Stephen Galpin: Hello, and welcome to Property Question Time. This is the program where you can have your property-related questions asked by a team of experts. I’m Stephen Galpin. And joining me today are John Howard, property developer, author, and mentor. John, welcome.
John Howard: Thank you.
Stephen Galpin: Paul Mahoney, founder of Nova Financial Group, author, and of course public speaker.
Paul Mahoney: Thank you.
Stephen Galpin: Welcome, Paul. And joining us from France is Trevor Leggett, founder of Leggett Immobilier, French property experts. Welcome Trevor.
Trevor Leggett: Good afternoon.
Stephen Galpin: How was your trip over?
Trevor Leggett: It was great.
Stephen Galpin: Good.
Trevor Leggett: No strikes, no problem.
Stephen Galpin: Good. Okay. And nothing’s going to change when we leave the European Union.
John Howard: No, nothing.
Stephen Galpin: Right. Okay. John, your first question. “It seems that many UK buyers get caught out when buying off-plan in large developments. The market changes during the construction period. Lending criteria perhaps gets tighter and people’s financial circumstances change after making a legally binding commitment. Do the experts think it’s time to regulate this kind of sale by building in some kind of protections for the purchaser?”
John Howard: Well, it’s interesting. I mean I really call these people lazy investors. Because it’s no different than taking a punt on the stock exchange or something like that. There’s no real skill at property developing, investing skill, in putting your name down for a property, allegedly with a 15, 20%, 10% discount when it’s not ready for two years. If the market is rising and you can see it continue to rise over the next three, four, five years, then obviously a lot of people in the past had done well on that basis. But at the moment, where the market isn’t looking like it’s going to rise at all particularly, then I would be very, very cautious of doing this type of investment.
And in terms of regulation, I’ve been banging on, ever since I’ve been involved in this in the last year or two, the property education side, taking money of investors, I think it needs to be regulated, financially regulated. And, funny enough, I was at the [inaudible 00:02:35] conference recently and I discussed this with one of the cabinet ministers because I feel passionately about the fact that it should be regulated a lot… Well, regulated, not a lot more. It should be regulated, yes.
Stephen Galpin: Well John, I’m, I’m really with you on that. And I’ll come to our other two panelists in a moment. But I’ve been involved in selling off-plan for the last 30 years. And I can’t tell you how many times when we’ve had the dips in the market, people have come to me and said, “Look, I can’t go on. I’m happy to lose my 10%.”
John Howard: Yeah, absolutely.
Stephen Galpin: And I say, “Well, unfortunately, it’s not a question of losing your 10%,…
John Howard: No, it’s a bit more serious than that.
Stephen Galpin: … it’s a question of the fact that you’re in for the whole thing.”
John Howard: Yep.
Stephen Galpin: And they say, “Well, in that case, I’d want a huge discount,” to which you then have to say, “Well look, why do you think you’re entitled to a discount? How much extra would you have given me had the market gone the other way?” And of course they say, “No, no, no. I’ve got a contract.” And you say, “Well, that’s exactly the point.”
John Howard: Exactly why, yeah.
Stephen Galpin: “That’s why the developer did it. That’s why you did it. What did you think?”
John Howard: I mean it’s a huge risk people are taking with a lot of money. If you said to someone, “You’re going to invest given on the stock market tomorrow, and then we’re going to shut our eyes and then in two years time we’re going to see what it’s worth,” they wouldn’t do it.
Stephen Galpin: You see, I think there is a difference here in the market too. I mean there are two very distinct markets. You mentioned the word investor several times.
John Howard: Yes.
Stephen Galpin: That’s fine. I think that could be regulated by simply doing some kind of declaration. Paul, like “I’m a sophisticated investor,” or whatever the term is in market, and take yourself out of the problem that way to a degree, or at least give the developers some comfort you know what you’re doing. But the people I feel for is the young families, the moms and dads that sort of push their kids to go and buy off-plan thinking it’s going to save them money in two or three years time, and it’s not always going to happen that way.
John Howard: Not always.
Stephen Galpin: Paul, you must see this a lot.
Paul Mahoney: Yeah. Look, and I disagree with John a lot …
John Howard: Oh, that’s a surprise.
