finance
monthly
Personal Finance. Money. Investing.
Contribute
Newsletter
Corporate

Prepare your home

For your house to sell quickly, you need to make it presentable and visually appealing. Avoid major home renovations and concentrate on handling quick repairs that could discourage prospective buyers if left unaddressed. Thoroughly clean your house and clear out the clutter. Remove personal items as home buyers need to be able to see themselves living in your property. Rent a storage unit in the meantime to safely store your belongings and get rid of bulky furniture to free up space. 

Boost curb appeal

Aside from taking care of your interiors, you also need to enhance your home’s curb appeal to ensure that it can give a strong impression to potential buyers. Many modern home buyers rely on digital real estate platforms, so your home exteriors should be attractive enough for them to check your online listing. Address minor exterior updates and exert effort in beautifying your surroundings. Some of the things you can do to enhance curb appeal include: 

Price it competitively

Regardless of the current market type, you must price your property wisely. Overpricing can deter prospective buyers and cause your property to stay longer on the market than necessary. On the other hand, pricing it too low can cause doubt among buyers and force you to sell it way less than you initially intended. Consider the price ranges of similar properties in your area and work with your real estate agent to get the best possible figure for your house. 

Be flexible and accommodating

Being flexible and accommodating is essential for your house to sell quickly. Since you’re pressed for time, you must be highly adaptable to your potential buyers’ showing requests, even if they tend to schedule at the last minute. Adjust your schedule around your buyers’ ideal schedules and always make them feel welcome in your home. 

Explore your selling options

Selling your house using traditional methods can take longer than necessary. Consider alternative strategies such as selling it for cash, auctioning off your property, going with the for sale by owner (FSBO) route, or offering it to an investor or developer. In most cases, choosing a cash buyer is ideal as these companies will purchase your house in its current condition. Research the local cash buyers in your area and make sure to go with a trusted home buying company.  

Selling a home with a rigid deadline can be challenging. Remember to follow these tips the next time you need to quickly sell a property. 

Indeed, the competitive nature of the UK property market is a key factor in the continuing prevalence of gazumping. In late 2021, for example, it is estimated that for every residential property that was up for sale there were around 29 prospective buyers.

Certainly, a chronic undersupply of properties and increasingly high demand amongst buyers and investors have contributed to this competitiveness, as well as a rise in prices. For instance, in 2005, the average price of a house would set you back £150,000. In February 2022, the average price had soared to around £277,000, with an increase of over 10% in the last 12 months alone.

With prices and competition so high, aggressive buying tactics like gazumping have become essential to prospective buyers who want to avoid missing out on a home they like.

The prevalence and ramifications of being gazumped

At Market Financial Solutions, we recently carried out some research amongst more than 500 home buyers who had purchased a residential property within the last 10 years. Worryingly, we found that almost a third (31%) of buyers in England and Wales had been gazumped when trying to buy a property, whilst over half (51%) of respondents in London reported the same experience.

Some 37% of buyers said they lost out on solicitor and surveyor fees due to a purchase falling through. Of those who have been gazumped, 23% lost money in the process. These are alarming figures, considering that home buyers can lose around £2,700 on average, with this figure rising above £5,000 for more than 10% of buyers. 

Indeed, it is not just the financial ramifications of being gazumped that can impact a prospective buyer. In many cases, buyers will be attempting to purchase a property that they have had their sights – and their hearts – on for some time. 

Therefore, with 17% of buyers settling for a property that they liked less than the one they wanted originally, there is also an emotional toll of being gazumped.

Understanding gazumping

As the economy becomes increasingly unstable, sellers will be looking to secure the best possible offer, even if that means that someone gets gazumped in the process. And with almost half (47%) of buyers admitting that they would resort to gazumping if it meant winning their preferred property, it is unlikely that buyers will experience an easing of pressure any time soon.

With this in mind, for prospective home buyers to protect themselves from being gazumped, they must first understand the factors that leave them vulnerable to the practice. From our research, it is clear that long property chains and delays in finding finance are the most significant risks.

In fact, one in four (25%) of home buyers said that they were gazumped because they were stuck in a long property chain, whilst one in five (20%) cited delays with their mortgage lender as the cause for missing out on a purchase.

In both instances, delays in receiving a financial product to complete the purchase or waiting for another property to be sold to free up property leave buyers vulnerable to rival bidders coming in and offering a high price. As such, when provided with a more attractive or speedier offer, sellers are often likely to take the higher offer.

So, how can buyers and investors better protect themselves?

How specialist finance can help

Naturally, moving quickly is essential when trying to buy a property in England and Wales. Therefore, potential landlords would do well to seek alternative finance to secure their properties, due to their speed and flexibility in comparison to traditional lenders.

The bridging sector is uniquely placed to provide buyers with these alternative financing options. For instance, a buy-to-let (BTL) landlord might require a mortgage in a shorter time frame than a traditional lender can provide. As such, a BTL mortgage from a specialist lender can provide landlords with the finance they need to complete a purchase quickly because they can be issued in as little as a week after the initial enquiry.

Similarly, bridging loans can be issued in as little as three days and could help prospective buyers avoid getting caught up in a long property chain. For instance, if a landlord needs to sell a property to free up capital for the purchase of another home, then a bridging loan can be used to refinance the original property and give the landlord time to sell it.

