Alpa Bhakta, CEO of Butterfield Mortgages Limited, explores the current landscape of London property investment and how it may soon shift.
During the last five years, the prime central London (PCL) property market has witnessed significant shifts and spikes in demand and supply. However, nothing could have prepared the market for the immense impact of the COVID-19 pandemic and the consequential UK-wide lockdowns.
The economic ramifications of the novel coronavirus pandemic will undoubtedly be felt across the global economy for some time. But, when it comes to the UK prime property market, there is more than one reason to be optimistic about the future.
Alongside numerous other measures introduced to encourage consumer spending and investment activity, the UK government announced a series of measures to support transactional activity across the real estate market.
And, in this, the government has been successful. Recently, the property market witnessed its fastest rate of house price growth in over four years. This is very much a result of the Stamp Duty Land Tax (SDLT) holiday. No wonder, given that the tax relief policy allows anyone – from first time buyers to seasoned buy-to-let (BTL) investors – to save up to £15,000 on British property purchases.
Based on experience helping clients navigate the PCL property market, I’ve noticed multiple trends that potential PCL investors should keep abreast of over the coming months. As England navigates its second nationwide lockdown, the precise nature of the capital’s property market remains uncertain. Nonetheless there are certainly things for those interested in prime property in the capital to be on the lookout for.
Recently, the property market witnessed its fastest rate of house price growth in over four years.
London: the jewel of UK property?
With remote working set to remain a reality for many of London’s professionals, some property commentators feared a collapse of the PCL market as newly homebound workers fled to the countryside. This has demonstrably not occurred.
Although some shift in buyer demand away from central London and towards quieter, more suburban areas was recorded by Rightmove, this trend’s impact on the PCL market is seemingly minimal.
Despite the so-called working-from-home revolution, the market for properties in central London worth in excess of £5 million has been one of the most active sectors of the UK’s real estate market throughout 2020. The number of transactions involving such properties was 13% higher during Q1 2020 than during the same period in 2019; and Q3 saw more PCL housing sold than during any other quarter since 2015.
Even within the £5 million + London property market, over half of all such sales are located in just five postcodes, according to Savills.
The driving force behind this spike in activity is multi-faceted. Yes, the previously mentioned government initiatives to support the UK property market are partially responsible. But, given that the SDLT holiday only protects the first £500,000 of a purchased property’s cost from the tax, there must be other underlying forces at play.
One such force is the SDLT foreign buyer surcharge. Due to be implemented on April 1, 2021, this added 2% tax for those purchasing British property from abroad represents a massive intervention into the PCL market. In H2 2019, such buyers represented 55% of all PCL transactions.
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A motivating factor for many foreign buyers at present, then, will be to avoid this added cost. This trend will likely continue until the currently scheduled end of the SDLT holiday on March 31, 2021, with international investors keen to complete on transactions before this key date. Reportedly, 22% of such buyers are so keen that they’ve purchased property without a single viewing, according to London Central Portfolio.
With such an impressive year for transactions numbers then, I believe that the PCL property market’s prospects should only improve as COVID-19 is brought under control. At the moment, that could be sooner rather than later based on recent vaccine announcements.
As it currently stands, the PCL property market looks set to remain strong for the foreseeable future. Buyer demand from domestic and non-UK residents is increasing the number of transactions taking place, demonstrating the underlining attractiveness of prime property as an investment venture.
The average UK home sold for more than £250,000 last month, marking the first time the average has crested a quarter of a million pounds.
New data was released in Halifax’s latest House Price Index, a leading authority that gauges the state of the UK property market, showing that prices rose 7.5% higher in October than their average during the same period in 2019 – reaching as high as £250,547. The increase also marks the highest rate of annual growth since the middle of 2016.
The increase follows a surge in house prices in September, with a combination of the stamp duty holiday and a pent up demand from the initial lockdown period pushing the price of the average UK home up to £249,879.
Halifax managing director Russell Galley credited the continuing effects of the pandemic for creating “clear headwinds” for the UK property market. He added that stamp duty cuts and rising interest in moving “supercharged” demand and pushed prices higher.
“Overall we saw a broad continuation of recent trends with the market still predominantly being driven by home-mover demand for larger houses,” Galley said, adding: "The country's struggle with COVID-19 is far from over.”
While Halifax’s new index showed year-on-year growth to be strong, the rate of monthly price gains appeared to be slowing sharply. Prices rose by 0.3% between September and October, a notable decrease from the 1.5% rise seen a month earlier and 1.7% in the previous two months.
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Halifax warned that economic fallout from the COVID-19 pandemic, likely to arrive in early 2021, would put “downward pressure” on home prices.
