Resident Partner Archives | Page 3 of 4

Another blow to Buy to Let investments and number of rental homes available will drop and rents will rise

In continuing moves across finance providers, Barclays has announced that it is increasing its rental coverage ratio from 135% to 145%.

Rental coverage ratio is how much more the rent is than the cost of the mortgage. So for a £200,000 loan at 5% the cost is £10,000 per year.

Under the old norm of 125% cover the rent would need to be £12,500 now at 145% it will be £14,500; a 16% increase.

Barclays confirmed that it will continue to carry out income and expenditure assessments, allowing customers put disposable income and bonuses towards any shortfall in rental cover. This will only work if you don’t already have a mortgage on your own home or another Buy to Let which will all be added into your affordability calculations.

On the up side Barclays is also reducing its stress test from 5.79% to 5.5% which means can you afford the mortgage at 5.5% instead of 5.79%.

Barclays said: “These changes are being introduced as a result of the reduction in landlord tax relief available from next April (phased in over four tax years). As a responsible lender we want to ensure that our clients can afford their repayments plus, other costs associated with the property where the borrower is responsible for payment such as, council tax and management/letting fees.”

Foundation Home Loans also joined in the general tightening of mortgages when it announced earlier this week that it is changing the basis of its rental calculation for individual applications from 125% to 145%.

Despite concerns, the industry has said that increases in buy-to-let stress test levels should not be viewed as an ‘Armageddon moment’ for the sector.

However, many landlords see it differently they see it as part of a concerted attack on the option of investing money into UK residential property through Buy to Let.

The unfortunate effect of less Buy to Let investors is less property to rent which means the rental costs will rise and some renters will not be able to find homes.

As you know form our previous posts we think that the Chancellor is trying to drive individuals out of the market by reducing tax relief, increasing stamp duty and making mortgages more expensive. This then leaves the market open for institutions to enter the BtL market.

This has been Osbourne’s desire for many years but unfortunately the returns on investment have not been very good after all the agent’s costs are taken into account and institutions have not been keen to invest.

Now with private landlords being squeezed out of the market rents will rise and the market will be wide open for the big institutions so another example of social engineering by politicians and moving equity from individuals to institutions.

However, there is an alternative with the Joint Equity Bonds which pay 7 or 8% interest depending on the Bond or you can link the terminal bonus to Halifax Property Index to take advantage of house price movements. More on Joint Equity Bonds Here

It is now easier to invest in the UK property market through Joint Equity Shared Home Ownership scheme which has the security of property but does not exploit the person leaving in the property as Buy to Let does. All our Resident Partners share in the capital growth of the property while paying about the same as renting*.

*The maximum we will allow is £100pm more than they are paying in rent now.

Even discounted starter homes could be out of reach for the majority of families across the country, according to the Local Government Association.

Now we need to take this survey with a big pinch of salt as this falls into the category “well they would say that wouldn’t they” but while the hard numbers may not be accurate the overall picture is is the same as we would expect. Unfortunately.

According to the Local Government Association even discounted starter homes could be out of reach for the majority of families across the country.

Its analysis found that prices will be out of reach for all people in need of affordable housing in 220 council areas (67%) and are out of reach for more than 90% of people in need of affordable housing in a further 80 (25%) council areas.

People in need of affordable housing are defined as those who would have to spend more than 30% of their household income to rent or buy a home.

For the average earner with a 5% deposit, a 20% discount would make it possible to borrow enough to buy a starter home in just 45% of all council areas in England.

First-time buyers will be able to buy 200,000 new starter homes over the next five years (that is 40,000 homes a year) at a minimum discount of 20% to the market value. However, there is a demand for over 350,000 new homes a year. Discounted prices will be capped at £450,000 in London and £250,000 elsewhere.

The 20% discounts for new buyers would be funded by exempting developers from paying Section 106 contributions towards affordable rented housing and Community Infrastructure Levy contributions. In its own analysis, the Government has suggested that should 100,000 starter homes be built through the planning system, between 56,000 and 71,000 social and affordable rented homes would not be built.

Although house-builders will be able to build and sell starter homes below the price caps, councils are concerned that this could be difficult for developers to achieve without compromising on quality, particularly in areas with higher house prices.

