Friday, 14 September 2018

The Edinburgh property market – ten years on from Lehman Brothers



Can you believe this week marks ten years since Lehman Brothers collapsed and the dominoes of the late 2000’s financial crisis fell? The property market had actually been slowing before this, with the number of sales in the first half of 2008 down 40% compared to 2007. House prices had already dropped 10% too.

This trend accelerated though with Lehman Brothers demise. House prices fell a further 10% in the following six months, finally bottoming out in March 2009 (not that anyone knew they’d stopped falling at the time). This meant they had fallen from a high of £190,032 in September 2007 to £154,452 in March 2009; a drop of 19%.

Not coincidentally, in March 2009 interest rates were dropped to an all-time low (at the time) of 0.5%, where they were held for nine years. That’s a staggering decline considering they were still at 5% just six months beforehand, when Lehman Brothers went bankrupt. It’s quite the news story nowadays if interest rates change by 0.25%…back then we had six months in a row of them dropping between 0.5% and 1.5%!

Interestingly the average mortgage ‘SVR’ (Standard Variable Rate) in September 2008 was 6.95% (1.95% above the base rate) whereas it is now 4.1% (3.35% higher than the current base rate of 0.75%). So, compared to the stated base rate, borrowing money is actually more expensive now than it used to be - something which could be key if the base rate begins to rise.

It took until August 2014 for house prices in the UK to surpass the previous high of September 2007. During those seven years it was those in negative equity who faced the trickiest situation. With house prices retreating to levels last seen in April 2005, it was the property buyers between April 2005 and September 2007 who became trapped in their homes. For some this led to becoming accidental landlords so they could move on, whilst for others it meant having to wait out the storm.

Fast forward to today and the average UK property price stands at £228,384; 20% higher than the September 2007 ‘peak’ and 48% higher than the March 2009 low. Whilst you might have preferred not to buy between April 2005 and March 2009, anyone who did so should now have come out the other side ahead.

What still hasn’t recovered though is the volume of homes being sold. The record year for property sales in the UK remains 2006, with 1,581,727 sales. The following year there was a small dip of 6%, before the number of sales fell off a cliff in 2008, with just 765,313 homes changing hands (a drop of 49%!). A decade later and the volume of sales has recovered (to 1,098,215 in 2017) but are still well down on the levels seen in the years before the financial crisis.


For many it was the lowering of interest rates that helped them keep their homes; arguably stopping house prices from falling further. This, along with artificially pumping money into the economy, has led to asset prices becoming ever more expensive in absolute terms, whilst some will say it has only served to kick the can further down the road.

#edinburgh #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning #prs #privaterentedsector

Wednesday, 15 November 2017

Another acquisition for the fast expanding Edinburgh based The Key Place


The Key Place, the "go to letting agency" across Edinburgh and the Lothians, Central Scotland and the Scottish Borders, specialising in property management and buy to let investment, is delighted to announce that it has taken on PH Young’s letting business based in Bo’ness.

Robert Young, The Key Place’s Chief Executive, commented “We are delighted to have taken on PH Young Lets as, on top of it being an excellent, well run business, it enables us to consolidate our strength in property lettings across Central Scotland.  I can see this being the first of many acquisitions that we make over the next couple of years and, with the regulation coming into the sector next year, I expect that a fair number of property letting agencies will be looking to exit the market rather than go through the hassle of becoming regulated.” 

Tuesday, 7 November 2017

Trend towards multiple property owning Edinburgh landlords


I am seeing a couple of trends amongst our Edinburgh landlords – both understandable and, I suspect, likely to continue. 

On the one hand, the more serious landlords are investing and buying more properties on the basis that, despite the recent changes and hassles in the Private Rented Sector, buy to let property investing is an attractive proposition. 

However, on the other hand, the ‘hobby’ or ‘accidential’ landlords are throwing up their hands in horror at these changes and are selling their properties.

