A few weeks ago I wrote about the benefits of estate agency regulation – and those words were echoed in this year’s Queen’s Speech. Most of the accompanying coverage has focussed too much on redress, but I suppose that is more an indicator of our litigious society than any other factor.
Regulation has been a long time coming. Section 22 as it was known (from the original bill) has been 28 years in the making. Consumer champion Which? as well as the National Association of Estate Agents have campaigned hard for this significant development.
Rooting out the cowboys is just one of the benefits of regulation. It also creates a career path for new entrants through examinations and puts the industry on a professional footing, resulting in greater consumer confidence in the service being provided.
The bill requires estate agents to join an independent ombudsman scheme such as the National Association of Estate Agency.
More than 60% of estate agents are already members so the job is half done. And this approach is affordable, which is important for estate agents who operate on slim margins.
I was glad that Alistair Darling acknowledged that the majority of estate agents provide the “straight deal” that buyers and sellers want, underlining a commitment to “drive up standards”.
I hope the regulation will focus on improving standards rather than penalising professional agencies.
Continuing my theme to reflect on the year from a different viewpoint, what a fabulous year it has been for everyone involved in overseas property markets.
Research out this week shows the number of people who own a second home abroad has grown by 250,000 in two years. A total of 800,000 people – the equivalent of 3% of British householders – have invested in a bolt-hole abroad, and the trend shows no sign of fading with an estimated two million households ready to join the overseas property ladder.
I was disappointed to see the same research showing that most of the 28% of those questioned who would like to own a second home in the sun, believe they could only achieve this by winning the lottery. I pity these people who statistically have more chance of meeting Elvis.
They obviously do not have access to the specialist advice and skills of an experienced, professional mortgage broker, to help them realise their dream of a place in the sun.
As I’ve said before in this column, if you don’t make your clients aware of your own expertise in this area – whether you offer it direct or introduce to a specialist overseas business partner – it is likely that when your clients look elsewhere for the overseas service, the usurper will also look to take care of their domestic mortgage arrangements.
UK investors look to overseas property market for higher yields
Fly-to-let continues to drive the overseas property market. Where Easyjet, Ryanair and BMI Baby go, the developers and estate agents follow (or is it the other way round).
Whichever way you view it, EU expansion and cheap fares have opened up new holiday hotspots for investors and holidaymakers. Bulgaria and Romania are poised to join the EU in January, and thousands of Britons have already taken the plunge to invest in these locations.
According to Jane Goodall who runs Quest Bulgaria magazine, more than 3,000 Britons already live in Bulgaria with at least five times that figure having holiday homes there.
Today, thanks to technological advances, UK residents are just as likely to buy their second home with a view to living in it for part of the year rather than just using it for holidays. And this is having an effect on where people are buying abroad.
Clients will be just as likely to be looking for advice on owning property in the European capitals as well as beachfront regions. Just as previous generations invested in a London pied-a-terre, so today’s true Europeans are property hunting across the continent.
As the public seek alternative investments to fund their retirement and adventurous baby boomers take the risk of investing in lifestyle choices and double residencies, so a new wave of investors has switched to overseas speculation. This year saw an upsurge in UK professional landlords moving abroad because of the typically four times higher rental yields.
Disenchanted buy-to-let investors who are not achieving their desired UK yields are also moving their portfolios offshore, investing in developments, often off-plan, instead of the individual properties.
The global lending market has changed considerably. Not only is there a raft of TV programmes to demystify the process but UK lenders who previously declined the business are now seriously considering the lucrative market of loans for second homes abroad. However, the competition from established regional players is vast – even for these global brands.
Many overseas lenders not only offer favourable rates (SVR of 3.8% in Spain compared with the UK’s 6.5%), they also offer preferential lending criteria such as taking into account rental as earnings, accepting low deposits and mortgages on a self-cert basis.
And while investors might initially remortgage a UK property to afford the start-up investment in overseas property, they can quickly take advantage of the capital growth of their second property to remortgage abroad and maintain their greatest borrowing at the lower overseas rate.
Affordability now takes on a whole new meaning. Not only have booming UK house prices fuelled the ability of many to buy holiday homes, but climbing prices and a shortage of affordable homes has forced many to rethink their investment destinations.
Whether first-time buyers unable to get on the ladder, or professional landlords wanting to cash in on lower house prices and higher rental yields, overseas opportunities enable buyers to invest abroad and then use their capital growth to invest in the UK market.