Cllr Peter Box, LGA Housing spokesman, said:

“The private sector has a key role to play in solving the housing shortage, but it cannot build the 230,000 needed each year alone. Councils need to be able to ensure genuine affordable homes continue to be built for rent and sale across the whole country for future generations and the millions of people stuck on waiting lists.”

Brad Bamfield, CEO Joint EQuity, said “We need to get new entrants into the affordable market and to somehow change Local Authorities perceptions that only Housing Associations can provide affordable homes. At the moment LA’s make it very difficult for private companies to enter the market and that disadvantages buyers who need help. Private firms with private funds can deliver many new homes but we need to change the tenure structure.”

Joint EQuity has been providing shared home ownership homes from private funding since 2007 and allows the buyer to find their own home.

Government to build houses but can we make them affordable? Yes we can with Joint Equity

The Government is to directly commission the building of 10,000 new homes on public land as part of a “radical” new plan to build at a faster rate using smaller companies.

Prime Min Picture David Cameron ister David Cameron described the move as a “huge shift”, claiming it marks the biggest use of such a policy since Margaret Thatcher and Michael Heseltine started the regeneration of London’s Docklands in the Eighties.

Rather than waiting for major construction firms to work their way through the government’s long list of housebuilding projects, the scheme will see smaller businesses take on less extensive sites that have already have planning permission.

The policy will be backed by an extra £1.2 billion to prepare brownfield sites for the building of 30,000 starter homes – available to first time buyers under 40 for at least a 20 per cent discount – over the next five years.

David Cameron described the move as a “huge shift”, claiming it marks the biggest use of such a policy since Margaret Thatcher and Michael Heseltine started the regeneration of London’s Docklands in the Eighties

“This Government was elected to deliver security and opportunity – whatever stage of life you’re at. Nothing is more important to achieving that than ensuring hard-working people can buy affordable homes,” Mr Cameron said.

This is right and Joint Equity wholeheartedly agree no one should be forced to live in rented accommodation who deos not want to. And that is anyone from 18 to 80, we think a home of your home with absolute security to stay there as long as you want is a basic human right.

Our CEO Brad Bamfield has lived in rented accommodation and hated the insecurity, the interference of the agent and the different agenda of the landlord. It was one of the big driver later in his life to develop Joint Equity and help everyone who wants their own home get one.

So we do agree with DC in principle but what Mr Cameron and politicians of all persuasion describe as affordable and what everyone else considers affordable is two quite different things so we think the Government and the private investment industry needs to go further.

Brad Bamfield, CEO of Joint Equity, has written a blog on What is the Cost of an Affordable Home the conclusion is the Help to Buy Scheme is not really affordable for great numbers of ordinary people. But Joint Equity can provide you a home of your choice for as little as the cost of a cup of Cappuccino coffee a day more than renting the same house. Well we would say that you say but click here to read how we arrived at that surprising result. Its not rocket science and we explain all.

Old DC backed this up with a further £1.2 billion to get homes built on brownfield sites, “it shows we will do everything we can to get Britain building and let more people have the security that comes with a home of their own.” he said.

The construction of the first wave of up to 13,000 directly commissioned homes – 40% of which will be starter homes – will begin this year in Dover, Chichester, Gosport, Northstowe in Cambridgeshire and Old Oak Common in north west London.

In addition to these, the extra £1.2 billion will fast track the creation of at least 30,000 new starter homes and up to 30,000 market rate homes on 500 new brownfield sites by 2020. The new projects form part of the Government’s commitment to building 200,000 starter homes before the end of the Parliament.

Half of all new homes are constructed by the top eight house builders and the direct commissioning approach will help smaller builders and new competitor firms, according to No 10.

But how will people be able to afford it? Just having more homes does not make them affordable if you cannot get a mortgage or need £30k as a deposit.

We feel the right way forward is the partnership between investors and occupiers through Joint Equity and our Investment Bonds, more on our Bonds here.

Why invest in Buy to Let with all its hassles and its costs when with a Co-Ownership Bond from Joint Equity you can earn 5.5% average plus 3% pa contribution from the terminal bonus.

So 8.5% return and helping people buy their own home at the same time.

