2015 Budget Reaction

In light of George Osborne’s first all-conservative budget, CEO of My Online Estate Agent, David Grundy takes a look at what it means for the property market. You can read his reaction below:

 

“Cutting tax relief on buy-to-let mortgage interest is counterproductive. There is always an argument for trying to create a more accessible market for first time buyers, of course, but I question whether this tax measure will have a significant impact in that regard.”

 

“What it will encourage is a rise in rent charges from landlords who are looking to recoup their losses. For tenants who are trying to save up for a deposit in order to get onto the property market, increased rents will be a major set-back. At the same time, potential buy-to-let landlords will think twice about entering the market so the number of rental properties available will be reduced. This will make it harder for young people who are looking for that first bit of independence to find affordable rental properties.”

 

“Every business benefits from tax relief on interest so why shouldn’t landlords? They differ from ordinary home-buyers who do not have to pay tax on the gains they make on their properties. The rate of tax relief enjoyed by buy-to-let landlords was totally justified and cutting it, with a view to phasing it out altogether doesn’t make sense.”

We’d love to hear your views on the budget so please comment and let us know what you think!

April 2015 Property Trends from Rightmove

There is one major conclusion that can be drawn from the Rightmove April 2015 house price index – now is a great time to sell!

The index offers data and insights into the property market based on houses put up for sale over the previous month. In contrast to many other surveys which look at completions – such as Nationwide and Halifax – the Rightmove index gives a feel for seller behaviour.

Rightmove HPI April 2015 Key Comments

Rightmove’s latest data highlights a few points of interest:

  • Asking prices are at an all-time high – £286,000.
  • There remains a relatively small in number of new houses coming onto the market – 4% down on the prior year. Not quite the “slump” that Rightmove call it, but still important.
  • Buyer activity is at record levels, at least based on number of site visitors to Rightmove, so there is certainly demand out there.
  • The property bubble that is appearing will be a major challenge for the new government.

So why is now a great time to sell your home?

Based purely on the Rightmove analysis we are very much in a seller’s market. Prices are on the up, and there is a shortage of available properties. These two factors are combining to reduce the average period it is taking to sell – Rightmove have calculated this at 72 days, which accords with our experience at My Online Estate Agent.

In addition, mortgage rates remain very low, and will continue to be so for the foreseeable future. Fixed rate deals below 2.5% are commonly available, and few commentators expect a rate rise within the near term, so it is possible to plan for low mortgage costs for the next few years. This means that houses are more affordable, increasing the available population of buyers that might be attracted to your property.

“I’m waiting to sell, for further price rises …”

One question we are repeatedly asked at MOEA is whether waiting a bit longer may enable you to get an even better price for your property. This is certainly possible, and whilst the seller’s market remains the upward trend will continue. But, equally, nobody knows what is around the corner, so waiting and then trying to sell when there is suddenly a glut of properties could be counter-productive.

It is also worth remembering that summer is just around the corner, when housing activity stagnates, and a hung parliament could cause confusion. As such, there is no certainty on where the market will head over the next 6 months.

My advice for buying and selling this month

Nobody has a crystal ball to tell you where the market is heading. It is thus important to take decisions based on what you know now. If you are keen to get a good price, now is definitely a great time to sell, and you should get close to your asking price in a short period of time.

Of course, waiting may be the better strategy, but it could also be the wrong approach. The key question to ask is this – if you got close to a recommended asking price for your property, would you be happy? If the answer is yes, don’t worry about whether prices may go up, because nobody knows, and put your house for sale!

For more insights on Rightmove’s index, take a look at the full report here (pdf) and if you’re considering selling your property, be sure to check My Online Estate Agent’s fixed fee seller packages.

Rightmove

[Source: Rightmove Property Portal]

Selling Property At Auction – What You Should Know First

With the rise in alternative and modern ways to sell your house – including online estate agents such as myonlineestateagent.com and DIY home listing services, there has been increased interest in use of auctions to sell properties. This blog looks at how property auctions work, and the pros and cons, answering the questions you may have about how to sell property at auction.

