Property Investment

New home building not increasing at rate needed in England

by International Commercial Investment on October 1, 2018

Source: Property Wire
More needs to be done to boost house building in the UK, according to the industry, with the latest official figures showing that the number of new build starts has fallen.

In the second quarter of 2018 new build starts in England fell by 4% quarter on quarter and were also down 4% compared with the same period in 2017, the data published by the Ministry of Housing, Communities and Local Government (MHCLG) shows.

However, completions are increasing, up by 7% in the second quarter of 2018 compared with the same quarter in 2017 and were 1% higher than a year ago.

The figures also reveal that year on year new building starts fell by 3% in the 12 months to June 2018 compared with the year to June 2017, but completions increased by 5%.

The data shows that in terms of the wider picture, starts are now 126% above the trough in the first quarter of 2009 but 21% below the peak in the first quarter of 2007 while completions are 62% above the trough in the first quarter of 2013 and 16% below the peak of the first quarter of 2007.

The figures show that currently there is no boost to home building, despite Government targets being set, according to Shaun Church, director at Private Finance. ‘The figures shows these ambitions are falling flat. While completions may be up, new build starts are down on both a quarterly and annual basis, suggesting the momentum to build more homes and tackle the UK’s supply crisis is waning,’ he said.

‘Despite being the typical home for a first time buyer, flats now account for just 20% of all new builds, compared to 50% 10 years ago. While lack of supply is the most dominant force pushing house prices to beyond affordable limits, we also need to ensure we’re building the right types of home to match the demands of the market,’ he pointed out.

‘Although first time buyers are benefiting from stamp duty exemptions and mortgage rates at incredibly affordable levels, if we fail to address the UK’s chronic housing supply issues, affordability concerns will continue to prevent many from joining the housing ladder,’ he added.

Kate Davies, executive director of the Intermediary Mortgage Lenders Association (IMLA), believes there could be problems ahead for first time buyers when the Government’s flagship Help to Buy scheme comes to an end in 2021.

‘The market has clearly been influenced by the Government’s Help to Buy equity loan scheme, which has helped over 170,000 households into home ownership to date. Whilst Help to Buy may not have been intended to become a permanent fixture to the UK housing market, it has become a very important element of business for builders, lenders and prospective home owners,’ she said.

‘It is therefore very important that the Government clarifies what it intends do when the scheduled funding of Help to Buy ceases in 2021, in order to avoid the risk of market disruption,’ she pointed out.

‘If the scheme is to be maintained but in an amended form, participants will need maximum notice of this in order to plan ahead so that construction and lending can continue smoothly. If the scheme is not to be continued, the Government will presumably announce alternative measures to address the housing shortage, as promised in its February 2017 White Paper,’ she explained.

‘With the Autumn Budget on the horizon, the IMLA would welcome confirmation that the Government will continue to its support of first time buyers post-2021 and also ensure that the whole housing market, public and private sectors, continues to be supported,’ she added.

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International Commercial InvestmentNew home building not increasing at rate needed in England

Private sector rents in the UK reached a record high for August

by International Commercial Investment on September 28, 2018

Source: Property Wire

Rents in the UK’s private rented sector have reached a record high for the month of August with 40% of tenants seeing an increase, the latest monthly report shows.

This was up from 31% seeing a rise in rents in July, according to the data from the Association of Residential Letting Agents (ARLA), the highest figure since records began in January 2015.

The figures also show that year on year this has increased from 35% in August 2017 and 27% up from August 2016.

The ARLA report also reveals that demand from prospective tenants fell significantly, with the number of house hunters registered per member branch dropping by 19% month on month.

Overall, year on year, demand is down 11% with 72 prospective tenants registered per letting agent branch in August 2017.

Meanwhile, the supply of available properties rose to 197 in August, from 184 last month, the highest figure seen since December 2017, when supply stood at 200. Year on year, this figure is up 4% from 189 in August 2017.

‘As we’ve highlighted before, the impact of recent and ongoing tax changes continues to have a material impact on the buy to let market. Four in 10 tenants saw their rents rise in August, the highest level we’ve seen since records began,’ said David Cox, ARLA chief executive.

‘Although it’s encouraging to see the number of properties available to rent rising, supply still isn’t anywhere near high enough to slow down the pace of rent rises. We need more homes to rent, and for Government to change its narrative and recognise the very valid role buy to let plays in the housing mix. Driving small landlords out of the market ultimately impacts tenants most,’ he added.