Paul Mahoney: … with regards to there being no skill at picking the right off-plan property. I think that’s not true. I think there is skill in picking the right off-plan property.
Trevor Leggett: Right, yeah.
Paul Mahoney: Perhaps not as much skill as there is in developing a property. It’s a different thing. But I think there’s a lot of safety in centrally-located, desirable properties because the demand is a lot more sustainable regardless of the state of the market.
John Howard: But it doesn’t mean that the price is going to go up, which is why they do it.
Paul Mahoney: It doesn’t necessarily mean the price is going to go up.
Trevor Leggett: Yeah, but you’ve got a safe investment.
Paul Mahoney: It means it will be easier to mortgage, it will be easier to rent, it will be easier to sell. I mean not every centrally-located, desirable property fits that criteria either, so there is a skill in finding the right one that mitigates not all downside risk but mitigate some downside risk, and potentially adds more potential for upside as well.
Stephen Galpin: I think what I’d like to see there is this differential between the two types of purchase. I’m quite happy that people from some of the more wealthy areas of the world, Singapore, Kuala Lumpur, Hong Kong, where property gambling really, which is what it is, is the game.
John Howard: Right. It is property gambling. You’re quite right, Stephen.
Stephen Galpin: I’m happy they take their chances in the market.
John Howard: Absolutely. Yeah, I agree.
Stephen Galpin: What I’m very much against is young people making commitments two, three years ahead of time, not being able to predict their finances, their situation.
Trevor Leggett: I think the problem is exasperated. Even in France, where a lot of, as you say, young families were encouraged by the government through fiscal advantages, basically tax back to invest in rental property. But clever developers built stuff in areas where they were the managing agent. They had promised ridiculous returns on investment [crosstalk 00:06:13].
Stephen Galpin: Guaranteed rate to return. I’ve seen that.
Trevor Leggett: They would pay it for a year and then hand it over to an insurance company that would say we would ensure the rental income and guarantee. In fact, it meant nothing. And a lot of these people, unfortunately, going back to what you said were dragged into buying properties in the most ridiculous locations with promises of return on investment that were completely unrealistic, and they’ve [inaudible 00:06:36].
I think there’s an easy saying here, “There’s no such thing as a free lunch.”
Paul Mahoney: [inaudible 00:06:41] quite often say is that off-plans is quite a broad term. At one end of the scale you have higher deposits, developers with less of a track record, higher risk. And then, at the other end of the scale, you’ve got smaller deposits, protected deposits, developers with strong track records, to buildings that are half-built, all that sort of stuff that mitigate. There’s lots of ways of mitigating risk.
John Howard: I wouldn’t disagree entirely what you said, Paul.
Paul Mahoney: Good.
Trevor Leggett: Do your homework.
Stephen Galpin: Yeah, exactly.
John Howard: Do your homework, yeah.
Stephen Galpin: Good point. And Paul, your question. “With some one-bedroom apartments in certain parts of London now costing more than a million pounds, does the panel think that the market demands a price correction now or, as seems to be the case for many decades now over time, it’s an upward-only spiral with just the need to be patient and see wages and income catching up with property inflation?”
Paul Mahoney: It’s a fairly common question. I think what people need to keep in mind here is a Central London one-bedroom apartment isn’t an average property, and it’s not driven by average drivers. So to say just because that one-bedroom apartment is worth more than my five bedroom house doesn’t mean it’s overvalued. Because people are willing to pay that for it. And the reason they’re willing to pay that for it is Central London’s one of the most desirable places in the world, not just for people to live there but very strongly for people to buy there. So you mentioned before about the wealthy places of the world, well this is where they want to buy because it’s a high-ticket item, it’s something that they like to own and have.
Stephen Galpin: It’s also legally safe, isn’t it?
Paul Mahoney: Exactly. So it’s not necessarily driven by wages. Someone might say, “Well that might be more than 10 times the average wage,” from an affordability perspective and all that sort of thing. Well, it’s not the average person that buys there. So that doesn’t drive it. That doesn’t necessarily mean that that property is overvalued because someone is willing to pay that for it, and therefore that’s what it’s worth. I definitely don’t think it’s an indefinitely upward spiral. The market is cyclical, as we’ve just seen. There’s already been a correction in Central London over the past couple of years, and now it seems it’s coming back a little bit. So there always are corrections along the way. But I think it’s the wrong view to say a one-bedroom apartment in London is worth 1 million and therefore the market’s a bit silly and need to correct, because that’s not the driver of that particular type of property.
