Housing Market
News covering issues affecting the UK residential property market, house prices, interest rates and buying and selling trends.
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Government Spending Review
George Osborne has today declared that he plans to “end the crisis of home ownership in our country.” Great news. To do this, The Chancellor is to double the housing budget to £2 billion a year and build 400,000 new homes across the country. “We are the builders!” yelled Mr Osborne above the parliamentary hubbub. He was talking about infrastructure when he said that, but it also applies to his housebuilding plans. A new building bonanza will be funded by public money, with developers channeled into building starter homes for hard working families (Mr Cameron’s favourite sector). The Chancellor is also mindful of the importance of ‘young hardworking families’ as he has now decided to rein back his proposed cuts to tax credits, softening the blow by delaying implementation of those deeply unpopular cuts. He is, however, capping Housing Benefit for new tenancies. The funding for housebuilding will be split into several parts; £2.3 billion directly to developers (ever thought you were in the wrong business?) to ‘encourage’ them to build 200,000 starter homes. That’s £11,500 per house. These homes are designated as being for ‘those aged under 40.’ Tough luck if you are just 41 and not yet been…
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Planning delays stifle new housing
A lack of resources within planning departments is one of the biggest reasons for the chronic housing shortages in this country, according to Linea Homes. The niche housebuilder reports that the vast majority of planning applications are being delayed by six months or more owing to what it claims is a shortage of staff and inefficient processes within local planning departments. It is estimated that around 250,000 new homes need to be built in the UK annually to help address the growing supply-demand imbalance in the market, but housebuilders will continue to fail to meet that target year-on-year owing to severe delays with planning applications that could be avoided, Gavin Sherman, Co-Owner of Linea Homes, has said. He commented, “We are not alone in experiencing severe delays with our planning applications that are complete with professional reports and are policy compliant. Local authorities are so under resourced that they simply can’t acknowledge and administer the number of applications they are receiving. Some officers only work two days a week, which makes it impossible for them to deal with the workload they are given.” A recent report compiled by the British Property Federation and GL Hearn, a property consultancy, supported Sherman’s…
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Britain is building again
The volume of new homes in England increased by 25 per cent in 2014-15, the biggest rise in 28 years, according to latest Government figures. Alterations to planning laws helped boost the number of residential properties developed through a change of use, but the main factor was a hike in the number of new-build homes completed during the year. Data from the Department for Communities and Local Government shows that a total of 170,690 homes were added to the country’s housing stock, which Communities Secretary Greg Clark said was further proof of the Government’s commitment to get more homes developed. More than 700,000 additional homes have now been delivered since 2010, supported in part by a rise in the number of commercial buildings converted into residential properties. Clark (left) said, “As a one nation government we’re determined to make sure everyone has the opportunity and security of owning a home of their own. “Today’s figures show a 25 per cent increase in the number of new homes over the past year – showing our reforms are building new homes across Britain. “We are going further and will do everything we can to help families buy a place of their own.…
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Static lending rates may fuel house prices
Residential property prices in the UK will almost certainly continue to rise next year after the Bank of England implied the first interest rate rise may not happen before 2017, according to Savills. With borrowing costs set to remain low, the company forecasts that UK home prices will rise by an average of 17 per cent over the next five years, led by gains in the South East of the country, with an increase of 21.6 per cent, while properties in the North East will appreciate by only 12 per cent over the period, Savills said. The forecasts are based on interest rates staying below 4.5 per cent, but it is now expected that the base rate may only increase to 0.75 per cent in around 2017. “If interest rates rise too quickly, mainstream house price growth will be quickly be curtailed,” said Lucian Cook (left), Head of UK Residential Research for Savills. “On the flip side, if rates remain low for too long, there is a risk that prices will rise too far, creating affordability issues further down the line.” Property prices in London, which have increased more than other parts of the UK in recent years, are expected…
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Lack of homes for sale hits profits
Countrywide, Foxtons, Savills, Martin & Co and Belvoir were among the main property firms to see their share prices fall last week amid housing market fears. The residential property market in parts of the country is taking time to recover especially in Prime Central London, where transaction levels remain at historically low levels owing to strong recent price growth and changes to stamp duty. Countrywide was one of the FTSE 250’s biggest fallers last week, with shares at one stage down 60.10p or 12.92 per cent to 404.90p, before later recovering to 412.79. Other listed estate agent firms also suffered, with Foxtons dropping 7p to 192.8p and Savills down 9.5p to 902.5p. Countrywide, which saw its annual operating profits drop 11 per cent in the nine months to September compared to the same period last year, has warned that its full-year profits are set to fall below its 2014 total of £121.1million, primarily due to a lack of homes coming up for sale after the anticipated post-election recovery in residential transactions failed to materialise. “Against the current backdrop of less than expected residential volumes, group EBITDA for the nine months to September 30 was 11 per cent below last year,”…
