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Em Morley

House Prices Rise in July as Stamp Duty Falls

Published On: August 5, 2015 at 10:54 am

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House prices in the UK rose by 0.4% in July, to a record high of £195,621, according to Nationwide.

The building society calculates that homebuyers paid a total of £275m less in tax in the first half of the year, due to changes to Stamp Duty in December 2014.

After a drop in June, when the annual rate of price inflation fell to a two-year low, July’s increase pushed it up to 3.5%. Nationwide’s Chief Economist, Robert Gardner, says that this is close to the historic pace of earnings growth.

He explains: “After moderating over the past 12 months, there are tentative signs that annual house price growth may be stabilising close to the pace of earnings growth, which has historically been around 4%.

“This would bode well for a sustainable increase in housing market activity, though whether this will be maintained will depend of whether building activity can keep pace with increasing demand.”

The figures are based on mortgages approved by the society during July. They show that the annual rate of growth was around a third of the 10.6% reported in July 2014. Meanwhile, the three-month rate of growth has decreased from 2.4% to 0.9%.

House Prices Rise in July as Stamp Duty Falls

House Prices Rise in July as Stamp Duty Falls

July’s monthly growth follows a rise in activity after the general election, with mortgage lending bouncing back in June after falling in the winter months. However, the amount of hopeful vendors has hit a record low, meaning some buyers are facing fierce competition.

Gardner continues: “It remains unclear whether activity on the supply side will catch up with demand.

“The number of new homes under construction has started to pick up, albeit from historically low levels, and further increases are required if a sustainable recovery in the housing market is to be maintained over the longer term.”

The Nationwide believes that changes to Stamp Duty mean that around 235,000 homebuyers in England and Wales have paid less tax, saving an average of £1,800 each.

It adds that the removal of the tier system, where the tax is a flat percentage of the price paid for a property, has cut the amount of homes gathered around the price thresholds for different rates.

Before the reform, many homes were prices at just under £125,000, when the 1% rate began, at just below £250,000, when the rate changed from 1% to 3%, and just under £500,000, when the rate rose to 4%.

Gardner says that buyers in the south, where prices are typically higher, have benefitted the most. Around 85% of transactions in London, the South West and South East have seen Stamp Duty drop, compared with 55% in the north.

However, Nationwide has found that buyers in the prime market are paying significantly more.

Gardner claims: “We estimate that around 5,000 (2%) of purchasers paid more – two-thirds of whom were in London – with an average of £28,000 more tax being paid compared with the old system.”1

Managing Director of buying agents Garrington Property Finders, Jonathan Hopper, says that house price growth has “clicked back into gear.”

He adds: “With no sign of a summer lull yet, surging levels of buyers and a limited number of sellers have combined to drive up prices in much of the market.”

However, he says that the prime market is still “reeling” from the increase in the top rate of Stamp Duty, which has risen massively for homes costing £2m and over.

“The Stamp Duty hike was supposed to gently apply the brakes to stop the prime property market racing away,” he states. “But in the event its effect has been more of an emergency stop.”1

1 http://www.theguardian.com/business/2015/aug/04/uk-house-prices-up-july-stamp-duty-revenue-falls

£31m paid out for fraudulent property deeds

Published On: August 5, 2015 at 10:30 am

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A property company has made a substantial claim that in excess of £31m has been paid out by the Land Registry in just the last three years, in relation to fraudulent property deeds.

Payments

The company in question, Titlesolv, proclaims it has used Freedom of Information requests that show that £23.3m worth of claims were sent to the Land Registry in 2014. Since the beginning of 2012, the Land Registry’s Indemnity Fund has received in excess of £59m in claims, and has paid out more than £31m against these them.[1]

Titlesolv found that some of the claims made related to the perceived theft of a property owner’s identity and the attempted raising of an unenforceable mortgage against a home.

