Month: March 2016

27th March 2016

Happy Easter – Buying Off-Plan !

One of our landlords called the office last week to ask what we thought about buying property off-plan. He’d seen some flats being advertised on the site of the former nurses’ home at Fairfield House in West Green, Crawley. The site is being developed by Fabrica and they’ve been asking prospective purchasers to register their interest for the off-plan launch on 16th April. 1 bedroom flats are being marketed from £190000 & 2 beds from £240000. Fabrica can be contacted on 01293263083. Here’s the Rightmove link for a further details http://www.rightmove.co.uk/new-homes-for-sale/property-58469585.html?premiumA=true

28-3-16 Buying off plan

The question posed by our landlord, like most in the world of property, is difficult to answer as there are so many variables to consider. For example, are property prices going to tumble due to recent tax hikes imposed on buy-to-let landlords ? What rental prices will the properties achieve when they’re built ?  Are the properties going to be completed to a high standard ? Etc…..

One thing we would say about buying off-plan is not to be taken-in by hype. In every property transaction boring old “due diligence” is always the order of the day. If you ever hear of people queuing around the block to “snap up” property that is being sold off-plan as they did in 2007, my advice is to walk the other way as quicly as possible ! Although the long term trend in UK property prices has been upwards for a very long time, price corrections do occur from time to time, as we saw after the credit crunch of 2008.

That’s the warning out of way, so now let’s consider some of the details of the advertised off-plan development !

The site in West Green for this development is fairly central for Crawley town centre; close to the Asda supermarket; Crawley hospital and only a short walk to Crawley train station. One thing to look out for if you’re considering investing is the amount of parking available for each flat. Ideally you would need allocated parking (rather than first come first served). Our advice would be to try and secure as many parking spaces as possible.  This may sound a bit greedy, but allocated parking spaces can really help to let your property quickly and possibly at a higher rent. As an investor who may be investing at an early stage of the development, you can often negotiate additional “perks” to be included with your purchase, such as parking – if you don’t ask you don’t get !

If you consider buying one of the two bedroom apartments at the development, there are a few keys areas to look out for. For the advertised marketing prices we would expect to see ensuite facilities to the main bedroom. If this is the case, make sure that the family (communal) bathroom has a shower over the bath and that the walls are tiled up to the ceiling in the “bath” area.

Also remember that for one reason or another developers often have different sized properties, with different facilities. For example, some may have balconies, while others do not. Make sure that you scrutinise the plans and secure the best sized properties with the most facilities for your money. Last but not least, don’t forget to ask when the site is scheduled for occupation. This will normally be phased over a period of time as different stages of the build project are completed.

So how do the properties stack-up as potential investments ?

Current rental prices for modern 1- & 2-bed flats in the area are in the region of £895-£975pcm & £1000-£1175pcm, respectively. These rents, together with the advertised marketing prices, give yields ranging from 5.7%-6.2% and 5%-5.9% for the 1- & 2-bed flats, respectively. Rental yields such as these are very good for the Crawley property market. However, please do bear in mind that these properties haven’t been built yet and actual rents achieved, as well as future capital growth, will very much depend on future market conditions.

However, in answering our landlords’ enquiry, we hope that we’ve also given you a pointer towards the pros & cons of buying property off-plan. If you’d like to discuss any of the issues detailed above or have any more general questions about property investment in and around Crawley, don’t hesitate to contact us. Our advice is free…. just give us a call on 01293 515588 or e-mail crawley@northwooduk.com.

The opinions expressed in this article are those of the author only and not of Northwood. If you are considering investing in property, please make sure that you seek appropriate professional advice.

15th March 2016

Impact of the April 2016 Stamp Duty Rise:

We’re sure that everyone is now fully aware that Stamp Duty Land Tax (SDLT) is going to increase by 3% on all of the tax bands for additional properties purchased after 1st April 2016. In case you’re not sure of the Stamp Duty rates we’ve reproduced them in the table below.

Table 1: Stamp Duty Bands & Rates

Mar 16 - Stamp Duty Bands

If you are a property investor and are not well underway with your next property purchase by now, it is almost certainly too late to complete by the end of this month !

So, have you missed the Buy-to-Let boat ?

To answer this question, let’s look at the facts.

Consider, for example, a typical Crawley investment property, such as a modern 2 bed flat close to Three Bridges station. Currently these types of properties are being advertised for around the £235k mark.

What Stamp Duty would be paid by an investor if a property like this was purchased before or after 1st April 2016 ?

The Stamp Duty payable is shown in Table 2 and, as you can see, the total due from 1st April is a whopping £9250! Put another way, the Government is imposing a SDLT surcharge of  £7050 !  No wonder property investors have been trying to complete their purchases before April !