John Howard: I mean I would say, Paul, if you can afford to buy in Central London in a market that’s not hyped up like now, a sensible market, if you’re a foreign investor at the moment, wow, what an amazing time to buy in London.
Stephen Galpin: [crosstalk 00:09:19].
John Howard: I mean it’s next to buying gold I would say, literally. Because if you look what it’s done over the last 50 years, 100 years probably to be fair, it’s an amazing success story.
Trevor Leggett: Well you can’t go and build London somewhere else.
Paul Mahoney: No.
Stephen Galpin: You can’t.
John Howard: Exactly. Very good point.
Trevor Leggett: [crosstalk 00:09:36].
Paul Mahoney: And to a lesser extent, I think that does apply to not just London. Similar to my previous answer, there is there is safety-
John Howard: Would you say Sydney as well, or somewhere? Similarity?
Paul Mahoney: Well, Sydney is a good example, yeah.
John Howard: Really? Not London though, is it?
Paul Mahoney: Any major employment hub with infrastructure, employment facilities and amenities, and with money being spent on those things, it’ll move in the right direction. There is safety in central-located property.
John Howard: There is in central-located properties. But I can assure you, Paul, there’s nothing like London for that.
Trevor Leggett: Yeah, there is, Paris.
John Howard: Paris, maybe. But even Paris, I don’t think isn’t as strong as London.
Trevor Leggett: It is.
Stephen Galpin: Do they have the same issues there, Trevor, in Paris perhaps?
John Howard: They’ve got the euro. That’s one problem.
Trevor Leggett: Yeah. I mean the thing is, the problem in Paris is the size of the place. It’s a very small city. And we have a massive problem. I mean we can’t go high rise. Obviously the planners are very strict in Paris. And recently there’s been buildings that we’ve been allowed to go half a story up. We’re gaining a little bit of space. But Paris protects its skyline, it’s sacred. We still haven’t seen a leveling yet. We’re normally two or three years behind the UK, generally speaking.
John Howard: That’s interesting.
Trevor Leggett: We probably will get a correction shortly because prices are very high. But at the moment demand is so strong and the supply is so small that prices are continuing to rise.
Stephen Galpin: I think the only nervousness I’ve got is that it’s sort of 10 years since we had the last really big property crash. Are we not just heading for another one now?
John Howard: The average is 17 years.
Stephen Galpin: Is it? Okay.
John Howard: Average is 17 years.
Trevor Leggett: Well the property crash is normally created by a financial crash in the first place.
John Howard: That’s interesting.
Trevor Leggett: And I think we are going to get a financial crisis at some point.
John Howard: We’re going to have a correction of some sort.
Trevor Leggett: We can’t keep printing money for free. We can’t keep…
Paul Mahoney: Yeah. But there’s nothing to say that we need to have a crash every 10 years either. You don’t need to follow the averages.
Stephen Galpin: I suppose.
Paul Mahoney: We already have had a correction in Central London, for example.
John Howard: But it’s also a benchmark. To say average of 17 years there’s a property recession is a benchmark. It’s like a guide. It could be 25 years, it could be 15 years, but it just makes you… The one question I ask you, Paul, are we closer to a correction of prices now than we were in 2010 and 2011, 2012? We’re getting closer to that?
Paul Mahoney: We have to be, yeah.
John Howard: Exactly. I rest my case.
Paul Mahoney: The prices [crosstalk 00:12:00].
Trevor Leggett: Affordability.
John Howard: I rest my case.
Stephen Galpin: Okay. Trevor, your question. “I’ve previously been advised that when buying property in Spain, France, or Italy, I should fund it by remortgaging my own property in the UK. This is despite the fact that I was told that local mortgages are readily available in the country of purchase. However, if I wish to take early retirement and live full time abroad, I would need to remortgage again abroad because my UK home would obviously be sold and the mortgage is settled. Does the panel think that mortgages in the country of purchase will become more difficult for Brits to obtain once we leave the EU?” So it’s a few questions there.
