Dundee’s buy to let investment opportunities

A recent survey by LSL Property Services reported that average rents in the UK have reached their highest level for 2 years, a statistic which matches my experience of the Dundee and Angus property market.

Mortgage funding for first time buyers continues to be difficult to come by, meanwhile parents are becoming less able to fund deposits of their children’s first property, the result is there are increasing numbers of people who are looking to lease property instead. A number of local property managers have indicated to me that they cannot get enough properties to meet the demand.

Readers of previous blogs will know my feeling that Dundee is a prime area for buy to let property investment and I am of the view that with the correct advice a buy to let investment can provide significant income return as well as the potential for capital appreciation. Whilst funding for buy to let investments, like all types of mortgage, is harder to come by, I was pleased to see a couple of new products coming into the market.

The fact that Dundee is a university city with a high tenant demand and comparatively low entry prices, means that it could once again be poised to reclaim its title of buy to let investment capital.

Help needed urgently for first time buyers

With house prices at very attractive levels compared to valuation and extremely low interest rates you would think that this would be an ideal time for first time buyers to enter into the market.  However, due to constrictions with lending and a degree of economic uncertainty there has been a dearth of first time buyers over the last few months.

A report from Right Move indicated that first time buyer activity was 12% less than this time last year.  Given the chain nature of the housing market no matter what you are selling, be it a traditional first time buyer property or a £500,000 mansion, everyone involved in the housing market is affected by the lack of first time buyers.  I would also suggest that unless a degree of stability and security can be brought into the housing market then banks which have securitised most of their debts against these housing assets will not feel confident.  If the banks aren’t confident then they will not feel comfortable increasing their lending, and without increasing lending the economy will not be stabilised, thus a potentially damaging circle of events occurs.

I have already asked in this blog for the Government to pay more attention to the housing market and in particular first time buyers – and I repeat this plea.  It is my view that the Government could enter into a very simple agreement with the majority of lenders, asking them to lend 95% of loan to value with the Government guaranteeing 5% of the loan for first time buyers.  The definition of first time buyer has now been brought into legislation via the emergency Budget.  Given that it is a guarantee then it only becomes a cost to the Government should the loan go bad.  The Government could limit this pot to a certain level and this extra expenditure could be funded from very simple changes to Capital Gains Tax dealing with particular people buying and selling non main residences within say a seven year period.

More action is required by the Government and first time buyers urgently need more help. This would stabilise the housing market and improve the general economy.

P.S. Since this article was written I was pleased to see that a lender has recently introduced a 95% product for first time buyers at a reasonable rate which required a guarantee from parents or grandparents. Whilst this does not go as far as a Government backed scheme it is certainly a welcome step in the right direction.

The housing market – home or away?

I have been reading with interest the various reports that have come out in the last few weeks detailing the state of the Scottish housing market. All with the exception of a report from the Daily Express have been full of doom and gloom, indicating house price falls and activity levels down.

As I mentioned in a previous post, it is always important to treat house price reports with a degree of caution, particularly at this time of year. Whilst the housing market is not as seasonal as it once was, there is no doubt that in general you see an uplift in activity at the end of February which slightly dips with the school holidays in April. There then tends to be a peak in June with activity levels dropping for July and the middle of August. There is then the autumn surge which usually comes round about the end of August with the schools going back from the summer holidays and then there tends to be a surge at the end of December as people try to get into their properties before Christmas.

My experience for July 2010 is that there has been a higher than expected level of properties coming on to the market, coupled with the usual quietening down of the number of purchasers which is to be expected for this time of year. I think the end of August will be a telling time at which point we will be able to decide if the increase in market activity will continue or if we will get the slow down as expected.

Figures from the Registers of Scotland indicate that on average activity in the Scottish market is between 10% and 20% up on a month to month basis. My feeling is that for the rest of 2010 we will see activity levels much closer to 2009 levels with house prices remaining stable. I will keep you up-to-date as soon as more information becomes available.

Technology, technology, technology

I don’t usually use this blog to promote my firm’s initiatives, however, I am particularly excited about the launch of our new web-based client interaction area.  As I mentioned in a previous blog, I’m confident that technology will play an increasingly important role in the marketing of a property, and the data that can be obtained will be a tremendous sales tool. 

We have invested heavily in our website and we continue to do so to keep it at the cutting edge of the property market.  The client interaction area means that from the moment you contact Blackadders and arrange a time for a Sales Valuer to come out and visit your property you will be e-mailed your unique user name and password which will enable you to view the progress of your sale online at your own convenience – from checking appointment dates and times to ascertaining viewer feedback and checking whether or not price changes have been made.  All in all I think this is a fantastic initiative.

A seasonal property market?

Is the property market as seasonal as it once was?  My answer to that question is ‘no’ – it has been much flatter and steadier during the past 12 months.  However, there are still some key points in the year which may be of interest to you.

At the end of January/beginning of February there tends to be a rush of people putting their property on the market as the festive period comes to an end and people decide to get moving with their plans for the year.  This causes a marked increase in activity of viewers and sales/purchases in March and April.  The Easter break does tend to cause a slight slow down but the market usually continues to rise until the end of June/beginning of July, marking the start of the school holidays.  At this time there tends to be a drop off in both new houses coming on to the market and also potential purchasers until mid August, picking up again when the schools resume.

In November the market begins to quieten down again, however, there does tend to be a rush of people wanting to get their transactions settled before the end of the year.  This was particularly noticeable in 2009 with an apparent rush to avoid the changes in Stamp Duty and VAT.  December is one of my busiest months as far as property settlements are concerned.

The above is useful to remember, however, it is not something that should be used to dissuade general plans.  People who are looking to buy should not stop looking in the summer.  While there may be less properties coming on there is always the chance of picking up a bargain as the number of viewers are down.  People who are looking to sell should be aware that general activity levels will be slightly lower in the month of July to middle of August; this means that there is less competition and it can be a good time to get a property on the market to meet the autumn rush.  Likewise getting the property on as early as possible in January does mean that you can hopefully take advantage of the spring rise in activity. 

Again, as has been a constant theme through many of these blogs, my recommendation is to speak to a property expert who will give you the correct advice and keep you right regarding timing and marketing strategy.

Using technology to sell your property

Following a recent discussion with a client who was selling his property,  I was reminded of how much technical information and data is available to selling agents and how useful this can be when planning a marketing campaign for a property.

The client’s property had been on the market for some time but had generated little interest.  I had a meeting with our Estate Agent who was responsible for the transaction and we conducted a full investigation into trends, prices and the typical purchaser of this type of property.  We also looked at other available data – hits on the Tayside Solicitors Property Centre website, hits on our own website, the number of people accessing the Home Report, the number of people requesting schedules and we reviewed the feedback from a few people who had viewed the property. This enabled us to put in place a detailed strategy for the client which involved a slight price change.  The reduction in price enabled us to refresh the mailing list and also send the updated information to all the people who had previously viewed the property or accessed the Home Report. We continued to monitor the data and it was interesting to note a spike in the activity around the property as soon as the price had been altered.

I am pleased to say that after two weeks an offer was received and negotiated to an acceptable level. Whilst there is no replacement for experience, enthusiasm and the skill of a trained property sales consultant,  it brought home to me the importance of  analysing all the technical data available.

When choosing a selling agent, vendors should explore the technology and data that is available to the estate agent.

House Prices: How long is a piece of string?

One of the questions that I am frequently asked is how much prices have gone up or gone down in the last couple of years. My trite response is “how long is a piece of string?”. Each property needs to be dealt with on its own merits and that’s where getting proper advice comes in.

To give you a couple of examples, I was recently involved in a transaction in St Andrews where the property was on at offers over £275,000 and valued at £295,000, at the closing date it went for in excess of £355,000. Conversely, I was recently involved in negotiations for a property over on the West Coast of Scotland where we managed to get the property not only considerably less than the asking price but also the valuation. These two extreme examples show the importance of getting proper advice from an experienced property solicitor.

My first port of call is always to note interest and it is amazing how much information can be teased out of a selling agent at that stage – the property has been empty for a long time, the seller is desperate, the seller has found somewhere else to go – all actual examples of information that has been passed. I would thereafter carry out an investigation into the area including recent transactions and that coupled with my own knowledge and experience, as far as negotiations are concerned, would then lead me to put together a proposal for my client.

In a non-competitive situation I can never guarantee success but my aim is always to smoke out the lowest possible price that the seller would be prepared to accept.

In conclusion, there is no formula as far as house prices are concerned but it is very important to get advice at the earliest opportunity. My recommendation would be that before you start looking you take advice as the adviser will be able to give you a rough generalisation in respect of your type of property and area and give you an indication of what sort of price range you should be looking at.

To quote an old Law Society campaign, “It’s never too early to call your solicitor”.

The future of estate agency: part 2

The previous post on the future of estate agency has caused a few people to ask me what I would recommend that they look for when choosing an estate agent.  The first thing I would stress is that cheapest is not always best.  Make sure that you get a written estimate of fees and outlays so that you are able to make sure that you are comparing apples with apples.  Once you have had a written estimate I would then recommend that you get three agents out to your property and ask them what price you are likely to achieve for your property and their overview of the property market. 

Find out about their available marketing options, and ask to see samples of schedules and photographs.  As I have mentioned in previous blogs I do think that technology plays an important part in selling and when speaking to the agent you should ask them about the technical data that they can provide you with (for example, the number of times a property has been viewed online).  Before making your final decision, have a look at the agent’s website whilst imagining yourself as a prospective purchaser, a site which is clear and easy to use is vital.

It is always good to take recommendations from friends and acquaintances and if it is a solicitor based estate agency and you have already had dealings with a solicitor in the practice then it is always a good idea to be introduced to the solicitor that would be looking after you.

Whilst I would always recommend Blackadders Property Services, I think that if the above rules are followed then you should manage to ensure that you achieve the maximum price for your property – which is ultimately what you are hoping to do!

There is no such thing as a ‘bad market’ – only a ‘different market’

A frequent frustration of mine is the lack of advice given to buyers and sellers in the property market. I regularly hear that we are in a difficult or bad market and I am concerned that because of a lack of advice not all opportunities are being fully explored and investigated. To combat this Blackadders has launched a Home Buyer Service. This is part of the service that we offer anyway but I felt that by giving it more focus and clarity more people will take advantage of this service which will hopefully increase the activity in the property market. In general it would entail discussing with a potential purchaser (who also has a property to sell) the other options that may be open to them if they cannot get their property sold or they have in fact received a lower price than anticipated for their own property. We feel that with a combination of our property market experience, access to the whole of the mortgage market and our negotiating skills that we can perhaps open other avenues for you that would be worth exploring.

I recently dealt with a case where we managed to convert the client’s existing house into a buy to let mortgage, raising enough money to pay off the current mortgage on this property and have a deposit for the new mortgage. This gave the client breathing space to purchase their new house. And because we were able to move quickly they were able to purchase at 20% less than the anticipated valuation – thus more than covering any extra cost and securing the client’s dream home. They subsequently managed to get their old house sold earlier than expected and for a higher price than anticipated – winning at both ends!

Whilst every case will not work out as well as this, it does show that it is well worth exploring all the options.

Lindsay Darroch
Head of Property Services

The future of estate agency

I deal with property transactions throughout Scotland and I’m always interested to see the differing approaches by agents in terms of receiving offers.   This approach differs from area to area, agent to agent and the most marked difference is between the solicitor estate agents that I deal with and independent estate agents.  Whilst the purpose of this blog is not to criticise independent estate agents, the Scottish Government is continuing to carry on its campaign against solicitor estate agents for whatever reason.  I think it is astounding that the Scottish Government continue to attack and are looking to replace highly regulated solicitor estate agents who have professional indemnity insurance, are regulated by the Law Society of Scotland and work to professional rules of conduct such as conflict of interest, respect of another agent’s client and replace this with an unregulated, unmonitored body of estate agents. 

Surely the first thing that should be done is to regulate the independent estate agents and put in place a regulatory body and other rules so that the consumer is protected and everyone is playing off a level playing field.