Millennium years of 2000-05

This is not solely an issue of the Ashford housing market slowing down since the credit crunch – the challenge is to separate shorter-term factors such as Brexit and the upcoming election from longer-term structural issues of the UK society, because when these most recent property transaction figures are seen against longer-term trends for Ashford, they suggest there are more significant issues within the Ashford housing market.

In the late 1990’s, 2,035 properties were sold annually in the Ashford area, then in the same area, the Millennium boom saw transactions rise to 2,886 per annum. Property sales then almost halved to 1,639 per annum in the challenge of the global financial crash and subsequent retrenchment of the mortgage market. Post credit crunch (2012 and beyond) locally, on average, 2,111 properties have sold annually:

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So whilst there was a recovery from 2013 onwards, it was

rather uninspiring when compared to the pre-credit crunch years, with a lacklustre
performance in property transactions since the mid 2010’s.

You might ask why should we be concerned about the number of property transactions and not the change in property values?

The fact is, the number of property transactions are a far more reliable bellwether of the health and potency of the local housing market.

As less people have been selling their homes locally, this is not only bad for the Ashford housing market but also for the local economy, especially when you consider how many allied businesses – builders, decorators, solicitors, removal vans, estate agents, mortgage arrangers and others  lose out as a result.

Some say the deficiency of property supply, mainly in affordable first-time buyer homes, is the chief reason why transaction figures remain stubbornly low. Others suggest an absence of suitable housing stock elsewhere in the property ladder (particularly bungalows for older generations), combined with rising demand, is causing a bottleneck in our local housing market.

I know there has been much talk in Westminster of grand home-building programmes, yet we require actual delivery of these undertakings and, even then, it will be a decades before any seismic change in the Ashford property market is seen as a result.

In the short-term, a quicker improvement may come from changes to stamp duty: First time buyers do not incur Stamp Duty up to a certain level, yet those Stamp Duty concessions could so easily be also extended to mature homeowners looking to downsize. This could liberate a meaningful number of family homes currently occupied principally by retirees and the tax lost through Stamp Duty could be replenished by a restructuring of the Council Tax bands.

The Council Tax bandings were set in 1991 and the highest starts at £320,000 (based on 1991 values). It seems irrational that this upper value band, set in the 1991 revaluations, has not been increased, particularly as house prices in London have soared by over 400 per cent in the last 25 years.

These two changes would mean higher taxes for those who don’t move yet less tax for those that do – a situation that would encourage a far more liquid Ashford property market.

Just a thought of one possible way to mend the local property market – what are your thoughts?

How Long is an Average Ashford Property on the Market For?

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If you are selling or buying a property in Ashford, there are a few reasons why it may be taking some time to sell your Ashford home or to find that perfect place to call your new home. It may be taking longer than you thought to find a buyer for your home because of the current state of the property market or finding that perfect Ashford home may be taking too long because of a lack of suitable properties to buy.

So, taking everything into consideration, all of these factors invite an obvious question – how long is too long to persist in the Ashford property market?

If you are looking to sell your Ashford property, it may have become infuriating that your home has been on the market for longer than you anticipated. Perhaps the property market is purely in a position where it’s challenging to get a property sold quickly, or at the price you want to achieve for it. If you do live in an Ashford home that is towards the upper reaches of the price band, you have to be open to the idea that because it’s worth so much more than the average property in Ashford and so more than most individuals can afford, you will have to wait longer to get it sold.

Your Ashford home might be taking longer to sell because your asking price is simply too high. Even if you are prepared to take a realistic offer, if you have an unrealistic asking price your overpriced Ashford property will likely turn off potential buyers from even being inclined to book a viewing.

Looking at the market in Ashford compared to a year ago
makes very interesting reading…

image001When it comes to the average length of time on the market,

the detached, semi-detached and apartments in Ashford appear to be taking
longer to sell, yet the length of time Ashford terraced houses seem to be on
the market has dropped.