Indeed, if buyers are facing delays with their mortgage provider, then a bridging loan can also enable them to buy the property and therefore avoid being gazumped, before finalising their application for a longer-term financial product.

To briefly conclude, despite 80% of home buyers supporting anti-gazumping legislation it is unlikely that a ban will be implemented any time soon. As such, consulting specialist lenders and exploring the range of fast finance products that are out there will go a long way towards protecting buyers from gazumping in today’s highly competitive market.

About the author: Paresh Raja is the founder and CEO of Market Financial Solutions (MFS) – a London-based bridging loan provider. Prior to establishing MFS in 2006, Paresh worked as a senior professional consultant in one of the top five management consultancy firms, and also set up an independent investment group.

This is why the success witnessed in the UK property market was quite special. The resilience of the market saw investors presumably looking to cash in on assets that have been historically reliable during a time when other opportunities haven’t looked as stable. Clearly, when looking at recent figures, this isn’t slowing down, with houses selling faster than ever, twice as quickly as they did in 2019, according to Rightmove’s house price index.  

This boost in market activity is coupled with the surge in rising house prices recorded across each of the major recognised UK house price indices. For example, Nationwide's April house price index revealed that average property prices have now reached £267,620, the ninth straight month of growth.

Of course, this should not encourage complacency – the property market is not impervious to market volatility, particularly in the face of rising inflation and a cost-of-living crisis. 

That said, with all Covid restrictions coming to an end at the beginning of the year, the health of the market is set to receive a significant boost in the form of international investors keen to take advantage of the freedoms not as readily available in previous years. 

What is the role of international investment?

Attracting non-domestic investment will be vital. Not just to maintain the current growth of the market once domestic activity begins to lose momentum, but to help with the country’s economic recovery. 

Fortunately, this appears to be the case since the reopening of travel into the UK. According to Knight Frank’s City Wealth Index section of their 2022 Wealth Report, in 2021, London saw more cross-border private capital in real estate than any other city in the world, with over $3 billion invested. Their forecasts estimate this trend to continue over 2022, with a further $24 billion expected to be invested in the capital.

The demand is certainly here for international investments when considering the UK’s housing crisis as the country desperately needs to address the chronic shortage in housing. According to one estimate commissioned by the National Housing Federation (NHF) and Crisis from Heriot-Watt University, around 340,000 new homes need to be supplied in England each year, of which 145,000 should be affordable. However, only 216,000 new homes were supplied in 2020/2021. 

International investors have the potential to play a key role in supporting the construction and development sectors by buying new residential units off-plan and funding development schemes, particularly at a time when the knock-on effects of the pandemic have contributed to the slowdown of construction.

As such, they have the potential to achieve strong returns, especially when investing in growing areas. Regional areas outside of London, such as the West Midlands and North of England, are also very much on investors’ radars and will be ones to watch as they continue to gather pace in the years to come. 

Could current macroeconomic headwinds slow down international investment?

Despite the promising signs, one must also acknowledge that the macroeconomic headwinds at play could impact the pace of growth.

For one, interest rates have continued climbing, having recently risen to 1%. Usually seen as a negative headwind for property investors, increased base rates tend to be followed by a rise in mortgages. Any overseas investors already operating on a variable term mortgage will see rates rising, while those considering taking a new one out to purchase UK property will have to factor in higher mortgage rates than they would have experienced last year. 

Of course, the reason the Bank of England has increased interest rates is to control soaring inflation; another potential concern for the investors. Prices are set to rise to 10% this year – the highest rate for 40 years alongside increased energy bills and goods prices. A combination of high interest and inflation could erode rental returns and devalue the property if house price growth slows. Not to mention the consequent cost-of-living crisis brought on by raised costs has an indirect effect, as tenants could struggle to afford rents. 

However, with all this said, international investment in the UK is unlikely to falter when the demand for new property is so high. Meanwhile, the drop in the pound since the UK’s withdrawal from the EU means that favourable exchange rates will see investors’ money stretch further.

With so much economic uncertainty off the back of a, to put it lightly, challenging two years, it is more important now than ever that we take full advantage of international investment flows. Harnessing the potential of this vital resource will be key to ensuring the continued healthy growth of the industry, the creation of new homes, and the wider economy in general, as we look to put recent times behind us. 

About the author: Jamie Johnson is the CEO of FJP Investment, an introducer of UK and overseas property-based investments to a global audience of high net-worth and sophisticated investors, institutions as well as family offices. Founded in 2013, the business also partners with developers in order to provide them with a readily accessible source of funding for their development projects.

At first, selling your home may feel like an invasion of privacy, as strangers come into your house, poke around the rooms, and open your cabinets and closets. Potential buyers can also openly criticise your most prized possession or offer less than what you estimate your house to be worth. To avoid these challenges and ensure that your house sells fast, you should consider working with cash home buyers.

Problem Property Pals are reputable cash buyers who won’t waste time during the sales process. Nevertheless, sellers should avoid the following common mistakes to ease the process.

1. Setting Unrealistic Price

One common mistake homeowners make when listing their properties is asking for unrealistic prices. Even though inspection and appraisal aren’t mandatory for cash home purchases, you should conduct a comparative market analysis to estimate the value of your property. Overpriced homes generally don’t sell or take long before finding a buyer.

