8th August Property Surgery on BBC Radio Scotland

This week Louise Whiteford stood in for Kaye Adams on Radio scotland and hosted Brian Gilmour’s fortnightly property surgery.  There were plenty of property issues in the news and callers and texters with their specific issues.  Here’s the show from Tuesday 8th August.  Brian will be back on Tuesday 22nd August from 10am.

Louise:                   Now, coming up around half past 10, we’ll also be taking your calls on all matters property. Brian Gilmour from Indigo Square Property will be here to help us all understand this ever changing sector.  So whether you’re renting at the moment or you’re hoping to buy. Perhaps you’re an owner hoping to sell or perhaps you’re still searching for your dream home. Perhaps even contemplating trying to give the offspring a bit of a helping hand onto the property ladder, Brian is here to help answer all your queries. Get in touch with us as soon as possible and we’ll get all those questions in for Brian, on 08085-9295-00 and there’s always the text number 80295.

Brian’s with me now just for a quick up sum of who it is you want to hear from. You’re also across many of the property stories that are around this week. Brian, it’s nice to see you. Good morning.

Brian:                      Morning Louise.

Louise:                   One caught my eye, U.K. house price growth easing, says one of the major lenders. This comes from the Halifax. No doubt a plethora of information lands on your desk every day. Do you read it with interest? How much credence do you give it?

Brian:                      I do read it with interest. It’s actually in line with … The Nationwide came out with similar statistics recently. You’ve always got to take these things with a pinch of salt because we have much lower transaction levels then we were pre-crash and so we’re much more susceptible to little peaks and troughs that show things. But the underlying trend is that house price inflation is pretty much ticking along at where normal inflation is, which shouldn’t really surprise us because wage inflation is not that particularly high. So you can’t have … This is what caused the bubble, the housing bubble pre-2007, is we had house price inflation that was out stripping wage inflation. It wouldn’t be any surprise that wage inflation is sitting there. I think the ONS has wage inflation at there or there abouts, of about 2%, so average house price inflation going 2% is no great surprise.

Louise:                   Okay, so who are you wanting to hear from today?

Brian:                      Well, first-time buyers. There’s always a chance with first-time buyers so it would be useful to hear from first-time buyers or people looking to help first-time buyers. There was a study out by Royal Mail Money recently, which showed that 51% of first-time buyers had had assistance from a family member to get onto the housing ladder.

Louise:                   Give us that statistic again.

Brian:                      51% of first-time buyers got assistance.

Louise:                   Were you surprised by that?

Brian:                      Yes and no, if I think back to 20 something years ago when I bought my first property, the me and my wife who bought that property, in the same type of job, wouldn’t be able to buy that property today.

Louise:                   That is the phrase that you hear so often amongst our generation, if we had to go back and buy our house again, we wouldn’t be able to it. And that is a wake-up call for parents. For perhaps their offspring who are perhaps in their 20s, early 30s, who are struggling to get onto the property ladder.

Brian:                      The average age of a first-time buyer is pushing into the mid-30s because people are moving onto the rental ladder first. You’ve also got the average house price, £143,000 in Scotland. The average first-time buyer price is £115,000 in Scotland. But when you consider that people can get a maximum of about 80 – 85% loan to value, that’s about £20,000 – £25,000 cash that people need to be able to get on the property ladder. If they’re students and they’ve got student loan debt on top of that, you can start to see why it can be quite a daunting process.

Louise:                   Okay, so you’d love to hear from first-time buyers today, potential first-time buyers. Also, people who are thinking of selling because I know you’ve got quite a nice story on the difference between sellers in Edinburgh and Glasgow and how we do up our homes, we’ll keep the big reveal for a little later on. And also for, I guess, the older generation who are perhaps trying to get the kids onto the property ladder because obviously, there are tax implications if you do go and buy a second property.