The overall average length of time an Ashford property remains on the market has risen by 13%, from 54 days a year ago to 61 days today

The question that remains is, if you are having no luck
selling should you leave your Ashford property on the market or not? This is basically
down to your personal circumstances – a big decider has to be if you are moving
up market or downsizing.

Buyers will compare your Ashford property to all the other
homes on the market using the portals such as Rightmove, On the Market and
Zoopla and even if your asking price is realistic, if your marketing
(brochures, pictures, even video walk through) isn’t top dollar, they will
dismiss your property.

Remember, the average buyer only views 4.5 properties
before they buy and on average, each buyer will only spend just over 25 minutes
viewing each home  …

The more properties that are on the market, the greater the
choice for buyers (yet more competition for house sellers), so lets look at how
many homes were for sale in Ashford now, compared to 12 months ago.

As you can see, there are some big differences between the property types in Ashford:

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As for buying an Ashford property, searching for that dream
house can take time as you have to consider the needs of your spouse, children,
schooling, etc., what you can realistically afford and whether your current
location can accommodate you until you find that perfect Ashford home.

Don’t forget that upwards of 10% of homes do not make it to the portals, so don’t just rely on the internet to let you know what is coming on the market. I often hear of disappointed buyers who missed out because another buyer registered directly with the agent, whilst they simply relied on the portals.

When it comes to buying an Ashford home, and so you do not
make any decisions you will regret later on, taking your time is always the
more practical option. The amount of money that is involved in buying a home
and all the costs connected with it means that you should not rush into buying
or selling without due consideration.

74.3% of Ashford OAPs Own Their Home … and They Are Worth £1,408.3m

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That number is staggering isn’t it?

Of the 5,872 households in Ashford where the head of the household is 65 years or older, an astounding 4,363 (or 74.3%) of those are owned, equal to the national average of 74.1% – which sounds great; yet nothing could be further from the truth.

I see many Ashford pensioners who would like to move but cannot, as there is a scarcity of such properties for mature Ashford people to downsize into.

Due to their scarcity and high demand, Ashford bungalows on average fetch a 12% to 22% per square metre premium over two storey properties.  To add insult to injury, a recent NHBC reported that only 1% of new builds in the Country were bungalows (compared to 7% in the mid- 1990’s).

Ashford OAP’s are sitting on £1,408.3m of equity in these Ashford homes

In a survey conducted a couple of years ago by YouGov, they established that just over one third of homeowning people aged 65 and over in the Country were looking to downsize into a smaller home. Yet, the Torys over the last nine years have appeared to target all their attention on first-time buyers with ‘initiatives’ such as Starter Homes to safeguard the youngsters of the UK not becoming perpetual members of ‘Generation Rent’.   Equally though, this doesn’t address the long-lasting under-supply of suitable retirement housing essential to the needs of the Ashford’s steadily ageing population.  Lamentably, the Ashford’s housing stock is tragically unprepared for this demographic shift to the ‘overextended middle age’, and this has created a new ‘Generation Confined’ quandary where older people cannot move.

Also, those older Ashford retirees’ who currently live in the limited number of Ashford bungalows are finding it difficult to live on their own, as they are unable to leave their bungalow because of a lack of sheltered housing and ‘affordable’ care home places.

Thus older Ashford retirees can’t leave their Ashford bungalows, younger Ashford retirees in their larger 2 storey family houses can’t buy those Ashford bungalows (occupied by the older retirees) and those Ashford people in the 30’s and 40’s can’t buy those larger 2 storey family houses (occupied by the younger retirees) that they need for their growing families … it’s like everyone is waiting for everyone else because of a bottleneck at the top.

For those wanting to see the complete stats for Ashford as whole …

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Ashford’s (and the rest of the UK’s) property prices have soared over the last 50 years because the number of properties built has not kept up with demand.  With restrictive planning regulations, migration, people living longer and excessive divorce rates (thus one family becoming two households) we need, as a Country, 240,000 properties to be built a year since the Millennium to just stand still.