Data from the requests shows that the Land Registry has dealt with or paid a growing number of the claims that it receives, increasing from 78% of claims lodged in 2012, to in excess of 86% in 2014.[1]

£31m paid of for fraudulent property deeds

£31m paid of for fraudulent property deeds

Value

With this said, the actual proportion of the value of claims approved has fallen substantially overt the same time period, from around 80% in 2012 to less than 36% in 2014.[1]

If, as expected, interest rates rise in the coming months, Titlesolv believes that more claims will arise. A company spokesman said, ‘if these mortgages become unenforceable, the Registry-and the public purse-are vulnerable to claims of negligence.’[1]

[1] https://www.estateagenttoday.co.uk/breaking-news/2015/8/title-fraud-costing-land-registry-millions–claim

 

 

Benefit Cut Could Make More Young People Homeless

Published On: August 5, 2015 at 9:59 am

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Thousands of vulnerable young people could become homeless due to the Government’s plans to cut housing benefit payments to unemployed 18-21-year-olds, warns the YMCA.

The youth charity houses around 1,400 young people in supported accommodation who would be affected by the change. The YMCA believes that the policy won’t save much money for the taxpayer, but cause instability for young people who have left family breakdowns and abuse.

Benefit Cut Could Make More Young People Homeless

Benefit Cut Could Make More Young People Homeless

It states: “The Government could be in danger of inadvertently taking away support from the young people who need it most, and in doing so, exposing many more vulnerable young people to the risk of becoming homeless.”1

The Government insists that its plans to end entitlement to housing benefit for unemployed youngsters will take away the incentive to leave home and live off benefits.

The policy would affect all new claimants after April 2017 and is predicted to save £135m over four years, according to Government estimations detailed in the Budget.

But some groups are exempt, including care-leavers, says the YMCA. Once these costs are considered, alongside the added costs to public services for dealing with increased homelessness, the net savings are likely to be only £3m.

Chief Executive of YMCA England, Denise Hatton, comments: “In seeking to tackle those small numbers taking advantage of the system, the Government is in real danger of inadvertently taking away support from some of the country’s most vulnerable young people.

“In removing automatic entitlement to housing benefit, young people could face the prospect of losing not only a safety net, but also a springboard that helps get them up and get their lives back on track.”1 

A Department for Work and Pensions spokesperson claims: “This report is deliberately misleading, since we have been very clear that vulnerable young people, including care-leavers and people with children, will be exempt from this policy.

“We want to make sure young people get the support they need to move into work and do not slip straight into a life on benefits.”1

The Government is expected to exempt care-leavers, those with dependent children, disabled youngsters who cannot work and young people who have been working for six months before claiming.

Before exemptions, the YMCA says that 19,000 young people currently claim Jobseeker’s Allowance (JSA) and housing benefit, equivalent to under 1% of housing benefit claimants.

It argues against this group chasing a lifestyle choice, saying that almost three-quarters claim for less than six months, indicating that it is used as a short-term safety net. JSA is £57.90 per week and the average housing benefit payment is under £75 a week.

The YMCA points out that the amount of 18-21-year-olds claiming both entitlements has halved in the last two years and is decreasing faster than any other age group. Over two-thirds of 18-21-year-olds live at home with their parents, and this proportion has grown over the last decade.

1 http://www.theguardian.com/society/2015/aug/04/housing-benefit-cut-thousands-vulnerable-young-people-homeless

 

 

 

 

The Generation Winning at Homeownership

Published On: August 5, 2015 at 8:58 am

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In 1969, the average first home cost just £4,000, and the typical first time buyer was 25-years-old, according to the Office for National Statistics (ONS).

Now, only 8% of 25-year-olds are on the property ladder, says the Council of Mortgage Lenders (CML). The average price of a first home has risen by 5,225% over the last 46 years, to £209,000.

This rate of growth has hugely surpassed the incomes of aspiring buyers, which have increased at less than half the pace. Homelessness charity Shelter estimates that today’s first time buyers spend 30-40% more on buying a property than they did in 1969.

Director of the affordable housing campaign PricedOut, Duncan Stott, comments: “If you were able to buy your first home before prices started rocketing, you have received massive unearned wealth gains – but only at the expense of the generation who are now locked out of ownership and stuck paying the highest rents in Europe

“Buying today requires your income to be in the top 20% of earning and a willingness to take out unprecedented levels of mortgage debt.”1

These dramatic changes in homeownership have led to the younger generation forced into rental accommodation, but will anyone have it as good as the older generation again?

