May we first take the opportunity to wish you and your teams a very happy New Year. It’s been a particularly busy year with plenty of challenging valuations and its fair share of interesting properties. We need to be very alert to sensitivities in the market place, with the great unknown of Brexit dominating the political scene. Uncertainty is no friend to the housing market and simply leads at best, to stagnation and paralysis and predictions of interest rate rises continue to stalk the corridors on Threadneedle Street. The landlords continue to feel the pressure with taxation changes starting to bit and the reality of the mandatory HMO rule changes last October also increasing the financial burden and in some cases landlords having to take rooms out of occupancy as they fall foul of the new room size legislation.
It is really essential that surveyors continue to provide the best advice for the client i.e. the bank. Remember your audience and spell out your recommendations. Do not leave it chance. Vague or unclear references will not get acted upon with the result that non compliant HMO’s will slip through the net. Do not assume that the conveyancers will second guess your report. Similarly you must be aware of the planning, licensing and local standards that apply in your local authority area. Ignorance is no defence as all this information is in the public domain.
Read the RICS Guidance – there’s some clear pointers as to how investment properties should be valued. Is it just a house with a few smoke alarms? Can you simply buy the house next door and do the work yourself? Is it really an investment valuation? Remember that the Receiver of Rent on default will want to be able to let the property at or above the passing rent. The existing license will also fall away upon default so they will want to be able to apply a get a new license without issue. Just because a house has a license at the moment may not mean it will get one in say a years’ time.
Oversupply in certain areas is causing concerns around room occupancy. The explosion in out of town investors purchasing HMO’s /HMO propositions in secondary locations my well end in tears. Stand back and consider whether the proposition is really appropriate for the location.
Purpose built student blocks continue to come on line and at some point this will impact on the traditional student terraced house market. The proposed restructure of student loans could also cause some issue within the University sector who may well find funding increasingly difficult leading to reduction in courses. What impact will this have on HMO demand?
Food for thought.
We still see reports being returned with no thought in relation to the level of initial ground rent on flats and not recommending that solicitors check for any rising ground rent provisions and event charges hidden within the lease. The lender guidance is very clear and must be followed to avoid challenges further down the line. Similarly if you have concerns over the type of cladding used on the high rise, new of refurbished block you are valuing then follow the reporting guidance and impose a full retention. Why leave to chance? Only last week we received two reports where the block was clearly clad in a ACM material and the surveyor had not considered this point.
So whether your glass is half full or half empty we must have regard to first principles. Remember your client – after all its their money which you are recommending should be advanced.