International Property News for Europe 2005 edition

Anger and dismay has greeted Chancellor of the Exchequer Gordon Brown’s announcement that he will not now go ahead with a planned change to self invested personal pension rules that would from next April have allowed such schemes to invest in residential property. Promise of the change, included in last year’s Finance Act, has encouraged the financial services industry to invest millions in developing appropriate SIPPs.

All that has now been wasted. True to form the Chancellor has pounced on the slightest hint of tax avoidance and in so doing will be making changes that were originally designed to simplify pensions law extremely complicated even before they come into effect. A ‘technical note’ – virtually the only reference to his decision to overwrite his SIPPs promises included in his Pre-Budget statement – sets proposals to deal with direct and indirect investment in residential property, and much more. Source

December 2005 Back to top

ARLA - The Association of Residential Letting Agents has asked the Government for a Christmas present - The licensing of letting agents. This follows a "Watchdog" television programme that probed an unregulated letting agent in Stratfod, east London. This was after Landlords and Tenants were owed money and administrators were called in and closed down the company.

ARLA has been calling on successive governments for the licensing of letting agents since the 1988 Housing Act deregulated the private rented sector. There has been a six month period when four letting agents' offices have gone into administration or the principal jailed for fraud. They stated that the number of letting agents failing with loss of rent and deposits was on the increase.

Letting insurance specialist Letsure has moved its Glasgow operation into new offices to enable it to cater for a growing demand for its Tenant Assessment Service (TAS). The company has seen a 26% growth in the TAS business over the past year

Letsure has recently introduced a number of new features to the Tenant Assessment service including a significantly improved range of personal history information such as confirming that a tenant living at the address provided on the application form. A newly calibrated risk score has also been developed a more informed decision to be made on accepting or declining rental. If you are looking for a Letsure product click on the logo December 2005 Back to top

Property developers could claim thousands of pounds in VAT repayments after a landmark ruling that has exposed a tax loophole, say experts. John Fuszard, VAT expert at UHY Hacker Young highlighted the case of HM Revenue& Customs v Mr Ivor Jacobs, where Mr Jacobs applied for a refund on VATpaid to convert a school into residential property. HMRC refused repayment because the school had already contained some residential accommodation for staff and pupils.

Mr Jacobs fought the case in the VAT Tribunal, the High Court and finally the Court of Appeal who agreed that the VAT should be paid back. The Court applied the 'recount test' whereby if there are more houses and flats after conversion than there were before then VAT can be reclaimed. The Court also acknowledged that there is 'much more at stake for HMR&C than Mr Jacob's claim.'

John Fuszard says this could open the floodgates for thousands of similar claims: "Too many developers are not aware of this and have paid VAT unnecessarily. The ruling could affect conversion projects all over the country including converted pubs and shops and offices with residential accommodation. Anyone who has carried out this type of project should seek expert advice as soon as possible to see if they're entitled to a VAT refund."

The Bank of Ireland has recently revealed that rents will rise by a further 2 per cent, however this will not worry the twenty to thirty plus age group rental market. The average Dublin rental is now over 1200 per month after being under this level since late 2003. People want quality property like waterfront/docklands developments where they will pay 1500 - 1650 a month for a two bedroom apartment. There has been an influx of immigrant workers, largely from China and former eastern bloc countries that has boosted the rental demand. In Dublin agents report that 4 bedroom houses near the city centre have seen the biggest rise in recent months and two bedroom units account for over 40 per cent of the rental market have risen on average by 50 a month.

Average rents in Cork and Galway are 20-30 per cent lower than in Dublin. The Cork market is slightly more buoyant.Properties take an average of 12 days to let whereas in Galway it is over two weeks. The average bedsit now costs 150 per week and with a tenant only earning 270 - 280 a week there are going to be financial problems for them if rents rise too high. December 2005 Back to top

New research shows how the skills gap is biting for businesses across the UK. The Investors in People survey shows that over a third of employers lack the applicants they need for their positions.

