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Em Morley

London Property Market at Risk of Becoming a Housing Bubble

Published On: October 30, 2015 at 12:03 pm

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Categories: Property News

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London’s property market is at risk of becoming a housing bubble, according to a new report.

Global financial services firm UBS warns that based on previous experiences, the bubble is 95% likely to burst within three years, bringing house prices down by 30%.

London Property Market at Risk of Becoming a Housing Bubble

London Property Market at Risk of Becoming a Housing Bubble

The group states that London’s house prices are currently the most over-valued of any major city in the world.

It is one of two cities, the other being Hong Kong, where there is a risk of a bubble forming, says the UBS Real Estate Bubble Report.

The study analyses property prices in 15 major cities in the world. It believes that London risks a significant price correction, as house prices have decoupled from local incomes.

UBS reports that London is less affordable for local people to buy homes than anywhere else, except Hong Kong.

London has the second highest price-to-income (PI) – a calculation of the number of years a skilled service worker needs to work to be able to buy a 60 square metre flat near the city centre. In the capital, it would take 14 years.

London’s PI has reached an all-time high and is only behind Hong Kong’s.

Due to the capital’s cheap financing costs and “bullish expectations”, there is a real danger of the market decoupling from the whole economy, warns UBS.

The UBS’s index rates London at 1.88.

The study found that between 1985-2009, whenever the index exceeded 1, “a real price correction of an average 30% began within three years 95% of the time”1.

It expects London house prices to drop by more than 10% by the end of 2016.

UBS also believes that homes are over-valued in Sydney, Vancouver, San Francisco, Amsterdam, Geneva, Zurich, Paris, Frankfurt, Tokyo and Singapore. However, it found that prices are fair-valued in New York City and Boston, and properties in Chicago are under-valued.

Claudio Saputelli, Head of Global Real Estate at UBS, says that in the world’s leading financial centres, house prices are now “fundamentally unjustified”.

He adds: “While it is not always possible to prove conclusively the existence of a bubble, it remains essential to identify the signs of one early one.”1 

1 http://www.propertyindustryeye.com/bank-warns-that-londons-property-market-is-worlds-biggest-bubble/

Keep your property safe as dark nights set in

Published On: October 30, 2015 at 10:54 am

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Categories: Landlord News

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October is National Homes Security Month, and as a result, estate agents Harrison Murray have given a seasonal reminder on keeping homes safe.

Despite Britain enjoying an Indian summer, the clocks go back in a little under three weeks. With this in mind, it is important to make sure homes are sufficiently protected before the dark nights draw in.

Security

‘As we move further into autumn and winter, the days and nights are obviously getting darker, but we aren’t suggesting that people live in fear,’ said Su Snaith, Head of Estate Agency for Harrison Murray, part of The Nottingham Building Society.

‘It is simply about adopting a practical, common sense approach in assessing safety measures in your existing or new home, which can sometimes be targets for opportunistic thieves,’ Snaith added.[1]

Keep your property safe as dark nights loom

Keep your property safe as dark nights loom

Tips

Harrison Murray’s top-ten tips for keeping property safe are:

  • Have sufficient lighting-homeowners should consider installing motion-sensitive lighting materials above doors, porches, garage doors and all entrances to gardens. In addition, timers should be fitted to all indoor lights when out for the evening or prolonged period.
  • Fit and use an alarm
  • Bolt or padlock all gates
  • Lock all windows-People should make sure that this includes both up and downstairs windows, particularly those that can be easily accessed.
  • Keep valuables well away from letterboxes-With vehicle theft becoming more common, thieves often look to obtain car keys through letterboxes. Property owners are advised to keep them well away from this access point.
  • Mark all personal items with a U.V pen
  • Do not obscure the front of homes with trees or hedges
  • Be savvy online-With people seemingly putting everything about their social lives on Facebook and Twitter, thieves are more commonly using these means of resource to target potential victims. Never reveal that a property is to be empty be posting online. 
  • Join a Neighbourhood Watch scheme
  • Get home and contents insurance

[1] http://www.propertyreporter.co.uk/household/top-tips-to-keep-your-property-safe-as-darker-nights-draw-in.html

 

 

Rents Rising Across the UK

Published On: October 30, 2015 at 10:00 am

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Private rent prices increased by an average of 2.7% across the UK during the year to September, according to the latest data from the Office for National Statistics (ONS).

The growth was fuelled by London, where the average rent rose by 4.1% annually.

Rents Rising Across the UK

Rents Rising Across the UK

The figures also show that rents increased by 2.8% in England, 1.6% in Scotland and 0.5% in Wales.

Excluding the capital, rents grew by 1.8% over the 12 months to September.

The ONS index reports that rent prices are now rising at the fastest rate for three years.

