What is the Green Deal?

What is the Green Deal?

This is scheduled for introduction in autumn of this year, and will enable accredited retailers such as Tesco and B&Q to supply, without no upfront cost, quality assured services to homeowners and businesses looking to improve the energy efficiency of their property.

The full cost of the measures will be recovered through instalments on the energy bill over several years, and because the Green Deal is not a personal loan or an advance payment scheme, there is no obligation to continue paying the instalments when the owner moves home.

Qualification for the scheme depends on a simple calculation, known as the “golden rule”– whereby the predicted savings from the energy efficiency improvements to the property must equal or exceed the cost of installation.

How will it work?

Those wishing to participate in the Green Deal will require a full property assessment carried out by an independent and fully accredited advisor.  This initial consultation will provide householders and business owners with an opportunity to learn about the current energy performance of their properties and the specific measures which they would have access to under the Green Deal to improve this performance.

If it assessed that the homeowner or business owner qualifies (see above) then a comprehensive quote, clearly breaking down the total cost of energy efficiency installations for your property, the size of repayment instalments attached to utility bills, and the estimated length of the repayment period will be issued. 

This will be supervised by the accredited advisor who carried out the survey and the work will only be financed if it is carried out by approved Green Deal installers.

How will it be financed?

The finance will be through an instalment plan attached to the utility bill and which will be attached to the property rather than the individual.

Although a Green Deal finance plan requested by a homeowner or small business is not a personal loan, it is likely to be considered a fixed term credit arrangement and customers will therefore be protected under the Consumer Credit Act.

How will installation work?

Once a Green Deal finance plan has been approved, installation will be arranged and carried out by certified Green Deal providers. 

Will the Green Deal help to save money in the long term?

Only time and a track record will tell!

The current language used by the Government suggests they are also not sure of the probable outcome of the measures.   Upon being pushed by a commentator on this subject the Department of Energy and Climate Change stated: "[People] should still save money compared to what it would have cost to heat their home in that way without a Green Deal."

How will the Homeowner and Business Owner be able to monitor and track progress once the initial application of interest is registered?

We are currently working on a tracking system which can be used by the home owner and business owner to record and track key stages within the process and to create at the end of the procedure a property log book for transferring the records and information to the next owner.

For further information on the Green Deal feel free to email me

David Pett

Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

Three good reasons for not instructing a solicitor recommended by an estate agent

You might not know it, but you could be paying more for legal services when moving home because of the recommendation received form your estate agent.   The reason for this is that many estate agents have ‘arrangements’ with solicitors under which they receive what is known as a ‘referral fee’  or as it is often described, a ‘kick back’.

Many of the solicitors who operate in this way do not absorb the referral fee in their fee but add the fee on to the fee they quote you.  This means that you could very well be paying as much as £200 more for the service than you would have otherwise paid had you shopped around and gone to a conveyancing solicitor direct.

Is this legal?  Well at present yes providing the estate agent and solicitor tell you about the arrangement before you make the decision to instruct the solicitor.  The question is how many of those involved actually disclose the referral fee.  Sadly I do not believe it is many.

It also raises the question whether instructing a solicitor recommended by a ‘tied’ estate agent will ensure you receive the best service available.  My experience is that where such arrangements exist the solicitors instructed are normally part of some ‘factory’ operation and in the main the service levels of those firms is very poor.  This could mean you will find yourself having to constantly chase and inevitably the move will take longer.

Instructing an agent with a ‘pet’ solicitor may also impair the solicitor’s ability to offer independent advice. The agent will have a vested interest in the sale completing. Once an agent has agreed a sale, they will want it completed so they will put pressure on the connected solicitor to complete without regard to your best interests. If your solicitor discovers a problem and considers he should advise you to withdraw, will he be prepared to do so if the agents on whom he relies for work tell him not to?

My advice is not to rely on your agent’s recommendation.  Shop around, visit websites, read the reviews on the service offered and do not be tempted by deals offered by some agents to ‘wrap’ your legal fees in with the agent’s fee.  Perhaps even choose your solicitor before you put your house on the market because many solicitors like us know which are the 'good' and 'not so good' agents.    And before you ask, no we do not get a ‘kick back’ for recommending an agent!

David Pett Partner MJP Conveyancing Solicitors 

New energy rules for those selling and buying homes

The rules on the display of energy ratings (Energy Performance Certificates (EPC)) for homes have changed.

