UK Property

It’s better to value homes by floor space than the number of rooms, says Paula Hawkins

IN A NATION as obsessed with house prices as our own, there can be few homeowners who do not have at least a vague idea of what their property is worth. If asked to put a value on our homes per square foot, however, many of us would not have a clue. But pricing per square foot or per square metre is the standard in most other markets, and as more foreign buyers come to the UK it is becoming more common to think about property values in terms of floor space rather than the number of rooms.

“When you buy a property at the top end of the market say a flat in Sloane Square  you will usually see the size of the property quoted in square feet,” says Joe Martin, of the Royal Institution of Chartered Surveyors (RICS). But what you do not see is the price per square foot. “It has always bemused me: why we do not value property per square foot the way that everyone else does,” Martin says. “We have this fixation with the number of bedrooms, which I believe has had an adverse effect on the property market. It has led to us building smaller houses with lots of small rooms.”

Moreover, rooms in private homes are the smallest of all. “It is one of the quirks of history that social housing is generally bigger than private housing, because there are minimum standards for the size of rooms in social housing,” Martin says. The Parker Morris Standards, which were introduced for all council housing in 1969, state that there should be at least 33 sq m for the first occupant of a house, and an average 13 sq m for each additional person.

No such standards apply to private housing, however, which has meant that the rooms in our houses have been getting smaller and more numerous. According to RICS data, a typical house built today is 55 per cent smaller than one built before 1920. House size has not changed a great deal since the 1980s, but the number of rooms we squeeze into our homes is rising, due to the popularity of en suite bathrooms, utility rooms and home offices.

When you do take a look at the price of property per square foot, it becomes clear just how expensive UK housing is. The estate agent CBRE Hamptons International has found that, per square foot, Central London is the most expensive place in the world to buy a home. The CBRE Hamptons report shows that prime residential property in London costs about £1,200 a square foot, 20 per cent higher than the cost of property in New York. For “super-prime” properties, prices range from about £2,000 a square foot to a staggering £3,000 a square foot at the very top; this was the actual price achieved for an apartment sold recently in Chelsea Square.

Pricing per square foot allows international buyers a clear view of what they can get for their money. For example, while London’s average price is £1,200 and New York’s is £1,000, Tokyo property costs £900, Hong Kong £700 and Dubai property just £200 a square foot.

Maximum super-prime prices are, of course, much higher, with only Monte Carlo, at £2,800 a square foot, coming close to London prices.

There is obviously more to purchasing a property than price per square foot. Andrew Jones, a partner at the estate agent Knight Frank, says: “People want very different things from different cities. Each international centre has its own attributes, so a straight price per square foot comparison may not be that helpful.”

However, while there are plenty of other factors to consider when looking at properties to purchase, this should at least be one. Since most estate agents will now put the area of a property in square feet on the floor plan when marketing a home, you can do your own calculations to find whether you are getting good value. A higher overall price may be worth paying: for example, take two three-bedroom properties in London SW4 (Clapham). The smaller flat, which costs £275,000, has a total area of 649 sq ft, while the larger three-bedroom home near by costs £375,000 but has a total area of 1,082 sq ft. Measured in terms of space, the larger property is cheaper, costing £346 a square foot, while the smaller property costs £423 a square foot.

JOIN THE WORLD OF SPACE INVADERS

COMPARISONS may well be odious, but there’s no doubt that the world of property is increasingly obsessed with them. Everything that takes off in America comes to the UK eventually think super-size fridges and pre-nuptial agreements so we had better get used to square foot comparisons when we buy our homes.

Prices being quoted per square foot really started with new-build blocks of flats, but in a burgeoning property market this trend has now spread to homes of all kinds. The South East, as you might expect, has the highest values, with residential property in Central London the clear leader at £1,200 per square foot.

Guildford, voted one of the best places to live in Britain in a recent Channel 4 programme, is a far more affordable £249. Cambridge, boosted by an affluent educated elite and wealthy silicon-valley market, comes in close behind at £240, while Brighton, bolstered by its Soho-by-Sea reputation and its celebrity residents, follows closely with prices of £232 per square foot.