The research, conducted amongst more than 700 Investors in People organisations, shows that recruitment is becoming an increasingly important business issue. Nearly nine in ten (86%) employers say recruitment is a high or very high priority for them over the next 12 months. Almost one in five (37%) see it as more of a priority than they did a year ago. But a lack of quality applicants is proving a challenge for businesses in the UK. Nearly a quarter of UK bosses (24%) have to wait up to six months on average to fill job vacancies; only 18% say it takes less than a month to find the right person for the job. December 2005 Back to top

LONDON (Reuters) - Loan approvals for home purchases rose 23 percent on a year ago in October, data from the British Bankers' Association showed on Friday, in further evidence that housing market activity is gradually picking up. Mortgage approvals -- the number of loans agreed but not yet made -- rose to 72,328 from 70,105 in September. The figure, often viewed as a leading indicator of house prices, was the highest since June 2004 and up markedly from 59,011 a year earlier. © Reuters 2005. All Rights Reserved. December 2005 Back to top

Hong Kong's first property investment fund, which was nearly scuppered by a legal action from a pensioner, has gained on its first day of trading. Shares in the Link REIT, or Real Estate Investment Trust, rose as much as 15% to 11.80 Hong Kong dollars ($1.5). The fund will buy real estate such as car parks from the government and pay investors a fixed return from rents. However, the scheme was delayed by a legal case that complained it would push up rents and grocery prices. http://news.bbc.co.uk/1/hi/business/4468786.stm December 2005 Back to top

The use of Home Information Packs by home sellers in England and Wales will be compulsory from 1 June 2007. The government has finally decided on the launch date after the packs were made law by the Housing Act a year ago. Buyers will be provided with a survey, land registry details and answers from both the sellers and local authority to standard questions. The government says the packs will cost about £600 plus VAT and will make home buying quicker and cheaper. The idea of introducing such packs has been discussed in the industry since the early 1990s. http://news.bbc.co.uk/1/hi/business/4448332.stm December 2005 Back to top

FSA finds There is no evidence that mortgage brokers are systematically still letting self-employed borrowers inflate their earnings, a report has found. Market watchdog the Financial Services Authority (FSA) carried out a review of 39 small mortgage brokers and a "mystery" shopping exercise at 41 more. Only three firms advised how clients could lie to obtain bigger home loans. http://news.bbc.co.uk/1/hi/business/4436102.stm December 2005 Back to top

LONDON (Reuters) - House prices were unchanged in October but the annual rate of inflation picked up to a five-month high, the nation's largest mortgage lender reported on Friday. HBOS Plc said in its Halifax house price survey that prices were flat after a 1.1 percent monthly rise in September. © Reuters 2005. All Rights Reserved. December 2005 Back to top

The 2003 law regarding swiming pools in France comes into force on January 1st 2006. This specifies that all private pools withouth exception should be equipped with a safety installation, designed in particular to protect children. Failure to observe the new rules could bring a fine of 45,000 euros. There appears to be no system of routine inspection in force, however if you try to rent out your property through an agency, you could well have difficulty if you have not applied for the new security measures. If there is an accident in your "unprotected" poolyou could be in big trouble. In 2002-2004 there was an average off 22 deaths a year in France by drowning in pools. November 2005 Back to top

The Money Centre one of the country's biggest providers of buy to let mortgages, reached and exceeded its annual target of processed mortgages three months early. In September 2005 the company processed over £150 million worth of buy to let mortgage for the first time. The September figures shows enormous growth compared to 2004 when the average monthly turnover of buy to let mortgages was £60 million. Lynsey Scrivener the marketing director said that the growth was due to experienced by to let landlords expanding their portfolios and refinancing their investments. November 2005 Back to top

Up to half of the UK Landlords have at some point had a tenant do a runner. The finding emerges from a survey by the National Landlords Association.