Alpa Bhakta, CEO of Butterfield Mortgages Limited, explores how large and small banks have responded to the disruption caused by the pandemic and how it is likely to shape the future of the sector.
No business or sector is immune to the impact COVID-19 has been having on society. Not only are there the immediate health implications to deal with; the introduction of lockdown measures and social distancing has completely transformed the way businesses, investors and consumers interact with one another.
There is a general acceptance that, regardless of how or when the COVID-19 pandemic is effectively contained, the changes brought about by the virus will be permanent. From flexible working patterns to the adoption of digital processes that reduce the need for physical interactions, businesses are slowly transitioning to what is now being termed as the “new normal”.
Of all the sectors adapting to the new normal, one could argue the financial services sector faces some of the biggest obstacles. Historically, large financial institutions have naturally relied on traditional practices and have been slow to embrace change. This is partly due to their size and the natural time it takes to reorganise teams, install new systems and pass the necessary due diligence checks.
Adapting to lockdown: how did banks perform?
The sudden rise of COVID-19 cases caught many of these organisations by surprise. When lockdown measures were announced by the UK Government back in March 2020, these companies were faced with the following challenges.
The first was overcoming the logistical hurdles involved in managing a company when the vast majority of employees were working from home. Unlike small, specialised businesses who were able to adapt to this new environment, big banks had to ensure the necessary systems and protocols were in place in order to continue operating whilst managing risks appropriately.
The second challenge was reviewing the current products and services on offer and deciding which needed to be temporarily withdrawn from the market. If we look at mortgages, the majority of high street banks decided to stop offering high LTV products. Others refused to process new applications, with stringent application checks put in place.
Unlike small, specialised businesses who were able to adapt to this new environment, big banks had to ensure the necessary systems and protocols were in place in order to continue operating whilst managing risks appropriately.
The decision to pull certain mortgage products from the market makes sense, particularly at a time when it was not known when social distancing would be eased. However, this also had a significant impact on homebuyers.
A survey of 1,300 homeowners and prospective homebuyers by Butterfield Mortgages Limited (BML) in late May revealed that over half of homebuyers had been denied a mortgage this year. This is despite having agreements in principle. Of those we surveyed, three in ten, or 31%, said they had lost their deposit due to delays in securing a mortgage as a result of the coronavirus.
These statistics are startling and bring me to the third and final challenge banks are indeed continuing to face. That is effectively engaging and supporting their clients so that these customers are in a position to confidently manage their finances and make significant investment decisions.
Responding to the changing needs of the market
Banks cannot afford to overlook the importance of effective customer engagement. After all, it is in these uncertain times that people are eagerly looking for advice and support. And based on separate research conducted by BML in the summer, it is apparent that some are not satisfied with their banks handling of the pandemic.
Indeed, some 19% of homeowners have lost faith in their banks this year because of the lack of financial support available during the pandemic. This is a concerning statistic and could signal the beginning of a bigger confidence crisis if not effectively addressed. What’s more, just under a third (31%) of customers said they were frustrated by their banks’ dependence on chatbots and automated services.
This is an interesting finding. At a time when people are more inclined to use digital services, it shows that banks cannot simply rely on a chatbot to meet demands for financial advice. In other words, banks need to see technology as an instrument that can be creatively leveraged to engage with their clients and networks. It is not a solution in of itself; rather a tool that will only be effective if part of a larger communication strategy.
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Customer engagement is key
Over six months since lockdown measures were first introduced, it looks as though the country could be facing a new wave of social distancing regulations. This is without doubt a frustrating development. The UK Government has been actively trying to encourage spending and investment activity through targeted policies, and banks have been slowly putting products back on the market.
Regardless of what lies on the horizon, banks need to ensure they are doing everything possible to engage with their clients. This means creatively adapting to the new normal and not letting the other challenges they face overshadow their customer engagement. Failing this, they could risk losing customers in the long-term.
Jamie Johnson, CEO of FJP Investment, explores the new property landscape that the COVID-19 pandemic has created and offers his advice to prospective BTL investors.
Almost no investment strategy could’ve prepared one adequately for the sudden onset of COVID-19. With financial markets exhibiting unprecedented uncertainty, and no end of the pandemic in sight, investors are no doubt treading lightly to minimise their risk exposure.
Here in the UK, we have seen a significant number of investors turning to the real estate market. Based on recent statistics, we can observe that demand for residential property has been rising at a significant rate, resulting in growing house prices and increased transactional activity.