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Supply shortage leads to rise in rental prices
Private rents in the UK rose by the fastest rate in almost three years in September, as the severe housing shortage continued to place upward pressure on rental values across the UK. The latest figures from the Office of National Statistics (ONS) reveal that the cost of renting private accommodation increased by 2.7 per cent in the year to September, the biggest jump since November 2012. The biggest increases in rents were recorded in London, where prices rose by an average of 4.1 per cent year-on-year. “When people say the UK needs more homes, the true meaning is usually that London needs more homes,” said Andrew Bridges, Managing Director of Stirling Ackroyd. The increase in rental prices in the capital was almost half as much as the average rise of 2.8 per cent recorded across the rest of England, and significantly outstripped increases in Scotland of 1.6 per cent and Wales of 0.5 per cent. “For landlords and buy-to-let investors, the story has been one of consistent rental increases, with no notable dip in growth levels since 2014,” said John Goodall (left), CEO and Co-Founder of buy-to-let mortgage lender Landbay. “The big trends pushing up rents are the booming job…
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Cash buyers account for one-third of property transactions
The number of people paying in cash for properties in England and Wales has increased, according to new analysis published by the Council of Mortgage Lenders (CML). The total volume of cash buyers rose to around one-third of transactions, fuelled largely by older purchasers who are selling off their large homes for significantly more money than they paid for them. In turn, they are acquiring smaller units with cash, leaving them mortgage-free. The research by CML shows that in the region of three-quarters of cash purchases were funded by the sale of another property. Most of the rest are paid for from savings or an inheritance. Cash buying increased across many parts of England and Wales, with the average value of a cash transaction almost identical to one funded by a mortgage. The largest proportion of purchases funded by cash is in the South West, while the smallest proportion is in London, reflecting the fact that property prices in the capital are significantly higher than the national average. London and the South West were the only parts of the country where the average property acquired for cash is more expensive than one funded by a mortgage. Within the capital, there…
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Housing bubble trouble in London
London has been named as the world’s riskiest for a housing bubble after fresh data revealed that the average price of a home in the capital had hit £500,000 in September, up 10 per cent year-on-year. UBS said last week that the property market in London has formed the world’s biggest residential property price bubble, based on property prices to incomes, and property prices to rents, which are both at record highs. The Swiss bank waned that the UBS Global Real Estate Bubble Index points to the risk of a “substantial price correction” in London’s property market should the fundamentals for residential property investment in the city deteriorate. The average price of a residential property in London reached £499,997 in September, according to the Land Registry, up 10 per cent on a year earlier. UBS said that London’s housing market is now the world’s least affordable, bar Hong Kong, which UBS ranks as the second-most likely city to have a property bubble. “Foreign demand (for homes in London) and demand deriving from safe-haven seekers largely explain current valuations. Global geopolitical risk and the high property valuations in Asian cities have helped to propel London house prices to new heights,” UBS…
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Landlords see rise in tenant demand
Almost half of landlords in this country are reporting an increased demand for rental properties, according to the latest research by the National Landlords Association (NLA). Some 40 per cent have experienced a rise in tenant demand over the past three months, demonstrating just how important the private rented sector is in housing a growing number of people, the NLA said. The East of England witnessed the biggest net growth in tenant demand with a 48 per cent increase. This was closely followed by the South West – with 45 per cent increase – and the South East and outer London – with 41 and 40 per cent respectively. According to the research, just six per cent of landlords, on average, reported a decrease in tenant demand in the last three months. Landlords in the North East reported the largest net decrease in tenant demand of all the regions with a 15 per cent decline in demand, closely followed by 12 per cent in Wales and Yorkshire and 11 per cent in the North West. The research conducted by the NLA also found that 5 per cent of landlords will sell up following the Government’s plans to remove mortgage interest…
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House prices set to rise
Residential property prices look set to increase by an average of £60,000 over the next five years, hitting more than £320,000 in 2020, according to Cebr, the Centre for Economics and Business Research. The economic forecaster expects the average price of a home in the UK to reach £263,000 this year, up 5.6 per cent on last year, but believes that the market offers further room for growth of 3.5 per cent in 2016, with further annual price rises of in the region of 4 per cent in the four years that follow. If accurate, these price hikes will take the average price of a UK home to £321,600 during 2020 – £58,600 more than the average residential property price in 2015, according to Cebr. Nina Skero, CebrEconomist and main author of the report, believes that capital growth will be primarily fuelled by a growing “reduction in the number of properties being put on the market” as a result of low levels of housebuilding, as well as other factors such as an ageing population and the rising cost of moving up the property ladder. He commented, “The price gap between a first-time home and a larger family home has skyrocketed…
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