Now that is a win/win Partnership

Just how much does an affordable house cost? And is it affordable – the answer is surprising.

The average price paid for a property through an affordable housing scheme is now £189,786 according to Halifax – just 4% (£7,750) lower than the £197,535 average for house purchases.

That is not a big saving is it?

However, the discount is different for London:- regionally, the highest average price paid by purchasers using affordable housing schemes is in London (£323,148), while the lowest is in the North (£147,437).

Nevertheless, the average value of a London property sold in a scheme is 33% lower than the average London regional price (£482,579).

First-time buyers remain the biggest beneficiaries of Help to Buy housing schemes; accounting for 80% of purchases over the last year. This is significantly higher than the 46% of all mortgage financed home purchases made by first-time buyers over the same period.

The average price paid by first-time buyers using the Government schemes is now £150,361; this is 10% (£16,732) lower than the average price paid by FTBs (£167,093) for all housing.

Again not a big discount and the question becomes does a 10% discount make the house affordable.

However, not everyone is eligible for or wants the properties offered through Help to Buy so what happens to them? Well they have to do the best deal they can with the mortgages currently on offer.

Lets look at what constitutes the term affordable:_

The amount of deposit. The first thing you have to find is the deposit and unless your family can help you have to save it. So for a £150,000 house the deposit can be between 20% (£30,000) for good mortgage deals and 10% for the lowest deposit (£15,000).
The costs of the mortgage. The deposit and the cost of the mortgage trade off each other for a 10% deposit the rate currently (Jan 16) is 2.18% to 2.5%. But for a 20% deposit the rate drops to 1.44% to 1.65%. In Cash terms this means a 90% LTV costs £585pm and 80% LTV £477pm, a difference of £108 pm.
Your salary and the % you spend on the mortgage. Mortgage providers are required by the regulator to ensure you can afford your mortgage and that still equates to not borrowing more than about 4x your income. So for a £135,000 mortgage (the mortgage for a 10% deposit) you will need to earn £33,750pa.
To the Government affordable seems to mean not more than 30% of your income. So for this£150k house and a mortgage of 585pm we would need an annual income of £23,500pa.

Lets look at this another way:-

So an average income family on £27,000 pa can get a mortgage of £108,000 which means the difference, £42,000, has to come from savings to be the deposit.
This would mean the LTV is 72% so the deposit is 28%.
The monthly cost would be £429 which is 20% of the income well inside the Government’s 30%

So the monthly cost is affordable but the deposit is not. Is that really affordable.

Lets now look at Joint Equity Co-Ownership for the same £150,000 home.

The minimum deposit required from the Resident Partner £7,500.
The mortgage of £67,500 costs £268pm
The Non Resident partner payment, for the 50% you do not own, is £387pm
The total cost pm for your Joint Equity home is £655pm
This is 29% of the average income of £27,000.

So Joint Equity offers the £150,000 home that you chose for £7,500 deposit and £655pm.

The alternative to buying is renting and the average cost of renting a £150,000 house is now around £575.

That means a owning your own home through Joint Equity will cost you £2.60 more a day than renting and you have the security of your own home, no short term tenancy, the threat of termination, swinging rent rises, or over bearing landlords and agents.

And what is £2.60 a day?

Well its a cup of coffee, 3/4 of a pint of beer or 6 cigarettes – not a very high price is it really.

And don’t forget that £2.60 also means you own 50% of the house and will benefit from rises in value of the house.

So if the property rises in price by 6% per year you will earn £4,500 per year or £12.32 per day. Not a bad return for your £2.60 extra cost is it?

Brad Bamfield, CEO of Joint Equity, says “affordability is a combination of many things and the tragedy is that many of our Partners are turned down for a mortgage when the rent they are paying is similar to the mortgage costs. To me its affordable if the deposit is at an attainable level, the monthly costs are not too high a proportion of the income and the security is assured. Joint Equity delivers affordable homes.”

How much do you need to earn to buy a home? It ranges from £24k to £97k

A ‘chronic shortage’ of homes for sale in Britain’s cities has helped to push house prices up in urban areas by more than 10 per cent this year. It means buyers need to earn significantly more than a typical wage before they can own a city home.