Those advertising property such as estate agents must now (as from the 6th April) :

• Include the 1st page of the EPC for all sales and lettings properties in printed and electronic property particulars.

• Have ordered an EPC prior to marketing and to produce  it within 7 days of marketing

If you are looking to market or let your property it is important for you to make sure your agent is complying with these requirements. 

Your agent must include a copy of the entire front page of the EPC document and not just the EPC graph as has currently been the case.  This includes any literature containing particulars of the property to be marketed including electronic communications such as emails.

Property particulars are defined as including at least two of the following elements:

• a photograph of the building or any room in the building,
• a floor plan of the building,
• the size of the rooms in the building,
• the measured area of the building, or,
• the proposed rent in relation to a building being rented out,.

This may therefore (depending on how the new rules are interpreted) extend to the pictures and particulars of your home that appear in the agent’s window or in the local paper.  As for rentals the new rules seem must clearer and there seems no getting away from the requirement to display in any advertisement the front page of the EPC.

Almost all lettings adverts will include a property photo and the rental price, and thus it will be hard to avoid this.

The size of the EPC extract shown in the particulars must be sufficient for the details to be read – don’t allow the agent to print it very small nor to try and circumvent the rules by simply adding a link to the EPC.

Interestingly the first page of the EPC contains the full address of the property.   Agents do not normally like to display the full address in literature as this provides marketing opportunities for competitors.   Unfortunately there now seems no way around it and the address must remain within the published first page of the EPC.

What about properties appearing on agent’s websites?  Arguably as there is a picture of the property and often other particulars such as room sizes etc the first page of the EPC ought to be reproduced possibly in full rather than through clicking on a link.  

Rightmove it is reported recently emailed all of its agent clients and made the claim as quoted below:

"Rightmove is a property advertising website and the information displayed on Rightmove by all our member agents takes the form of property adverts and not property particulars. This is clearly stated at the bottom of every page on Rightmove that displays the details which have been provided to us by the agent about a specific property and will continue to do so.

It is our view that the new regulations do not place any additional obligations on Rightmove, although you may wish to consider separately how the new regulations might affect your own company website. We do, however, understand that some of our member agents may wish to display the EPC as part of the property advert on Rightmove. Rightmove does provide the functionality for you to do this if you so wish."

I do not necessarily agree that is correct; looking at the new rules and the elements that must exist for the publication of the EPC it is difficult to see how one can in this way distinguish ‘adverts’ from publication of property particulars.  Rightmove publishes pictures and particulars of property and this is no different from details published in newspapers or in an agent’s window.

Let’s not forget the purpose that lies behind the rules, and that is those looking for a property to buy should be able when searching to have immediate access to the energy rating for that property.

The problem is that as with the fated Home Information Pack some agents are reluctant to go to the expense of ordering and paying for an EPC until they know a buyer has been found for the property.  They view these requirements as an unnecessary hurdle to the marketing of the property.

My advice to those selling and renting is to always ensure that any agreement reached with an agent to sell or rent you home includes a clause that the agent orders and pays for the EPC. If you are buying always insist on seeing the EPC before viewing a property and if the EPC’s first page does not appear in the particulars of sale wherever these might appear always ask for an explanation.

Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

Solar panels could make your property difficult to sell

Solar panels may be associated with green issues but beware as they might be viewed as a red card when it comes to re-mortgaging your house or when looking to purchase a property with a mortgage where solar panels are fitted .  This is according to an article recently appearing in the Guardian.

Guardian Money reported on a Southampton couple who were refused by several companies when they tried to re-mortgage their home. The couple had previously agreed, with their lenders permission, to allow a firm to install solar panels on their roof for the duration of a 25-year lease.  They now face the prospect that their property has become ‘unsalable’.

The owners are reported to have said:

"We signed up to this scheme on the basis that we were doing the green thing, but it has turned out to be a nightmare," says John, who works as an air traffic controller.

The implications for us are that we cannot re-mortgage our house on a lower interest rate. We would still have a mortgage but one on the standard variable rate which will increase with the Bank of England interest rates.

We are extremely concerned that we will not be able to sell our house as no buyer will be able to get a mortgage on it. We can't be the only people in this position, can we?"

