Property development is a tricky business in London. Hotspots change and appear over night.
Good research upon the mainstream areas of London is always helpful.
Main London areas to look for:
There are a lot of ways of launching yourself into the real estate business. And if you are really close to the business, opportunities might be even more diverse. And that is because ‘diversification’ is a trend and it creates niches of investments one can miss as an outsider.
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Before buying a home, it’s essential to know whether it’s freehold or leasehold. It’s the difference between owning your property outright and having a landlord.
Owning a property freehold means you own the whole building and the land it stands on. Most houses – not ones divided into flats – are sold on this basis. When buying a freehold property, you are listed on the land register. You’re responsible for any and all costs incurred to maintain the fabric of the building, common parts and land.
While this might sound like a big responsibility, the benefit is that you won’t need to pay ground rent, service charges or management fees, and you’re able to modify the property to your tastes – seeking planning or building permission where required.
Leasehold means you effectively lease a property for a number of years. This is common for flats or apartments, and less common with houses. You will have bought and signed a lease agreement for the property from the freeholder, often referred to as the landlord.
When buying a leasehold, the more number of years on the lease, the better. Leases can last as long as 999 years! After this time, the lease reverts back to the freeholder. Avoid buying properties with 80 years or less left on the lease. Securing mortgages on these properties is difficult and you may have to shell out for expensive renewal fees if you wish to remain in the property after the lease has expired.
Leasehold limitations
You don’t own the property outright when you buy a leasehold. As a result, you may face restrictions and additional charges.
For example, you’ll need the freeholder’s permission to do certain things. This is known as requesting a ‘licence for alterations’. From asking to keep a pet, to seeking permission to knock walls through, actions you may need to ask the freeholder about can vary from property to property.
Ground rent and service fees apply, too. These annual fees are charged to the leaseholders for the maintenance of the building. Primarily, these fees are put towards building insurance, but also cover the upkeep of common areas, entrance ways, building security or roofing and structural repairs.
The only time this is not the case is if the leaseholders have been awarded the Right to Manage.
What is Right to Manage?
Unhappy with how the freeholder’s managing agents look after the property, or are spending the service charge funds? You could apply to take over certain building management duties from the freeholder. This is known as ‘The Right to Manage’ and is awarded by the First Tier Tribunal.
To gain Right to Manage responsibilities, multiple leaseholders need to apply collectively. For more information on qualifying for Right to Manage, visit the Leasehold Advisory Service.
Should you choose to buy a leasehold property, in many cases you may be eligible to collectively purchase the freehold. ‘Collective enfranchisement’ is when a group of leasehold property owners act together to buy the freehold of the property. Owning the freehold is an attractive prospect, because you’ll have more freedom over your property. Sounds great, but the road to get there is complicated.
We strongly recommend researching the complexities of owning a share of the freehold, seeking legal advice before making your first move. Sites like gov.uk and lease-advice.org are great starting points.
The average price of a property coming onto the market in January 2018 is up by nearly £2,000 compared with December 2017, but sales are down by 5.5% from this time last year.
Rightmove, which tracks 90% of the UK property market, said there had been a “good start” to 2018, with more than 4 million visits a day to its site, up nea
rly a tenth on last year. The average price was up 0.7% to £297,587.
But sellers may be being hopeful in their pricing and may have to reduce the price to find buyers. Rightmove said the average time to sell a property has jumped to 67 days compared to 55 days last summer, which is an extra 12 days.
The period from now to late spring is traditionally the busiest time of the year for house hunters as they aim to complete transactions and then move during the summer school holidays and be settled in time for the Christmas holidays, but Rightmove said the pace of activity had slowed down.
Asking prices continue to fall in London. The average price for a home listed by the website in the capital is currently £600,926, down 1.4% on the month and 3.4% over the year.
With affordability stretched and incomes falling behind inflation, most property forecasters are predicting flat house prices in 2018 or relatively minor rises.
The two big lenders that operate well-known price indices, Nationwide said it is expected property values to be “broadly flat in 2018, with perhaps a marginal gain of around 1%”. Halifax has allowed itself some wiggle room, predicting UK growth from 0% to 3%.
Halifax said that in December house prices fell by 0.6%, the first decline it had registered in six months.