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Will your property pass the new MEES energy test?

There are now only six months until the new Minimum Energy Efficiency Standards (MEES) are implemented. This sweeping change due in April 2018 will rule out any new or renewed leases on commercial property with an Energy Performance Certificate (EPC) rating of F or G.

Time is running out and landlords with commercial portfolios would be well advised to prepare carefully, or risk losing out on significant amounts of rental income.

Below are some key tips to help protect you from inadvertently allowing your property to become ‘unrentable’.

Organising a well-maintained property database

    Having a comprehensive and accurate property asset list, including a detailed record of current EPCs, is invaluable when it comes to compliance with MEES legislation.

    Open communications with all parties involved in changes to your portfolios will help you to keep on top of your assets. This way you are fully aware of assets that are being sold, refurbished or tenanted.

    Keeping a stringent log of tenant movements will result in an asset list that can quickly and easily be referred to for accurate and current data. This will reduce time and resource required to draw information from multiple sources and avoid any duplication of effort required to collate the data.

    It is essential that good EPC records are kept. They should detail the EPC rating, date of expiry and EPC address, which is often different from the addresses known to property management teams. It is worth remembering that EPC’s can be commissioned by any individual. A tenant may have authorised a new EPC since the landlord last ordered one.

    Reassess EPC ratings

    An EPC is based on the characteristics of a building and its services (such as heating, ventilation, air conditioning and lighting). As such, energy assessors often do not have detailed and updated information about a property.

    As a result, they need to gather as much information as possible during their EPC site assessment visit, modelling their findings before determining the EPC asset rating. With time constraints and a lack of readily available information, existing EPC’s are often based on assumptions, conventions and default settings. These will represent worst case scenarios. They often do not provide an accurate representation of the current building status.

    Before refurbishing a property with an EPC that is currently considered sub-standard, we would recommend that its building energy model is re-assessed to eliminate as many estimates as possible and improve the EPC rating.

    Don’t limit your analysis

      There are a number of additional factors you should consider to ensure a comprehensive understanding of your risk exposure:

        Listed Building status.

      Despite popular belief, listed buildings are not exempt from EPC legislation. In fact, they are likely to fall within EPC F and G bands because of their poor fabric specifications in terms of energy performance (single glazing, uninsulated walls etc).

        E-rated EPC buildings.

      EPC’s are linked to the UK Building Regulations, Part L, which are regularly updated and become more and more stringent each time they are revised. Hence previous EPC’s, whose Asset Ratings were E, may fall within the F & G categories once their 10 years validity period has expired.

        Rental Values.

      If refurbishment works are abandoned in favour of offering sub-standard properties, landlords will not be permitted to market buildings with a subsequent loss of rental income. The rental value per annum, per square metre, should be taken into account in order to undertake suitable risk assessments and prioritise remedial actions.

      Two birds with one stone

      Many owners are unsure about their exposure to MEES compliance risk. That’s why undertaking a desktop review is vital. You can also save time and money by simultaneously commissioning reviews of additional environmental compliance risks when third-parties are involved in determining MEES risk exposure.

      For example, ever changing climatic conditions often reassert the importance of understanding flood risk. Property owners therefore need to understand their risk exposure to reduce business threats and develop action plans for guaranteed business continuity.

      MEES however provides the perfect opportunity to ask further questions about the environmental legislation agenda. Property environmental compliance risk exists in many areas including air conditioning inspections (ACIs), ESOS energy audits and asbestos registers among others.

      On top of providing a valuable assessment of regulatory and non-mandatory environmental risks, high level reviews also highlight opportunities, like solar PV installation, that impact on the wider business.

      Plan ahead to ensure leases provide protection

      You must consider the risk that a tenant could carry out works that may lower the EPC rating, thereby affecting re-letting once the property becomes vacant. Whenever the opportunity arises, owners should be looking to introduce provisions against the tenant carrying out alterations thatadversely affect energy performance. You may also wish to restrict the tenant’s ability to commission its own EPC, as this would invalidate the existing certificate.

      At the same time, the new regulations are also an opportunity for greater engagement with tenants through the use of green leases. A green lease is a standard form lease with additional clauses included which provide for the management and improvement of the environmental performance of a building. Both owner and occupier can agree carbon, energy, waste and water reduction strategies which best fit with the circumstances of individual properties.

