Posts with tag: house prices

Will 2017 be the Year the London Property Bubble Finally Bursts?

Published On: January 19, 2017 at 10:18 am

Tags: house prices,housing bubble,London,London property market,property market,property market crash

A Times survey of leading economists has predicted that 2017 will be the year that the London property bubble finally bursts, almost a decade after the last market crash.

The worrying report prompted online estate agent eMoov.co.uk to analyse the loss in value a similar London property bubble burst would have on house prices across the capital, as well as elsewhere in the UK.

With house prices once again reaching a dangerously inflated level, eMoov looked at the decline in values between the end of 2007 and beginning of 2009 (21 months), when the last property bubble burst, across each region of the UK, before applying that percentage decrease to the current average house price in each area, highlighting the loss that property owners could experience if the London property bubble bursts again this year.

The UK as a whole

At the end of 2007, when the market was on the cusp of collapse, the average UK house price was £189,424. Property values then went into freefall until 2009, plummeting by an average of 16.7% (-£31,618).

If the same 16.7% drop in values was seen today on the current average house price of £217,928, property owners would lose £36,393 on their asset, taking the average value down to £181,535.

London property bubble

Will the 2017 be the Year the London Property Bubble Finally Bursts?

Of course, it’s the capital where property owners stand to lose the largest sum should the property bubble burst this year.

During the last market crash, those with properties in London saw their assets depreciate by an average of 16.3% (-£48,421). However, since then, the average house price in the capital has soared to £481,648. Therefore, the same percentage decrease would result in a loss of £78,267 today, taking the average value down to £403,381.

Outside the capital

Although Londoners suffered the greatest monetary loss following the last crash, the capital didn’t see the largest percentage decreases during the last collapse.

Greater declines were recorded in the South East (-17.6%), the East of England (-17.4%), the South West (-17.2%), the East Midlands (-16.8%) and the West Midlands (-16.5%), with property owners in these regions seeing their house prices drop by between £24,000-£42,000.

Although a burst in the property bubble this year would mean a smaller monetary loss than in London, these property owners would still face a substantial hit. The lowest would be felt in the East Midlands (-£29,656), taking the average house price down to £146,868, climbing to a decline of £55,146 in the South East, where the loss would bring the average property value down to £258,188.

North of the border

While the ripple effect of the 2007 crash did reach north of the border, property owners in Scotland saw the smallest depreciation across the UK, at -7.4% (-£10,000).

With the current average house price, £143,033, only marginally higher than it was in 2007, the same decrease in 2017 would result in a similar drop in values, taking the average down to £132,449.

Across in Wales

When the last property bubble burst, Wales experienced the third lowest drop in house prices, behind the North East and Scotland. However, the 15% decline still caused £22,348 to be wiped off the average property value of £148,565.

The property market in Wales has struggled ever since, with the current average house price failing to reach the peak of 2007, at just £146,742.

As a result, it is the only region where a crash in 2017 would actually result in a lower monetary loss for property owners than in the previous crash. A 15% decrease today would see £22,011 taken off the value of the typical property, resulting in an average house price of £124,731.

The Founder and CEO of eMoov, Russell Quirk, comments: “Although the UK property market as a whole is faring very well, there are signs that the London market, particularly the prime central end, is running out of steam heading into 2017.

“Even so, it is unlikely that we will witness a market crash as monumental as the one we experienced a decade ago, so homeowners should rest assured that this research acts as a warning of what the worst case scenario might look like, with London homeowners losing £858 a week in property value.”

He cautions: “However, it is a warning nonetheless, and one that the majority of homeowners should heed. A turbulent year for the property market has seen many buyers and sellers back off from their sale or purchase, and baton down the hatches to wait out the storm.

“Whilst the market itself remains resolute, it will inevitably stutter to a halt without the buyer-seller activity it needs to operate. Those considering a sale now would be wise to act before it’s too late, as a reduction in asking price of a few hundred pounds in the current market climate is a lot easier to stomach than a loss of up to £80,000 a year or so down the line, should the market crash.”

Do you think that the London property bubble could burst this year?

Property prices rise by 3.3% year-on-year

Published On: January 18, 2017 at 10:12 am

Author: Em Morley

Categories: Property News

Tags: Buy-to-Let,house prices,property prices,tenants

A new report released by haart estate agents has shown that property prices throughout England and Wales fell by 1.6% during December. This resulted in an overall drop of 3.3% year-on-year, with the average property price at £224,991.

Demand

The investigation indicates that new buyer demand for homes slipped by 15.1% in December and is well down year-on-year, by 38.8%. What’s more, the number of homes coming onto the market declined by 16.7% in the month and by 7.5% in the year. Despite the decrease in stock, there has also been a decrease in the number of buyers. This meant there were nine buyers per instruction during December.

In addition, the market was more efficient in December, as transactions increased despite the number of viewings dropping. This means that buyers are looking at fewer properties before buying.

Purchase prices

Average purchase prices for first-time buyers rose during December, by 7.6%, but remain stable year-on-year. The rate of first-time buyers entering the market slipped by 17.3% month-on-month and by 44.7% in the year.

In London, the average price of a property slipped by 2.5% in the last month, leading annual growth to slip to 5.9%. The fall seen in December in the capital was greater than across the rest of England and Wales.

Property prices down by 3.3% year-on-year

Seasonal Slowdown

The number of tenants coming onto the market fell by 12% in December, but increased by 1.7% year-on-year. In London, the fall was more prominent, with falls of 20.2% in the month and by 65.1% annually.

Buy-to-let sales also fell in the month and in the year.

Paul Smith, CEO of haart, observed: ‘A slight jump in transactions in December is definitely very promising, pointing to a cohort who have stopped sitting on their hands, brushed off their Brexit uncertainty and started to move on with their lives. Our applicant activity in the period after Christmas to date is up 5% on the year, which when considering the pre-stamp duty rush in early 2016, is very impressive. If the economy remains sound, renewed interest should translate into higher transaction rates in 2017.’[1]

‘It is certainly time we all moved on. The idea of Article 50 holding up someone’s decision to buy or sell a home is ridiculous nearly a year on from the referendum, especially as the economy has remained so robust. Prices cooling down is a good thing for buyers – now is a great time for them to get a good deal,’ he added.[1]

[1] http://www.propertyreporter.co.uk/property/positivity-surrounding-brexit-boots-housing-market-sentiment.html

[1]

House Price Inflation Continues Strong Growth Seen Since 2013

Published On: January 17, 2017 at 10:02 am

Author: Em Morley

Categories: Property News

Tags: average house price,house price inflation,house prices,London

House price inflation across the UK continued the strong growth seen since 2013 at the end of last year, according to the most recent index from the Office for National Statistics (ONS)/Land Registry.

Average house price inflation stood at 6.7% in the year to November 2016, up from 6.4% in the previous month.

House Price Inflation Continues Strong Growth Seen Since 2013

This takes the average property value across the UK to £218,000, up by £14,000 on the previous year and £2,000 higher than October.

The main contribution to November’s house price inflation was England, where values rose by an average of 7.2% over the year, to reach £234,000. Wales saw house prices increase by 4.1%, to stand at £147,000, while the average value in Scotland was up by 3.3% to £143,000. In Northern Ireland, the average price was £124,000 in November.

Regional house price inflation

London continued to boast the highest average house price of any region across the UK, at £482,000, followed by the South East and East of England, at £313,000 and £278,000 respectively. The lowest average price continued to be found in the North East, at £127,000.

The East of England showed the highest annual house price inflation, with values up by 10.5% in the year to November. Growth in the South East was second highest, at 8.6%, followed by London, at 8.1%. The lowest annual increase was recorded in the North East, at just 3.2%.

Local authority house price growth

The largest annual growth in property values in the 12 months to November was in Rutland, where prices rose by a whopping 20.7% to reach an average of £307,000. The lowest annual increase was seen in the City of Aberdeen, where prices dropped by 7.8% to an average of £172,000.

In November, the most expensive borough to buy a property was Kensington and Chelsea, where the average home cost a huge £1.3m. In contrast, the cheapest place to buy was Burnley, at just £75,000.

The CIO and co-founder of LendInvest, Ian Thomas, comments on the latest figures: “Despite some knocks, the property market will remain fundamentally strong throughout 2017, with a sustained drive by Government to increase the supply of new homes.

“The Housing White Paper, expected later this month, will add detail to the commitments already made by the Housing Minister to tackle the housing crisis. Industry will be watching with hopes that these announcements will reinvigorate the market.”

The ONS/Land Registry index follows reports from both Your Move and Rightmove yesterday, which claim that house prices ended 2016 almost at the peak recorded back in March last year.

So will values start to come down as they reach a potential affordability ceiling?

House Prices Almost Recovered to March Peak at End of 2016

Published On: January 16, 2017 at 11:12 am

Author: Em Morley

Categories: Property News

Tags: average house price,house price growth,house prices,property sales

House prices almost recovered to the March peak seen last year at the end of 2016, but transactions dropped by 3.9%, according to Your Move’s latest House Price Index.

The agent found that prices rose by 0.4% in December and by 3.1% on an annual basis, to an average of £297,678. This figure is close to Rightmove’s average asking price for January of £300,245.

The Your Move figure takes the average house price almost back to the £297,725 March peak reached amid the rush to beat last year’s Stamp Duty deadline.

House Prices Almost Recovered to March Peak at End of 2016

However, the annual rate of growth was down from 3.5% in November, while transaction figures for the final six months of the year show just how great the impact of the Stamp Duty reforms were, as sales dropped by 14.7%.

There was much variation across the country at the end of last year, with annual price growth as high as 16.2% in Hull and as low as -11.5% in the London Borough of Hammersmith & Fulham.

Overall, London has trailed the other regions of England and Wales, with house price growth of just 0.2% year-on-year.

The East of England recorded the highest annual increase of 2016, at 7.9%.

The Managing Director of agents Your Move and Reeds Rains, Oliver Blake, says: “It was a strong finish to an uncertain year. Despite the doubts over Brexit, prices have continued to grow, powered by good value commuter properties.

“As the lower transaction figures since April show, the market faces challenges ahead, but it has entered 2017 a lot stronger than many would have expected.”

In terms of properties coming onto the market, Rightmove claims there is now an opportunity for first time buyers to get onto the ladder, as there is less competition from buy-to-let landlords.

Rightmove attributes the 13.2% decline in sales of smaller properties – those with two bedrooms or fewer – in December to less buy-to-let interest. As a result, the portal reports that available stock for sale in this sector is up by 1.9% on last year. This contrasts to January 2016, when availability of these properties fell by 18%.

Across the whole market, Rightmove puts the current average asking price at £300,245 – up by 0.4% on December and 3.2% annually.

The average time taken to sell a property rose to 72 days in December, up from 67 in November, while the average stock per member agent dropped from 56 to 51 over the same period.

Miles Shipside, the Director and Housing Market Analyst at Rightmove, comments: “The 0.4% monthly and 3.2% year-on-year price increases are indicators of the continued market momentum from the autumn.

“Demand for a suitable home is such that visits to the Rightmove website are still up by 5% year-on-year, despite being compared to a period that was boosted by high demand from buy-to-let investors rushing to beat the Stamp Duty deadline.

“Year-on-year comparisons for transactions in the first quarter of 2017 should also allow for the distortion of last April’s additional Stamp Duty tax deadline, as transactions were up 40% in the first quarter last year.”

Prime Central London House Prices Hold, but Transactions Plummet

Published On: January 13, 2017 at 10:32 am

Author: Em Morley

Categories: Property News

Tags: house prices,London,London property market,prime central london

2016 proved a challenging year for prime central London house prices and sales, according to London Central Portfolio (LCP). So how will the past 12 months affect the next year in the market?

Over the last year, sales activity slumped in prime central London following Stamp Duty changes, which dramatically affected sentiment, and the uncertainty caused by the Brexit vote.

With these headwinds, prime central London house prices have started to fragment, creating a watershed at £1m. As a result, property prices at the lower end have shown modest growth, while values have come down at the luxury end.

For the market as a whole, however, prime central London house prices have remained stable, reports LCP. According to Q3 statistics from the Land Registry, prices fell by just 0.5% overall on an annual basis, to £1,590,472.

More significant has been the 24% decline in transactions over the past 12 months. The 58% and 50% falls for Q2 and Q3 respectively far outweigh the 29% increase recorded in Q1, ahead of the introduction of the 3% Stamp Duty surcharge for additional properties.

The number of transactions for the last year stands at just 3,696, found LCP. This is one of the lowest annual figures recorded by the Land Registry and equivalent to the depths of the financial crisis. It’s a huge 42% lower than two years ago, when the new Stamp Duty rates for residential property were introduced, significantly increasing the tax burden on homes worth more than £1.125m.

Prime central London house prices

Prime Central London House Prices Hold, but Transactions Plummet

Unlike the sub-£1m end of the market, the luxury sector – particularly the new build market – has been hit hard by a series of new taxes. Three successive Stamp Duty increases since 2012 have caused a rise from 5% to 15% on some purchases, alongside other taxes, such as the introduction of non-resident Capital Gains Tax (CGT) and the Annual Tax for Enveloped Dwellings (ATED).

Luxury prime central London house prices have suffered a correction over the past year, with marked drops in sales activity, despite an influx of discretionary capital in Q1 as buyers rushed to beat the Stamp Duty surcharge deadline.

While definitive statistics are difficult to come by in the luxury market, all market data points to a softening in prices. Knight Frank has recorded declines between 6.2% and 7.3% for 2016 for homes worth more than £1m. Other high-end estate agents have reported similar or greater declines, and LCP’s in-house research upholds these claims, indicating an overall fall in prices above £1m of 6.4%.

Price growth at the top end of the market, where the average value stands at £3,357,811, traditionally experiences extreme volatility in periods of political and economic turmoil. This has been seen in house price fluctuations since 2000, as the market felt the effects of the dotcom bubble and a weak stock market, before the financial crisis hit.

While the long-term outlook for the sector remains strong as a global destination, it may take several years to correct, as prices rebase themselves to take account of higher buying costs.

The prime central London private rental sector

Despite the gloomy picture for the luxury end of the market and more subdued reports for prime central London as a whole, one sector has shown positive growth in 2016.

Prime central London’s private rental sector typically shows a far more consistent performance than the discretionary luxury end of the market. Having been far less affected by the recent introduction of new taxes, the mainstream sector has experienced a 4.3% rise in value over the past year. As an entry price market, it is also more accessible, remaining particularly attractive to international investors taking advantage of current exchange rate benefits caused by Brexit.

This is supported by the Land Registry data for October 2016. Annual price growth for the City of Westminster, where prices average £937,473, hit 3.8%. In contrast, Kensington and Chelsea, where prices are typically over £1m, has recorded a decline of 2.6%.

While decreases in transactions have been seen in this sector, this is as much due to a lack of sellers as buyers, claims LCP. It explains that property in the mainstream sector is generally a long-term hold and commercially rented, so if sellers are unable to achieve their price expectations, they will generally retain their assets, which supports property values.

Although 2016 has been a rollercoaster year for prime central London’s property market, the moderate price growth at the lower end of the market is good news, insists LCP. The investment firm anticipates that after a year of constrained activity, coupled with increased uncertainty both in the USA, elsewhere in the EU and the Middle East, investors will actively re-enter the market.

The firm believes that, whatever the next year holds, prime central London will remain a globally sought-after destination for property.

What Will 2017 Hold for London’s Property Market?

Published On: January 12, 2017 at 10:42 am

Author: Em Morley

Categories: Property News

Tags: house prices,London,London property market,property hotspots

It’s a question that will be on every property owner’s, investor’s and buyer’s lips – what will 2017 hold for London’s property market?

Mark Lawrinson, of London estate agent Portico, answers some key questions and reveals his top predictions and potential hotspots in London’s property market for the following 12 months…

2016 recap

We all know that 2016 proved an extremely eventful year. House prices in the capital ballooned to unbelievable levels, the additional 3% Stamp Duty rate for additional homes was introduced, and the Bank of England cut interest rates to just 0.25%, making mortgages the most affordable they’ve been for a long time.

London’s new Mayor, Sadiq Khan, opened the Night Tube on several lines and set out plans for more “genuinely affordable” London homes. But despite his efforts, affordable housing is still a huge problem and concern for the majority of Londoners – and the issue is exacerbated by the fact that property sales volumes in the capital are now at historic lows.

The year culminated with Philip Hammond’s first Autumn Statement, in which he pledged to ban letting agent fees charged to tenants, in an attempt to help generation rent.

Through all of these changes in the property market, the country experienced a number of political shocks. EU referendum worries dominated the summer months, before the shock of the Brexit vote left the UK – and its property market – in a period of uncertainty. The USA’s election of Donald Trump as its president also caused a shockwave this side of the pond.

This year, we will find out how profound the effects of these events on London’s property market will be. Lawrinson shares his forecast:

Prices will soften or continue to rise slowly

Buyer affordability was stretched to the limits last year. With the current average house price in London at the highest it has ever been – £580,600 – property value growth simply cannot continue at this rate. Sales transactions in the capital have also dropped significantly since the Stamp Duty surcharge came into effect last year – now down by 60% in prime central London.

The combination of Brexit, over-inflated prices and falling sales volumes mean that price growth is expected to slow this year, with values in prime central locations most likely to soften.

And although Brexit will by no means solve generation rent, slower price growth and super low mortgage rates will come as welcome news to those hoping to get onto the property ladder.

Greatest price growth will be in Zone 3 outwards

What Will 2017 Hold for London’s Property Market?

Though Lawrinson expects prices to soften in prime central London, he still expects certain hotspots to experience growth – though perhaps not at the level seen in recent years.

If you’re seeking an investment in London’s property market, it’s vital that you buy in areas that are undergoing gentrification or infrastructure investment, Lawrinson insists, as these locations will offer healthy yields, making mortgage repayments less of a worry.

Areas in the outer zones are likely to experience the highest price growth of the year. Zone 5’s East Croydon is becoming the capital’s next big property hotspot, he believes, as it’s currently undergoing huge development, offers key train links and the Gatwick Express, and Westfield shopping centre will soon be arriving. Its mix of luxury and affordable living also makes the area great for young professionals.

Crossrail beneficiary Forest Gate is also likely to experience further gentrification when the high-speed rail link arrives this year, which will keep house prices on their upward climb. Leyton is another east London hotspot tipped for price growth – in fact, east London as a whole will be one of the best investment locations generally this year, due to improving transport links and affordable property values (when compared to the rest of the capital).

If you want to invest more centrally, Farringdon is a safe bet, again thanks to key infrastructure changes, such as Crossrail, and the fact that the nearby Silicon Roundabout is becoming a great area to live, work and play.

Rush in valuations

Back in 2015, then chancellor George Osborne revealed a shock tax change – the tax relief that landlords currently receive on finance costs will be restricted to the basic rate of Income Tax. Basically, the current rules that give most landlords a 40% discount on their finance costs will be cut to 20%. This tax change will be phased in gradually from 6^th April this year and will be fully implemented by 2020.

There’s no doubt that this reduction will make things more difficult for landlords. However, all investors must be aware that those who are basic rate taxpayers or those without a mortgage won’t be affected at all. Nevertheless, the change may also push around 22% of landlords into the higher tax bracket.

Secondly, there are steps that landlords can take to try and cut their interest costs – the first being remortgaging. Buy-to-let mortgage interest rates have dropped massively in recent years, so deals currently on the market will likely be substantially better than those arranged a few years ago.

With large house price increases in London, another tip is to get your investment property re-valued. This will make your lender recalculate your loan-to-value ratio (LTV), and a lower LTV means a better interest rate and a larger choice of lenders.

Will 2017 be a good year to buy?

For many Londoners, owning a home, a larger home or moving into a new area will likely be a key New Year’s resolution.

With sales volumes typically a leading indicator of price growth, there is a chance that values may soften, making 2017 a great year to buy. Having already witnessed an annual drop in house prices in Westminster, Lawrinson believes that bagging a bargain in London’s central market may be possible. However, he does warn that there is no way to be sure that this price correction will ripple out to Greater London.

Most importantly, he warns, it’s crucial that you buy when you’re ready. As nobody can accurately predict the market, it’s extremely difficult to try and time things to a drop in prices. If you’re buying a home, then holding off could be equally as detrimental as it could be positive.

Nonetheless, with money currently as cheap as it can be to borrow, getting on the property ladder or moving up it should be that bit easier.

As London’s property market has proven in the past, it is an extremely resilient region, making property investments as a business or home incredibly safe.

If you’re purchasing a property to invest or buy-to-let, then – so long as you use the advice available to you – you can protect your assets and minimise any risk. Buy in an up-and-coming area experiencing gentrification or infrastructure investment, advises Lawrinson, and you are likely to benefit from a boost in both rental yield and capital growth, even in a weak market.

When is the right time to sell?

Again, there is no right or wrong answer to this question, explains Lawrinson. If you need to sell to release money or trade up, there are buyers ready and waiting to take advantage of competitive rates and enter the market when the right property comes along. The firm is already starting to see overseas buyers return to London’s property market, keen to benefit from the weaker pound and softening prices in the prime sector.

Selling this year also gives you the advantage of limited competition in a limited marketplace, which could translate into a quick sale at a good price.