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Em Morley

London House Prices to Drop by 5%

Published On: January 15, 2015 at 4:45 pm

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There is a lack of new housing stock as sellers await the general election, according to the Royal Institute of Chartered Surveyors (RICS).

Estate agents are also predicting that property prices in London could fall by as much as 5% this year, and larger family houses will drop the most.

The RICS report indicates that demand for new homes in London is continuing to decrease, as 45% more RICS members claim to have seen a drop in new buyer enquiries in December, compared to November.1

The industry remained positive following the Stamp Duty reform announced in the Autumn Statement, which should lift the weight of tax for buyers.

London House Prices to Drop by 5%

London House Prices to Drop by 5%

However, survey respondents expect a decline in sales in the capital of 5%-10%, and a drop in prices from 2%-5%, as overinflated prices balance themselves, and there remains political uncertainty around the general election.

The number of homes coming onto the market is also dropping to historic lows, revealed RICS.

An estate agent from Jackson Stops & Staff in Chelsea says: “There will be a very cautious start to 2015 in the central London property market. Vendors appear reluctant to market their properties in the expectation of having to take significantly lower offers.”1

The amount of surveyors and estate agents reporting a drop in those looking to buy rose by 10% in December.1

New buyer enquiries decreased for the sixth consecutive month. Industry experts blamed stricter mortgage lending, in the Mortgage Market Review, and the typical slowdown of the market in the Christmas period.

Estate agents think that the Stamp Duty changes will drive sales to a 2%-5% rise in transactions around the UK.

Although there is a general negative outlook for London, estate agents in the north, the South West, Scotland, and Northern Ireland have witnessed a boost in buyer demand after consumer confidence spread from London and the South East.

Simon Rubinsohn, Chief Economist at RICS, explains: “The changes to Stamp Duty are expected to provide a timely boost to activity in the housing market across most of the country, but there remain significant challenges, particularly for first time buyers seeking to take an initial step onto the property ladder.

“Meanwhile, demand to rent property is growing as the sales market slows and this, coupled with a drop in supply of new stock to let, is helping underpin the rental outlook for landlords pretty much across the whole of the country.”1

This comes after data from the Council of Mortgage Lenders (CML) revealed that lending in the buy-to-let sector is the only area of the mortgage market to have grown, while general lending dropped 12% in December.1

1 http://www.telegraph.co.uk/finance/property/house-prices/11346743/London-house-prices-to-fall-up-to-5pc-as-sellers-abandon-the-market.html

 

 

House Price Growth at Lowest Level for 19 Months, say Surveyors

Published On: January 15, 2015 at 8:57 am

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The rate of house price growth dropped to the lowest level in over a year-and-a-half in December, as values in London have fallen for the first time since 2009, revealed the latest national property report.

There are huge differences around the UK, property experts have found, with Northern Ireland, Scotland, and the North West of England experiencing the strongest growth in property values. London is the only region where prices have dropped more than grown.

The Royal Institution of Chartered Surveyors (RICS) has said that as there is so little choice of properties on the market in the capital, it is “implausible” that prices will dip too much.1

It also said that if demand from hopeful buyers picks up from the current steady levels, increased competition for the few homes on the market would result in an upturn in house prices.

Around the country, 11% more surveyors saw property prices generally rising rather than declining in December; the weakest rate of price growth that the RICS has recorded since May 2013.1

London experienced high price growth in early 2014, however December saw 36% of surveyors in the capital reporting falling values.1

Property prices in London are expected to drop by 3.3% and nationally by 0.6%, a Centre for Economics and Business Research report revealed last week.1

House Price Growth at Lowest Level for 19 Months, say Surveyors

House Price Growth at Lowest Level for 19 Months, say Surveyors

Generally, regions that have experienced slow house price growth recently are now showing stronger increases, as they surpass their pre-crisis peak.

In Northern Ireland, values have been recovering more slowly, however they saw the strongest price growth in December. 65% of surveyors there saw prices rising.1

Scotland showed the second strongest improvement in prices in December, with 45% of surveyors reporting rises. Regions in the North of England have also witnessed fairly strong price growth, as 34% of surveyors in the North West reported in December. 23% of surveyors in the North also reported increases.1

In Wales, 6% of surveyors reported rises, and the number in the East and West Midlands was 9%. In the South West, 16% of surveyors saw increases, and 24% in the South East.1

The RICS claim that the amount of new house hunters entering the market has dropped for six consecutive months. Additionally, the number of homes on the market is “close to historic lows”, it says. The volume of new properties being listed has fallen for ten out of the last 12 months.1

Chief Economist at the RICS, Simon Rubinsohn, says: “There is a risk that with so little housing available, any pick-up in demand could rapidly feed through into higher prices rather than higher sales.”

Housing market experts have estimated that the Stamp Duty reforms could push more people to buy and sell homes in the coming months, as for most of those that pay the tax, it will be lower than under the old system. But for those buying the most expensive properties, predominantly in London, the new Stamp Duty will be more.

RICS have claimed there is general optimism among its members that the changes will bring a 2-5% increase in both house sales and prices in the next year, however surveyors in London predict a sales drop of 5-10%, and prices by 2-5% as a consequence.1

Rubinsohn says that as well as a rise in buyer caution, responses to the RICS’s latest study reveal a general feel of uncertainty caused by the general election, which is contributing to the recent relax in the housing market.

He adds that as the amount of properties being listed in the market stayed flat for most of last year, “it seems implausible that the dip in demand will result in very much of a decline in house prices.”1

The Halifax predicted a rise in house prices last week; by only half of the 7.8% it reported in 2014, at between 3-5%.

The mortgage provider said that the rate of annual property price growth has been slowing monthly since the 10.2% peak of July 2014.1

In the past week, official figures have seen property prices increase by only 0.2% between October and November, as the average value of a house is £271,000, lower than the record high of £274,000 seen in August 2014.1

1 http://www.thisismoney.co.uk/money/news/article-2910171/House-price-growth-stalls-lowest-level-19-months-surveyors-report.html

Official House Price Index Revealed in March

Published On: January 14, 2015 at 4:14 pm

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Details of how one official Government-approved house price index will be created are to be published in March, after the Office for National Statistics (ONS) says they have received a “very good response”1 on the matter.

Official House Price Index Revealed in March

Official House Price Index Revealed in March

The ONS explains: “The consultation regarding the development of a new, single definitive house price index closed on 12th December 2014. There was a very good response to the consultation and thanks are passed to those who either responded directly to the consultation, or attended one of the user sessions. A formal response to the consultation will be published within 12 weeks of the closing date.”1

Without a single Government-approved index, the agency industry has found the issue irritating for a long time.

However, the ONS released its own index, revealing that house prices have risen by 10% in the year to December, but this is down 0.4% on the annual figures of the previous month.1

House price inflation was 10.4% in England, 3.1% in Wales, 4.4% in Scotland, and 11.7% in Northern Ireland, according to the ONS.1

The yearly increases in England were fuelled by rises of 15.3% in London, 11.9% in the east of England, and 10.8% in the South East.1

Excluding London and the South East, property prices rose by 7.1% in the UK in the year to November 2014.1

In November, first time buyers paid 11% more on average than in the same month the previous year. For existing homeowners, prices rose by 9.5% in the same period.1

1 http://www.estateagenttoday.co.uk/1843-new-official-price-index-details-in-march

Low Interest Rates Cause Buy-to-Let Boom

Published On: January 14, 2015 at 3:53 pm

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Low interest rates for savers are driving a £12 billion boom in the buy-to-let market, research has found.

Thousands of families are disappointed by the extremely low interest rates on savings and investments, and are moving into the buy-to-let sector.