New figures suggests that out of 20 major cities in Britain, the average household income needed to afford a home with a typical 76 per cent mortgage is £49,700, up from £45,000 a year ago.

But the range is significant – from less than the average wage at £24,000 in Liverpool, to a staggering £80,200 in Oxford and almost £100,000 in London.

The research by Hometrack found those buying in Liverpool need a smaller deposit at £26,500, compared to £88,700 in Oxford and £108,000 in London.

The weakest rate of growth has been Aberdeen, where average house prices have dropped 2 per cent following a 12 per cent increase the previous year.

The city with the strongest turnaround in the past year has been Glasgow, where growth has jumped from 1.8 per cent to 8 per cent as prices recover from a relatively low level in one of the most affordable cities covered by the research.

Hometrack blamed a lack of supply, created by strong demand from investors along with a low number of existing homeowners who are moving. The latter group accounts for 33 per cent of housing sales today compared to 50 per cent in 2007.

Richard Donnell, director of research at Hometrack, said: ‘The scarcity of homes for sale looks set to remain a feature of the market in 2016. This will only ease once we see greater levels of output from home builders and renewed activity among existing mortgaged homeowners.

‘Questions about the sustainability of house price growth are being raised as house prices accelerate on growing scarcity and lower sales volumes, especially in the high growth markets such as London.

However, there is a glimmer of hope for buyers as investor demand weakens next year, Hometrack predicts. This will be due to the changes in stamp duty rates for second homes and the tax relief changes for landlords.

Mr Donnell added: ‘Assuming the first interest rate rise is in the second half of 2016 then we expect 7 per cent growth in city level house prices over 2016 with housing transactions broadly flat. This is based on a slowdown in growth across London as affordability pressures and lower investor demand ease the upward pressure on house prices.

‘Earlier and faster rate rises than those assumed by the market would reduce the scale of house price growth as they would further impact investor demand and mortgage affordability.’

The Bank of England is widely expected to raise interest rates in the second half of next year from the historical low of 0.5 per cent as the economy improves.

Brad Bamfield, CEO of Joint Equity says “buying with Joint Equity means your deposit is lower at 5% of house price as a minimum and we use your ability to pay rent as the affordability factor. So if you have paid rent for 12 months or more we will support you up to £100 per month more than that rent.”

This means most people who can afford to rent can afford to buy with Joint Equity.

Article source This Is Money, full article here.

Rents rising faster than house prices – a good time to buy with Joint Equity

House prices will rise by 6 per cent next year, according to the Royal Institution of Chartered Surveyors, but renters will lose out the most to inflation.

Tenants are set to see the cost of renting a home rise faster than their incomes and faster even than house price growth, RICS suggests rents could rise by five per cent a year.

Next year, house prices across the UK are expected to climb by an average of six per cent and will ‘outstrip any commensurate rise in household incomes’, RICS forecast.

Northern Ireland and London could see prices climb by 5 per cent next year, while the South East and West Midlands could see hikes of 7 per cent

The Office for Budget Responsibility had predicted that house prices would rise 5 per cent year-on-year until 2020.

This is because the surveyors expect demand for homes to continue to outstrip supply going into the new year.

Northern Ireland and London could see prices climb by 5 per cent, while the North West, Wales and Yorkshire and Humberside could see a rise of 6 per cent.

In the North East, house price growth is expected to be more modest than the national average next year, with prices rising 3 per cent, RICS said.

Other regions, including Scotland and the East Midlands are predicted to see house price growth of 4 per cent next year.

East Anglia prices are predicted to lead the way with an increase of 8 per cent next year, while the South East and West Midlands could see 7 per cent price hikes RICS said.

These are predictions based on factors such as lack of supply and the impact of government initiatives.

Should house prices continue to rise faster than average incomes, aspiring first-time buyers will find it even tougher to get on to the property ladder in the new year. The problem would be compounded if rental costs continue to rise at an even faster pace as tenants will have to spend a greater proportion of their incomes on housing costs and will have less to put away towards a deposit.

Simon Rubinsohn, RICS’s chief economist, said: ‘Housing has clearly leapt up the Government’s agenda, but despite the raft of initiatives announced over the past year, the lags involved in development mean that prices, and for that matter rents, are likely to rise further over the next 12 months.

