The art world has a reputation of being under handed. There is no regulation in this market, the price of a picture is not even quoted. The artists and dealers protect themselves by saying this allows the viewing to be totally about the art and not the price. In theory, and sometimes in practice, dealers will quote a different price depending on who they are speaking to. Why would they do this? Because, depending where the piece ends up will affect the future of the artist. In certain galleries the artist will gather repute, and in the home of a private collector who perhaps does not even know what he’s buying, the sale will have little impact.
Given this is only one thread of how the art market works, it is refreshing when there is an auction, as anyone who qualifies for a paddle can come in and bid. The auction room offers transparency. OR does it?
Like the property market, auctioneers often have a habit of what they call in the art market chandelier bidding. The term for the property market is bidding against the wall, as you don’t always have a chandelier in the humble rooms used. Here, the auctioneer starts the bidding below the reserve price, and if there are no bids in the room they pretend there are bids coming in until they hit the reserve price. Not exactly transparent.
In the art market there are also those who have vested interests, and want to ensure the prices are kept up to a level. There is no intrinsic value to a piece of art, it is paint and canvas. If they have a collection of a particular artist, they do not want to see a single piece sell for less than a certain amount. They will ensure someone at the auction will be bidding up the price, if this means they end up with the piece so be it.
In the property market, unlike the art market, there is transparency in terms of pricing. One can see within minutes what all the other properties in the block or street have sold for, and when the sale occurred. You can also see the ownership details, and whether they have a mortgage and with whom. This is arguably perhaps a little too much information. This is the issue of the property market, there is too much information and therefore the margin is very tight; meaning everyone knows the construction cost, and the resale values. Therefore, when selling a development you will sell it leaving approximately 25% for the incoming developer. If the market turns, the developer will struggle, depending on where he is positioned in the market. The top end will feel the pinch more generally.
The property auction market may look transparent and on the whole is, however, those who know the rules also know how to bend them. With the influx of retail investors, many auctions instead of being the realm for dealers, have now become a dumping ground for traders. With the idea being to dupe the unsuspecting buyer, whilst complying with the letter of the law but not the spirit.
We have seen several cases of buyers ending up with lemons from the auctions. However, auctions can also be a great place to pick up opportunities, and you do have the security of actually getting the deal done. One just needs to exercise a healthy dose of caution when tackling them.
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New EPC rules are heading our way!
Last week, we covered the new rules regarding EPCs, which are coming into effect on the 1st of April 2018. Remember, from April if your property is rating F or G you will have to make improvements to your property or you will not be able to rent it out without a fine.
Tips on improving your EPC rating
There are things you can do to improve your rating, for example:
l take a look at your windows - poorly installed windows can lose your home 10% in heat
l install loft insulation
l add thermostats
l draught-proofing
l replace any halogen, or non-low energy lighting, with LEDs, or compact fluorescent lights
l check your walls for cavities
l replace old inefficient boilers
l insulation for hot water cylinders
l consider replacing your appliances with higher energy ratings
As mentioned in last week’s article, some or all buildings may have to reach a rating of A at some point (however, I might be wrong, but I think realistically we would be looking at a C), so it’s better to do as much as you can now.
There are some circumstances in which you can apply for an exemption. One, for example, is where the occupying tenant withholds consent. It should be noted that you need to check the tenancy agreement. A tenant’s consent may not be required where the tenancy agreement allows you to enter to carry out improvements (as opposed to just repairs). There are temporary exemptions that can apply too, in some cases.
You will not need to get a new EPC if you already have a valid EPC, however, of course you will need to renew it once its 10 year life span is up. Although, some landlords might choose to get an EPC redone, as a higher rating can be a selling point.
Act quickly
It is important that you are ready by 1st April 2018, as you don’t want to find yourself in a position where you are unable to rent your property out, leaving you with an empty property not even covering your mortgage let alone earning any money.
Don’t panic, help is at hand. If you are still stuck as to what to do to ensure you are ready in time, get in touch and I’ll share some more free tips on this.
Richard Bond
Lettings Manager
Sow & Reap