Note that most cash buyers purchase properties as-is. They are searching for properties that can be transformed and sold for profit. This highly differs from selling to individuals who want to live in the house. Get familiar with the fair market value in your region and the prices of homes in your neighbourhood.

2. Selling During Winter

Unknown to most people, there is a right time or season to sell your home. Winter, especially during holidays, isn’t the best time to list your home for sale. This is a slow time to market your property, as people are occupied with social events, and the cold weather makes it appealing to stay indoors.

Listing your home during winter will expose the property to very few potential buyers. You will get very few offers, and it will take longer to sell your home. On the flip side, there are few competing sellers, and you can easily land a good deal. To avoid relying on luck, don’t list your home during winter.

3. Not Planning To Move Out

Most homeowners planning to sell their homes to cash buyers also fail to plan their exit strategy. You should plan to move out immediately after you start negotiating with cash buyers. The main advantage of selling your property for cash is to close the sale faster. Cash purchases can be completed within one or two weeks.

Once the buyer commits, you should plan to move out immediately. Otherwise, you will be caught unaware, not knowing where to go, if you don’t plan to move out sooner. Have a move-out strategy weeks before you start engaging with cash buyers.

4. Spending A Lot On The House

While maintaining your home is important, you shouldn’t worry about renovations when selling your property for cash. Cash buyers often buy houses as they are. Spending a lot on renovations doesn’t make sense if you intend to sell the property to cash buyers. Spending on valuable renovations only makes sense if you want to sell your house through a realtor.

Endnote

While you can sell your property through various methods, selling to cash buyers is the fastest way of closing the sale. It is also safe, reliable, and eliminates various steps in the sale process. However, make sure that you set the right price, prepare to negotiate, and find the right cash buyers.

Here are a few tips to get your home market-ready for the spring surge and help you achieve the maximum price for your property. 

Why market in spring?

As property professionals will tell you, spring is famously a very busy time for buying and selling. It’s when families begin to plan for the school year ahead and often when people make the decision to move after having considered their options in the new year. After the shortage of properties over winter, buyers have a larger range of available options to choose from, making it a great time for sellers. And while it may mean more competition for sellers, it also means that when you’re ready to find your next home, there are properties on the market to make the process easier. 

Declutter the entire property

People want a home that’s clean, tidy and ready for them to move into, but decluttering doesn’t have to mean stripping away all elements of character and personality. It’s more about staying organised, being purposeful with the items in your home and allowing the property itself to shine rather than filling every room to the brim. Clear away items from the worktops and store them in cupboards instead, make sure clothes are packed away and consider removing some of the ornaments and picture frames around the home to open up surfaces. 

Fix any damages or deterrents 

Few people want to take on a project when buying a home, so reduce the risk of a potential buyer seeing things that need fixing by taking on some DIY jobs before you have the property valued. Not only will it make your home more appealing to buyers but it could even help secure you a higher valuation, depending on what needs doing. Fix cracks in the wall or loose cupboards and doors, make sure fencing and gates are in good repair and go through the property with a fine-tooth comb to find any issues that can be resolved ahead of viewings.

It is also wise to sort out any unfinished business, niggles or disputes with neighbours which might deter an interested buyer. For instance, a short lease on a flat or maisonette can be off-putting for potential investors. If you extend the lease legally before you plan to sell, you will have more success marketing your property and reaching the full asking price. 

Decorate with neutrals

Similarly to decluttering, redecorating your home in neutral tones can help to brighten up the space and give a potential buyer a blank canvas to work from which can make your property a more appealing option over a home where they’ll need to do the work themselves. From creams and beiges to light greys and off-whites, think about how you can create a space where a buyer can visualise their own items in the property more easily. 

Prioritise space through dedicated zones

Consider the layout and flow of your home and repurpose unused space, such as making an empty spare room a dedicated guest room or utilising disused areas as storage zones. It can help to reduce clutter and create a more cohesive layout for a buyer, showcasing just how much available space your property has while also inspiring them with the possibilities for different layouts. 

Enhance with plants

Plants serve double duty, as they not only freshen up the air of your home and help to omit odours but they can also add life and colour to the property to make it more visually appealing. From greenery to vases of fresh flowers, plants can really help lift an otherwise drab room and bring it to life while adding a fresh scent for viewings. Couple this with opening up the windows to let fresh air circulate and create a bright, airy space. 

Don’t neglect the exterior

If you’re lucky enough to have your own outdoor space with your property, whether a garden, a patio or even a balcony, don’t neglect them when preparing to put your home on the market as they play a vital role in the overall look and feel of your home. Sweep any pathways, mow the lawn and rid the beds of weeds to get the area looking clean and tidy. You may also want to enhance the area further with garden furniture, planters or new flowers to add colour and interest. 

Consider home staging

Property staging is a great investment for making your home look its best, as it helps a buyer imagine themselves living in your home. Presenting your home in a certain way could help to speed up the selling process and even help secure a higher price in some cases. Maybe it’s switching out the lighting, replacing furniture with something more neutral or adding mirrors to create the illusion of bigger rooms. You may want to stage your home yourself or you can pay for specialist companies to do it for you for a fee. If you’re serious about selling and need a quick sale, it could be a good investment. 

