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Property Eye #10
These recent property news items caught our eye:-
Taylor Swift in Berkshire?
According to press reports multi award winning singer Taylor Swift has set her sights on a “stunning” period property within 35 miles of London. Swift is said to want to live nearer to her boyfriend Calvin Harris and best mate Ed Sheeran. This year Taylor became the youngest ever person to make the Forbes Power Women List and her multi-millionaire status should ensure that she can afford the UK home of her dreams.
Rock ‘n ‘Roll Oxford
Outspoken Radiohead front man Thom Yorke is a long term resident of Oxford and has now moved to a new £2.75million townhouse in the centre of the city. Thom, whose 4 bedroom pad looks out over the centuries old university buildings, brings a unique brand of rock panache to the dreaming spires of the famous city.
Goodbye to Mark Shand
The 2 bedroom Bayswater flat of “golden boy” adventurer Mark Shand late brother to the Duchess of Cornwall has been sold for £1.325million (original asking price £1.5million). Shand who tragically died aged 62 after a fall in New York just over a year ago had lived in the flat for around 5 years.
New Home for New Girl Zooey
Zooey Deschanel the star of the hit US TV sitcom New Girl is swapping her £1.6million bungalow in the Hollywood Hills where she lived for six years for a £3million six-bedroom house in New York’s Manhattan Beach which comes with swimming pool and tennis court.
Five figure weekly rent better value than stamp duty?
Last year a young lady paid five years’ rent up front for a £15,000 per week flat in the One Hyde Park development. Ignoring any discount she might have negotiated this is a staggering £3.9million. But when compared to stamp duty of just under £2.4 million on a £20million purchase maybe it’s not such a mad deal. Particularly if top end prices were to decline over the next 5 years.
The trend for renting at the top end is certainly increasing according to London agents with clients comparing the cost of buying (stamp duty, legal/agents fees, and service charges, financing costs etc.) against the comparative costs of renting.
More properties are also coming to market with the option to buy or rent. Examples include a 7 bedroom property in Chelsea for sale at £14.5 million or for rent at £10,000 per week and a 9 bedroom house in Hampstead which is £24.995m to buy or £25,000 per week to rent.
Stamp duty on the Chelsea home would be around £1.65m or the equivalent of just over 3 years rent at £10000 per week.
The stamp duty of just over £2.9 million on the Hampstead house would fund 2 ¼ years rent at £25,000 a week.
Looked at from the “landlord’s” point of view a £25000 weekly rent on a £25,000,000 property provides a reasonable gross yield of around 5%.
Right to Buy Controversy Continues
The government’s plans to extend the existing “right to buy” scheme to include the properties of Housing Associations has been strongly criticised by Lord Kerslake in his maiden speech in the House of Lords. Lord Kerslake who was head of the civil service until last year became chairman on 1st June of Peabody one of London’s oldest and largest housing associations.
In his speech Lord Kerslake claimed that the scheme is wrong both in principle and practice and won’t help tackle the urgent need to build more houses.
Some commentators have pondered whether David Cameron is now slightly embarrassed by the legislation having assumed that it would have been blocked by his partners in a minority government. Following the Tory’s surprise election success it was announced as government policy in the Queens Speech.
Debate about the issue is likely to rumble on for some time with Lord Kerslake’s new colleague at Peabody CEO Stephen Howlett saying that giving Housing Association tenants the chance to buy at discounts of £102,700 in London and £77,000 outside would cause a “buy to let” bonanza.
House of Scandal
The renovated grade II listed Mulberry House in Smith Square Westminster has been put up for sale for £25million. The 7 bedroom house was home to a couple that gained notoriety in the 1920s for a tragic scandal that shocked polite society.
The writer Gilbert Cannan’s affair with the wife of Peter Pan author J M Barrie had already caused the break-up of that marriage before he started living with the artist Gwen Wilson. They were then joined in a “ménage a trois” by Henry Mond heir to the ICI fortune who later became an MP and subsequently the second Lord Melchett.
Whilst Cannan was touring the USA promoting the work of his friend D H Lawrence (author of Lady Chatterley’s Lover) Mond and Wilson got married causing Cannan to have a mental breakdown from which he never recovered. He was declared mentally insane in 1924 and institutionalised for life.
Saga of “Last Time Buyers”
It is estimated that £820billion of property and around 7.7 million spare bedrooms could be unlocked if all those older homeowners who wanted to downsize could find suitable properties to downsize to. This is based on research undertake by the Legal & General and the Centre for Economic and Business Research which identified that only 7% of homeowners aged over 55 had actually downsized although 33% wanted to.
