Would Stamp Duty reform make a difference?

 Mark Hordern
Published by in Market analysis on May 10th, 2012 | No Comments »

The Scottish Government now has the power to reform Stamp Duty Land Tax – the tax buyers pay on purchases of residential property.  But should it?

The current Stamp Duty charges.

Stamp Duty has been widely criticised because of its ‘slab’ nature.  If you buy a property for just a pound over one of the thresholds for the tax, you pay the higher rate on the full amount of the purchase price. 

Advocates of reform argue that the tax should be changed so that the higher rates of tax are only paid on that part of the purchase price above the relevant threshold.  That way you eliminate distortions to the market as people try to keep below a particular tax threshold. 

Sounds sensible enough, but could it work in practice? It’s more difficult than you might think.  (more…)

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Conveyancing – behind the scenes at the coal face of buying a home

 alafferty
Published by in Uncategorized on May 2nd, 2012 | No Comments »
Title deeds and accompanying house keys

Title deeds are more likely to be held electronically these days, but getting it right first time is just as important.

Conveyancing, eh? The dark art of the property solicitor. Title deeds, missives, long letters in legalese, panicky phone calls about loan funds and keys. Have you built an extension to your house without a building warrant or planning permission???? Phone me now please. And thousands upon thousands of emails.

Boring it isn’t

When I go round Scotland’s universities doing talks for law students, I hear the more starry-eyed of them saying things like” I want to do criminal court work, not something boring like conveyancing”. Depending on what mood I am in , I either shake my head and chuckle , or vigorously point my finger in their cherubic faces. Boring? Boring? Let me tell you this, sunny Jim. Getting clients into a house on the due date while ensuring they have good title, a house worth the 5 or 6 figure sum they are investing, making the mortgage money drop down on time from Leeds or wherever the bank department is, forcing the seller’s solicitor to come up with a local authority letter of comfort to replace the missing building warrant, getting the missives for their sale concluded in time for matching up the sale and purchase dates of entry after the title could not be found in their previous solicitor’s office for 6 weeks, finding out that YOUR client’s NHBC certificate was not with those titles, checking that all the money is available  – including enough for your rather moderate mates’ rates fee is there – all part and parcel of the solicitor’s daily high-wire act. And unlike in LA Law, or Suits, it is not just one gig at a time. you know the guy who used to be on the telly on a Saturday night with 150 sticks planted in the stage and plates spinning on the ends of them? His  whole act was running from one plate to another keeping them spinning so none crashed, with music playing in the background and a cheery if desperate grin on his face. That is identical to the job of the conveyancing solicitor. (more…)

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Is property now affordable?

 Mark Hordern
Published by in Market analysis on April 25th, 2012 | No Comments »

There has been a lot of news recently suggesting that property is becoming increasingly affordable. 

The Bank of Scotland said recently that Scotland has the most affordable housing in the UK.  Here’s their press release on the subject: Scotland has the UK’s most affordable housing

A time to buy?

The issue is more than academic.  If property is affordable now, then it’s probably a good time to buy.  If you think homes are still over-priced, then you would delay your purchase until later. 

So, which is it?

Two measures of affordability. The vertical lines indicate the start of price falls. Note that prices continue to fall when the red line is elevated, but stablise when it falls. In the last two years, note that prices stablised almost as soon as mortgage costs fell.

Measures of affordability

There are two common measures of affordability; the price earnings ratio – the average house price relative to average income – and the ratio of mortgage payments to income -how much of someone’s income goes to paying the mortgage.

The trouble is that, right now, these two tell you completely different things (see chart).  One says property is a bargain, the other says not.  Which begs the question, which measure should you be looking at? 

I think the better measure – and arguably the better predictor of house prices – is mortgage interest as a proportion of income.  Here’s why (and apologies if this is heavy going).

Past performance

To test which indicator is a better measure of affordability, you need to look at their past performance.  The graph on the right shows how these two measures changed over the last two recessions.

(more…)

Sales higher and prices steadier in west coast property market

 Mark Hordern
Published by in Market analysis on April 11th, 2012 | No Comments »

● Sales up 15% on last year
● House price inflation positive for two quarters in succession
● Divide between Glasgow and surrounding areas grows

Annual House Price Inflation

Annual house price inflation has been positive for two quarters in succession - for the first time since 2008.

House prices in the west of Scotland are higher now than they were a year ago for the second quarter in succession.  It is the first time since early 2008 that the GSPC quarterly market report has recorded two consecutive quarters of positive house price inflation.  Sales in the first three months of the year were also sharply higher than in the same quarter a year ago, although selling times have lengthened further.

Prices remain volatile with sharp falls followed by significant rallies according to Professor Gwilym Pryce of Glasgow University, whose analysis forms the basis of the report.  And some of the increase in sales is partly the result of sellers coming to terms with lower prices. 
 

(more…)

The high cost of 0% finance

 Mark Hordern
Published by in Property marketing, Uncategorized on April 4th, 2012 | 3 Comments »

Despite appearances, interest free credit can turn out to be surprisingly expensive.

Here’s how 0% finance works

With 0 per cent finance, the retailer (or estate agent) pays the interest, not the buyer (or homeowner). There is also often an ’admin’ fee per transaction and a monthly charge for the retailer/estate agent to offer this service.

It is then up to the retailer/estate agent to decide how much of that cost is added to the price of the product or service. In theory, they can decide to absorb the cost themselves. In practice, the interest and other costs are usually added to the price of the service or product.

Comparing the costs of paying for a Home Report with a credit and 0% finance

A Home Report with 0% finance is more expensive than paying by credit card, even if your home is on the market for a year.

Now, if you are offering interest free credit, you must provide the product or service at the same cost to all customers – whether they want credit or not. If you can get it cheaper by paying at the point of purchase, then the higher cost for paying later is effectively interest – which would mean that it’s not interest free.

Higher costs for all

That means that the same, higher, cost has to apply to everyone. Even those who could pay at point of purchase have to pay the higher price because the same price has to be applied to all.

But, you may say, it at least allows those who can’t afford to pay upfront to get their home on the market. Possibly, but there are better ways of doing it. (more…)

Stamp Duty change will have little impact

 Mark Hordern
Published by in Market analysis on March 20th, 2012 | No Comments »

Here’s an interesting graph from the Bank of Scotland.  It shows how many first time buyers in the UK benefitted from the temporary increase in the Stamp Duty threshold to £250,000 (from £125,000) that comes to an end on the 24th March. 

Relatively few first time buyers in Scotland benefitted from the Stamp Duty exemption

Just over three quarters of first time buyers in Scotland did not benefit from the change because the homes they were buying were not priced between £125,000 and £250,000  – where Stamp Duty would have been payable without the change in threshold.  With an average purchase price of £87,440, they would not have paid Stamp Duty even if the threshold had not be raised.

So, we may not have gained as much as others from the Stamp Duty holiday, but it is less likely that the Scottish market will suffer as a result of its abolition.

 

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What does the New Home deal mean for the property market?

 Mark Hordern
Published by in Market analysis on March 19th, 2012 | No Comments »

Developers and mortgage lenders in Scotland are expected to launch a low-deposit mechanism for those buying a new home very soon.  But what effect will ‘MI New Home’ have on the market?

 

Buyers could soon be able to purchase some new homes with just a five per cent deposit.

MI New Home will make it possible for some to buy a new build property in Scotland with just a five per cent deposit.  In other words, buyers will be able to get a 95 per cent mortgage on a new home – provided that they can prove to the lender than they can afford it. 

It’s the Scottish version of NewBuy which went live recently and I think it’s worth pointing out that a lot of the work that made NewBuy possible was actually started in Scotland.

The aim of the scheme is to reduce the risk to lenders and so make it easier for them to lend to those without a large deposit.  The developer puts aside part of the purchase price to be held by the lending bank for seven years.  And the Government provides a guarantee that it will cover part of the purchase price in the event that the buyer defaults on the mortgage and the house sells for less than its purchase price.  (more…)

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Local advertising matters most

 Mark Hordern
Published by in Property marketing on March 7th, 2012 | 2 Comments »

Research suggests that around 95 out of 100 home buyers live locally.  If you want to sell your home, effective local marketing is what delivers results.

 

Research from Registers of Scotland

 

Moving time: very few of us move more than 40 miles from where we currently live.

You may not have heard of Christopher Muir, in fact he is hard to track down, even using Google, but if you have any interest in selling your home or in advertising property for sale, his research is revealing and relevant.

You see, Chris Muir is a GIS (Geographical Information Systems) Analyst at the Registers of Scotland – the organisation that records every property transaction in Scotland.  A little while ago, he wrote a paper titled: ‘Redefining Housing Market Areas in Scotland’ (you can see it here) Redefining Housing Market Areas in Scotland and it is very much more interesting than its title might suggest – at least to someone whose job it is to advertise homes for sale. (more…)

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The Stats File

 Mark Hordern
Published by in Market statistics on March 7th, 2012 | 2 Comments »

The Stats File is where we keep key data on the property market in the west of Scotland.

So far, it includes historical information on average selling prices in the area and information on the number of property transactions as recorded by the Registers of Scotland.

We’ll update these at least quarterly and we’ll add other key metrics as time goes on. (more…)

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