At the turn of the Millennium, the Country was constructing on
average 180,000 to 190,000 households a year, that figure dropped in the five
years after the Credit Crunch to 135,000 and 145,000 households a year.  Although we built 217,000 last year, we still
have all those 19 years to make up for.

The answer …. allow more land for starter homes, bungalows and
sheltered accommodation because land prices are stifling the property market
as the large building firms are more likely to focus on traditional houses and
apartments than bungalows (because they make more money from them).

My thoughts for savvy Ashford property investors  – until the Government changes the planning rules to allow more land to be built on; bungalows, especially ones that need some TLC after someone has passed away are a great bet  – either for flipping or for a great rental return as more and more OAP’s will be renting in the decades to come…

Ashford’s Leasehold and Ground Rents Scandal

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Freehold or Leasehold? Well, when buying a property in the UK these are the two main types of ownership and, when boiled down, they mean the following…

Freehold: The person who owns the freehold of a
property owns both the property and the land it stands on.

Leasehold: A leaseholder does not own the land the
property is built on and essentially rents the property from the freeholder for
a number of years, decades or, in some instances, centuries.

Apartments are generally sold as leasehold properties because of the very nature that, if you have a neighbour above and/or below you, both of you can’t own the land – with the length of the lease usually being over 100 years (sometimes far more).

However, some apartments – particularly Victorian and Edwardian
houses converted into numerous apartments –  are sold on the basis that the leasehold apartment
owner also owns part of the freehold (with other leaseholders in the same
building), having what is known as ‘share of freehold’.  Similarly, the Government also brought in
legislation a number of years ago for more modern apartment blocks built in the
20th century where it allowed leaseholders to club together and have the right
to purchase the freehold together.

Now we must
stress, there is nothing wrong with leasehold – it’s been a useful form of property
ownership since Norman times, it’s just that with a leasehold comes potential
extra responsibility. If there are four apartments in a block, who pays for the
leaking roof when all benefit from it being watertight? Who pays for any
subsidence, when all benefit from good foundations? Who pays for building
insurances? .. the list goes on – so clauses are added to the leasehold agreement
to ensure everyone is protected and pays their fair share of the joint costs of
the building with service charges and a nominal ground rent (ground rent is a nominal rent, commonly quite low, often in the region of
£50 per year to the freeholder of the property).

Whilst houses tend to be sold as freehold as it’s a more unambiguous set-up, given there is only one property on the land. Contentiously however, in the last 20 to 25 years this has not always been the case with new-builds as some new homes’ builders have sold the leasehold to the buyer and retained the freehold. There is nothing wrong with that, it’s just in some cases (not all) they also added some onerous clauses to the lease of the property they were selling, which could well be the basis of another ‘PPI-style’ scandal.

Builders started to add clauses
into leasehold property sales with ground rent being set at an initial £300 to £400
a year but doubling
every ten years. Though unwary
first-time buyers were habitually told that their 500 and 999-year leases were
practically freehold, the clauses inescapably meant that the ground rent would rise
to ridiculous levels meaning the average ground rent would be £23,750 a year by
2070 and £379,900 a year by 2130, making the properties practically
unsellable today, with owners often left unable to re-mortgage too.

Government reports have emerged recently that suggest 12,000
leaseholders in the UK are facing such ground rents – which are paid to the
freeholder – that double in cost, usually every 10 years, but occasionally even
more frequently.

So, how many people are affected by this in our local area?

Well, using Government data, our research suggests that in Ashford 66 householders have bought a detached house, semi-detached house or town house – all of which would ordinarily be freehold – as leasehold. Not all these have onerous lease clauses, but some do. I know it doesn’t sound a lot, yet that is potentially 66 lives ruined with homes they can’t sell or possibly even refinance – making them prisoners in their own property.