The problem is that there are not enough suitable properties despite the efforts of a handful of specialist retirement home developers who have created around 50,000 apartments tailored to older residents.
In the wake of the publication of their investigations L&G chief executive Nigel Wilson issued a plea for an expansion of housing supply for older people. This would enable the elderly to find homes of the right size and convenience and also release their current bigger properties for use by younger families.
Offset Mortgage Rates at an “all time low”
Figures released by Moneyfacts the mortgage and savings analytics company show that the average offset mortgage rate is at an all-time low of 2.65%. This is down by over 1% from the rate of 3.68% two years ago.
An offset mortgage allows you to offset your savings against your mortgage so that rather than earning interest on your savings you don’t pay it on the equivalent of your mortgage debt enabling you to pay off what you owe more quickly.
As an example a 25 year £150,000 mortgage would cost £672 per month but offsetting £30,000 of savings would reduce the interest by £21,000 and allow the loan to be paid off 2 years and 7 months early.
Chelsea Issue Tracker Mortgage for 0.98%
Another record low mortgage has been released by Chelsea Building Society whose tracker mortgage is available at 0.98% for borrowers who can raise a deposit of at least 35 per cent. The mortgage has a fee of £1545 and a 1% early redemption penalty in the first 2 years.
New terms from Nationwide
Nationwide has broadened its lending rules to allow owners to apply for both a buy to let and residential mortgage at the same time if they have to move elsewhere and want to convert their existing property to an investment opportunity. The offer is open to new customers but existing borrowers can re-mortgage their home on a buy to let basis and if they complete their residential mortgage on their new property through Nationwide they will get £250 cash back.
UK Mortgage Approvals Jump
Mortgage approvals jumped by the biggest amount in six years in April. The Bank of England have confirmed that there were 68,076 mortgage approvals in April, the highest level for 14 months and up by 6,131 from March. Re-mortgaging approvals were up by 8.8% from March also to a 14 month high of 35,930 as homeowners took advantage of cheaper rates.
Analysts believe that these increases suggest that there is plenty of life left in the mortgage market and predict that approvals will continue to rise over future months as mortgage rates remain low. The number of approvals still remains 10% lower than at the start of 2014 despite the near 10% rise in April when more mortgage approvals were given than any month since the introduction of tighter rules for lending introduced in April 2014.
Construction Sector Builds
More indications of a buoyant housing market came from the latest purchasing managers’ index which jumped 1.7 in April to 55.9. There is more optimism amongst those surveyed with 58% expecting a rise in business activity over the next 12 months compared to just 4% a month ago.
Job creation in the sector has also improved hitting a 5 month high in May suggesting that the brakes are now off the construction sector.
Negative prediction on buy-to-let returns
LSL Property Services is predicting a plunge of 62% in buy-to-let returns over the next 12 months. Their pessimistic prediction is based on their belief that capital values will not rise and indeed may fall over the next year.
At the moment it says that average returns to the landlord are £15,503 of which rental income makes up £8,247 and the average capital growth is £7,256. In 12 months it predicts that although rental income will have risen to £9,292 capital growth will be minus £3,036 dragging the average overall return down to £6,256.
This prediction coincides with a surge of interest in buy-to-let investments with the proportion of property purchasers paying with cash at an all-time high.
Call for more surplus land
The government minister and chairman of the new Housing Taskforce, Communities secretary Greg Clark, last week urged government departments and councils to release more surplus land for housebuilding.
The Housing Taskforce has a remit to sell off enough government-owned land to build 150,000 homes by 2020.
Clark wants a further 150 sites to be released for sale in addition to the 146 sites released during the last parliament by Whitehall departments which opened up space for up to 103,000 homes.
Clark also wants local authorities to release vacant plots on brownfield sites for residential development.
The Housing Bill, announced in the Queen’s Speech, will require local authorities to create a register of brownfield land in their area, including their own land.
Britain faces massive housing shortfall
Property experts are warning that Britain could face a shortfall of over 1 million homes over the next decade. The current gap is 136,000 per annum according to a report from the agent Savills. The supply shortfall had the effect of keeping house prices up through the recession.
MP lines up £9.5million profit
Tory MP Adam Afriyle who was brought up in a Peckham council house is set to make a profit of over £9million on his Westminster house which is on the market for £16.7million. Mr. Afriyle who represents Windsor bought the Grade II listed Georgian townhouse in November 2005 for £7.25million.
The Brits are back!
Moneycorp chief executive says “The strong pound is encouraging UK investors to take advantage of overseas opportunities….the Brits are back!”
The foreign exchange provider saw a marked increase in the number of Britons sending money abroad to buy homes during the first quarter.
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