In 1971, homeownership levels were so high that an equal number of people rented as owned their homes. By 1981, the amount of owner-occupiers had grown to 58%, says the ONS.

At this time, Margaret Thatcher introduced the Right to Buy scheme for council housing tenants, who could now purchase their homes. The legislation was passed in 1980 after a rise in incomes.

The Generation Winning at Homeownership

The Generation Winning at Homeownership

Professor Colin Jones, of Heriot-Watt University’s School of the Built Environment, states: “Rising incomes meant that more people were demanding homeownership and so some sort of scheme was inevitable.

“There was also none of the supply-side problem we have today, so councils felt perfectly comfortable selling off the stock.”1

There was so much stock that properties were mostly selling at less than their rebuilding cost, explains Angus Hanton, co-founder of the Intergenerational Foundation. Buying a house was also more affordable because “mortgage interest relief meant that interest payments on mortgages were tax-advantaged – buyers effectively paid their mortgage out of pre-tax income.”1 

Over a third of property wealth in the UK is now owned by households where at least one occupant is aged 65 or over. Almost one in ten (9%) of 55-64-year-olds live in households with net property wealth of £500,000 or more. This is the highest of any age group, found the ONS.

And this trend looks set to continue, as house prices remain high. The average pensioner’s property has risen by £900 in value per month this year, a report from Key Retirement indicates.

At present, 28% of those aged 22-30-years-old have had to stay at their family home or move back in.

Figures from the Chartered Institute of Housing (CHS) show that homeownership among 25-34-year-olds has fallen from 67% in 1991 to 26% in 2013. Ownership among those aged 65-74-years-old has grown from 62% to 77% in the same period. In 1981, this was just 49%.

Recent research from the Intermediary Mortgage Lenders Association argued that the older generation hoards large family homes, causing the market to go static for aspiring buyers.

Additionally, the CHS warns that older homeowners are buying and renting homes to those priced out of the housing market.

But not everyone agrees that young buyers are struggling. David Ingram, founder of MyLocalMortgage.co.uk, argues: “With so much governmental support being provided for those wanting to step on the property ladder, it can hardly be claimed that this generation have it any worse.”1

Many in the older generation will not identify themselves as asset-rich, as lots of retirees offer financial support to their adult children and elderly parents, says Emma Myers, spokesperson for Saga Legal Services.

She adds: “Aside from the time and emotional costs of this, the financial costs can escalate rapidly.”1 

A study from the Equity Release Council (ERC) suggests that the over-55s contributed about £26.7 billion in support to children and grandchildren last year. A house purchase was the most common reason for financial assistance, with retirees offering an average of £14,065.

Research by Prudential found that 41% of over-55s plan to sell their current home, with 2.5m planning to downsize. The average amount of cash that last time buyers hope to free is £87,600. Many will use this money to help their children.

However, many of those approaching retirement age are not selling up to help their children onto the property ladder, but to fund their own retirement. Research by LV= says that 52% of people aged 60 and over plan to sell their home to pay for retirement.

Spokesperson Richard Rowney says this is due to “small pension pots, a lack of retirement savings and the continuous rise in house prices.”1

These sales may benefit retirees, but the younger buyers who purchase the homes find themselves in record levels of mortgage debt, argues David Kingman, a researcher at the Intergenerational Foundation.

“Young families [are] effectively subsidising or wholly funding the retirements of the downsizers.”1

Meanwhile, young people who do not earn enough to save for a large mortgage are stuck in a downward spiral of debt.

Professor of Geography at the University of Oxford, Danny Dorling, concludes: “Income inequality is the real underlying problem for buyers today.

“People can’t save for a deposit so they are forced to rent, but rents are so high they can’t ever afford to save. Rich property investors are simply rubbing their hands with glee.”1

1 http://www.theguardian.com/money/2015/aug/04/homeownership-the-generation-that-had-it-so-good

Tool Helps Landlords and Tenants Know Their Responsibilities

Published On: August 4, 2015 at 4:53 pm

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Just under half (43%) of private tenants do not know their responsibilities relating to several areas of their tenancies, according to new research.

