Record Numbers Plan to Fund Retirement by Selling Property

According to this article by Patrick Collinson on August 13th, 2013 of The Guardian nearly five million homeowners say they will sell or rent their main property, as annuity rates slump to new low.

Record numbers of people are planning to sell their main home to fund their retirement, according to research published on Tuesday, which comes amid claims that pensioners will have to live to 90 to make annuities "good value".

The research, by Baring Asset Management, found that 13% of people (nearly 5 million) say they are planning to rent or sell property to fund their retirement, up from 11% last year.

But there were big regional variations, with people in the south west four times more likely to have property to sell their primary residence in retirement compared to people in Scotland and the West Midlands.

Faith in property as an investment for retirement mirrors the decline in confidence about annuities. An annuity is the annual income that savers buy from their pension pot, but rates have collapsed over the past decade, and moved to new lows as quantitative easing and Funding for Lending has depressed interest rates.

Ros Altmann, a former pensions adviser to Tony Blair, told the Daily Mail that annuities are now "the biggest gamble" of pensioners' lives, and that they will have to live to 82 to get their money back, and 90 before they become "good value".

She said: "Buying an annuity is considered the 'safe' thing to do when reaching retirement. This is misguided. The 'safety' only refers to the fact that the amount of income will be set for the rest of your life.

"But the capital itself is at risk. Most people will receive a very poor return on their money – and many will not get their money returned to them at all."

Many people have turned to buy-to-let as an alternative to traditional pension plans, as the investment does not have to be turned into an annuity – and have enjoyed much better returns than equities or bonds.

The Office for National Statistics reported on Tuesday that house prices rose 0.4% month-on-month in June, as they had done in May, which pushed the annual rate of increase up to 3.1% from 2.9%. This is being inflated by strong price rises in London (up 8.1% year-on-year in June).

The figures come hard on the heels of a report from the Royal Institution of Chartered Surveyors, which indicated that Help to Buy and other schemes are fuelling a rapid recovery in prices.

Economist Howard Archer of IHS Global Insight said: "It is looking ever more likely that house prices will see marked increases over the rest of 2013 and during 2014, with the result that we have raised our house price forecasts. We now expect house prices to rise by at least 3% over the rest of 2013 and to then increase by 7% in 2014."

Article Source:  http://www.theguardian.com/money/2013/aug/13/record-numbers-retirement-selling-property

How to Avoid Being Caught Out if the Property Bubble Bursts

Simon Read suggests ways on how to avoid being caught out if the property bubble bursts as revealed on this August 12, 2013 news by The Independent.

The Bank of England’s base rate has never been lower and the new Governor, Mark Carney, has signalled that rates may not rise for three years.

Meanwhile, competition among mortgage lenders is getting more fierce, leaving average five-year fixed rates at 3.83 per cent, the lowest they’ve been for some time.

It’s no wonder more people are thinking about getting on the property ladder or taking advantage of the attractive headline rates to move home. Especially as the latest survey of estate agents from RICS, published today, shows that home prices grew last month at their fastest rate since the market peak of November 2006. That raises fears that if you don’t take advantage soon, the affordability of your dream home may yet again climb beyond your reach.

And there are many ways that – even if you don’t have enough of a deposit – potential borrowers can climb on to the property-owning bandwagon. But before you leap it’s worth heeding the warnings from some economists that a housing bubble looms. If the bubble bursts, as some predict, that shiny new home could prove a financial drain, especially if you’ve stretched your finances to buy it.

But such uncertainties have been a feature of the mortgage market for much of the past six or seven years. With that in mind, it’s wise to look to buy a home that you may be happy with for some years, rather than a property that you hope to sell at a profit in a year or two. If there is a bubble and consequent price deflation, you’re more likely to end up in negative equity, owing more than you borrowed and stuck with a property you can’t sell.

Given that, there are several ways for the short-of-cash to buy a home, not least through the Government’s Help to Buy scheme. It offers loans of up to 20 per cent of the value of a new-build property in England and will start part-guaranteeing mortgages across the UK from next year.

