The Power of Prop Tech 2019: What is it and why does it matter?

Property technology will continue to transform the industry

The UK’s property industry has remained stubbornly resistant to change, even as innovation reshapes entire verticals across the wider economy. Compared with finance or retail, where e-commerce now accounts for around 20% of total UK retail sales, technology-led disruption in the property sector has been marginal. Whilst most of us bank and shop very differently today to how we did just a few a years ago, the fundamentals around buying a house, acquiring a mortgage or renting office space has remained more or less the same. But all of those things are about to change.

Technology has been continuously remapping the way we work in the industry, and we can expect to see this trend continue in 2019. Over recent weeks, we have seen the Property technology innovations make national headlines, with the worlds first AI auctioneer overseeing an online property auction using blockchain to create an electronic audit trail and google making it’s first property tech move outside of the US by investing into UK property management service AskPorter. And its not just google who think that PropTech is a good idea.

Historically the property industry has been slow to embrace technological change. However, attitudes appear to be changing now we are heading into the year of 2019. A survey carried out by Property Week underlines the steady increase in the number of businesses looking to adopt new technology, with 68% of respondents saying they reembrace tech and are ‘willing to innovate and trail new products’. With 67% of property companies saying they believe the investments they have already made in tech have given their business a USP.

Innovative property technologies in the UK Market

1. Move bubble – a collaborative site for property owners, agents and renters

The site’s aim is to champion the renter’s needs and in doing so it’s a collaborative site where owners, agents and renters can work together as individuals to streamline the rental process. There’s a huge shift going on with the younger generation coming onto the market. They’re demanding more simplistic, value adding, mobile, cloud based solutions that enable collaboration between end-users, offering far greater levels of transparency.

2. Virtual View App – the UK’s first mass-market augmented reality property platform

Founded in 2016 out of the startup accelerator Rainmaking Loft, Virtual View App combines digital and printed marketing materials to allow users to access 3D property models and floor-plans, photo galleries and videos by scanning an image. There’s the ability to look at other elements of the property process, such as unique videos to market properties or cloud services that manage rental-related documentation.

3. Splitwise – an app to make shared living simple

In the ‘hassle-free’ space, Splittable claims to “make it easy to split bills and track expenses with your housemates”. This innovative application focuses on making shared living easier by tackling the often tricky subject of bills. Claiming to stop arguments before they start, Splittable makes it simple to split bills flexibly while helping users keep track of house share expenses.

So what does the future hold for property technology?

There is a lot of excitement around property technology both locally and globally. The key for success in property technology both locally and globally. The key for success in the property industry is to continually improve visibility and transparency, and to work hard to empower investors and other stakeholders as part of the value chain. That’s why its extremely important to get comfortable with new technology to make your business flourish, times are changing, and you know what they say, “innovate or die”.

Important things to know about Help to Buy ISAs in 2019

The Help to Buy ISA was launched on the 1st December 2015 and runs until the end of November 2019, with all bonuses having to be claimed by the 1st of December 2030. With just under a year left to open and start saving, now could be a good time to consider one. They offer an alternative to taking out a loan to help fund an initial deposit for your first home along with other benefits, with the way they work and how you can take advantage of them.

How do they work?

Help to Buy ISAs work in a similar way to regular ISAs, the only difference is, the government will top up any contributions made by 25% (up to a limit of £12,000). A minimum amount of £1,6000 is required to qualify for a government bonus and you can start with a deposit of anything up to £1,000. After the initial deposit has been made you can only save up to £200 a month, so you can’t simply transfer £12,000 across, for example. Then when it comes to buying your first home with the ISA, 25% will be added to it as long as its between the minimum and maximum contributions.

Qualifying Criteria

In order to open and use a Help to Buy ISA you simply need to be a first-time buyer over the age of 16. The good news is that they are available to each first-time buyer and not each home, so if you have a partner or want to buy a property for a friend, you can combine savings and get up to £6,000 from the government towards your home. Any home worth under £250,000 (or 450,000 in London) is eligible and it can be used with any mortgage, not just a Help to Buy one.

