More Homeowners Renting. Doesn’t it make sense?

Let’s be clear, we at UK Property Ladder promote lease options also known as “rent to buy” “rent to own” or “try before you buy” schemes. We believe this is the best way to bring some stability within the UK housing market. Lease options offers a smooth transition between renting and owning. It is tailored to first-time-buyers, landlords who are looking for a happy exit strategy (a smart way to avoid repossessions, or selling to pocket equity) and even desperate sellers we could avoid becoming accidental landlords.

So let’s analyse this video from ITN, “More homeowners renting” does it really really make sense?

• Property sales are down all accross the United Kingdom - ok that’s a fact.
• Rental market is on the increase, letting and management agents are reporting healthy increase. That’s also a fact.
• But as rental demand grows, supply also grow. The report mentioned that accidental landlords or landlord who can’t sell their property are letting instead.

What the report deos not say is that the seller had a particular reason to sell. The reasom has not disappear it’s just that the market conditions do not allow him to sell. That’s why we advocate lease options (call it how you like: rent before you buy, try before you buy) as a way to help all those who want to sell but can’t sell because of the market conditions.

People still need to leave somewhere and that’s not going to change whether a PROPERTY CRAAASH happen or not. So will a property crash turn tenants who are flushing money they will never recover into an renting into owners? No, never. And if they can buy now when the period is favourable they won’t buy when prices go back up. So those who can’t sell needs those who don’t want to waste their rents. We know reputable bespoke property transaction company that can help. Just get in touch to find out how lease options can work for you whether your a tenant/buyer or a landlord/seller.

The UK Housing Crisis Did Not Start with the Credit Crunch

I googled “housing crisis uk ladder” without the quotes just to see if I would find this blog on the first page of google results.

Somewhere down the bottom on the first page of google results I did found the blog. However, a website that which ranked higher caught my attention with it’s sumary: “How are the young ever to afford to get on the housing ladder given the severe … Wanted: new city to solve UK housing crisis, Household growth in England. …”

I clicked on the website. It was promoting a book titled “The Housing crisis” published in 2004.

I jumped to the key facts and highlighted the following:

“Britain will need a new city the size of Leeds to be built over the next decade if it is to tackle the chronic housing shortage which leads to rocketing house prices that keep potential first-time buyers off the property ladder. (p. 20) “

Bearing in mind that this book was published in 2004 way before the credit crunch started (2007), we can draw four keypoints about the UK housing crisis:

1. The fundamental UK housing crisis is mainly due to the housing shortage
2. Many would-be first time buyers won’t jump on the property ladder if no creative solution is brought to the market
3. “Rent to buy”, “rent to own”, “rent now buy later” or lease options are best suited solutions to allow most first time buyers with regular income to reach the first rung of the the property ladder.
4. Any one who can’t qualify for a mortgage immediately but have regular income will also benefit from these creative solutions to (larger) home ownership.

If you can’t qualify for a mortgage right now but would like to buy a property eventually, visit our tenant-buyer section.

If you have a house that you preffer to sell at market value or above because of your personal circumstances, visit our landlord-seller section.

Example: Specifying defaults for submission

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Will The Property Market Improve By End 2008?

Below, I’ve listed property market headlines from June 27 until July 2008. The next time I publish another headline list will be around the end of the year. I don’t set any expectation. I just want to see if the market improves or not. Unfortunately one of the article quotes: “SLUMP COULD GET WORSE - Hit by the global credit crunch, lenders have toughened up borrowing conditions, demanding as much as 25 percent of a home’s value as a deposit before making any new loans — until relatively recently 100 percent loans were commonplace“. Read the rest of the headlines and follow the links for more information.

But the point is this:

• If you cannot put 25% down as deposit then rent now buy later, consider becoming a tenant buyer.
• If you cannot accept 25% price reduction off the value of your house then let now sell later, consider becoming a landlord seller.

UK Property market - housing crisis headlines

July 10 - Builders feel pain as house prices fall
July 9 - Housebuilders have cut nearly 4,000 jobs in the past 10 days, with some shedding 40 percent of workers to cope with the deepening crisis in the housing market. Bovis cuts 400 jobs and Redrow cuts 350 jobs. Bovis CEO says the downturn has gathered pace in the past few weeks and feels “an awful lot worse” than the last major correction in the early 1990s.

July 8 - Persimmon cuts 1,100 jobs.