Trevor Leggett: There’s a few questions in one there. But firstly, I would say, yeah, borrowing, if you’re going to Europe without a doubt borrow in euros. Because, one, you’re not going to get a lot of euros for your sterling currently. Your sterling’s undervalued. My view is the sterling, it’s real value sits around 1.25 to the euro. So you’re losing 15% at the moment on the exchange rate. Why would you bother cashing up when you can borrow euros at about 1.5% fixed for term. So the terms can be pretty long.
John Howard: Right. Unbelievable.
Trevor Leggett: We’ll borrow till you’re 83. You can borrow until you’re 83 if you really want to, if you want to be paying me and pay your mortgage that long. I had a mortgage offer yesterday on a piece of land adjoining my property from my bank. And the phone call came in, and I’d normally haggle.
John Howard: That’s a surprise, isn’t it?
Trevor Leggett: Normally I’ll say, “Can you not do a little bit better than that?” But they said, “How does it 0.55 sounds to you?” I thought to myself, “I’d better not haggle. Let’s just say yes for once.” So I said, “Okay.” And that was fixed for 10 years. You can currently get 0.77. 0.8 and 15 years.
John Howard: That’s amazing, isn’t it? Incredible.
Trevor Leggett: 1% has become the norm for a resident. For a non-resident, you’re going to pay about 2%, but 2% fixed for term. So I could get pretty much any of my clients a mortgage around two, two and a half. Two and a half would be the maximum anyone’s going to pay. And I could fix it for 20 years, 25 years.
John Howard: I mean even if you’ve got the cash,…
Trevor Leggett: Why would you use it?
John Howard: … why would you use your cash?
Stephen Galpin: But, again, I think the other thing is, I mean if there’s going to be any volatility it’s going to be this side of the channel. [inaudible 00:00:14:27].
John Howard: Really?
Stephen Galpin: I think so.
Trevor Leggett: Well you say that, but the euro could come under pressure. I mean, yeah, of course it could. It would be irrational to say that it couldn’t. I think sterling will fluctuate a little bit, but I mean we’re already-
John Howard: Discounting already.
Trevor Leggett: In the UK, we’re already discounting for Brexit. And I think that there will be more of a tendency and an upward trend once it’s sorted out and then there is a down.
Stephen Galpin: All right. Thank you for that. That’s all we have time for in this half of the program. Join us again after the break.
John Howard: My name is John Howard and I’ve been investing and developing properties for over 40 years. In that time, I’ve been very successful, but of course I’ve always made the odd mistake as well. In my book, I explain how to be successful and what to do should something go wrong. I’ve survived three property recessions. I can help you do the same. My book is available online. Please go to johnhowardpropertyexpert.co.uk.
Speaker 5: Property is a great investment option, but it’s one of the largest purchases that you’ll ever make. As individuals, we’re all limited by our resources. And regardless of our experience, knowledge, or time, we can achieve much more with the help of a qualified team and extra resources being available. Nova Financial specialize in assisting clients to achieve financial freedom through property investment. With over a hundred years of experience, we shape your family’s future to invest in property with absolute confidence. Call us on 0203 8000 600 or visit nova.financial.
Speaker 6: The antiquated village of La Rochebeaucourt in rural Dordogne may not have the cachet of Paris or London, yet it houses one of the 10 fastest growing property consultancies in Europe. It is home to Leggett Immobilier, the leading international estate agent in France. They have around 16,000 properties for sale right across the country, with a network of 400 agents who provide local expertise and market knowledge. If you want to know the best villages, schools, restaurants, or boulangeries, then the Leggett’s team will know the answer. As well as advising buyers on the local market and regional property prices, they also have a bilingual contract team who ensure that your purchase will go through as smoothly as possible. Leggett has been voted best estate agent in France for the past four years running. To experience these exceptional service levels for yourself, then head to our website, leggettfrance.com.
Stephen Galpin: Hello, and welcome back to part two of Property question Time. I’m Stephen Galpin. And with me are John Howard, Paul Mahoney, and Trevor Leggett. Welcome back gents. John, your question in this half is this. “I’m currently in the process of buying an apartment in a block of approximately 500 individual units.”
John Howard: Sorry, how many?
Stephen Galpin: 500.
John Howard: Goodness me.
