Phew – the new government aren’t hanging about! They’ve certainly got stuck right in and are making some big changes that are going to affect anyone involved in the property industry.

First came the abolition of Hips packs last month, then last week they announced the reclassification of back gardens.

Now the Housing Minister Grant Shapps is to scrap the residential property landlord register planned by the previous government (you can read about it here).

So far, the move has been widely welcomed by the industry. And I can see why! I think that the last government went too far with their plans for the landlord register. Ultimately, it would have led to more red tape, more complexity and would have been costly for the housing sector.

The move to reduce bureaucracy and red tape is a good one. I think it’s a great way to build up confidence in the property industry and encourage further investment in the sector.

However, saying that, I think that ignoring the regulation of the private rental sector is a mistake. Currently, there are no mandatory controls of letting agents. This can lead to unethical and unprofessional agents giving the industry a bad name.

It seems the Government hasn’t decided how, when, or if it will introduce some form of regulation of letting agents. I think more self-regulation would be the preferred option and this is something that they do seem to be considering. Let’s hope they don’t leave the decision too long.

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Yesterday, the new Communities Minister Greg Clark announced that he intends to change the planning classification of gardens to tackle the so-called problem of ‘garden grabbing’. As a result, gardens will no longer be considered “Brownfield land”  (i.e. land that has been previously developed).

This is something that has been on Mr Clark’s agenda for sometime. In fact, the BBC covered a story way back in 2006 when he tried to introduce a Protect Private Gardens Bill.  You can read about it here.

It’s worth noting that Mr Clark is the MP for Tunbridge Wells. As a much sought after area of the South East, Tunbridge Wells is an area where land is at a premium and where housing demand is historically strong… so is  one of the rare areas where garden grabbing has been a bit of a problem… however how much of a problem is it in the rest of the UK?

Is “garden grabbing” really the problem it’s made out to be?

In my recent blog post on the topic of garden grabbing, I mentioned that planners already have powers to stop this practice. But the fact remains, that despite media and government spin, garden grabbing isn’t a major problem for much of the UK.

How do I know?

Well, let’s just take a look at the recent independent research that the previous Government commissioned to investigate the issue of inappropriate developments within back gardens.

The review found that: “Of the 127 [councils] who responded, less than half (50 councils) considered it an issue in their areas. Of those who reported a problem, only 5 per cent (7 councils) had specific, local policies in place.”

So how will the new legislation affect us developers and land finders?

Regardless of whether garden grabbing is a problem or not (even though over 50% of councils don’t actually think that it is!), it appears that gardens have now been reclassified in the Government’s new Planning Policy Statement 3 (PPS3) which you can read here.

So what kind of effect will this have on us developers and land finders?

Well, overall, pretty limited I would say. Though I think the impact will differ around the country. For example, earlier today I looked back at the deals I’ve done in recent years… and, actually, I can only find one such ‘garden land’ deal that would’ve been affected by this reclassification.

All my other deals have been Brownfield sites used for other purposes, so as such, they wouldn’t have been affected by the policy change.  These included an MOT garage and petrol station, a tyre and exhaust garage, a public house, a farm house and barns, a former Church, the site of a lodge that had been land filled, a haulage depot, a van sales yard… to name but a few!

All of these were sourced off market and none of them were gardens.

What about my current ‘garden site’ deals?

Having said that, I have just agreed a price on three garden sites and am ready to submit planning on one of them this week.  So will the new legislation affect my deals? Probably not…

The fact is, there are many different kinds of “garden-type developments”. Some will be more suitable than others, and ultimately, as with all developments, it’s going to depend on what you propose to build on the land… and how it sits within the specific characteristics of that locality.

So I will still continue to look at these opportunities for now, because I think that even when the policy does change it will be much more applicable to certain geographical areas – such as the South East – and also specific areas within each town.

For example, in my hometown of Bolton, it is well known that Lostock and Heaton are the most affluent wards where demand for large houses has been most keen for many years.

In these areas, the local planners have already severely restricted the practice of developing in gardens – as well as the demolition of a large property sitting in a big plot and replacing it with a higher density development.  So I can see the change in policy will only help to “shore up” the council’s defence against the practice.