July 4 - Barratt Developments cuts 1,000 jobs.

July 2 - Taylor Wimpey says it fails to raise up to 500 million pounds in new cash.

June 30 - Taylor Wimpey says it will write down the value of its land holdings by 660 million pounds and axe about 1,000 jobs.

May to June - Housebuilder shares fall almost daily as investors flee the sector.

April 30 - Nationwide Building Society says its April house prices index was down 1.0 percent year-on-year, the first annual fall since March 1996. Days later, Halifax says April house prices, as measured by it, were down 0.9 percent year-on-year for the first annual fall since February 1996.

April 24 - Persimmon, Britain’s biggest housebuilder by market value and No.3 by homes built, says the housing market has deteriorated rapidly since Easter.

April 8 - Halifax says house prices fell 2.5 percent in March.

March 6 - Taylor Wimpey, Britain’s biggest housebuilder by volume, says its order book is down 19 percent year-on-year and suspends a 500 million pound share buyback.

February 17 - Northern Rock is nationalised.

November 8 2007 - Halifax, Britain’s biggest mortgage lender, says house prices fell for the second month in a row in October, the first back-to-back monthly falls in two years.

November 6 - Bovis Homes says global financial turmoil is hitting the housing market, effectively telling analysts to trim their profit forecasts. Other housebuilders tell a similar story in later weeks.

September - A run on savings at Northern Rock results in the government agreeing to guarantee all existing deposits.

August - “Credit crunch” starts appearing in headlines.

June 27 - Mortgage bank Northern Rock cuts its 2007 profit forecast, blaming a rise in funding costs in financial markets.

How can this title on Yahoo news: “Branson predicts “spectacular” airline casualties” not shock you?

The reference article can be found at: http://uk.news.yahoo.com/rtrs/20080712/tuk-uk-britain-branson-fa6b408.html

The man in charge of Britain’s No. 2 long-haul airline, Virgin Atlantic complained in The Times newspaper: “The financial state of the world is just about the worst I’ve ever known it,” and he added “It’s getting perilously close to being worse than the 1990s.”

He also added: “You have the perfect storm — you’ve not only got the banking crisis and the housing crisis, you’ve got the soaring fuel prices as well…” 

Here at UKPropertyLadder.com our main interest is the housing crisis. If Sir Richard Branson himself considers that the housing crisis is getting perilously close to being worse than the 1990s then UK house prices are set to continue to fall. At the same time recession conditions of the 1990s means affordability to housing will also drop due to higher unemployment and tighter or tightening bank lending criteria.

If you desperately need to sell your house at market price or above, this is the worse time ever to sell. But there is always a solution at hand for those who are ready to walk the extra mile. Visit our landlord-sellers page and learn how you can sell your house at market value or above.

If you think now is the time to buy your dreamed home because prices have never been so low yet you can’t seem to qualify for a mortgage visit our tenant-buyers page. You’ll learn how you can afford your dream house without the banks saying no to you.

Real Estate

Luring Affluent Renters in Manhattan

By VIVIAN S. TOY

Published: June 29, 2008

The rental market in New York City usually gets stronger when co-op and condo sales slow down. But this year, some landlords of high-end buildings are feeling the need to offer free rent and other enticements.

http://www.nytimes.com/2008/06/29/realestate/29cov.html?ex=1372392000&en=ac3816c1019b7238&ei=5124&partner=permalink&exprod=permalink

What do we learn from this development?

1) Landlords have adjusted accordingly.

The article says:

“A lot of landlords were getting ready to increase rents for the busy season, but they’re finding that those projected rents aren’t attainable,” said Daniel Baum, the chief operating officer at the Real Estate Group New York, a Manhattan brokerage. “No one anticipated having problems on the rental side, and it’s definitely forcing property owners to take a second look at marketing and to rethink their pricing.”

Likewise, in the United Kingdom landlords could think of increasing rents but in some city centres that may not be possible. There is still an excess of new build and creating vacant flats. Manchester, Nottingham, Liverpool, Norwich to name but few city centres.

If You Want To Buy A Property In 2008  you should watch Out these companies:

New build properties - There are very limited mortgages for these properties.  There reason being that banks are unhappy with the way this type of property is valued. Obsviously it can only be valued above the same type of much older properties. Since property property prices are going down in 2008  much property are reducing in value. The only way to value new build properties is to in comparison to older build properties since the banks are nervous at the moment, theyve restricted lending for new build. Unless you have a big deposit more than £35, 000 forget it..you will struggle to you get finance.

