Sarah Beeny: a home as an investment

Sarah Beeny: In the last couple of years, a lot has been written about moves out of the city to the countryside. Many people are working from home and only have to travel into work two or three days a week, so the suburbs are getting bigger.

However, I don’t think people fundamentally change [their behaviour] in the grand scheme of things. It may be that people at the top of their industry work from home, but there will always be a role for offices for the younger generation.

I do think that people have had more time on their hands, so they have been thinking of the property moves they want to make. Therefore, I think we’ve seen a high concentration of movers, but I’m sure we’ll see a long-term change [in desire to move to the countryside].

There’s lots of cities around the UK that are exciting cities. When I was younger, London had a stronger hold on opportunity, but now I think there are cities all over the UK which have lots of opportunity. I still think there are fewer opportunities in rural areas.

I’d also add, don’t try and second guess the market. Move when it’s right for you and don’t try and predict interest rate moves or inflation. Time doesn’t wait for any man, so, if you feel you want to move and it’s right for you, you should get on and do it.

Lisa Parkes: It can be a challenge to find the right property. This means, when they do find a property, they need the ability to move quickly.

In terms of financial situation, many clients have seen a change in their profile during the pandemic. For example, they may have seen a drop in personal income because they’ve been keeping profits in their business. So when they’re trying to demonstrate affordability to get the mortgage they need, they could face a challenge.

Lisa Parkes: In line with Sarah’s experience, during the pandemic many clients were accelerating their decision to move to the countryside, because they wanted more space. We also saw a number of clients choosing to renovate properties or explore self-build, which in itself posed challenges during the pandemic.

Post-pandemic, we’re seeing more clients looking to buy in London again. Recently I’ve had clients looking for a second home in London, as opposed to the other way around and locations in west London are in particularly high demand.

This poses challenges for investors who are looking for a property ‘at a right price’ so they can add value. They are finding it hard to do that in areas where the demand is high again.

Lisa Parkes: Many of our clients are asset rich but might have a more modest income. Investec doesn’t only look at drawn income, we look at available income when calculating affordability. [For entrepreneurs] we can look at assets and view business income and personal income as one. For Private Equity clients, we may look at forecasted carry income. We have the ability to provide our clients with the level of support that they need.

We can be flexible in how we structure deals. We can start with high LTV mortgages, which may help clients with upfront renovation costs. We can then apply a repayment profile that suits them; it might be interest-only or capital and repayment focused.

We can also move quickly. We talk directly to our credit team and meet daily so once we’ve talked through a structure, we can seek quick approvals. Our clients always have access to their private bankers who have oversight of the process from end to end.

Sarah Beeny: When you invest in your main home, you get to enjoy it.

Gains on a buy-to-let may be subject to Capital Gains Tax. There are also a lot of costs involved in buying a buy-to-let. You will have vacant periods, you will have maintenance costs and there are anomalies with the business plan. It’s not for the faint-hearted and unless you’re certain you have been realistic with the figures, you may be better to invest in your main home.

Sarah Beeny: There are so many downsides to the current energy crisis. If there was one tiny silver lining, it’s that the green agenda is right at the top of everyone’s agenda. If nothing else was going to encourage us to go green, this is it.

This means if you have the space, ability and capital to invest, consider if you can get off-grid, because your property may be worth more money.

You hear of people that spend £20,000 on a new kitchen, but people are really going to start caring about energy costs and EPC paperwork. People are starting already to look at last year’s energy bills when they buy a home. We’ll see that more and more. If you haven’t thought about how you can lessen those bills, you will find it harder to sell or rent. It was an area that was seen as a luxury before and now it’s as important as having a non-leaking roof.

Sarah Beeny: The starting point for a building is to first make sure you don’t need much energy, then you start looking at how you make your own energy.

If you’re building a home from scratch, the most important thing is to build a thermally efficient shell. I’m a fan of UPVC windows which need no maintenance.

The principle of air source heating or underfloor heating is that you retain a lower level of temperature, but you ventilate mechanically to maintain a constant heat. So, you have to look at how you’re going to live. If you insist on wearing a T-shirt in December, you are not helping the planet and you are being irresponsible.

Sarah Beeny: One of the unfortunate things with the planning system is that it involves guidelines. There guidelines are made at government level and interpreted at each local authority by an individual. What you might get from one may be different from another and you might get a differing opinion on what matters.

Almost all local authorities have signed up to the Government’s green agenda, so I would make sure your planning department has signed up and point it out to your officer.

One of the problem with trying to be more ‘green’ – a loose term – it’s a bit like the Wild West. There’s not a lot of information about what you should and shouldn’t do. However, you shouldn’t be getting pushback from a local authority when making your home more energy efficient.

Philip Shaw: The Bank of England seems to be cognisant of the challenges that the economy is facing, particularly for households. We predict that the Monetary Policy Committee will say ‘no’ to an interest rate rise in May. The chances of interest rates rising too fast or too quickly is small.

We foresee a gradual rise by historical standards. There have been relatively few periods over the last 20 years that housing prices have shown a sustained fall. We had a fall amid the financial crisis and then in 2012, but since then we’ve seen a very sustained increase in house prices overall. Therefore, it’s more likely that we get a flat picture for house prices under these circumstances.

Lisa Parkes: We do have to apply ratios and look at modelling income. The multiple of 4.5 of loan to income is a level that’s been set by the Financial Conduct Authority. We’re regulated by them so our lending book sits within those guidelines. Where we can assist our clients is by looking at wider available income as opposed to historic drawn income.

We [may be able to] leverage buy-to-let income. We offer buy-to-let facilities if you’re looking at securing a loan against an unencumbered property. And we can take rental income into account when looking at personal income.

Sarah Beeny: We used direct labour and ran the building site ourselves. It’s a full-time job to work on everything, but it does give you more control. I like being able to take responsibility for my own mistakes.

Sarah Beeny: It’s hard and it’s a long fought game. We bought the farm that we did because the previous owners already had planning permission for a house of the same size. It had taken them ten years to get it and it still took a year to get permission for our plans.

I don’t think we have a housing crisis [in the UK], we have an infrastructure crisis. We’d be better investing in faster and quicker services and more transport. We have lots of property, but it’s difficult to get to it.

I’d like to see a few more homes in each village so you support the community in that village. If you build out slowly, that community can benefit from services and those services are supported.

I’m not sure building a 1,000 new homes solves the problem in itself.

Sarah Beeny: Tesla has been collecting data about battery storage since they first made batteries and it shows that longevity is affected by the temperature it’s stored at and charged at.

A power wall has the advantage that if you make extra electricity, you can sell it back into the grid at the same price you buy it at.

The problem with solar panel is that they work to the lowest common denominator. This means you need an optimiser on each solar panel so they work independently. Plus, you can see it on an app on your phone to see if they work or not.

Sarah Beeny: The cost of materials is always a major factor. Wood is expensive, it’s seen as an eco-friendly option but it is biodegradable. If you’re going to use timber, make sure it’s timber you’re going to use for a long time.

In terms of the principle costs, I believe you should build once and build for good. Whatever you build or do, if you can afford to make a design that exists or is still relevant in 50 or 100 years’ time it’s a much better solution.