The study, of almost 800 renters by Makeitcheaper.com, indicates that 11% of tenants think they know more about where the responsibility lies within a tenancy than their landlords. 48% say that landlords know better.

This suggests that many disputes arise between landlords and tenants because the tenant is unaware of their responsibilities.

Tool Helps Landlords and Tenants Know Their Responsibilities

Tool Helps Landlords and Tenants Know Their Responsibilities

The most common areas where responsibility has been disputed in the last 12 months are:

  1. Furniture and appliances – 14%
  2. Fixtures and fittings – 13%
  3. Mould – 12%
  4. Energy efficiency – 6%
  5. Utility bills – 2%

One of the most unclear issues was the difference between damage and fair wear and tear, with 25% of tenants stating that they need clarity on this subject.

However, different age groups express difficulty understanding different issues:

  • 18-24-year-olds would welcome clarification on the rules regarding interior décor.
  • 25-34-year-olds are most unsure about whether they should pay for insurance or not.
  • Over 35-year-olds are most confused about rights of access.

Tenants and landlords can use Makeitcheaper’s online tool to determine where responsibility lies, from issues such as the deposit and Council Tax to cleaning and damp. Find out more here: http://www.makeitcheaper.com/business-insurance/landlord-insurance/landlord-vs-tenant.aspx

Over 65% of respondents said the most important quality for their landlord to have is honesty when fixing the issues they’re responsible for. It appears that many landlords are fair, with over 85% of tenants rating their landlord’s management as average or better. 60% gave a good or very good rating.

Additionally, just 15% of renters reported having an unresolved dispute in the last year. This indicates that tenants think highly of their landlords, despite what many suggest.

Less than one in five tenants admitted that they have been too afraid to bring up issues with their landlord, however.

Prime central London rental values slip

Published On: August 4, 2015 at 4:50 pm

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Latest research indicates that rental values in prime central London locations slipped during July. Additionally, financial service sector demand also dropped off, due to an uneven global economic climate.

Falls

The monthly slide of just 0.1% was the first dip since February 2014 and saw annual growth slow down to 2.9%. At its peak in May, growth was 4.2%, while prime gross yields were at 2.95%, according to a study by Knight Frank.[1]

According to the prime central London Index, stock levels have received a boost by the restrained sales market, with an increase in stamp duty for properties worth in excess of £1.1m slowing activity.

Tom Bill, head of London residential research at Knight Frank, suggests that with annual price growth slowing, more property owners have chosen to become landlords and wait until the market to settle, following the introduction of a number of recent tax changes.

Supply/demand

Mr Bill said that the short-term imbalance between supply and demand meant that tenants are having to shop around more, meaning that deals are becoming more difficult to close for landlords. As a result, Bill believes that landlords have made it more beneficial and attractive for existing tenants to remain in place, which has led to increased renewal rates.

‘While seasonal demand from students has remained strong, corporate demand has become more muted, despite some pockets of stronger performance,’ Bill noted.[1]

Prime central London rental values slip

Prime central London rental values slip

In addition, the report shows that demand in the prime central London lettings market has typically been strong, but this year, optimism from bankers fell away during the second quarter of the year.

Mr Bill said, ‘continued regulatory uncertainty means banks are scaling back spending plans and nervousness surrounds a possible UK exit from the European Union, the recent Greek crisis and Chinese stock market volatility. However, there are longer term grounds for economic confidence, and the UK’s recovery was underlined by strong GDP figures in July. Furthermore, in an attempt to increase the appeal of London, Chancellor George Osborne plans to reduce the bank levy.’

‘Meanwhile, Brevan Howard, one of the world’s largest hedge funds, is reportedly moving senior traders back from Geneva to London, underlining the city’s dominance as a global financial centre,’ Bill concluded. [1]

[1] http://www.propertywire.com/news/europe/central-london-prime-rents-2015080410824.html