Rather surprisingly, homes in Lincoln are fetching an average £190 per square foot, ahead of Birmingham at £152, where smart flats in the old jewellery quarter have proved popular with young and well-off singletons. York probably counts as something of a bargain at £182, as does Bristol at £164 and Leeds at £147.

Bottom of the league, but top of the table for bargains, is Manchester, where prices are a very manageable £137 per square foot.

Source: Timesonline

Related:

London has officially overtaken New York as the world’s most expensive residential market, a top global property agency said in a report on Thursday.

“Our research suggests prices currently achieved in the prime areas of Central London are the highest in the world when measured by price per square foot (sq ft),” said CBRE Hamptons International, part of CB Richard Ellis Group Inc (CBG.N: Quote, Profile, Research), one of the world’s largest property services firms.CBRE said prime residential property in London on average cost around 1,200 pounds ($2,280) per sq ft compared with 1,000 pounds per sq ft in New York.

The pricing differential largely reflected the continued buoyancy in the London market, which was in sharp contrast to the slowing U.S. market, CBRE said.

Tokyo was the third most expensive residential market at around 900 pounds per sq ft.The report said London’s West End also beat Manhattan at the very top — or super-prime — end of the market.

It cited apartments at The Plaza and a triplex penthouse in the Pierre Hotel in New York that were on the market for between 2,700 and 2,800 pounds per sq ft, while an apartment in London’s Belgravia had set a record for a new development above 2,800 pounds per sq ft and a second-hand property in Chelsea had sold for more than 3,000 pounds per sq ft.In Europe, only Monte Carlo had kept pace with prices in London and New York, CBRE said, citing a recently completed sale at Le Park Palace for 2,840 pounds per sq ft.

Source: Reuters

The Bank of England surprised markets on Thursday by raising interest rates for the first time in two years, citing concerns that inflation would stay above its 2.0% target for a while.
Most economists said the quarter percentage point rise to 4.75% was likely to be a one-off move, but bond prices fell and sterling gained more than a cent against the dollar.
While the majority of economists had predicted the bank’s Monetary Policy Committee would leave rates unchanged for the 12th month running, it was always going to be a close call. The MPC felt it was time to reverse last August’s quarter-point cut as the economy has strengthened to above its long-run trend rate and inflation is already running half a percentage point above its target.

“The pace of economic activity has quickened in the past few months. Household spending appears to have recovered from its post-Christmas dip,” it said in a statement accompanying the decision.

“CPI inflation picked up to 2.5% in June, and is expected to remain above the 2.0% target for some while. Higher energy prices have led to greater inflationary pressures, notwithstanding muted earnings growth and a squeeze on profit margins.”

European bonds markets also fell in sympathy as they awaited an expected rate rise from the European Central Bank. The Bank will publish its new quarterly forecasts for growth and inflation next Wednesday.
“The MPC are likely to be wary that the market does not interpret today’s move as the first in a string of hikes,” said Alan Clarke, economist at BNP Paribas. “As a result, we believe the upcoming Inflation Report will be used to manage expectations that today’s hike was a one-off.”

Source: iii.co.uk

0 1848

RIGHTMOVE had nearly £100 million wiped off its stock market value yesterday after the property website gave warning that the Government’s U-turn on home information packs (Hips) would significantly hit earnings.

Four months after floating on the London Stock Exchange, the online property search company was shaken by a ministerial announcement on Tuesday that home condition reports, a key component of the proposed Hips, would not be compulsory.

Rightmove had already invested £8.5 million in preparation for the introduction of Hips and was sinking capital into the division at a rate of £1 million a month in readiness for the legislation.

The company had planned to pull together much of the documentation required for the packs and sell them to estate agents. Home information packs would have been available to download on its website as well. The home condition report, one of the key ingredients of the packs, was to have been supplied by four partners, including Countrywide, which owns a 30 per cent stake in the website.