However, in other areas of Bolton I would expect less resistance, providing that the scheme was in-keeping with planning regulations and in-keeping with the local neighbourhood…

The main thing to ask yourself with any development is this: Does it sit well within its surroundings?

Let me show you an example…

Below is a “back garden” type of site that I looked at recently. The fact is, these have always been tricky when it comes to getting planning…

I wanted to demolish the existing pair of large semi detached houses in the centre of an acre plot.  However, even with existing planning laws, the planners where able to resist the scheme as they argued it wasn’t in keeping with the design policies of their Unitary Development Plan (UDP).

The planners were looking at the proposal in its locality, not the wider area. As annoying as it is, to some degree I could see their point!

Now compare that to the plot below. This is more of an infill garden plot…

Here, we have a pair of semi-detached houses. One of them has a large garden that is over grown and not used.  Here I have done a deal with the owner and I intend to submit planning for a single detached house.  This opportunity is a natural infill and won’t alter the character of the area.

So as you can see, these are two completely different examples of garden-type opportunities that I believe will be considered differently by the planners.  Both would be profitable if acquired at the right price.

Below is another example that “makes sense” from a planning point of view as it is a natural infill.

So how can we protect ourselves against a sudden change in policy?

I’m not sure about how long it will take for the policy change to take place, though it appears to be immediately enforceable if local councils are minded to do so. However, when considering your developments it’s crucial that you carry out thorough due diligence as usual.

To be on the safe side, it might be wise to stick to more appropriate, less controversial garden types schemes like the ones shown above.  Stay away from back land type development, as they are often fraught with difficulties.  Also, make sure you check your proposals with the local planning office before delving too deep into a deal!  You may have to look at their policy more carefully at the outset.

Don’t forget, of course, that there are thousands of other Brownfield opportunities out there too! You most certainly don’t need to stick to garden sites to make money in this game. Though they are (or have been) a great place to start.

We will just have to wait and see how the policy emerges. However, I suspect that it will be locally driven so will vary considerably around the UK. Plus, much will depend on the development scheme that you are proposing – just as it does now.

In short, always ensure that your proposed developments are in-keeping with both the neighbourhood and the local planning regulations. In this respect, nothing much has changed. There are still plenty of prime opportunities out there just waiting to be discovered…

And if you find that “garden grabbing” becomes more restricted in your area, then it can only serve to increase demand yet further for other types of Brownfield site, leading to lucrative opportunities for land finders and developers alike!

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After the recent slump in property prices, headline figures suggest that house values are once again on the up. The latest figures from Nationwide reported that house prices rose by 1% in April, and have increased by over 10% in the past 12 months, while the Halifax has stated that prices are 7% higher than last year.

Plus, the Royal Institution of Chartered Surveyors has predicted that the housing market will experience a post-election boost with housing prices increasing over the summer.

Sounds good on the surface, right?

Well you’d certainly think so! However, in my experience, lenders seem reluctant to pass on the good cheer. Low mortgage valuations are still proving to be a big problem for many people.

So why are low valuations such a problem?

When assessing for finance, some mortgage lenders have been valuing properties by up to 20% below market value.  So say you’ve found a great BTL opportunity on the market for £200,000.  The lender then values it at 160K. This leaves you having to find a bigger deposit, negotiating a lower price… or simply missing out on the opportunity all together.  And, it’s not just BTL investors who are being hit. The problem also affects private home-buyers and especially those trying to remortgage…

So what can you do about a low valuation?

Firstly, make sure that the lender carries out a physical inspection of your property, rather than simply relying on a “desktop” appraisal. If they still come back to you with a low valuation, you can try appealing against the decision and show your lender evidence of a few similar properties in the area that have sold at the right price. However, this isn’t always easy… in a market where few properties are changing hands, you may struggle to gather enough evidence.

That doesn’t mean you have to miss out though…

If you’ve sourced a great BTL opportunity that’s been down-valued in this way, and you can’t persuade the valuer to change his opinion then it really comes down to one thing:

Do you think it’s a good deal or not?