The big question is how many more home owners are there out there who are oblivious to this potential problem.  Solar leasing deals were heavily marketed last year by companies  looking to take advantage of  Government backed incentives to  those with solar PV panels on their roofs.

The most credible companies advised their customers to seek their lenders agreement, but many didn't.

The issue does not affect those who paid for their panels to be installed. It only relates to those installations undertaken under a lease arrangement.

One can only surmise as to why lenders are struggling to come to terms with these arrangements.    They may be concerned that if they have to repossess and sell quickly there could be a problem in finding someone to purchase the property where there is lease with financial obligations to take on.   This is because the leasing arrangement for the panels follows the property and not the owner who installed the panels. The lease company will only remove the panels if the lender can show it has tried and failed to sell it.

The article suggests having contacted the Council of Mortgage Lenders that the  issues which have begun to arise  may be down to  a failure on the part of the banking sector to formulate a clearer policy on solar panels and how these cases should be approached.

This reported case should however send out a warning to those looking to install panels under a leasing arrangement and also to those acting for those looking to purchase a property where an arrangement exists.   Time will tell whether those homeowners who have sought to reduce their energy bills in line with Government advice and encouragement will be left with problems in selling their property at  market price.  

Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

Prediction of 19% rise in housing transactions in 2013

Much of today’s focus has been on Budget headlines and little comment has been made of the detail supplied by the Office for Budget Responsibility (OBR), particularly about its view of what is likely to happen to  the property market over the next 36 months.

According to the OBR the future looks bright and forecasts a dramatic increase in stamp duty receipts by 2016, when it expects the Treasury to receive £11.1 billion a year, nearly double the current level of around £6 billion. 

This suggests the OBR is expecting housing market to spring back to life in 2013, with a 19% rise in transaction levels and a further 14% increase in the number of sales in 2014.

This is based on the OBR’s expectation of an easing in credit conditions in 2013

The downside is the OBR has downgraded its housing price forecast expecting prices to rise by only 0.5% next year. This is in line with independent forecasts published this year.  

Looking ahead the picture is even better as prices are predicted to pick up more strongly in 2014, along with further strong rises in transaction numbers.

Let’s hope the OBR is right with its predictions.  The success of this budget clearly rests on the generation of extra Stamp Duty suggesting the Government has put  a lot of faith in the OBR's assessment. 

Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

Flood risk alert for future home owners and coveyancers

Buying a property that may be within the range of a flood plain has become even riskier due to the news that around 200,000 homes at risk from flooding could face problems getting insurance from next year.

Properties that have a 75% chance of flooding in any one year are those most at risk. Boston and Skegness in Lincolnshire is the constituency with the most homes at significant risk of  flooding with 7,550 properties under threat, followed by the Vale of Clwyd (7,339 homes), Folkestone and Hythe (7,196), and Windsor (7,125). Some properties in Great Yarmouth also fall into this category.

The reason for this is that an existing deal with the Government expires in 2013 and time is running out for ongoing talks about a new safety net arrangement.

The Association of British Insurers’ director-general Otto Thoresen said: "Insurers want to make sure that every home has access to affordable insurance, should the worst happen, and we're concerned that those people most at risk will lose out unless the Government considers a safety net.

"We are frustrated with the progress of our talks with the Government on this issue and want it to look urgently at a model that would allow flood cover to remain widely available and competitively priced. No country in the world has an entirely free market providing universal affordable flood insurance, and action is needed now to avoid 200,000 high-risk homes struggling to afford cover."

The possible non - availability of insurance may make it more difficult for people to find a mortgage for properties in the affected area and may lead to current home owners in those areas feeling trapped. 

Those acting for prospective owners of such property need to keep a close eye on this development and to warn clients of the what is happening and how this could affect the future value of the property.    Looking more closely at environmental reports and assessing the risk of flooding will clearly be needed as will the requirement to report the risk if indentified to the lender.

Unless Government acts quickly to extend the current arrangement we could see a large number of transactions failing over the next 12 months. 

By David Pett Solicitor and Partner

Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

More news of housing doom and gloom

Rightmove, the property portal, reports that since the beginning of the year new homes for sale has slumped to its lowest point in more than a decade.  Only 34,433 properties have come on to the market equating to around half of pre-credit crunch levels.