‘Lack of stock will continue to be the principal driver of this trend but the likely persistence of cheap money will compound it for the time being.

‘Looking further out, there is some justification for taking a more optimistic view of new build with significant incentives being put in place to deliver starter homes.

‘While this may not on its own stem the upward trend in house prices, it could help to slow the rate of growth to something closer to the probable rise in household incomes.

‘Critically our principal concern with the measures announced by the Government is that they are overly focused on promoting home ownership at the expense of other tenures.

‘Discouraging Buy to Let could see private rents take even more of the strain if institutional investment doesn’t increase significantly, particularly given the likely reduced flows of social rent property going forward.’

Brad Bamfield, CEO of Joint Equity says “buying with Joint Equity means your deposit is lower at 5% of house price as a minimum and we use your ability to pay rent as the affordability factor. So if you have paid rent for 12 months or more we will support you up to £100 per month more than that rent.”

This means most people who can afford to rent can afford to buy with Joint Equity.

46% of First Time Buyers consider Shared Home Ownership

Almost half (46%) of first time buyers are considering turning to shared equity and shared ownership schemes to enable them to buy their first home, according to research from Lloyds Bank.

Of these, one in four (26%) said affordable housing schemes were their only option for getting onto the property ladder and they would not be able to buy a home otherwise.

One in four (24%) said it allowed or would allow them to buy in an area which would otherwise have been unaffordable.

The economic downturn has also had an impact on how people view affordable housing schemes, with one in six (15%) of first time buyers saying they would not have considered the schemes previously, but have changed their mind due to the economic conditions.

Eight in ten (81%) first-time buyers claim to have a basic or good understanding of shared ownership schemes, although this is less for shared equity schemes (64%).

Brad Bamfield CEO of Joint Equity said: “Over the past few years the shared home ownership concept has become more established and understood. However most people have only heard of the Government and Housing Association schemes and developers own schemes or Help to Buy for new houses.

“Government schemes still have a stigma attached and the social engineering aspects that Housing Associations apply put off many people. Of course developers only use shared home ownership to shift the rump of developments they cannot sell in any other way and buyers know that and of course are not impressed.”

What many people don’t know is that there is an alternative privately financed shared home ownership option which delivers quality homes to want-to-be homeowners – with no social agenda.”

Over the last 7 years Joint Equity has become a life style option for our Owner Partners which provides many advantages over other home ownership options.

Find out more here www.jointequity.co.uk

Sources: Lloyds TSB read research here

The word is spreading about Joint equity and Shared Ownership

Good to see the word being spread about the Joint Equity model of shared ownership. Read some of our latest press coverage here:

1) ‘I earned £9k by “spotting” an empty home’: How buyers, sellers, investors and even a spotter can win in the property market

17th October, by Laura Shannon, featured in This Is Money and Financial Mail on Sunday

“Help to Buy, the Government’s flagship home ownership scheme, currently allows people to buy a property with just a 5 per cent deposit. But a new scheme from company Joint Equity is being launched tomorrow to give those who rent privately a leg up on to the property ladder.

It is targeting ‘reluctant renters’, retired people who are renting and divorced or separated tenants.”

2) Company kicks off 50-50 home ownership scheme

9th October, byRyan Bembridge, Mortgage Introducer

http://www.mortgageintroducer.com/mortgages/253932/5/Industry_in_depth/Company_kicks_off_50-50_homeownership_scheme.htm

“Joint Equity Investment LLP said it will cater for reluctant renters, retired renters and divorced & separated renters who are unable to raise a deposit and don’t qualify for local authority or housing association support because they earn too much.”

3) Will Joint Equity be the key for first-time buyers or should they hold out for the Help to Buy Isa?

16th November, The Independent

http://www.independent.co.uk/money/will-joint-equity-be-the-key-for-first-time-buyers-or-should-they-hold-out-for-the-help-to-buy-isa-a6734346.html

“Available for homes worth under £250,000, a pilot for Joint Equity has been running over the past five years – and has helped 21 buyers get a home in Bedfordshire, Buckinghamshire and East Anglia.”