Limitations to Help to Buy ISAs

Within all the criteria mentioned, there are a few further restrictions. Help to Buy doesn’t work if you are wanting to buy a property overseas or open more than one. Technically you can’t buy a property and rent it out with one, but if your circumstances change and you have to work away, for example, you will be able to rent it out.

Should I open one in 2019

Any first time buyers will be looking into getting a good financial position before purchasing a property by ensuring they fulfil their financial obligations. If you are considering buying a house in the years should seriously consider open one. As long as you meet the qualifying criteria and open one before the 2019 deadline then theres little reason to not open a Help to Buy ISA.

Property to buy: Top saving tips for first-time buyers revealed

PROPERTY TO BUY: Saving for a first home can seem impossible, especially with rising house prices. However, new research has revealed the top saving tips for first-time buyers looking to purchase a new home.

Top tips and tricks for buying a new property

Property to buy is on the minds of many Britons, with many people looking to buy a home for the first time. It’s a long and often difficult journey, with saving for a deposit seeming like an almost impossible task. New research from the Post Office Money has now revealed the easy ways first-time buyers can successfully save for a first home. According to the research it takes first-time buyers four years of adjusting and scrimping to be able to save for their first home, with these tips helping along the way.

Top tips for people saving towards their first home

Cut back on the essentials

According to the Post Office, the easiest (and most common) way people manage to set more money aside when saving for their first home is finding ways to cut down on their day-to-day spending. This could be as simple as switching to supermarket basic brands, comparing energy and mobile providers to see if you they could reduce your their bill or even seeing if it’s possible to reduce their rent by moving to a less expensive property.

Map out a deposit goal and stick to it

This is important particularly if putting aside money with a partner – very few people save without assistance from their loved ones and first-time buyers will often be planning to purchase their home with a partner.

When saving money, be sure to agree on how much both partners can commit to save realistically on a monthly basis and hold each other accountable, so it’s more difficult to splurge.

Look for tools that may help, as there are a range of apps and calculators freely available to help plan a savings journey, such as the Post Office online tool.

Can savings be spread out over a longer period?

If the goal seems out of reach, consider how to reduce the pot needed to save, such as buying a smaller property, looking at a different location or considering no-deposit mortgages.

Have an honest conversation with loved ones about financial support

It’s common for first-time buyers to get some degree of financial support from their families as they attempt to get on the ladder. The research actually showed that more than half will do so as they attempt to pull the money together for their first home. When asking for money, be sure to have an open and honest conversation about the terms of the agreement. If they are providing a gift or a loan and if it’s a loan, be clear on what they expect in terms of regular repayments.

Keep an eye on how affordability shifts and incorporate that into any plan

According to the Post Office, four years is a long time in our uncertain housing market and buyers want to make sure they are aware of how things shift while saving. You also need to keep up to date on all of the government Help-to-buy schemes. Up until 2023 first time buyers participating in the scheme, you only need a 5% deposit, with the government lending 20 % of the costs and the rest is made up with a 75% mortgage. You wont be charged fees on the 20 p% loan for the first five years. See below for all Fortitudo’s developments associated with Help to Buy.

Developments associated with Help to Buy

• The Highlands, Fareham

• West Quay Road, Southampton

• Commercial Road, Poole

• Willow Park, Havant

• Statum, Bournemouth

• Canaway Court Poole

First time buyer mortgage rates fall to a record low

This is why now is the time to buy for first time buyers, the banks in the UK are
making it easier for first-time buyers to get on the property ladder by offering the
lowest mortgage rates since records began in 1995. Interest rates on two and five
year deals have fallen to a twenty three year low, according to the latest Bank of
England figures.

People looking to buy a property with a 5 % deposit and take out a loan for the
remaining 95% could get a two year mortgage with an interest rate of 3.3%, down
from 4.02 % a year ago. For five-year mortgage, the average rate was 3.89% at
the end of October. It was 4.71% in the same month the previous year. Both rates
beat the record lows for each type of mortgage reached a month earlier, at 3.39%
and 3.95% respectively, suggesting that lenders are increasing efforts to push
businesses up. The reason for these rates falling is mainly down to the stiff
competition among leaders in the industry.