Only renovate to increase value

Moving is an expensive task, so when you’re selling up, you don’t want to waste money unnecessarily. Unless a renovation will add significant value to your home and increase your profits, it’s not worth spending the money or dealing with the hassle of a big project. If you’re unsure, it’s worth getting a professional opinion from your estate agent to see whether they believe your intended project will add value.

Gather documents

If you’re lucky, your home will sell quickly so to speed up the process even more, gather any necessary documents you’ll need such as evidence of permissions for any building work you’ve had done to the house, the latest utility bills, receipts for new installations such as boilers, and so on. You then have these to hand if potential buyers request them or if you need to supply them to your mortgage broker or conveyancer.

Selling a home can be stressful, but with a bit of prior planning and forward-thinking, you can make it a simpler and hopefully quicker process. 

About the author:  Annie Button is a professional content writer and branding aficionado.

Much of last year’s frenzied transactional activity was fuelled by homebuyers looking to capitalise on the pandemic-induced stamp duty incentives and the historically low interest rates, which started to climb upwards in December.

Indeed, the market’s defiant buoyancy has shone through the industry’s leading house price indices over the last quarter. Recent data from Rightmove showed yet another new price record in March for the second consecutive month, as the average price of property coming to market jumped by 1.7%. According to the data, this is the largest increase at this time of year since March 2004.

Against the backdrop of the current highly competitive market conditions, macroeconomic and geopolitical uncertainty has clouded the current economic climate. Buyers and borrowers are contending with rocketing energy prices, soaring inflation and multiple interest rate increases, the latest of which has taken the base rate up to 0,75%. Admittedly, having been cut to a historic low of 0.1% in March 2020 at the outset of the pandemic, further hikes were inevitably set to become a more frequent occurrence, particularly in light of the building inflationary pressures. 

As lenders, we have a responsibility to acknowledge these headwinds and look to be proactive in providing assurance and certainty for our brokers and borrowers. This can be achieved in a number of ways, from the financial instruments we have at hand to help borrowers navigate the complexities of the market, to enhancing proactive communication in anticipation of clients’ needs.

Navigating the evolving landscape

As the UK moves into an environment of tighter monetary policy, financial institutions must undertake a delicate balancing act.

They must anticipate their client needs, ensure that fundamental services and products are available in the market and also be prepared for any number of future scenarios, given the rapidly evolving landscape.

Recent data from Moneyfacts showed lenders have pulled over 500 mortgage products from the market in February meaning there are now 518 fewer products to choose from, leaving 4,838 fixed and variable rate mortgages available at the start of March. It is likely that borrowers will also be met with a tightening of lending criteria, particularly in the mainstream mortgage market.

Against the uncertainty of the delicate economic environment, lenders’ ability to offer agility, flexibility and effective communication becomes ever-more important to help borrowers navigate the competitive market conditions and added financial pressures.

To shed light on mortgage customers’ sentiment towards their lenders and the wider mortgage market, Butterfield Mortgages Limited recently commissioned an independent study among 690 mortgage customers in the UK. The timely research highlighted the value mortgage customers place on having the support of an attentive lender, with two thirds (65%) believing it is key to succeeding in the competitive market.

The research also uncovered a desire among borrowers for more flexibility from lenders, with 59% saying mortgage providers rely too heavily on strict and rigid criteria when assessing an applicant’s eligibility. This ‘tick-box’ methodology favoured by mainstream lenders tends to exclude those with complicated financial structures or irregular sources of income, which can mean sound borrowers being overlooked.

In turn, brokers must play their part – the data found that the most common method of finding a mortgage lender is through broker advice, while 60% of homeowners felt working with intermediaries made the application processes easier. Fostering strong relationships with all stakeholders in the property market will more adequately position lenders to adequately meet the needs and demands of their clients.

Fixed-rate products

Lenders can also assuage concerns over the volatile environment by exploring how they can diversify their product offering to suit borrowers’ differing needs. 

For instance, with uncertainty mounting over the successive interest rate hikes, offering loans with fixed interest rates across the entire term will become an increasingly appealing option for borrowers at all levels.

The importance of offering products tailored to the needs of the market was also evidenced in BML’s recent study. When it comes to the key factors influencing borrowers’ choice of product, the terms of the loan and additional fees emerged as the most prominent – both were cited by 85% of customers as being important considerations. This was closely followed by the interest rates (84%), while the length of the fixed term and the ease of application were both selected as important by 80% of customers. 

For Butterfield Mortgages Limited, our focus at present is fixed on how we can best support borrowers, be that our current or prospective clients. For instance, we have been reaching out to our clients to explain that we are able to offer flexible, fixed-rate terms for up to ten years, giving them more security over potentially unpredictable years ahead.

Enhancing customer support

Favourable terms will go a long way to assuring customers of the long-term viability of their loan, but they must go alongside appropriate ongoing communication from the lender. Times of uncertainty will bring anxiety and caution, so lenders should seek to project clarity on both their present standing and ability to adjust to evolving circumstances.

The research highlighted that three-quarters of respondents (77%) considered the lender’s quality of customer service an important factor in selecting their mortgage, however, the findings revealed borrowers are seeking greater customer care. Nearly half (48%) of all mortgage customers felt lenders do not provide adequate support to borrowers once the loan has been delivered, indicating significant room for improvement across the sector.