However, in some regions of the UK, rent price growth was minimal, at 0.5% in the North East and 0.7% in the North West.

Managing Director of London estate agent Stirling Ackroyd, Andrew Bridges, comments: “Britain’s rental market is being powered by London, as the capital’s allure continues to draw graduates and professionals from around the country.

“Supply remains an unaddressed issue – more apartments are needed rapidly to combat spiralling demand. And as renting becomes the norm for all ages, the result of this mismatch is felt clearly in average rents as much as property prices.

“When people say the UK needs more homes, the true meaning is usually that London needs more homes.”1

In separate research, the Association of Residential Letting Agents (ARLA) says that housing supply in the capital continues to be an issue, but that tenants in the West Midlands are being hit the hardest by rent rises.

It reports that three in five ARLA letting agents in the region experienced rent increases in September. This is despite allegedly healthy supply levels, with the average office managing 272 properties.

In London, the average ARLA member branch manages just 124 properties.

The ARLA study was conducted online by Opinium Research among 317 letting agencies.

1 http://www.propertyindustryeye.com/rent-rises-grow-across-uk-at-under-inflation-rate/

 

 

 

 

 

 

 

 

 

 

 

 

Average London Home Now Costs Half a Million Pounds

Published On: October 29, 2015 at 4:50 pm

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Categories: Property News

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The average London house price has risen to almost £500,000, according to official statistics that highlight the north-south divide in the property market.

Data from the Land Registry found that the average price in the North East of England has dropped below £100,000.

Average London Home Now Costs Half a Million Pounds

Average London Home Now Costs Half a Million Pounds

House prices in England and Wales increased by 1% in September, reaching an average of £186,553. This is about £6,000 higher than the average selling price recorded at the peak of the last property boom in late 2007.

However, London’s shocking house prices are disguising wide regional variations. While the typical home has risen in value by 5.3% in the past 12 months, the average London property has experienced 9.6% growth to hit £449,997.

Ten London boroughs have recorded annual price growth of at least 10%, including Newham at 13.6% and Greenwich at 12%. However, prices are steady or falling annually in a few boroughs, including Camden and Hammersmith & Fulham.

In the South East, excluding London, and the East of England, prices have increased by 8.5% and 8.3% respectively over the last year. Huge rises have been seen in Reading at 15%, Luton at 14% and just under 11% in Thurrock, Essex.

Contrastingly, in the North West of England, the annual rate of price growth is just 2.5%, taking the average value to £115,594.

The North East is the only region to have recorded price declines over the year. Last month, the average house price in the region fell by 0.3%, taking it to just £99,559.

Managing Director of buying agents Garrington Property Finders, Jonathan Hopper, believes that London’s “half-million milestone” was inevitable.

He adds: “The average London property price won’t stay at £500,000 for long. Bullish sentiment has driven annual price inflation in the capital close to double digits again, and the half-million mark could soon be forgotten.”

He also says that the data reveals how strong the north-south divide is: “Even though the North West has reversed the sudden month-on-month drop in prices it saw in August, prices in the North East have slipped back into negative territory. By contrast, much of the south and east looks like one giant hotspot, as the national picture returns firmly to type.”1

Chief UK Economist at IHS Global Insight, Howard Archer, expects house prices to increase by around 6% in 2016: “We believe house prices are likely to see pretty solid increases over the coming months, but will not race ahead.

“Higher interest rates are unlikely to have a major dampening impact on housing activity for some time to come. Interest rates look increasingly unlikely to rise until well into 2016, while the Bank of England is stressing that when interest rates do start to rise, they will only move up gradually and to a limited extent.”1 

1 http://www.theguardian.com/money/2015/oct/28/average-london-home-500000-in-north-east-england-100000

Average House Price Increases to Almost £197,000

Published On: October 29, 2015 at 3:56 pm

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House prices have risen over October, reaching an average of £196,807, according to data from the Nationwide.

The annual rate of price growth has bounced back slightly to 3.9% after dropping to a two-year low of 3.2% in August. However, it remains much lower than the peak of 11.8% recorded in June 2014.

Chief Economist at the building society, Robert Gardner, comments: “Over the past five months, annual price growth has remained in a fairly narrow range between 3% and 4%, broadly consistent with earnings growth over the longer term.

“While this bodes well for a sustainable increase in housing market activity, much will depend on whether building activity can keep pace with increasing demand.”

After a strong start to 2014, the property market slowed in the second half of last year, with the drop in activity continuing into the first half of 2015.

Average House Price Increases to Almost £197,000

Average House Price Increases to Almost £197,000

Recent data reveals a rise in the amount of buyers taking out mortgages and registering with estate agents. However, many agencies have reported a lack of homes for sale.

Nationwide’s study, based on loans approved by the building society during October, shows that over the last three months, house prices have increased by 1.1%, up from 0.8% growth over the previous three months.