Stephen Galpin: So that’ll be about 50 stories. Okay. “I have a nice car and parking is important for me. However, although I’m paying 25,000 pound for a parking space, I’ve been told by my solicitor that I’m only getting the right to park. My solicitor says that this is quite normal. And, in his view, the fact that the right to park runs in perpetuity with my long lease isn’t a problem. Apparently it is common practice in the larger developments. My worry is that although there are 500 flats, there are only 250 parking spaces. What happens if those parking spaces are oversubscribed? I might not be able to park. I’ve asked the developer about this and they say the chances of the park ever being full are almost nonexistent. And to support this, various traffic and car usage surveys have been carried out by them and the local authority prior to giving planning consent for the development. What are the panel’s thoughts on this? Should it be a deal breaker?”
John Howard: Well that’s the end of the show, isn’t it? I mean, goodness me, I’ve never heard such a long question in all my life.
Stephen Galpin: Well, I can tell you now it’s a question that often crops up here. It’s this business called controlled parking. Now, just before you answer, I’ll tell you what my view is.
John Howard: Well thanks. Is there any point of us being here?
Stephen Galpin: No. My view is it’s a very good scheme for developers to sell twice as many parking spaces as they’ve got. But John, what do you think? Does it affect the value?
John Howard: Two things. I would question why you want to buy in a block of 500, that’s the first thing. That’s the first thing.
Stephen Galpin: They don’t have a lot of choice around here.
John Howard: Maybe you haven’t got a lot of choice in certain areas, but that’s the first thing I think. Well, actually, probably you’re better to buy in a smaller block. That’s the first thing. Second thing is, yes, it’s the old chestnut, that right to park is certainly very advantageous shall we say to the developer and it does lead to squabbling and all sorts of nasty situations, can do, with neighbors and so on and so on and so on. Most people of course have two cars. Right to park, one, but of course the girlfriend turns up or the kids or whatever, and it’s a mess. I would be very cautious about buying, one, in a block of 500 and, two, on that basis.
Stephen Galpin: What’s your objection to big numbers?
John Howard: Big numbers, I just think that the whole thing can get out of control slightly. And perhaps it’s more of a personal thing, but I would always prefer a smaller block. When you’re in there, you’ve got no real control of a block of that size, the service charge can become very unwieldy. And although I know there’s laws in place now to control all this type of thing, it’s very difficult to get 250 people, which is what you have to do, residents, to agree to change anything. Whereas if you’ve got 10 or 15, 20 residents, you couldn’t do something.
Stephen Galpin: You never will because it’s international ownership, that’s for sure.
John Howard: Exactly. So maybe he needs to look at a smaller development, personally.
Stephen Galpin: Paul, two things for you on this. Do you think it affects the value of that flat?
Paul Mahoney: I don’t necessarily think it does if it’s in the right location. And I think that’s generally people’s biggest concern with bigger blocks is I’m competing against 499 other units. But that’s not the truth. You’re competing against the whole market. There might be a block of 15 across the road. They’re in direct competition with you as well.
John Howard: Well sort of, Paul. But they’re not in competition. And it’s a very good point you make. And what I forgot to mention is that you’ve got block of 500, at any one time you’ve got 10% on the market, you’ve got problems.
Paul Mahoney: I don’t think so.
John Howard: Because everyone’s going to compare.
Paul Mahoney: Because you’re competing with the whole market.
John Howard: And a lot of them, if they’re similar, someone’s just going to drop it because they need to sell, yours isn’t going to sell.
Paul Mahoney: Some valuers and things will say that, but I didn’t necessarily agree. I think if it’s in a location where there’s strong demand, you mentioned about Canary Wharf and 20,000 going in here, there is an under-supply of properties in London and that 20,000 might seem like a lot in isolation. But actually in comparison to the demand, I don’t think it necessarily is.
John Howard: I agree it’s relative. I agree it’s relative to the area, but it makes me uncomfortable.
Stephen Galpin: I think the real issue is when it’s a short-term consideration, when somebody in your block, probably near to your floor, really needs the money, really dickers the price. And then of course you are governed by the cheapest price in the building, aren’t you?
John Howard: Exactly. That’s the problem.
Paul Mahoney: On the parking space bit, I’ve had a lot of experience with valuing places with and without parking spaces. And quite often parking spaces don’t actually add any value to the property,…
John Howard: Really?