Low-deposit mortgages are often popular among first-time buyers, but are usually
more expensive than other property loans, meaning lenders have more scope to
cut rates. Saving up a large deposit typically results in a cheaper mortgage. The
average two-year mortgage rates for a buyer with a 10 % deposit is 2.24%.
Even with cheaper 95% mortgages and exemptions on stamp duty, first time
buyers still need to raise more than £10,000 to put down a 5% deposit on a
typical property. The current lowest rate for a two year fixed mortgage with a 5%
deposit is 2.76%, from Halifax, however this is only available through brokers,
who charge a fee. It is common to see mortgage lenders offer low rates in the
final months of every year in an attempt to hit their end of year targets. However,
it is thought that the current low rates for first-time buyers will continue into
2019.

The economic benefit of development to the local community

Some people call us greedy and some call us ruthless, but really developers helps communities grow which fuels economic growth. A lot of people fail to recognise how far the economic benefit stretches with the creation of new developments. Many people just assume that it is merely a percentage of housing that is allocated to the council for social housing, under the section 106 affordable housing act, but really it’s so much more than that. For many property developers it is very frustrating, as they are penalised for being greedy and bringing too much change into a community, but people do not see the bigger picture and the economic growth we create.

The house building industry is a massive driver of the UK economy and makes a huge
contribution to communities across the country. While delivering much needed new homes of all tenures, house builders are quietly creating and sustaining jobs, boosting investment in infrastructure and amenities in village, towns, and cities. As well as becoming ever more reliant on private builders to deliver affordable housing through planning agreements, vast sums are ploughed into new roads, schools and community facilities each year. Below we talk about the economic footprint provided in the UK of the property development industry.

1. Before a site has even been acquired, a company has many employees working in
house, depending how large the company is. As you can see already there are jobs
created and business rates paid even before the development takes place, this could be
anything from graduate to apprenticeship jobs helping the community grow.

2. Acquiring a development site is a key stage and the beginning of the property
development process, there are many systems in place to help to source a site, which is
normally done in house. Once this is found, each party has to have a legal
representative which they will outsource to a local law firm.

3. Development appraisal forms the backbone of the financial side of property
development and is arguable the most important step within the property development
process. A developer will know their appraisals inside and out and be able to quickly and efficiently put together an initial site appraisal and cash flow. This will be done in house, and is the deciding factor as to whether the site is worth purchasing, where many different considerations will be taken into account. This is the start of outsourcing the project to different expertise in the field. This could be a planning consultant, architect, solicitor, engineer. This changes from site to site, but there is always lots of jobs to go around in the local community.

4. A development cannot happen or go ahead without funding. Money is one of the 3
pillars of property development and is an area new and inexperienced developers struggle with the most. For each site that you look at, you need to understand how you
will fund it and how to structure the financial side. Each site is different and will require
a different set of funding criteria, and because it’s become increasingly difficult for
developers to get funding, they have to sometimes work with different funding
partners, this can lead to inefficiency and become very expensive.

5. One of the 3 pillars of property development is planning, and the required permissions to actually be able to start and finish a development project. As a property developer, we need to manage the process to ensure all the permissions are in place and that we have a scheme designed that is viable. A developer will know how to optimise and maximise every single square foot on a site to achieve the maximum amount of profit the sit can yield, which in fact means more affordable housing due to being a percentage measurement. There are many other permissions required, not just
planning. For example, building control and party walls. These all need to be managed
along the process to ensure that a development can actually go ahead and happen.

6. Reaching the construction step along the property development process is a major
milestone and there will have been some serious work, effort tune and money invested
into the project. There are many ways to contract with a builder, and this will also
depend on the role you are taking during the construction process.

7. Once the development is finished, it will then be sent off to different estate agents
around the area, but also the development company itself may choose to market the
properties. Sometimes they may hire private marketing companies around the area to
give it that extra push, or work with local newspapers and PR companies.

As you can see from the above, no matter what angle the development is going there is always a need for outsourcing jobs in certain expertise. What people do not understand is the idea of job creation for so many local businesses from development companies. It being a major boost for the local economy, providing modern and attractive spaces for businesses, creating new jobs and encouraging more visitor numbers into the town throughout the year. Below you can see some statistics put together from Litchfield’s of the economic footprint of developers around the UK.

