Wednesday September 12, 2007
Guardian Unlimited
CHRIS, AN ESTATE AGENT in Greenwich, south London, opens the door with a flourish. "It's a lovely view," he says. And it is: from this living room you can see London stretched out along the Thames, from St Paul's cathedral in the west to the O2 venue in the east. Straight in front of you is the high-rise grandeur of Canary Wharf.
And it's a bargain: £269,000 for a two-bed flat in the heart of Greenwich, seconds away from the Cutty Sark and close to good transport links.
But it's an ex-local authority property, and to get here we have walked up concrete stairways and along dim corridors. Location it's got in spades, but is it a des res? Not quite.
Urban attraction
A few years ago, buying ex-local authority property was the preserve of the buy-to-let investor, happy to snap up a cheap flat and let it out for a good return. This still happens where flats can be bought for less than £100,000, but as prices have risen so investors' yields have shrunk. They are selling up, and taking their profit.
The new kids on the council block are first-time buyers, desperate to get on to the property ladder. To them, the UK's stock of 2m ex-local authority properties has started to look attractive.
"The idea is to live somewhere funky and urban," says John East, manager at London estate agents Kinleigh Folkard Hayward. Think the Trellick tower in north-west London and you're not far wrong.
The reality, however, can be far from that. While most ex-council houses have seamlessly merged into the market since right-to-buy was introduced in the 80s, there are issues facing flats and urban estates.
Buyers have to balance the benefits - "great location, great space, great price," according to west London agent Tom Dogger - with the downsides - "ex-council stigma", as East puts it.
Ex-local authority properties can be attractive. They are cheaper than their privately built neighbours, often have more space, tend to be built with thicker walls and better layouts than private developments, and in many cases are in, or near, desirable locations for city workers.
"They represent very good value for money," says East. "A two-bed ex-local authority flat is going to be bigger and cheaper than one in a private development."
East sold two two-bedroom flats this summer, which illustrate his point. Both are close to the same London tube station. One was a 64 sq metre ex-local authority flat for £250,000. The other was a 48 sq metre private flat for £290,000, which works out at £2,100 a square metre more than the ex-local authority home.
Dogger, who manages a branch of Winkworth's estate agents in one of London's most expensive areas, Knightsbridge and Chelsea, agrees: "Prices are roughly 30% lower for ex-council."
He may be more used to selling multi-million pound properties, but Dogger also has ex-council stock on his books, most recently a two-bed flat for sale at £415,000.
Overlooking Brompton Cross, one of the most upmarket shopping areas in London, it is a bargain given the location. A comparable flat in a private building "would be £700,000," he says.
Sticking points
Such deals may sound perfect, but buyers should proceed with caution - buying an ex-council property can be quite different to buying any other kind of home.
While covenants stopping ex-local authority flats being sold into the private sector are quite rare - this is more something to watch out for when buying from a trust or housing association like Peabody - buyers should find out when the property was originally bought from the council.
"If the current owner bought the property from the council within the last three years, they will have to pay all or part of the 'right-to-buy' discount back to the council," according to housing charity Shelter.
"This will need to be checked as part of the legal preparation, and may cause delays if the seller can't afford to pay the money back."
Problems can also arise when it comes to getting a mortgage. Most lenders won't give loans on ex-council properties more than five or seven storeys high. Many high-rise blocks were built cheaply - prefabs in the sky - and are not robust. Even if you buy for cash, such a property will be hard to sell on.
When a flat is involved, lenders are also concerned with who manages the property and the proportion of owner-occupiers in the block. Some estate agents say the minimum ratio should be a "healthy balance" of 30% owner-occupiers to 70% council tenants, but others suggest less owners represents an opportunity.
"It could be seen as getting in first," says Dave Whitehead, Halifax estate agent's regional manager for London and the south-east.
Liability
When buildings become 100% owner-occupied, the owners tend to set up a management committee. If there is a mix, however, the council will be in charge. And that matters because while it can be a good thing to have a big organisation in charge of maintaining the property, it can also lead to hefty bills.
Councils issue section 20 notices to owner-occupiers in council-managed buildings when major work needs doing - a new roof or lift for example. The notice sets out what work needs doing and explains the tender process. But it can then be a year before work starts and another year before the final bill is known. In some cases owners have been handed bills for tens of thousands of pounds.
Fortunately, section 20 notices will come up in any searches, and estate agents should be aware of them well before negotiations to buy get serious.
In many cases, maintenance of ex-local authority stock is fairly good. "Many were refurbished in the 80s and 90s," says Halifax's Whitehead. "They were re-roofed, had new central heating put in and new double glazing."
But before you take the plunge you should consider saleability. Ex local-authority homes don't rise in value as quickly or as much as their neighbours, says Dogger. And they are harder to sell if the market falls.
East agrees: "In a tougher market some estates may suffer."
Ultimately, says East, buyers will know whether they can live in a place or not. "Visit the area and make your own judgement," he says. "Don't treat all estates the same, because they're not."
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