Much of this activity can be attributed to the implementation of the stamp duty land tax (SDLT) holiday in July, ensuring that all homebuyers were exempt from paying the tax on the first £500,000 on all properties in England and Northern Ireland. This exemption also applied to buy-to-let (BTL) purchases.
The subsequent jump in demand triggered a surge in market activity, itself resulting in an uptick in property price growth. Halifax’s September house price index showed that, even in the midst of a pandemic, house prices had increased by over 7% year-on-year; and a recently released survey by the Royal Institute of Charted Surveyors revealed that we’re now experiencing an 18-year-high in the rate of UK house price growth.
So, with the UK property market booming, it follows that buy-to-let investments would be in vogue. As the SDLT holiday deadline beckons closer, those seeking a BTL investment would do well to quickly decide whether or not they wish to add to their property portfolio.
But where’s the ideal place to purchase such a property? And where, over the next decade, is likely to emerge as the UK’s next BTL hotspot?
Halifax’s September house price index showed that, even in the midst of a pandemic, house prices had increased by over 7% year-on-year
Changing preferences for rental properties
There’s one thing we know for certain about the UK’s next BTL hotspots: they will not be confined to central London. Figures from Rightmove recently demonstrated the extent in which newly-home-bound professionals are seeking larger, cheaper properties outside of central London; as companies adopt working-from-home en masse and, subsequently, move to smaller commercial real estate spaces.
Buyer enquiries regarding cities like Cambridge are up 76%, whereas locales like Earls Court and Euston are down -40% and -10% respectively. This shows that buyers are clearly looking beyond the capital to consider potentially cheaper properties that also offer additional lifestyle benefits. No doubt this type of behaviour is also being adopted by renters seeking cheaper accommodation in order to reduce rental payments and save enough money for a deposit.
Looking to the different cities and regions attracting significant attention from BTL investors, I have detailed below some of the hotspots that should be on the radars of these buyers.
Leeds life
When comparing cities for BTL investment, Leeds has the advantage of being recently deemed the ‘most profitable city to become a landlord in the north of England’; according to CIA Landlord.
Although not offering the highest rental yields, the combination of low average property values and a bustling student population means this Yorkshire city is primed and ready to offer considerable long-term gains for property investors over the coming 12 months.
And not only does the student population offer an endless stream of tenants, but Leeds’ exclusive status as a ‘brain gain’ city, shared with only Manchester and London, means that more of these students remain in the city after graduation than those that move away. One consequence of this is that the city hosts the nation’s largest financial services sector outside London, potentially attracting investment from companies eager to move out of their expensive London offices following COVID-19.
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Liverpool
Those aware of the UK’s BTL market will already know that Liverpool has ranked #1 in numerous rankings of UK cities in terms of potential BTL rental yields. As a key beneficiary of the UK Government’s ‘Northern Powerhouse’ initiative and with six universities and colleges in total, Liverpool is ideally situated to be a willing recipient of those leaving London for larger, cheaper accommodation.
For BTL investors, there are thankfully multiple developments to choose from. Five entire neighbourhoods are soon to be completed as part of the Liverpool Waters development, and the Wirral Waters plan will bring both residential and commercial developments alongside 25 miles of the River Mersey.
And, thankfully, these developments are being matched with an adequate level of infrastructure. High-speed rail connections between Leeds, Manchester and Liverpool are due to be finished within half a decade, likely increasing the average property value in these cities immediately upon completion.
Shining beacon of property
Coronavirus has demonstrated to investors, consumers, and homeowners the attractiveness of real estate during uncertain times. Buy-to-let investments allow for investors to take advantage of property’s unique survivability; ensuring rental dividends and the potential for long-term capital growth. And with the UK’s housing crisis still very much unsolved, there continues to be a real market need for rental accommodation.
I’m confident that the cities I’ve described above will enjoy an influx of BTL investment before the end of the SDLT holiday in March next year. I anticipate new communities of renters to emerge across the country over the coming months, with more people looking to locations that offer affordable living accommodation and significant lifestyle benefits. While I still think London will remain a leading global city, BTL investors would do well to consider rising rental hotspots.
UK property prices jumped by 7.3% year-on-year during September, with lender Halifax also reporting in its latest House Price Index that mortgage applications have reached a 12-year high.
Halifax’s figures showed that the average price of a residential home reached £249,870 in September, a 1.6% rise from August. This brought the annual growth rate to 7.3%, the fastest observed since June 2016, beating analysts’ predictions of 0.6% monthly growth.
“Few would dispute that the performance of the housing market has been extremely strong since lockdown restrictions began to ease in May,” said Russell Galley, managing director at Halifax. “Across the last three months, we have received more mortgage applications from both first-time buyers and home movers than anytime since 2008.”
