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House Price Growth at Lowest Level since 2013, According to Official Data

Published On: February 14, 2019 at 9:06 am

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Categories: Property News

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Annual house price growth in December (for which the latest data is available) was at the lowest level since July 2013, according to the Office for National Statistics (ONS).

In the year to December 2018, the average property value in the UK rose by 2.5%, which is down from 2.7% in the 12 months to November. This is the lowest annual growth recorded since July 2013, when house prices increased by 2.3%.

Following a non-seasonally adjusted rise of 0.2% in the average house price between November and December 2018, a typical property in the UK is now worth £230,776.

Annual house price growth was strongest in Northern Ireland at the end of last year, where the average value rose by 5.5% in the year to the fourth quarter (Q4) 2018. Wales and the West Midlands followed this, where house prices increased by an average of 5.2% over the 12 months to December. 

The lowest annual growth was recorded in the North East, where prices fell by an average of 1.0% in the year to December, which is down from a rise of 1.7% in November 2018. London followed, with an average decrease of 0.6%. House prices in the capital have been dropping every month since July last year.

Scotland recorded house price growth of 2.4% in the year to December, while the average property value in England was up by 2.3% over the same period.

The ONS notes that the Northern Ireland figures represent a three-month change, and are not comparable with the other regions and countries included in the index.

Interestingly, the ONS House Price Index also looks at the difference in house prices for both first time buyers and existing homeowners. In December, the average first time buyer home was worth £194,237, while existing owner-occupiers paid an average of £268,067.

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Conor Murphy, the CEO of mortgage platform Smartr365, says: “Modest house price growth is expected, as political uncertainty continues to weigh down on the property market. However, despite these circumstances, the mortgage market remains strong, and we are seeing borrowers take advantage of competitive deals and fixing for longer. As a result, though, each transaction and conversation is more crucial than ever for brokers – and this is where technology and end-to-end solutions can play a vital role in helping brokers retain business.”

Steve Seal, the Director of Sales and Marketing at Bluestone Mortgages, also comments: “Slower house price growth is no doubt a reflection of potential buyers choosing to adopt a wait-and-see approach before committing to the biggest purchase of their life – a home. To tackle this, lenders are offering near record low deals to reassure borrowers that there is still plenty of opportunity to lend. 

House Price Growth at Lowest Level since 2013, According to Official Data

“However, there’s no doubt that there are borrowers out there who feel they can’t even secure lending due to their employment status or credit score – for example, self-employed workers, contractors or those with adverse credit. This is where specialist lenders come in, helping customers with unique financial circumstances step onto the property ladder and, in turn, making the market more financially inclusive.”

Danny Belton, the Head of Lender Relationships at Legal & General Mortgage Club, gives his thoughts on the market: “While some buyers and sellers may be hesitant to take any action in the current political climate, choosing to take the wait-and-see approach, there are still plenty of positives in the market to highlight. The ever-growing number of mortgage products available, combined with low interest rates and steadier house price growth, is good news to those who are looking to get onto or move up the property ladder.

“With all of the choice available, it may seem a little daunting to those wanting to buy their first property. For any buyers unsure of where to start, a mortgage adviser can provide a helping hand. Not only can these industry professionals provide bespoke advice, but their extensive knowledge of the market means they are best placed to find the right mortgage for a borrower’s needs.”

Lucy Pendleton, the Founder Director of estate agent James Pendleton, offers another standpoint: “Last year will go down as one of the hardest to read markets in recent memory, a real pea-souper. Prices in London began falling on an annual basis, while other parts of the country kept notching up solid gains.

“In the end, property just about triumphed over inflation and rose in value in real terms, but it was a close run thing, with inflation coming in at 2.1% over the year. 

“Estate agents and economists desperately tried to read the tea leaves last year, blaming every backward step on Brexit and every bounce on lack of supply. 

“In truth, the veil that has been drawn by politics across the housing market’s true condition will only be lifted once we know what the UK’s future relationship with the EU looks like. 

