Who Buys Ex-Local Authority Property and Why?
There's no doubt that ex-local authority property is popular, but just who is it popular with?
After asking a group of people who are or have been somehow associated with an ex-local authority property, we learned that homes that were once owned by the council are popular with just about everybody. From the first-time buyer looking to get a foot on the property ladder to those interested in property investments, an ex-local authority property is a suitable choice for many.
First Time Buyers
When it comes to first-time home buyers, Sue Merchant, a 28 year old nurse from Islington, North London, told us that buying an ex-local authority property enabled her to secure a 2-bedroomed house with an easy to manage garden at about 15,000 below what she would have paid for a similar, private built property.
"Because my house is on an estate, the price was so much lower than others I'd looked at and hadn't been able to afford," she explained, "But it's a decent estate and buying this house has given me the chance to finally get on the property ladder".
Earning just £18,000 and living alone means she has to be careful with her expenses and the idea of working solely to pay a mortgage didn't appeal. "I'm still young and although I wanted a good property investment, I didn't want to have to be tied to the house by a huge mortgage. Buying an ex-local authority property meant I've been able to invest in my own home as well as having some left over to enjoy life with."
Sue's happy, and why shouldn't she be? Her house was built at the end of the 1950s and is spacious by today's standards. Patio doors and double-glazing had been installed by the previous owner who used the Right to Buy scheme and the bathroom had been completely tiled and a new shower unit installed. This is, without doubt, the perfect solution for a first time home buyer.
"I've a few ideas of my own for the place," Sue told us, pointing out carpets to be replaced by wood flooring and eagerly explaining her plans for a brand-new kitchen. "I've drawn up a five-year plan and am hoping the improvements will increase the value enough to allow me to move up the property ladder to a bigger house. Who knows, I might even have a partner and kids by then!"
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Right-To-Buyers
Tens of thousands of council tenants have taken advantage of the Right to Buy scheme. Some are still living in the property they bought under the scheme and have no intention of moving on while others have enjoyed a comfortable profit that's given them a much needed push up the property ladder.
Carol Ives, a 45 year old telecommunications supervisor living in South Cheshire, bought her flat in East London in 1991 under the Right to Buy scheme.
"Paying a mortgage and the council maintenance charges actually worked out cheaper than renting the property," she explained. "When I first bought the flat I wasn't thinking of property investment - it was just the economically sensible thing to do. As it turned out, not only did it save me money on a monthly basis, when the time came to sell I made a 900 percent profit on what I originally!"
Carol lived in her flat for 11 years before she sold up and enjoyed a profit that even serious property investors rarely make. Couple the fact that local authorities were selling property at up to 70 percent below their market value with the huge increase in property prices that London has seen over the past ten years and those who bought their homes early were making a property investment that was far greater than anybody could have foreseen.
"I was getting fed-up with the area I was living in," explained Carol, when we asked her why she sold up 3 years ago. "I really wanted a garden and knew that property prices in London were peaking so decided to get out while I could make the most of my investment."
When asked whether she has any regrets, she gave us a very definite "no". And we're not surprised. "Selling the flat meant I was able to buy a 3-bedroom house in Cheshire that I commute to at weekends. It has a lovely garden in peaceful surroundings - the total opposite of what I had before. If I hadn't used the Right to Buy scheme, I'd still be living in East London and would probably have no way of getting out. As it is, I was able to buy my house with a small mortgage and have money in the bank for a rainy day. Would I go back and do it again? You bet I would!"
But not everybody who uses the Right to Buy scheme moves on.
John Edwards is a 50 year old plumber living in an ex-local authority property in Belvedere, South London. He bought his 3-bedroomed semi-detached house from the council 17 years ago.
"We've been here 24 years," he explains. "The girls grew up in this house so our memories are here. We've got good neighbours, the shops are just a short walk away and the pub never runs out of beer! Why would we want to move?"
John's obviously happy and doesn't foresee ever selling the ex-local authority property he bought for just £18,000 even though the market value today would be around £130,000.
"We never bought this as a property investment, we just wanted something that was ours that we could leave to the kids when the time comes. If they want to sell it, then no doubt the extra money in the bank will come in handy for them - maybe even help them get onto the property ladder."
For most Right to Buyers, the scheme has obviously been a success. As first time buyers they've enjoyed the chance to own their own homes that they would probably never otherwise have got.
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Property Investors
Not everybody who buys an ex-local authority property does so with the intention of living in it. Some are in it purely for the profits.
Nadia Sarjeem is a 34 year old serial investor who bought her first ex-local authority property seven years ago. She now owns four flats in East London and one in Chelsea.
"I inherited some money and decided to make a property investment," she explained when we asked how she got started. "I looked at a lot of different properties and, as a first time buyer, spoke to others who'd been in the game for a while before eventually deciding on a flat in a low-rise block in Bethnal Green. It's close to the tube so great for commuting which has meant I've been able to let it to professionals."
Nadia went on to explain the importance of location when making a property investment and why flats are generally better investments than houses for those who buy to let.
"Professionals have the money to pay the rents I need to make a decent profit," she says. "When the kind of amenities they want are close by and it's easy for them to commute, a property will never stand empty for more than a few days at the most. Professionals rarely want to bother with gardens - they want large rooms, plenty of cupboard space, lots of light and maybe a balcony, although that isn't strictly necessary either."
Nadia obviously knows what she's doing and her long-term property investments are paying off.
"I would never buy private built property," she said. "Although the rents aren't as high on ex-local authority properties, they're profitable when seen in relation to the price I've had to pay for my property investments. I never have to worry about maintenance, either, so as far as I'm concerned it's a win-win situation."
While there are those who have been unlucky with their property investments, whether because they've bought their own flat in a high-rise block and have either been surprised by huge repairs and improvement bills or simply haven't been able to sell the property and move on to the property ladder, for most, buying an ex-local authority property has been a worthwhile investment. First time home buyers, right to buyers and property investors have all seen the advantages of owning a property that was once owned by the council.
Buy-To-Let Property
For those investing in property on a buy-to-let basis, ex-council homes in sought after locations make sound financial sense.
In London zones 1 and 2, which cover popular areas such as Camden Town, Kensington Gardens, Fulham, Pimlico and Chelsea. Yes, it's possible to buy ex-local authority property in areas usually associated with the Range Rover set - a far cry from the picture that's often painted of council property. Such properties can be bought for far less than similar private sector properties but can command rents that equal 80 percent of what could be expected from property costing almost twice as much.
But even property in less attractive areas can be an excellent investment for the buy-to-let property investor. With the Olympics coming to London in 2012, property in London's East End will be increasingly sought after so buying now is bound to yield a huge profit on property that, until now, has been largely overlooked by major property investors.
Property investors who are interested in buy-to-let property investments are generally able to finance ex-local authority property through special buy-to-let mortgages . Most lenders know that there are huge yields to be made from this kind of property as long as the location's right, and with property investors being able to command rents of around £2000 per month in sought after areas of London, there's little risk of loss.
While ex-council properties in good locations offer high returns to buy-to-rent property investors through rents, the actual property value growth is likely to be somewhat lower than could be expected from similar properties.
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