      Conclusion

    Using some or all of these strategies, landlords can safeguard themselves and their portfolios ahead of MEES – and potentially ensure not only that they are scraping by for compliance, but that they are leading the way in terms of property and asset management, and demonstrating the value of this attitude when it comes to environmental protection.There are now only six months until the new Minimum Energy Efficiency Standards (MEES) are implemented – a sweeping change due in April 2018, that will rule out any new or renewed leases on commercial property with an Energy Performance Certificate (EPC) rating of F or G.

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Best areas for property investors in Wirral?

Many of our clients are from out of area and want advice on the best areas to invest in the Wirral. When investors come to our offices for the first time we sit them down in front of the large Wirral wall map and discuss what the area is like, highlighting the areas that are probably of most interest.

Not everyone can make it to us in Hamilton Square, so for those investors from further afield here are the main highlights of my regular introduction to investing in the Wirral.

The peninsula is an oblong shape, roughly 15 miles long by 7 miles wide, bisected by the M53 motorway which runs north to south through the middle of the area.  The major towns are Birkenhead and Wallasey to the east and Heswall and West Kirby to the west.

 

Although a bit of a generalisation, the east tends to be older, higher density and lower value properties whilst the west has larger higher value property.  To get a higher yield from your investment property you should be looking in the east, and this is where we will be concentrating on this post.

Major areas of interest:

Central Birkenhead, around Laird St and Park Road North.

North Birkenhead (locals call it The North End), but selective parts only.

Tranmere, especially the area between the parks.

Rockferry and parts of New Ferry.

East of Wallasey and Liscard, but not Seacombe.

New Brighton, especially the south and older properties in the east.

Parts of the Noctorum, Beechwood and Woodchurch estates.

The Wirral is unusual in that it is fairly common to have some very high value property enclaves abutting run down areas and particularly difficult streets.  Local knowledge is key to ensure you buy in the right areas to maximise your rent and avoid the known problem areas.

Contact Andrew@hamiltonsquareestates.com for more information

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New build property investment returns: Liverpool V’s Manchester V’s Birkenhead.

We have all heard a lot over the past months about the death of new build buy to let investment in the UK. Undoubtedly the second homes SDLT surcharge has caused investors to carefully consider the maths for new purchases. Likewise, the upcoming changes to the taxation of mortgage interest relief will cause many landlords with existing portfolios to reconsider their position. So with these changes already known, why is BTL still considered not just a viable, but a desirable investment?

My area of interest is the North West of England, particularly the areas around Manchester, Leeds and Merseyside. We presented a couple of investment seminars at this year’s Homeowner and Property Investor Show in Docklands Arena. They were standing room only, so we know there is plenty of interest from out of (our) area investors wanting to buy here. We also run tours for investors around the local area to highlight the vast range of projects currently underway (see Liverpool and Wirral Waters, the new Liverpool 2 port, China Town, Salford Quays, et al in my previous posts). We have around 2 groups a week here from London for our own Grand Tour – think Clarkson, Hammond and May but with fewer car crashes and more coffee.

The most regularly asked question is about the comparative returns available on new build between Manchester, Liverpool and Wirral, and what are the prospects for the 3 areas.

My own view is that they all have their own merits, depending on your aims. There is no space on this short post to go into too much detail, but in brief:

    Manchester

Manchester offers the widest range of existing high quality provision. The market for better quality apartments is more mature than the other areas, and the job prospects for the city are very good. Unfortunately this is reflected in the prices, with current new build 1 bed flats achieving around £2,100 per M2. Prices start around £110,000 per unit for mid-range developments on the periphery of the city centre. Rents are high compared to the wider region, but so are prices. Despite this gross yields are around 5.5%, with net yields of 4.2% in better quality new-build sites.

    Liverpool

Liverpool has seen very rapid development, in the past 5 years particularly, driven by the rapidly improving local economy and some major infrastructure investments. Prices are still far below Manchester levels but rising quickly, as are rental rates – 1 bed flats close to the river regularly go for £685 pcm. If you are looking for an absolute bargain you are probably 18 months too late, although there are still some very good buys available if you know where to look. Prices range from £1,500 – £2,000 per M2, with the prices rising the closer you get to the River Mersey, particularly in the L1, L4 and L69 postcodes. Gross yields are averaging at 7%, or 5.6% net.

