Different aspects of the UK Housing Market:
UK House Prices
Statistics
Supply
Economics
Articles for Home-owners
Three different stories this week highlight the ‘tip of the iceberg’ that is or was mortgage fraud.
Are the problems finally coming home to roost in the courts or will we just be catching the small scale exploiters. According to Experian 90pc of mortgage fraud originated from genuine individuals misrepresenting their financial situations.
President Obama set up a new task force this week to invade Financial Country rather than any other country. In presidential year he must be the best hope for a major professional scalp from the industry.
Spending a working life in the mortgage and lending business is no guarantee that your “trusted adviser” isn’t a crook.
‘A Pennsylvania mortgage broker got 30 years behind bars after defrauding more than 800 borrowers in a Ponzi scheme, which somehow kept all the balls in the air for 20 years. A Kansas City, Missouri, appraiser pleaded guilty to mortgage fraud and was sentenced to 20 years in prison, plus a $500,000 fine.’ about.com
‘A pair of fraudster brothers built up a property portfolio with the help of a crooked building society worker. Billy Blue Ingham and Bobbie Jo Ingham obtained loans for £700,000 by lying about their lifestyles before snapping up properties in Salford. Anna-Marie Fletcher, a worker at the Cheltenham and Gloucester in Farnworth, Bolton, waved through the dodgy mortgage applications, a court heard. Manchester Crown Court was told she stood to gain thousands in bonuses for meeting targets.’ Read more at: Manchester News 25/1/12
Obama alleges misconduct by financial institutions including issues with mortgage lending and the packaging and selling of home loans into bonds for purchase by investors – focusing on the mortgages “that led to the global financial crisis”. FT.com 25/1/12
The holy grail of property investing is to get your investment into an area or property just before values move upward exponentially.
Finding such areas takes skill, effort and no little amount of luck.
Meticulous investigation and planning are your best tools. Do not believe all you hear on TV renovation programmes, they are for entertainment rather than your education.
Start Spotting Early
- You do not need to be first into a new market area. Explorers and expeditionary forces face the most problems.
- There are good profits to be made by being an early adopter of a good idea or area.
- Talk to local agents for advice but filter out the sales speak.
- Tramp the various patches taking care to look for those areas adjacent to those that have recently been upgraded or hot spots themselves.
- Know the areas where the original building was good quality. Victorians and Edwardians could jerry build with the best.
Hot Spot Indicators
- When a trendy area becomes too expensive or just plain ‘full up’ the adjacent areas can quickly become fashionable.
- Areas where new work is in evidence are good signs. Skips in the street, smart new doors and windows (wood is best), scaffolding etc.
- Better quality, late registration cars in the area.
- Upmarket shops are getting planning permission to open in the area eg Starbucks, M&S Simplyfood, Waitrose
- Newsagents seem to be stocking a better range of life style magazines.
Hot Spot Essentials
- Good local facilities are a prerequisite. Shops and transport for singles market. Good schools and parking for families.
- No or low crime areas.
- Availability of renovation and maintenance skills in the area.
- No local planning blight or negative development issues.
Spot The Bargains
- It is not always the area that is your sweet spot for investment. Know your onions and specialise for a good return.
- Rarity carries a premium and a distinctive property should attract a premium or niche following.
- A property that has been on the market for a long time may be a dog not a bargain.
- Local natural features, rivers, hills, national parks can stimulate good zones.
Comment on Hot Spots
- Hot spots congregate together.
- Find where your investment will add the most tangible value.
- Do not pick zones where you or your family would not wish to live.
Yorkshire is known for its involvement in social welfare, the Co-operative movement and the foundation of many Building Societies. The county seems to be the center of the Rotary Club initiative to build retirement homes under the charity banners of Flower Fund Homes.
Bradford Flower Fund Homes
This is a registered charity founded in 1957 by Ernest Marriott a prominent Bradford businessman. Its main objective is “the relief of elderly folk by the provision of homes and dwellings”. They provide easy-to-manage homes in pleasant surroundings for elderly people of pensionable age to enjoy their retirement. The Fund takes its name from the original funding idea, whereby donations could be made in lieu of funeral flowers after bereavement. The Fund still receives some of its support in this way, along with other donations, legacies and self-generated income.
The homes generally have one bedroom, a living room, a kitchen and a bathroom. Flats may be ground floor or first floor and there are stairlifts in the three Main Houses at Flower Mount, Flower Hill and Flower Garth.
Scarborough Flower Fund Homes
The Scarborough and Filey homes arose from an idea promoted by the local Rotary Club during the 1960′s when, at the time, there was a pressing need for affordable homes for those members of the local community who were single and for various reasons were unable to enjoy a retirement home of their own – often after a lifetime of service to the community.
