9 April 2008
Southwark is home to the largest amount of council flats in the country, but buying ex-local authority homes has not been seen as an attractive proposition in today's competitive property market.
Unattractive concrete tower blocks, boarded up windows, dingy stairwells and anti-social neighbours has been at the forefront of potential buyers minds. Historically poor housing has helped areas get a bad reputation, which in turn makes them an unpopular place to live which may have led to the breakdown of communities. But this situation has been quietly changing, for many wanting to buy in Southwark, ex-council is not only an affordable way in but a truly good investment. We talked to Michael Curness, Managing Director of Movingspace, an estate agency covering the SE1, SE5, SE11 and SE17 in Southwark as well neighbouring SW8 and SW9 postcodes. We asked him to give us the low-down on buying ex-council property:
Where is the best place to buy ex-council property in Southwark and why?
“Areas where new transport links are planned and regeneration areas such as Elephant & Castle should produce good long term financial gains.
“The Elephant & Castle provides a good location with a high percentage of ex-Council and ex-Local Authority properties for sale. Buying in areas such as this which are close to the West End, or a bus or tube ride away, means purchasers should reap the rewards when the proposed regeneration plans are complete. With reinvigoration and renewed sustainability to a previously ‘grey’ area, the introduction of improvements such as underpasses and new pedestrianised areas will give locations such as Elephant & Castle a new dimension, and added investor potential. Whilst the Old Kent Road may have been one of the cheapest options in a Monopoly game, the reality is very different.”
What has happened to bring about the change to buying ex-council property?
“In 1997 there were 2.1 million houses owned by local authorities and housing associations that did not meet the decent homes standard. Local authorities had a £19 billion backlog of repairs and improvements and the government was keen to change this situation by challenging all councils and housing associations to improve their housing stock to a Decent Homes Standard by 2010.
“By the end of 2004 the number of non-decent homes had been reduced by 1 million, while £18 billion was invested in existing council and housing association homes. Between 2004 and 2006 a further £7 billion investment was made in existing homes. This meant that by 2006 capital spending on council homes was on average 55 per cent higher than it was in 1997, (adjusting for inflation) - a massive increase in investment in council housing. This has had a very positive impact on many of the local authority developments, with improvements to the external fabric of the buildings, new windows, newly refurbished gardens and common parts, new security, entry systems and in some developments new foyers and concierge.
“Since May 2004 and the inclusion of many former eastern block countries into the European Community, we have seen a large influx of population into London. Much of this population have not come with the same negative preconceptions of ex council housing. To the contrary, many developments are very well built, have generously proportioned accommodation and are ideally located within easy reach of good transport facilities.”
But what about section 20 notices, all of these improvements come at a cost to the home owner living on a council estate or block?
“These improvements have not come free of charge though and historic private owners of flats within these buildings have had to shoulder the cost of a proportion of these improvements, (reference Section 20 notice). This said, in most cases the capital appreciation and the fact that they can let their properties more quickly and at higher rents has more than paid for any of these incurred expenses, although short term cash flow may have caused some concern.
“Purchasers won’t go far wrong if they find out who the freeholders and/or managing agents are, and it’s also useful to research the materials the property was built with and indeed who built it.”
What ex-council should you not buy?
“Things to be cautious about when it comes to buying an ex-Council or ex Local Authority property include multi storey blocks, where the general consensus is not to go above five floors due to mortgageability and blocks where there are more tenants than owner/occupiers, although in some areas, many high rise blocks built by the Corporation of London provide a majority owner/occupier ratio which should provide a better investment.
“With regards to tenure when it comes to buying ex-Council or ex-Local Authority property, purchasers are not guaranteed to be the freeholder if they are buying a house, as some properties have communal heating systems or you may find that the garage situated is under or in the house, and doesn’t come with the house itself. Purchasers may have to make some contribution by way of a service charge towards street lighting, heating systems, etc; and they may also find that if they buy a house, where the fourth bedroom overhangs a communal path or walkway, they may encounter a flying freehold, and here legal advice should be sought before proceeding with such a purchase.
“The two key cost savings over buying into a new development may be the service charges and maintenance costs, which can be modest in comparison. It’s always useful to speak to current residents where you are considering buying to ask about the costs and what is covered, and whether the place is well maintained.
“As ever with a buy to let investment, all costs need to be calculated as part of the long term plan, and investment properties need to be looked after and left to grow for at least 10 years to reap the financial rewards.”
What are the best council properties to buy?
“The best properties to opt for include low rise brick-built blocks or structures in concrete on well-established and highly regarded schemes. Mortgage companies prefer this, and you need to consider the make up of owner occupiers to rental flats. More than 50% with Council tenants may have a negative impact on a mortgage offer. The general attitude is that owner occupiers may look after a property more carefully. There is also the re-sale factor, which may be less attractive.
“Potential buyers are well advised to look in areas which are surrounded by private housing, as this provides a ‘comfort’ zone and offers security in postcodes which will ‘go up’ rather than ‘come down’.
“Reputation is also a key buying factor when looking for an ex-Council or ex-Local Authority property, and some of the best ‘hidden gems’ in London have been designed by top architects, where genuine modernist principles have been applied. Particularly outstanding in the way of architectural merit include The Sydenham Hill Estate, SE26, which was built in the 1950s by the Corporation of London, parts of which are Grade II listed.”
REASONS TO BUY EX-COUNCIL
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