Matt from Cooper Brouard and Pierre from SPF joined John Randall for their monthly catch up on property and finance.
Matt starts the conversation by giving his brief opinion on the big issue of Brexit. He says that whilst he cannot provide any answers on this, he believes that Guernsey will not be overly affected, and will hopefully remain ‘insulated’. The only possible areas that he can predict issues with, would be importation to the island, but only time will tell.
From an Estate Agents point of view, Matt tells us that Cooper Brouard has welcomed fresh interest from people looking into purchasing open market properties and says that properties in Alderney have also received a higher level of interest lately. He suggests that Guernsey is often viewed as a ‘safe place’ to invest in property and as a result, has experienced a surge of property sales towards the end of last year, which he believes is due to the increase in document duty. He explains that there is now an extra ‘tier’ that has been introduced, above £2 million, where the document duty has been increased to 5.5%.
The new rates are 2.25% up to the first £250k, between £250k – £400k it is 3.5%, £750k – £1 million is 4.25% (an significant increase from the previous 3.75%). On values of £1 million – £2 million, the percentage is 4.5%. Matt suggests that these levels are similar to when he started out in property, around thirty years ago, and with over seventeen open market property sales towards the end of last year.
The conversation turns to Pierre, and he tells us that SPF have experienced a busy start to the year, following the surge of property sales, in December. To counteract the higher document duty, from the 1st January 2019, it is now cheaper for people to re-mortgage, (change from tracker and fixed rate mortgages etc), which has consequently increased competition, within the lending market. Pierre believes that people are now very keen to analyse their mortgage situation and as a result, SPF have already completed a transfer of a total of £1 million, from one lender to another, through court and have more transfers lined up for February.
On the subject of lending, we are told that The Marsden, which is a new lender that was introduced to the island last year by SPF Private Clients, are looking to increase the loan to value level on mortgages, expecting up to 80%, next week.
Lloyds Bank are now offering great new ‘buy to let’ mortgage rates, in which Pierre describes as being ‘staggeringly good’. As an example, on a buy to let mortgage of up to 75% loan to value, Lloyds will lend this at 1.9% for 2 years. This would be offered as ‘interest only’, and Pierre suggests that by only paying the interest on this mortgage, any prospective borrower would be getting a yield of around 4.8%. You have a further option to fix for five years at 2.5%, which could promote more investment activity into the property market.
With a strong demand for rental properties on the island but with a shortage of stock, Matt agrees that such mortgage rates could benefit people, as in his opinion more buyers are viewing property purchase as a good pension plan option. With the rental market currently very steady and in demand, buying investment property is a relatively safe option. He adds that property stock on the market is definitely reducing, however, and from the lows of 2014/2015 he has seen increases in volumes of sales. Local market sales are up by 9% in recent years, but very little is coming onto the market, in comparison.
John raises the question of why is Skipton advertising nationally now, opposed to just locally? Pierre explains that Skipton is in fact part of the Skipton Building Society in the UK and they therefore offer a lot of lending locally, for expats into the UK housing market, and are doing well with these products.
With thirty four Havelet Waters Apartments available, not all are sold, but Matt says that there has been ‘solid interest’ in the remaining properties, with eight viewings taking place in one day, for both local and open market, and he believes that this development has been very well received. Cooper Brouard has been kept busy so far this month with viewings etc, with a percentage leading to sales through the court, and Matt believes that the market is much steadier then it was compared to two to three years ago. With regards to property prices, Matt and Pierre describes prices as plateaued and Matt uses last year’s property sales as a comparison as to what volumes we may see this year.
John talks about the Open Market in Guernsey, and questions if the Open Market equivalent in Jersey, is as active. Matt suggests that this difference could be down to the fact that stock may be low on Jersey, and the prices have been ‘pushing hard’. Pierre believes that this lack of activity could be down to the fact that people are actively moving to Jersey but are not looking to invest in property as much as Guernsey, and instead choose to rent. This could also be down to the difference in property prices.
Matt talks us through the Open market new build offerings in Guernsey, and he explains that this is a relatively small market, with around two or three properties currently on offer. He then explains to John the process of open market development and says that environment are becoming more open to the idea of developing older properties, that are not listed.
The guests then discuss the various properties currently on Cooper Brouard’s books, both open and local market.
Pierre talks us through the process of property bonds and explains to us that if you pay off your mortgage, for example, it is advisable to leave the bond in place because if ever you wish to borrow against your property in the future, the bond will still be in place, which will make the process cheaper. Albeit the benefits being reduced slightly, with the reduction of the bond fee.
Pierre suggests that Guernsey’s house buying process is far superior to say Jersey or the UK. 76% of house purchase lending in Guernsey, was carried out by four banks, which shows that we have four, strong lenders which are willing to lend, and that puts us in a great position.
You can listen to the discussion in full here.