However, Galley also warned of “significant downward pressure” that would be placed on house prices in the months to come as the housing market will eventually be dampened by the UK’s economic downturn.
“It is highly unlikely that the housing market will continue to remain immune to the economic impact of the pandemic. The release of pent up demand and indeed the stamp duty holiday can only be temporary fillips and their impact will inevitably start to wane,” he said.
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The “pent up demand” of prospective house buyers has been widely credited for the resurgence of property sales since March and April, when house viewings and moves were banned under COVID-19 lockdown measures.
It is likely that the housing boom will be weakened by the reimposition of strict lockdown rules in several parts of the UK, and by the ending of several of the government’s employment support measures at the end of October.
Jamie Johnson, CEO of FJP Investment, looks into the resurgence of the UK property market and how the government could sustain it.
After so many months in lockdown, attracting the investment needed to help bring back market activity to pre-pandemic levels is by no means an easy task. However, there have been some signs that government initiatives have, thus far, been successful in coaxing investors back to the market; most notably in the real estate sector.
Following the introduction of the stamp duty land tax (SDLT) holiday, property listing site Rightmove recorded a massive 75% increase in the number of buyer enquiries recorded on their site. And according to Nationwide’s House Price Index for August, house prices experienced their biggest monthly increase in over 16 years.
While undoubtedly a positive sign for the sector, the big question is whether such momentum can be maintained. Property investors need to feel confident enough that COVID-19 has been successfully handled by the Government and that the country can fully recover from the pandemic.
To gauge investors' sentiments towards the Government’s tackling of the pandemic, FJP Investment recently surveyed over 900 UK-based investors with assets in excess of £10,000; excluding residential property and workplaces pensions. Our research showed that, while the SDLT holiday has proven successful in reassuring some investor’s worries, there is still much more than can be done to help sustain a strong post-COVID economic resurgence for the UK.
Following the introduction of the stamp duty land tax (SDLT) holiday, property listing site Rightmove recorded a massive 75% increase in the number of buyer enquiries recorded on their site.
SDLT holiday a hit
Of the investors FJP Investment surveyed, a quarter (24%) plan on buying one or more properties to take advantage of the SDLT holiday, a figure that rises to 43% for those aged between 18 and 34.
Given that buyers can potentially save up to £15,000 through this tax break, it makes sense that those who may be making their first foray into the housing market would be keen to take advantage of the comparative discounts on offer.
However, a larger proportion of investors––43% of those surveyed––believe that the Government needs to offer further support to homebuyers and property investors beyond the SDLT holiday. Just over half (54%) are in favour of extending the mortgage payment holiday relief scheme beyond 31 October 2020, and 57% believe that more financial relief is needed to support the businesses affect by COVID-19.
It would serve the government well, then, to offer extra assistance to those seeking access to real estate opportunities, be it extending by extending SDLT holiday or providing additional financial relief for those affected by the pandemic.
Long-term worries
Perhaps a more pressing worry, though, is that 54% of UK investors that have lost confidence in Boris Johnson’s government generally based on its handling of the COVID-19 pandemic thus far. Investors will be wary of making any large financial decisions if they do not believe that the pandemic is under control.
Fears surrounding a mishandled second spike may limit the success of the SDLT holiday if the Government isn’t able to inspire confidence amongst homebuyers and property investors. The point is that there is clear demand for residential real estate – the challenge is ensuring buyers are given all the tools and incentives they need to make a fully-fledged return.
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The pressure is very much on Boris Johnson and Chancellor Rishi Sunak to assuage these concerns and boost investors’ confidence in the UK. Doing so will ensure that investors’ feel confident in injecting life back into the financial markets; and subsequently triggering a wider recovery of the UK economy. I am happy to say that current signs are indeed promising.
Jamie Johnson, CEO of FJP Investment, analyses the state of the property market and how it is likely to change in the near future.
On 6 July, chancellor Rishi Sunak delivered the so-called ‘mini-budget’. As part of his announcement, a series of reforms were introduced as part of the government’s strategy to boost economic activity. The real estate market is key driver of national productivity and growth. Recognising this, the chancellor announced the immediate introduction of a Stamp Duty Land Tax (SDLT) holiday.
What this means is that all buyers of property less than £500,000 in England and Northern Ireland are exempt from paying the tax until 31 March 2021. However, additional surcharges for second home purchases still apply.
The government backs property investment
The impact of this new initiative was felt almost immediately. Papers reported a ‘mini-boom’ in UK property as asking prices rose and buyers returned to the market in droves. Property listing site Rightmove recorded a 2.4% increase in the average asking price of properties being listed during the month of June. What’s more, the number of inquiries from potential homebuyers increased 75% year-on-year.