At the end of the day, if your due diligence has shown that the property is good at the price, with great potential, then you may have to be brave and trust your judgement. That’s assuming you have the capital to invest to cover the extra deposit shortfall.

These are far from normal times and 12 months from now, with more confidence in the market, the same deal could be seen in a much different light.

Bear in mind that these low valuations are being given by some over cautious lenders to provide them with an extra buffer of protection on the deal. So, I prefer to judge each property on its own merits and ask myself whether it’s a good deal or not.  If it is, I’m likely to be happy with it, regardless of what a surveyor may think at that point in time. Let’s face it, BTL is a long-term investment strategy so I’m more interested in the value of the property in a decade or so’s time, not what it’s worth at the bottom of the property crash.

So, if after carrying out your due diligence you decide to press ahead, you can take the mortgage offered by the lender and make up the shortfall yourself or through mezzanine finance.

What other options are available?

Obviously, there are lots of lenders out there – even in the current market – so it can pay to shop around to see if you can get a better valuation – and finance deal – elsewhere.

A lot of investors rely on a development finance broker who knows which lenders are less likely to undervalue. They should have access to a wide network of specialist finance lenders and financiers and be able to trawl through all the relevant products to find you the very best deal.

A good broker will not only save you time and effort but – perhaps even more importantly – they’ll also be able to provide you with good value for money, getting you a deal that will pay for their services many times over.

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So remember, just because some lenders are providing low valuations, doesn’t mean you have to put up with it or miss out on profitable BTL opportunities – you still have plenty of options!

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It’s not very often that you’ll catch me agreeing with Prince Charles’s views on architecture… however, listening to his address to councillors and planners in Edinburgh recently, he echoed something I’ve believed for many years.

Essentially, he called on housing developers to consider whether they would want to set up home in the properties they build.

This a basic rule of thumb I’ve always applied to my own developments, and encourage other developers to carefully consider.

“Would you want to live there?”

When you think about it, it’s not a bad test on the quality of a proposed development.  After all, if the developer would want to live there, then it’s pretty reasonable to assume that other people will too.  If you apply this principal to your development schemes – and even your BTL properties – then you stand a much better chance of shifting the houses quickly when they come to market.

But it’s about more than just cash flow. Often, developers can lose sight of the fact that they are building so much more than housing developments or housing estates… they are actually contributing to, or even creating, communities.

That’s why taking a broader, more holistic, approach to developing, taking into consideration not only the bricks and mortar, but the surrounding neighbourhood environment and the socio-economic aspect of a development can result in something altogether more rewarding.

I’m constantly hammering home to my Developing Profits students the fact that good development planning is essential – it makes the development more appealing for everyone involved…

That means it’s good for the neighbourhood… and good for profits too!

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Love of them or hate them, Home Information Packs (Hips) have finally been scrapped from today. In a decisive move to cut some of the “pointless red tape that is strangling the property market”, the Conservative-Lib Dem Government has opted to get rid of the controversial Hips all together.

Sellers will still have to provide an official energy efficiency assessment of their property, but this is a fairly cheap and simple document in comparison.

So what does this mean to sellers and buyers?

Widely criticised by those within the property industry from the outset, Hips were seen as little more than an annoying obstruction. Now, sellers will be able to get on with marketing their properties without having to shell out the extra costs for Hips. This will mean that, typically, a seller will save around £250 on marketing.

Plus, it’s thought that the move will encourage more sellers to put their homes on the market, as due to the additional, up-front expense of Hips, many were put off speculatively marketing their properties.

As for buyers… well, it’s unlikely to make a huge difference to them, as it’s believed that house hunters paid little attention to the documents anyway – and seeing as Hips were provided for them, it makes you wonder how worthwhile the entire exercise has been!

On a sad note…

The decision will mean that a number of companies will go out of business overnight and thousands of people that have trained to deliver Hips will lose their jobs.

Let’s hope that the failed Hips initiative will encourage ministers to take more considered decisions on housing policy in future. Perhaps next time they may even listen to the advice of the industry itself.

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