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International Commercial InvestmentPrivate sector rents in the UK reached a record high for August

UK house prices rising faster than wage increases, Halifax says

by International Commercial Investment on August 12, 2018

Source: The Guardian

A surprise spike in UK house prices in July has increased the annual rate of property inflation to 3.3%, pushing the cost of buying a home to a record high.

Halifax said house prices rose 1.4% in July alone, taking the average house price to a new record of £230,280. The annual growth rate jumped from 1.8% in June to 3.3% in July, the largest increase since last November.

The increase pushed house price inflation back above wage growth, which is currently at about 2.5% a year, and comes just days after the Bank of England raised interest rates.

Halifax said house prices are being supported by the underlying strength in the jobs market, with employment rising by 137,000 in the three months before May. Pressure on household finances is easing as wages have begun to outstrip inflation.

Although a rebound in prices will dismay those struggling to save money to buy their first home, some estate agents greeted the figures enthusiastically.

“Annual growth just exploded to a level not seen since the autumn,” said the London agents James Pendleton.

“With two negative quarters behind us, many were hoping the usually busy summer period would produce a bit of a bounce, and this is a promising start.”

But Halifax said that transaction activity “remains soft” and that it expected the number of mortgage approvals to be broadly flat during 2018.

Economists said the July figures from Halifax should be treated cautiously. Howard Archer, the chief economic adviser to the EY Item Club, said: “We remain doubtful the UK housing market is stepping up a gear. Activity is still relatively lacklustre despite coming modestly off 2018 lows, with consumer conditions challenging.”

The Halifax figures for July are significantly higher than those reported by its rival lender Nationwide. It recorded a rise of 0.6% in July compared with Halifax’s 1.4% figure. Its figure for annual house price inflation is 2.5%.

Next month’s figures will be the first to reflect the impact of the rise in Bank of England base rate to 0.75%, although few property experts are expecting a significant impact given that most households are on fixed rates.

TSB has followed Nationwide by raising its base mortgage rate by 0.25%, but giving most of its savers an uplift of just 0.1% in interest paid.

Jonathan Harris of the mortgage broker Anderson Harris said: “We don’t expect this month’s interest rate rise on its own to have too much of an impact. However, it may cause some nervousness going forward as buyers worry about the possibility of future rate rises. It is no surprise then that fixed-rate mortgages continue to be by far the most popular product as borrowers look to protect themselves against future uncertainty.”

Brexit uncertainty is likely to keep house price rises restrained, said Jonathan Hopper, managing director of Garrington Property Finders. “The future course of the market is delicately balanced. With even cabinet ministers now warning that a no-deal Brexit is more likely than an orderly exit from the EU, investment buyers are dialling up their caution.”

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International Commercial InvestmentUK house prices rising faster than wage increases, Halifax says

House prices gain momentum in July

by International Commercial Investment on August 1, 2018

Source: telegraph.co.uk

House prices gained a bit of momentum in July after rising at their slowest annual rate in five years in June, mortgage lender Nationwide said on Wednesday.

House prices across the United Kingdom were on average 2.5pc higher than in July last year, faster than growth of 2.0pc in June and above a forecast for a 1.9pc rise in a Reuters poll of economists.

In monthly terms, prices rose by 0.6pc in July from June, faster than a forecast of 0.2pc.

Nationwide said the annual increase remained in the narrow 2-3pc range of the past 12 months and the lender still expected prices to rise by only 1pc in 2018.

Britain’s housing market has slowed since the 2016 referendum decision to take the country out of the European Union. Eight months before Brexit is due to happen, Prime Minister Theresa May has still to agree with the EU about Britain’s future trading relationship with the bloc.

Nationwide economist Robert Gardner said an expected interest rate hike by the Bank of England on Thursday was likely to have only a modest impact on the housing market because most mortgages issued in recent years were on fixed interest rates.

However, around 12pc of homeowners already spend more than 30pc of their gross income on their mortgage and “for those, some of whom will be on variable rates, any rate rise will be a struggle, even though the impact on the wider economy and most households is likely to be modest”, Mr Gardner said.

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International Commercial InvestmentHouse prices gain momentum in July

Property prices are still rising

by International Commercial Investment on July 2, 2018

Source: The Express

House prices jumped by 1.5 percent month-on-month in May following a 3.1 percent decline in April, according to an index. Halifax said the average UK house price is now £224,439.

Property values in May were 1.9 percent higher than a year earlier, experiencing slower growth than the 2.2% annual increase in April.