• A total of £38 billion for the economy is generated by house building each year.

• A total of £4.2 billion is either given from developers to help provide affordable housing
in the local area.

• There are over 698,000 jobs created each year from a variety of fields of expertise.

• There is an around £2.7 billion in tax paid each year, which comes from a Council tax, Stamp Duty tax, Corporation tax, National Insurance, Pay As You Earn tax.

• A total of £5.9 billion spent in local shops and services by residents of new homes.

• A total of £1.2 billion is spent on tenants making their houses feel like home
i.e. furniture

 

 

Learn why the property development industry is an important aspect to the affordable housing crisis

Affordable housing is fundamental to health and well-being of people and to the smooth functioning of economies. Over time it has become increasingly difficult for developers to gain planning permission for different sites around the UK due to a slowing in process from council job cuts and development feasibility becoming more challenging. In addition to this traditional lenders are increasingly reluctant to approve loans to developers, and this is having the biggest impact on small to medium (SME) property development companies.

It needs to be highlighted that developments always deliver affordable housing, where viable due to a clause in the section 106 affordable housing act. It is a planning legislation which requires developers to include a portion of affordable housing in their developments, which is then often sold to housing associations. It is the primary driver of affordable housing delivery, with 45% of housing association homes (14,437) developed using the mechanism in 2016/17, according to figures complied by the nation housing federation.

The importance’s of small developers in helping address the imbalance between housing demand and supply cannot be understated, and off course the push for affordable housing which is given to the government. Policy and initiatives designed to encourage SME developments to achieve their maximum output new build homes are needed. Doing so ensures the UK effectively uses its available resources, increasingly the housing stock and making the property market accessible for prospective home buyers.

What can the government do to narrow the housing-affordability gap?

Unlock the land supply is an important aspect to narrowing the affordable housing gap. Land is one of the largest property development expense and securing it at an appropriate location can be difficult. In the largest global cities, many parts of land remain unoccupied or underused. Some of them may belong to government and could be released for development or sold to buy land for affordable housing. Reducing construction costs would encourage developers to challenge bigger project, which is turn would lead to more affordable housing, so the obvious solution is to allow taller buildings.

Lowering financial costs for buyers and developers, will lead to improvements in underwriting would help make banks safely make more housing loans to lower income borrowers. Governments could help cut the financial costs of developers by making affordable housing projects less risky by guaranteeing buyers or tenants for finished units.

Current market revealed: First time buyers are driving the housing markets

Just in August alone there were 35,000 first-time buyer mortgage applications completed, which is one of the best months this year, and 2% higher than the previous year. Experts said people that are taking their first step on the property ladder are benefiting from continued low interest rates, a good choice of mortgages and government policies aimed at giving the sector a helping hand. Furthering this stamp duty was cut for first-time buyers in 2017, leaving buyers with more money for better homes.

Buy-to-let mortgages have helped to transform the concept of housing in the UK over the last few decades. They represent one method by which rental housing can be transformed into an investable asset. Data from Savills 2018 shows the average rate for five-year buy-to-let mortgage could be an appealing prospect for many landlords, especially at such attractive rates and range of mortgage products available and will continue to grow, more than doubling over the past year. Property website Rightmove said that first-time buyers are in the best time to negotiate deals this autumn. Rightmove has also seen a softening in asking prices for properties with two bedrooms or fewer – the usual target market for both affordability-stretched first-time buyers and buy-to-let investors.

Overall the house purchase completions remain stable, driven largely by the number of first-time buyers which reached its highest monthly level since June 2017. First -time buyers generally are benefiting from low interest rates and more choice in the mortgage market, as well as schemes such as Help to Buy. Lenders continue to offer competitively-priced high loan-to-value products to attract first-time buyers and with property prices softening in some areas, there are good opportunities for those trying to get on the ladder for the first time.

It has never been a better time to buy, grab your opportunity now. At Fortitudo we strive in making it possible for first time buyers to get themselves onto the property ladder. Many of our developments are associated with Help to Buy, to kick start your journey to owning your own home. For more information on our latest developments, please visit out website.