Brian:                      Exactly, there’s additional stamp duty if you go and buy a second property so it’s a consideration if you’re going to assist someone. How are you going to do that? Exam results today so it’s prevalent in people’s minds about buying a second property if their kids are going to college, university. So all those types of considerations that people might have.

Louise:                   Okay, good to hear from you Brian for the moment. You’ll be back around about half past 10 with your Property Phone In and a reminder of our number, 08085-9295-00.   Right, Mr. Property himself is back. Brian Gilmour from Indigo Property is back with me in the studio to talk about all things property. Any questions you have, whether you are renting, whether you are selling. Whether you are thinking of selling and you want to tart up the home, what places in the house should you actually focus on? Is it worth re-papering, re-carpeting, perhaps not at all? Certainly weeding, that always looks good. I don’t like a house covered in weeds, or the garden covered in weeds. But anyway, lots of questions. Everyone you want to hear from this morning, Brian.

Brian:                      Absolutely, yes.

Louise:                   No question out there that you’re not willing to answer, 08085-9295-00. 80295 is our text number. Now, we’ll got a text in here let me just have a look. The listener doesn’t leave me their name. “I’m needing to sell my house quickly are their sell quick companies out there that I could consider? I know you get a price well below market price, but time is of the essence.”

Brian:                      Yeah, there are sell quick companies out there and all businesses exist to make a profit. So if somebody is going to promise to sell your house quickly, they are going to do that by reducing the price. Some of them even promise that they will buy the property themselves and again, they are only doing that because they are going to make money out of it, which means the price needs to be lower. Depending on where your property is … Actually, one of the things in the market, we touched on earlier Louise, about average house price statistics not moving greatly, but what is happening is houses are selling quickly. Because the number of properties up for sale at the moment is low. To give you some comparisons, pre-crash the peak of the market there was 160,000 properties sold a year in Scotland-

Louise:                   But is that across all properties? Because I was driving through the West End of Glasgow the other day and I have to say, I did see a lot of for sale signs up in flats. I’m thinking, “Okay. Where’s everyone going?” Or is it a case of perhaps, some individuals who have perhaps bought properties as part of a pensions portfolio et cetera, wanting to shed some properties. Because there seems to be an awful lot of for sale signs in certain areas, but not others.

Brian:                      What actually tends to happen is people think the market’s not doing great. They hear the statistics of low growth and then they see a neighbour selling quickly and they suddenly think, “Oh, the market is moving.” What that does is then encourages the six, seven people who’ve been sitting, waiting around for a year or two and they put their homes on. Properties, in general, are selling quickly. It’s actually a challenge that estate agents have got is a lack of stock. They’re just not selling quickly, and that’s not … Well, they’re selling quickly but that’s not pushing the prices up.

Getting back to the texter, if selling is the urgent need, have a look around. Have properties been selling quickly in your area? If they have, you don’t necessarily need to go to one of these quick sell agents. You might be able to get good market value for your property. If there’s been no comparable advice or you … The most important thing is, have you done your sums? Is the price that they are going to tell you that you can get to sell it quickly, still allow you to make the move you want to make? And if it does, then it’s right for you. That’s probably the easiest.

Louise:                   Alright, well there’s the advice. 80295 if you want to text in a question. You can, of course, pick up the phone and talk directly to Brian on 08085-9295-00.

Another question here from a listener, “We’re just about to give our son his deposit for his first mortgage. After returning from working aboard for four years, he’s had to start with a zero credit rating, this has made things much worse regarding interest rates for car loans et cetera. He’s just be given approval on his first mortgage, if we weren’t able to help, I don’t think it would have ever happened. He’s been approved for £105,000 with a £10,000 deposit. What price can he look at?”

