Posts with tag: house prices

Stabilising Rental Yields Could Cause London House Prices to Balance

Published On: October 2, 2018 at 9:54 am

International buyers have been purchasing a high proportion of London property in PCL

As rental yields in the capital look to stabilise, the slide in the value of homes in Greater London is expected to come to a halt as early as autumn 2020, according to the latest analysis by Home.co.uk.

The company’s data suggests that house prices look set to stabilise in the capital within two years, due to improving rental yields.

Home’s Doug Shephard explains: “During London’s recent property boom, house prices soared ahead of rents. Investment fever drove prices up more than 50% in just five years. Meanwhile, rents rose only 10% over the same time period, causing yields to collapse.”

Stabilising Rental Yields Could Cause London House Prices to Balance

Rental yields fundamentally underpin house prices and, following a long period of decline, the tide has turned. Sliding property values, combined with rapidly rising rent prices, are driving yields back up in the capital.

The average house price in London has fallen by around 2.3% over the past year, while rents have jumped by 4.3%. Moreover, rent price hikes are accelerating due to a scarcity of rental accommodation. Overall, the number of available properties to let in Greater London has dropped by around 14%, but, if we filter out the unlettable properties that have been hanging around for more than 20 weeks on the market, the decline is more like 27%.

Low rental yields, sliding capital values, higher taxation and more regulations have all served to disincentivise investors from purchasing more properties. In fact, this combination of factors has been encouraging many landlords to leave the rental sector altogether, hence the decrease in available properties to let, caused by a steep fall in supply of 21% over the last 12 months.

At present, the average gross rental yield in London of 3.7% remains too low to be attractive, and returns in prime central locations are even worse, making buying a property to let far more lucrative in other UK regions.

Across England and Wales, the average rental yield in August was 4.7%, while, in Leeds, for instance, the typical return is a far more attractive 6.0%.

Looking at the counter trends of sliding prices and surging rents in London, Home estimates that rental yields could reach as high as 6.0% in the capital by the end of 2020; sufficiently attractive returns to trigger substantial reinvestment, thereby stabilising house prices.

Shephard poses the question: “How long will London prices keep falling? This is a key question for the UK market as a whole, as history tells us that what happens first in London happens later to the rest of the regions.

“The answer may be quite simple: when rental yields return to attractive levels. For that to happen, either prices must come down, or rents must rise, or both. In fact, the current trends show both processes are occurring already, but slowly.”

He adds: “We expect some significant rent hikes over the next two years, as tenants compete to secure a home in the capital, and this will accelerate the rise in yields. Sufficient yield recovery will prompt landlords to invest once more in London’s vital private rented sector, although, should rent controls be imposed, they will almost certainly stay away.”

London, the South East and East of England Record Lowest House Price Growth

Published On: September 21, 2018 at 10:04 am

Author: Em Morley

Categories: Property News

Tags: house prices,London

London, the South East and East of England have recorded the lowest levels of house price growth over the past year for the first time since 2009, according to the latest House Price Index from the Office for National Statistics (ONS).

The data, which covers the year to July 2018, found that the average UK house price rose by 3.1%, which is down slightly from the 3.2% rate of growth recorded in June. This is the lowest annual increase since August 2013, when it was 3.0%.

The annual growth rate for UK house prices has slowed since mid-2016 and has remained under 5%, with the exception of October 2017, throughout 2017 and into 2018. This slowdown over the past two years was driven mainly by declines in the south and east of England.

The lowest annual growth rate recorded in July this year was in London, where the average house price dropped by 0.7%, down from an increase of 0.3% in the year to June 2018.

In July, the average UK house price stood at £231,000. This is £6,000 higher than in July last year and £2,000 higher than in June 2018.

By property type

Across the UK, all houses showed an increase in the average price in July when compared to the same month last year. Detached houses marked the greatest rise, at an average of 4.6%, taking the typical value to £352,000.

The average price of a flat or maisonette grew by 0.6% in the 12 months to July, to reach £208,000. This is the lowest annual growth of all property types.