Out of those landlords who have experienced runaway tenants, nearly four out of ten said that this had happened to them within the last year, with more than one fifth saying it had happened within the last six months. The 41% remainder of landlords with fleeing tenants said that it had been more than two years since a tenant had abandoned one of their properties. The NLA made a number of suggestions for landlords to try to prevent the problem, but using a lettings and / or managing agent was not one of them. November 2005 Back to top

A controversial £60 million plan to build a holiday village, partly within a national park was given the all clear after a bitter two year legal wrangle. The Bluestone project promises to create up to 9000 jobs in Pembrokeshire, West Wales and transform prospects in an unemployment blackspot. November 2005 Back to top

Marrakech in Morocco is experiencing a mini-Dubai style property boom. Over the next five years, 17 developments, comprising nearly 10,000 new homes are due to be completed.

A warm climate and easy access from the UK (approx 3 hours from London Heathrow), combined with comparatively low property prices, a strong economy and a stable currency, makes Morroco an exciting prospect for property investors

Marrakech's desert location offers a different range of attractions to other Morrocan developments based along the coast. Developers are hoping that tourists will be attracted by the vibrant medina and nearby Atlas Mountains as an alternative to beaches and the sea.

Whilst the majority of new developments will be hotels and villas, investors may want to consider purchasing a Riad. These are comfortable town houses located within the walled city itself, but they will need to be quick. Prices of Riads have rocketed in the last few years and there are only a handful left.

Worries that the new developments will end up resembling Californian condos and desert golf courses, eroding the Moroccan culture are countered with building regulations to limit the height of new developments and ensure use of traditional building materials from local sources.

As the flight time is around three hours flight from the south of England, Marrakech could be a vibrant and interesting alternative to buying a holiday home in France or Spain.

Do you have a holiday home property that you want to advertise in Morocco. Did you know that jmlvillas.com will advertise your property for only £11.75 a year (approx 17.05) inc VAT for more infomation click on the logo.

Confidence among buy-to-let landlords continues to rise, with increased demand for rental property from tenants during the third quarter of this year.

The latest buy-to-let Confidence Survey from Mortgage Express, the specialist lending arm of Bradford and Bingley, claims that 87 percent of its respondents are planning to either extend or maintain their portfolio over the next six months.

The survey found that 81 percent of landlords state that demand for rental property is either increasing or staying the same - up 3 percent from last quarter. Some 91 percent report that rent levels had either increased or stayed the same over the last six months.

Large UK holiday homes with plenty of bedrooms are benefiting from a growing trend in group holidays.

Whilst couples who traditionally rented a small cottage for their main holiday are now jetting off abroad, the UK holiday home market is reinventing itself to cater for long weekend breaks. These weekend breaks are particularly popular with large groups of friends and extended family gatherings.

To capitalise on this opportunity, investors are buying up larger properties or converting smaller terraced properties by knocking through walls. Although purchasing a larger property will be more expensive than a two bedroom cottage, it is possible to collect up to £2,000 per week during the peak rental period, whilst the smaller cottage may only bring in about £350.

However, there are warnings about putting all your eggs in one basket and many investors would prefer to own a portfolio of smaller cottages, as they feel they are easier to fill without the hassle of large group bookings. They also point out that large groups of families will lead to higher maintenance costs.

The advice from those who have already bought large holiday properties is to be prepared to spend some money to ensure the interior is modern and comfortable.

Clients will expect nice furniture, fully equipped kitchens, modern bathrooms and all the latest gadgets such as a Playstation, a DVD player and Sky television, to keep the kids happy if it rains.

Do you have a holiday home property that you want to advertise in the UK. Did you know that jmlvillas.com will advertise your property for only £11.75 a year (approx 17.05) inc VAT for more infomation click on the logo.

LONDON (Citywire) - Bulgarian-focused property fund Black Sea Property, backed by Mark Harris of New Star, has announced its second major investment since its launch in March.

The 57 million pound company is financing the construction of 350 holiday apartments in the Bulgarian ski resort of Pamporovo. New Star's Mark Harris bought 7.725 million shares or 3.1 percent of the company at Black Sea's launch in March and has held on to them since. His stake is worth 1.75 million pounds at current prices.