Brian:                      If he’s been approved for £105,000 and the £10,000 sounds like it’s somewhere in the region of about a 90% loan to value that they’re offering, which is one of the top end rates that you can get. He can look to spend … You’ve got some costs in there, you should be looking somewhere between about £100,000 to £115,000, if he’s looking in that sort of region then he’s got a wee bit of breathing space that if he finds something that’s just marginally above, if he sets himself a target of £115,000, he’s got a wee bit of breathing space that he can get something. I say that’s one of the challenges. Ironically, it can be more difficult to get credit such as a mortgage, if you’ve never had credit than somebody who’s got three or four credit cards. Because if you’ve had three or four credit cards, you’ve got a track record that you can repay that debt.

Louise:                   We were talking about this earlier this kind of footprint that you need, they can look at your track history and go, “Okay, let’s see what we’re dealing with here.” Whereas if you come clean, well, you could be anybody.

Brian:                      Which is often the challenge for a first-time buyer. They’ve been staying at home with their parents, not required to get any debt. Perhaps parents may be discouraging people to get debt because it can start a downward spiral. Then they come to get a mortgage, and they’ve got no track record of paying off. If you put it in context, you ask for a credit card you might be asking for two, three, four thousand pounds of credit, you suddenly turn around to a mortgage provider and ask for £100,000 of credit, they’re wanting a track record to demonstrate you can afford to pay that off.

Louise:                   I mean, an interesting point that this parent makes, the fact that if it wasn’t for them, then they just could never have envisaged how their son would actually get onto the property market. More and more parents are having to help youngsters onto the property ladder, but it’s not quite as simple, there are tax implications as well.

Brian:                      Yes, that gets onto the comment we discussed earlier about 51% of first-time buyers in a Royal Mail Money survey, said that they required assistance to get onto the housing ladder from family members. But the challenge for that is, how does the family member give that cash? They’ve got to obviously, have that money lying around. They might then, depending on their age and where they are in the work cycle, that parent may be remortgaging in order to assist their child to get onto the property ladder.

There are also tax implications if the parent themselves decide to buy it. This time of year you’ve got people getting their exam results and so they’re looking at university. There are a number of parents that I’ve dealt with other time where what they see is, they see as an opportunity now, for them to buy a property that their child can perhaps go and live in as a student when they’re at university and they will then use that a start for their child to get onto the housing ladder down the line. Or perhaps they might then just flip into a buy to let landlord. Well, they’ve then got to consider if they’re doing it in their own name, new stamp duty, it’s now called LBTT, Land and Building Transaction Tax. For an additional property, you have 3% stamp duty surplus on top of what the stamp duty rate is.

Louise:                   Wow. Okay, so that does really hike it up. Now we know that’s in brackets.

Brian:                      Yes, it is.

Louise:                   And it rises. You love to read out these brackets for us.

Brian:                      So, up to £145,000 is 0 but you would still have your 3% to pay. Between £145,000 and £250,000 it’s 2%. Between £250,000 and £325,000 it’s 5%. Now, the difference a lot of people who haven’t moved for more than 10 years, the old stamp duty was on the full amount, this is on the incremental amount, so if you bought a property at £300,000, you’ll be paying 2% on the bit between £145,000 and £250,000 and then 5% on the bit between £250,000 and £300,000.

Louise:                   So have a calculator to hand and a stiff drink.

Brian:                      … Yes. And then your 3% on top of that if it’s a second property and then when you come to sell that property, if you in a wise and good location, you’ve got capital gains tax to pay on top of that.

Louise:                   You could always give it to your offspring to take the penalty, but then, is that fair?

Brian:                      Depends on your financial set up at home, doesn’t it? And what’s right for you at the time.

Louise:                   You know, lumbering them with that sort of burden at that stage in life, but anyway. Lots of things to consider. We’ve got a call coming in, Kathleen Bryce is on the line now, she wants to chat to you. Kathleen, good morning. Welcome to The Property Phone In. What would you like to ask Brian?

