Property: UK

Property editor Shane McGinley on the UK market

Sterling deals
There appears to be much misery in the UK property market of late but, when prices are down, it is the best time to strike a bargain, says Shane McGinley.

Homeowners and investors in the UK property market have been facing much uncertainty because of the credit crunch, but many analysts believe that now is the time to uncover a bargain.

John Townsend, a partner at Lester Aldridge LLP solicitors, believes that foreign buyers can also take advantage of the weak pound. “If the average price of a UK property has already dropped 20%–25% since its peak in 2007 and the exchange rate is factored into the equation, then a property could be up to 50% cheaper for an overseas investor than it was 18–24 months ago. This could represent a relatively small window of opportunity in a property market that has become one of the most bullish in Europe,” he says.

Fellow lawyer John Howell from The International Law Partnership LLP agrees, rating London joint second with Miami for the best places to invest in 2009. “Riverside apartments are being sold for half their original value and less than the cost of construction,” he says. However, he does believe that “in terms of timeframe, the bargains are likely to be more extravagant in six months and so it is advisable to wait until mid-2009 before you make a purchase”.

High-net-worth investors are flocking to pick up bargains, and Property Vision, a subsidiary of HSBC Private Bank, reports that up to 80% of Arab buyers they spoke to on a recent visit to the Gulf are planning to buy in the UK this summer. Ed Mead, a director at the Douglas & Gordon agency, reports that in the capital they have seen a 20% rise in interest from overseas buyers. “Currently, 70% of our sales transactions in central London are to foreign buyers,” he says.

The price slide doesn’t seem about to stop any time soon. Jones Lang LaSalle’s latest Residential Market Forecast estimates that prices will drop by about 13%–15% this year, will hit rock bottom in 2010 and by 2011 will recover and grow by 4%–6%.

The latest Rightmove House Price Index found that in February the average price of a house was £216,163 (€233,321), a yearly drop of 9.1%. Across the country, Wales and northwest England were the worst hit, both dropping by about 14%, while Greater London was down only 3.5%. In Kensington & Chelsea and the City of Westminster, prices actually rose by 27.2% and 15.4% respectively last year.

Aaron Turner, chief executive officer of www.look4aproperty.com, advises that people look to buy individual properties, not new-build. “Individual homes like terraced houses have the potential to be improved upon, but with blocks of flats there will always be greater competition from other properties for sale within that building,” he says.

Many buyers over-exaggerate the creditcrunch crisis, according to research by Unbiased.co.uk. It found that about one in 10 people think they need a deposit of 40%, and 18% believe they need a 30% down payment. In reality, you can get a mortgage with just a 22% deposit, the website says. The research also found that a quarter of Brits believe you can only get a home loan equal to 2.5 times your salary, when in fact most lenders offer 3.25 to four times.

In an effort to entice buyers, many developers are offering innovative schemes. For instance, Barratt is offering the Head Start deal, which allows first-time buyers to move into a brand new property with an 80% mortgage and 5% deposit, while still owning a full 100% of the property. No interest or rent is payable on the 15% deferred and is paid back any time up to the resale of the property or within 10 years.

The company is also offering HomeBuy Direct, a Government-funded scheme that means some buyers can move into a house by taking out a 70% mortgage – with no deposit required. You pay no interest on the remaining 30% for five years, and the amount is repayable when you sell the property. Barratt has also been running a part-exchange scheme for many years, where they will buy your old house, meaning you can move quicker without the hassle of putting it on the market.

Hillreed Homes is also offering incentives, including mortgage subsidies, help with deposits, payment of stamp duty due and help with moving costs and legal fees. Such schemes are clearly starting to work, because Hillreed Homes reports that its sales in January this year were up 160% compared with January 2008.

The final reason to buy is actually down to the economy itself, with more Brits opting to take holidays at home and even so-called “staycationing”. Figures from the HolidayLettings website show that inquiries for UK holidays in January were up 77% year-on-year, adverts for UK holiday homes were up 74%, interest in Scotland and Wales was even up 91% and 97% respectively and UK bookings were up 50%. This is all very good news for UK buy-to-let landlords.

Take five
BUDGET BUYS AROUND EUROPE
Gran Monovar, Spain
Price: From €95,000
Details: Just 20 minutes from Alicante airport, these apartments and villas are part of the region’s first eco-development. The site will encompass thousands of trees, water recycling, eco-friendly architecture and solar panels.
GRAN MONOVAR, WWW.ECOCITYSPAIN.COM

Silver Resort, Slovakia
Price: From €78,401
Details: Located in a Unesco World Heritage site, this ski resort in the High Tatras has studios, apartments and villas, offering rental yields of up to 6% and 80% mortgages.
PROPERTY FRONTIERS, WWW.PROPERTYFRONTIERS.COM

Lodge St Germain, Languedoc, France
Price: From €155,000
Details: Set within a 56ha historic site and opening in 2010, Lodge St Germain is an eco-resort that includes 79 suites and rooms and eight private villas. The scheme also features a vineyard and olive grove, and facilities such as bars, a restaurant and private dining rooms.
WHAT GREEN HOME, WWW.WHATGREENHOME.COM