While it is still early days, all this indicates that the government’s policy has so far has proven to be a success. Demand which was previously being suppressed due to COVID-19 concerns is flooding back to the market. After months of property price decline and housing market inactivity, such impetus should be heartily welcomed.
The announcement of the SDLT holiday also followed Prime Minster Boris Johnson’s ‘build, build, build’ speech, pledging £5 billion to invest in housing and infrastructure. Collectively, these measures are part of the government’s broader vision to meet both the future property needs of the country while at the same time instigating a post-pandemic economic recovery.
Demand which was previously being suppressed due to COVID-19 concerns is flooding back to the market.
Priorities are shifting but demand remains the same
Of course, the pandemic will have lasting effects on society at large; and the property market is no different. As working from home becomes the new norm for many, the need to live within commutable distance from your company is being brought into question. The aforementioned statistics provided by Rightmove showed interest in London properties had only risen by 0.5%, implying that many homebuyers are now seeking properties away from London in light of the COVID-19 pandemic.
Other factors may disincentivise buyers away from London as well. Back in March, Rishi Suank announced a very different type of SDLT adjustment, an additional 2% surcharge for overseas buyers – due to come into effect in April 2021. Given just how integral foreign buyers are to the Prime Central London (PCL) property market, accounting for 55% of PCL transactions in H2 2019, the additional surcharge risks discouraging foreign investment into the capital.
With the lucrative PCL property market becoming less and less attractive for high-end developers for the reasons outlined above, house price growth outside the London commuter belt may begin to grow exponentially in the coming years.
But regardless of where your property portfolio is located, UK property is still proving itself to be a resilient asset class in the face of global crisis. Global property experts Savills confidently stuck by their prediction of 15% growth of UK house prices by 2024, even as the UK experienced the worst of COVID-19’s economic impact.
Their reasoning, which I fully agree with, is based on the idea that the strong buyer demand we saw in January 2020 – which facilitated the highest level of property price growth since 2017 - did not simply vanish when COVID-19 arrived. Instead, this demand was suppressed due to pandemic uncertainty, ready to return once coronavirus was in retreat. Now, bolstered by the SDLT holiday, the UK property market is set to enjoy this influx of previously suppressed demand; and house price growth is sure to follow as a result.
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FJP Investment recently carried out a survey of 850 investors to confirm this, and our findings supported this idea. 43% of those whom we spoke to stated they weren’t making any large financial decisions until they believed the coronavirus pandemic to be entirely contained. It follows that as COVID-19 cases in the UK decrease, these investors will gradually return to the market – increasing general activity and facilitating a prosperous property sector once again.
When this demand returns, I look forward to witnessing the changes that COVID-19 has inflicted upon the UK’s property sector. Will this surge in interest of non-London property continue, and where will the new house-price-hot-spots of the UK be? I, for one, am excited about finding out. As COVID-19 case numbers decrease, and investor confidence rises, we’ll all be enjoying the benefits of a resurgence of UK property sooner, rather than later.
Halifax’s house price index, released on Monday, revealed that the average UK property sold for £245,747 during August, the highest level since records began.
The widely followed index recorded a 1.6% increase on house prices in July and a 5.2% annual rise. This figure fell below analysts’ expected 6% year-on-year increase.
The UK has seen a house price boom in recent months, following the imposition of a stamp duty holiday on home purchases below £500,000 in England Northern Ireland which came into effect in early July. Lockdown measures in the wake of the COVID-19 pandemic also drove many first-time buyers to delay their search for a home, leading to a swell of demand as lockdown restrictions eased.
Halifax noted this demand surge in its release. “A surge in market activity has driven up house prices through the post-lockdown summer period, fuelled by the release of pent-up demand, a strong desire amongst some buyers to move to bigger properties, and of course the temporary cut to stamp duty,” the lender wrote.
However, Halifax also warned that the price increase will likely be curtailed soon: "Notwithstanding the various positive factors supporting the market in the short-term, it remains highly unlikely that this level of price inflation will be sustained.”
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Nationwide, a rival lender to Halifax, released its own figures last week that showed prices at record highs in August. According to Nationwide’s data, prices rose by 2% between July and August, and 3.7% from the same period last year.
Tiba Raja, Director at Market Financial Solutions, offers Finance Monthly her insight into the pandemic's impact on the lending market.
Economists and politicians are currently grappling with the question of how to bring about a post-pandemic economic recovery for the UK. So far, the government has introduced policies to stimulate investment, productivity and economic growth to this end. While these reforms have delivered measured success, more works need to be done. Businesses need to take a step back and understand how the pandemic has affected their respective industries.
