Right to Buy Recent Developments, Old Complexities Remembered Samantha Cheng (BSc Hons) Sales & Acquisitions Manager London Borough of Southwark www.southwark.gov.uk
Housing Act 1980 – RTB introduced – Minimum qualification period 3 years – Discount 33% up to maximum 50% – (20 years tenancy, 1% rise per Average property £23.3k annum after 3 years) price UK – Sale of freehold property only Average property £30.5k – £50k ceiling nationwide price London – Right to 100% local authority BoE Interest rate 16.3% mortgage – £100 deposit allows deferment of Annual RPI 18% sale for 2 years (at original price) change – Repayment of discount on simple sliding scale over 5 years – No time limit on cost floor www.southwark.gov.uk
Housing and Building Control Act 1984 Average property price UK £31.0k – RTB extended to the sale Average property price of leasehold property £43.7k London – Minimum qualification period reduced to 2 years First time buyer house – Minimum discount 32% up 2.8 price to earnings ratio / to maximum 60% mortgage payments as 33.4% (30 years tenancy, 1% rise %age of net pay UK per annum after 2 years) First time buyer house – Right to Buy on Shared 4.0 price to earnings ratio / Ownership terms mortgage payments as 50.6% introduced %age of net pay London – 380,912 RTB sales achieved to end March BoE Interest rate 9.7% 1984 Annual RPI 5% www.southwark.gov.uk
Housing Act 1985 Average property price £34.4k UK Average property price £51.4k London - Consolidation of disparate First time buyer house 2.9 housing legislation price to earnings ratio / 37.8% %age of net pay UK First time buyer house 4.3 price to earnings ratio / 63.2% %age of net pay London BoE Interest Rate 12.1% Annual RPI 6.1% www.southwark.gov.uk
Housing and Planning Act 1986 - Discounts for flats start at Average property price UK £37.6k 44% increasing to Average property price £62k maximum 70% (15 years London tenancy, 2% rise per First time buyer house annum after 2 years) 2.9 price to earnings ratio / - Discount repayment mortgage payments as 34.2% penalty introduced on %age of net pay UK simple sliding scale over First time buyer house 3 years 4.7 price to earnings ratio / - 530,576 sales achieved mortgage payments as 64.0% through RTB to end %age of net pay London March 1986 BoE Interest Rate 10.7% Annual RPI 3.4% www.southwark.gov.uk
Housing Act 1988 Average property price UK £51.4k – Cost floor period limited Average property price £89.7k London to preceding 8 years – Delay notices First time buyer house 3.4 price to earnings ratio / introduced mortgage payments as 40.5% – 701,053 RTB sales to %age of net pay UK end March 1988 First time buyer house 5.6 price to earnings ratio / mortgage payments as 75.9% %age of net pay London BoE Interest Rate 10% Annual RPI 4.9% www.southwark.gov.uk
Leasehold Reform, Housing and Urban Development Act 1993 Average property price UK £51.2k – Right to local authority Average property price £67.8k mortgage abolished London – Right to defer completion First time buyer house abolished 2.4 price to earnings ratio / – Right to shared ownership mortgage payments as 20.5% lease abolished %age of net pay UK – Rent to mortgage introduced First time buyer house – 1,132,866 RTB sales to end 2.8 price to earnings ratio / mortgage payments as March 1993. 26.3% %age of net pay London BoE Interest Rate 5.9% Annual RPI 1.6% www.southwark.gov.uk
Statutory Instrument 1998 No 2997 Average property price UK £65.2k – Regional discount ceilings Average property price £103.8k London introduced ranging from £22k in North East to £38k in First time buyer house London (new claims only), 2.5 price to earnings ratio / mortgage payments as effectively lowering discounts 24.4% %age of net pay UK for many applicants. – Cost floor period raised to First time buyer house 3.5 price to earnings ratio / preceding 10 years mortgage payments as 34.8% – 1,333,804 RTB sales to end %age of net pay London March 1998 BoE Interest Rate 7.2% Annual RPI 3.4% www.southwark.gov.uk
Statutory Instrument 2003 No 498 Average property price UK £127.2k Average property price £214k – £16k reduced ceiling in London London, some South East First time buyer house 4.0 areas and Watford (new price to earnings ratio / mortgage payments as claims only) 31.5% %age of net pay UK – 1,633,523 RTB sales to end First time buyer house of March 2003. 5.6 price to earnings ratio / mortgage payments as 44.8% %age of net pay London BoE Interest Rate 3.7% Annual RPI 2.9% www.southwark.gov.uk
