January Newsletter - Tips for buyers and sellers looking to move

2020 is here! We're looking forward to a healthy year in the property market, and we're kicking things off with news of a new discount for first-time buyers, as recently announced in the Queen's Speech. 

We also explore the concept of shared ownership and how it can help younger buyers, we take a look at the possible effects of the upcoming abolition of Section 21 and finally, we offer our top tips for both buyers and sellers looking to make a move. 

Young people and the concept of shared ownership

 

With the wealth of options out there to help people onto the property market, it is no surprise that the number of first-time buyers has steadily been increasing, with numbers currently at an 11-year high. However, outside of the government’s Help to Buy scheme, it seems that young people do not understand their other purchasing options – chiefly that of shared ownership.

What is shared ownership?

Research carried out from YouGov found that although three quarters of people in the UK have indeed heard of ‘shared ownership’, only 40% of 18 to 24-year olds were aware of the scheme. Furthermore, of that 40%, half of them revealed that they had no knowledge of shared ownership whatsoever, other than having heard of the name.

The scheme explained

Aimed mainly at first-time buyers, The Shared ownership scheme is a cross between buying and renting. Essentially, you buy a share of the home – between a quarter and three quarters – and rent the remainder at a reduced rate, with the option to buy a bigger share in the property at a later date. All shared ownership homes in England are offered on a leasehold basis, and the majority are newly built; however, there are some properties which are being re-sold by housing associations. At its core, the scheme is intended to help first-time buyers onto the market, but those who earn a household income (combined) of less than £80,000 or are renting a council/housing association property can also buy through the scheme.

A viable option?

Many of those questioned in the YouGov survey thought that shared ownership meant quite literally sharing the property purchase with friends, family or a partner. When the scheme had been properly explained, almost a quarter of the 18 to 24 year olds stated that they would be “very likely” or “fairly likely” to use the initiative in the future, the highest out of all of the age groups questioned – showing that the scheme appeals directly to the target market, with just the awareness of the scheme limiting participation numbers.

“Shared ownership as a method of purchasing has been around since the 1970s and offers a realistic way of getting onto the property ladder. It’s a proven formula that helps people secure a home, even where a traditional mortgage is not affordable, and its longevity is testament to its success,” said Jaedon Green, director of product and distribution at Leeds Building Society.

“The method is becoming increasingly popular for first time buyers as it reduces the need for a significant deposit, which can be difficult for some to manage. The scheme also permits first time buyers to combine it with a Lifetime ISA, maximising any deposit,” he noted.

Awareness limiting efficacy

The YouGov research has shone a light on the fact that almost a quarter of those aged 24 or under would consider shared ownership as a way to purchase property, once they fully understood what the scheme consisted of. With so many potential buyers being put-off from buying a property simply due to lack of awareness it is clear that the onus is now on educating the wider public, and specifically 18 to 24 year olds, to the benefits of the scheme in order to continue to grow first-time buyer numbers and support the property market as a whole.

Local first-time buyers set for 30% discount

 

In the Queen’s speech it has been announced that the Government has pledged to provide more support to first time buyers to get onto the property ladder. They have announced that a scheme, named First Homes, will be created to provide local people who are yet to buy a home, a whopping 30% discount off purchasing their first property. This significant reduction could result in new local buyers saving tens of thousands of pounds.

In her speech, the Queen said, “my Government will take steps to support home ownership, including making homes available at a discount for local first-time buyers”. The motivation behind the scheme is to enable local people a fairer chance at owning property in the increasingly competitive market; with current competition from overseas buyers and investors steadily invading the market. This will drastically improve the affordability of homes for the average working person which provides a glimmer of hope for their home ownership pursuit.

According to the Monevator, “over the past 30 years house prices have risen nationally by 428%; with London house prices rising by an average by 559%”. Whilst this does not take inflation into consideration, it is easy to interpret that wages have not risen at the same accelerated rate during this time making it difficult for the average working person to save a large enough deposit to buy a home. Considering this, it is fair to say that the introduction of a 30% discount scheme would be welcomed by all and will enable a stronger sense of community. This is because the scheme names ‘key workers’ as part of those that it will target; recognising and offering support to those who contribute to their community.

This scheme seems to be a replacement for the recently closed to new applicants Help to Buy ISA, with further focus on helping first time buyers. To enable the First Homes scheme to function, councils will be able to use contributions from housing developers to facilitate the discounts.

The First Homes scheme should not be viewed as taking away from these other areas, as the Government has also pledged to rejuvenate the Affordable Homes Programme and Shared Ownership Programme so that they can also deliver on their promises. An overhaul of the rental system to make it fit for contemporary society and will strengthen the rights of tenants has also been discussed.