This comes at a time when emerged borrowing costs have fallen to a 14-year low with the average mortgage payments for new borrowers standing at 27 per cent of disposable earnings. Good news for those with existing mortgages but still no hope for those people trapped in rental properties without the money for the deposit.

Those who do have the cash to put down on a deposit have their own problems given the shortage of new homes. This has in turn created in certain areas a high demand for property and perhaps explains why property prices have remained more or less unchanged.

It has also led to those looking to buy to be more selective in their hunt for a suitable property and one that fits their budgetary constraints.  

The situation is likely to get worse when the stamp duty holiday for first-time buyers ends this spring.

So why is there a shortage?  We seem to building less new homes than before and this combined with the economic uncertainty and owners worried about  replacing their existing mortgage, there appears little hope for any immediate change.

Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

Beat the 24th March Deadline for Stamp Duty

The time to act is now if you are thinking of buying a new home as the concession on Stamp Duty for first time buyers ends on 24^th March. 

Until that date first time buyers do not have to pay Stamp Duty on property purchased for £250,000 and under.

Instruct us now to make sure you exchange and complete before this deadline and save up to £2500 – our prices start at £240 Plus VAT.  We offer a fast and professional service and are open Monday to Thursday 9 am to 8 pm, Friday 9 am to 5 pm, Saturday 10 am to 1 pm.

Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

New approach to the offer of mortgages

Changes put forward by the Financial Services Authority will introduce some of most significant changes to the mortgage market this country has seen in recent times.

The FSA new rules for banks  to follow on approving mortgages are designed to make sure customers are not able to borrow more than they can afford. They include a ban on self-certification mortgages, new rules for those seeking to remortgage, stricter rules on interest-only mortgages, improved affordability checks, and a change in the rules on how advice is given by mortgage brokers.

These changes have come about prevent another boom in mortgage lending and in house prices. This is what happened in the middle of the last decade and why some right wing commentators say we are now facing one of the worst financial disasters ever witnessed.

So how does the affordability test, as proposed, work?

A lender will consider how much you spend on essential household expenditure such as heating and council tax plus basic living costs and other debt commitments. If these changes are implemented a lender will no longer have to consider how much you spend on discretionary spending such as on leisure activities and holidays as it will expect a borrower to change spending habits if the borrower wishes to succeed with the loan application.

Lenders will also apply a “stress test” on your finances so as to assess your ability to afford your mortgage repayments if interest rates rise in the future.

What about interest only loans?

Borrowers will only receive an interest-only mortgage if it can be proved there is a robust strategy to repay the capital, such as from the sale of a second home or have an Isa (Individual Savings Account) or from regular bonuses.

Replacing existing mortgages will also prove difficult under these new rules though the FSA have introduced “transitional arrangements” to help existing creditworthy borrowers that might not be able to move home or refinance as a result. Lenders will be allowed to waive the new affordability rules for existing borrowers if the borrower has met repayments for at least the last 12 months and have not fallen into arrears. Existing borrowers who need to borrow more will however be subject to the new affordability rules.

These new rules are unlikely to change the current attitude of borrowers and in the short term are likely to keep property prices stagnant.  Whether this will assist first time buyers remains to be seen, though our view is that they will only serve to make it more difficult for those looking to get onto the property ladder and force more people into looking to the rental market.   These rules could very well begin to turn our property market into those markets commonly found on the continent where home ownership is not a priority and indeed a goal of those looking for a home.

The rules will create a more stable housing market but one which will be seeing a reduced number of transactions and one where only those who have financial stability and a track record of proving it will be able to become home owners.  Whether this is good for the country as a whole and will lead to a more stable and balanced society will remain to be seen.

As conveyancers, there will be fewer transactions around and as those borrowing will face higher lender fees and perhaps spend more money to prove their track record and credit worthiness, there may be a temptation to make economies elsewhere, and perhaps look to find the conveyancer advertising the lowest price.

At MJP we understand this, and this is why we offer a competitive price for our moving service, but with the commitment to ensure we also provide a personalised service and one in which we take pride.   We are able to offer a quality service at a discounted price because we operate a unique case management system and have quality checks built into every stage of our process.  All out clients can access the system and receive regular updates straight to their phones.

Each client is also assigned his or her very own case handler who will oversee the transaction throughout its course.

Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

"David Pett and his team have been excellent - regular updates and speedy responses to queries. Something that has been problematic with other solicitors in the past" 

Louise Stone - December 2011

Dont let romance blind you when buying a home!