Article Source: http://www.independent.co.uk/money/spend-save/simon-read-how-to-avoid-being-caught-out-if-the-property-bubble-bursts-8758229.html

Welsh Government Announces £1.9m for Co-operative Housing

This article was published on August 12, 2013 by the InsideHousing.co.uk revealing the announcement of Welsh housing minister to fund co-operative housing.

The Welsh housing minister announced £1.9 million funding for three pioneer co-operative housing schemes.

The pilots in Newport, Cardiff and Carmarthenshire will receive funding to deliver 58 new co-operative houses.

There are further plans in the pipeline to deliver 400 co-operative homes in Wales, the minister said.

Carl Sargeant said: ‘This is a welcome step forward in delivering on the Welsh Government‘s commitment to develop new ways of providing housing through initiatives such as co-operatives.

‘Research by the Chartered Institute of Housing shows that households who are currently priced out of the owner-occupied sector but whose needs are not so great that they can access social housing, are keen to explore the co-operative housing model.’

Dave Palmer, co-operative housing project manager at the Wales Co-operative Centre said: ‘The capital funding announced today will assist in the building of these homes and in demonstrating that co-operative housing can offer a viable alternative housing option in Wales.’

Seren Group will receive funding of £650,000 for 20 co-operative homes in Newport within a mixed tenure development on the Pirelli site.

Carmenthenshire Council will receive funding of £851,150 for 28 co-operative homes to be developed by the Council in partnership with Family Housing Association as part of the Gwynfryn site housing development.

Cadwyn Housing Association will receive funding of £408,000 to deliver a further 10 co-operative rental properties within the Ely Farm housing development. The site plan already includes 31 homes for social rent.

Article Source:  http://www.insidehousing.co.uk/development/welsh-government-announces-%C2%A319m-for-co-operative-housing/6528122.article

How Slashing Stamp Duty will Help Young Homebuyers

This article was published on August 8, 2013 on Home & Property. According to Naomi Heaton slashing stamp duty is the best way to get young Londoners into their first home.

As Scottish ministers finally do away with stamp duty and a consultation begins in Wales to do the same thing, it is high time the Tories also kept to their election promise and made changes to Britain's most-hated tax.

A crisis looms as the average price of property in England and Wales rapidly approaches the £250,000 mark — the point when stamp duty triples from one per cent to three per cent of the purchase price. This increase could see 80,000 people a year falling into this higher tax bracket, facing a huge £7,500 tax bill, rather than a somewhat more affordable £2,500.

It is ironic that it was a Scotsman who first introduced the crippling £250,000 stamp duty tax threshold. Before Gordon Brown took the job as chancellor, stamp duty was set at a flat rate of one per cent for all properties sold over £60,000. In 1997, however, Brown introduced the notion of stepped stamp duty tax bands, bringing in a new threshold of 1.5 per cent at £250,001. He then raised the charge by half of one per cent every year until 2000, when it reached three per cent. It has stuck at that level ever since.

In the apparent interest of "fair taxation" — but more as a desperate attempt to plug the public finance deficit — recent years have brought additional thresholds at £500,000, £1 million and £2 million. No move, though, has been made to raise the level at which the three per cent tax hit kicks in, despite average house prices rising over threefold from £72,900 to £239,296 since 1997.

Stamp duty was a tax introduced to generate revenue from the wealthiest of buyers. According to Nationwide, a house worth £250,000 in 1997 would be equivalent to £716,000 today. One could say it was the "mansion tax" of the Nineties but what equated to riches then is no longer the case in 2013.

Having dragged more and more ordinary buyers into its grips, stamp duty will soon be an "everyman" tax: just another way for the Treasury to dip into our pockets.

Now first-time buyers are being frozen out
Across the country, 26 per cent of buyers now pay more than £250,000 for their property and in London it is 62 per cent. For people who have already paid income tax, stumping up another £5,000 of stamp duty for their family home is not only a double whammy but equivalent to another 10 per cent on top of their deposit.

Transactions have dropped 32 per cent since 1997 and the fall-out, should the band not be reassessed, could be even more devastating. Not surprisingly, potential buyers are reluctant to pay three per cent stamp duty on properties above £250,000. Not only is this a barrier to trading up but owners of properties above £250,000 are then unable to sell, or only at a reduced price, which means they cannot trade up either. This freezes the market and prevents first-time buyers from getting a look-in.
 