4) New home-buying scheme aims to give shared ownership alternative

19th October, by Rozi Jones, Financial Reporter

“Joint Equity is rolling out nationwide a scheme which will allow private renters to purchase a property in a 50/50 partnership with the bondholders through a Joint Equity Investment LLP.”

http://www.financialreporter.co.uk/finance-news/new-home-buying-scheme-aims-to-give-shared-ownership-alt3rnative.html

Read more about the Joint Equity shared ownership offering here. Read more

Key questions about the Joint Equity co-ownership scheme

There are key questions about the Joint Equity co-ownership scheme from buyers and mortgage advisers alike. They give you valuable insight into what some of the shared ownership market participants care about – so here are our answers.

“Key questions here for potential buyers are how much of the profits they receive on sale”

You are a co-owner with us and receive the same proportion as your Share.

50% Share = 50% of the sale profits.

“What interest rate they are paying on their portion of the loan.”

The interest rate you pay is the interest rate your mortgage lender offers. You can shop around and are free to go with any lender who will support Joint Equity co-ownership.

“What happens if and when I want to sell?”

When you want to sell you must offer your Share to us first and we have advice 21 days to say if we will:-

Buy your Share
Sell our Share with you at the same time.
Or do neither and you are free to sell your Share to a new incoming Joint Equity Resident Partner. (it’s like selling a normal house and we assist your estate agent)

“What happens if the property falls in value or falls into negative equity?”

It’s the same as owning 100% of your house. If you are in negative equity and keep paying the mortgage and Non Resident Partner payment there is no impact. If you need to sell your Share for any reason you will get market value.

“We would always advise clients to try and obtain a larger deposit through collecting funds from family who can release equity from their own properties, or guarantor schemes, or even buying with friends. Entering a partnership with a commercial organisation will always come with risks that are usually not as flexible to negotiate with as friends/family or other less commercially minded sources of funding for your first home.”

This is the usual advice given to buyers however our Resident Partners often don’t have parents or family in a position to help.

The other thing our Resident Partners tell us that, contrary to this view, it is better to go with Joint Equity as we have clear rules in the Partners Contract and our Resident Partners know what they can expect from us.

Do let us know if you have any other questions that we don’t yet answer in our FAQ.

No way out of renting for four in ten tenants

Home ownership is out of reach for 42% of tenants, who say they cannot afford to save for a deposit at all, and other want-to-be homeowners are unable to save enough.

The average amount saved by the 35% of tenants who do save for a deposit is £12,125 – about 7.3% of today’s average house price of around £165,000. That’s significantly less than the 10 to 20% which is typically required (approx. £16,000 to £30,000).

What many people aren’t aware of are the alternative co-ownership options available to them. With Joint Equity, for example, the minimum deposit required is 5% of the home value which for today’s average house is £8,250.

Surprising still is that nearly one-third of tenants are spending more than half their take-home pay on rent, and 35% of those managing to save a deposit are having to dip into it, either regularly or to pay for holidays. Among the under-30s, 60% have already used their home savings pot for other things.

These statistics are all from the property-sharing website SpareRoom, and another interesting and perhaps unexpected statistic shows that the large majority (79%) of those polled described themselves as employed professionals.

Matt Hutchinson, director of SpareRoom.co.uk, said: “A significant proportion of the people we polled expect to live in rented accommodation for at least five years, and many believe it will be much longer than that.

“The facts speak for themselves. Soaring living costs mean it’s a struggle for many households just to keep their heads above water each month, let alone have enough spare cash to put aside towards a deposit. The survey shows that even those who are squirreling away funds have not managed to save anywhere near enough to buy the property they want.”

Brad Bamfield CEO of Joint Equity said, “These stats continue to shock us which is why we’re determined to help educate people about alternative home ownership options. For instance, our Resident Partners can now live in their own home in co-ownership with us on a 50/50 basis. In nearly all cases if you can afford to rent you can afford to buy with Joint Equity.”

“We aim to help over 25,000 people leave the rented sector for their own home every year and our vision is that no one who does not want to rent should be forced to stay in it longer than really necessary”

For more information visit www.jointequity.co.uk

Our thanks to http://www.spareroom.co.uk/