    Wirral

Wirral is still the wild west for new build investors. Until recently there was not much good quality stock to buy into, although things are now changing. A number of schemes are completing and there are other interesting developments in the pipeline around the Birkenhead and West Kirby areas in particular. The area benefits from being only 10 minutes by train from Liverpool centre. We see more people moving from Liverpool to Wirral to take advantage of the lower prices whilst still retaining access to the big city experience. Good quality stock goes for around £1,400 per M2. Gross yields are holding at 8.5%, Net around the 7.2% level.

conway-st-to-tunnel

So, who comes out top? For range of options Manchester is difficult to beat. If your target investment is only city centres then Liverpool is a very good bet, especially the area south of the Albert Dock and into the Baltic Triangle.

However, our winner is Birkenhead. Our view is that east Wirral in particular offers the best opportunity for price increases in the next 1 – 5 years, coming off its current low (some would say undervalued) base.

With low but rising prices and high yields, coupled with the 10 minute transit time to Liverpool city centre for both work and leisure, Birkenhead is our top tip for property investors in the region.

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Merseyside tops Property Investment league table

I post regularly on some national blogs, and have included a copy below of something that affects all local investors.  It is a map showing likely investment returns for all areas of England, and Liverpool has done well as expected.  However, my gripe was with the mapping which put Wirral in with Clwyd for some reason.  Extracting this and combining all Merseyside as one entity puts our area firmly at the top of the table.  A link to the original post is below, with my comments under this.

https://www.lettingagenttoday.co.uk/breaking-news/2016/5/revealed–where-the-highest-rental-yields-will-be-in-2020-apparently

 

Interesting article. My only complaint is with whoever drew up the mapping and their reasons for drawing the boundaries as they did. My area of interest is Merseyside and North Wales and so took particular note of this part of the map. Three points to note are:

1. Wirral is part of Merseyside and should have been included within their boundary, not Clwyd. Wirral currently has some of the highest yields of anywhere in the country, even higher than Liverpool. Inclusion of Wirral within the Liverpool map would have pushed Merseyside to the very top of the returns table. Prices in Wirral are some 10- 15% lower across the range than comparables in Liverpool, but rents are almost identical for all property types outside the immediate Liverpool city centre area.

2. Wirral will be included within the area of the Merseyside metropolitan area under control of the new Metro Mayor from next year. So far, so dull. However, Wirral will then be subject to the policies of new Mayor, with devolved powers that affect housing, transport and inward investment. The Mayor is likely to be Joe Anderson, the current Labour party Mayor of Liverpool. You may or may not like some of his policies but he has a good track record of leveraging in funds for the city region. His policies for housing and transport in particular look credible, and he has a very good track record of representing the Liverpool region on the international stage, bring in more investment.

3. There are huge programmes of infrastructure improvements and inward investment on both sides of the Mersey that should push values on at pace equally in Liverpool and Wirral. These are being instigated by Peel Group (owners of pretty much the whole of both banks of the River Mersey) under the banners of Liverpool Waters and Wirral Waters. House prices do not yet reflect these major upcoming changes and so yields will remain high in the medium term until prices reflect these improvements to the Mersey basin area.

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Changes to energy efficiency requirements

The Government has must announced the dates by which rental properties are required to meet certain energy efficiency measures.  These are related to the property’s EPC and are as follows:

April 2018: by this date it will be unlawful to let out a property with an F or G Energy Performance Certificate rating, as a new let. There will be a few limited exemptions.

April 2020: by this date the requirement for a minimum E rating will apply, not just to new lets but also to existing tenancies.

2025: the target is for a minimum D rating.

2030: the minimum target will be a C rating.

 

If any landlords are concerned about what this means or how to implement the requirements then please call either Andrew or Elaine for advice – we are always happy to help where we can.

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L2 ports development moves forward

THE arrival of a giant vessel bearing five ‘megamax’ quayside cranes for Liverpool’s new deep water port has been hailed as a “truly unique day” in the city’s maritime history.