The Bingley Flower Fund Homes.
Registered as a Charity in 1962 this organisation was formed by local business people, raising money from charitable donations, to provide bungalows and flats for retired people from Bingley district.
In 1966 eighteen units were opened, a further sixteen in 1969, thanks to the enthusiasm of the entirely voluntary committee.In 1986 the final phase at Littlelands in Cottingley provided a further six flats. The complex includes a common room, laundry and a flat for the warden.
Subsequently a new development took place at Lyndhurst in Hall Bank Drive, Bingley, comprising eight flats and facilities as at Cottingley.
Other West Yorkshire Flower fund charities include Spenborough Flower Fund Homes Ltd, Bingley, Littlelands and Aireborough who build and maintain one bedroomed bungalows for the elderly in need in the Aireborough area. We aim to allow tenants to lead an independent life in affordable homes and work to support them in this.We are a registered charity.
Managed by Harrogate Flower Fund Homes, Fulwith Close has age exclusive housing including 18 one and two bedroom flats Built in 1991.
Funding Of Flower Fund Homes
- The original funding idea, or flower fund principal is one whereby donations could be made in lieu of funeral flowers after bereavement.
- Whilst initial funding was based on this ‘flower fund’ principle, it was realised that even with the additions of the modest rents to the budget, there was a considerable shortfall if development of the existing site was to continue and new sites bought and developed.
- With the help of publicity, local business and the community many were encouraged to donate, but more particularly to consider Flower Fund as a deserving local cause for legacies and inheritance or when making a will. Such provision plays a considerable part in the development of our sites.
- Most of the work done by these charities is undertaken by volunteers including organisation, fund raising and routine maintenance.
Comment
- Any house building is to be welcomed at the moment and the government could do worse than encourage a whole new flush of Flower fund charities.
- Flower funds fits in well with The Big Society.
- These homes also fit in with the agenda that wants to see retired folk downsize to make more space available for young families.
- Read Yorkshire Gods Own County.
Housing Property Investment Strategies.
You can seek to make money out of housing in a number of ways but first you need to think about your options and how they fit with your personal traits.
Investing in your own home may be the safest for those who want to start an investment process. At the other end of a buy to let scale is the ownership and conversion of a property into a Home of Multiple Occupancy or HMO. In all sectors there is the opportunity for wide-boys to operate and new comers should do careful research.
Self Help
The size of investment you make in a property means you do not want to get it wrong. Particularly you want to protect your initial nest egg. You can’t avoid mistakes but you can reduce there impact or incidence by checking out the best advice at an early stage.
There are many self-help books on the market and it is easy to be cynical. If the authors have done so well investing why turn to publishing their secrets. Never the less we may learn what to do and more useful what not to do by consulting such tomes.
Wage Slave to Financial Freedom: How the Right Property Investment Strategy Helped a First Time Buyer Escape the Corporate Rat Race by Neil Mansell from amazon
This book is Neil’s story of how he made the transition from corporate life to running his own highly profitable property business. In it, he charts his fears, how he overcame the challenges that faced him and shares the moments that made all the difference between failure and success.
In this book Neil shares the secrets of his own investment strategy and gives useful and practical insights into how anybody can follow the same route and build up a successful HMO business from scratch for themselves. I am involved in property myself and I was not really aware of how successful an HMO strategy could be.
The book tracks the growth of his business from scratch, and contains practical business advice that can help budding entrepreneurs on their way, as well as showing how a really strong business model can be built on his investment strategy which even the most successful property developers can pick up a few new ideas from.
Even if property isn’t your thing but you like a good success story, you’ll get a real motivational shot in the arm from reading this
As well as giving lots of tips on property investing, this book is a fascinating account of how to make a career change
The 7 Biggest Mistakes Made by Property Investors and How to Avoid Them by Steve Bolton and Nick Carlile Amazon
Homes in multiple occupancy (HMO) may be the way to go. This book is a bit self serving but it questions if the standard “buy to let” is the way to go and introduces you to the advantages of actively managing properties that are let on a per room basis to professionals.
What it does do exceptionally well is change the way you think about investing in property. It is a very good starting point to your research.
Check out The Upsides of Property Investing here
and The downside of Property Investing here
Invest in Your Own Home
Investing in UK property
If you buy your home as an investment with a view to making an investors return then you are not as concerned about a cosy living space but about potential. Never the less your own home is likely to be the largest or one of the largest purchases you make until you have more investment funds.