Caller:                     My daughter is a student and has just moved into a flat in Glasgow. She’s moved in very, very quickly and I haven’t been to see it yet, but from what I’ve heard that they’ve moved in, signed a lease, paid the deposit and the first month up front. When they’ve got in, the fire alarms aren’t working … It’s a fourth floor flat … The fire alarms aren’t working. The kitchen window came out in their hand. The bedroom window is leaking so much that she’s sleeping in the living room. There is no light in the bathroom. And there’s a lamp in the bathroom apparently, that they’d be able them to use, which I don’t even know why there’s even a socket there.

Louise:                   Kathleen, can I just ask a question? Why did she move in, in the first place?

Caller:                     Because she’s a student and it was affordable.

Louise:                   Okay.

Brian:                      Kathleen, can I ask was there an agent who managed this?

Caller:                     Yes. I don’t know if there was an agent who managed it, but there was an agent that went through when they found it. They then got the landlord and he then took them in and said, “There are things to get fixed, I’ll have them sorted but you can move in on Friday.”

Brian:                      As a landlord, you require before anybody moves in, you’re required to have working fire alarms, smoke alarms. You’re required to have working CO2 detectors. You’re required to be a registered landlord with a registered landlord number. All of this needs to be in place before somebody moves in. If they are not in place, then the lease is void and your daughter’s entitled to walk out. Because the other requirement of a landlord, is to make a home wind and water tight, and you just described that the property is not wind and water tight. So, if I were you … Obviously, the challenges are, I know from the rental market just now that properties are being snapped up at first viewings so your daughter may have made this decision based on missing out on properties and the need to act quickly, so that’s understandable. She’s given assurances by what appears to be a reputable firm that these issues will be fixed, so that’s I’m sure why she did it. But what she needs to do very urgently, is to go back to the agent, or if the agent was doing a tenant only and now she’s dealing directly with the landlord-

Caller:                     I’m going to do that this afternoon.

Brian:                      … point out that these things have to be in place. If they’re not in place her personal safety is far more important than anything else and the lease is voidable and she’s entitled to her money back. The deposit needs to be held within an official government deposit scheme. She should get an email within 30 days of moving in confirming that the deposit is in that scheme and she will be entitled to her deposit back. If that’s used as a threat to keep her in, the deposit scheme … If she’s got evidence, take photographs, if she’s got documentary evidence of emails that these things are not right, the deposit scheme will be looking for this type of evidence and will … they’re independent, will get the deposit back.

Louise:                   I’ve got a feeling that Kathleen’s going to be driving around to that flat as soon as you’ve stopped speaking. Kathleen, as a mum, it must be quite concerning for you?

Caller:                     It’s her personal safety that’s worrying me. I’m going up to see the flat this afternoon. I’m going to be straight round to the agency to see if they’ve even got in touch with the landlord. But, she’s already messaged to say that this, that and the next thing wasn’t done that they said would be done before she moved in. And she was basically told, if you’re not happy with the flat, you can your money back because I’ve got a queue of people that would take it behind you. And it’s unsafe, as far as I know.

Brian:                      Well, the other thing to do it have a word with Trading Standards.

Caller:                     Right, okay.

Brian:                      About that agent, if that’s the type of threat they’re making.

Louise:                   And also, I think if you’ve got any issues convincing your daughter, maybe let her listen back to this programme on iPlayer a little later on and just listen back to what Brian’s had to say. Because I think when your basic safety is compromised over fire and smoke alarms, it’s just not worth it.

Kathleen, many, many thanks indeed. Thanks for calling in.

Another student related query, we’ve got Cathy on the line. Cathy, good morning. Many thanks for calling in. You’re buying a flat for your student daughter. This is something that we’ve just been talking about in the last few minutes, what specific questions do you have for Brian?

Caller:                     Well, the question I’d like to ask is, obviously if I’m buying it as a second property, I wasn’t very clear about the tax that I would have to pay. You know, I’m going to take out a small mortgage for this. My mother died, we’re going to put the money we got from my mum’s house into a property for my daughter. I basically, like the last caller you had on, she was in a rented flat last year, we had a lot of issues with it and problems so I’ve decided now that we’re in a position to get a property that we would effectively, become my daughters landlords and we would make sure that the flat was in good condition-

Louise:                   Okay, let’s cut to the chase.