The property auction process

Most house sales use an estate agent to market a property, awaiting offers from prospective purchasers, and then agreeing terms that are acceptable to both parties. This can be a time-consuming and uncertain process. Using an auction process can work in a faster timescale, with the typical process as follows:

• The property is advertised as being sold at auction, on a given date.
• Ahead of this date potential buyers are given the opportunity to view the property and conduct surveys, legal searches etc.
• On the day of the auction the auctioneer will invite increasing bids for the property. If a reserve price is met or exceeded the highest bid wins.
• Immediately, the purchaser must sign a legally binding contract for purchase of the property, and pay a 10% deposit.
• Completion occurs within 28 days of the auction.

Specialist estate agents can be used to sell a property at auction. They will act in a similar way to normal estate agents, including providing an indication of value, and their charges are much the same, often around 2%. The specialist auctioneer may also require a fee for their services.

The advantages of selling property at auction

By far the biggest advantage of selling your house via an auction is time, and hence why auctions are most commonly used for vacant properties. The date of the auction is set in advance, usually only a few weeks from when marketing starts. Although a reserve price can be set (and hence it is not certain a sale will complete) the date for exchange and completion is known.

This is much quicker than a normal sale, where it can take months and sometimes years to agree an offer, and then more time to complete the conveyancing process.

The time advantage is why auctions have been popular with banks who have repossessed properties and want to realise cash to cover interest arrears. However, it can also be relevant in other circumstances, such as death or divorce, where there is a necessity to sell quickly.

The disadvantages of selling property at auction

If time is the biggest advantage, the flip side is value. By only giving a short period of time for potential buyers to conduct due diligence (remember, they sign contracts as soon as the auction is over, all surveys etc are done beforehand, at their cost) there is a commensurate reduction in the price you’ll expect to receive – 25-50% discounts are not uncommon!

Indeed, most people using auctions as a way to buy properties understand this fact, and set their price limits accordingly. To them, this seller disadvantage is to their advantage, and bargains can be had if you are prepared to take on the risks of buying at auction.

There is a middle-ground – closed-bid property auctions

If you are looking to sell a property quickly, but still believe there is potential to achieve a good price, then estate agents can conduct closed-bid auctions. The agent can market the property in the normal way, but making potential buyers aware that they are required to submit sealed bids for the property by a given date. The highest bid is accepted, and an accelerated process of survey and conveyancing is then entered into. At myonlineestateagent.com we have used this process a few times in London, where there has been high and competitive buyer interest.

If you are prepared to accept a lower price in return for a quick sale, then an estate agent can market a property in the normal way, but with a lower asking price and making it clear in the property description that you are seeking a quick sale. This will highlight to buyers that they could get a bargain, but without the discounts that are common through traditional property auctions. Online estate agents can be effective for this route, as their lower fees reduce the impact of a lower selling price and they are less concerned about the impact of pricing on their commissions.

Final thoughts

Closed-bid property auctions are possible, but only in certain circumstances. Otherwise, if you are looking to sell very quickly or have tight deadline you are working to then a normal auction process may work, but you have to accept that you will be selling at a significantly lower value.

For anyone considering selling property at auction for the first time, it’s worth attending a few auctions first, to see how the process works, and also speak to a few estate agents to see what price they could achieve within a quicker-than-normal speed. Don’t forget to include online estate agents in your research!

Should You Invest in the New Help-To-Buy ISA?

The Chancellor George Osborne’s 2015 budget announcement included a new incentive to encourage first-time buyers, namely help-to-buy ISAs, to be launched in Autumn this year. We take a look below on how this new scheme will work, its pros and cons, and how first-time buyers can make the most of it.

Overview of help-to-buy ISAs

The headline-grabbing soundbite is that this scheme allows individuals to save up for a deposit on a new house, as a first-time buyer, and receive a cash inventive from the government of up to £3,000. All well-and-good!