The eye-catching red cranes, which sailed up the River Mersey on Monday, were built in Shanghai and have been transported more than 18,000 miles to their new home in Liverpool.

The new cranes mark the start of a new era for the Port of Liverpool as the most visible element of Peel Port’s £300m investment to create the UK’s most centrally located deep water container terminal.

The cranes were produced by Chinese company, Zhenhua Heavy Industries Co (ZPMC), the largest heavy duty equipment manufacturer in the world, as part of a contract with Peel Ports worth more than £100m.

A total of eight ship-to-shore megamax cranes and 22 cantilever rail-mounted gantry cranes are being supplied to Peel Ports as part of its investment programme to expand and develop the Port of Liverpool.Liverpool2 cranes arrive

Each crane measures 92 metres high to the top of the frame, approximately the same as the city’s  iconic Royal Liver Building, and 132 metres high when the boom is raised. Each crane weighs around 1,600 tonnes.

Liverpool2 is the UK’s largest transatlantic deep-sea port and container terminal and the investment in facilities will allow it to accommodate the majority of the world’s current container fleet, including vessels up to 20,000 TEU (twenty-foot equivalent units) or two 13,500 TEU vessels simultaneously.

Mark Whitworth, chief executive of Peel Ports, said: “This is a truly unique day in Liverpool’s long maritime history. The spectacular sight of these cranes sailing up the Mersey to the L2 site is unprecedented. Our investment in leading-edge infrastructure and technology will allow Liverpool to offer the quickest and most cost-effective route to market, not just for goods destined for the north of England but also for Scotland, Ireland, North Wales, opening up a new logistics routes estimated at four million TEU every year and increasing potential import and export trade.”

The cranes will have the ability to operate at speeds in excess of 30 moves per hour and will facilitate an anticipated 1,500 moves in each tidal window.

The combination of infrastructure and technology will reduce the time taken to transfer containers from port to road or rail, helping the Port of Liverpool to achieve targets of 65% of haulage turned round in 30 minutes and 95% of haulage turned in 60 minutes.

 

So, what does this mean for us property people?  It is a sign that all the huge infrastructure developments talked about over the past few years are actually going to happen.  When you see the L2 plans together with Wirral Waters it shows the scale of what is happening in the local economy.  Investment means jobs, and jobs mean increasing property values – both commercial and residential.  It won’t happen overnight, but I am increasingly positive about prospects for the Merseyside area.

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Bigger container port for Liverpool – more jobs for Wirral

Plans are well advanced for a bigger container port for Liverpool, bringing the biggest container ships in the world to our doorstep.  Called post-Panamex ship, they can carry 25% more cargo than previous types.  The new facility will be built adjacent to the existing container port at Seaforth.  I have attached a video link below that gives more detail:

 

So what does it mean for us in Wirral and Liverpool?  In a word – jobs.  Peel Ports are the owners of the site and they say it will take 2 years to construct.  Once opened it will become the centre of container distribution for the UK.  This means we can expect some high quality, high paying jobs to be here during construction.  When the port is operational we will benefit from the increased train and road traffic, as well as the jobs that come with operating the port itself.

I am here to read about property stuff, why does this mater to me?

It matters because it is part of the theme of regeneration that is centred around Wirral Waters and Liverpool Waters, and because any major uplift to the local economy will affect house and commercial property prices in our area.  This is another game changer for our local economy.  Put alongside the waterfront developments on both sides of the Mersey it will have a major beneficial impact on everyone who has invested in property in our region.

I have said it before in previous blogs, but Merseyside is about to go through a period of immense change.  Canny investors see this and are already positioning themselves to take advantage of the changes ahead.

 

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UK Housing Market activity hits six-month high

UK housing market activity reached a six-month high in September and remortgaging experienced another stand out month, according to the latest research from Connells Survey & Valuation.

Last month, the total number of property valuations was the second-highest monthly level on record, with only 0.5% fewer valuations carried out than in March 2015, the current high.

Total valuation activity is up 29% compared to September 2014, following a 23% month-on-month rebound from August 2015.

The number of valuations carried out specifically for first-time buyers rose 25% in September compared to the previous month. This is an 18% increase on September 2014.