I believe there is an opportunity for lenders to take a proactive stance toward customer engagement and the importance of regular communication once the loan has been delivered must not be overlooked.

Elsewhere, six in ten (59%) felt mortgage providers continue to rely too heavily on strict and rigid criteria when assessing eligibility for loans. This ‘tick-box’ methodology favoured by mainstream lenders tends to exclude those with complicated financial structures or irregular sources of income, which can mean sound borrowers being overlooked. From these figures, we can ascertain the value of lenders helping their customers through all stages of the loan process, particularly as borrowers’ lending profiles continue to evolve.

As the property market takes shape against the backdrop of rising interest and inflation, flexibility will be the watchword for lenders. The research suggests that homebuyers are increasingly willing to consider specialist lenders to find financial products which more accurately suit their needs, including products that offer longer-term insulation from adverse borrowing conditions. Even so, lenders must now assess how they are supporting their customers; while financial products can address challenges directly, a culture of caution from borrowers may take hold if greater communication and care is not taken to build productive relationships with all stakeholders. 

Alpa Bhakta is the CEO of Butterfield Mortgages Limited, which is a London-based prime property mortgage provider with a particular focus on the needs of UK and international HNWIs.  

Butterfield Mortgages is authorised and regulated by the Financial Conduct Authority (FRN:119274).  

Butterfield Mortgages Limited is part of the Butterfield Group and a subsidiary of The Bank of N.T. Butterfield & Son Limited. 

2021 is expected to mark the country’s busiest property market in 14 years in terms of property transactions, as homeowners seek out more living space amid the pandemic. This is according to Zoopla’s latest house price index. 

Zoopla’s data reveals that, by the end of 2021, 1 in 16 houses will have changed hands, making this year the busiest property market since 2007. 

High demand is pushing up the rate of annual house price growth, which is tailing at 6.9%, up from 3.5% in October 2020. Nonetheless, the growth marks a slight easing back from the growth above 7% seen in August and September. A slowdown in the overall pace of growth is also indicated by the data. 

The average value of a home in the UK now stands at £240,000, up from £200,000 five years ago. The past 12 months alone have seen the average price increase by £15,500. 

While buyer demand is currently 28% above the 5-year average, the supply of homes being put up for sale in 2021 has been running between 5% - 10% below the averages seen in 2017 and 2019. 

However, despite some interest rate rises, it is likely that mortgage rates will stay relatively low compared to long-run averages. Additionally, there is also greater space for price growth across some of the country’s most affordable housing markets. 

With the frenetic activity of the past 18 months looking likely to cool following the stamp duty holiday’s conclusion, the property sector now has a rare opportunity to draw breath and assess how the market is likely to evolve in the coming months.

Reflecting on the SDLT holiday period will naturally lead to differing opinions – the sector contains a huge number of stakeholders, each of whom will have their own take on the relative successes or failures of the schemes. For instance, it would be easy to suggest that buy-to-let investors and homebuyers benefited significantly from the SDLT holiday, in the short term at least. However, figures released by the Office for National Statistics showed average UK house prices increasing by 8% (or £19,000) in the year to July 2021. In other words, the uptick in property prices actually exceeded the total tax savings on offer (£15,000). 

One thing we can say for certain is that lenders, agents, legal firms and essentially any organisation involved in the transacting of real estate will probably have been busier than normal since July 2020.

This is certainly true of bridging loan providers, which have in many cases experienced a surge in applicants who were looking to capitalise on the stamp duty holiday, yet have been hampered by the shortcomings of traditional lenders.

How could the market shape up going forward?

Taken in whole, the UK economy shrunk by nearly 10% over the course of 2020, highlighting the resilience of the property sector (where house prices rose sharply) in the face of broader economic downturn. This indicates a number of things; in particular, the role of property as a cornerstone of the UK economy, marking it out as an evident ‘safe haven’ asset that should continue to attract investors even as uncertainty continues to plague many other sectors of the economy.

This hardiness to outside market forces gives rise to the larger question of how the revival of full-rate stamp duty will impact the market in Q4. There is, of course, a simple logic to the idea that re-imposing a tax of up to £15,000 will naturally lead to a cooling of transactional activity, and in turn a modest downward correction in price levels. 

There are encouraging signs pointing towards price levels proving sustainable in the immediate aftermath of the pandemic. Recently, house prices were forecast to grow by 3.5% each year between 2022 and 2024, indicating a healthy return to more sustainable growth.

In this case, it is credible to suggest that the primary influence of the stamp duty holiday was not, in fact, the creation of a property bubble, but instead an acceleration of long-term annual growth trends.

Alternative finance enters the spotlight

The frenzy of activity also gave rise to an enhanced role for alternative finance products. As various deadlines for rate savings loomed over investors and homebuyers, many traditional lenders struggled to adapt to the scale and diversity of the demand. For instance, in the early months of the pandemic, traditional banks and lenders withdrew the vast majority of mortgage products from the market. This was a risk-averse move in the face of wider uncertainty and an initially depressed property market, though led to a lack of preparedness for the flurry of activity that was to follow. 