As "stamp duty Doomsday" beckons, and with average prices within a hair's breadth of £250,000, the present Chancellor must move quickly to reassess the tax banding. While the Government's much-trumpeted Help to Buy stimulus package has begun to unlock the market, this can only be good news if the one per cent stamp duty trigger is also raised.

Re-evaluating the threshold will give buyers a much-needed boost, allowing home owners to trade up and first-time buyers to begin climbing the ladder. Even the Treasury can make some money. For every purchase that does not happen because of the £250,000 barrier, the Government earns three per cent of nothing. For every property sale that would go through, due to a kinder stamp duty regime, the Government would earn one per cent of something: a win-win situation which would make a real difference.

A government keen to trumpet "fair taxation" should question how this tax can possibly bring fairness to a nation of aspiring homeowners, and take heed of the TaxPayers' Alliance Stamp Out Stamp Duty campaign.

Naomi Heaton is chief executive of London Central Portfolio, residential experts and fund managers (londoncentralportfolio.com).

Article Source: http://www.homesandproperty.co.uk/property_news/news/stampdutycrisishigherrates.html 

Henderson: UK Property at ‘Very Fair’ Levels

This August 6, 2013 article by Eleanor Lawrie of the FT Adviser reveals how Henderson fund is seeing healthy inflows as outlook improves. 

UK property valuations are at “very fair” levels even though they are significantly lower than prior to the 2008 crash, according to Henderson’s Ainslie McLennan.

The co-manager of the £989m Henderson UK Property fund said positive incremental changes in valuations were more reassuring than dramatic spikes up and down.

“We have come through such a difficult time in 2007-09 and we haven’t got close to getting back to those valuations,” the manager said.

Ms McLennan, who runs the fund alongside Marcus Langlands-Pearse, said the product was seeing “healthy inflows” as investors seek alternatives from volatile assets.

She said: “The fund has seen very healthy inflows over the year. There is money coming out of cash, some from bonds, some from commodities. I think it’s healthy that it’s coming from different places - a spread of asset classes.”

The manager described property as “the opposite to equities and bonds”, offering a gilt-style steady return but with roughly one-third the risk of equities.

Ms McLennan estimated that half of the recent interest in the fund had been from discretionary wealth managers, and half from the adviser community.

Ms McLennan said other property funds might struggle from tenants not being able to keep up with payments, but said the longer leases held by the Henderson fund would eliminate this problem.

The main tactical play in the fund is an underweight in high street retail properties, which make up just 5 per cent of its holdings. Ms McLennan said the changing habits of consumers in the UK had weakened high street shops, as people increasingly shop online or in retail parks.

“We are trying to find businesses that are relevant going forward and have longevity, and that aren’t at risk of massive change,” she said.

Instead, the fund owns retail stores in “robust locations” with little competition, such as a branch of Marks & Spencer in Nottingham and House of Fraser in Chichester.

Roughly 70 per cent of the fund is in the southeast of England due to the managers’ cautious outlook and the region’s strength relative to other areas of the UK.

The Henderson UK Property fund has underperformed the IMA Property sector in one, three and five years to July 31, according to FE Analytics. In three years, the fund returned 10.9 per cent compared with a 22.8 per cent average return from the peer group, while in five years, the fund has risen 2.3 per cent, compared with a 13.6 per cent average rise for the sector.

In June, Henderson announced it was combining its real estate business with that of US-based TIAA-CREF to create a European and Asian real estate company called TIAA Henderson Global Real Estate. Henderson has moved to reassure investors that there will be no changes to the management or process on the UK Property fund.

Article Source: http://www.ftadviser.com/2013/08/06/investments/property/henderson-uk-property-at-very-fair-levels-Q2h5oTJta3VmejjXFqxWZL/article.html

London Property – A True Safe Haven?

Good news for London property investors. This interesting article on August 5, 2013 by Matt Skinner of NuWire Investor revealing London still as the best attraction for international investors.