Countrywide’s shares suffered yesterday, falling 32½p to 393¼p despite attempts to reassure investors that market estimates of revenues for this year should be unaffected by the U-turn on Hips. The company said that there may be some long-term impact on earnings if Hips are not introduced. The overall value of each pack will be lower, because less information will be required, so revenues from Hip products will be much lower than expected, Rightmove said.

Analysts at Numis Securities said that it had been envisaged that Hips packs would cost about £1,000, but now that they will contain only an energy efficiency rating, searches and title deeds, they may cost about £150. “This will have severe consequences on the financial prospects for estate agents and surveyors such as Countrywide,” Numis said.

Ed Williams, chief executive of Rightmove, was shocked by the decision, but said that the company would take its time before deciding whether to abandon its Hips division, which employs 30 people. The company is expanding rapidly and recruiting heavily to support its fast-growing online search division, which is separate from its Hips operation.

Mr Williams said that the company was likely to seek further clarification from ministers about Hips this summer, but the group would have to make up its own mind about what to do. “We have to be grown up and make a decision for ourselves, but we will wait until the Government can give us a considered view rather than hammering at their door for an explanation right now,” he said.

Analysts at Panmure Gordon downgraded the Rightmove shares from “buy” to “hold” and slashed its price target from 425p to 310p. In a morning note Alex DeGroote said that he now valued Hips for Rightmove at zero.

The setback came just weeks after Rightmove had unveiled an encouraging first-half trading statement. Since floating at 335p, the shares had soared to 413.75p in March and achieved a sky-high rating. Yesterday they closed down 77p at 275p.

Source: Timesonline

A COUNTRY pile has proved a sure-fire way to make money this year.

Some of the most expensive homes in the land have generated almost £80,000 in price increases for their owners since December, a report from the estate agent Knight Frank has disclosed. Manor house owners have seen the value of their property rise at a rate of £26,238 each month from January to March. Farmhouse and country cottage owners have had increases of £14,000 and £5,000 per month respectively.

Price inflation in the prime country house market hit a 22-month high in the first three months this year and on average country houses rose in value by 3.3 per cent during this period.

Record City bonuses, a strengthening of the economy and an increase in interest from overseas were behind the huge rise in buyer numbers and country house sales. The number of overseas buyers rose by 46 per cent in the past two years. In Surrey and Berkshire there was noticeable growth in the number of buyers from Russia, Europe and the Middle East.

However, a shortage of top-notch country homes for sale has led to stiff competition among house hunters. Liam Bailey, of Knight Frank’s research wing, said: “The country house market was pretty weak last year; now best and final offers are being taken for the first time in nine to twelve months. You get buyers waiting for a property in a certain area, and if it ticks all the boxes it doesn’t matter what they pay for it as long as they get it.”

The surge in prices was led by the top of the country house market, with the strongest price rises being recorded in the most expensive price brackets. Country houses costing between £3 million and £4 million rose in price by 6 per cent in the past three months alone.

Recent big sales include Edgecote Estate, Northamptonshire, which sold for £27 million, Sarsden in Oxfordshire, which fetched £24 million, and Woodperry near Oxford, which went for £21.5 million.

Robust price rises were also reported in lower price ranges. Country cottages costing on average £500,000 have experienced price rises of 3.1 per cent so far this year. Farmhouses costing about £1.15 million rose by 3.8 per cent, and manor houses costing about £2.66 million rose by 3 per cent.

The country market’s upturn followed a surge in London’s prime property market. In London, homes in the £1 million to £2 million price bracket rose by almost 14 per cent in the first three months of the year.

Rupert Bradstock, of Property Vision, the buying agents, said: “In Kensington and Chelsea I can show you properties that have risen by 15 per cent in value from September to February – that is a warning sign for the country house market. What happens in London usually follows in the country. We have seen gazumping and houses going under offer in a day.”

Knight Frank forecasts that prime country property prices will grow by 4 per cent by the end of the year, with the very best properties rising in value by 7 per cent. Its overall forecast for property price rises nationwide is 2.5 per cent.