The properties will be complete in time for the 2007/2008 ski season but Black Sea Property intends to sell them off the plan in the coming months. It believes if it can sell all the apartments at their current estimated value within the next two years its initial rate of return on the investment will be 54 percent.

Once final building permits are in place, Black Sea will issue 4.6 million euros (3.1 million pounds) to the developer at agreed stages during the building process with the balance of 6.9 million euros to be paid a month after the development is completed.

This latest investment means 40 percent of the funds Black Sea raised at launch have now been committed to development projects totalling 2,850 apartments. Black Sea chairman Melville Trimble: "Diversification into the ski and mountain resort market is in line with the fund's stated strategy."

Bulgaria has attracted a great deal of attention from UK investors recently with a myriad property schemes tempting Brits into buying overseas second homes. However this is not without risk and investment funds such as Black Sea and Bulgarian Property provide a more diversified option for investors.

Looking for a holiday home to rent? Do you have one to let out? CLICK HERE (or one of the photos for more Information)

The chief excecutive of the Environment Agency, Lady young says some local authorities keep ignoring the agency's advice by granting planning permission for developments on flood plains.Properties are being built in areas that are at a serious risk of flooding.

Lady Young is demanding tougher powers to deal with Councils and will name and shame the worst offenfers. She says "What surprises me is that having consulted the flood risk experts at the agency, local authorities are prepared to put people's property and lives at risk by allowing development in the flood plain".

It has been estimated that as many as 5 million people in 2 million homes are in areas at risk of flood.October 2005 Back to top

Are you prepared for a wet and windy winter? Flooding in the summer in the UK?

In October 2005 thousands of people in northern England, Wales and Scotland faced a miserable weekend mopping up their homes after severe flooding. Those people are unlikely to be the last victims of water damage. In a report published on 12th October 2005 by the Environment Agency (EA) that nearly 5 million people in England and a further 2 million in Wales live in areas at risk from flooding. Two fifths of those affected have no idea they are vulnerable the Government agency has warned.

The Met Office has predicted that the 2005/06 winter will be the coldest since 1995/96.If you have a rental property that you let out, is it insured fully? CLICK HERE for more information. October 2005 Back to top

Six months since the Chancellor of the Exchequer - Gordon Brown announced a doubling in the nil rate Stamp Duty from £60,000 to £120,000, new figures have revealed a dramatic movement in the lower end of the property market. In the period April-June 2005 sales of properties priced from £100,000 to £120,000 rocketed to 23,811 compared with sales of 15,492 in the previous quarter - January to March. Compared to the same quarter in 2004 this is a rise in sales nationally of 8,319 in this price bracket. Sales in the price bracket £120,001 to £150,000 where the Stamp Duty is 1% have been more in tune with the rest of the market. There were 9,284 more properties sold in April to June 2005 than in January to March, but 1,829 fewer than in the same quarter in 2004. The average house price in England and Wales is currently £178,899. October 2005 Back to top

The broker Landlord Mortgages has conducted research showing that the London Buy-to-Let sales now only accounts for 8.54% of the overall rental sales market in the 12 months to August 2005 - down 5% on the same period in to August 2004.

Lee Grandin the Managing Director said "Despite the fact that London has traditionally had a strong buy-to-let market over the last few years investors have started looking elsewhere. The capital is too expensive to provide the type of yields and potential capital appreciation that investors are loking for." In the north west the buy-to-let took 13.41% of properties and the east Midlands 10.13%.

A survey earlier in 2005 byARLA - The Association of Residential Letting Agents also found that gross annual rental yields in London (apart from the city centre) were lower than the UK as a whole.October 2005 Back to top

ARLA - The Association of Residential Letting Agents is warning that there could be a shortage of rental property. This follows the finding that one third of ARLA members' offices report more tenants than properties available to rent. Only 37% of all offices report more properties than tenants. Although there is still a marked over supply of property in prime central London, supply and demand is broadly in balance in the rest of the south east of England. ARLA agents throughout the country reported significant increases in rents achieved, particularly for flats in prime central London, despite the over supply of properties. October 2005 Back to top

As there is now increasing competition from the resorts in Eastern Europe and the growing influence of low cost airlines, the French Riviera is now struggling to maintain market share in the tourism industry. The strong Euro had not helped and Eastern Europe has more availability and is less expensive.