This is particularly important when it comes to the lending market. Any attempt to support the economic recovery of the UK must include measures that support property investment. For this reason, I have listed below what I see as the three main ways COVID-19 has affected the lending market.
Speed is of the essence
One key trend is the speed in which borrowers are now needing their loans deployed to ensure they can complete on a property transaction. Recent government intervention, namely the stamp duty land tax (SDLT) holiday, has resulted in increasing competition and rising house prices. The first Nationwide house price index (HPI) following this policy’s introduction showed an annual 1.5% rise in general house prices, in contrast to the 0.1% decline the month prior.
When coupled with the fact that the SDLT holiday ends on 31 March, 2021, borrowers are keen to act quickly to reduce their chances of losing out on potential property opportunities. What’s more, there is likely to be a surge in activity in the final month that the SDLT holiday is in place. This means that lenders have to act quickly and ensure they have access to in-house credit so that loans can be deployed as soon as is viably possible.
When coupled with the fact that the SDLT holiday ends on 31 March, 2021, borrowers are keen to act quickly to reduce their chances of losing out on potential property opportunities.
Consolidation of the specialist finance market
In the months preceding COVID-19, the number of specialist financing firms entering the market was growing. As more and more brokers and borrowers became aware of the benefits bespoke loans could offer, demand for such services grew, and many new firms were keen to meet this demand.
However, as the reality of the pandemic hit, many of these firms found themselves unequipped with the experience needed to properly navigate these choppy waters. Established lenders, on the other hand, were able to rely on the quality of their services and the strength of their client-broker relations, leaving them as the only option for those seeking fast finance during the lockdown.
Specialist lenders that managed to continue through past lockdown are now experiencing a newfound appreciation of their services, a trend unlikely to end anytime soon. After all, borrowers and brokers benefit from specialist lenders due to their ability to deploy loans quickly and also tailor their products and services to the individual needs of each client.
Mortgage application difficulties
Finally, it is being reported that the those who are taking advantage of the mortgage payment holiday scheme are struggling to take on new debt. Given that the Financial Conduct Authority made it especially clear at the time that participation in this scheme wouldn’t affect one’s credit rating, the fact that some applicants have reported traditional lenders denying mortgage applications has left many prospective buyers worried and confused.
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Of course, it is understandable that in these uncertain times, lenders would view a failure to meet previous mortgage payments as a negative mark on an applicant’s application. However, given the completely unprecedented nature of the times we now live in, lenders should not be penalising those that were simply following advice and taking advantage of a government-backed scheme. What is needed is for lenders to properly assess each application on a case by case basis before making a final decision.
Ultimately, I am optimistic that the lending market will make the changes needed to properly equip itself for the current climate. The property market is experiencing a mini boom, which is positive news for all those involved in real estate, including lenders. I look forward to seeing a sector primed and ready to play a leading part in the UK’s economic recovery.
Many landlords require their tenants to have renter’s insurance policies and will request proof of them before you sign your lease. Not all of them will require it, however. If there’s one thing to take from this article, it should be that all renters should have a policy in case something happens.
Renter’s insurance does more than protect property: it offers protection for costly circumstances that you may not be able to foresee. Renter’s insurance should be part of any savvy renter’s game plan. Knowing what renter’s insurance policies cover can help anyone decide how much they need, even though there’s no-set-in stone answer. Everyone’s situation is different, so their need for this insurance is different too.
What Is Covered by Renter’s Insurance?
If you’re wondering, “How much renter’s insurance do I need?” you need to know why people need these policies in the first place. The main reason people opt for renter’s insurance is to protect their property. Personal belongings outside and inside your apartment are covered by renter’s insurance, but that’s not all.
In the event that you have to leave your rental home or apartment for a while, renter’s insurance policies also cover your living expenses while you’re staying in another place. These circumstances may not be foreseeable and could include an infestation, a fire, or other damage. Living expenses can become untenable in these situations without renter’s insurance.
How Much Renter’s Insurance Should You Get?
The first step to figuring out how much renter’s insurance you need is to calculate the value of your personal possessions and compare it to your budget. At that point, you can compare the quotes of several insurance companies to the value that you calculate in your personal property.
From a policy as low as the average renter’s insurance plans, which cost around $15 per month, you can get tens of thousands of dollars of personal liability coverage and property coverage.
The first step to figuring out how much renter’s insurance you need is to calculate the value of your personal possessions and compare it to your budget.
What Types of Coverage are there?