It was interesting for me to have this anecdotal trend borne out by evidence. 

Whilst the number of rented properties across the Country is increasing from 4.9 million in 2015 to 5.1 million in 2017, the number of landlords across the Country is falling from 3.72 in 2015 to 3.72 in 2017.  This means that the size of the average landlord’s portfolio is 1.44 which is the highest level it has been since records began in 2005 up from 1.33 in 2015 and a low of 1.24 in 2010 (presumably due to the affects of the financial crash).  Another interesting stat is that in 2017, 73% of landlords owned one buy to let property which is a far less that the 86% it was in 2010.

So, what do you need to think about when you get into owning multiple buy to let properties.

Firstly, it is often more profitable and less risky to buy a number of properties than just one for the same outlay.  Not only that it gives you more flexibility and reduces the effects from voids; your risks are therefore reduced too.

If only one property is purchased a void period will result in no income for the investor.  However, if multiple smaller units were acquired the effect of one property being unoccupied is proportional to the number of properties held and a return on your investment will still be maintained.

Additionally, the overall achievable rental return is likely to be significantly higher across a portfolio of several smaller properties rather than a single investment in a larger one. In Edinburgh, for example, rent from one £300,000 property would be £1,250 pcm but from 2 x £150,000 properties it could be over £1,500 pcm.


Time it right

In general there is upward movement in all aspects of the housing market and this makes property an excellent choice to consider for investment.  Your return on your investment is a mixture of yield from rent and capital growth, perhaps 6% and 3% respectively, so a potential annual ROI of 9% gross.

Maximise your profit potential by adding to your portfolio when property prices are rising, but aren't running away. In Edinburgh we're currently experiencing a fairly 'flatish' sales market with prices increasing but not at an overly accelerated rate. Perhaps this is the future, but a steady 3 – 5% growth is healthier than boom and bust.

In addition, it's important to review the rental market as well.  Indicators of good timing for growing your portfolio would be when there's competitive tenant demand and rents are on the up (as this will automatically increase your yield).

Plan and prepare

The solid foundations of property portfolio success are often down to advanced planning and precise preparation…

Before investing you need to have your finances in place, plus you will need to have an overall long-term plan.  Taking advice from a qualified financial advisor as how best to fund purchases is essential.

It's important to identify why you're investing in an additional property and what you want that property to achieve.  For example, is it for a pension?  Are you hoping to increase your monthly income?  Is it for a long-term capital growth to use in the future?  Are you planning to live at the property in the future?

It's also essential to know when (and how) you're intending to exit the investment so that a clear and concise exit strategy can be prepared. Again talk to a financial advisor and tax expert before committing to portfolio growth so you can plan how to exit in the most cost-effective way.

Starting the search…

Although there is likely to be a multitude of properties available for purchase in your area not all of them will make the best rental investments so it's important to choose carefully.

When searching for your next investment, short-list several properties taking into consideration the following for each: location, price, potential renovation costs, suitability for the rental market, timescales before being rental ready, tenant demand, achievable rental return, potential for capital growth, plus where it will fit in with the rest of your portfolio. 

I am happy to have a chat with you before you start your search and/or once you have got your short-list.  Not only do I know the local property market but I also know what tenants want and need from a property, what's in demand and which type of properties are likely to be successful for investment purposes. In fact, as risk indicators are sometimes overlooked by those searching for a purchase, I can tell you what's wrong with a property as well as what's right.

Overcoming challenges

Of course having multiple properties isn't without its challenges.  Each element of the rental process will be multiplied… doubled, tripled, quadrupled etc.

Not only will you be dealing with the paperwork and maintenance of a number of properties, you will also be juggling the management of the people who live there, all of whom will have their own demands and needs.

Bear in mind too that there are new financial challenges. We're in year one of a four-year process to drop tax relief for landlords, plus an extra 3% Stamp Duty now has to be paid for each property bought for rental purposes.

So, how can a landlord make juggling multiple properties simpler?

