FSA Mortgage Market Review

I was interested to read the reports on the FSA Mortgage Market Review.  As had been widely trailed previously, the proposals focus on a new affordability regime where the onus is on the lender to show that the borrower can afford to repay the mortgage and also cover life costs.  There are requirements that borrowers should be able to afford an increase of 1% in Base Rate.  Interest only mortgages have not been banned as was widely anticipated but borrowers now must have a credible way of repaying them and that cannot rely on the assumption that house prices will rise.  Lord Turner, Chairman of the FSA said “We believe these proposals will hardwire common sense standards into mortgage lending and guard against the risky lending practices of the past – leaving most borrowers unaffected but better protected.”

While there are formal guidelines in relation to mortgage lending I would have hoped to have seen this coupled with proposals from the Government to stimulate the mortgage market.  My fear is that the use of tighter rules will stifle the market and make it even harder to obtain mortgage lending.

These proposals do not come into effect until 2013 and I will keep you updated regarding any other comments.

Lindsay Darroch
Partner & Head of Property

First time buyers – an endangered species

I was very interested to read a report from Right Move regarding their predictions for the first time buyer property market for 2012. Right Move forecast that less than a quarter of purchasers will be first time buyers – 23%, a fall from 26% being the average for 2011 and considerably short of the 40% normally associated with a more active and healthy housing market. Right Move’s study provides an insight into the make-up of those who will purchase their first homes over the next 12 months indicating that the average age of a first time buyer will be 32 years old and will require to find an average deposit of £22,000. Given that most of this group are currently paying rent far in excess of monthly mortgage payments, the issue is not one of monthly income affordability but rather the problem is raising the deposit. I have stated this on many occasions and have urged the Government to take action to assist in this matter. My predictions for 2012 will follow in January.

Lindsay Darroch
Partner & Head of Property

RICS – Scottish market expected to pick up

I was very encouraged to read a Report by the Royal Institute of Chartered Surveyors indicating a small increase in the number of houses put on the market in November.

The RICS Report from November also found 4% more Surveyors reported new buyer enquiries rose rather than fell and it advised that Chartered Surveyors were confident sales would pick up in the next three months. As mentioned I will report my views on 2012 in January but any positive indicators, especially at this time of year, are very welcome. A full report will follow.

Lindsay Darroch
Partner & Head of Property

Government gives up on Stamp Duty

Chancellor George Osborne has not extended the Stamp Duty holiday for first time buyers despite massive lobbying from the mortgage and estate agency industries. The Government has taken the view that the Stamp Duty break has proved ineffective and has not benefited first time buyers the way that it had been anticipated. I do tend to agree with the Government’s view and think that the cost of the Stamp Duty relief would be better spent assisting first time buyers in relation to the deposit. The Government has mentioned a scheme where it will underwrite 95% mortgages for first time buyers for new build purchases. My experience indicates that first time buyers rarely buy new properties and I advocate a Government Guarantee scheme for first time buyers for all properties. A recent National Association of Estate Agents Report advised that the proportion of first time buyers fell to 16% in October from 23% the month before and I would urge the Government to do more to help first time buyers.

Lindsay Darroch
Partner and Head of Property

Launch of Scottish Property Centre website

As readers of previous blogs will know, I am currently on the Board of the Tayside Solicitors’ Property Centre. One of the projects that TSPC has been working on recently is the creation of a Scottish wide property website.  Various Solicitors’ Property Centres throughout Scotland have joined forces to launch a new national property website – www.spcscotland.co.uk went live on St Andrews Day.    SPCs operate throughout the whole of Scotland and advertise a high percentage of properties within their respective areas.  Most of the Scottish centres have collaborated to set up this new national site which brings together all of the properties they are marketing in one place.  The expectation is that this site will advertise approximately 14,000 properties. 

This is a great development and is another weapon in Solicitors armoury when it comes to selling Scottish properties.  As readers of previous blogs will know my firm is an active member of the TSPC  and also has access to the Right Move Property Portal as part of our Scottish wide strategy.   The new Solicitors Scottish Property Centre website will strengthen our proposition.  It is important that when choosing an agent to sell a property people should look carefully at personality and what the agent offers you in terms of their website, their knowledge of the market place, their property schedules, their For Sale board and their overall marketing strategy for selling your property. Should anybody require a free market appraisal then please do not hesitate to contact me and I will arrange for one of my Estate Agents to contact you.

Lindsay Darroch
Partner and Head of Property

Property Update – November

I am sorry that there have been so few blogs recently.  This should be taken as a good sign in terms of the activity levels in the Scottish property market.  I thought it would be useful to have a general update on the property market.  In January I will be starting off with my review of 2011 and my predictions for 2012, and then every month I will publish a general overview blog giving you the figures and stats as I see them.

Activity levels for November in the Scottish property market are bearing up remarkably well.  There is still an East/West divide with the West Coast – in particular the Glasgow area which is struggling to gain any momentum.  Aberdeen continues to boom, Edinburgh is showing signs of recovery and Dundee is still punching above its weight, both in terms of listings and sales.  Sellers are becoming more realistic in terms of their expectations and asking prices and I now see a greater willingness for people to “do a deal”.  This reinforces the need for people who are thinking about buying or selling property to turn to specialists – they may pay a slightly higher fee but the results and benefits are clear.

During the month of November we had the Chancellor’s Autumn Statement which included proposals in relation to the housing market.  While I welcome any proposal to stimulate the housing market I do feel that there was a missed opportunity and I am frustrated at the inability of both UK and Scottish Governments to grasp the importance of the property market to the general economy.  As readers of my blogs will know, a very simple plan to assist first time buyers, encourage developers to develop more properties, increase the funding of social housing and the abolition of the Home Report in Scotland would go a long way to assist the property market and have huge benefits for the general economy. 

In relation to the Home Report, I was very interested to read an article in the Sunday Times on 4 December calling for its abolition in Scotland.  I have recently come across two cases which reinforce to me the need to abolish the Home Report.  In one case a property languished on the market for more than two years because when the Surveyor had got the initial Home Report Valuation wrong – it was too high – and the seller was then unwilling to put their property on the market at a reasonable level. In another case, the Surveyor, under pressure from the seller/seller’s agent, had slightly amended and watered down his Home Report. This highlights to me the tension in the Home Report system in that it is instructed by the seller but relied upon by the purchaser.

Overall in the month of November I noticed a steady increase in the number of buy to let investors coming into the market lured by attractive prices and good yields and the promise of future capital growth in the long-term.   I have also been in discussions with a number of lenders regarding exclusive mortgage products for first time buyers and new build properties and I hope to be able to make some announcements shortly.

Lindsay Darroch
Partner and Head of Property