Source: Times Online

Remember my brief mention of Veronica de Lotbiniere, the property tycoon & mother of four? Well she has setup her company, Heavenly Property that sources discounted bulk properties and organises property investment seminars. The Telegraph has a more detailed breakdown of her portfolio in an interesting article about how she amassed and manages her fortunes . Here is a breakdown of her portfolio: Five-bedroom seaside house in Suffolk 10 properties in Brandon and Thetford Five-star serviced apartment in York Flat in Dubai New flats in Wolverhampton, Manchester and Birmingham Flat in Budapest Skiing penthouse in Bulgaria Flat in Stockwell, London

Read more about how she manages her four children, seven horses, four dogs and property investments worth £5m here.

LONDON – The Observer will unveil a new Sunday property supplement on March 26, aimed at readers looking to buy property at home and abroad. Property, edited by Observer journalist Jill Insley, is planned as a five times a year full-colour supplement and will be published to coincide with peak times in the property market, beginning with the start of spring, a traditionally busy period in the market.

The Observer says Property will include practical advice on a range of issues affecting the property market, including eco-friendly housing, urban regeneration, student accommodation and buying abroad. Articles on luxury homes in Morocco and Bulgaria are likely to feature in the early editions.

Stuart Taylor, commercial director at Guardian Newspapers, said: “This vibrant new property supplement draws upon the editorial strength of The Observer to give advertisers a chance to reach a previously untapped element of the property market.” The Observer Property supplement will also be published on May 7, May 28, September 10 and October 29.

It follows The Telegraph’s recent London Property supplement aimed at buyers in London and the South East.

Bankers and other employees in London’s financial industry are set to put down 3 billion pounds ($5.3 billion) of their 2005 bonuses as deposits on more than 20,000 new homes in the next two months, according to a report issued today.

The spending spree would finance almost 200,000 average-price homes, the Homebuyer Show said in the e-mailed report. The forecast expenditure equates to 40 percent of the record bonuses paid out to the 325,500 people working in the City of London and Canary Wharf, the U.K. capital’s two main financial districts.

“The payment of City bonuses can have such a dramatic effect on the market,” Property for Life spokesman Adam Woolley said in the statement. “In recent years, so much of this extra money has been invested in property that it has had a strong influence on the direction of the London market.”

The priciest homes in central London gained more in value last year than cheaper apartments and houses, with higher than usual transactions in November and December as buyers sought to pre-empt the impact of bonuses on the market, according to Knight Frank LLC, a London-based real-estate brokerage.

The forecast assumes a 10 percent deposit with the remainder financed by a mortgage, Homebuyer Show spokeswoman Liz Holloway said. That gives an average price of almost 1.5 million pounds for each property. The average U.K. home costs almost 172,000 pounds, HBOS Plc, the U.K.’s largest mortgage lender, said on Jan. 9.

Record Profits

Four of the five biggest Wall Street firms, including Goldman Sachs Group Inc. and Morgan Stanley, posted a combined record $14.6 billion in profit last year, an increase of 15 percent.

London paid out 7.5 billion pounds in bonuses for 2005, or 23,000 pounds a worker, the Centre for Economics and Business Research said on Jan. 12. Wall Street will pay out $21.5 billion in bonuses, New York State Comptroller Alan Hevesi said on Jan. 11.

Some of the bonuses will be spent on buying real estate overseas in countries such as Bulgaria, Spain, India and China, Nick Clark, chairman of the Homebuyer Show, which takes place in London’s Docklands district on March 16 to March 18, said in the statement.

“This is exactly the type of investment which can appeal to those City workers who are used to speculating on assets and deals in their professional lives,” Clark said.
Source: Bloomberg More on story from Financial Times

The number of Britons who plan to buy properties abroad is set to double, according to research released by today by Barclays.

Some 5% of people questioned by the bank already own a home abroad, while a further 5% said they would “definitely” buy a property overseas in the future.

In addition, 37% of respondents said they were “considering a purchase abroad”.

But while people are attracted to the idea of buying overseas, the survey revealed there are some practical concerns they need to address.

Over half (58%) of those who are considering a purchase said they were concerned about local legal or tax issues; 17% were worried about the security of an empty property; and 8% feared they might be overcharged by the seller.