But, to earn the full £3,000, you need to save up £12,000 yourself, with the government contributing 25% to what you have saved. Another condition of the scheme is that the maximum amount you can save per month is £200, although you will be allowed to make a one-off contribution to the ISA of £1,000. All of which means it will take 4½ – 5 years to save enough to earn the maximum incentive.

The new ISA will operate at an individual level, so if you are buying your first house with somebody else you will both qualify for the incentive and collectively receive £6,000 towards your first property from the scheme.

Why has the help-to-buy ISA incentive been introduced?

Everybody knows that first-time buyers are finding it increasingly difficult to buy a property – a combination of rising house prices and greater deposit requirements from mortgage providers mean that for many it is simply not affordable to buy a house, despite mortgage rates being surprisingly cheap at present. A lack of first-time buyers is not in the long-term interests of the country, and hence George Osborne is trying to ease this burden.

There are other government schemes also available for first-time buyers, which generally seek to reduce your deposit to 5%, with an additional loan being supported by the government. Whilst positive, these other schemes have not had the take-up that was hoped for, mainly because interest rates on such mortgage arrangements can be quite high, reducing the benefit of a lower deposit requirement.

How will help-to-buy ISAs work in practice?

Nobody really knows, as they will only come into operation in Autumn, and the devil will be in the detail!

You will be able to withdraw the money put into the ISA should there be another reason you need the funds, but will only receive the government cash incentive if you use the savings to buy your first house. Whilst this makes sense, it is also canny politicking from the chancellor, as he will only need to find the money towards the end of the next parliament.

It is not yet clear what interest rate will be earned on the ISA, in addition to the government cash. Banks tend to like regular savers, so offer relatively attractive interest rates, but conversely the attraction of these ISAs is the government support, so there is less need for high interest rates. Time will tell, but the best advice will remain as always, shop around.

Are there any negatives?

As noted above, you will need to save up for the best part of 5 years to earn the maximum reward. In that time, house prices will have increased, and mortgage rates will almost certainly be higher, so you could be chasing your tail! It is certainly difficult to advise people to put off buying their first house, simply to earn more government money – whilst this may appeal, it is unlikely to be the best answer.

There is speculation that the scheme will increase house prices, making it harder again for people to get on the property ladder. The view at Myonlineestateagent.com is that the scheme is overstated, and it is unlikely that there will be a noticeable impact on the property market. Government schemes in this area have flattered to deceive, with a lower impact than planned, and the amounts involved are unlikely to stimulate high demand for first-time-buyer properties.

How can you make the most of the scheme?

If it encourages you to save, then there is an immediate benefit. At present there would appear to be few down-sides to opening a help-to-buy ISA if you are likely to be a first-time buyer in the next few years. Interest rates for your savings are likely to be lower than other more general ISA products, but if you shop around and the downside should be minimal.

With the government cash, the maximum house deposit you can save from these ISAs will be £15,000, plus whatever interest a bank may give on top. This still doesn’t represent a particularly high deposit for typical house prices, especially in London, so if you can, blend a help-to-buy ISA with other savings that can be combined to maximise your deposit.

Also consider that the bank of mum and dad can help! Rather than having to support children with a large one-off deposit, parents should consider setting up and funding, or part-funding, payments into such an ISA. For example, if children are going to university, having a help-to-buy ISA whilst getting educated can make a good start to a having a deposit for a property purchase upon graduation. Parents may be more able to afford the monthly payments, rather than a large lump-sum, especially if there is some sharing of the contribution.

Final comments – is it worth setting up a help-to-buy ISA?

Anything that encourages savings and supports first-time buyers is good. But the new help-to-buy scheme is not the panacea that some people believe – it takes time to save up the full amount to maximise “free” cash, and the property market will have moved on in that time. So, start saving early, and you will reap the best rewards.

If you’re looking to buy a property, view the properties for sale with My Online Estate Agent here.