Investment Potential in your Own Home
- When making your purchase you will be thinking of investment potential and creating a growing financial asset. You will be planning to trade on when the time is right to realise the investment and buy somewhere else to live.
- Select a property in a ‘hot spot’ or area where you expect the local property values to increase.
- If you buy with a view to improving the house (doing up a wreck) your renovation costs must be controlled. It is too easy to spend more than the likely return.
- Buying a property with development potential needs an understanding of planning rules. Extra rooms, loft conversions and extensions can add value but take care of the cost/value equation.
- Building a second home in the garden has been very successful but there is currently a ground swell against this practice.
- A large property may be capable of sub-division into flats and apartments.
- Rents from lodgers and tenants or B&B income may become part of your investment return.
Pros & Cons of Investing in your Own Home
- As you intend to live in the home until a profit can be realised you are likely to take more care with the selection and purchase than you may with a buy to let property.
- Because the property is your main residence there should be no capital gains tax to pay. On a new build you may be able to reclaim Vat
- You have the advantages of living in the home whilst the gains are hopefully accruing.
- The downsides include a potentially long stay until the market is right to sell.
- Moving too quickly can lead to a disrupted family life.
- You need to factor in the costs of every sale and move.
- There is a risk property prices will go down or renovation costs over run.
Comment
Your own home is an investment. Treat it as such and you will reap rewards whilst still having a place to call your own.
Trading up after your first planned sale may give you the opportunity to buy two properties one to live in and repeat the process, the other to set up as a rental property.
Investing or reinvesting in your own home works so why take equity out of your property to invest in shares or something you do not understand or can’t touch and control.
Check out
Property Investment Strategies
The Upsides of Property Investing here
and The downside of Property Investing here
There are many downsides to investing in property but you also need to consider the risks of alternative investment strategies. Property prices may have further to fall in the short term and funding a buy-to-let purchase may be hard or impossible but it may be worth the effort.
Property Investment Up Sides
- It is a buyers market and if you have a property the rental market is strong and looks set to remain so for some time.
- Renting is growing even more rapidly with ownership out of favour. Life styles are changing in a way that favours rented homes.
- Property values tend not to fluctuate as much as other investments. They retain considerable value even in dire circumstances.
- Property is still seen as good security for a loan and interest rates are in landlords’ favour.
- Rental income is steady and more or less reliable. Rent beats bank interest and many riskier investment returns.
- If a property investment is ‘washing its face’, covering all costs and mortgage payments you are growing your equity value
- The layman finds property investment easier to understand than stocks and shares never mind more complex investment products.
- You can change or use property for a range of purposes and it should always retain the land value at the very least.
- There is the probability that values will again increase over time leading to capital gains. Just have an exit plan as it will be a slow process.
Special Property Investment Upsides
- A second home that can act as a holiday retreat but bring in casual income can fulfill a dream. It may be unconventional as a houseboat, converted windmill or an American apartment.
- Overseas property carries a currency risk or potential reward. Sterling, dollars, euros and Yen have been stable currencies but what rate you buy at may not be what the rate is when you come to sell.
- You can get personal satisfaction and other rewards from property that do not come with normal investments
There always seems to be a housing shortage and successive governments have been unable to square this circle of supply and demand.
Property is a hedge against hyperinflation and also provides a well worthwhile rental income.
Like all investments try to consider the downside and risks set against the return and the alternatives available.
For more Downsides of Investing in property read
There are many upsides to investing in property even during the current market correction phase that seems to have been going on for several years. Notably it is currently and will continue for some time to be a buyers market. There is the added fact that more people are going to have to rent in future which should underwrite rental incomes.
Property Investment Down Sides
- Property is harder to turn into cash than stocks and shares. With property you have to wait for a buyer to come along. You can sell a quoted share or batch of shares quickly through a broker.
- Buying and selling a property is a complex and time consuming business even when you have a willing buyer and willing seller.
- Investing in property is expensive generally needing at least a three figure sum. Costs need adding including stamp duty, renovation costs, legal and other fees, the list goes on.
- A large deposit and access to mortgage funds is required to make a property investment.
- Profits on sale of a property will be liable to capital gains tax unless it is your main residence.
- Property is a high maintenance investment.
- Ongoing costs, insurance, utilities, council tax, mortgage payments, service charges can all add up to a tidy extra sum.
- There may be special risks with special properties.
- Unless you are wealthy you may have all your eggs in one investment basket. You need to spread risk if possible.
Special Property Investment Downsides
- Leasehold property has its own risks.