Paul Mahoney: … regardless of whether you own them.
John Howard: Is that because you’re only just buying a car in London now? Because everyone else would consider that important.
Paul Mahoney: In the eyes of a valuer, quite often it doesn’t add any value.
Stephen Galpin: No.
Paul Mahoney: Obviously there is extra utility to it. I’ve had that comment many, many times. And the other thing to consider is if you’re in a central location, quite often people don’t own cars. So that’s probably what they’re referring to [crosstalk 00:22:32].
John Howard: Great. In that case, they can rent the space out to someone else.
Stephen Galpin: I think the one thing to watch, especially in these popular areas of London, is that now a lot of the local authorities are saying if there are car parking spaces available to buy then you will be precluded from asking for a residence permit.
John Howard: And that’s only fair as well.
Stephen Galpin: And that that is fair, but it can affect your decision whether you buy as many-
Trevor Leggett: There queues for resident apartments, if I understand, in most boroughs of London. You have to go on a waiting list. And then if you don’t take your space, if you haven’t renewed your permit… It happened to me because I was away on holiday.
John Howard: Again.
Trevor Leggett: And I lost… No, not that kind of thing. And I let it run out and I hadn’t renewed it for a month, and they’d given it to somebody else. They’ve given my parking.
John Howard: Yeah, it’s a nightmare. That Mayfair is a nightmare that area, isn’t it? It really is.
Stephen Galpin: Okay. Paul, your question now. “I’m purchasing a new apartment in a block of over 60 stories. As part of the sales incentive for purchasing early, I was given, as were others, 30,000 pounds worth of furniture from the developer. The valuer has recently attended to carry out the value for the purposes of my mortgage. However, he’s reduced the value of the property by that 30,000 pounds for the furniture. This means I’ve got to find another 30K for the deposit, which I’m going to have difficulty doing. I’ve asked the developer not to supply the furniture and reduce the price accordingly, but he won’t.”
John Howard: Surprise, surprise, surprise.
Stephen Galpin: Any advice, please? I’m fairly sure I won’t be able to proceed on the basis of a reduced valuation.”
Paul Mahoney: Yeah, that’s fairly common. So it’ll sell on the CML and the incentives that have been included, and quite often valuers will take that off the value of the property. However, some won’t. And that’s based upon the lender’s criteria. And also some developers would be willing to leave it off the CML, which they technically shouldn’t do, but some will.
John Howard: A side letter is required instead.
Stephen Galpin: Does a side letter affect the CML declaration?
Paul Mahoney: Well, technically the developers should include anything that’s provided on the CML. And some will say that if they don’t, it’s fraud. But, for example, if a side, and I assume this is what you mean, if it’s coming from a different company, for example. Quite often developers have multiple SPVs, for example. If some sort of incentive is coming from elsewhere, then it’s not directly from the vendor who’s selling the property.
John Howard: I have to say, as a developer you can’t do that.
Trevor Leggett: [inaudible 00:00:25:00].
John Howard: The only way you can do it is, it’s a [inaudible 00:25:03], is to explain to the lender. It’s not on the CML, but we do a side letter and see if technically it ticks the box. If it doesn’t tick the box and they’re not happy, then obviously you can’t do it. But you’d inform them anyway.
Trevor Leggett: [inaudible 00:25:16] furniture, is that what you’re saying?
John Howard: No. Well it’s really one and the same.
Paul Mahoney: No, they won’t. But some are very strict on taking the incentive off the value of the property because it’s been given as an extra. It’s not just furniture, it’s rental guarantees, cashbacks, things like that.
John Howard: I personally would take off, say,… Personally, if I was a valuer, I’ll take off 25% or something like that.
Trevor Leggett: [crosstalk 00:25:32] they would actually finance the entire purchase including the furniture. Because if it’s for a residence de tourisme, which is obviously to be let as a tourist apartment. If it was a ski apartment [crosstalk 00:25:44],…
John Howard: It needs it.
Paul Mahoney: It needs furniture.
Trevor Leggett: … you need the furniture in order for you to be able to let it, and enables you to claim back the VAT on the whole unit.
John Howard: Gotcha, right.
