The announcement yesterday by Sajid Javid, Communities Secretary, that he is to ban the sale of leasehold houses and reduce ground rents on new properties to “as low as” zero resulted from months of work by the Leasehold Knowledge Partnership.
It will have a marked effect on McCarthy and Stone, according to an article in the Daily Telegraph.
McStone made four per cent of its revenues last year from ground rent sales.
Ground rents in retirement properties have always been high – for no reason whatsoever as they are for no service.
The Daily Telegraph reported that they are £400 to £600pa with McCarthy and Stone, which are very high indeed. The ground rents rise with RPI, rather than double every ten years which has blighted other properties.
McStone’s shares fell 3.9 per cent yesterday.
High ground rents in retirement housing are an increasing urgent issue, with huge increases kicking in on older leases.
It is important that retirement housing plays a prominent part in Sajid Javid’s “consultation” over ground rents.
Retirement housebuilders will doubtless say that they are essential for their business models.
But as they are for no service, and simply a feudal tax imposed on families usually seeking to house an elderly relative in a hurry, should they exist at all?
Related posts:
Our ground rents are fair, says McCarthy and Stone (even though they go up to £600 and are for no service whatsoever)
Ground rents are essential to McCarthy and Stone’s business model
ARCO snubs McCarthy and Stone / Churchill by saying there is no need for ground rents
McCarthy and Stone: we want you to succeed, but you don’t need ground rents
This shows how dependent developers are on the entirely “bogus’ ground rent income that is generated.
It would be of interest to know if the income from future ground rent has been securitised against loans to McCarthy & Stone and if so over how many years?
Clearly if loans have been granted against the asset of ground rent income (as was the case with the Tchenguiz portfolio including the older McCarthy & Stone developments) they will need to find new income streams to support loan repayments? McCarthy& Stone have thousands of residents with cash available. An increase in management fees here, a little bit of extra maintenance there, the odd” upgrade” that is found to be needed? Lead us not into temptation!
Before buying into the McCarthy & Stone lifestyle choice potential customers should look at older McCarthy & Stone developments to see how the “lifestyle choice” turned out?
For example, What did the service charges increase to?
Are older developments paying 20%VAT on communal electricity whilst newer developments are only paying 5%?
How well was it managed?
Do they still have a live in House Manager?
If they were built with a swimming pool, is the pool still open?
How long did Warden Call Systems/Entryphone systems last before they were declared to be obsolete and had to be replaced at great cost?
How long is the roof expected to last in a new build McCarthy & Stone development and after how long were they declared to need replacement on older builds?
What are the actual achieved selling prices for older build McCarthy & Stone developments?
Are there problems in taking out an equity release plans that are not at a penal rate of interest for a McCarthy & Stone development.
When considering a purchase, don’t look at the brand new shiny stuff? Ask yourself what it would be like in 20 years to get a realistic appraisal?
I am completing some in depth research on one such 2007 M&S development that has lost nearly £1M on resales for its loyal customers to date. Another triumviate of the M&S/Peverel/TFT collusion. Soon it is going to the Guardian hopefully for publication.