Business News on the Block

Buy-to-let investors
According to ARLA, the Association of Residential Letting Agents, buy to let investors have seen increases in their returns during the first quarter of 2008. The average return on a geared investment is 21.7 per cent, up 0.27 per cent, and returns on cash purchases average 10.91 per cent, with flats showing a marginally higher return on the whole across the UK than houses. The data, published in ARLA’s quarterly Review and Index, also highlights that around half of all investment landlords intend to buy further property in the next twelve months. This is encouraging news for our sector and underpins our long term faith in the market.

Delph avoids ‘ghost towns’
We have been interested to read this week reports of ‘ghost towns’ as new blocks of flats across the UK’s major city centres are lying empty, as the market struggles to attract buyers. We saw this massive oversupply coming and have steered well clear of traditional residential hot spots such as Manchester, Leeds, Liverpool and Newcastle. Instead we focused our investment on cities such as Southampton, Hull, Cardiff and Bristol, where we invested more than £50 million over the past year. Factors we look for that present an attractive investment opportunity for a location are a robust local economy and strong employment growth to support tenant demand. Successful models for city centre living schemes require both workplace and leisure amenities to be on the doorstep of the dwelling.

Eco-towns update
Housing Minister Caroline Flint has announced a shortlist of 15 potential locations for the Government’s eco-towns programme. The thinking behind eco towns is that they will provide the opportunity for a major boost in affordable housing across the country while tackling climate change. The criteria for eco towns is that they are new settlements, separate from existing towns but well linked to them, and create a minimum of 5,000 to 10,000 new homes. We support initiatives to improve eco standards, and have, for example, embraced CHP (Combined Heat and Power) in our major schemes. We do however have a cautious approach to the wholesale creation of new communities, unless the demand and the content have been carefully thought through.

Commercial developers turning to residential market
Commercial property developers are being compelled to enter into the residential market. Mixed–use schemes require housing as an essential component to secure planning consent and constitute a sustainable regeneration scheme. The risk we take when acquiring residential units in mixed-use schemes is a very calculated one. Our offer to developers of mixed-use schemes is compelling, as we effectively provide them with the residential equivalent of a pre-let.

We are also providing valuable funding to help facilitate the scheme moving forward in the development process, while increasing the overall investment value of the scheme. Research undertaken by leading international real estate advisors Savills has demonstrated that mixed-use schemes containing a residential element boast higher returns for investors than developments with no residential component. ®Å½

Humberts sells Farleys
National estate agents Humberts has sold the management business of Farleys estate agents in London for £424,500. Last month Humberts said it was considering the sale of non-core assets as part of efforts to improve on a poor financial performance last year. The management accounts in respect of the Farleys Management business show a turnover of £363,000 and a contribution of £69,000 for the year ended 30 September 2007.

As a result of a closed auction process, Farleys Management is being acquired by Peverel Ltd the holding company of the Peverel Group of companies that comprise some of the leading providers of property related services in the UK. Peverel is wholly owned by the Consensus Business Group – owned by Vincent Tchenguiz – which is also a substantial shareholder in Humberts®Å½

Moretons moves to Crabtree
Crabtree Property Holdings Ltd announced recently that it has acquired Moretons Property Management Services Ltd. This will give the Crabtree Group a base for expansion in central London. Terry White, MD of Crabtree, said: “Crabtree is delighted to have been given the opportunity to acquire Moretons. The company has a strong reputation in central London and Crabtree is keen to enhance this further. There is a natural fit between the two companies who both seek to provide an excellent level of service to their existing clients.” ®Å½

MIPIM 2008 – a blockbuster
For the third year in a row, MIPIM, the world’s property market, has set an all-time attendance record. Total attendance reached 29,318 delegates (12% up on 2007) from 89 countries. The 9,744 companies represented at MIPIM was also a 12% increase on last year.

“The challenges caused by the sub-prime crisis in the US and the slowdown in global economic growth have had very little impact on MIPIM. The event continues to be the major international gathering for the property business, where professionals learn about large-scale projects, and new geographical and commercial investment opportunities,” says Nadine Castagna, Director of MIPIM. ®Å½

Lease extensions on the up
Leaseholders enquiring about lease extension rose by almost 400% in 2007 reports The Ringley Group. The Ringley Group reports that the number of enquiries for lease extensions has gone up dramatically.

Mary Anne Bowring, MD of Ringley and a governor for the Institute of Residential Property Management (IRPM) predicts this figure will increase even further because of the hardening of the residential property market and growing number of properties with short leases.

“We are receiving double the amount of enquiries each month on leasehold issues, the top enquiry being lease extensions, with absentee freeholder problems and freehold purchase close behind. Continued growth is expected as it is inevitable that leases can only get shorter and as the market hardens a long lease will become critical to persuade would-be buyers that your property is as good an investment as the next. In London leases of 40-60 years are now common,” says Bowring.

Leaseholders who have owned the property for two years have a legal right to claim a 90-year lease extension that can add value to the property. ®Å½

Tenant protection
mydeposits.co.uk, a Government-authorised insurance-based tenancy deposit protection scheme protecting over £177 million of deposits, has published its figures marking the first anniversary of the legislation.
Out of 200,000 individual deposits protected throughout the year by more than 31,000 landlords and letting agents, there were only 341 actual disputes notified to the scheme.

From these 341 disputes, only 20% (64 cases) of the more intractable cases needed to be adjudicated through Alternative Dispute Resolution (ADR). This process relies on evidence provided by all parties in order to reach a final and binding decision on how much, if any, of the deposit should be returned to the tenant.

In 86% of these more serious disputes, the ADR has found in favour of the tenant: 45% will have received their full deposit and 41% will have received a proportion of their deposit as determined by the adjudicator. In 11% of these cases landlords and letting agents have been able to withhold the total deposit.

David Salusbury, Chairman, mydeposits.co.uk, said: “After only 12 months, it is quite clear that tenancy deposit protection has clarified the rights and responsibilities of tenant, landlord and letting agent. With so few disputes actually being notified and only 20% of these requiring external adjudication, it seems that this kind of self-regulation is proving to be extremely effective.

“The risk to landlords of not complying with the legislation is considerable. Not only would a landlord appear to be totally oblivious to their legal obligations but they will receive a fine amounting up to three times the deposit. In addition, for as long as the deposit remains unprotected, a landlord faces significant limits on their ability to seek possession.”®Å½

Peverel launches Marlborough House Management
Peverel OM has created Marlborough House Management in response to a growing demand to provide a less complex and more basic service offering to Residential Management Companies (RMCs) and real estate clients.
Marlborough House Management is based on Peverel OM’s vast expertise in the administrative process that is required in the property management industry, yet is tailored to suit private landlords and RMC directors by offering only those services that they require; for example Accounts Only and Ground Rent Collection Only services.
Andrew Billson, Managing Director at Peverel OM comments: “We have designed Marlborough House Management specifically for private landlords and residential management companies who perhaps do not require a full management service, yet can benefit from our wide experience and expertise within property management as a whole.” ®Å½

Who can you Trust?
Trust Property Management Group plc announced a pre-close trading update for the year ended 31 March 2008. This has been a year of growth since the company’s admission to AIM in March 2007. The Company reports that trading has remained buoyant and has created a strong financial platform for future growth.

As well as considerable organic growth, the year has seen the successful integration of two acquisitions, which have provided further geographical reach and important new client bases.

The Company has strengthened its sales and marketing teams as well as its accounts department to support its rapidly growing management portfolio.

To accommodate the enlarged team, in May 2008, the Company is moving to new head office premises, which nearly doubles its capacity to 4,600 sq ft.®Å½