There are three types of coverage included in renter’s insurance policies. To what extent a policy includes each type determines its value. These coverage types include personal property, loss-of-use, and personal liability coverage. Ask yourself: how much of each type does a typical policy contain? This is important to know so you can spot plans that are expensive for their coverage amounts and those that are a true value.
The average renter’s insurance policy offers around $30,000 in personal property coverage, 40% of the personal property’s value in loss-of-use coverage, and $100,000 in personal liability coverage.
Deductibles are another important factor when choosing a policy. If you don’t already know, a deductible refers to the amount of damage you have to pay for yourself before an insurance policy kicks in. These exist in healthcare policies and it’s no different for renter’s insurance.
An average or acceptable deductible for these policies would be around $500. These policies are considered the best value for those that want renter’s insurance for coverage but aren’t necessarily worried about a specific accident. Those that want a lower deductible should expect to pay a much higher per month premium.
The disadvantage of cheaper policies is that the deductible is much higher, which is fine until you have to pay it. There’s also not much of a drop in the price per month for losing 50% or more of your coverage amount. A few dollars less a month will lower your coverage amounts considerably. This is why policies priced at or near the competitive average are often the most desirable.
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The Takeaway
Renter’s insurance policies involve three different types of coverage, including personal property coverage, personal liability coverage, and loss-of-use coverage. Knowing how much renter’s insurance you need depends on the value of your belongings compared to the needs of your situation.
Since the value of renter’s insurance policies decreases drastically with only a small reduction in the cost per month, average renter’s insurance policies are often the most desirable. Use this information to conduct more research into available companies to find the right renter’s insurance policy for you.
Renovations and improvements are the best ways to raise your asking price without scaring potential buyers away. We spoke to property experts Zoom Property Buyers who help people sell property in London.
Zoom Property Buyers are a premier cash real estate buyer and gave us some great tips to make your property more saleable and get the best price and return on your investment. If you are running a property renovating company, selling for cash is also a fantastic way to move business quickly and efficiently with no estate agent fees and a super quick sale helping the business move forward.
Here are some simple things you can do with your property to increase its value without breaking the bank.
Paint your living room
The living room is where families spend most of their time together. It facilitates bonding and will hold many fond memories. You can use this to your advantage and invoke some emotions in your potential buyers. A fresh coat of paint can go a long way in making your living room more appealing. Recent trends suggest that taupe paint might be the way to go. It's the right combination of contemporary and soothing. You'll love it, and your potential buyers will love it, too.
Resurface your cabinets
The kitchen is one of the most attractive and valuable parts of a home. Unfortunately, remodeling a kitchen can also prove to be quite expensive. If you don't have the money to remodel your entire kitchen, stick to your cabinets. Resurfacing your cabinets can add significant value to your kitchen. Plus, the look of a new, clean layer of wood on your cabinets can speak volumes about the condition of your entire kitchen.
Resurfacing your cabinets can add significant value to your kitchen.
Change the colour scheme of your kitchen
While we’re on the subject of kitchen value, changing the colour scheme of your kitchen can also raise your asking price. Current trends in real estate have it that lighter upper cabinets and darker lower cabinets are the way to go. The scheme is called tuxedo cabinetry, and statistics show that it can raise the value of a property by as much as £1,500. You may admire your current uniform colour scheme, but if you want to add real value to your home, you should swap colours.
Replace your carpeting with wood
Carpets are add-ons, and while you may find yours appealing, your prospective buyers can be turned off by them. Instead, remove the carpets and expose your hardwood floors. Besides the fact that a wood floor adds character to a home, wood is durable and easy to maintain. If your home doesn’t have a wooden floor, laying one can be an excellent investment. You can even spend less on engineered or laminated wood. You can get them at a fraction of the cost.
Get some steel entry doors
Steel entry doors may give off the appearance of additional security, but that’s not why they are on this list. Steel doors can improve the appeal of your curb. If you’re selling an inherited house, you may want to replace the old doors with steel ones. They are sleek and come in various kinds of paneling and finishes. Also, steel entry doors are incredibly durable, so you won’t have to worry about them for a long time, even if you change your mind about selling your home.
If you’re selling an inherited house, you may want to replace the old doors with steel ones.
Upgrade your light fixtures
If you’re living in an older house, you’ll definitely need to pay attention to some of the details. As industry trends move to more modern styles, so should your home's decor. You can begin with your lights. If your home has the construction-installed thick and round mounts, you need to upgrade to new, sleek ones. The good news is that you can get fixtures in various price ranges, and they will all add significant value to your home. New light fixtures are basically the building blocks of a modern style.