Housing Act 2004 • Minimum qualification period raised to 5 years Average property price • Effect of deferred resale agreement £148.4k UK introduced • Right of first refusal introduced Average property price £233.1k • Tenants with ASBOs or demoted tenancies London precluded RTB • First time buyer house Initial demolition notice suspends RTB for 4.7 maximum 5 years price to earnings ratio / • mortgage payments as Final demolition notice ends RTB, no new 39.9% claims for 2 years %age of net pay UK • Residence qualification raised to minimum 5 years First time buyer house • price to earnings ratio / Discount penalty raised to 5 year sliding 6.1 mortgage payments as scale dependent on original discount to 53.2% market value ratio %age of net pay • London Rent to mortgage abolished • Discounts for houses start at 35% increasing to maximum 60% (30 years tenancy, 1% rise BoE Interest Rate 4.0% per annum after 5 years) • Discounts for flats start at 50% increasing Annual RPI 3.0% to maximum 70% (15 years tenancy, 2% rise per annum after 5 years) • 1,717,625 RTB sales to end March 2004 www.southwark.gov.uk
Statutory Instrument 2005 No 1735 Average property price UK £156.3k Average property price £240k London First time buyer house - Landlords must provide 4.8 price to earnings ratio / secure tenants certain mortgage payments as 42.2% %age of net pay UK information about RTB First time buyer house - 1,776,273 RTB sales to end 6.1 price to earnings ratio / March 2005 mortgage payments as 54.8% %age of net pay London BoE Interest Rate 4.6% Annual RPI 2.8% www.southwark.gov.uk
Housing & Regeneration Act 2008 Average property price UK £169k – Maximum period for initial Average property price £278.6k London demolition notice increased from 5 to 7 First time buyer house years. 4.8 price to earnings ratio / – Concept of “tolerated mortgage payments as 45.0% trespass” addressed. %age of net pay UK – Review of redetermination First time buyer house introduced 6.4 price to earnings ratio / – 1,846,996 RTB sales to end mortgage payments as 60.8% %age of net pay London March 2008 BoE Interest Rate 4.7% Annual RPI 4% www.southwark.gov.uk
Statutory Instrument 2012 No 734 – Cost floor period raised to Average property price UK £163.6k preceding 15 years for Average property price £299.3k properties built or London acquired after April 2012 First time buyer house – Maximum discount raised to 4.4 price to earnings ratio / £75k nationwide (new and mortgage payments as 33.7% existing claims) %age of net pay UK – 1,861,496 RTB sales to end First time buyer house March 2012 (average 3,625 6.6 price to earnings ratio / per annum for last 4 years mortgage payments as 51.9% from highs of over 130,000 %age of net pay London per annum in late 80s) BoE Interest Rate 0.5% Annual RPI 3.2% www.southwark.gov.uk
Statutory Instrument 2013 No 677 Average property price UK £168.9k Average property price £325.4k London First time buyer house – Maximum discount in 4.5 price to earnings ratio / London raised to £100k mortgage payments as 32.6% (new and existing claims) %age of net pay UK – 1,869,898 RTB sales to end First time buyer house March 2013 7.2 price to earnings ratio / mortgage payments as 53.2% %age of net pay London BoE Interest Rate 0.5% Annual RPI 3.0% www.southwark.gov.uk
Statutory Instrument 2014 No 1378 Average property price £182.3k UK Average property price £381.6k London – Maximum discounts linked to First time buyer house price to earnings ratio 4.8 rises in CPI UK First time buyer house price to earnings ratio 8.4 London BoE Interest Rate 0.5% All figures to end of 2 nd quarter 2014 www.southwark.gov.uk
What’s coming…. • Maximum discount percentage for houses to rise to 70%. When? • RTB agents signposting to available finance, advising on delay notices, etc • Reduction in minimum qualification period from 5 years to 3 years with Deregulation Bill/Act, expected Oct/Nov 2014 www.southwark.gov.uk
Where does this leave us? www.southwark.gov.uk
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