When the lease runs out the property reverts to the freeholder
The shorter the lease the more rapidly the value diminishes. - Flood plain property or that nice holiday cottage on a cliff edge can become a serious liability. Insurers are taking a tougher stance and property values can collapse or disappear rapidly.
- Overseas property has legal and political risks attached. Rule and law changes can adversely affect non-resident owners.
- Heavily leveraged property with significant debt can lead to added stress for the owner.
To bowdlerise a phrase is your house half full or half empty?
To get a balanced picture read Upsides of Investing in Property
There is a flow of new and recent publications that provide a slant on the profligate housing finance that contributed to the economic woes of the western economies over the last half decade. Two tomes from USA and one from Ireland are worth seeking out in your university or business library.
A new format for information on The USA Housing Bubble and it’s economic impacts comes in the form of an environmentally friendly, print-on-demand book of US Senate Papers.
At £18.99 the documents are not cheap but the research time saved could make this a viable purchase.
The Housing Bubble And Its Implications For The Economy from United States Congress Senate in [Paperback] is available from Amazon.
This is for the advanced student, researchers and those with a detailed interest in the cause and effect of the property boom and bankers role in the rise and fall.
The Bankers: How the Banks Brought Ireland to Its Knees by Shane Ross is also available from Amazon.
This is a review of a different order.
- Three years ago, the Irish economy was still booming and the state coffers overflowing; now, the country is tackling an unprecedented crisis.
- This is the story of how Ireland got from there to here in a tawdry tale of collusion, back-scratching and denial among bankers, developers, regulators and politicians.
- Shane Ross – independent Senator, long-time champion of citizens against misbehaving corporations, and Journalist of the Year 2009 – tells in of going behind the scenes and the headlines to explain what happened, how it happened and who made it happen.
- They’re all here: Sean FitzPatrick, Michael Fingleton and the other bank bosses; Patrick Neary and his colleagues in Ireland’s failed regulatory apparatus; the property developers, whose borrowings ruined the banks, and many of whom are now personally ruined; and the politicians, whose policies helped inflate the property bubble and who have allowed the banks to dictate the terms of their bail-out.
- In ‘The Bankers How the Banks Brought Ireland to Its Knees’ Shane makes sense of a scandal that will haunt Ireland for years to come.
Returning to the United States of America ‘The Future of Housing Finance: Restructuring the U.S. Residential Mortgage Market by Martin Neil Baily was published in December 2011 and is the most up to date review of the fundamental flaws in the U.S. housing finance market.
Contents Include
- Ideas for the introduction of a new system that reduces the incentives for excessive risk taking take centre stage.
- New approaches, of interest to all western markets, for regulating mortgage securitisation, with the primary goal of financial stability.
- A limited role for government in providing credit guarantees for qualifying mortgage securities.
- The gradual withdrawal of Fannie Mae and Freddie Mac from the housing finance system.
Information is power, knowledge and experience is of great value and both are needed when negotiating a purchase or sale of a property.
This recent paperback and kindle book ‘How to Buy Your First Home (and how to sell it too).’ was first published in 2011. It provides an up to date perspective on housing and how the market has moved in the last few years. Available from Amazon
Phil Spencer is well known for his TV appearances with Kristie Allsopp and has also written Adding Value to your Home.
Our Tip Guide to Buying and Selling
- Housing can be a complex business.
- Many ‘professionals’ make a good living out of buyers and sellers of houses.
- Most people have little or no experience of negotiating and concluding a housing transaction. Intermediaries in the market do it for a living.
- Due diligence means taking all reasonable steps to check the facts and issues that may arise. We recommend that part of your house transaction due diligence is to learn and understand about the process. Do not let ‘professionals’ run away with the task without explaining your rights, exposure and position to you.
- Keep on top of timetables, it is in your interest not to let things drift.
- Check as many sources of information as practical including friends and relatives and books like the one above.
Publisher Blurb on ‘How to Buy Your First Home’
‘Breaking everything down into simple and achievable steps, he makes this daunting process easy. Learn how to Find your perfect pad, – Get a mortgage that’s right for you, Negotiate with estate agents and sellers and Organise exchange and completion.’
Reader Reviews
‘The money-saving tips and an essential trouble-shooting section covers everything a first-time buyer needs to know.’
‘Easy to understand, full of lists, contacts and step by step advice.This book is both informative and reader friendly. Lots of case scenarios to help clarify what Phil is saying. Loads of contacts for research.’
Finance Blog Tip
Buying your home is one of, if not the biggest, investments you will ever make. It is sensible to read up on the subject and go into the market fully prepared.
Stay current and check out a range of sources as the market is in a state of flux. New government backed incentives are being developed to help first time buyers. Read More