A further 14% were worried that they did not know the local language well enough to arrange the deal.

Among those questioned, Spain (including the Balearics and Canary Islands) was the most popular location for a second home, with 30% of potential buyers naming it as their preferred destination.

Perhaps surprisingly, the US was second on the list, favoured by 15% of Britons, while 14% said they wanted to buy in France.

Some 9% of those asked said they didn’t yet know where they wanted to buy.

“The trend towards owning property abroad shows no sign of abating and could go through the roof if people were more confident of a hassle-free purchase,” said Suzanne Clay, head of European business development at Barclays.

Speculating on reasons for the surge in interest in overseas property, Ms Clay said: “Many people buying a second home overseas are likely to use it for holiday purposes, but are not averse to letting the property out to help with mortgage repayments.”

“They might also be looking at it as a place to retire to,” she added. “To others, this may be a significant step towards moving overseas permanently.”

The popularity of second homes abroad has risen in recent years, according to figures released by the Office for National Statistics in June.

They revealed that between 2002-03 and 2003-04 the number of British families who owned a second property overseas increased by 20% to reach a quarter of a million.

Source: Guardian Unlimited

People should think very carefully before placing their incomes in retirement at the mercy of the buy-to-let property market, warns the Actuarial Profession.

The warning comes as product providers gear up to for changes to the rules for Self-Invested Personal Pension Plans (SIPPs). From 6 April 2006 SIPPs may, for the first time, invest directly in residential property. This may at first sight appear to offer an attractive income and capital tax shelter for buy-to-let properties inside a pensions wrapper.

But the Actuarial Profession cautioned that there are a number of reasons why residential property may not be suitable for many peoples’ pension investments prior to retirement, or for a fund which is being drawn down in order to provide an income:

The initial outlay is likely to be substantial in relation to the existing savings. Existing property cannot be injected directly into a pension fund, and investors should consider the cost of rearranging existing pension investments, and the balance of their revised portfolio.

Savers are permitted to borrow part of the cost of the property, leading to an element of gearing which increases the overall level of risk, especially if interest rates were to rise

Most people need to draw their pensions as soon as they retire, and may have little discretion about when this happens. If the property market is not performing well at that time, a forced sale may be required at a relatively low price

Overseas property investments may be subject to local legislation that inhibits dealing with them, and in some circumstances they may prove extremely difficult to sell.

Residential property can be a volatile investment. Rental income (which cannot be guaranteed) represents a large part of the return, and letting voids and/or marketing costs can quickly erode estimates of rental returns. Properties come in relatively large units and cannot be subdivided; and the property cycle (the period over which values rise and fall) is very long; all one’s eggs are in one basket.

Uncertainty over rental income is especially risky if the property is retained after retirement as part of a “draw down” arrangement, and the investor relies upon the income to fund his or her pension.

Only more financially-secure investors, such as those who already own a buy to let property and who wish to ensure that future rises in value are free from CGT, or those who have large existing pension funds and who perceive property to offer high returns for acceptable risk, should consider buy-to-let property.

Alan Goodman, Chairman of the Financial Consumer Support Committee of the Profession, commented: “There are just 150 days to go before the rules change and people may invest their pension funds in buy to let properties. We are sure some providers will be looking to cash in on this market with enterprising new investment vehicles.

“But people must not be seduced into buying them – even though house prices have rocketed and stock markets have slumped in the recent past. The value of houses, too, may fall as well as rise and the lack of liquidity that could arise from being a forced seller in a falling market could have very serious implications on an individual’s ultimate income in retirement.

“We have identified important reasons why people should think twice about putting all their pension eggs in one property basket. There may be a place for property within a diversified portfolio, but this is best achieved using a property fund rather than investing directly in bricks and mortar.

“In our view the vast majority of people should invest in pooled funds, rather than much riskier individual properties. We therefore urge everyone to consider very carefully whether residential property is a suitable investment for their pension funds and if so, ensure they get good independent financial advice before they go ahead.”

Source: Easier