How will the outcome of the 2015 General Election affect the new build market?

The question of whether we will be living under a red or blue, or a mixture of both, Government will soon be known.  How this will affect the new build market is also unknown and has created some uncertainty.

So what is likely to happen going forward, depending of course, on who lands up as the governing force.

The Conservative Party has committed to build 200,000 starter homes (built for first time buyers aged under 40 with a 20% discount) and 275,000 affordable homes by 2020.  Relatively small numbers and it is no clear whether the latter is in addition to the 200,000 starter homes.  The Labour Party is also looking to build a similar number of starter homes by 2020 and has committed to the establishment of a Future Homes Fund for investment in increasing housing supply.

It has similarities with the Liberal Democrats idea of a Government backed Housing Investment Bank to provide long term capital for major new settlements and to help attract finance. The new home start figure for the Liberal Democrats is set higher at 300,000 each year. They also commit to set in motion at least ten new Garden Cities.

Looking to make it easier for those looking for a home in the area in which they live is high on the priority list for Labour and they have promised to give priority to local first-time buyers in new housing areas.

In an effort to encourage owners of empty properties to sell Labour will be looking to allow local authorities to charge higher council tax on empty house.  The Conservatives have outlined plans to unlock and allow development on certain brownfield sites to enable 400,000 new homes to be built. Again it’s unclear whether this is an addition to the 200,000 new starter homes and 275,000 affordable homes.

This is all well and good and shows a broad acceptance across the parties of the need to build more new houses and to make these affordable to those looking to get on the property ladder.  The numbers proposed are however relatively small and do not meet ( apart from the Liberal Democrats) the 250,000 new homes each year that some commentators consider to the correct number to keep up with demand.  The truth is that we have never come close to this figure and as long as we fall behind with development economic recovery will remain volatile, rents will continue to rise and the cost of buying a property and keeping hold of it will remain an issue for many. People on ordinary incomes should be able to buy or rent a high quality home at a price they can afford today, and have confidence they will be able to afford tomorrow.

The major problem which none of the main political parties have so far fully addressed is the lack of competition in the new build market.  By 2012 70% of new homes were built by large house building concerns.  This is not surprising when land is so expensive and only the larger developers can afford to purchase.  The issue is that they all approach development in the same way, that is to minimise build cost and maximise sale prices by releasing homes slowly.   If there is a downturn in the market they reduce output and this contributes to a deepening of the problem.  So what happens is that output only increases when there is an acceptable level of house price inflation.

So in short land needs to be made available at a price which will enable smaller and less resourced builders to compete and or those smaller builders and developers need access to affordable finance to allow them to build good quality homes at affordable prices.  I will not hold my breath!

MJP Conveyancers 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

Housing Market - 2013 Review and 2014 Predictions and Fears

2013 Summary

In January 2013 the Nationwide Building Society measuring price changes from December 2011 to December 2012 showed a national fall of 1% leaving the average price of a property at just over £162,000.

Moving to the end of the year this picture has changed dramatically with the latest data disclosing the average price at £174,500 and national increase of between 5 ( Nationwide) and 7.7 %(Halifax).  This has been fuelled by increased transactions and a dramatic increase in mortgage lending. The Land Registry has a more modest estimate of value growth if 3.1%.

Whichever of these statistics  you rely on it is clear that that there has been a significant increase in prices within the last 12 months. 

The Nationwide reported in November a 34% increase in mortgage lending. 

As for total transaction numbers, the Council of Mortgage Lenders estimate this will exceed one million, which compares favourably with the 1.6million figure for the boom years 2006 and 2007.

The rental market has also faired extremely well this year with the monthly lettings index from Countrywide disclosing average national rents up 4.2pc over the year to November. The increase in property value has however had a negative impact on the rental income relative to property price yield, with the yield, according to the specialist buy to let lender Paragon, falling from 6.7% to 6% on the year ( November 2013 to November 2014)

2014

House prices are predicted to continue to rise with the Government predicting a 27% price increase by 2018.  

It is also predicted by one leading buy to let broker that buy to let transactions are likely to increase in 2014 by at least 25%. 

All good news but what are the possible barriers to these predictions becoming reality?

Interest rates remain at a record low but what is likely to happen if these suddenly increase.  Looking at the varying views on this most commentators believe we will not be seeing an increase until the early part of 2015. 

Another fear relates to the global economy and how this still remains in a very unstable state.  Central banks remain unclear about how and when to remove the colossal stimulus they have provided for their economies over the past five years and of how this will impact on growth.  On top of this is the fact that many of the problems which led to the near collapse of the banking system has still to be addressed.  All of this has led some commentators to predict that we may be on course in 2014 for yet another economic crisis. 

in conclusion with everything else being equal 2014 should be a good year for those working in the property industry though given the unexpected collapse in 2007 who am I to say this can be guaranteed!  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

Housing Summit - No room for lawyers?