Tourism industry experts are a little more optimistic after the 2005 season. In Nice for example there was a 4 per cent increase in hotel guests in July compared to the same time in 2004 according to the Syndicat des hôteliers Nice Côte d'Azur. They indicated that the hotel occupancy in Nice was at around 70/75 per cent in 4 star and deluxe hotels and 80/85 per cent in other categories.

There are several factors contributing to the upward trend. There are now low cost routes into Nice from Bratislava and Budapest and the Euro is not quite as strong as it had been. The region has been using the Internet more for promoting travel packages with the annual events like jazz festivals and there has been a change in which hotels have adapted to the needs of their customer base.

The main visitors to the region are principally foreign tourists from Britain, Belgium and Germany and more Americans are returning to France. Nice Côte d'Azur airport has reported a 6 per cent increase in passenger traffic. There is also a booming cruise liner market with Monaco

reporting a 55 percent cent rise in passengers. They still have a long way to go before they regain their previous dominance and the job now is to keep people interested.

New directives reveal that the future of regional tourism is believed to be concentrated on two main markets. Leisure - affiliated with events, special interest tours and cultural highlights. events. The other is Business tourism - Conferences. September 2005 Back to top

House prices picked up in Ireland during the summer - the first time in two years according to the latest Permanent TSB house price index. The August survey showed that they rose by 1% nationally. Over the past 12 months house prices have climbed by 6.2%. The average price for a house in August 2005 was 265,364 that just over 11,000 up so far this year. Over the first eight months of 2005 first time buyers prices have risen twice as fast as those for existing homeowners.(7.6% compared to 3.8%).September 2005 Back to top

Independent adviser Chase de Vere is warning of a slowdown in the commercial property market and is predicting that returns for the current year will not be as high as 2004. But property still looks better than cash or bonds and UK property fund managers are still predicting returns comfortably over 10 percent for the current year, the adviser says. "We retain the view that the sector is an excellent diversification tool and at current rates of return, a strong performer for any portfolio," said Chase de Vere.

"We are wary of some of the more exotic property fund offerings coming online and believe that most UK investors should concentrate their search amongst those UK property portfolios with strong track records." Over at independent investment adviser Chartwell, Ben Willis, agrees. "Commercial property has outperformed both equities and bonds over the last five years and has delivered positive returns in each of the last ten years.

Commercial property is still the hot topic for investors today." He added: "We believe that whether this performance can be maintained or not is, to a degree, irrelevant as commercial property should be considered as part of a balanced portfolio due to its non-correlation with both equities and bonds." (c)2005 citywire.co.uk. September 2005 Back to top

Homeowners who fail to move their mortgage to a new provider once their introductory rate has expired are losing thousands of pounds each year, say leading mortgage providers. Bradford & Bingley said on Tuesday that homeowners on a standard variable rate (SVR) for an average 100,000-pound mortgage could be wasting as much as 1,800 pounds a year by failing to switch to one of the current market-leading rates. Mortgage broker John Charcol said the annual saving could be more than 2,000 pounds, or the equivalent of a near-10 percent pay rise for someone earning 25,000 pounds a year. © Reuters 2005. All Rights Reserved.September 2005 Back to top

Hundreds of thousands of homebuyers seeking a three or four bedroom house are having to shoehorn themselves into two-bedroomed places because there are simply not enough family-sized homes around, according to research by a property website. Propertyfinder.com said on Monday its research showed that 68 percent of homebuyers wanted to buy a three or four bedroom home. However, homes of this size accounted for only 39 percent of Britain's housing stock. By contrast, the one in five homebuyers looking for a two-bedroomed place should have a surfeit of properties to choose from as they make up around 41 percent of the housing stock. © Reuters 2005. All Rights Reserved.September 2005 Back to top