5 things you need to know about the Help to Buy equity loan

  1. First time buyers

The scheme begun helping first time buyers back in April 2013, and since there has been over 169,102 competitions to March 2018, of which 81 per cent of these were first time buyers  and around 13,000 of these were based at London properties. The value of these properties is estimated at £42.23 billion, according to the Ministry of Housing, communities and Local authority.

  1. Equity Loan

The Help to Buy equity loan scheme supports those with a low deposit looking to get onto the property ladder. This is completed by combining a 5% deposit from the buyer, a government loan of up to 20% of the property value, which is interest free for the first five years, and a 75% mortgage. There is also a scheme for those looking to buy in London.

  1. Re-mortgaging

It is possible to re-mortgage with an equity loan in place, but it depends on the circumstance of the homeowner. There are a number of moving variables that will affect how easy it is to re-mortgage. This includes the mortgage loan itself, how much the property value has risen or fallen, whether the homeowner has any equity to put in and how much income they receive.

  1. Selling up

This follows the same process as any other property sale, however, at the point of sale, the homeowner will have to repay the equity loan in full to the Home and Communities Agency. The amount of paid back will be the same as the amount burrowed, unless you sold after the 5 year mark, then interest would start to occur onto off your equity loan.

  1. Alternatives

The Help to Buy equity loan is not for everyone, and there are many different ways for first time buyers to get on the housing ladder, such as the shared ownership scheme. This allows people to buy a share of between 25% and 75% of a property. A mortgage will be paid on the share the homeowner owes, with a subsisted rent on the remainder being paid to the relevant housing association.  Whilst shared ownership makes mortgages more accessible for those on a lower wage, homeowners still have to pay 100 per cent of the ground rent and service change on a property. Homeowners do have the option to buy a greater share of the property in the future, this is a process called stair-casing. However a stamp duty charge will be charged on the whole value of the property and will have to be paid once the shares equal or exceeds 80%.

Autumn Budget 2018: New Help to Buy scheme to be launched for first time buyers

On Monday it was announced from the government that a new Help to Buy equity loan scheme for first-time buyers will be launched in April 2021. The scheme will feature regional price caps, and come alongside reforms to stamp duty for shared ownership users, capital gains tax changes for landlords and extra funding for house builders. It has enabled developers the visibility needed to plan their land purchase requirements, and while the government has stated that there will be no extension after 2023, these schemes have already been extended twice.

New Help to Buy scheme for first-time buyers

The current help to buy equity loan scheme is due to end in March 2021, a new version will be launched with regional price caps. The scheme, which will run for two years until March 2023, will only be available to first-time buyers.

The new scheme will have a higher price cap, which will be 1.5 times the current average first-time buyer price in each region. With South West capping at £349,000 and London at the maximum of £600,000. The government says it has no plans to continue offering Help to Buy equity loans after March 2023.

£500m for housing infrastructure fund

Given that the major house builders cannot make up the shortfall in housing the British Business Bank will provide guarantees on up to £1bn of loans to small and medium sized builders, with an additional £653m going towards strategic partnerships with nine housing associations. The budget announcements also included a further £500m for the housing infrastructure fund, to unlock up to 650,000 new homes. The government has also agreed to reduce planning restrictions in order to make it easier to convert shops into homes.

First-time buyer stamp duty cut extended to shared ownership

The government will also extend stamp duty relief to first-time buyers purchasing shared ownership homes priced up to £500,000 backdated to include those who have bought since 22nd November 2017.

Currently, buyers who use a shared ownership scheme can either pay duty on their share of the property (if it costs more than £125,000 threshold) or on the whole value of the property (including the portion they haven’t bought yet but may buy further down the line.

Under the current system, those who chose the former would previously have missed out on the first-time buyer stamp duty relief. So, assuming you’re buying 50% of a home priced at £350,000 and only plan to pay stamp duty on your initial share.

– You share costs 175,000, meaning you’d need to pay stamp duty on the amount over £125,000 threshold, that’s £50,000.

– On this £50,000, you’ll have needed to pay stamp duty at 2% that’s £1,000.

Under the new system, the buyer wouldn’t need to pay this £1,000 charge. The cut to stamp duty for first-time buyers was originally announced in last years budget, and the chancellor says it has so far helped 121,500 buyers.