London, the South East and East of England Record Lowest House Price Growth

Weaker growth in UK flats and maisonettes was driven by negative annual growth in London for these property types. The capital accounts for around 25% of all UK flat and maisonette sales.

By country

The main contributor to the increase in UK house prices during July was England, where the average property value rose by 3.0%, to hit £249,000.

Wales saw house prices increase by an average of 4.2% over the year to July, to reach £157,000. In Scotland, the average price rose by 3.2%, taking the typical value to £152,000.

The average house price in Northern Ireland currently stands at £133,000, following 4.4% growth in the year to the second quarter (Q2) of 2018.

By region

On a regional basis, London continued to boast the highest average house price in the UK, at £485,000, followed by the South East and East of England, at £327,000 and £295,000 respectively. The lowest average price continued to be seen in the North East, at £132,000.

The North West recorded the highest annual house price growth in July, at an average of 5.6%. The South West and West Midlands followed (both at 4.4%).

The lowest annual house price growth during July was seen in London, where prices fell by an average of 0.7%. The capital has shown a general slowdown since mid-2016.

The second lowest annual growth rate was in the South East, at just 1.8%, followed by the East of England, at 2.4%. This is the first time since May 2009 that London, the South East and East of England have been the lowest ranked regions for annual house price growth.

Comments

Post Office Money’s Crysanthy Pispinis reacts to the index: “The findings this month demonstrate that, while some places like London may be cooling, other areas of the country are still showing healthy growth. Recent research conducted by Post Office Money noted that, while London itself may have seen house price decreases, towns within a commutable distance, such as Reading and Luton, have seen nearly 10% growth over the last year alone, due to sustained interest. With first time buyers increasingly citing location as an area they are willing to compromise on (19%), it follows that buyers have been looking for more affordable yet commutable options.”

Shaun Church, the Director of mortgage broker Private Finance, also comments: “Brexit uncertainty is the greatest test our housing market has faced since the 2008 financial crisis. The fact that property prices are still growing, albeit at a more modest rate, is a testament to the resilience of the UK property market. As gloomy predictions are made about the future of the housing market should we face a no deal Brexit, UK homeowners should take solace in this persistent annual house price growth.

“House price performance remains incredibly varied across the UK. London is the only UK region experiencing falling prices, as buyers increasingly look to the commuter belt for more affordable properties. Meanwhile, house prices in other regions – particularly the North West – have seen annual growth of upwards of 4%. The imbalance between supply and demand continues to have a strong influence on regional affordability, and will continue to do so until the current housing shortage is addressed.”

The Investment Manager at property investment platform British Pearl, James Newbery, has his thoughts: “Growth is soldiering on at a rate that is flat lining, but not nose-diving, amid fraught headlines proclaiming a hard exit from the EU will push Britain’s housing market over the edge.

“These figures prove property in the UK is actually standing firm in the face of the looming no deal sledgehammer. If the market is turning, it’s turning like a tanker with incredible growth of nearly 6% on average still being achieved in the North West.

“Transaction levels are still woefully low year-on-year, which, besides a no deal Brexit, is the other main source of concern that a Day of Reckoning could be brewing for some areas where growth has been strongest.

“However, a resilient labour market, improving household incomes and a weak supply of new stock have kept prices afloat in choppy seas, and bricks and mortar is still streets ahead of inflation across great swathes of the country.”

No Deal Brexit Could Cut House Prices by a Third, Warns BoE

Published On: September 17, 2018 at 8:59 am

Author: Em Morley

Categories: Property News

Tags: Brexit,house prices

A no deal Brexit could cause UK house prices to fall by over a third, the Governor of the Bank of England (BoE), Mark Carney, has warned.

He told senior ministers that, in a worst case scenario, house prices would crash by 35% over three years, as mortgage interest rates spiralled. This could potentially send millions of homeowners into negative equity, while making it harder for younger people to get onto the property ladder.