More than half of all mortgage lenders have failed to pass on the full Bank of England interest rate cut to borrowers. Financial information group Moneyfacts said 58 of 120 lenders had passed on the Bank's 0.25 percentage point cut. Some lenders argue that replicating the rate cut is not necessary because they did not pass on past increases, while others say they have yet to decide. news.bbc.co.uk September 2005 Back to top

A flood of money pouring into Sipps from next April, when it becomes possible to invest in residential property, will ease the pension crisis by encouraging people to save for retirement. From 5 April 2006, investors will be able to use their pension funds to buy residential property both in the UK and overseas. A survey of 200 property experts reveals that an estimated 6.5 billion pounds is likely to be invested in property Sipps (self-invested personal pensions) in the first year. Of this, 1.75 billion pounds is expected to displace existing pension investments, mostly equities, and 4.75 million pounds will be new money, increasing the UK annual private pension contribution of approximately 70 billion pounds by 7 percent. (c)2005 citywire.co.uk.September 2005 Back to top

The buy-to-let market continues to slow with the number of loans granted to investors declining by 4 percent in the first half of 2005 to 94,000. However, this is an improvement on the second half of 2004 when the number of mortgages granted dropped dramatically by 18 percent. Worryingly for lenders, the number of buy-to-let mortgages three months or more in arrears has increased in the first half of this year, albeit by a small amount from 0.66 percent in the second half of 2004 to 0.7 percent in the first six months of this year. This compares with overall arrears of 0.87 percent for the mortgage market as a whole. (c)2005 citywire.co.uk.September 2005 Back to top

First time buyers in Dublin, Ireland are being locked out of the property market because of escalating house prices in the capital. There is a widening gap between those in the rest of the country and those in Dublin according to new figures from Permanent TSB and the Economic and Social Research Institute (ESRI). 29 per cent of the population live in Dublin, but only 20 per cent of the homes bought by first time buyers are in the capital. Making up the other 80 per cent half are in rural areas or small towns.

Pictured left brand new apartments being built at Dublin Port ©jml property Services 08-05 See also Renting in Ireland

Since 1966 house prices in Dublin have risen almost 300 per cent and property prices in the city are now 55 per cent higher on average than outside the capital. Nine years ago the gap was 15 per cent. The average age of a first time buyer is now 30. August 2005 Back to top

On the 4th August 2005, the interest rate in the UK was cut to 4.5 per cent. This is the 100th interest rate decision that the Bank's Monetary Policy Committee has taken since it was given this power by the Government. The objective is to kick start the slowing economy. This move had been widely expected in the City. The rate cut marked the first change in the cost of borrowing since August 2004. At the point there had been a series of rate increases to cool down the housing market and consumer boon. August 2005 Back to top

The Irish holiday market is experiencing change this year, with more an more Irish residents using self catering accommodation instead of Bed and Breakfast according to statistics from the Central Statistics Office. In the first 3 months of 2005 there were 26% fewer nights spent in B&Bs and guesthouses compared with the same period in 2004.

In the same period this year the occupancy in self catering accommodation has grown by 27%.The figures for the same period for accommodation in conference centres and hotels has remained unchanged. August 2005 Back to top

The number of new home buyers rose in June for the first time in six months boosting hopes of a rebound in the housing market in the UK a report shows. The turnaround in buyer enquiries followed four consecutive months of falls the (RICS) Royal Institution of Chartered Surveyors said. A growing speculation of an imminent cut in UK interest rates had probably shored up buyers confidence. Economists expect a rate cut next month. There is also a slowdown in the number of properties coming onto the sale market, implying that prices might rise soon.Rics said that house prices fell last month and this indicated that the market would remain dormant for some months. July 2005 Back to top

A first quarter survey of mortgage advisers and brokers shows a rise in the number of landlords increasing the size of their portfolios and a fall in the number of "novice" first-time buyer landlords - suggesting that experienced landlords are seizing the opportunity to buy in poorer trading conditions. The proportion of landlords expanding their portfolios rose from 39% to 41%, while the number of people buying their first investment property declined from 27% to 24%. The trend towards landlords expanding their portfolios has been generally upward over the past 2 years or so, rising from 37% in April 2002 to 41% now (May 2005)People purchasing their first investment property have dwindled from almost 39% in April 2002.