The ‘tick-box’ methodology used to consider applicants by traditional lenders is often challenged by those with complicated financial structures or irregular income sources. Accordingly, the traditional lenders fell short of delivering on market demand. In H1 2021, it took 16 days longer to complete a property sale than it had in H2 of 2020, with the delay largely attributed to excess time spent on securing a mortgage. Bridging products, on the other hand, are considered on a more ‘case by case’ basis, and so can often be approved and deployed much faster.

Property chains became a more pronounced issue as the stamp duty holiday progressed, with a broken link carrying the potential cost of missing out on the savings. As brokers and buyers sought to access bridging finance to hold together fracturing property chains and afford themselves some breathing room to complete a sale with the security of having already advanced with their next purchase, bridging products came into their own. Indeed, during the stamp duty holiday, one of the major motivating factors for a rise in applicants was the need to complete in time to access the tax relief and to step in where traditional lenders were unequipped to facilitate financing.

For bridging loan providers, then, the stamp duty holiday has underlined the importance of keeping the market as liquid as possible, with ongoing opportunities to deliver personalised and high-quality service to investors, and affording a flexible service while traditional lenders shuffle their feet.

About the author:

Nikes Khagram is a founding partner and director at KSEYE, a London-based bridging lender. Founded in 2012, the company provides short-term finance solutions to property investors in England and Wales. Its mission is to transform the bridging finance experience for brokers and borrowers, ensuring they can access the finance they need in a fast and flexible way.

1. Get The Best Realtor

Sellers should try to get the best realtor they can be. There are a lot of good agents out there who want your business and will work hard for you. Sellers need to make sure that their home is in move-in-ready condition before listing it with an agent. You could also choose the best home buying company as it will help sell your house faster and at the best price. It's important not only from a practical perspective, but the fact that you'll be saved from the hassles that come with selling a house on your own is all worth it! 

2. Price Your House Competitively

Sellers often get their hopes up, looking at the highest price from a year ago. But what did that house actually sell for? You could end up with someone willing to pay top dollar only because they don't know about all of the competition in your area. Sellers should price their homes competitively for what similar properties are selling for in their neighbourhood.

3. Be Honest With The Condition Of Your Home

Sellers need to be realistic about the condition of their home in order for buyers to take it seriously. Sellers should not think that they can get away with hiding defects in the home just because it is their own. Sellers who are looking for the top dollar would be wise to invest some money into renovations or repairs before putting up the home on the market, as this will help you attract more buyers and ultimately receive a better price.

4. Have Patience While Waiting For An Offer From A Buyer

Small house sat on calculator

Sellers tend to get antsy and want a quick sale. If you find your buyer quickly, that is great. Sell as soon as possible if this happens, but don't pressure yourself into selling the house before it's time. Sellers who do not have patience tend to give in and accept low offers because they feel like it is the best deal on the table. So, be patient and try to stick with your selling price because it is the best price for your house. Sellers who are willing to wait for that perfect buyer tend to get better offers.

5. Paint The Exterior Of Your Home A With A Fresh Colour 

It's possible that if you're considering moving out of your current home, that it may be time to paint the exteriors. To make sure you get the best deal for your house and sell it faster than expected, consider painting before listing. It will definitely show a buyer how much work has been put into maintaining its appearance over the years while giving them ideas about their own potential upgrades after purchase. A fresh coat of paint can do wonders. So what are some colours you see in modern houses? Well, homeowners looking to move often choose shades like light greys or whites with greys being popular as well since they have an airy feel, making rooms seem larger and more open. Lighter colours also have a fresh, clean look that will appeal to most buyers. And don't forget about neutrals if you're looking for a more traditional style, as they can be easily paired with any accent colour.

6. Be Confident About Selling Your Property

Sellers are often plagued with self-doubt, which can end up costing them thousands. Be confident that you know what your house is worth and why it's a good investment for buyers. This will help to ensure that the process goes smoothly and that you don't put yourself at risk by selling too low, or miss out on potential profit because of buyer doubts about the price.

Sellers who fear raising their asking prices may settle for lower offers than they should receive due to a lack of confidence in their property value. One way to combat this fear is simply researching comparable home sales data, so there's no mystery surrounding market values. You should be aware not only how much other homes sold for, but also how quickly they went under contract. This also means that you should be confident in your property value, and this confidence will help sell the house much faster.

7. Install A New Mailbox

Anyone selling their home should prepare for showings by installing a new mailbox. It can be an old-fashioned design or something more modern, but it should have the same appearance as other mailboxes in your neighbourhood. Sellers should also make sure that the box is emptied and free from junk mail. If you are selling your home on your own, you could paint the mailbox to give it a fresh look. It might not sound like much, but this is an important step to helping give your front yard a new look. 

When you’ve finally decided it's time to sell your house and move, the next step is figuring out how to do that. You could ask friends who've been through all that, find buyers online, and in addition to this, post your home on online listing websites. It will not be easy at first, as this is one of the most challenging things to do in life. This has been your home for years, and you must have been attached to it. 

To sell your property, you need to find a motivated buyer and be confident in the market and of what your home is worth. In addition, it’s important that you have an experienced realtor who understands how buyers think about properties for sale. There are many factors that go into pricing competitively for similar properties in your area.