Paul Mahoney: Well it was one of the changes following the last financial crisis, where stupid incentives were being given,…
John Howard: Oh, [crosstalk 00:25:56].
Paul Mahoney: … almost to the point of the deposit being given back to the buyer.
Stephen Galpin: And even free cars being given, weren’t there? [crosstalk 00:26:01].
Paul Mahoney: Yeah, lots of things. Yeah, they were financing properties 100%, or more than a hundred percent, because they’re financing the furniture and everything else as well.
John Howard: 105% in certain cases really.
Paul Mahoney: So it’s to stop that happening again, which is probably a good thing.
Trevor Leggett: Is that the bank or is it the financial regulators?
Paul Mahoney: Well, it’s interpreted differently by each lender.
John Howard: That’s the problem.
Paul Mahoney: Some lenders will be okay with some incentives. For example, some are okay with rental guarantees, others aren’t. Some will be okay with things like furniture, whereas others aren’t. There’s even an issue that I’ve noticed recently with Help to Buy where a lot of developers are paying for stamp duty. Now technically that’s an incentive and some lenders won’t be okay with that. I’ve just seen one that isn’t, whereas others are. So I’ve seen exactly the same case with a different lender where one’s been okay and one hasn’t.
Stephen Galpin: What about service charge holidays, Paul?
Paul Mahoney: Service charge holidays? Good question. I haven’t seen that being an issue, but I also haven’t seen it being offered as an incentive very often.
Stephen Galpin: Okay. But often you get a developer that will say, “I won’t charge any service charge until the building is full…
Paul Mahoney: Fully occupied, right.
Stephen Galpin: … because I don’t want to be liable for the empty apartments.” And some people think, “Well that’s absolutely great.” But of course all the developer’s doing is it’s providing a very skeleton service.
John Howard: By the way, I’ve still got empty rates to pay. If you a developer and you’ve got 50, 60 flats finished and going through sales, that rate is a lot of money now.
Trevor Leggett: [inaudible 00:27:26] the rental management companies run at a loss literally to subsidize by the developer in order to… So you have to be really careful because the rental returns are artificial in fact.
Stephen Galpin: Yes, the [inaudible 00:27:39] service charge goes through the roof and you’re stuck, aren’t you?
John Howard: You got to be careful.
Stephen Galpin: All right. Trevor, your question. “I’m considering buying a property in France. It’s a nice apartment in a block of eight, newly constructed. The property has been bought for my retirement but I’m concerned that, if the other apartments are being purchased for rental investment, I’ll be plagued with noisy holiday makers throughout the summer. Is there anything I can do to protect my peace and quiet, and are there any restrictions on holiday lets that could help?”
Trevor Leggett: No.
Stephen Galpin: No.
Trevor Leggett: There are no restrictions…
John Howard: That was quick.
Trevor Leggett: … unless it’s in the lease that you can’t sublet, obviously, in the particular residence. There may be a residence which is obviously destined for retirement years where you’re not allowed to sublet simply. But the majority of places are residence de tourisme, where you’re actually not allowed to live in them. So I mean it depends on the designation in France, and I think it’s similar in Spain. Depends what the destination of the building is. And other than that, it’s just pure free hold and the owner can do what he likes with it. But there are buildings that are what we call residence de tourisme, and this is the same in Spain, where the planning application had be given purely as a residence to tourisme, and it’s been done by the council to bring in employment and to promote tourism. And you’re not allowed to live there permanently anyway. So that’s normally where you get the noisy neighbors and the [inaudible 00:29:00].
Stephen Galpin: And any restrictions in France on the likes of Airbnb in these tourist areas?
Speaker 5: Yeah. Only in Paris for the moment. Nice are looking at it. There’s a few other cities in France that are looking at it. Mainly that’s the problem. The hotel traders are screaming. Because the hotel traders are-
John Howard: You can understand it, can’t you?
Stephen Galpin: Yeah. All right, gentlemen, thank you very much indeed. That’s all we’ve got time for today. So thank you to John Howard,…
John Howard: It’s a pleasure.
Stephen Galpin: … Paul Mahoney,…
Paul Mahoney: Thank you.
Stephen Galpin: … and Trevor Leggett. Thank you all very much indeed. I’m Stephen Galpin, join me again next time on Property Question time.