Reorganise your garage
Most people hate this task, and they hope they never have to do it. But then, think about it. If you hate it, your buyers will probably hate it as well. Nobody is going to want to pay top dollar for a home with a cluttered garage. You should take out a day (or a week depending on how cluttered your garage is) to reorganize your garage. Since the garage is basically the home’s storage space, you should invest in some shelves or hangers for the stuff in your garage. It will definitely clear up the room and make it look more appealing.
Paint the garage floor
Now that you can see the floor, how about adding a new coat of paint? Paint is relatively inexpensive, and a new coat of acrylic paint made for floors will go a long way. Very rarely do people have lots of space in their garage. A shiny floor will only add to that impressive feature of your home and impress your potential buyers. While it might not raise your properties value by thousands, it will make an impact on whoever sees it.
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Trim your trees and edges
According to UK Forestry, trees can raise the value of a house by up to 20%. However, if your tree is unkempt, it can have the opposite effect on your property value. The good news is that you even need a contractor to take care of your trees. Simple tasks like applying tree fertiliser, trimming and pruning, and even spraying can keep your property value where it should be. The same thing goes for hedges and bushes. They make a home more attractive, but not if they look jagged and overgrown. If you don’t want to do it yourself, you can pay a gardener a few pounds to trim the hedges. Your property will thank you.
Pay attention to minor repairs
If you’re serious about raising the value of your property, then the chances are that you've already started making some repairs around the house. Replacing broken windows and dented door jambs, and filling cracked plasters are projects you've probably done already. If you haven't, you should consider doing so. Little cracks and imperfections can send unwanted signals to potential buyers. They can make the home appear older than it is, or diminish its overall appeal.
It might even be worth getting a loan to pay for the renovations, as the value added will make the investment worthwhile.
Paresh Raja, CEO of Market Financial Solutions, examines the impact of the SDLT holiday so far and the importance of reinvigorating the property market.
With a value of £1,662 billion, the UK’s real estate market is a vital contributor to economic growth and productivity. That’s why the government’s plan to support the UK’s post-pandemic recovery has focused so heavily on real estate. After all, it was one of the first sectors to benefit from the initial easing of social distancing measures, ensuring that buyers and renters were once again in a position to move homes and initiate new property transactions.
Most recently, Chancellor Rishi Sunak took the bold step of announcing a new Stamp Duty Land Tax (SDLT) holiday applicable to all property transactions until 31st March 2021. The government estimates that this will see average SDLT bill cut by £4,500, with nine out of 10 buyers purchasing a main residential home exempt from the tax.
The move aims to encourage buyers back to the real estate market, and so far, it has been having measured success. Estate agencies have noted a spike in enquiries – importantly, these enquiries range from first-time buyers to non-UK residents seeking a buy-to-let property. While it is too early to tell whether the holiday will bring about a stable and sustained increase in real estate transactions, the fact prospective buyers have acted immediately following the SDLT holiday announcement is promising.
With a value of £1,662 billion, the UK’s real estate market is a vital contributor to economic growth and productivity.
Unlocking the full potential of the SDLT holiday
The SDLT holiday provides the financial incentives needed to reignite interest in property, but one feels it will only have limited success. This is because homebuyers will still struggle when it comes to finding the right type of finance needed to complete on a sale.
When lockdown measures were first introduced, mainstream mortgage providers decided to retreat from the market by limiting their product and service offerings, freezing new applications and delaying the deployment of mortgages already agreed to in principle. This had dire consequences for those in the middle of a property transaction, increasing the risk of chains collapsing.
In response, brokers and borrowers turned to established specialist finance providers who remained committed to meeting the needs of the market. Bridging loans became a popular option due to their speed, flexibility and ability to be tailored to the individual needs of each borrower. While transactions did decline during lockdown, a proportion of those completed was due to specialist finance.
Now, banks and mortgage providers are once again returning to the market. However, the range of mortgage products available is still limited. There are also fears that these traditional lenders will only deploy loans for a handful of cases in order to minimise their risk exposure. Indeed, there are already reports of banks not deploying mortgages to borrowers who take advantage of the COVID-19 loan repayment holiday scheme.
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Just like we saw in the aftermath of the global financial crisis (GFC), it is during times of economic recovery that the need for creative solutions that support growth and stimulate investment are needed. And similar to what we witnessed in the months and years following the GFC, specialist finance is rising to the call by ensuring that homebuyers are able to act confidently and quickly.
At this critical moment, it is important that buyers and property investors have access to the finance needed for new home purchases. This requires research and a full appreciation of all the products and services available beyond just the high street.
Failing this, there is a real risk of the SDLT holiday only having limited success.
