Investment News

Source: The Independent
The price of renting a two-bedroom flat in London has risen at almost three times the rate of earnings growth since 2011, new research has revealed.

While the average rent for a two-bed in the capital soared 26 per cent to £1,500 in the six years to 2017, earnings grew just 9 per cent, research by the GMB union found.

In 16 of 33 London boroughs, rent on a two-bedroom flat jumped more than 30 per cent over the same period, while across England rents rose 18.2 per cent to £650 per month.

Greenwich experienced a 50 per cent rise in rents for the same type of property to an average of £1,350 a month – the biggest rise in the capital, while local wages increased just 7.2 per cent.

Warren Kenny, the GMB’s London regional secretary, said high wages were here to stay and warned that younger workers faced living in private rented accommodation for longer.

He called on employers to pay higher wages to staff to enable them to afford to rent.

“If employers don’t respond with higher pay they will face staff shortages as workers, especially younger people, are priced out of the housing market,” Mr Kenny said.

“It makes little sense for these workers to spend a full week at work only to pay most of their earnings in rents.

“There is a massive shortage of homes for rent at reasonable rents for workers in the lower pay grades.

“There is no alternative to higher wages to pay these higher rents, plus a step change in building homes at reasonable rents.”

Source: Financial Times

For years, London’s property market has been a tale of rising prices and ever-increasing demand. But enthusiasm for housing in the UK capital appears to have plateaued. Similarly to the rest of the country, the combination of economic uncertainties and tax changes has resulted in a steady drop in purchases.

According to a new survey from the Royal Institution of Chartered Surveyors, demand for properties has fallen for the 12th consecutive month. The drop has been sharpest in London and the south-east of England. The report also said that prices across the whole of the country are flat, while new instructions from sellers have fallen for the seventh month in a row. Respondents expect the slowdown to continue.

Several factors could be responsible. The UK’s volatile political climate may have hit investor confidence. While the very top end of the market has stagnated for several years, the uncertainty of two general elections could have turned off other segments of the market, too. Brexit could also hold back transactions, as buyers wait to see the result of negotiations. A smooth departure from the EU is still far from guaranteed.

Interest rates have also hit the housing market. Last November’s rise in the Bank of England benchmark rate, to 0.5 per cent, was the first in a decade. The BoE’s Monetary Policy Committee has hinted that further increases are on the horizon. Inflation remains 1 per cent above the BoE’s target, so those with variable-rate mortgages are reluctant to contemplate further borrowing. The Rics report suggests the slowing housing market could even affect deliberations over another rate increase in May.

Although rates remain historically low, mortgage affordability is still a challenge. Until recently, increases in London housing prices came while banks could not make more than 15 per cent of their loans to highly stretched buyers.

Some sellers have also refused to accept that house prices are under pressure. So instead of settling for lower offers, owners are opting to take their homes off the market.

Another factor for the market slowdown is taxation changes. In 2014, then chancellor George Osborne revamped stamp duty to scrap the slab system and replace it with a sliding scale, based on the cost of the property. A tax-free bracket was introduced for homes up to £125,000, plus a new tax for the upper brackets.

The critical threshold was £937,000: purchases over that level paid more stamp duty under the new system. The average London property price is £486,000; all the same, a significant part of the capital’s property market was affected. A year later, Mr Osborne introduced an additional 3 per cent stamp duty tax on properties purchased for renting and second homes.

These changes were designed to balance the market. Their impact, however, was to create disincentives to sell London houses. Instead of trading up or down, homeowners appear to have opted to stay put.

Stamp duty, like other transaction taxes, is arbitrary and inefficient. It could be scrapped entirely and replaced with a reformed council tax that adequately reflects the true value of properties. Purchases of expensive properties still need to be taxed in some form: the housing market cannot be titled in favour of the high end.

Stamp duty reform would be hard to achieve. Even if it succeeds, it would not eliminate all the pain of deflating property prices. But unblocking the top end of the market will have benefits for all London property owners.

Source: Business Insider

London’s property market is worth a total £1.5 trillion according to new figures from Zoopla — more than twice the value of the nine other most valuable property markets in the UK combined.

Zoopla’s figures suggest that the value of London property is 13 times higher than that of its nearest rival, Bristol, which has a property market worth £115.2 billion. London represents just over 18% of the entire UK property market by value.

However, London property prices grew the slowest out of any of the top 10 hotspots last year, according to Zoopla’s figures. House prices in the capital rose by just 1.54% over the last 12 months.

Zoopla’s rival Rightmove said last week that London house prices have now moved out of their “boom” phase after nearly two decades of rapid price rises.

Lawrence Hall, a spokesperson for Zoopla, said in a statement: “It comes as no surprise that London is significantly more valuable as a residential property market than any other British city.

“However, the data does show that, in comparison to cities further north and across the Scottish border, the rate of growth in London has slowed. The capital may be worth almost 10 times more than Sheffield, but Britain’s Steel City wins in the growth rate stakes.”