By far the easiest way to manage an expanding portfolio with ease is to engage the help of a property management agent.  As industry experts they will thoroughly vet potential tenants, troubleshoot emergencies and issues and arrange necessary maintenance utilising our bulk buying power with our regular contractors.  They also understand and meet the current legislation, plus will keep on top of essential anniversaries, such as gas safety certificates.

All of the above becomes increasingly harder for a self-managing landlord as their portfolio multiplies but, if you engage the services of a property management agent, your involvement will be minimal.

Watch out for further information on this in future posts on The Edinburgh Property Blog (www.theedinburghpropertyblog.co.uk).



#edinburgh #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning #energyefficiency #privaterentedsector #prs #privaterentedsector 

Tuesday, 31 October 2017

Opinion piece: The Key Place, Countrywide, Purplebricks and the changing lettings landscape in Edinburgh


The lettings landscape is changing. 

It is changing as a result of the regulation of the sector being implemented by the Scottish Government.  It is changing because of the recent tax changes introduced by that historical figure, George Osbourne .... remember him?  It is changing because of the changing mortgage market.  And it is changing because of technology advancements.

Fundamentally, even with all this change, the lettings market is still a good place to be just now because current demand greatly exceeds current supply and this shows no sign of changing in the short, medium or long term as the obstacles to building more properties are so high that we will not be building enough properties to solve the problem for decades to come.

However, what will evolve is who manages letting properties and how they are managed.

At the moment there is great talk of national internet based letting agencies, like Purplebricks and Ewemove, being the next great thing and there is lots and lots of talk that large national office based letting agencies like Countrywide (called Slater Hogg & Howison in Scotland) being dinosaurs who will not survive (for what it worth, I personally suspect that Countrywide may well be more valuable if it is broken up .....). 

For me, technology will change the lettings market and the lettings industry must embrace technology so that it provides a continually improving service.  However, unlike selling tins of beans (which absolutely lend themselves to be sold by national and international businesses on the internet), ultimately lettings is about local knowledge and long-term relationships and personally I do not think that national letting agencies – whether internet based or not – can provide the same level of local knowledge, people skills and long-term relationships as local letting agencies like The Key Place.  The Key Place is a family run business with extensive local knowledge, people skills and long-term relationships with landlords, tenants, contractors, Councils, Edinburgh etc which is invaluable in ensuring that lettings is done properly .... particularly when the ‘road bumps’ of lettings come along.

Keep it real, keep it local!



#edinburgh #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning #energyefficiency #privaterentedsector #prs #privaterentedsector #firsttimebuyers

Tuesday, 17 October 2017

Edinburgh private rented properties and energy efficiency – dull but important stuff!


As some of you will no doubt be aware the Scottish Government is conducting a consultation regarding energy efficiency and condition standards in private rented housing.  Details of which can be found by clicking here

The Scottish Association of Landlords has submitted its ‘generic’ response to the consultation.  Details of this can be found by clicking here.  I have submitted my own as a landlord/letting agent.


We are all busy people but I would encourage you to have a look at what is proposed if you can find the time and possibly respond to the consultation – it is online and not too onerous.

Without boring you to death, the bottom line is that for a variety of reasons including Climate Change and Fuel Poverty, the Scottish Government has put in place a policy that requires all Private Rented Housing in Scotland to meet a certain standard of energy efficiency as measured by the Energy Performance Certificate.

This consultation is not about whether this will happen, but rather how and when.
In its most basic form, all rented properties will need to achieve at least an EPC level E initially and subsequently an EPC level D rating within a timeline that is to be set.


There is no need to panic, I will just repeat that..... Don't Panic.

Worst case, assuming the consultation is adopted wholesale, we have until April 2019 before properties let from that date on ‘new tenancies' need to achieve an EPC rating of E and by end of March 2022 for all properties. After which we have until the end of March 2025 for all properties to achieve an EPC rating level D.
Those of you who are ‘regular’ readers of my blog will notice that I have started mentioning the EPC rating of potential ‘buy to let’ properties where appropriate, this legislation is the reason why.


