Posts with tag: house prices

Will Regional Property Markets Catch the Capital?

Published On: July 23, 2018 at 9:26 am

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The latest UK Cities House Price Index from Hometrack predicted a narrowing of the price gap between regional property markets and the capital over the next year or two.

For landlords, the general consensus is clear: regional property markets are the places to be if you’re looking to profit from buy-to-let. But are we at risk of completing the same cycle that we saw just over a decade ago, or has the market learned from its mistakes?

Jonathan Stephens, the Managing Director of property investment firm Surrenden Invest, says: “While many factors mirror the housing market’s performance back in the early 2000s, there are some substantial differences that look set to bring about different outcomes from this state in the cycle. Tax changes are playing a key role in this, as are the rising quality and security standards of regional city developments.”

At present, according to Hometrack, house price growth stands at an average of 4.3% for the UK as a whole on an annual basis. For London, this figure drops to just 0.4% over the same period. Edinburgh has experienced the greatest increase in values, at an average of 7.1%, closely followed by Manchester, at 7.0%. Birmingham has also fared better than average, at 6.5%, as did Liverpool, at 5.9%.

The success stories of regional property markets stands in stark contrast to the price falls experienced in 20 of London’s 33 boroughs.

The same trend of regional property markets racing to catch up with London’s inflated prices was seen between 2002-05, when the capital recorded weak growth after a period of strong performance from 1996-2000. Regional property markets had lagged behind, but began reporting solid growth from 2001 onwards, thus narrowing the price gap.

Nevertheless, Surrenden Invest is quick to highlight that the current market has a number of significant differences to that of the early to mid-2000s. While the cycle appears similar, secondary cities may actually stand a more realistic chance of catching up to London’s prices than they did previously.

“People have been saying that London is too expensive since before Black Monday in 1987, yet, over the last 30 years, property prices there have grown enormously,” Stephens explains. “Still, there comes a point when a market becomes too expensive to bounce back quickly, even when there are chronic underlying supply issues, as is the case with London.”

He adds: “The city remains one of the world’s most significant and sophisticated property markets, but that doesn’t mean that it can’t suffer a sharp, swift price correction – or that it could quickly recover from such an occurrence.”

In past property market cycles, regional property markets have narrowed the price gap between their cities and London, only for the capital’s prices to race ahead once more. This time, though, the quality, security and corporate governance of nationwide developers are far stronger than they were even ten years ago. Previously a concern for risk-averse buyers, these strong credentials – and the attractive rental yields on offer – mean that regional cities stand a good chance of catching up to London’s prices outside of the standard cycles that we’ve seen over the last 20 years.

Another contributing factor is the new Stamp Duty regime. Many of the capital’s properties are located in prime and super prime locations, costing upwards of £1m. The sale of these properties has been significantly hampered by the higher tax rates, as well as the additional 3% charge on second and buy-to-let homes. With regional properties available for significantly less money, the tax burden is reduced sufficiently to make property purchases outside of London more attractive in the eyes of many investors.

Stephens concludes: “Are we likely to see the regions catch up relative to London in terms of their property prices? Probably not, as London remains a uniquely appealing market. However, what we are likely to see is a sustained and significant narrowing of the price gap, as regional cities hold fast in the wake of London’s price correction.”

House Price Growth Drops to Lowest Level for Five Years

Published On: July 20, 2018 at 8:55 am

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Average house price growth in the UK has dropped to the lowest level for five years, according to the Office for National Statistics’ (ONS’) official House Price Index.

In the year to May 2018 (for which the latest data is available), the average UK house price rose by 3%, which is down from 3.5% in April. This is the lowest 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% throughout 2017 and into 2018, with the exception of October 2017.

Slowdown in London

This drop in UK house price growth was driven mainly by a slowdown in the south and East of England. The lowest annual growth was recorded in London, where the average price dropped by 0.4% over the year to May. This is the fourth consecutive month that house prices in the capital have fallen.

The average UK house price was £226,000 in May. This is £6,000 higher than in May last year and unchanged from April.

By property type

Across the UK, all property types showed an increase in average prices in May when compared to the same month of 2017.

Detached houses recorded the greatest rise, at an average of 4.6% in the 12 months to May, to a typical value of £344,000.

House Price Growth Drops to Lowest Level for Five Years

House Price Growth Drops to Lowest Level for Five Years

The average price of a flat or maisonette was unchanged, at £203,000 – the lowest annual growth of all property types. Weaker growth in the value of UK flats and maisonettes was driven by negative annual growth in London for this type of property. The capital accounts for around 25% of all UK flat and maisonette transactions.

Across the UK

The main contributor to the increase in UK house prices in May was England, where the typical value of a property rose by 2.9%, to £244,000. Wales saw house prices increase by an average of 1%, to stand at £149,000. The average value in Scotland also stands at £149,000, following growth of 4.9%. In Northern Ireland, the average house price is £130,000, after a 4.2% increase was recorded in the year to the first quarter (Q1) of 2018.

Region-by-region

On a regional basis, London continued to boast the highest average house price of the UK in May, at £479,000, followed by the South East and East of England, which stood at £322,000 and £289,000 respectively.

The lowest average price continued to be found in the North East, at £129,000.

The East Midlands recorded the highest annual growth in May, with prices up by an average of 6.3%. The West Midlands followed, at 5%.

The lowest annual rate of growth was seen in London, where prices dropped by 0.4% in the 12 months to May. The capital has shown a general slowdown in its annual growth rate since mid-2016. This is the fourth consecutive month that London house prices have dropped. The second lowest annual growth was in the North East, where prices increased by an average of 1.3%.

Comments

Lucy Pendleton, the Founder Director of independent estate agent James Pendleton, responds to the findings: “Persistent regional disparities are evidence that this market is still as tight as a drum. Yet there are signs of momentum shifting as regional growth rates begin to fall back down to Earth.

“London’s figures are skewed down by places such as Westminster remaining 10% down annually, but the gap in growth rates between the capital and places such as Scotland, and the East and West Midlands, have narrowed in the past few months.

“Since February, the gulf between growth in London, and the East and West Midlands has slimmed from 7.3% and 8.3%, to 6.7% and 5.4% respectively.

“Scotland has been doing incredibly well, yet there are also only 5.3 percentage points between the growth rates of homes in the capital and those north of the border in May, compared with 7.4% in March. These disparities remain excessive in the tightly woven market we have in the UK, but a slowdown in the regions is now underway, even if prices continue to climb.

“The Help to Buy scheme is still fuelling price growth of new build homes, but, even there, latest figures show a sharp monthly contraction of more than 2%.

“The headline figures in London will continue to make disturbing reading for some, but, privately, estate agents are cheering a cooling that has already begun to deliver a recovery in transaction levels.”

Shaun Church, the Director of mortgage broker Private Finance, also comments: “The average London home saw its value drop by £1,916 in May 2018. With property prices having reached their ceiling limit in many areas of London, it was only a matter of time before we saw the market ease.

“For first time buyers in London struggling to make their first step onto the housing ladder, these figures will be welcomed, helping to make the dream of homeownership that bit more attainable. However, for those that already own a property, news of negative house price growth will be met with concern, as hopes of making a quick and easy profit from their properties will be dashed.

“A decline in house prices is never a vote of confidence for the UK economy; this downward trend we are witnessing in London, however, is a correction, not a crash. House prices in the capital have soared in the past few decades to prices well beyond affordable for the majority of its residents. We could be seeing property prices finally nudging back to levels that Londoners can afford.

“The easing of house price growth across the UK, combined with near record low mortgage rates, means market conditions are firmly working in the borrower’s favour. Buyers should therefore consider locking into a long-term fix to allow them to enjoy the rock bottom interest rates of today, well into the future.”

Call for Bank of England to have Set Targets to Control House Price Inflation

Published On: July 12, 2018 at 9:00 am

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The Institute for Public Policy Research (IPPR), a think tank based in London, believes that the Bank of England should be granted the ability to regulate house prices and freeze growth at 0% for the first five years.

This opinion has been stated in its recent publication, ‘On Borrowed Time: Finance and the UK’s current account deficit’. Grace Blakeley, author of the research in the document, includes that the Financial Policy Committee (FPC) of the Bank of England should be able to use a revised mandate set by HM Treasury in order to gain some control over house price inflation.

Blakeley states: “This would be equivalent to the remit the Monetary Policy Committee (MPC) has to control consumer price inflation. Under such a target, the Bank of England should aim to keep nominal house price inflation at (say) 0% for an initial period – perhaps five years – to reset expectations, and allow affordability to improve.

“It should then be increased to the same rate as the consumer price inflation target of 2% per year, meaning zero real-terms house price growth. The target should be implemented using macroprudential tools, such as capital requirements, loan-to-value, and debt-to-income ratios.

“Since lending is not the only driver of house price inflation, the government should accompany this target with active housing policies designed to increase housing supply and restrict overseas purchases of UK residential property.”

Discussing the issue of price inflation, it is also stated in the report: “In the fourth quarter of 2017, UK house prices were almost 10 times their value in the fourth quarter of 1979. Consumer prices increased just five times over the same period.”

“During this same period, housing grew from 53-66% of households’ net assets, creating a wealth effect that allowed households to borrow more, financed by cheap funds from abroad.

“Between the late 1980s and 2008, household debt increased from around 50 to 100 per cent of GDP and savings rates also fell to all-time lows by 2007. Equity withdrawal also grew every year from 1997 to 2007, peaking at £140 billion annually in 2006 before sharply declining during the financial crisis. Over this period there is a clear correlation, not only between mortgage debt and house prices, but also between consumer credit and house prices, showing this wealth effect in action.”

Responding to the proposals, Mark Hayward, chief executive of NAEA Propertymark, has commented: “Excessive house price growth is certainly not something we want to see, but home buyers make purchases on the basis of capital appreciation and the belief that their investment will be protected and enhanced.

“We encourage all measures to help first-time buyers get on to the housing ladder, but with property transactions at an already low level, this sort of tampering could have unintended consequences.”

What Does the World Cup Mean for the Property Market?

Published On: July 11, 2018 at 7:55 am

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Much like the property market, the nation’s emotional state during the World Cup is also slightly unpredictable. However, do these emotions affect the rise and fall in UK house prices? And if so, to what extent?

 1966

Taking a trip down memory lane on the 30th July 1966 when the entire nation rejoiced at England’s victory, with consideration of the UK’s economy previously in 1996, the average house price was below £4000.

This was three times the amount of the average man’s wage and four times the amount of the bonus England received for their victory.

In regards to house prices, this would be the equivalent value of £61,000 in 2018’s climate. This is far from the average house prices we expect to witness today.

1970-1980

House prices experienced an increase at a staggering rate during the following months of July 1966, with house prices at an average of £70,246. However, these prices experienced a decline in value prior to the first World Cup of the 90s. It is blatant that as a result of England’s victory, UK house prices had experienced a £9,246 rise, showing that the World Cup does certainly have an effect.

1990

Due to West Germany having secured the World Cup winning title in 1990, in addition to Brazil taking this from them in 1994, the UK property market saw an 18% decrease in 1992. During West Germany’s victory in this month, the average price of a property in the UK was £57,245. Furthermore, by the time Brazil had won the World Cup in 1994, this figure had dropped by £5,514, meaning that the average house price stood at £51,731.

The Noughties

House prices during 2000 and 2007 began to experience a recovery. However, this was followed by a 21% drop again in the second quarter of 2009. By 2011 things had stabilised, with the northern, southern divide narrowing in addition to house prices in London presenting the least growth at 63% compared to 102% in the North.

2018 World Cup

It wasn’t until the early 90s that house prices decreased. Since then, it’s taken six decades (six World Cups) for the market to recover, with the average house price being £188,559 during the time Germany won the World Cup in 2014.

From 2014 onwards, house prices have experienced a development, despite the uncertainty of the climate. 2018 should be a good year for house prices.

Lastly, here at Landlord News, we sincerely wish England the best of luck with their upcoming game

Rise for Rents in London since December 2016, Landbay Index Reveals

Published On: July 9, 2018 at 7:59 am

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Rent prices in London have increased by 0.1% in the past year to June 2018, according to the most recent Landbay Rental Index. This is the first annual rental rise in the capital since December 2016.

There has been a lot of conversation concerning slowed rental growth in the capital which has dragged down the national average. However, rental growth finally returned to a promising territory this month.

Results provided by the index reveal that rent prices have soared in 25 of the 33 boroughs over the last six months.

The average rent paid for a property in the capital now stands at £1,884 per calendar month (PCM). This is still double the £764 per calendar month (PCM) in the remainder of the UK despite the vigorous market in London forcing rents down in recent years.

In other locations of the UK, rental development persisted to slow, with rents increasing by just 0.4% in the first half of the year.

Landlords have witnessed rental prices increase by 0.95% in addition to 0.70% respectively.

Contrastingly the northeast has lagged behind, with rents dropping by -0.08% this year.

In regards to a county level, Nottingham experienced the fastest rental increases this year, at 1.43% and 1.25%.

CEO of Landbay, John Goodall comments: “While there remains a huge degree of regional variation, the overall trend has been a slowing of rents across the UK in the first half of this year. However, much of this has been London weighing down heavily on otherwise resilient growth across the UK. Now that London rents have bounced back to growth this could all be about to change.

“Wherever they’re based, landlords have had to face a myriad of challenges over the past two years, with regulatory and tax changes reshaping the sector. Despite this, there has been little sign of them passing on additional costs to tenants. However, with a rate rise on the horizon, meaning a rise in the cost of borrowing for landlords, we may well start to see landlords increasing rents in the coming months to stay afloat.”

 

 

 

 

Warning Issued for London Economy as Record Numbers Leave Capital

Published On: July 5, 2018 at 9:49 am

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High house prices in London have contributed to record numbers of people leaving the capital for more affordable living elsewhere, Knight Frank claims.

The agent has put together figures from the Office of National Statistics (ONS), which showed migration numbers were at 336,000 people leaving London for other UK cities. This is for the year up to June 2017, and is up by nearly 15% since the previous year.

In total, 229,405 individuals moved to the capital from other parts of the UK, and 336, 013 left in the year to June 2017. This puts London’s net outward migration at 106,608 – 55% higher than in 2012.

Where are the most desirable areas for people moving out of London?

The highest proportion of movers from the capital ended up in Scotland, but Birmingham and Brighton were the most popular cities in England.

As part of the cohort leaving the city, areas concentrated around London’s commuter belt have become increasingly popular, with Elmbridge, Dartford, Reigate and Slough being the most sought-after areas.

Warning Issued for London Economy as Record Numbers Leave Capital

Warning Issued for London Economy as Record Numbers Leave Capital. Pictured: The Jubilee Plantation, Richmond, London

Who is this likely to affect most?

Londoners in their 30s formed the largest cohort of people leaving the capital, and were also the ones that favoured the commuter belt areas.

In terms of positive net migration, the only age group where more people moved into the capital than out of it were those in their 20s. Knight Frank attributed this to the large number of students who move to London universities to study.

Tom Bill, head of London residential research at Knight Frank, said: “While this highlights a potential longer-term risk, housing affordability is likely to have helped sway the decision of some to leave London.

“While this highlights a potential longer-term risk for the capital’s economy, for others, exceptional house price growth in London in recent years will have enabled them to make the move.”