The value of buy-to-let mortgages on new buys increased by 34% between January and November last year, to £11.6 billion. This is a £3 billion rise on the same period in 2013.1

Lending to landlords rose by 9% in November, compared with the previous year, while mortgages for owner-occupiers dropped by 7%.1

The amount of landlords taking out mortgages on new purchases also increased by 21% between January and November 2014 to 93,970. 8,500 are awarded every month.1

This compares to the 13% rise for home movers and first time buyers, as they saw stricter lending criteria, while the buy-to-let market is unregulated.1

The amount of first time buyers being offered a mortgage dropped drastically to a seven-month low.

17,700 buy-to-let loans worth £2.4 billion were awarded in November, as savers turned to the housing market for a return on their savings.1

This news arrives as under 26,000 first time buyers got a mortgage in November, down 11% on October, 3% less than November 2013.1

However, buy-to-let loans are more expensive than owner-occupier mortgages. Interest rates are higher and borrowers are charged an initial fee, which can be as much as £2,000.

The cheapest buy-to-let mortgage has a 2.29% interest rate, but a traditional mortgage has a rate of as little as 1.29%.

Although, buy-to-let loans have dropped in price significantly recently, making it an option for many Britons.

Investors are seeing huge rental returns due to those forced out of the housing market by high house prices and tough lending rules, meaning they must rent for longer.

Chief Executive of mortgage broker SPF Private Clients, Mark Harris, says it is “no real surprise” that buy-to-let is growing, as there are attractive returns for investors compared to savings accounts, which pay “pitiful” interest rates.

He comments: “Of course, the resurgence of buy-to-let does have an impact on first time buyers, with many competing for the same entry level properties.”1

Amateur landlords are expected to rise in April, when pension reforms will come into force, which allow people to withdraw their retirement savings.

The Council of Mortgage Lenders (CML) say that its latest November figures show a “decline in lending to first time buyers, home movers and remortgaging from the heights of November 2013, but a year-on-year increase in buy-to-let lending.”

Low Interest Rates Cause Buy-to-Let Boom

Low Interest Rates Cause Buy-to-Let Boom

The Mortgage Advice Bureau’s Brian Murphy says that the buy-to-let market has been “reinvigorated” after the financial crisis.1

However, these figures will cause concern that buy-to-let investors are increasing prices for those trying to get onto the property ladder.

The average first time buyer is now 30-years-old. They will also need a mortgage of around £125,000 for their first home.

25,900 home loans at a total of £3.8 billion were given to people entering the housing market.1 This is the lowest amount of loans given in this sector since last April, reveal the CML.

First time buyers also needed to have a deposit of 17% of the property’s value in November.

This is a rise on the 16% deposit needed in the previous month, but less than the 20% required a year earlier.

The average size of a first time buyer mortgage has also dropped for the second consecutive month to £124,822 in November, around £1,000 less than the average £125,800 in the previous month.1

Remortgaging increased in the buy-to-let sector almost ten times faster than for house movers, as the number of loans rose by 24% between January and November, compared to just 2.4% for owner-occupiers.1

This drop in normal home loans was blamed on stricter affordability checks enforced in April.

Recently, a Bank of England (BoE) study found that although mortgage availability has increased slightly in recent months, lenders are less willing to give mortgages to people with deposits of less than 10%.1

The CML’s research shows that mortgage lending to existing homeowners who were moving house dropped in November, as did offers to those remortgaging.

However, buy-to-let lending has risen yearly.

29,700 loans worth £5.4 billion were provided to movers in November, a 13% fall on the previous month and down 10% on November 2013.1

24,000 remortgage loans were offered in November, at a total of £3.6 billion, which is 10% less on the previous month and 14% down on November the previous year.1

Figures from the Office for National Statistics (ONS) reveal the average price paid by first time buyers for a home was £208,000 last November, 11% more than in November 2013.1

Sequre Property Investment’s Graham Davidson, says: “Many people are turning away from the more traditional but volatile investments and poor interest rates on their savings, in favour of the tried and tested route of bricks and mortar. The buy-to-let market has never been healthier.”1

1 http://www.dailymail.co.uk/news/article-2910221/Mortgages-time-buyers-falls-seven-month-low-needed-borrow-125-000-property-ladder.html

 

 

A Shrinking Private Rental Sector

Published On: January 14, 2015 at 3:52 pm

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Landlords generally believe that if rent controls were introduced, property prices would plunge downwards due to landlords selling off their portfolios.