So having given some background and the bad news, is there any ‘good’ news?
On the plus side, the current proposal does include a cap on the expenditure of £5,000 per property (not massively great news I accept). Most properties, we hope, should be able to meet the requirements at a much lower level of expenditure than this.

Additionally, we have been told that there will be ‘some' funding available (no details as yet) in terms of grants, interest-free loans etc.

I would suggest is that any landlord who has concerns should start exploring alternatives fairly soon.


You might consider the following:
  • Identify if your property needs upgrading to meet the standard.
  • If it does, have a look at the full EPC report as they usually give some guidance on energy efficiency measures. Whilst I suggest that you take this guidance and the projected costs/savings with a truck load of salt, they are a start.
  • Explore all the possibilities for energy efficiency but ensure you get ‘expert’ guidance and written quotes for the different types and their efficiency. The range of insulation, heating, energy efficiency products that are available now is staggering and it’s only getting bigger as ‘energy efficiency’ becomes more and more of a focus.
  • Explore the funding situation to see what's available. Some companies that specialize in ‘energy efficiency' works will assist with this and/or will often have a good handle on what might be available. Additionally, some will throw in a post works EPC (which is required to evidence the improvement in the EPC rating) for free.
  • If you are going to get work done then allow for disruption, discuss it with your tenants and/or try and plan it for when there is a void period. Maybe combine it with other works you may have planned. 

To give you an idea of the kinds of ‘technologies’ that are available here are some examples, with links to some providers. This list is by no means exhaustive and you might try to check out the Energy Savings Trust Scotland website by clicking here.


I would emphasize that these aren't companies I have used and I am merely providing their details as examples. It is for you to decide whose services you employ bearing in mind that, which technologies or improvements will have the greatest impact on any given property, will depend on a variety of factors and so need to be considered on a case-by-case basis.
  • Heating – obviously installing gas central heating is a big improvement but also a sizeable cost and that’s assuming gas is available. However, even if that’s not an option, the range of modern electric heaters that are highly efficient and cost effective is massive. From simple panel heaters to gel, water or oil filled alternatives even modern versions of the venerable storage heaters. I have gel filled in one of my own properties and the tenants are very happy with them and they are a quantum leap up from the old ‘storage heaters’.
  • Insulation – there are numerous options depending on the construction of your property and how much you want to spend. As well as the usual loft and cavity wall insulation there are internal/external cladding systems, sprayable options etc. A couple of examples are: (i) ScotFoam – sprayable insulation and noise reduction, great for getting into spaces that aren’t easily accessible https://www.facebook.com/scotfoam/ and (ii) OVO Energy https://www.ovoenergy.com/guides/energy-guides/the-ultimate-guide-to-solid-wall-insulation.html.
  • Glazing: Ah yes that old standby, you may already have it, but how old is it? If you don’t have it then maybe now is the time, or a cheaper alternative might be secondary double glazing, if the property is listed or in a conservation area.
  • Energy Sources: Assuming your property isn’t a flat then maybe a miniature wind turbine, solar panels etc.
  • But let's not forget the basics that people have known about for years. Draft proofing, new cladding on hot water tanks/pipes, increased loft insulation, programmable thermostats to turn things on/off, modern controls on radiators, energy efficient lighting. Sometimes lots of little changes can add up to one larger one.

A few final points:
  • Firstly, there is plenty of time.
  • Bear in mind is that the areas of improvement with the highest EPC impact (in general terms) are insulation and heating.
  • Beware of false economies by which I mean by this is don’t do this on the ‘cheap’ and get caught out, don’t pay money to move from an EPC G to an E and then several years later have to get more work done to get to EPC D. Look at the costings and, if it's viable, carry out the work in one hit.
  • I can’t promise you the government won't ‘move the goal posts’ (there has been some talk of trying to get to EPC C, however, I think this is unrealistic given the age/type of some of the housing stock and that even some new builds struggle with this).
  • There is lots of information and guidance available out there so take your time and do your research.