While the rest of the UK scrambles to get back into a sustained period of stability, enormous demand has seen the British capital establish itself as a safe haven for international investors, with figures released by property website Rightmove showing that the average price of a London property has increased by £30,000 since the start of 2013. Recent figures from CBRE suggest that London attracted 21 per cent of all European inward investment in 2012.

Investment and development firm, Shaftesbury, point to London’s West End as a hot spot, with demand causing rents to soar. "London continues to attract unprecedented levels of interest from across the world from businesses choosing to locate and invest here, from visitors seeking to experience its unrivaled variety of attractions and from those who live and work here." the firm said.

There are concerns, however, that the bubble is dangerously close to bursting. At £1.5million, the average price of a West End property is already more than 6.5 times the UK national average, and many current owners are refusing to sell, believing the market has not yet peaked. The dwindling prime supply and soaring prices are causing investors to look into secondary markets.

The number of foreign investors looking at London for both residential and commercial investment opportunities has a potentially devastating knock-on effect to local economies. Many investors are purchasing buildings as pure investment - property agency Savills suggest that fewer than half of homes purchased in the prime central London are used as the buyers main home - properties are thus left unoccupied, as with values increasing at such a rapid rate, it makes little sense to let them.

Many are purchased as trophy investments, in 2012, of 7,000 new-build homes sold in the prime central London market, more than 5,000 were sold to overseas buyers. This skewering of the traditional market model has the potential to leave prime locations as virtual ghost towns, with local businesses suffering, eventually leading to a decrease in commercial property values in these areas, particularly smaller units aimed at serving the community, such as convenience stores and other amenities.

Another concern for the market is that, while values are affected by the strength of the pound and general investor confidence, global equity markets also have a large part to play. For example, according to research by Fathom Consultants, prime properties in the capital city may see their values slashed by 20 per cent if the US' quantitative easing program ends.

Danny Gabay, director at Fathom, added: “[The Central London market] is more overvalued than we’ve ever found it to be before - and our model goes back to 1985. [The market] could inflate yet further - but we are now in a position where, once you’re overvalued, I can’t predict where exactly the trigger will come from, but you are vulnerable to a correction.”
For now, however, prime London property remains a great investment prospect, with further growth expected throughout 2013.

Article Source: http://www.nuwireinvestor.com/articles/london--a-true-safe-haven-61001.aspx

Yorkshire Helps Regional Property Deals Hit the Heights

This interesting article by Mark Lane of Bdaily Business News on 5th of August, 2013 is about Yorkshire helping regional property deals reached heights in Q2 2013 according to LSH.

The Yorkshire region has played a major role in seeing demand for regional property stock reaching a two-year high in Q2 2013, according to new research by Lambert Smith Hampton (LSH).

During that period, LSH estimates that £3.24bn has been invested in commercial property outside London (excluding portfolios), with investment volumes in Yorkshire significantly high due to a number of notable transactions.

Deals in the region reached approximately £334m in Q2 2013, representing an increase of 267% on Q1 2013, at £91m.

This can be attributed to a number of large deals including Legal & General’s purchase of The Light in Leeds for £91m, the sale of Vanguard Shopping Park in York for £62.55m, Tritax Assets’ purchase of The Range in Doncaster for £37m and the £42m sale of The Green student scheme in Bradford.

The major investors in regional property were UK buyers – accounting for 89% of the quarterly total. In Yorkshire, the figure was just under 60%.

Deals across Yorkshire recorded an average yield of 8.3% in Q2 2013 compared with Q1 2013 where this figure was around 12.1%

The average deal size in Yorkshire also rose from £7.6m in Q1 2013 to £20.9m Q2 2013, in contrast to the rest of the UK where the average deal size fell from £28m in Q1 2013 to £16m in Q2 2013.

Abid Jaffry, Northern head of Capital Markets at LSH, said: “The regional investment market is currently dominated by UK investors who have been priced out of the Central London market and are seeking to take advantage of the greater value that can be achieved within the regions.

“A significant proportion of the transactions were of considerable size which is indicative of investor conditions across the North and highlights the groundswell of cash in the market at present."

Article Source: http://bdaily.co.uk/industrials/05-08-2013/yorkshire-helps-regional-property-deals-hit-the-heights/