The number of mortgages for first time buyers continued to decreased and now stands at 7.8%. The trend over the past 4 years has been for Remortgages and buy-to-let lending to increase whilst the proportion of first time & next-time buyers has decreased. May 2005 Back to top

The National Association of Estate Agents is seeking urgent talks with UK TV station Channel 4 over a property website website that encourages home sellers to bypass estate agents. Channel 4's property website - channel4.com/4homes that has been promoted on the channel's housing programmes states how you can save on agents fees. April 2005 Back to top

The Chancellor has thrown a lifeline to hard-pressed home buyers and those wanting to leave money and property to their families.

The threshold for payment of stamp duty on house purchases will be doubled from £60,000 to £120,000 from midnight. The move exceeded speculation in its generosity. Commentators had been expecting an increase in the threshold to £100,000.

To help first-time buyers, the Government is to enter a partnership with the Council for Mortgage Lenders which will finance a quarter of the house price.

It means 100,000 home buyers would become eligible for low-cost home ownership schemes.

He said that "new private homes" would also be built on council estates in nine pilot areas.

More estates will be exempt from inheritance tax, the starting point for that tax rising over the next two years to £300,000.

Mr Brown said that 94% of estates would now pay no inheritance tax. March 2005 Back to top

A 2006 property boom in the UK predicted on back of pension reform - March 2005

The April 2006 pension reforms could have a tremendous knock-on effect in the UK property market that could create the potential for an imminent property boom.

Mark Alexander - Managing Director of the Money Centre

(click on logo for more infprmation about The Money Centre.) explains why these will have an interesting impact on the potential for investment returns in the buy-to-let market. Currently property investors can use their pension to invest in a utilised property fund. This is restricted to investment in property company shares and the commercial market only. Individuals can set up a SIPP (Self invested Pension Plan) which can be invested in a single commercial property of the investor's choice.

In April 2006 this is set to change. Mark Alexanders says "that April 2006 is being labeled A-Day - the day when the rules will be re written. The rules are still a bit undecided, however it would appear that investors will no longer have to amortise debt, they may never be required to sell their properties and may also be in a position to transfer funds free of inheritance tax. If all of these changes actually come to pass, buy-to-let investors will be safe in the knowledge that their children will inherit their pension funds completely tax-free. It is believed that connected party transactions will become acceptable, even the possibility of selling your home to your SIPP and renting it back to yourself is opened up."

"Investors are likely to be quick to realize the huge potential for returns in the buy-to-let residential market, From April 2006, it will be possible to benefit from property market gains in a tax privileged pension wrapper"

"Property will become a sure way for people to invest for their retirement and for their family. However, choosing to invest pensions in property will require individual guidance and advice to make maximum returns on investments and minimize the risks."

"Buy-to-let investment really is for the long term and requires dedicated specialized consultation. Investors with a buy-to-let portfolio should be seeking two types of adviser. One consultant to advise on pensions and another to provide guidance on minimizing risk and gaining maximum returns from their buy-to-let portfolio" March 2005 Back to top

Student loan burden is deterring first time buyers in the UK - 27th January 2005

The Northern Rock mortgage bank has reported that the burden of paying off student loans is excluding would be first time buyers from the housing market.

The bank’s chief executive Adam Applegarth believes many first time buyers will continue to find it difficult to get a foot on the property ladder because of their higher education debts, rising house prices and competition for suitable properties from buy-to-let investors. The effect of 5% interest rate rises from the Bank of England since November 2003 has also caused the residential lending market to slow in the second half of 2004.