“Ultimately, 2019 could be the year that we come to realise just how much the bellows of Help to Buy and Stamp Duty relief for first time buyerscan really stoke the market.”

Shaun Church, the Director at mortgage broker Private Finance, also responds to the report: “The house price blues have finally started to leak out from the capital. While London’s property market has been languishing under a dark cloud of Brexit uncertainty for the past year, the rest of the UK seemed to be immune. However, with the latest figures showing a slight drop in house prices in the North East, it’s likely other region’s property markets will soon catch London’s cold.

“Though nothing is certain, a sudden pick-up in housing activity as soon as we officially exit the EU may be overly-optimistic. It’s likely to be a matter of months, if not years, before confidence is fully restored in the UK property market. For the millions of borrowers across the country that have been out-priced by the UK housing market, this uncertainty marks a time of significant opportunity. Easing house price growth, combined with near record low mortgage rates, means first time buyers are in a good position to make their first step onto the property ladder. 

“Borrowers ready to buy should shop around to secure the most competitive mortgage deal on the market. While further rate rises may look unlikely in the short term, locking into a long-term deal now can cushion against rate increases when they do eventually happen.”

Tenant Fees Bill Receives Royal Assent to Become Act of Parliament

Published On: February 13, 2019 at 11:01 am

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Categories: Law News,Tenant Fees Ban

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The Tenant Fees Bill has received royal assent to become an Act of Parliament in England. It will come into force on 1stJune 2019. 

From this date, landlords and letting agents in England will no longer be able to charge upfront fees to private tenants. It is expected to save renters at least £240m per year.

It will also cap the amount a tenant can pay in a refundable security deposit to the value of five weeks’ rent, as well as capping the amount of holding deposit a tenant would be required to put down to secure a property to just one week’s rent.

The Government believes that the act will make renting properties in England fairer and more affordable for tenants, by reducing costs at the outset of a tenancy, at the same time as improving transparency and competition in the private rental sector.

David Cox, the Chief Executive of ARLA Propertymark, responds to the news: “We’ve known the tenant fees ban has been coming for a long time, but, with only 109 days to go until it comes into force, the industry must start taking time to prepare.

“The Government will soon publish its guidance now that we have legislative certainty, which will give agents a better understanding as to how the ban should practically be implemented.”

Under the terms of the new law, the maximum amount that can be charged for a change to a tenancy is £50. Any landlord or agent breaching the ban for the first time will be hit with a £5,000 fine.

The Housing and Communities Secretary, James Brokenshire MP, says: “Tenants across the country should not be stung by unexpected costs from agents or landlords.

“This is part of our ongoing action to make renting fairer and more transparent, and make a housing market that works for everyone.”

Brokenshire explains that, under the act, agents will only be able to recover reasonably incurred costs from tenants, which will put a stop to, for example, “tenants being charged hundreds of pounds for a damaged item that actually only costs a few pounds to replace”.

He continues: “The act also ensures that tenants who have been charged unfair fees get their money back quickly, by reducing the timeframe during which landlords and agents must pay back any fees that they have unlawfully charged.

“Taken together, these provisions help reduce the costs that tenants can face at the outset, renewal and termination of a tenancy.”

Brokenshire explains: “The act is part of a wider package of Government reforms aimed at rebalancing the relationship between tenants and landlords, to deliver a fairer, better quality and more affordable private rental market.

“We have introduced a range of powers for local authoritiesto enable them to crack down on the small minority of rogue landlords and agents who let unfit properties. This includes fixed financial penalties of up to £30,000 and banning orders – possibly for life – for the most serious offenders.”

Millions of Households still Unable to Buy their First Homes since the Financial Crisis

Published On: February 13, 2019 at 10:27 am

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More than 2.4m households who were expected to have bought their first homes after the financial crisis are still unable to buy, research finds.

The Intermediary Mortgage Lenders Association (IMLA) found that almost five million borrowers would have been expected to buy their first homes since the financial crisis, but only 2.5m people became first time buyers since 2008.

The trade body warned that, although low mortgage rates are supporting borrower affordability, high house prices and regulatory constraints on lending are still key barriers to getting onto the property ladder.