Russell Galley, managing director, Halifax, said: “The month-on-month figures are more volatile than the quarterly or annual measures.

“In the three months to May, house prices were 0.2 percent higher than the previous quarter and on an annual basis they are 1.9% higher.

“Both of these measures have fallen since reaching a recent peak, in the final months of last year.

“These latest price changes reflect a relatively subdued UK housing market.”

Howard Archer, chief economic adviser at EY ITEM Club, said: “The housing market is struggling to gain traction amid challenging conditions and we suspect that any meaningful upturn will remain elusive over the coming months.

“We expect house price gains over 2018 will be limited to a modest 2 percent. At this stage, we expect prices to rise no more than 3 percent in 2019.”

Sarah Beeny, founder of estate agent Tepilo.com said: “A slowdown in growth levels is what the market needs to ensure it remains robust, as continuous high rises are unsustainable and make it difficult for many first-time buyers to get on the ladder.

“The whole market depends on first time buyers entering, so this more modest, sustainable level of growth is good news.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said house prices “remain supported by a healthy labour market, which is ensuring that few people are being forced to sell their homes in a weak market”.

Mr Tombs said he expects house prices to “flatline” in the second half of this year.

Mike Scott, the chief property analyst at estate agent Yopa, said: “Both supply and demand are subdued compared with last year, and we may see a lower total number of house sales in 2018 than in recent years.”

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International Commercial InvestmentProperty prices are still rising

London rents rising almost three times faster than wages, research finds

by International Commercial Investment on June 5, 2018

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.”

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International Commercial InvestmentLondon rents rising almost three times faster than wages, research finds

Tax reform could boost London’s housing market

by International Commercial Investment on May 3, 2018

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.

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International Commercial InvestmentTax reform could boost London’s housing market

UK house prices post biggest monthly increase for six months

by International Commercial Investment on April 10, 2018

Source: The Guardian

House prices strengthened in March to post their biggest monthly gain since August, according to surprise figures from the UK’s biggest mortgage lender.

The average price of a UK home rose 1.5% to hit £227,871, Halifax said. Prices in the three months to March were 2.7% higher than a year earlier, up from the 1.8% annual growth recorded in February.

The figures were an unexpected boost for the housing market after months of lacklustre growth and declines in December and January reported by Halifax, which is part of Lloyds Banking Group.

The role of the London housing market in the growth increase was not clear, because Halifax will not release a regional breakdown of the data until later this week.

Last month a survey showed that house prices in prime parts of the capital had tumbled heavily over the past year, with Wandsworth falling nearly 15%. By contrast, the figures from Your Move estate agents showed that the north-west was the fastest growing market in England and Wales with prices in Blackburn growing 16.4%.

Experts warned against predicting a prolonged revival in price growth based on the Halifax figures. Samuel Tombs, the chief UK economist at Pantheon Macroeconomics, said: “The jump in Halifax’s measure of house prices in March just looks like volatility, rather than the start of a strong upward trend. Halifax’s index is prone to large swings.”

Howard Archer, chief economic adviser at EY Item Club, the economic forecasting group, said: “The March spike in house prices reported by the Halifax does not change our view that 2018 will be a difficult year for the housing market. We still expect price gains over the year will be limited to a modest 2%.”

Russell Galley, Halifax’s managing director, said: “Activity levels, like house price growth, have softened compared with a year ago. Mortgage approvals are down compared to 12 months ago, whilst home sales have remained flat in the early months of the year. This lack of direction in the housing market is in stark contrast to the continuing strength of the UK jobs market.”

He said low unemployment, low mortgage rates and the ongoing shortage of properties for sale would underpin price growth in coming months. Halifax is predicting annual price growth to remain close to 3%.

Mortgages in Britain have reached their most affordable level in a decade, according to new research, also from Halifax. Typical mortgage payments accounted for 29% of homeowners’ disposable income in the fourth quarter of 2017, compared with 48% in 2007.

Jeremy Leaf, an estate agent in north London and housing spokesman at the Royal Institution of Chartered Surveyors, echoed Galley’s comments. “The increase in property prices is more to do with a shortage of stock, low mortgage approvals, and subdued activity rather than any great change in the market,” he said.

“What the results do show is that those who are actually looking to buy at this time of year are obliged to pay higher prices for properties in the areas they want to live in order to get what they want, which is what we are also finding on the ground.”

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International Commercial InvestmentUK house prices post biggest monthly increase for six months