Mr Applegarth said that tighter monetary policy will mean the home moving market being kept at relatively subdued levels for the next two years. January 2005 Back to top

UK Government plans to get more People on the property Ladder – January 25th 2005

The Deputy Prime Minister John Prescott announced plans that first time buyers are to be offered homes for £60,000 to get more people on the property ladder. He announced that an estimated 300,000 families in housing association or council property are to be allowed to buy a minimum stake of 50% in their homes.

Also announced in this imitative was that up to 80,000 first time buyers will be helped by the construction of low cost starter homes on public land, including 100 former NHS sites. English Partnership – in charge of regeneration will offer 30% of the houses for a target price of £60,000. Half of these homes will be offered to public sector worker (like police community support officers and nurses) in equity stakes of 10%. The land price is likely to cost an extra £40,000. English Partnerships will retain a 40% stake in the property until the buyer pays off the full cost. It was reported that Mr Prescott said that 1,000 homes would be built under this imitative by 2007.

Mr Prescott is pressing other cabinet ministers to release more surplus land to English Partnerships to built low cost housing. The Ministry of Defence surplus property would be one such example.

Mr Prescott has struck a compromise plan to extend the Conservative Right to buy. Under this, it could initially reduce the social housing stock by 50%. Housing association and council tenants will be offered discounts of up to £16,000 to buy a share in their own property. The objective being that when they leave they will be able to sell their stake at a price agreed by an independent valuer. This would mean that Housing associations and councils will be able to use the sale proceeds to build more property to rent. The proposal will be included in the Labour party’s 2005 election manifesto.

The initiative received a mixed reaction from the housing industry, which welcomed action on tackling the issue, but questioned whether it was economic. 25th January 2005

Meanwhile – It has been reported on the 25th January that the British Government and Bank of England appeared to be set on a collision course over the housing market. British Prime Minister Tony Blair forecast fresh rises in house prices whilst the Bank of England expert Kate Barker said a price fall was a likely outcome. Kate Barker is a member of the Bank’s Monetary Policy Committee.

The Prime Minister unveiled a strategy to boost home ownership and said” as housing prices rise, which they will do, they don’t rise at a level that is so great that people feel that they’re simply loosing the chance to get into the market”.

Ms Barker was making a speech to the Institute of Economic Affairs. It was reported that she said the Bank’s central forecast was for house prices to fall modestly for a period, but warned that prices could experience a significant and prolonged overshooting of their fundamental value,

Last year Ms Barker produced a report for the Treasury that found an annual shortage of 70,000 to 120,000 new homes and that there was an ongoing inadequate supply of new homes. January 2005. Back to top

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Yorkshire Dales Park Authority in Yorkshire, England to restrict the sale of new houses to local residents — 20th January 2005

The park authority has agreed that the sale of new homes in the Yorkshire Dales National Park is to be restricted to local residents.

The move has been designed to prevent wealthy outsiders buying second properties as holiday homes or weekend retreats and pricing local residents out of the market. It is reported that the average price of a property in the area is £240,000.

A government planning inspector, William Carlow has already backed the plans.
It is reported that members of the Yorkshire Dales National Authority are delighted with these proposals. The plans are to be sent back to a working group to decide how to implement them.

There was a meeting in the village of Hawes lasting a couple of hours in which South Lakeland District Councillor Kevin Lancaster said that the inspector has said that you can have local-only housing and that that you can have affordable housing and most of the committee are delighted with that.

Local residents appear to be equally as pleased. Apparently there is an influx of new investors to the park where there are 10,000 homes. This has resulted in house prices doubling. It is very expensive to buy houses there and that is bad news for local people, particularly young people. Holiday home owners do not occupy their properties fully and when they sell they usually make a good profit.

Because there are so many holiday properties, one resident said that the villages are becoming like ghost towns.

William Carlow the local planning inspector reported that any houses to be built within the National Park in the future should meet demand from local people and be at affordable prices.

Other National Parks are going to closely monitor the scheme and this might pave the way for a series of similar proposals across the country.
January 2005 Back to top

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