BMV Companies - Prices are falling so you want to buy Below Market Value using BMV companies. This type of purchasing is more for investors. BMC companies used to state that you can bridge and remortgage to buy properties with no money.  Lenders recently closed this loophole. Some investments companies are still advertising workarounds but be very cautious. 

Land Sales Companies - There is no finance for land simply because you cannot rent an empty field to anyone.

What are your other options?

You can buy a property with a sitting tenant which happens to be the former owner. There are companies operating ethical sale and rent back scheme. You get to buy an investment with a tenant who will take good care of you property!

The Credit Crunch - Consequences In 2008 And Beyond.

I am puzzled from what I read on the Telegraph’s website
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/19/bcnking219.xml

The article titled: “Bank of England’s Mervyn King warns wages will stagnate and house prices will fall“.

The title in itself signals that the Government and Bank of England can’t do anything to prevent it or they don’t want to do anything, do they? Is it not just a propaganda to prepare our mind for difficult economic times ahead of us? Do house prices have to come down and conversely food, fuels and other necessities have to go up? May be, just may be. But at UK Property Ladder we’ve identified four consequences to watch out for and will tell you what you could do to protect yourself.

1. Negative equity - homeowners
   Negative equity occurs when a mortgage outstanding is larger than the current value of a property on which it is secured. For example, if a property which has down valued to £160,000 but the oustanding mortgage is still £180,000, the negative equity of £20,000. This means that the property is worth less than the loans secured on it, then selling it up will not clear the outstanding debts. Is this case avoid a forced sale at all cost. As long as you don’t need to move you are fine. Eventually things will improve.
2. Negative equity - landlords or second home owners
   You can’t sell without finding extra money. To make things worse you could also have negative cashflow where the rents you’re getting do not cover the mortgage. In this case a lease option or let to sell is your best solution. esIf yat the property is worth less than the loans secured on it, then selling it up will not clear the outstanding debts. Visit our landlord-sellers section.
3. Repossessions - homeowners
   You’re beeing forced to sell by your mortgage lender. You must avoid a repossesion of your home at all cost.  This will  bear negatively on your credit file for several years and seriously damage your ability to borrow money in the future. Selling and renting it back could be an option. Make sure you ask the option to buy your property back when your circumstances improve.
4. Repossessions - landlords - second homeowners
5. Asking price too low but you must sell
   

Council Of Mortgage Lenders - Housing and mortgage market forecasts 2008.

The original document can be retrieved from: http://www.cml.org.uk/cml/publications/forecast

We’ve uploaded it here for your convenience.

CML Housing and mortgage market forecasts 2008.
http://ukpropertyladder.com/wp-content/uploads/2008/06/1forecastdocumentfinal05081.pdf

Our comments:

The CML is suggesting that “The worst of the credit crunch may now be over“.   But this is contradiction of various reports that Property Investors are receiving. Please bear in mind that this report was published in May 2008 about a month before the blog was posted. It was on Wedesnesday night 19/06/2008, in his annual Mansion House speech that Mervin King the governor of the Bank of England warned that the UK faces a few tough years ahead.

Mervyn King said that Britain is facing its ‘most difficult economic challenge for two decades’, due to falling growth and the steeply rising cost of living. In some cases, household finances will be stretched to the limit, due to modest pay rises being gobbled up by soaring food and energy bills.

Out of all these uncertainties we can state three certainties:

1. Overall house prices are going down generally in UK. According to the CML, there should be about a 7% reduction on average house prices between 2007 and 2008.
2. Mortgage lenders have all tightened up their lending criteria. Getting a new mortgage for first time buyers is proven more difficult and those remortgaging are have aslo difficulties if they don’t have a lot of equities in their house.
3. Now is a very good time to be opened up to more creative ways of buying properties in UK. We believe that rent to buy or lease options gives much more flexibility to sellers and landlords. All that needs to be done is to understand the conveyancing process and find solicitors who are familiar with it.

People perceive many commodities as necessities although they may not be of prime importance. Without generalising, a woman may think that having some make up is a necessity or man may think that having some power tools is a necessity. But since the dawn of human presence on earth men and women primary necessities have always been: food first, clothing second, then shelter.