The Queens speech has delivered some promising news to start 2020, but the success of the First Homes scheme will be truly measured by its detailed workings in practice. At present, the specifics of who counts as ‘local’ to qualify for the scheme is unclear (such as does someone have to live, where do they have to work, and how long for?). Despite the lack of detail, it is safe to say is that the Government clearly want to give back to the community to continue its growth and prevent homes being left empty in this time of growing demand.

Tips for buyers and sellers looking to move

 

It’s the start of a brand new year in the market, with buyers and sellers alike preparing to fulfil their New Year’s Resolutions and make their move. Market conditions appear to have stabilised after December’s general election brought with it a majority Conservative Government, but what can you do to give yourself the best chance of a successful transaction? Read our top tips for Buyers and Sellers below.

BUYERS TIPS

Research, Research, Research
As clichéd as it sounds, buyers who prepare sufficiently are more likely to end up with a better deal for the home they’re looking for. Once you’ve made the decision to begin house hunting, look into sale and listing prices for properties in the local areas that you’re interested in; this will give you a rough guide as to how much you can expect to spend.

Prepare your mortgage
If you’re house hunting in a competitive area where properties are quickly snapped up, then getting a mortgage agreement in principle will give you an advantage when you find the property that you want. Having your finances in order and prepared can save time and prove invaluable if the home you want is likely to generate significant local interest.

Survey the house
Once you’ve had your offer accepted, carry out a survey of the house to flag up any major issues or elements of the property that require attention, such as urgent defects or structural concerns. Depending on the age of the building, you could find yourself a wildly fluctuating amount of work to carry out, especially if previous owners have neglected its upkeep. Either way, a survey will provide valuable piece of mind in any outcome.

SELLERS TIPS

Research, Research, Research
Preparation is key for sellers, too! Make sure you know your property’s true value before it’s listed; carry out a full appraisal of your home with a trusted agent and not just an instant valuation to get a clear idea of what your property is worth. Inviting valuers into your home can also provide you a fresh set of eyes which can be useful in flagging up any existing issues or reminding you of a few flaws that could require attention before going to market, too.

Find ways to add more value
If you’re looking for ways to add more worth to your property, then carrying out home improvement projects will certainly aid you. These can be relatively simple tasks, such as installing double glazing or adding extra insulation to your loft, or bigger jobs such as renovating your kitchen. Whilst the cost associated with these projects may be off-putting, it will pay off when it comes to increasing your home’s value.

Declutter and organise
Take a look at each room in your house and you’ll likely find a few easy ways of decluttering and making extra space. This is vital for the viewing process as potential buyers need to be able to picture themselves living in this space, and in some rooms it’s as easy as clearing a few worktops or mantelpieces.

In today’s market, preparation really is key whether you’re buying or selling. Carry out your market research, get your finances and paperwork and make sure you utilise a knowledgeable and local agent to help you through the process.

Section 21 - proposed abolition to go ahead in 2020

 

2019 was filled with talks of abolishing Section 21 “no fault” evictions. The Government initially announced the abolition in April 2019, which was followed by a consultation process from July to October 2019. With the political uncertainty throughout the year that has recently settled, the Queens speech has confirmed that the abolition proposal is still intended as we move forward into the new year.

What exactly is a Section 21 eviction?
Included in the Housing Act 1988, Section 21 is the recovery of possession on expiry or termination of assured short hold tenancy. This essentially allows landlords to evict tenants from their properties with two months’ notice, without any reason given.

Why is this being abolished?
The ability that landlords have to evict any tenants without reason has been argued to have negative effects on tenants’ well-being and cause huge disruption to their lives. This can disrupt the lives of good tenants who may have done nothing wrong in relation to their tenancy agreement. It can also be extremely unsettling families who may have children settled in local schools and communities.

What impact will the abolition have for tenants?
The abolition of section 21 of the Housing Act 1988 will provide some protection for tenants by assuring them that their tenancy agreements will be upheld for the duration of their contracts. This is providing that they do not breach this. The abolition is a positive step for tenants; especially families who are renting on a long-term basis as it reassures them that their housing requirements are met allowing families to settle.

What impact will the abolition have for landlords?
It could leave landlords vulnerable to tenants who may abuse their home, leaving them with less power to regain possession of their property and making this process longer. Without an updated alternative provision to support landlords to protect their property, it could deter them from offering their property on the rental market. This could contribute to further demand for rental property, but with a reducing supply; driving rental asking prices to increase. To address this, the Government has proposed to strengthen Section 8 of the Act, which allows eviction due to the tenancy agreement being broken. This would ensure that the landlords needs are also protected with effective channels for them to use in the event of undesirable circumstances.

The Policy Director for the Residential Landlords Associations explained that it is crucial to also reform the way repossessions take place to avoid a rental crisis. A new system is required for landlords as well as tenants so that it is fair market for all. There must continue to be a lawful procedure to protect landlords in legitimate circumstances such as anti -social behavior, and tenant rent arrears.