The IMLA says that a significant jump in lending would be required to help those who are still waiting to purchase their first homes, but it predicts that the value of loans for home purchases will remain stable, at £156 billion this year.

The IMLA also warns that landlords are feeling the effects of the buy-to-let tax clampdown, and expects lending to drop by 6% over 2019, to a total of £36 billion, with landlords investing in 59,000 properties in the coming year, which is down from 66,000 in 2018.

Kate Davies, the Executive Director at the IMLA, says: “We have had a robust recovery in lending volumes since the low of 2010, and the continuing combination of steady inflation and low unemployment should underpin the housing and mortgage markets in 2019 and 2020.

“Intermediary-driven lending continues to go from strength to strength, as more people than ever turn to a broker to find the most suitable mortgage.”

However, she believes: “But the mortgage market isn’t fully functioning as one would expect. Record low rates and historically low loan-to-value ratios, coupled with cash and household equity being injected into the housing stock, are more usually associated with a continuing period of recession.

“These are symptoms of a market that has failed to support first time buyers and those moving up the housing ladder in the way it did for previous generations.”

Davies continues: “Although low mortgage rates are supporting borrower affordability, high house prices and regulatory constraints on lending make it harder for borrowers to move onto the housing ladder.

“With the mortgage market now following a gentle trajectory, it is a good time for policymakers and regulators to reassess the costs and benefits of the present regulatory structure, recognising that the impact on those locked out of homeownership can be considerable and lasting.”

Millions of EPCs could be Incorrect, Research Warns

Published On: February 13, 2019 at 10:00 am

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Millions of Energy Performance Certificates (EPCs) could be incorrect, due to poor training among assessors and wrong measurements on properties, research warns.

The study, by property technology solution Spec, warns that estate agents may not be meeting their consumer protection regulation obligations, and could be held liable by allowing inaccurate EPCs to be used on their property listings.

Spec analysed an area of 532 properties in London, as lodged in the public EPC register, and found that 29% are borderline and have a score within two points of an upgrade or downgrade.

The research then used Spec’s own measurement tools and criteria, and estimates that, on a scaled-up basis, 2.5m EPCs would be re-rated if the property were accurately assessed, 1.3m of which would be downgraded.

The discrepancy is blamed on domestic energy assessors used outdated methods of measurement.

One in four EPCs recorded the size of a property so inaccurately that it varies by more than 10% from the true size of the home, the report found.

The majority of EPCs lodged (90%) use the reduced data standard assessment procedure, which employs simple averages or standardised values, rather than actual measurement of many features that are relied on to calculate the EPC rating, such as volume of a property.

The report also warned that, as a result of these inaccuracies, many landlords could be failing to meet the Minimum Energy Efficiency Standards(MEES) that were introduced last April.

Landlords and agents are being urged to ask their assessors how many points of measurement are used in calculating areas of the property, how they measure complicated shapes, and is the raw data captured by a Royal Institution of Chartered Surveyors (RICS) certified measurer or chartered surveyor?

Anthony Browne, a Senior Advisor to Spec, says: “Our study reveals that it’s not really a case of if your EPC is measured inaccurately, but how much it is measured inaccurately.

“Inaccurate EPCs present serious challenges and risks, not only to property professionals, consumers and estate agents, but also the environment.”

He continues: “It means tens of thousands of landlords are unwittingly renting out their properties, opening them up to the risk of fines of thousands of pounds, through no fault of their own.

“Measuring the energy efficiency of buildings accurately is essential in limiting their environmental impact and tackling the bigger global issue of climate change. If you are not measuring the problem properly, you won’t tackle it effectively.”

Landlords, be sure to check how your EPC has been measured! 

Rent Prices in Prime London Rise Due to Higher Tenant Demand

Published On: February 13, 2019 at 9:02 am

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Categories: Tenant News

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Rent prices in prime London rose by an average of 1.9% in the fourth quarter (Q4) of 2018, due to higher levels of demand from tenants, as continued political uncertainty pushed prospective buyers into the prime rental market.