Interesting that the one absent party from the summit meeting on what should be done to help first time buyers, held and chaired by Housing Minister Grant Shapps on 15^th  of this month, was  a representative of the legal profession.   

The meeting was attended by ‘leading industry figures’ representing home builders lenders, councils and consumers.   Perhaps the Housing Minister, who of late has been preoccupied with television and radio appearances in his capacity as Local Government Minister, does not regard housing lawyers as having thoughts and ideas on what can be done to help our first time buyers. Perhaps it was a case of a simple oversight.

Yes, I know it may be more to do with availability of lower cost housing, and more affordable lending schemes, but there is clearly room for improvement in the conveyancing process that could be introduced to simplify and make less expensive the cost of purchasing.  

Lawyers working in the residential sales and purchase market day in day out know that the process of buying a property is broken and full of unnecessary form filling and other bureaucracy.   If as Mr Shapps claims there is need for all of the players in the industry to pull more closely together then clearly it is important to ensure that he has present representatives from all relevant sectors.   

Housing Minister Grant Shapps said:

"I called on key figures from across industry to come together today, because we must do more to help aspiring first time buyers - the average age of the first time buyer with no support from their family is now 37, and there are 1.4 million households who aspire to own a home but are simply unable to do so because of house prices and mortgage availability.

"I wanted to hear a first-hand account of the problems the sector faces, but I also wanted to knock heads together so the needs of young people who want to buy a home are put first. The Government is working with industry to improve the availability of mortgages - but there also needs to be a much more unified effort from across the board to work together, so we can ensure that young people are not locked out of the housing market."

Good rhetoric, and good intentions, but how long does it take a Government to conclude discussions with lenders on increasing the availability of lending, and although I agree there needs to be improved communication between the various ‘players’, the time for action is now and  perhaps less talking and more positive action is the key to this problem.

Conveyancing and Litigation - The differences

I have had the fortune to work in various different areas of the law during my career.  I started like most young lawyers of my time treading the boards of the local Magistrates Court trying my best to represent people who in the main had little appreciation for my efforts.  I then progressed into family law, running from court to court seeking injunctions only to be running back a week later asking for the injunctions to be withdrawn.  

For the majority of my career however I have been involved in the litigation process mainly undertaking personal injury work.  I have also undertaken sport related work acting for professional footballers and boxers.  A mixed bag which has become even more extensive in recent times with my introduction to residential conveyancing.   I have always had an interest in and enjoyed contract based work and therefore found the move into this area not so daunting.

My initial experience of this field of work has proved insightful. I have always looked upon conveyancing as uninspiring and dull.   A view I know shared by many other litigators.  I must say however that this is not a fair representation of what I have found to be a very demanding and often enlightening area of practice.  The danger, I suppose, of viewing and drawing conclusions from outside observations.

So how does conveyancing and litigation differ?

To begin with and the most noticeable difference is the pace at which conveyancing proceeds.  Unlike litigation where one is working within quite generous protocol and court timetables, the average conveyancing transaction time is around 6 to 8 weeks, during which the pressure to cross the finishing line is immense.  The fear of a transaction collapsing and the general stress of moving has made the process even more pressurized and demanding.  Letters coming into the office need to be answered on the same day otherwise the danger is that by the following day they will have been overtaken by events.

I equate the constant pressure to the buzz and work that goes into preparing for a large trial, making sure all of the witnesses turn up, collating and sorting trial bundles and generally ensuring all of the hard work undertaken during the previous 2 to 3 years is not put to waste.

The other major difference is the involvement of a large number of contacts and the obligation to keep everybody updated.  In litigation there is of course the client, the ‘other side’ and perhaps an insurer at the beginning. In conveyancing you can have two firms of solicitors to communicate with along with the two sets of estate agents and the client.    This has the effect of tripling the number of calls you would normally receive when working within litigation.

The third and major difference is the inconsistency in approach and application of the conveyancing process.  Each practitioner has his or her way of drafting contracts, some firms follow the Law Society protocol, other s follow local protocols.   It is clear that this is a process that is in need of reform.  It is too focused on form filling and administrative tasks and far more cluttered with pointless obligations and requirements than the court process that has benefited in recent years from constructive reform.

The time has come for conveyancers to step out of the ‘smoke and mirrors’ and join together to demand reform and to make the process simpler and far more consumer friendly.

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

Fixtures and Fittings are not too be overlooked when moving home

One of the most common questions that come across our conveyancing desks is what should I leave in my property and what should I expect the seller of the property I am buying to leave.  This should not come as a surprise given that fixtures and fittings is one of the most sensitive issues to arise during the transaction.  Upon a viewing of a furnished property you tend to build an impression of the property you are buying and when it comes to completion and you move in there is often a sense of disappointment.   Your expectation just does not match what you see!