Caller:                     … but I’m not clear about the tax.

Louise:                   What price bracket are you looking at?

Caller:                     I’m looking at sort of £170,000 up to £200,000.

Louise:                   Okay, so that takes us into the first tax hit, doesn’t it Brian?

Brian:                      Yes, so Cathy, are you getting a mortgage with this?

Caller:                     I’ll be putting some money into it obviously from the sale of my mum’s house, so it will be a small mortgage I’ll be getting.

Brian:                      Okay. The reason I was asking for that if it was a complete cash buy, then you could do the cash buy in your daughter’s name and then it’s her first property. That was the reason why I was asking that. If you-

Caller:                     Okay, let me ask you about that because I, a few years ago when my dad died, the children all got a wee bit of money and we got it in an ISA. And they’ve got an ISA, one of these help to home ISAs that they’ve been putting money into. But what I was thinking was because she’s a student, she wouldn’t get a mortgage and that we maybe couldn’t activate that?

Brian:                      You need to speak to a mortgage broker. There possibly aren’t any mortgages, but depending on if she has some income and you are acting as grantor, you maybe able to find, and it will depend on the size of the mortgage, you may be able to find a financial product out there that will help you do this so that the property’s in her name. Because at the price levels you’re talking about, the way that it works, say £200,000 you will pay stamp duty of 2% on the £55,000. So you pay stamp duty of 2% on the £55,000, plus stamp duty of 3% on the whole amount if it’s been bought in your name.

There’s actually a very good Scottish government website if you go onto the Scottish Government … If you type in Scottish … LBTT Scotland, there is a calculator that you can put in and it asks questions are you a second-time purchaser? What’s the purchase price? Et cetera, and it will tell you what your LBTT will be exactly.

Louise:                   Great. That’s really helpful.

Caller:                     Yeah, just to clarify then, the 3% is stamp duty is the normal stamp duty and the 2% is the second home one, is that right?

Brian:                      Other way around. 2% is the norm stamp duty if you’re buying about £200,000 and the 3% is a premium you’re paying for a second property. So if you were able to find a way to get it in your daughter’s name, it’s the 3% that drops out, so it’s quite a saving.

Caller:                     Right, okay. That’s really helpful. Thank you very much.

Louise:                   Cathy, I know it is a bit bamboozling. I was looking into this a little earlier and actually just some simple searches online, can actually pull up these brackets quite quickly. And as Brian said, there is a specific page on the government website.

Brian:                      Yeah, there is a government website. Just type into Google, LBTT Scotland, you’ll get to it, it’ll offer you the calculator and you can go in there. Getting back to Louise’s points about it being bamboozling, I spoke to a buy to let investor who is buying eight properties. He, his lawyer and the seller’s lawyer all came up with three different estimates as to what his LBTT amount would be. Don’t feel embarrassed if you’re listening to this and find it bamboozling. There’s three experts who couldn’t come up an agreed figure.

Louise:                   Okay, Cathy best of luck. You’re a generous mum. Thank you very much indeed for calling into the Property Phone In on 08085-9295-00. We’ll be right back.

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Louise:                   Do you want another queue for Name the Place? I bet you do. Clue number four, are you standing by? The Highland Chieftain is a regular visitor. Brian’s smiling, do you think you’ve worked it out?

Brian:                      No. I was laughing at my lack of knowledge of Scottish geography that every week I come in and have no idea.

Louise:                   Well, you never know. Maybe one day you might it lucky. Today’s the day, you never know. That’s clue number four folks. The Highland Chieftain is a regular visitor. Clue number three, which we read out a little while ago, there’s also a dedication to Saint Mungo. Sharon in Fife says, “Is it, Dunfermline?” Nah. Donald and Chris, that’s Donald in Stornoway and Chris from Fife, both say, “Is it, Glasgow?” Nah. Keep on guessing folks. 80295. Come on, it can’t be that hard. Actually, it is, I didn’t get it last night because I get alerted to what it is, you see, I’m allowed. Always terrifies me because then I think I’m going to actually come out with it before we actually do the big reveal.