House prices in Sheffield grew by 5.63% last year according to Zoopla. Here’s Zoopla’s full table of the top 10 cities by property market worth:

Source: Bloomberg

U.K. house prices rose in January as a shortage of properties coming up for sale offset an underlying slowdown in the market.

Values increased 0.6 percent from December, lifting the annual gain at 3.2 percent, Nationwide Building Society said on Thursday. While that’s more than the December rate of 2.6 percent — and the fastest since March — it’s still well below the pace of recent years.

The property market has been hurt by slower economic growth and a squeeze on consumers’ incomes since the referendum to leave the European Union in 2016. The Royal Institution of Chartered Surveyors said last month that activity remains subdued, and mortgage approvals fell to a three-year low last month.

“The acceleration in annual house price growth is a little surprising,” said Robert Gardner, chief economist at Nationwide. “The lack of supply is likely to be the key factor providing support to house prices.”

The average house price in the country rose to 211,756 pounds ($300,000) from 211,156, the report showed.

Source: Bloomberg

New York City took a double hit in an annual survey of real estate investors, which saw London overtake it in first place globally and Los Angeles tie it for top U.S. city.

The annual survey of the Association of Foreign Investors in Real Estate asks its members, who are estimated to have more than $2 trillion in real estate assets under management, to rank markets by various measures, such as stability and opportunity for capital appreciation. This year’s poll, the 26th, also saw pricey San Francisco, which had been one of the top five global cities since 2011, fall to 11th place, and Washington, D.C., skid to 25th from 15th place last year, part of a long slide.

Foreign investors are less worried about the impact of Britain’s exit from the European Union than they were a year ago, association Chairman Edward M. Casal said in a statement, referring to London’s jump from third to first place — although Britain did fall from third to fifth among countries offering the best opportunity for appreciation.

The U.S. was first for planned real estate investment in 2018, followed by the U.K., Germany, Canada and France. And New York is no slouch, as the chart shows.

New York’s tie with Los Angeles was a surprise, association Chief Executive Officer Jim Fetgatter said. It was L.A.’s first time in the top spot for U.S. cities, while New York had been named the top U.S. city for the last seven years. Los Angeles can thank its mighty port for the honor.

“With the growth of online shopping, foreign investors continue to rank industrial/logistics properties as their No. 1 investment opportunity,” Fetgatter said in the statement.

In an interview, he said that the recent U.S. tax overhaul is “not necessarily a boon” to real estate, preserving much of the status quo for the industry, but is generally a positive development. Investors will benefit from the far lower corporate tax rate, which will create jobs and increase income, he predicted.

The survey was conducted in the fourth quarter of last year by the James A. Graaskamp Center for Real Estate, at the Wisconsin School of Business.

Source: The Guardian

The total value of all the houses in the UK has passed the £6tn mark for the first time, according to research by Halifax which also highlights the vast concentration of property wealth in London and the south-east.

The value of homes in London is now more than all the houses in Scotland, Wales and the north of England combined. The research also reveals how property values in the south have escalated since the financial crash of 2007-08, despite incomes remaining relatively flat.

In 2007 Halifax estimated that the UK’s housing stock was worth a total of £4,077bn, but over the past 10 years the figure has risen to £6,015bn.

To put the £6tn figure into context, it is nearly four times the size of the UK’s national debt, which is currently just over £1.8tn, and three times our total national output in 2016 (around £2tn). But even if every house in Britain was sold, the money raised would pay off less than half of the US’s national debt.

The big rises in the value of the UK’s housing stock have mostly taken place in the south. In 2007, the value of housing in the north-east was estimated at £114bn, but today it stands at £136bn – an increase of £22bn.

But in London, houses have jumped in value from £718bn in 2007 to £1,338bn today, a gain of £620bn. Over the same period the value of properties in Northern Ireland actually fell.

In total, 68% of private property wealth, amounting to £3.8tn, is concentrated in the south, up from 62% in 2007.

The stock of privately owned homes in Britain also increased in number from 21.5m to 23.4m.

Among the biggest gainers of property wealth in the south have been landlords and second home owners. Halifax said that while the average rate of owner-occupation in the UK was 63%, it stands at just 48% in London.

The vast majority of housing wealth is owned by the over-55s. Halifax estimated that under 35-year-olds own just 3.3% of the UK’s net property wealth, while the over-55s hold 63.3%.

Russell Galley, managing director at Halifax, said: “The value of housing stock has grown by close to £2tn in the past decade, and with the equity rich regions of London and the south-east largely responsible, it highlights a considerable regional imbalance in the distribution of housing wealth.

“Within the capital there is also a mix of fortunes. While more than a fifth of total property wealth is in London, lower levels of owner-occupation reflect a major barrier to the property ladder with a far greater number of people renting where house prices are at their highest.”

The property market has bestowed much higher levels of housing equity – the difference between the value of a home and the outstanding mortgage – on people living in the south. Halifax estimated that the average homeowner in London has net equity worth £360,193, compared to £134,273 in the north-west of England.