A Shrinking Private Rental Sector

A Shrinking Private Rental Sector

Buy-to-let properties are part of the force driving generation rent. It appears that if these homes were cheaper, then those currently stuck in rental accommodation may be able to afford to buy. Would property investors selling their stock be a bad thing?

For the first time in a while, aspiring homeowners would be at an advantage.

However, the housing market would drastically change. The system would have to readjust itself, meaning that policies, and legislation would be changed to rebalance the shift.

Social attitudes towards renting, and therefore policies, would change again to deal with this change.

Although a huge get-out by landlords would cause chaos in the sector, the newly available properties would not likely stay empty for long.

The Government would have to react to the mass stock. Housing associations may even buy huge quantities of homes to rent out.

It is true that systems change when social issues arise, for example, when the Housing Act 1988 came in and abolished Rent Act protection.

Up to a year ago, the press blamed the strain on national debt by housing benefit on the unemployed. However, it became clear that the bill was increasing as more working people claimed benefits, as their wages did not match the cost of living.

In the last six months, private rented sector landlords have been blamed for benefitting from housing benefit.

 

 

Dealing with Rent Arrears

Published On: January 13, 2015 at 4:51 pm

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Tenants that do not pay their rent can cause huge problems for landlords. If a landlord relies on rental income to cover mortgage repayments, maintenance, or as a monthly supplement, loss of rent can leave landlords in a difficult position.

Landlords with large portfolios, who experience rent arrears in just one house, can quickly abolish margins and affect profitability and sustainability.

Late rent payment is a huge risk that landlords face, as 32% have experienced arrears in the past year, revealed the National Landlords Association (NLA).1

Dealing with Rent Arrears

Dealing with Rent Arrears

The average rent owed is more than £1,6001. If this amount has not been factored into the landlord’s budget, it can leave a wide gap in finances.

Landlords can be proactive however, and avoid a serious problem. The following tips will minimise the risk, and aid you if rent arrears do become an issue. The beginning of the tenancy should be the moment you reduce any possibilities.

It is crucial to vet would-be tenants, including background checks, financial checks, and references.

It is important to note that despite positive findings at this stage, anyone can experience a change in circumstances, so there are ongoing steps to take throughout the tenancy:

Build a good relationship

Maintaining a strong landlord-tenant relationship can ensure that any warning signs are picked up on. If the tenant has a relaxed rapport with you, they will be more likely to speak with you about any difficulties they are having.

Monitor payment

The tenancy agreement should detail when and how payment should be made.

If you discover that rent has not been paid, it is important to enquire quickly and politely. By finding out straight away, the problem can be sorted sooner.

If the issue is worse than immediately assumed, you should arrange a meeting or phone call with the tenant to discuss the situation. Always keep record of communications.

There are many reasons a tenant could be in arrears, including relationship breakdowns, or employment issues. Landlords should remain professional and sensitive throughout any intervention.

The NLA has advised that a repayment plan can be a positive option, depending on the reasons for arrears. A negotiated method can ensure the tenancy continues, and maintain a good relationship. A temporary adjustment to rent may be agreed, but should be recorded in writing and signed by both parties.

Landlord’s budget

Landlords are recommended to plan for only receiving ten out of 12 months’ rent in their budget. This makes sure that you are prepared for a possibility of arrears, and the impact on your finances will not be as bad should it occur.

It is advised that you and your tenant(s) look to the Citizens Advice Bureau, The Money Advice Service, and Step Change.

The tenant may want to end the tenancy, and if both parties agree it can end liability for rent, and allow you to find new tenants. Often, the tenant will leave when new tenants are found.

1 http://www.landlords.org.uk/news-campaigns/news/are-you-suffering-rent-arrears