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The good news is the Government is on the case and appear serious about sorting this issue out – they have already proposed a ban on the future sale of houses as leasehold, as well as cutting ground rents to zero. Yet serious questions remain about the future of homeowners in existing leasehold. Westminster wants the developers to set up compensation plans and many (though far from all) have stepped up to the mark and started to sort this, however some campaigners have said these schemes are not fit for purpose, let’s hope they are wrong…

Are Ashford Builders Constructing the Wrong Type of Property?

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The British housing market has never been so newsworthy. Every other day, there is an article in the newspaper or online about impending house price drops, house price rises, building on green belt, mortgage rates up/down, first time buyer affordability and the woes of being a buy to let landlord, to mention but a few. As a nation, we have a strong national desire to be homeowners.

The English
Housing Survey stated the proportion of owner-occupied households increased
steadily from 52% in the early 1980s to 2003 when it reached its peak of 71%.
Since then, owner occupation gradually declined to 63% in 2014, yet in fact
increased to 64% in 2017 and has stayed there since.

One of the
main motives of home ownership is the prospective tax-free capital appreciation
that can be obtained. It’s no wonder the phrase ‘as safe as houses’ is popular
in the English language, as many homeowners use homeownership as a nest egg or
even a pension pot, as savings rates are at extraordinarily low levels.

Yet even
with the news that homeownership is on the rise, the biggest seismic shift to
the Ashford property market is the growth of the rental market, which has more
than doubled in the last 15/20 years. So how can the social housing sector
(Council Housing) remain roughly at the same level since the millennium,
homeownership slightly grow, yet the private rental sector be so huge? Well it
comes down to the fact that many more homes have been built in Ashford in the
last 15/20 years, and a lot of them have been bought for buy to let, or Ashford
homeowners with second hand starter homes have also sold them to buy to let
landlords and they have bought larger brand new homes.

Yet the
question we wanted to ask is … are we building the right sort of homes, especially
when it comes to the number of bedrooms? Whilst the data doesn’t exist for Ashford,
the country’s stats are available and it makes fascinating reading…

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Looking at
the graph in 2008, 59% of new homes built were one and two beds, yet last year
that had dropped to 35%.

The
Housing Minster said recently he was concerned that new homebuilders were
building the wrong types of homes in the wrong places at the wrong prices. Many
(not all) tenants are tenants because they can’t afford the deposit and as there
is a direct coloration between the rent’s landlords charge and tenant’s earnings
(i.e. as earnings go up, rents go up and vice versa), and earnings for
the last seven years have been subdued, the property tenants have been able to
afford in Ashford are the smaller one and two bed properties. Yet a lot of
these tenants are now having families (with the need for larger property with
three, even four bedrooms).

Looking at
the stats for Ashford, it can be seen the vast majority of homeowners live in
the larger properties with more bedrooms, whilst private rental tenants are in
the smaller properties (with less bedrooms).

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Our concern is – will young families and professionals be able to afford to live and work in Ashford, especially as the local authorities are unable to build council housing (Social Housing)?

One symptom of all these issues mentioned above is the massive growth in multi-family households (i.e. households containing two or more families), which have increased by 42% in under a decade. Now of course many will be because of older couples moving in with their adult children yet many are unrelated families sharing a house, something that simply should not be happening in 2019.

If we
don’t increase the supply of the ‘right’ sort of homes, what will their living
conditions be like?

Whilst we are still a country of homeowners and even though there has been a slight growth in numbers, the long term trend is downwards if we don’t build enough of the ‘right’ new homes, in the ‘right’ location and the ‘right’ price, Ashford people will continue to increasingly rent … which will only be good news for Ashford’s buy to let landlords.

Taylors Residential Lettings Limited, Company no. 6002742, Regd Office: Suite 1, Invicta Business Centre, Monument Way, Ashford TN24 0HB