So legally what is the position with fixtures and fittings? Well its quiet simple the seller is not obliged to leave any items; all they have to do when completing the Fixture and Fittings form is to state what they are willing to leave.

I recently moved and the seller aggrieved perhaps that he was selling undervalue decided to take all of the light fittings, the shelves that could only ever fit the alcove they were serving and most of the curtain poles. To be fair he did make good the plasterwork and replaced all of the light fittings with some cheap spotlights.

Even though the Fixtures and Fitting form is used to provide a list of what is to be left and what is to be taken it is not always easy to read and can often cause confusion. For this reason if you are unsure either get your solicitor to question the form or speak with the seller direct and agree an inventory.  This can then be attached to the contract.

This is important as if you remove something that the purchaser thought you were leaving you could find yourself in court.

So what is the technical definition of fixtures and fittings? A fixture is any item that is bolted to the floor or walls; a fitting is any item that is freestanding or hung by a hook or nail.

The focus of attention is normally on the property, the bricks and mortar, and the fixtures and fittings often do not get the attention they deserve.  Remember however to replace all fitted and freestanding furniture, central heating fixtures, telephones, curtains, curtain poles, satellite dishes, fireplaces and external dustbins could cost well in excess of £10,000.

For this reason it is important to pause and to take time to consider what is to be left and what you might wish to retain. You can always negotiate and agree a price for items that you would like to keep.   

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

Another volume conveyancer goes into administration

One of the largest players in the Home Information Pack industry, LMS, is reported  in Inside Reporter to have gone into Administration as well as being the subject of a management ‘buy out’. 

LMS had prior to and during the HIP regime become one of the largest conveyancing panel managers in the country.

Insider Media reported on Friday that:

“About 100 jobs have been secured at Ellesmere Port conveyancer LMS Holdings after the business was bought out of administration.

It is stated that LMS has experienced a “difficult trading environment which led to a financial restructuring”.

LMS Group Holdings, which is based at Cheshire Oaks Business Park, reported sales of £54m in the year to 31 March 2009 and a pre-tax loss of £3m.

Although no one is making a direct connection it seems that the sudden and wholly unnecessary complete withdrawal of  Home Information Packs in May 2010 seem to have had some bearing on the fate of this business.

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

Free Conveyancing

The concept of FREE conveyancing can be a reality and is likely to become one in the very near future. 

As with most things in life nothing is ever completely FREE, there is always a catch or a set of conditions.    This is no different in the case of a FREE conveyancing service.  For this to happen the insular approach to conveyancing and the distrust in referral fees has to change.

The profession can no longer continue to believe that a competitive service can be built and developed solely on the back of diminishing conveyancing fees.

From October there will be increased competition and this can lead only to even lower pricing and possibly a falling in the quality of service to the end user. If those providing a conveyancing service believe they will still be able to compete I am afraid they are in for a big surprise.

The time to think outside the box is here and now. 

There are many solicitors who have steered away from referral fees because of the horror stories that have over the years emerged on failed partnerships with non-lawyer entities. I have sympathy for this line of thinking. However we live in a very competitive world where marketing costs remain high and profitability is becoming more and more difficult to sustain.  For businesses to survive and flourish business relationships within and outside the legal sector are essential.

We should not feel ashamed about charging a fee for an introduction providing of course all the necessary conduct rules are followed.  We have spent money and time in securing the client; the client has developed confidence in our service and if at the client’s behest the client is looking for other services why not charge a fee.

At MJP we have gone a stage further and as part of the transparent approach we take to referral fees we offer the client a share of the fee if they make use of one of the services offered by an external supplier.   This helps to get around the uneasiness there often is with referral fee accountability and also serves as a means for the client to receive money back that is often well in excess of the modest fee we charge for conveyancing (www.mjpconveyancing.co.uk).

We also operate a FREE web based system for other legal firms to make inter-firm referrals of cases such as clinical negligence in return for a share of the end profit earned on that case.  It has proved very popular. Further details can be found at www.mjpconnect.com

The creation of local networks of local professionals is nothing new, however with the Legal Services Act just around the corner it has, at least for us, taken on a new and essential meaning.  

If you wish to become part of our network or find out how you reduce the cost of your home move please e-mail: davidpett@m-j-p.co.uk or call 01603877004

David Pett who is a partner with Morgan Jones and Pett wrote this Blog Entry.  His role involves the supervision of the firm’s Residential Conveyancing Team.  He also runs the Business Development and IT Team.

Your feedback would be appreciated – davidpett@m-j-p.co.uk

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