Connells, who carry out a lot of valuations in Wirral, said valuation activity among established home-movers performed even better, with the number of valuations carried out for those moving house up 26% compared to last month and 23% since September 2014.

The number of valuations for those remortgaging rose 16% since August and was up 49% from September last year.

Meanwhile, the number of valuations in the buy-to-let sector has grown 13% since September last year. On a monthly basis, valuations activity carried out on behalf of buy-to-let investors was up 21% compared to August.

John Bagshaw, corporate services director of Connells Survey & Valuation, said: “Britain’s housing market is going from strength to strength. Against a brightening economic background, players in all parts of the market are feeling more confident about their prospects. Valuation activity is growing beyond the seasonal pick-up at the end of August, with year-on-year growth gathering momentum”.

 

This is reflected in our own experiences at Hamilton Square Estates.  There is a marked increase in enquiries from both owner occupiers and investors, and we are finding that 2 and 3 bed family homes are much in demand in Wirral especially. As ever, 1 bed flats are very popular with investors chasing a good return on their money.

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Wirral Property – House Price News

 Latest data on house price changes in Wirral make interesting reading.  The headline figure is that prices are up an average £8,653 or 4.21% across the area.  This is slightly below the national average of a 5.2% increase.

This shows an average sale price of £199,017 for Wirral, with 2,035 sales taking place in our area within the past 12 months.  Property prices are now higher than before the property crash of 2008 – 2011.

Within Wirral the usual areas remain popular, with Heswall and West Kirby doing well according to our friends at Zoopla.  Less expected is the resurgence of values within the Noctorum area.  Vyner Road South has done particularly well in the past year, but so has the whole area between Noctorum Lane to West Rd.  Clatterbridge has out performed the local market and looks set to continue the trend, with some good quality properties coming to market.

The most surprising data related to parts of New Brighton.  The area around Warren Drive has seen substantial activity and has done very well.  There are a number of large, well appointed houses and there seems to be an increased interest in the market.  It is about time that all the fantastic improvements in New Brighton are reflected in the local house prices.  I am sure this trend will continue.

My tips for the coming months?  Upton and New Brighton for owner occupiers.

For investors, however, things are very different.  Demand remains high for single bed flats, and for 2 and 3 bed houses.  Rents are stable in Wirral despite reports of a slowing trend in other part of UK.

The Council’s selective licencing scheme is about to come into effect.  The expectation is that it will drive down prices in the affected areas for a few years, as more properties are “forced” on to the market.  We should then expect prices to rise again, fairly sharply I suspect, as the benefits of the scheme become manifest.  Avoid buying in those areas for now.

Central Birkenhead, Tranmere and Rock Ferry continue to offer some of the best yields for investors.  That’s where my money is going.

 
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BTL mortgage rates update

It’s been a busy summer with plenty of activity from property investors and lenders. As Autumn approaches it’s time for me to update you with a few brief thoughts on the Buy to Let mortgage market from my perspective.

The first things that strikes me is that there are more lenders in the market than there have been for a long time. New names include Fleet Mortgages, Axis Bank, Pepper and Foundation Homeloans. It is always good to widen the choice available although for most straightforward cases the established and well-known lenders continue to provide the best rates and service.

The highest loan to value Buy to Let mortgages continue to be from Kent Reliance who offer some 85% LTV products but of course there tends to be a premium to pay in terms of cost for the higher LTV. There are now quite a number of lenders offering 80% and a wide choice at 75% LTV.

I continue to receive enquiries from investors of a certain age, who find difficulty in remortgaging or extending their loan terms. My advice is to take action before age 70 because at present there is potentially a 35 year term available for a 69 year old. Once over 70 it becomes more difficult although there are lenders willing to consider a term up to age 85, so a term of up to 15 years is possible.

Speculation continues about increasing interest rates. There are some attractive 2 year and even 3 year fixed rates below 3% and it could be a good time to consider one of these. Five year fixed rates start from around 3.79%.

As ever, in some cases the choice of product depends not just on the interest rate but also on being able to navigate through different lenders’ criteria to ensure the product is right for you. With access to the whole of the market and many years experience of Buy to Let mortgages our in-house mortgage advisor, Joe, is well placed to offer advice. Please contact me to discuss your particular requirements – I’ll be pleased to hear from you either by phone or email.