Carney also said that there could be a slump in the pound, as well as a general recession.

The Times reports that Brexiteers did not challenge Carney’s “grim” assessment during last Thursday’s three-and-a-half hour special cabinet meeting.

“Carney was very spicy,” noted one observer. “You saw a few eyebrows going up around the room, but nobody challenged him.”

Andrea Leasom, the Leader of the House, said that a housing crash would hit older people the hardest.

However, the Governor’s projections have been dismissed in the property industry.

The CEO of online estate agent Emoov, Russell Quirk, responds: “Mark Carney is supposed to be a custodian of the British economy. Instead, he continually indulges in talking it down in order to try to bring about the negative prophecies that he spouts as an ardent remainer.

“Regardless of his political stance, he would do well to wind his neck in and desist from being such a fiscal Grim Reaper. Not one of his forecasts has materialised to any truth, and his talk of house prices dropping by a third in the event of a no deal Brexit is pure fiction, based upon bluff and bluster.”

Are you concerned about the effects of a no deal Brexit on the housing market and the value of your property investments? Let us know what you think will happen over the next few years.

Average House Price Drops Between July and August

Published On: September 3, 2018 at 9:57 am

Author: Em Morley

Categories: Property News

Tags: house prices

The average house price in the UK dropped between July and August this year, according to Nationwide’s latest House Price Index.

The report shows that, due to an average decline of 0.5% on a monthly basis, the typical house price in the UK fell from £217,010 in July to £214,745 in August.

The annual rate of house price growth has also softened, to an average of 2.0%.

August’s month-on-month decline was the largest monthly drop since July 2012.

Robert Gardner, the Chief Economist at Nationwide, comments on the data: “August saw a slight softening in annual house price growth to 2.0%, from 2.5% in July. Nonetheless, annual house price growth remains within the fairly narrow range of 2-3%, which has prevailed over the past 12 months, suggesting little change in the balance between demand and supply in the market.

“Looking further ahead, much will depend on how broader economic conditions evolve, especially in the labour market, but also with respect to interest rates.

“Subdued economic activity and ongoing pressure on household budgets is likely to continue to exert a modest drag on house price growth and market activity this year, though borrowing costs are likely to remain low.

“Overall, we continue to expect house prices to rise by around 1% over the course of 2018.”

Help to Buy

Average House Price Drops Between July and August

The latest Nationwide report also assesses how much the Help to Buy scheme is affecting housing market activity in England.

Gardner explains: “There were around 48,000 Help to Buy equity loan completions in England in the 12 months to March 2018, up 21% on the same period last year. The scheme accounted for 8% of total house purchase mortgages in England in the period, though it continues to account for a higher share of activity in the north (10%) and the East Midlands (9%).

“The vast majority (80%) of Help to Buy loans were to first time buyers and, while its share of first time buyer activity has continued to trend upwards, it remains relatively modest, at 13% of transactions.

“It is unclear how much Help to Buy activity represents additional demand and how much has simply replaced activity that would already have taken place. The scheme has, however, been a key source of demand for newly-built homes in recent years. Indeed, Help to Buy has accounted for more than a third (37% in the last 12 months) of new build completions in England. This is even higher in some regions, such as the North West, where Help to Buy accounted for nearly half of new build purchases.

“It is unclear whether or not the scheme will be extended (or amended) beyond April 2021, when it is due to expire. However, given the long lead time on many housing developments and the political consensus on the need to increase housing supply, it suggests that the scheme will not come to an abrupt end.”

Comment

Lucy Pendleton, the Founder Director of independent estate agent James Pendleton, responds to the report: “With just four months left of 2018, the biggest monthly fall since the London Olympics brings prices dramatically in line with the lender’s forecast for the year. Nationwide’s prediction of a 1% increase in 2018 would mean prices finish on just over £213,000, a level not seen since April and only around £1,500 lower than current prices.

“That would undo most of the year’s gains, so, if that happens, expect the slowdown to feed into the Brexit mood music as the UK careers toward an uncertain future and possible hard Brexit in early 2019.

