Posts with tag: housing supply

Housing Demand and Supply are Both in Decline, Reports RICS

Published On: May 12, 2016 at 8:35 am

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Housing demand has fallen for the first time since March 2015, according to the latest Residential Market Survey from the Royal Institution of Chartered Surveyors (RICS).

Housing Demand and Supply are Both in Decline, Reports RICS

Housing Demand and Supply are Both in Decline, Reports RICS

The organisation believes that the market has cooled after landlords rushed to beat the 1st April Stamp Duty deadline and the EU referendum approaches.

The survey found that interest from buyers dropped in April, with 22% more chartered surveyors reporting a decrease in demand.

The RICS claims that there is little prospect of the market improving, with 8% more surveyors reporting a fall in new instructions in April and the lack of housing stock looking unlikely to ease in the short term.

Of the 303 surveyors polled, 22% more respondents in London expect property sales to drop over the next three months.

Despite a fall in demand, prices are still rising outside of central London and parts of the North of England. Over the next 12 months, prices are forecast to increase across the whole of the UK, with 61% more surveyors expecting prices to go up in England and Wales.

Regionally, London has lower price growth expectations over the next few years than the rest of the UK, with prices likely to remain steady. However, surveyors expect prices to go up in each part of the UK by between 3-5.5% per year in the next five years.

Surprisingly, following the recent surge in demand from buy-to-let landlords, there has not yet been a noticeable increase in new landlord instructions.

The survey suggests that recent policy changes in the buy-to-let sector are causing landlords to reconsider their position in the market. As tenant demand rises – 22% more surveyors have seen a rise rather than a fall – rent prices are more than likely to increase further. Due to a lack of stock for all tenures, rental growth is expected to rise at an average rate of 4.6% per year over the next five years.

The Chief Economist at the RICS, Simon Rubinsohn, comments: “Uncertainty is a word that features heavily in the feedback we are receiving from members responding to the survey and is contributing to the flatter trend in the latest data.

“More ominous is the expectation that both prices and rents will head materially higher over medium term, despite existing affordability concerns with the supply pipeline continuing to fall short of household growth, notwithstanding the various levers the Government is pulling to try and drive development.”

High demand and low supply to drive rents up

Published On: May 4, 2016 at 8:57 am

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A director of leading letting agents in Britain has warned that rents will continue to increase over the coming months.

Adrian Gill, director of Your Move and Reeds Rains, feels that there will be a cut in housing supply in the private rental sector, with many buy-to-let landlords leaving the market.

Alterations

According to Gill, the recent tax changes, including the additional stamp duty charges, is driving many residential landlords out of the sector. This is turn is set to drive up an early chronic shortage of properties in many areas.

Mr Gill notes that, ‘ultimately, this will only punish tenants, driving out buy to let landlords will reduce supply leading to lower choice and higher rents for those that can least afford them.’

He went on to observe that Spring represents the calm before the summer storm, with demand for homes in the sector driven by a flow of jobs and a flux of a general more mobile workforce.

‘This reflects the strengths of private renting, the opportunity for young, independent adults to strike out on their own, or for families to move across the country and earn the best possible livelihood. In the towns and cities with the biggest renting populations it is a constant struggle for supply from landlords to match demand from tenants. With a surge in jobs and local economic activity, rents rise. Keeping pace will not be easy and will depend on the freedom to invest as a landlord,’ Gill added.[1]

High demand and low supply to drive rents up

High demand and low supply to drive rents up

Restraint

Just last week, a survey from the Association of Residential Letting Agents (ARLA) found that 65% of landlords will not look to purchase any more buy-to-let properties in light of the tax alterations.

61% of ARLA agents said that rents will rise even further as a result of the tax changes.

David Cox, director of ARLA, said, ‘whilst landlords adjust to the increase in costs we can expect to see one of three outcomes prevailing in the buy-to-let market: landlords absorbing the cost and taking the hit; landlords withdrawing from the market causing supply to fall; or landlords regaining those costs through hiking rents. Next month we can start to assess the damage.’[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/5/rents-set-to-rise-as-demand-grows-and-supply-falls

A Brexit Would have Little Effect on Housing Market

Published On: March 22, 2016 at 11:51 am

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A Brexit after June’s EU referendum would have very little effect on the UK housing market, according to Capital Economics.

The economic consultancy believes that a vote to leave the EU is unlikely to trigger a crash in the housing market or the general economy.

However, it warns that the period before the referendum could cause uncertainty due to companies and consumers postponing major spending decisions.

A Brexit Would have Little Effect on Housing Market

A Brexit Would have Little Effect on Housing Market

Property agents Savills and Countrywide have also voiced similar opinions that uncertainty in the run-up to the vote could slow the housing market.

Capital Economics questions: “With housing already looking very expensive, could even a brief rise in uncertainty and volatility tip it over the edge?”

However, it continues: “Altogether, uncertainty in the short term might lead to a small drop in transactions and a slight easing in house price growth. But we think the prospect of Brexit driving a collapse in prices is slim.

“Rather, with prices very high compared to incomes, and being propped up by a shortage of homes for sale, a recession and rising unemployment that drove up the number of forced sellers and cooled buyer demand is probably the biggest risk.”

Yesterday, Rightmove announced that the average asking price is now over £300,000. While house prices have increased by a huge 50% over the past ten years, wages are up by just 22% in comparison.