Evergrande owes $305 billion but has run short of cash, leaving investors deeply concerned. A collapse of the company could pose systemic risks to China’s financial system and could reverberate around the globe. 

The deadline for paying off the $83.5 million in bond interest went by without any remark from Evergrande. Bondholders were not paid and apparently heard nothing from the company. Evergrande has now entered into a 30-day grace period. It will default if this period passes without payment. 

Howe Chung Wan, head of Asia fixed income at Principal Global Investors in Singapore, said: "These are periods of eerie silence as no one wants to take massive risks at this stage. There's no precedent to this at the size of Evergrande [...] we have to see in the next ten days or so, before China goes into holiday, how this is going to play out."

On Friday, China’s central bank once again injected cash into the banking system. However, authorities in the country have kept quiet on Evergrande’s situation, with no mention of any sort of potential rescue package.  

Last week, Evergrande appointed financial advisers and warned of default. On Monday, global markets fell dramatically amid fears of contagion, though they have stabilised since. 

Chinese policymakers now face the dilemma of how fiercely they can impose financial discipline whilst also avoiding social unrest. The collapse of Evergrande could devastate the property market which accounts for 40% of household wealth in the country. Even by last week, there were protests by disgruntled suppliers, home buyers, and investors, demonstrating how discontent could quickly and easily spiral if a default triggers crises at other developer companies. 

Namely, the spike in both transactional activity and house prices. While many sectors were reduced to emergency survival operations, the property market basked in largesse. On reflection, the sheer scale of the property boom over the last 18 months makes it difficult to remember that, in the early months following the onset of the pandemic, this sector faced as many challenges as any other. The most immediately striking of which was the need for the sector to adapt to social distancing restrictions. 

Estate agents and conveyancers, in this uncertain initial period, struggled to translate their offering to digital platforms, having lost the ability to perform on-site property viewings. In turn, activity slowed, as buyers were unable to assess these large investment assets with their own eyes. Should a residential property transaction have been completed in this period, there were significant obstacles to actually moving property, with removals firms, decorators, and tradespeople, all operating at a restricted capacity, if at all. 

There were more fundamental issues clogging up the liquidity of the market. For one, obtaining wet signatures on crucial documentation became a tiring process. It was not until late July 2020 that HM Land Registry announced it would now accept witnessed electronic signatures.  Equally disruptive was that, on the financial side, mainstream lenders took a particularly cautious approach given the prevailing economic uncertainty, with the consequence being the vast majority of basic mortgage products falling out of the market. It is important to establish these financial and structural challenges to understand how alternative finance, in particular bridging loans, became so well-placed to access a larger market, once the sector began to rejuvenate at pace in the summer.

How the sector turned around

By the summer of 2020, the dark clouds that loomed over the UK housing market began to part. In fact, the market bounced back from the initial gloom with unprecedented vigour – a marked and sustained period of growth which, more than a year later, has yet to show signs of plateauing. Naturally, the twin factors underpinning this reversal of fortunes were the tentative lifting of some social contact restrictions, and the seismic introduction of the Stamp Duty Land Tax (SDLT) holiday in July – instantly unlocking pent-up demand and instigating a flurry of opportunistic buying. The UK’s love affair with property is renowned, and in particular, during a crisis of long-term economic uncertainty, the SDLT holiday’s offering of a £15,000 saving for buyers on a safe haven asset naturally caused a boom in both house prices and volume of transactional activity.

Nationwide reported that the rate of growth in house prices in the year to June 2021 reached 13.4%; the highest rate seen in nearly two decades. Further data released by HMRC shows that transactional activity reached rare heights; with 350,000 residential exchanges completed in Q4 of 2020 – the highest levels in six years.

Alternative financing facilitating the market

UK property market amid covid-19 pandemicThis near-unprecedented surge in demand, volume of transactional activity, and sharp rise in prices, caught some elements of the property industry somewhat by surprise. A study conducted by Trussle found that, over the course of 2020, the time taken to approve a mortgage increased by more than double – from eight to 22 days. Significantly, this covers only the process from application to approval; it excludes the time for approved funds to actually be released. Given the urgency within the market, as buyers looked to take advantage of a rare and substantial immediate cost-saving, it is reasonable to suggest that the protracted application process was a source of anxiety for buyers. Meanwhile, many bridging loan facilities can be deployed in as few as three days – a huge boost for buyers.

It should also be noted that property purchases cannot be considered in isolation – most residential purchases depend on the sale of an existing asset, and so on, forming much-maligned property chains. Delays or obstacles faced by one purchase can have myriad consequences for any number of tangentially related purchases. Accordingly, the speed of delivery and flexibility of alternative finance afforded buyers greater confidence in their ability to proceed with a purchase. Should delays occur on a dependent sale, then the purchase can still proceed and be remunerated later on when the related deal completes.

Data from the Association of Short-Term Lenders (ASTL) reveals a clear shift by buyers towards engaging with alternative finance. In Q3 2020, there was a 25.7% increase in the volume of applications for bridging loans products. In Q4, there was an even greater surge in applications, with a year-on-year rise of 39.1%. It is evident that the conditions of the pandemic exposed buyers to the numerous benefits of alternative finance.