“The stuttering performance of house prices around this level sees them repeatedly do battle with the inflation figure. Having pipped inflation to the post in July, it’s now almost certain house prices have been washed over by CPI once again in August.

“House price support is still coming from record low unemployment and wage growth that is doing a better job of keeping pace with the rising cost of living. However, it is the Help to Buy scheme’s impact on the market that is highlighted here. For the number of Help to Buy loans to increase 21% in a year points to the huge additional demand that it has created, propping prices up at a higher level than would have been achieved in its absence.”

House Price Growth to Slow in Scotland: Transactions Take a Tumble

Published On: August 20, 2018 at 9:29 am

Author: Em Morley

Categories: Property News

Tags: house prices,property market,Scotland

As values are declining on a monthly basis, so is the growth of annual house prices in Scotland.

The latest House Price Index provided by Your Move, reveals that average prices north of the border have plummeted by 0.7% on a monthly basis during June, the second month of falls.

Annual growth slowed for the third consecutive month, down from 6.7%in March to 5.7%in April and now, 4.4% in June.

This meant that average prices were set at £182, 163 for June, while the annual growth rate is back down to the equal level seen in December last year.

The agent also disclosed that transactions in the first quarter of 2018 in Scotland were down 11% annually.

The blame for this slug was received by Edinburgh, where the Scottish capital has the highest average prices, however, has experienced the fall in prices over the past 2 months, down 1% in June.

Scottish price growth remains ahead of England and Wales, where average values are up just 1.7% annually.

Managing Director of Your Move in Scotland, Christine Campbell, said: “The market in Scotland has noticeably slowed as we’ve gone into the summer yet it still shows some strong annual growth, and it’s encouraging to see almost all areas showing positive performance.”

According to the headline statistics in the recent UK House Price Index Scotland: April 2018, the average price of a property in Scotland was recorded to be £148,952. Annually, the price change of a property in Scotland was 5.6% and monthly, 2.5%.

Simon Rubinsohn, RIC’s Chief Economist, commented: “The scale of the challenge the UK government faces as it announces its new approach to housing is clearly demonstrated in the results from our latest survey.

“Not only are the headline price and rent series pointing to further increases over the course of this year, but more significantly, the medium term view of RIC’s professionals working up and down the country is that both house prices and rents will, over the medium term, continue to grow at a faster pace than wages putting even greater pressure on affordability.

“Whether the measures announced can ease this trend remains to be seen.”

House Price Growth at Lowest Level since 2013, Reports ONS

Published On: August 16, 2018 at 8:03 am

Author: Em Morley

Categories: Property News

Tags: house prices,property market

Average annual house price growth was at the lowest level since 2013 in June, according to the latest official House Price Index from the Office for National Statistics (ONS).

The average house price in the UK rose by 3% in the year to June 2018, which is down from 3.5% in May 2018. This is the lowest annual rate of growth since August 2013, when it was also 3%. Annual house price growth has slowed since mid-2016 and has remained under 5% – with the exception of October 2017 – throughout 2017 and into 2018.

This slowdown in UK house price growth over the past two years has been driven mainly by a slowdown in the south and east of England. The lowest annual rate of growth was seen in London in June, where prices dropped by an average of 0.7% over the year, down from -0.2%.

In June, the average UK house price was £228,000. This is £6,000 higher than in June last year and £1,000 higher than May 2018. On a seasonally adjusted basis, the average house price in the UK was unchanged between May and June this year, compared with an increase of 0.5% during the same period of 2017.

By property type

Across the UK, all houses showed a rise in average price in June when compared to the same month last year. Semi-detached houses recorded the greatest increase, at an average of 4.4% in the 12 months to June, to £216,000.

The average price of a flat or maisonette grew by 0.5% in the year to June, to £204,000 – the lowest annual growth of all property types. Weaker growth in UK flats and maisonettes was driven by decreases in the value of this type of property in London. The capital accounts for around 25% of all UK flat and maisonette transactions.