Right, Brian, back to the texts. This listener called Joe has called in on 80295. “Hello. You were about to talk about sales figures before the crash in comparison to now but didn’t finish. Could you explain?” Oh, I hope that wasn’t because I interrupted you.

Brian:                      But, you know, that’s one of the most relevant things when people talk about house price statistics. When it matters is a comparison of when you bought it to what the sales price is now. It doesn’t really matter if house prices are … inflation is slowing, if you bought it at the bottom end of the market, then you’re in a good place. Prior to the crash … What we’ve pretty much seen is house prices in Scotland have dropped and they’ve just come back up to where they were. So you’ve got many parts of Scotland where the average house price now is just roughly where it was at the time of the crash. What we’ve seen in the last wee while is increases of about 2 – 3% per annum, which is just steady growth inline with inflation and in line with people’s salaries.

Louise:                   I was Googling the other day my old flat, my very, very first property, which looks darn cheap, I have to say, in comparison to what they’re asking now. And of course, I’m sure you’ve heard this before, “Oh, I wish I’d just held onto it. I wish I just held on it.” Particularly the fact that I’m at the stage now where I would happily go and by a flat for my youngster, the only thing is, I don’t have the cash. But he’s a student and he’s looking for property et cetera, et cetera and he’s in rented accommodation, so I was really listening out to the call we took earlier about the problem property because I happened to us exactly. I had to haul him out because there weren’t smoke alarms and there weren’t fire alarms and that takes us back to a very serious issue.

General advice for people listening, buy or sell first? What seems to be the trend? When I was doing it, you bought first and then you’re guaranteed to sell at the drop of a hat, has it changed?

Brian:                      Again, without sounding like I’m throwing in caveats, it depends on people’s personal circumstances. It depends on the market at the time. As I talked earlier, the market just now is properties are selling relatively quickly. That’s more relevant in urban areas such as Glasgow, Aberdeen, I think Perth has had the highest year on year property price rise in Scotland. Move to Aberdeen, where property prices are falling, and so you can see there’s a bit of a mixed picture.

So if you’re looking to sell and you’re looking to find somewhere, the benefit of selling first is you’ve got the cash in the bank, you know what it is. You’ve got an advantage over those people who are looking to get a mortgage first. You can move quickly if the seller’s moving to look quickly, so you’ve got all those advantages of selling first. The downside of selling first is I was speaking to someone earlier on this morning actually, the downside of selling first is because there are fewer transactions in Scotland, they were telling me of a friend of theirs who sold and now can’t find what they want. The problem then is you then move into rented, rentals are higher than mortgage rates-

Louise:                   Significantly, in some cases.

Brian:                      … so what they’re doing is then eating into the capital that they had set aside to buy the new property while they are sitting waiting for the ideal place to come up. So, that’s the downside of selling first. Of course, it’s the opposite way round for buying first.

Louise:                   Okay, Brian a very quick question, it comes from Anna she says, ” Louise, I’m just popping out but if you can answer this I’ll listen again on the iPlayer. Will I recoup the cost of a small extension?” She says she’s living in Saint Andrews, the extension would consist of a sitting room and a shower just off, and would cost in the region of about £60,000.

Brian:                      Probably, is the answer. I’d need to know more about the specific house but if it’s making greater family accommodation and makes it a greater appeal as a family home, then the likelihood is that it will add value onto her home. Extra public rooms, extra bedrooms are often the key to adding value. I was speaking to someone yesterday turning a two bedroom into a three bedroom, £15,000 to do it, £30,000 of value added on.

Louise:                   Okay, Anna, hopefully, you’ll enjoy it listening back to the programme.

Thank you very much indeed Brian. It’s always fascinating to chat to you.