Watch out for further information on this in future posts on The Edinburgh Property Blog.


#edinburgh #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning #energyefficiency #privaterentedsector #prs #privaterentedsector 

Tuesday, 3 October 2017

Edinburgh Property - Do you know the Facts and Figures?


Here at The Key Place, we can guide you to the right places to identify property values and yields in Edinburgh and, as well as that, we can provide you with other useful property related information so you can make sure you know all you need to know before making your future investments.

I was reminded of this the other day when I was chatting to a landlord of mine and he said that I was a font of useful information about the Edinburgh property market ..... at least I think he said useful! 

This got me thinking that others may be interested in some ‘useful’ property facts about our City of Edinburgh ....

There are 4,264 streets in Edinburgh with 215,822 households, and just over 35% of those houses (78,387 to be precise) have changed hands in the last 10 years.

Compared to the national average, Edinburgh has far, far more flats and far far less houses – it 79% more flats compared to the national average and 54% less detached houses, 45% less semi detached houses and 34% less terraced houses. This ties in with Edinburgh having many, many tenements and having significantly higher single person property occupancy compared to the national average (40% vs 35%) and correspondingly more 2 person + households.

Edinburgh has less owned properties than the national average (59% vs 62%) and less Council/social renting than nationally (17% vs 24%).  Overall this means that 24% of properties in Edinburgh are privately rented which is much higher than the national average of 14%.

We also have information at our fingertips on seemingly daft things which can turn out to be quite important.  For example, 81% of properties in Edinburgh have gas central heating which is much higher than the national average of 74%.  This is really useful to know when refurbishing a flat and considering whether you can ‘get away’ with electrical heating ..... it is less likely that you can in Edinburgh

I could go on but I better not!

If you would like more useful facts and figures call us (0131 603 4570) or email us (edinburgh@thekeyplace.co.uk).



#edinburgh #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning #prs #privaterentedsector

Tuesday, 26 September 2017

Paws for Thought… Should Edinburgh Landlords Accept Pets?


Tenants with pets are often dismissed out of hand by landlords who are worried about potential damage to their property.

This is very understandable.

However, opening up your property to tenants with pets may help maximise its rental potential and, by excluding pet owners, you may be missing out on a huge part of the rental market.

In some circumstances it’s a definite ‘No’!  Your title deeds may state that pets are not allowed – more likely in blocks of flats. Also, consideration should also be given to the type of property in question.  Does its age and size accommodate pets properly – a large dog in a brand new, fully furnished property is probably not a good idea.


Almost half of the UK population owns a pet and accepting pets into your property may well be advantageous.

Advantages

Increase demand for your property. With so few pet friendly properties out there, they are much sought after and may command higher than usual rents.

Encourage tenants to stay longer. Pet owners know how difficult it can be to find pet friendly rental properties and are more likely to have a longer tenancy.

Attract responsible tenants. Pet owners often take much more care of their home so not to jeopardise their tenancy making them ideal tenants!
So why is it that many landlords instinctively say they do not want pets due to the possibility of damage or noise? Landlords instantly reject tenants with pets when they apply for property. Is it really a sensible approach?

Steps To Take

If you do wish to accept pets into your property, there are a number of things you can do to further increase your protection:
  • Insert a Pet Clause into the Tenancy Agreement setting out the responsibilities of the pet owner ie the tenant.
  • Take a higher deposit to allow for any additional work that may be required at the end of the tenancy.
  • Insist that the tenants pay for a professional clean at the end of the tenancy.

A landlord can look at each case on its own merits. You may accept a small Terrier but not accept a large Alsatian. Every application can be treated individually.



#edinburgh #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning #prs #privaterentedsector