Non-resident stamp duty collection

The government will publish a consultation in January 2019 on introducing a 1% stamp duty surcharge for non-resident buying a home in England and Northern Island. Whilst stamp duty relief has also been extended, backdated to November 2017, on first-time buyers purchasing shared ownership homes, with an upper limit of £500,000.

Capital gains tax changes for landlords

The Chancellor says that the government will improve private residence relief on capital gain tax. From April 2020, letting relief will be reformed so that it will only apply when the owner of the property I in shared occupancy with the tenant. The landlord capital gains tax exemption on the final 18 months before a property is sold will also be cut to nine months. These changes will be subject to a consolation

What options are there to get yourself on the property ladder?

Currently, first-time buyers are driving the housing market, borrowers took out £300 million more in mortgages than last year, according to banks and building societies. Cheaper loans and government schemes with lower interest are encouraging buyers to save and get themselves onto the property ladder. From special tax-free savings accounts to shared ownership and innovative mortgages, there are options available to help buy your first home. Take a look at these top 5 options that have already helped millions…

Help to buy Lifetime ISA

If you’re saving towards your dream home, a lifetime ISA is a good choice, as you can get a boost of up to £1,000 free cash a year. You can save more into a LISA each year, £4000 more than you can into a Help to Buy ISA. You can also use the Lifetime ISA to purchase a high-value home at up to £450,000. To qualify buyers must be aged under 40, but over 18 to qualify.

What can you get out of a Lifetime ISA?

– You can transfer between providers.
– You get a free cash top-up.
– You can choose between cash savings and stocks and shares.
– You can deposit £4,000 a year, rather than face a monthly limit.
– It’s a tax-free wrapper
– You can purchase a property worth up to £450,000 anywhere in the UK
– If you and your partner both first-time buyers purchasing a property together, you can both open one and save – effectively doubting the bonus.

1. Help to buy ISA

These accounts help you save for a deposit and you benefit from the Government topping up your savings by 25%. You can put away an initial sum of £1,200. And can then save £200 per month after that, the government will give you a maximum bonus of £3000 once £12,000 has been saved.
Help-to-Buy ISA’s are also available for each first-time buyer, and not each household, this means if you and your partner were saving for your first home, you could each open a Help to Buy account and take advantage of the government schemes bonus. But Help to Buy ISA can only be used towards the total cost of the property, and not any additional fees such as solicitors and estate agent fees, or stamp duty etc.
What can you get out of a Help-to-Buy ISA?
– You get free cash to top up your savings
– Available from a number of banks and building societies
– These savings plans are tax-free
– You can transfer your ISA from one provider to another to chase the best rates
– This scheme isn’t limited to new-build homes

2. Shared ownership scheme

This scheme allows you to purchase a share of a new or existing home from a council or housing association, normally between 25% and 75% of the properties value. After living at the property for a certain period of time, you have the option to buy a bigger share of the property.

How can shared ownership scheme help you?
– You are only buying a share of a property, therefore a smaller deposit is required.
– Should make buying a home much more affordable.

3. Post Office Family Link Mortgage

If you are an aspiring first-time homeowner who can afford to repay a mortgage but you’re struggling to save enough for a deposit then the post office family mortgage could be the correct route for you. It allows you to secure a mortgage without a deposit by taking advantage of the help of your family. For the first five years, you will make two separate repayments, one towards the assistors mortgage (which is interest-free), and one towards your own mortgage, where interest rates will apply. With these arrangements you can use the equity in your parents’ home to help you get a deposit together, this means you don’t have to use your savings, and you won’t be draining your families hard earned savings.

What should you think about before applying?

When applying for a mortgage a lender will check your credit history and assess how much of a risk you are. These checks have become increasingly harder on buyers, due to the financial crisis back in April 2014. Furthering this the Bank of England also bought in restrictions, limiting the amount you can borrow. This will depend on your income, where banks will give you no more than 4.5 of your annual earnings. Buying a property is one of the biggest financial commitments a person can make and can be a daunting process for first-time buyers, so it is wise to seek professional advice, who specialises with in-depth knowledge of the market and who can look at a range of mortgage products to help you find your best deal.