Table 2: Example Stamp Duty payable before & after April 2016

Mar 16 - Stamp Duty example

*Assuming second property purchase

 

However, let’s put some perspective on the Stamp Duty surcharge.

Although we know that property prices can go up as well as down, the average long term trend in prices has been upwards for a very long time.Last year, for example, average prices paid for properties sold in Crawley increased year on year by 10.8%, as we reported in last months’ Crawley Property Update (e-mail crawley@northwooduk.com and request your copy !)

A 3% increase on the Stamp Duty rate for 2nd property purchases would therefore have been easily “gobbled-up” in last years’ average property price rise.

The Stamp Duty surcharge appears even less significant when compared with average price increases in Crawley, over the last 15 years or so. According to the Land Registry, the average price paid for property in Crawley is now some 135% higher than it was in the year 2000.

Putting the Stamp Duty Rise into Context

The Chancellors additional 3% Stamp Duty increase from April 2016 is not particularly welcome for buy-to-let investors. However, we feel that when property price rises over the medium to long term are factored in, it is not something that should deter those determined to invest in the property market.

Of course, it should be stated that investing in the right property and in the right location, is perhaps even more important than it has ever been. If you’re in any doubt about what property to invest in, make sure you talk to a local property expert.

Last, but not least, it has been reported that the Government is currently proposing that the Stamp Duty surcharge can be offset against any capital gain when the property is sold. However, we can’t guarantee that ministers won’t change their minds at some point in the future, perhaps when we’re not looking !

The opinions expressed in this article are those of the author only and not of Northwood. If you are considering investing in property, please make sure that you seek appropriate professional advice.

3rd March 2016

1 Bedroom Maisonette, Tollgate Hill, Crawley

Anecdotal evidence from solicitors indicates that completion dates for property sales that have only just been started will almost certainly be after April 2016. For investors looking to build their property portfolios, this means (thanks to the Chancellor) you’ll have to fork out an extra 3% stamp duty on top of the purchase price.

So will it still be worth investing in Buy-to-Let property after April ?

The answer to this question will of course depend on a multitude of different factors, not least of which will be your own personal circumstances. Getting proper & up-to-date tax advice is increasingly important, as will be investing in the right property that fits within your overall investment strategy.  For example, are you looking for Capital Growth, Rental Income or a combination of both ?

For now, however, let’s take a look at a potentially high yielding property that has recently come on to the market with Astons estate agents at £125000. It’s a 1 bedroom maisonette in Tollgate Hill, Crawley and the agents state investment buyers only.  This could mean that the property is already tenanted and the current owner wishes to sell with the tenants in-situ. Alternatively, it could also mean that the lease on the property is quite short – so cash buyers only, as it will be difficult to get a mortgage. Of course, rather than speculate, if you’re interested in the property just give Astons a quick call and they’ll be able to tell you ! Here’s the Rightmove link for the property http://www.rightmove.co.uk/property-for-sale/property-53140177.html

 

Tollgate Hill 27-2-16

Assuming that if you purchased this maisonette it would be an “additional” property & that completion took place on or after 1st April this year, you the would pay a 3% stamp duty surcharge. In pounds, shillings and pence that equates to £3750 ! So does this property stack-up in terms of an investment package ? To try and answer this question, let’s look at the figures.

Maisonettes like the one we’re considering here currently rent for between £600pcm & £650pcm. If you were to purchase the property for the full asking price of £125000, the gross rental yield would range from about 5.8% to 6.2%. So, pretty healthy indeed.

If, however, you were to take into account the additional 3% stamp duty and just add it on to the purchase price, the rental yields would be reduced a little to around 5.6% to 6.1%. Despite the additional stamp duty, therefore, these rental yields are still impressive when compared with the Crawley & UK-wide property markets. In addition, it has been reported that the government is going to allow the additional stamp duty surcharge to be deducted from any capital gain when the property is sold.

Hence, by carefully choosing the right property to invest in, decent rental yields can still be achieved despite the forthcoming 3% stamp duty hike heading our way  this April.

So, if you’re looking to invest & see a property that catches your eye (even if it’s through another agent), give us a call on 01293 515588. We’re more than happy to provide you with free advice and we can even visit the property on your behalf – and there’s still no charge or obligation on your part. Best to make use of this service before you part with any cash on surveys etc… ! Alternatively you can always e-mail us at crawley@northwooduk.com.

The opinions expressed in this article are those of the author only and not of Northwood. If you are considering investing in property, please make sure that you seek appropriate professional advice.