Oct 19

Newly released data from estate agency, Springbok Properties, has found that first-time buyers in and around London have seen some of the biggest jumps in average house prices since the Help to Buy schemes were introduced.

Help to Buy is characterised by three schemes.

The Help to Buy Equity Loan was launched in 2013 and has buyers contribute a 5% deposit towards a new build, with the government providing a 20% equity loan on the property, or 40% within London, which is interest-free for the first five years.

This is available on new builds under £600,000 in England and £300,000 in Wales. The scheme is running until 2023, though after 2021 it will only be available for first-time buyers and there will be caps on the value of homes people can buy.

This is the most well-known of the Help to Buy schemes.

The second scheme is the Help to Buy Mortgage Guarantee, which also launched in 2013. This had the government act as guarantors against loans, while it wasn’t restricted to new build. It was discontinued at the end of 2016.

The Help to Buy ISA was launched in 2015, which saw savers pay money into an ISA and then get a cash bonus form the government. The scheme closed for new entrants in November 2019, while the bonus must be claimed by 2030.

Springbok Properties looked at the average cost of a first-time buyer property across the UK and where has seen the largest uplift in price growth since Help to Buy was introduced. While Help to Buy has given many a leg up when it comes to climbing the property ladder, the influx of additional demand has also, perhaps ironically, pushed the cost of Help to Buy homes up considerably.

Across Great Britain, the average cost of a first-time buyer property has increased by 32.8% since 2013, almost on par with the regular market. The typical price first-time buyers paid for a property in Barking and Dagenham was £281,396 in 2019, an alarming 70.8% increase from 2013.

This isn’t the only East London region to see huge increases the average first-time buyer price, as they rose by 60.7% in Newham to £349,874 and 60.1% in Havering to £307,874.

Other areas to see a strong uplift are Waltham Forest in North East London, rising by 68.7% to £408,233; Thurrock in Essex, increasing by 59.2% to £237,635; and Stevenage in Hertfordshire, rising by 58.7% to £250,086.

Scotland and the North East more subdued

The City of Aberdeen, which has been hit hard by falling oil prices in the past few years, is the only area of the UK where first-time buyers are paying less than in 2013. The price they paid has fallen by -10.9% to £126,794 in 2019.

Some other areas of Scotland have only seen modest rises, as Inverclyde prices have risen by just 6.55% to £83,995, while South Ayrshire prices have seen a 6.9% uplift to £102,992.

In England, the worst climber is County Durham in the North East, where prices rose by 3.5% to £88,790. This is followed by Redcar and Cleveland, where prices climbed by 4.5% to £105,156; while behind that is Middlesbrough with an increase of 5.0% to £110,304.

It seems Help to Buy hasn’t been enough to kick-start some of these markets into action.

Shepherd Ncube, Founder and CEO of Springbok Properties, commented: “Help to Buy was introduced by the previous government with good intentions – to assist would-be home-buyers in their first step onto the property ladder.

However, it seems that whilst around 200,000 buyers have indeed been supported, the unintended consequence in most areas has seen an above average hike in prices driven by the demand that Help to Buy has created.

First rung homes are supposed to be more affordable, but we’ve seen the average price paid by a first-time buyer accelerate to similar levels as the wider market. Not only has this made it more difficult for today’s aspirational homeowner, but perhaps some tax-payers might question the wisdom of using their money to fuel house prices even further?”

Sep 19

On the face of it, it isn’t the most obvious time to invest in property. Tough new regulations and tax changes have led to a huge sell-off, with landlords offloading almost 4000 properties a month.

But well-positioned landlords willing to stick it out may yet snap up some bargains. And with the Bank of England base rate at a historic low, now could be a prudent time to remortgage. So you’re determined to fatten your nest egg and willing to take the plunge, what next?

Here is my advice for the BTL landlord keen to expand.

1: Get the right support

Once you’ve sat down and crunched the numbers, the best possible thing you can do for yourself is to taking great care to choose the right professional support.

No business owner would invest without external advice and the property industry is no different. This is especially true if you plan on re-mortgaging your properties to fund the expansion. You should take time to find the right mortgage broker and the right accountant, each of whom must understand your individual circumstances and expansion plans in the short, medium and long terms.

The financial markets, the property markets and UK legislation are forever changing and ever-increasingly more complex so having on-going support from the right team of professionals is absolutely key. They will need to have sufficient knowledge of the markets and the foresight to predict trends and react to changes as well as experience helping other clients grow their property empires.

Even if you are well versed in the UK property market, you could have a lot to gain from professional support. Lenders will want reassurance that you are well supported and know your stuff, and accountants can help ensure that your business is structured to be as agile and as tax efficient as possible.

2: Choose the right investments

Clients should also be extremely careful in choosing the right new investments.

The first rule of BTL always holds: you must keep emotional ties to properties and sentimentality firmly at bay. If you are running a BTL business, then the property is a business decision. Ultimately, you need to be cool-headed enough to acquire the properties which generate the best return on investment and sell anything in your portfolio which is, or are even just likely to become a poor performer.

However, some professional landlords can go too far the other way in thinking it’s a simple numbers game. Everyone knows to look at growth areas. But it’s important not to simply get caught up in impressive yields without considering an area more closely. It’s crucial that you keep an eye on any works planned for the area, and any new infrastructure that could be coming in as well as consider the renter’s profile in that area. Of course, much of whether a property is a good idea for you, depends on your specific growth plan. If you’re at all unsure, then a property consultant could prove invaluable.

3: Do your homework

The most important part of overseeing your business is keeping an eye on the money. You need to be aware of the changing values of your investments; both capital value and income values.

Perhaps it goes without saying, but any expansion should be preceded by a very thorough review of your current investments.

Loan-to-value ratios are crucially important; over-leveraging brings higher risk and so higher arrangement fees and interest rates, thus reducing returns on investments. The income will be assessed with regard to debt serviceability.

Expanding your portfolio isn’t easy and there are only signs that it’s going to get harder. Right now we are seeing many Landlords (particularly in London) reacting to the buy-to-let tax and legislative changes introduced last year by evicting their tenants and selling up. The Government’s announcement last month that they will be abolishing section 21 notices only adds to the pressure. In this environment it’s only the most well-positioned landlords that want to stay in the game. If you’re confident that you’re in a position to expand, then making the right long-term choice of property investment is paramount and more than ever is pays to take the time to do it well.