I have acted for many first time homebuyers and as you would expect many of these clients have had to make significant financial sacrifices to save money for a deposit.  For many of these clients their heads are very much in the clouds. The romance of living and owning a home together for the very first time makes it difficult to discuss and provide advice on the financial implications of what is clearly a major life changing decision.

In a number of these cases advice has to be given because one partner may be putting more money into the transaction than the other. It is not uncommon for the deposit to be as much as 30% of the purchase price and for this to be funded by savings accumulated before the couple met. This is not of course an arrangement confined to the first time buyers.  There are also clients who are for example looking to buy a property with a new partner following death, separation or divorce.

The common thread is that at this point in time the relationship may be at an early stage and the buyers are only really concerned about the immediate future, and not what might lie ahead.

In general, couples purchasing a home instruct me that they wish to purchase the property as “joint tenants”. The significance of this is that if one of the partners were to die then the share of the profit in the property would automatically pass to the other partner, even if the deceased partner makes a different provision in his or her will.  A Court would not be able to interfere in that arrangement even if the deceased partner had contributed more towards the purchase of the property when it was originally purchased.

Even though it is often an unpalatable exercise I always advise my clients that they should think about whether it would still be their wish for their share to pass to the other in the event of death or separation.  More than often they shrug their shoulders and I am greeted with a perplexed look.

There are times however when I am instructed to set up the way in which the property is bought so as to provide for the equity (money left over after the mortgage and fees are paid) in the property once it is sold, to be divided on an unequal and predetermined basis.

If one party for example put 2/3 of the money forward for the deposit and the other the remaining 1/3 then they might instruct me to ensure that the property is held in such a way so as to provide that 70% of the equity/profit in the property goes to one, and 30% of it goes towards the other.

There are also three or four other different ways in which unequal contributions can be recorded and it is therefore important that if you are in this situation and seeking advice that you ask your solicitor to explain these options to you. The way in which the division of the proceeds is expressed at the outset can have quite a substantial bearing on the financial outcome in the event of a future sale.

Even though your solicitor may try and persuade you to look beyond the romance of owning your first home together you may still decide even though unequal contributions are made, for the property to be held jointly. This is understandable. There is however a half way house in that you can instruct your solicitor to record that you are holding the property as joint tenants but that if anything happens in the future, and one of you decides that you want to serve notice to say to the other to say this arrangement should no longer apply, that the net process should then be divided in accordance with shares predetermined at the point of purchase.

I am happy as ever to answer any questions you might have about this or any aspect of property transactions. Please feel free to email me at my email address shown below.

Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

Nationwide predicts extended stagnation in property market

Property costs declined by 0.1 per cent last month, taking the average home down to £161,602, according to the latest statistics published by Nationwide,.

This is a year-on-year decrease of 1.1 per cent and means houses now cost less than in September 2009.

Nationwide chief economist Robert Gardner said that although the outlook for the year as a whole is still uncertain, "the most likely outcome is that the pattern of low transaction levels and prices moving sideways or modestly lower will continue through 2011".

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Property Ladder - Tips for moving up

Today saw an interesting article published on Money Supermarket’s website focusing on tips for those moving up the property ladder.  

It reports that recent research by Lloyds TSB has revealed that those looking to buy their first home are not the only ones struggling.  The bank found that 19% of people already living in their first home and looking to move on simply do not have enough equity to do so.

The average second home is priced at £48,216 more than the average first home, which is a hefty 32% increase.

The TIPs for those looking however to make that next step include:

Get an idea of your home's value:

Websites such as www.propertypriceadvice.co.uk provide a lower, higher and average valuation depending on confidence and activity in the market. Make sure you keep a realistic view on the value.

Be prepared to take a price cut:

If your home isn't budging, be prepared to reduce the price as this might be your only option. According to the Lloyds TSB research just 13% of people will reduce the asking price if they can't sell their home at the current price

Try to keep the value to under £250,000:

The duty  jumps from 1% to 3% as soon as you break through the £250,000 mark on your new home, so try to keep under the threshold by shopping around and, of course, negotiating. Keep in mind that the average expenditure on other moving expenses is around £5,500.

Stamp Duty Tax planning may be option for those buying above £250,000.