By country

The main contributor to the increase in UK house prices during June came from England, where the average property value rose by 2.7%, to £245,000. Wales saw house prices increase by an average of 4.3% in the 12 months to June, to stand at £157,000.

In Scotland, the average property value grew by 4.8% over the same period, to £150,000. And the average price in Northern Ireland currently stands at £133,000, following a 4.4% increase

House Price Growth at Lowest Level since 2013, Reports ONS

over the year to the second quarter (Q2).

By region

On a regional basis, London continued to be the region with the highest average house price in June, at £477,000, followed by the South East and East of England, which stood at £325,000 and £293,000 respectively.

The lowest average price continued to be found in the North East, at £127,000.

The West Midlands recorded the highest annual growth in June, at an average of 5.8%. This was followed by the East Midlands (4.1%).

The lowest annual growth was seen in London, where the average price dropped by 0.7% over the year. This is the lowest annual growth rate for the capital since September 2009, when it was –3.2%. London has shown a general slowdown in its annual growth rate since mid-2016. The second lowest annual growth was in the North West, where prices fell by 0.6% in the 12 months to June.

A recent report from home.co.uk claims that a slowdown in certain UK regions is now spreading to other parts of the country.

Comments

Lee James Pendleton, the Founder Director of independent estate agent James Pendleton, responds to the ONS data: “This is the fifth consecutive month that London house prices have fallen over the year. The capital has dropped from its knees onto its back, but, with every stumble, new blood is coming into the market.

“After a rate rise, however, all eyes are on anything that hints at excessive borrowing and a country addicted to easy money.”

The Executive Director of the Intermediary Mortgage Lenders Association (IMLA), Kate Davies, also comments: “Government policy aimed at recalibrating the balance between the buy-to-let sector and the ability of first time buyers to access the property market has – as intended – put pressure on the buy-to-let sector. This has, in turn, led to a falling off of investment in the sector, which directly correlates with private rental prices in the UK.

“This is confirmed by reports last week by the Royal Institution of Chartered Surveyors (RICS) of a drop in landlords advertising rental properties to let. This is unsurprising, given landlords are weighing up their options in light of their loss of tax relief, which has put pressure on their finances.

“The true impact of these policy changes is still rippling through the system. However, the end result seems clear: decreased investment into the buy-to-let sector by landlords reduces supply, which, in turn, will increase the upwards pressure on rental prices. Unfortunately, it will be those who are currently renting, or seeking suitable properties to rent, who will bear the brunt of the increases.

“More needs to be done to protect and foster the rental sector, especially as homeownership has become unattainable for many. The Green Paper published on Tuesday by the MHCLG [Ministry for Housing, Communities and Local Government] underlines the urgent need for more properties to be made available in the public rented sector: we welcome this – any increase in the number of properties available for sale or rent will help ease the pressure on the private rented sector and the stock or properties available for purchase. The Government made clear its intentions in last year’s White Paper (Fixing our Broken Housing Market): it is vital that the momentum is maintained so that real results can be delivered.

“Mortgage lenders will continue to underpin the private rented sector by supporting buy-to-let borrowers as best they can, but we need the Government to recognise that putting further financial pressures on landlords will inevitably impact those who are renting.”

Shaun Church, the Director of mortgage broker Private Finance, adds: “A slight correction in house prices is no bad thing for the UK property market. Years of steady house price hikes have created huge affordability issues for first time buyers, so the fact that annual house price growth has fallen to its lowest point in five years will be a welcome change for many. The trend has been reversed completely in the capital and, with negative price growth also seen in the North East, it could be that other regions will see a more relaxed pace of house price rises in the coming months.

“House prices are still rising faster than wages and, until the two are more evenly matched, affordability issues will continue to impact homeownership levels. The good news for buyers is that mortgage rates continue to be very affordable – though with interest rates on the up, it may be wise to lock into low rates sooner rather than later.”