VARO Apts, CostaBlanca, Spain
Price: From €69,800
Details: These apartments are 5km from a top golf course, have balconies, a communal pool and views over the historic town of Almoradi and the Vega Baja area.
ATLAS INTERNATIONAL, WWW.ATLASINTERNATIONAL.COM

Oakley Vale, Corby, UK
Price: From €106,197
Details: This development of apartments and townhouses benefits from a new London rail link, and is part of a multi-million pound regeneration just south of the town.
ELSON HOMES, WWW.JELSON.CO.UK

Eastern promise in West Sussex
FOR ONE COUPLE, MOVING INTO A NEW HOME NEAR LONDON WAS MUCH EASIER THEN THEY HAD EXPECTED
Some people buy property as an investment or nest egg for the future. Some people buy property as a second home they can bring the kids to on holidays. Yet for the Pytkas it wasn’t just buying a property, it was buying a home and starting a new life.

Krzysztof, 27, from the Ukraine and Svitlana, 29, from Lithuania, moved to the UK four years ago and met when they were both working as managers in a restaurant.

After getting married they decided to buy a house in Crawley, West Sussex. In light of the credit crunch, the young couple didn’t think they would be able to afford a two-bedroom home. However, after doing some research, they found that the Pembroke Park development was offering a “Flying Start” deal for first-time buyers.

The Flying Start deal is designed so first-time buyers just need to arrange a 75% mortgage through a recommended mortgage adviser. The Pytkas have no rent or interest to pay on the remaining 25% of the property for up to 10 years, despite having full ownership. This basically equates to a 25% interest-free loan, but it made it possible for the couple to qualify for a mortgage and buy their house.

They eventually picked out a brand new two-bedroom apartment for £175,000 (€186, 323). The remaining 25% of the property value doesn’t have to be repaid for 10 years, or when the couple decides to sell their home.

“We were delighted when we found out about Flying Start, as it enabled us to buy a larger home that we may not have been able to afford previously,” says Krzysztof. With the property industry going through turbulent times in eastern Europe, the Pytkas were glad to be able to set up a new life in England. The special deal also meant that they didn’t have to pay any stamp duty or legal fees.

Located 45km south of London, Crawley is a thriving area with plenty of choice for leisure and entertainment. K2 is the town’s brand-new leisure complex with facilities including an Olympic-sized pool, a 12m climbing rock and a health-and-fitness suite.

The couple’s house was truly made a home when two days after they moved in, Svitlana gave birth to their first child Angelika. “We were waiting for a kitchen delivery when Svitlana went into labour and I had to rush her straight to the hospital!” says Krzysztof.
WWW.FAIRVIEW.CO.UK

Tips & debate
SPACE INVADERS
If you need a bigger home but moving is out of the question, there are some great ways to solve the problem, says Shane McGinley.

With prices tumbling it's clear right now that holding on to a property is better than selling. If you’ve got any spare cash that means investing in your place and building up its value ready for the inevitable upturn in fortunes. Now’s actually the best time to do it.

“People are still spending money on maintenance and refurbishment, but they appreciate the competitive nature of the market and know they can shop around for the best price,” says Aspect Maintenance managing director William Davies.

“The sector’s margins are being squeezed, and operators have to be smarter in the way they work. There has been a power shift to the customer, and there has never been a better time to get work done on your home. In addition to the competitive marketplace for the builder, materials suppliers are fighting for sales, so good discounts can be achieved by your builder which can be passed on.”

Davies had expected refurbishments to dry up in 2009, but found instead people are still looking for work, just haggling for better rates. “We’ve seen a reduction in the average size of job being undertaken, with customers doing a bathroom or a kitchen rather than the entire property,” he says.

To increase value, many are adding an extra room by extending into lofts. Research by the Federation of Master Builders found that a carefully planned loft space can add up to 15% to a home’s value. Furniture designers Neville Johnson have devised a “Loft Living” service where they will plan a bespoke layout and provide the furniture to fit the space. Prices start at £3,000 (€3,197) plus VAT, and they can create everything from an additional bedroom to a cinema room, living room, library or study.

If you have a garden you can utilise a service called Ecospace. Generally cheaper than an extension, Ecospace build a wooden structure that can be used as a guest room, gym or playroom. Installed over about 12 weeks, depending on planning permission, at an average cost of £19,850 (€21,135) plus VAT and delivery. In comparison, the Royal Institution of Chartered Surveyors says the average home extension costs about £28,000 (€29,834). Ecospace (pictured) also uses sustainable wood and low-energy heating.

If you are moving into a new-build house it may also be wise to ask the builder to add on a conservatory. When my parents moved into their new home they did just that and discovered it was nearly 50% cheaper to get a conservatory added while the house was being built, rather than to wait and add it later.
FOR MORE DETAILS, VISIT WWW.NEVILLEJOHNSON.CO.UK AND WWW.ECOSPACESTUDIOS.COM