Remember only first-time buyers who have never owned a property before are exempt from paying Stamp Duty on properties costing up to £250,000, and this exemption only applies until March 2012. If you are buying with someone else, they must never have owned property before either for the tax perk to apply.

Morgan Jones and Pett Solicitors - 01603877000

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Land Registry figures show further fall in house prices

The Land Registry has  announced that house prices are now just 1.5% higher than a year ago. As regards prices the news is no better with house prices falling by 0.2% in December compared with November, putting the average cost of a home at £163,814 in England and Wales. Some regions are however doing better than others. The highest price change is in London, which has experienced an annual increase of 6.2% and a monthly gain of 1%.

The picture for the immediate future looks gloomy with the  downward trend in prices looking to continue due the uncertainty regarding the economy and the Government’s spending cuts.

Mortgage approvals and house sales continue to fall and the housing market is expected to remain subdued throughout 2011 as a result.

Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

US Housing Market still failing to make a marked recovery

The latest Chief Economist's Weekly Brief form National Westminster Bank suggests that the large supply of housing stock, compared with falling demand, will continue to ‘weigh the market down’ and  cause a ‘drag’ on  the general economic recovery happening within the US.  This is evidenced  by US house prices falling by 0.5% m/m in November (1.6%y/y) bringing them down to 2003 levels. This is 30% below the peak and only 3% above the 2009 trough. 

Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

The changing face of Housing

Unlike the Continent we are a land where the majority of us aspire to owning our own home. In fact according to the Housing and Planning Statistics 2009 there are 22 million dwellings of which 68% are owner occupied.   There are only according to these statistics around 3 million properties which are privately rented.  Contrast this with Germany where half of the housing stock is occupied by tenants.

So why are we so obsessed with ownership?  For many of us it is how we have been brought up, to do well at school, to find a job and to then look to buy a property, normally as part of settling down and starting a family.  It’s part of our make up as well as being regarded by some as a symbol of success.  For others home ownership is about financial security at a time when pensions and other investments are constantly at risk form economic downturn.  

The tide may however be changing or about to change and there are many reasons for this, the main one of which are the austerity measures taken by the Government and the impact these will begin to have on how we live our lives in the future.

There are of course other factors such as affordability. The National Housing Federation reported an eight per cent rise in house prices and the continuing squeeze on lending means that would-be buyers in Cornwall now need to earn more than £54,000 a year to set foot on the property ladder.

The Government’s housing policy however is the main cause for change in the way we look at housing and could well see the end of the Country’s property owning democracy. The Government has as part of its recent Spending Review slashed the building budget for affordable homes by 60 per cent, and given only 140,000 new private houses will be built in the UK this year, we will soon be facing a major shortage of new housing stock.

The shortage of new housing combined with limited mortgage lending, insecurity about jobs and the worry of making long term lending commitments, and in some areas the high cost of getting onto the property market, can only lead to large property institutions seizing the opportunity this presents to invest in the building of property designed only for rental.

‘Build to let’ is the latest buzz phrase and we have already seen the likes of Legal & General, Aviva and ING making overtures in this direction.

Some private investors have already begun to purchase land in London with a view of creating ‘no thrill’ three bedroom family flats in complexes where heating and other services are shared.  Rents would be set at around £300 a week – surprisingly, just below the £340 housing benefit limit to be introduced next year for three-bedroom accommodation.  To me this all sounds similar to the Council Estates which exploded onto the scene in the 60’s and 70’s.

The Government’s agenda hidden in part behind the Spending Review is quite clear; it wishes to reduce the role of the State in housing and to open the door for the private sector to fill the gap.  The challenge for the private sector is to decide where demographically it will pitch its investment.  The risk is that those who were at one time looking to get on the housing ladder and who may be looking for rental property could be overlooked with the focus being on those eligible for housing benefit given the financial security and guaranteed return this presents.  Those who fall in between low income and the level of wage needed to purchase a home could find themselves even further out in the cold.

For this reason there must be stricter controls exercised through planning restrictions to ensure we do not end up as we did in the past with parts of the country where all those occupying property are from the same social background.  We must strive for a fairer distribution of our ever shrinking housing stock otherwise we face the risk of creating even deeper cracks in the social fabric of our country.

David Pett is a partner with Morgan Jones and Pett and can be contacted  HERE: CLICK TO E-MAIL