The question remains, as it does with the property sector as a whole, whether this growth will prove sustainable once normality properly resumes. After all, it is widely anticipated that the resumption of full rate SDLT will precipitate a cooling of activity in the property market – which would naturally lead to a reduction in the amount of financing required. 

This is a credible projection, certainly, though it is my view that the alternative financing sector has emerged from the pandemic in a healthier position than before. The circumstances surrounding its boom in activity have afforded short-term lenders an opportunity to extol the virtues of these types of financial products. 

Even in ‘normality’, there will continue to be a need to provide flexible loans to those with complex financial structures who may miss out on tick-box mortgage products; and concerns around property chains are here to stay. Accordingly, there is optimism within the sector that, even post-pandemic, bridging loans and alternative finance more generally will continue to engage a variety of buyers.

About the author: Paresh Raja is the founder and CEO of Market Financial Solutions (MFS) – a London-based bridging loan provider. Prior to establishing MFS in 2006, Paresh worked as a senior professional consultant in one of the top five management consultancy firms, and also set up an independent investment group.

Pent-up demand during the initial phases of the pandemic, changing preferences among homebuyers, and the Stamp Duty Land Tax (SDLT) holiday combined to fuel this market growth. The result was a well-documented rise in property prices and transactional activity.

Now, as we look cautiously towards a return to ‘normality’ over the coming months, the question of the national debt is rising to the fore. Of course, with such extreme financial support measures required for businesses and consumers alike, this issue was inevitable. And it is the bullish property sector that could come under the microscope or, more specifically, the way property transactions are taxed. It is an apt time, then, to delve deeper into the subject of stamp duty––something that has seldom strayed from the media spotlight over the past year given the Government’s aforementioned temporary tax break. 

A short background

For me, any discussion of SDLT requires us to first appreciate its history, which is often overlooked. Most notably, we must acknowledge the fact that the tax as we recognise it today is younger than those who pay it. Though it is considered an inevitability and has roots in broader goods taxes going back centuries, the SDLT functioning as a simple tax on land transactions and paid by the buying party came into effect via the Finance Act 2003.In the following 18 years, the tax has been numerously tweaked and complexified to suit the needs of the market and the national economy.

The most significant of these was the introduction of bands, and rates within them. Formerly the tax had been a percentage calculated by the total cost of the transaction. In December 2014, this was reformed to a banded system with a nil-rate on transactions up to £125,000 and a top rate threshold of 15% for properties changing hands for over £500,000.

The SDLT has also been slimmed down and reinforced to stimulate or cool activity amongst certain types of transactions. For instance, domestic purchasers of second homes, and residential purchases by non-UK residents are subject to surcharges of 3% and 2%, respectively. Meanwhile, first-time buyers can access reduced rates, including an extension of the nil-rate to £300,000. Accordingly, the SDLT can be considered a somewhat flexible tax––constantly evolving in its function, eligibility, and revenue generation utility. As a result, many will conclude that a more permanent reform of this tax may shortly follow.

Areas for further change

Depending on state priorities, the most likely change will be an adjustment in bands and rates. It would be productive in the short term to consider a modest increase in the nil-rate band to account for purchases in higher-priced urban areas, where first-time buyers will typically still need to pay the tax. Equally, a reduced top rate could do much to entice back to UK shores the flow of international investment that was stifled by the pandemic’s travel restrictions. This seems less likely, however, particularly in light of the recently introduced surcharge on overseas buyers, as noted above. 

What we can say with more certainty is that further reform is in the offing. House prices have been on the rise consistently for more than a decade, and the pandemic spike has accelerated this trend––the average house price was estimated to have reached £261,743 in June, a rise of 9.5% in just 12 months. As prices rise and rise, the stamp duty bands are likely to undergo changes of their own. There is a range of more creative ideas for reform that are frequently thrown around. Some have called for the tax to be levied onto the selling party, rather than the buyer. Others consider alternative systems used abroad to be more favourable and equitable. For example, introducing an annual tax based on land value, which could stimulate developers and speed the pace of regeneration in the UK’s under-invested provinces.

Naturally, any reform to the SDLT will evoke strong reactions from those with a vested interest in the sector. While the robust health of the property market has been heartening for investors during this difficult period, new priorities are beginning to emerge as growth and confidence return to other markets. Accordingly, with consideration to rising public debt and the need for a sure-footed post-pandemic recovery, it will be intriguing to see how SDLT reform is handled over the coming months.

About the author: Alpa Bhakta is the CEO of Butterfield Mortgages Limited. Part of the Butterfield Group and a subsidiary of The Bank of N.T. Butterfield & Son Limited. Butterfield Mortgages Limited is a London-based prime property mortgage provider with a particular focus on the needs of UK and international HNWIs.

About Finance Monthly

Universal Media logo
Finance Monthly is a comprehensive website tailored for individuals seeking insights into the world of consumer finance and money management. It offers news, commentary, and in-depth analysis on topics crucial to personal financial management and decision-making. Whether you're interested in budgeting, investing, or understanding market trends, Finance Monthly provides valuable information to help you navigate the financial aspects of everyday life.
© 2024 Finance Monthly - All Rights Reserved.
News Illustration

Get our free monthly FM email

Subscribe to Finance Monthly and Get the Latest Finance News, Opinion and Insight Direct to you every month.
chevron-right-circle linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram