lease-reform

New leasehold reform: Will it make homeownership fairer?

  • New leasehold reform will save millions of leaseholders tens of thousands of pounds
  • What does the reform change?
  • Will it make homeownership fairer?

 What is the new leasehold reform?

New legislation that has been brought forward, will give leaseholders the right to extend their lease for 990 years at zero ground rent. The leasehold reform will save millions of leaseholders up to tens of thousands of pounds. The government described these measures as part of English property law's biggest reforms in 40 years.

Housing Secretary Robert Jenrick says: "Across the country, people are struggling to realise the dream of owning their own home but find the reality of being a leaseholder far too bureaucratic, burdensome and expensive.

"We want to reinforce the security that homeownership brings by changing forever the way we own homes and end some of the worst practices faced by homeowners."

What does the reform change?

The reform will give leaseholders the right to extend their lease by a maximum span of 990 years with zero ground rent. Previously, leaseholders of houses have only been able to extend their lease for 50 years at a time and had to pay ground rent. 

Leaseholders have also been met with expensive charges to extend the lease. Some of these extra costs have now been abolished with the reform, such as the "marriage value". This required leaseholders to share information with the freeholder about potential profits from extending a lease.

A cap on ground rent, the cost paid when a leaseholder extends the lease or buys the freehold, will also be introduced. An online calculator will now make it easier for leaseholders to know how much it will cost to do either. This hopes to make the costs associated with a lease more transparent.

Will it make homeownership fairer?

While the proposed leasehold reform has much to support, many in the industry feel they need some more detailed information. There are concerns that the reform has created further uncertainty for leaseholders. Moreover, there is apprehension that the proposed actions could take years to become law.

However, for many in the property industry, there is a shared hope that the reform will make homeownership fairer and put an end to the ground rent scandal.

What is the ground rent scandal?

The ground rent scandal is one of the reasons why leasehold reform is so important. Objections to the unfair expenses on leasehold flats and homes sold with unclear clauses began some years ago. Some clauses involved freeholders increasing ground rent excessively. In some cases, leaseholders saw their rent double every ten years. The increased costs left some homeowners struggling to sell their property. As a result, properties with short-leases or high ground rents are often left vacant. 

Mark Hayward, the chief policy advisor at Propertymark, discusses the organisation's research into the ground rent scandal:

"Our research' Leasehold: A Life Sentence' in 2018 found that 46 percent of leasehold house owners were unaware of the escalating ground rent when they purchased their property. Over one million households in the UK are sold through a leasehold, and this new legislation will go a long way to help thousands of homeowners caught in a leasehold trap."

 

Conclusion

Homeowners will see direct benefits from the government's leasehold reform. 4.5 million homeowners will save up to thousands to tens of thousands of pounds. Furthermore, the reform will allow leaseholders to buy a freehold for a lower price. Overall, homeownership costs will become cheaper, and property sales will be more straightforward.

Let's not forget about the benefits for properties with shorter leases. Properties with short-leases or high ground rents are sitting empty around the country as owners struggle to sell. Homebuyers will now become more open to purchasing properties with shorter leases leading to fewer stranded, vacant properties. 

All in all, the leasehold reform is provides willingly received changes to many in the property industry. The only desires that remain are for details to be made explicitly clear and actions to be fulfilled promptly.


2021-market

London Property Market 2021

  • Londoners leave the capital
  • Foreign investment to remain strong
  • Tenant demand to increase

The development of the property market will principally rely on the UK's economic resurgence from the coronavirus. In 2021, the economy is forecast to grow by 5.3%, but the recovery still faces uncertainty.

The pandemic's ambiguity meant it was a challenging year for the property sector, and it's tough to predict how the market will prove in 2021. Despite the ongoing Brexit unpredictability, the outlook for 2021 is largely positive. Industry experts are optimistic that Brexit is not likely to have much of an impact on the housing market in the short term. This year, the London property market will see Londoners continue to leave the capital while investment from overseas remains strong. Tenant demand will begin to increase and, by the end of the year, the rate of rental decline will have slowed.

The London Exodus

The COVID crisis sparked a London exodus, with a sudden scramble to purchase homes on the outskirts of the capital. As the pandemic forced most of the nation to work from home, more and more people chose to leave London.   As a result, commuter belts have widened around London and all major cities.

In 2021, the trend is set to continue with more Londoners realising the potential of working from a rural home or commuting once or twice a week. Estate agency Hamptons forecasts that the London exodus will continue for at least the first half of the new year but may slow down as house prices flatline.

Foreign Investment

Foreign investment in the capital is predicted to maintain strong levels in 2021.

Foreign investment from around the globe forms a significant share of London's property business. Despite the challenges London is facing, investors abroad have not forgotten the long-term appeal. Recent reports state London is the second-best place for property investment in Europe. The capital had climbed two spots from the previous year's 'Emerging Trends in Real Estate' report (PricewaterhouseCoopers and the Urban Land Institute). 

Local and foreign investors alike have been closing on prime property during the stamp duty holiday. Many are raring to close deals before the additional 2% tax returns for international buyers in April. However, many industry experts are confident that the charge will not deter foreign investment.

Renters and Landlords in the Capital

In 2021, the tenancy market may improve in London.

Renters in London were at a shortage in 2020 as tenants encountered financial challenges. Job uncertainty, furlough wage reductions, and redundancies had their effect on the London rented sector. Supply increased substantially in the capital, and some landlords had to accept lower rent to avoid void periods. Central London saw rent fall by 20%, according to statistics from estate agents Chestertons. Other prime London locations saw 15% decreases, and rental prices in Greater London lessened by 4%.

This year, the number of properties available to rent will likely decline. Once restrictions begin to lift, demand is likely to pick up, and the rate of rental decline will lag. If this year sees the economy recover as anticipated, rent will likely resume growth over the course of 2022.


tax holiday ends

Is there still time to buy before the stamp duty holiday ends?

It may still be possible for buyers to take advantage of the stamp duty holiday before it ends. The stamp duty holiday will end on the 31st of March, and buyers looking to take advantage of this opportunity may be worried that it's too late. 

Thousands set to miss out on the tax holiday

The spike in interest from buyers due to the break has caused too much demand to keep up with in some areas. Buyers searching in popular locations are faced with a lack of properties of the right price range. If they are able to find a suitable property, due to the explosive demand, there are significant processing delays in getting sales through. 

Property experts warn that many buyers may be set to miss out on the £15,000 tax saving when their sale is delayed past the deadline. The rush to take advantage of the stamp duty holiday has created a staggering backlog in regulating mortgages, valuations and conveyancing. As a result, sales that were expected to take place this month may not be complete before the holiday expires. The likelihood is that thousands will be disappointed to find that they cannot complete by the 31st of March.

Calls for the tax break to be extended

There have been calls on chancellor Rishi Sunak to extend the holiday in the face of this backlog. However, the government has responded stating assertively that the deadline will not be prolonged.

Is there still time to get a sale through before the deadline? 

If you are looking to buy a property fast to take advantage of the tax break, you may still have a chance. It helps if you are fully prepared in terms of your mortgage and surveyor. If possible, you may consider employing a mortgage broker to chase any delays on your behalf. Ideally, to complete quickly, you will have no property chain to slow the process down. Brand new homes and chain free buyers get through matters faster. Purchasing a new-build home via Help to Buy could improve your chances of meeting the deadline.

However, in reality, if you haven't had your offer accepted before the end of the year, it will be hard to complete before the March deadline. Finance, surveys, and conveyancing can take up to 12 weeks.

What if you miss the cut-off date? 

There is no need to be discouraged if you do miss the cut-off date. Some experts suggest that you may, in fact, be better off waiting on your property purchase. While your tax bill will go up in April, demand is likely to begin to cool off. As the frenzy calms, you might be able to negotiate on the asking price to find an even better deal on your new home.


cladding-crisis

The UK Cladding Crisis Continues

One of the most prominent scandals currently in the UK is the cladding crisis. Up to 700,000 people are being forced to live in dangerous and unfit homes. The buildings are unsafe due to the flammable cladding material used. The type of cladding was the cause of how rapidly the fire spread in the deadly Grenfell Tower fire, which left 72 people dead in June 2017.

Government Confusion

In the wake of the tragic Grenfell Tower fire, the government decided to refurbish tower blocks with the unsafe cladding material - but did not specify who should cover the immense cost. The Government's confusing response to this crisis has left owners of up to 1.5 million flats in limbo. With the unsafe cladding on their buildings, they cannot sell or get a mortgage on their homes. Lenders are too cautious about providing mortgages for these high-rise flats unless they have certain safety certificates.

Those living in properties with the unsafe cladding are told they must spend thousands of pounds to remove it from the building. The majority, who are renters, do not even own these properties. As a result, millions have been left desperate and without options as they cannot afford the immense expense to remove the cladding, and while it remains, their properties are left worthless. Leaseholders are urging chancellor Rishi Sunak to settle the cladding scandal by covering the costs of removing the hazardous material.

Thousands of pounds in costs

Campaigners say that the cost of the urgent work needed to make buildings safe often falls on leaseholders. The sums of removing hazardous materials can reach above £100,000 per flat in the worst cases. Before the works can be done to make the buildings safe, leaseholders are also required to pay for waking watches, a 24-hour fire patrol, and other interim safety measures. These costs can reach up to £800 per month per flat. 

Earlier in the year, the Government announced a £1 billion fund towards covering the costs of necessary safety work. This cam on top of the £600 million previously committed. However, critics are adamant that the fund doesn’t go nearly far enough. They claim that the £1.6 billion will only cover the costs of fewer than 600 of the 2,957 high-rises that have registered for funding.

National effort required

Campaigners in the cladding scandal urge the Government to drive an urgent national effort to eliminate all dangerous cladding from buildings by June 2022. They push for the fund to be extended to cover all buildings, regardless of height, and deal with other dangerous fire safety defects. In response, the Government says that an ongoing effort is being led to develop a possible financing solution to protect leaseholders from the unaffordable costs. The Building Safety Programme aims 'to make sure that residents of high-rise buildings are safe – and feel safe – now, and in the future.'

However, the programme does not answer the call of flat owners left with uncertainty and desperate to move now. The Government must provide urgent clarity over what homeowners who cannot sell nor get a mortgage can do. The onus also falls to mortgage lenders, who must become more willing to accept applications from people in these flats looking to remortgage. 


international-travel-affect-property

How Will The Return Of International Travel Affect UK Property

Pfizer took the world by storm with the announcement that they have a vaccine in the works with BioNTech that is more than 90 per cent effective. Economic forecasts have since been enhanced and the FTSE 100 has seen several gains. Extraordinarily, the GDP is speculated to recover to levels from before the pandemic by the middle of 2021. As a promising vaccine makes its way around Europe and the rest of the world, international travel is beginning to resume. 

With the return of international travel, so too comes the international buyer - one of the most significant sectors in our cosmopolitan city. In areas such as Knightbridge and Belgravia, some estate agents report up to 70% of properties sold in the last ten years has been to international buyers. 

The coronavirus pandemic drew international travel to a near halt, stifling the property trade. In September, Heathrow arrivals were down 81 per cent on the previous year. The market so regularly accustomed to an onslaught of international buyers began to dry up. As a result, house prices in central London, usually safely afloat, decreased in value by 1.6 per cent compared to last year. 

While house prices seemingly plateaued, a newfound optimism has supplemented demand. According to London estate agents, the vaccine announcement has led to a spike in enquiries from international buyers. Despite questions still remaining on the efficacy of the vaccine out-rolling, the sense of hope is palpable. Discovering the light at the end of the tunnel has made its impression on buyers. The scale of the sudden restoration of interest has been likened to that generally reserved for a popular election result or influential budget announcement. The question remains whether this reinvigoration will last long enough to dispel the predictions of momentum loss in the housing market in 2021.

"Most people are taking a long-term view. There's an expectation that London will return, it's a question of when not if," says Ashley Wilsdon of buying agents Middleton Advisors.


central-london-property

Will A Covid Vaccine Bring Back Central London Property Prices?

During the coronavirus pandemic, house prices in central London challenged expectations by declining in value. House prices in the prime location fell 1.6 per cent compared to last year. This is partially due to decreased demand with post-lockdown buyers fleeing urban metropoles in search of the countryside, larger properties for home working, and gardens. City-lovers continue to question the advantages of living in the heart of a city where the buzz is on pause. Theatres, galleries, restaurants, clubs and bars have not been in normal practise for close to a year. A swift commute to work is not the luxury it used to be when you're working from home 80% of the year. A central studio flat is also not an ideal space to act like a home, office, cinema, gym and more.

What difference could a vaccine make?

The City Buzz

The announced vaccine has the power to restore the London buzz and vibrancy that allures people to the city in the first place. As entertainment industries reopen, the hope is that the bustle will return perhaps with a new-found vigour in its revitalisation. 

"The real challenge for London's prime market is supporting buyer demand and attracting buyers willing to pay more to be in a buzzing city full of all the entertainment venues, restaurants, theatres, etc. that they have come to expect. It's difficult to put a number on it but prices are definitely looking rosier with a vaccine than without next year and beyond," says Marcus Dixon of LonRes.

The Workplace Commute

As workplaces get back to normal without the fear of infection, the commute will return and boost the city centre housing market. Knight Frank's Tom Bill thinks that the one-bedroom city-centre flat which has fallen out of favour, could then be revitalised.

"If you look at one-bedroom flats in urban locations that have perhaps fallen out of favour in the past months, it's quite a good time if you're a buyer or investor to look at those. These are the types of early signifiers that smart money reacts to and further down the line rest of the market following suit."

Pied-a-Terre Properties

The central one-bed properties are likely to be snapped up by a growing group of buyers who have recently left London. Those who headed for nature are likely to find themselves needing to commute more often than expected from their country homes. These now comparatively good-value properties will serve buyers looking for a temporary place to rest their head, according to Central London agents. With a tidy sum left over from the move from the capital to the country, the pied-a-terre market is expected to grow. 


emissions-uk-home

Housing Emissions Crisis To Intensify From The Coronavirus

The Royal Institute of British Architects (RIBA) has published a report warning that UK housing emissions will be skyrocketed as a result of the coronavirus pandemic.

The RIBA has cautioned that responses to the virus include changes in behaviour that will turbocharge the UK housing emissions crisis unless the Government urgently intervenes.

The coronavirus pandemic has seen a surge in people working from home, creating a shift in UK emissions contributions. There has been an immense growth in the proportion of emissions coming from the housing stock. Within Europe, the UK has one of the most inefficient housing stocks and the RIBA's 'Greener Homes' report urges the Government to enforce less wasteful strategies. The report suggests bringing forward a National Retrofit Strategy to make UK homes more energy efficient.

What is the National Retrofit Strategy?

As a part of the National Retrofit strategy, a sliding scale of stamp duty would be introduced with the most energy-efficient homes accruing significantly less tax than the least. The tax would have a cap of £25,000, 

A tax rebate may be made available for a period after purchase, encouraging homeowners to tackle their own energy-efficiency developments. The suggested improvements include insulating lofts and walls, switching to double or triple glazed windows, draught-proofing doors, windows and floors and adopting smarter heating systems.

What Does RIBA Recommend?

RIBA has outlined in the report a list of suggestions that the National Retrofit Strategy should incorporate. These include:

  • A commitment to front-load money by the Government bound to be given to energy-efficient strategies over the next ten years spent throughout this Parliament. This aims to 'address the shift in the balance of emissions and assist with the coronavirus economic recovery'.
  • More deliberate targeting of existing income support payments, including the Warm Homes Discount and the Winter Fuel Payment.
  • A distinct long-term timeline for improving the Minimum Energy Efficiency Standards in both the private and social rented sectors
  • More robust performance standards for new homes
  • Further regulation of the quality of building work to make energy efficiency improvements making energy efficiency improvements conducted by tradespeople.

President of the RIBA, Alan Jones, said: "When it comes to energy efficiency, our homes are fundamentally below the mark. Our housing stock sits shamefully behind most European neighbours, and this will only be made more obvious by the changes in working habits brought about by the Covid-19 pandemic.

"We need urgent government action – a National Retrofit Strategy – with front-loaded spending that would double as a fiscal stimulus and a new stamp duty policy to encourage homeowners to think twice about opting for sub-standard homes.

"As the Committee on Climate Change has made clear, we need the near-total elimination of housing stock emissions to reach net-zero by 2050. It's quite clear we need to start now."

The report will be included as part of a submission by the RIBA to Her Majesty's Treasury that currently evaluates how public finances can be distributed to aid in the passage to reaching net-zero


House Prices 155% Higher In British Areas Of Military Importance

A new study shows houses in postcodes belonging to significant military buildings, such as the Churchill War Rooms and Bletchley Park, tend to have higher prices.

Analysis by estate agent Benham and Reeves sees UK postcodes of military importance command higher house prices compared to the general area. The new study analysed house price data in ten military locations. On average, property prices were £618,225, which is vastly higher than the UK average. Houses in postcodes of significant military buildings are 155% more expensive than the current average in Great Britain.

The most significant price rise is in the area of Hampshire’s Beaulieu Palace - a former finishing school for special ops agents. The New Forest location has the postcode S042, in which house prices are currently 107% higher than the wider area.

military-sginifance-higher-house-prices
Birds-eye-view of the New Forest S042 postcode.

The study revealed the second-highest house price postcode is that of The Frythe in Hertfordshire. The Frythe was used during the war as a secret research factory which manufactured army vehicles and camouflage equipment. Today, house prices in the postcode area 69% costlier than its neighbouring postcodes.

military-sginifance-higher-house-prices
The average price for the MK3 postcode in which Bletchley Park is located is £291,274.

We, of course, cannot fail to mention the iconic Churchill War Rooms - an underground complex that housed the government command centre during World War II. House prices in the local of the Churchill War Rooms run in around £1.4 million, 49% higher than average in the SW1 postcode in Westminster. 

military-sginifance-higher-house-prices
House prices in the postcode of the War Rooms are nearly twice as high as the surrounding Westminster area.

 

The director of estate agents Benham and Reeves, who conducted this study, is Marc von Grundherr. He emphasised that these costlier prices “aren’t so much an indicator of buyer demand, but more a demonstration of the pride taken in maintaining these locations and remembering the significant roles they played in their day.”

 

military-higher-prices
A chart published by Benham and Reeves displaying the results of the analysis.

The average overall UK house price is forecast to hit £362,350 by 2045, if the market is to continue to see property prices rise at the same rate, according to new research by estate agent Barrows and Forrester. Despite the coronavirus pandemic putting a short halt to the market, it has returned with a boom and shows no signs of slowing. Estate agents predict hose prices will continue to rise, and figures suggest that Britain’s property boom will progress. 

 


housing-market-second-lockdown

Can The Property Market Handle The Second Lockdown?

The property market has not shut in England despite restrictions of the second lockdown. The property market can continue to run, with viewings and valuations allowed throughout lockdown, the secretary of state for housing, Robert Jenrick, has confirmed. Renters, homeowners and buyers still able to view and move houses and construction sites remain open with tradespeople allowed to enter homes. Removal firms are also operating as usual, albeit while adhering to covid safety guidelines. The Welsh government, however, has paused all viewings.

The decision to remain open has been received well across the country. Many are eager to get on with their property exchanges and were relieved to hear that the government's approach had changed compared to the first lockdown. Back in March, all activities within the property industry were suspended for seven weeks, and estate agents were forced to shut their doors. In-person viewings were halted and builders forced to close construction sites. Surveying firms were also unable to perform on-site valuations. As a result, many home exchanges were put on hold.

Zoopla-housing-sales
Zoopla research shows the property market sales plummet over the lockdown market freeze and then rebound strongly.

As of yet, the property market is displaying flexibility and strength in the face of the second national lockdown. In fact, in the week following Boris Johnson's Saturday announcement of the lockdown, the number of pre-sale home valuations went up by 38 per cent. Many estate agents reported no difference in the number of viewing from one week to the next. Yet, the number of new viewings did fall by 15 per cent, according to Knight Frank. The number of buyers reaching out about properties also dropped, likely due in part to uncertainty on whether the property market would remain open. Nevertheless, the number of exchanges was 11 per cent higher in the week following the announcement, with the boom showing assured resilience to the lockdown. The number of sales agreed continues to grow, spurred, in part, by the stamp duty holiday.

Guy Robinson, head of residential agency at Strutt and Parker, stated: "Over the summer the industry has witnessed what can only be described as a 'mini-boom', with unexpectedly high activity levels across the UK, driven by pent-up demand after the property market was shut down for nearly three months… Usually, the market naturally starts to slow down at this time of year, but after the busiest summer that we can remember, there are a huge number of transactions in the pipeline for the coming weeks – so it is important that the market is kept moving from now until the spring when the Stamp Duty holiday is due to come to an end."


affordable-housing-prices-rise

Average UK House Prices See a 51% Rise by 2045

Study shows UK house prices potential rise by 51% as government fails to act on affordable housing crisis.

A new study has found that the average UK house price could hit £362,350 by 2045. This number is based on the market's current growth, with property values continuing to increase at this rate. This could see a 51% increase from the current average of £239,196. The average homebuyer would also see their 10% mortgage deposit climb to £36,235 - that's an increase of £12,315 from the average initial cost currently required.

The study by estate agent Barrows and Forrester also reveals that property prices in London could reach £789,531. The research looked into analysing historic data on housing prices and their rate of growth over the last 25 years to determine potential figures that could be actualised by 2045. For buyers in the South East of England, average house prices could rise to a predicted £524,726. This means that buyers would require £19,258 extra to afford a deposit for a property in this region, on top of the current average of £33,215. According to the research, those looking for property in the East of England could see the average house price rise by £167,135. House prices in South West could increase by £151,255, while homes in the West Midlands could go up by more than £100,000. House prices in the North East are predicted to climb by as much as £70,041. This would bring the average to £201,742, requiring a 10% mortgage deposit in excess of £20,000 from home buyers.

For many, these figures are a frightening reminder of the government's stagnant approach to the affordable housing crisis. Year after year, the government has consistently failed to act upon the call for affordable housing. The UK housing market bounced back from the pandemic market pause, and house prices are climbing once again. This rising trend has been maintained for the last quarter of a century and continues to increase to an unprecedented high. Promises to address the nationwide housing crisis have been made on multiple occasions, yet the government continues to neglect its responsibility with very few new builds being provided. In 2019, the BBC reported that yet another government plan to create new homes in England had resulted in no homes being built, the National Audit Office has found. A government plan to create 200,000 new homes in England for first-time buyers has resulted in no homes being built, the National Audit Office has found. None of 200,000 starter homes pledged five years prior had been built, according to watchdog

Barrows and Forrester hope that the study will act as a call to action for the government. They say this should be a warning to "refocus their attention on the delivery of affordable housing stock for the masses" to address "the spiralling issue of affordability for many homebuyers.