Chief UK Economist at IHS Global Insight, Howard Archer, believes that stronger earnings growth, high employment levels, increased consumer confidence and low interest rates are supporting the market.

He says: “We expect house prices to see solid increases over the coming months amid firm activity. Given that house prices were soft in the latter months of 2014, this is likely to see annual house price inflation on the Nationwide’s measure move higher over the coming months.”1

Mortgage lenders have been competing for the best deals over the last few months, helping buyers keep their monthly repayment costs down, adds Gardner. Despite average prices being £10,763 higher than the previous peak hit in the early 2000s, the amount of money needed to repay a mortgage each month has not risen.

And for first time buyers, mortgage payments account for just under 35% of take-home pay, according to Nationwide, significantly less than the 52% needed in 2007.

Gardner explains: “Historically low interest rates have helped to offset the negative impact of rising house prices on affordability. Indeed, even though house prices are at an all-time high, the cost of servicing a typical mortgage is still close to the long-term average as a share of take-home pay.”

However, the difficulty of affording a mortgage was highlighted by data published by Nationwide at the end of September, which found that the cost of a first time buyer home in London had risen to 9.6 times the average income.

Separate research from the Bank of England (BoE) reveals a slowdown in mortgage approvals for September. The amount of loans approved for home purchase dropped for the first time since May, to 68,874 last month from 70,664 in August.

These figures reflect data from the British Bankers’ Association (BBA), which also shows a fall in mortgage approvals, reportedly the result of a shortage of properties on the market.

Chief UK Economist at consultancy firm Pantheon Macroeconomics, Samuel Tombs, says the “big picture is that overall credit flows are improving, albeit slowly”.

The BoE data reveals that mortgage lending increased monthly by £3.6 billion in September, the highest net growth since early 2008.

Tombs continues: “The drop in mortgage approvals is neither a shock nor the start of a trend. The BBA’s narrower measure of approvals pointed to a September fall earlier this week, while lenders’ intention to increase the supply of secure credit and strengthening wage growth point to an imminent revival.”1

Gardner reports that in recent years, fixed-rate deals have become so popular that the proportion of outstanding mortgages on variable rates has dropped steadily; these are the loans prone to interest rate rises. In mid-2012, around 70% of outstanding mortgages were on variable rates. This had declined to about half by June this year.

Gardner adds: “This should help to insulate many households from the impact of higher interest rates, though the proportion on variable rates is still higher than the 38% prevailing in 2007. It is also important to note that the majority of recent fixes are for relatively short time periods – 65% were for two years and 30% for five years.”

However, he believes that the housing market should cope with any interest rate rises in the coming year – “provided the increase is modest and the economy and the labour market remains in good shape”1.

1 http://www.theguardian.com/society/2015/oct/29/uk-house-prices-average-197000-nationwide

Beware! Low Mortgage Rates Have Frightening Fees

Published On: October 29, 2015 at 2:51 pm

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Categories: Finance News

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As if we need more fear-inducing facts at this time of year! Moneyfacts.co.uk has revealed that the true cost of low rate mortgages is frightening.

Beware! Low Mortgage Rates Have Frightening Fees

Beware! Low Mortgage Rates Have Frightening Fees

New research from the website found that too many borrowers opt into low rate products mistakenly believing that they will save them money.

However, the study shows that many would be better off choosing a deal with no arrangement fee over a lower rate deal.

Finance Expert at Moneyfacts, Charlotte Nelson, explains why: “Whilst these low deals look great on paper, they are often compensated by high fees that can scare even the most seasoned borrower.

“With fees on mortgages ranging from nothing all the way up to £2,794, with the average mortgage fee sitting at £939, it is easy to see why it can be a costly mistake to opt for the wrong deal.”

She states that low rate high fee products favour borrowers buying properties at the high end of the market.

She continues: “However, large fees can turn what appears to be a cheap deal into a costly one for the majority.

“For example, by opting for the lowest two-year fixed rate mortgage at 60% LTV with no fee will mean borrowers will be around £1,500 better off a year compared to the lowest option in that sector.

“Arrangement fees allow providers to have greater flexibility in what rate they offer, however, the set up costs are not greatly different between mortgages, so many will question what this is actually for.”

Nelson reports that the size of the arrangement fee is particularly important on two-year fixed rate deals, due to the short-term nature of the product: “Borrowers will have to remortgage relatively soon and could again pay yet another fee.”

She urges borrowers to calculate the true cost of their loan: “There are deals out there with no arrangement fee, so borrowers will have to decide whether they choose a trick or treat when picking a mortgage.”1

Don’t be caught out by high fees, make sure you work out how much the loan will actually cost you.

1 https://www.introducertoday.co.uk/breaking-news/2015/10/cheap-mortgages-come-with-frightening-costs