The latest Prime London Lettings Index from LonRes shows that rent prices rose in Q4, owed in part to a supply-demand imbalance in the market, with 80% of respondents to the LonRes Agent Survey reporting an undersupply of studios and one-bedroom flats in their areas.

Over the course of 2018, 13% fewer properties reached the market.

However, it is worth pointing out that prime central London saw a slight year-on-year decline in rent prices – down by 1% on Q4 2017.

Many landlords remain cautious and are not raising rents for existing tenants, the report adds.

In Q4 2018, 72% of letting agents said that most of their landlords were not increasing rent prices on tenancy renewals.

As for new tenancies, renters negotiated an average of 4.9% off the initial asking rent in Q4, which is down from 6.4% in the same quarter of the previous year.

Meanwhile, 31% of properties in prime London underwent a price reduction in Q4 before securing a tenant, compared to 41% in Q4 2017.

A combination of fewer homes to let reaching the market and higher demand from tenants suggests that rent prices in prime London will rise in the near-term.

Some 58% of respondents to the LonRes Agent Survey reported an increase in tenants who were previously looking to buy. Just 8% reported a fall.

An increase in tenancy renewals resulted in fewer net lets agreed in Q4, which is down by 17% on the same quarter of 2017. The declines were greater in the second half (H2) of last year, with an 11% reduction in new lets, compared to 2% in H1 2018.

With fewer properties available to let, the time taken to find a new tenant has dropped. In Q4, 30% of properties to let in prime London had a new tenant within a month of being listed, compared to 23% in Q1 2018. This is the highest level for four years.

Marcus Dixon, the Head of Research at LonRes, says: “In an uncertain market, the response by both buyers and sellers in prime London has been to hunker down and observe, rather than participate. This is impacting on both transaction levels and prices. However, for those willing to buy, there are opportunities to be had and purchasers are negotiating accordingly.

“The prime rental market continues to benefit, as would-be buyers become tenants. Despite fewer new lets agreed, owing to an increase in renewals, stock levels are low, and competition among prospective tenants is leading to increases in achieved rents in most central London areas. Fewer landlords are needing to reduce their asking prices and discounts have fallen back.”

First Time Buyer Appetite to Chase the Market Collapses

Published On: February 12, 2019 at 11:04 am

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First time buyer appetite to chase the market has collapsed in the last 12 months, according to analysis by home purchase plan (HPP) finance provider Gatehouse Bank.

Gatehouse used Land Registry data to assess the percentage changes in the average price paid by first time buyers compared to those already on the property ladder across more than 100 major UK towns and cities in the past two years.

The study found that the number of areas where first time buyers were willing to chase the market and pay proportionately more than home movers has plummeted by 98.8% year-on-year, from 81 areas to just one.

This decline has been blamed on affordability and Brexit uncertainty, which are likely to have played a major role in first time buyers’ appetite to keep pace with the rest of the market. Their decisions not to chase the market are also likely to be a factor in the continued slowdown in house price growth across the country, Gatehouse believes.

House prices are still rising in the vast majority of areas, but, in the last 12 months, just one town saw first time buyers pay proportionately more than existing homeowners a year on – Doncaster in South Yorkshire. 

This represents a significant drop (98.8%) from the 81 locations recorded in the 12 months to November 2017, when 76.4% of areas saw first time buyers chasing the market.

Charles Haresnape, the CEO of Gatehouse Bank, says: “First time buyers are an interesting group, because they are a bellwether for affordability and the wider housing market. 

“In the round, they are acutely sensitive to whether they are getting good value, because it can have a significant impact on how quickly they are able to lower their finance costs and move up the ladder in the future.”

He continues: “If first time buyers are chasing the market to a larger degree than homeowners, it is a bullish sign for prices. When they do a volte-face like this, people should take notice, because first time buyers are the new blood that keeps a market on its feet higher up the ladder.

“This trend could right itself over the next year, but only if wage growth continues to beat inflation and there is confidence in the economic outlook.”