Capital Economics also believes that a Brexit would not affect sales of properties to overseas buyers, who consider London “as a safe haven, due to its robust legal system, favourable property laws, stable governance and cultural draws”1.

However, the consultancy does say that a Brexit would hit house building particularly hard, as many construction workers were born outside of the UK. Tony Pidgley, of Berkeley Group, claims that half of his subcontractors are from Eastern Europe.

This is a worry for the property sector, as housing supply is already extremely low in comparison to demand. However, it is believed that some house builders are restricting supply to keep house prices high.

Capital Economics adds that there are few signs of a forthcoming recession. Instead, it expects wages to rise, reflecting house price growth.

1 https://www.mortgagestrategy.co.uk/capital-economics-housing-market-meltdown-unlikely-if-uk-leaves-eu/

Are Housebuilders Restricting Housing Supply to Boost Profits?

Published On: March 2, 2016 at 3:33 pm

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Housebuilders have been accused of restricting housing supply in order to boost their profits, by keeping house prices artificially high.

Recent data shows that almost half a million homes in England have had planning permission granted, but have not yet been built. The length of time it takes for property developers to complete a home has also risen from 24 months to 32.

The figures have reignited a long-running disagreement between policymakers and housebuilders over who is to blame for the current housing supply shortage.

While rates of planning permission for new homes have jumped by 60% since 2010, there has only been a 48% increase in the amount of new homes being built.

Labour MP Clive Betts, the Chair of the Local Government Select Committee, claims the failure of the big housebuilders to speed up development was designed simply to boost their profits.

He comments: “I think it is clear that the big developers are building at a rate to maximise their profits, rather than addressing the country’s housing need.”

He notes that some developments have had planning permission, but are not due to be completed for another ten years.

“These are private companies who are very simply trying to make money for their shareholders,” he adds. “They are restricting supply and the Government urgently needs to come forward with measures to address this.”1

Ministers are becoming increasingly concerned about the failure of developers to speed up house building. There have been reports that some Conservative Party members believe that some housebuilders are deliberately restricting the supply of new homes to increase their profits.

Are Housebuilders Restricting Housing Supply to Boost Profits?

Are Housebuilders Restricting Housing Supply to Boost Profits?

The Housing Minister, Brandon Lewis, has his own frustrations with property developers.

He told the Local Government Committee: “When you have got housebuilders delivering, on average, 48 homes a year on some [large] sites, that’s not good enough.

“We know they can go further. Housebuilders will talk about saturating the market. But we are aware that in too many places, we are still taking 20 weeks to build a house when we can do it in three or four.”1

Recently, Taylor Wimpey announced a record operating profit margin of more than 20%, as it sold more houses at higher prices. Pre-tax profits at Britain’s biggest housebuilder, Barratt Homes, have also surged by 40% in the past six months, to almost £300m.

It is believed that ministers are considering new measures to speed up the rate of development, amid concerns that they will not hit their target to build 1m new homes by 2020.

New policies could include forcing housebuilders that buy publicly owned land to commit to rapid construction as part of the planning process.

Glenigan, the housing industry analyst, compiled the latest data for the Local Government Association, which was released in January.

It found that 475,647 homes in England that have been granted planning permission were yet to be built in 2014/15.

In 2012/13, the total number of homes given planning permission that were yet to be built was 381,390, and 443,265 in 2013/14.

A spokesperson for the Home Builders Federation, which represents developers, reports that the most recent Government figures show there were 170,690 net additions to housing stock during 2014/15 – a 25% increase on the previous year.

They claim: “The industry has delivered unprecedented increases in supply over the past two years, driven predominantly by the large private sector housebuilders.

“This has been on the back of the pro development policies introduced in recent years and a general increase in demand.”

They blame the planning systems of local and central government for the shortage of housing supply.

“As a priority, it needs to work with local authorities to speed up the planning system and ensure local plans allocate enough sites of different types and sizes that are attractive to a range of companies.”1

The latest property news can be found at LandlordNews.co.uk.

1 http://www.theguardian.com/business/2016/mar/01/developers-restricting-supply-of-new-home-to-boost-profits

Young struggling to get onto property ladder

Published On: February 22, 2016 at 12:49 pm

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Another report has underlined the notion that young people are becoming trapped in the rental market, due to spiralling house prices.

An investigation by the independent Social Market Foundation think tank has revealed that an extra 1.8 million people have been unable to get their foot on the property ladder since 2001.

Young struggle

The report shows that if home ownership levels among 25-34 year olds during 2016 remained the same as 2001, an additional 1.8 million people in this age group would now be owner-occupiers. Despite this, they are being faced with barriers in getting onto the ladder due to high property values, tighter lending criteria and difficulties in saving for a deposit.

Data from the investigation underlines a lack of housing supply as the most prominent factor in the lack of young homeowners. Results indicate that Britan will see a shortfall of nearly 1.3 million homes by 2026, if current supply levels and lack of growth remain constant over the same period.

In addition, the report looks at how the market could grow over the next decade and warns that supply could continue to come up short in the face of rising demand.

Young struggling to get onto property ladder

Young struggling to get onto property ladder

Boosts

This follows results from a different survey released last week by the independent Resolution Foundation body, which indicated that home-ownership for young, working class households could slip to just one-in-ten by 2025.

Claiming crowdfunding could be used to boost savings of young, would-be buyers, the report also suggests that the supply of new homes could be increased by providing crowdfunded equity to small and medium-sized constructers.

Social Market Foundation economist Katie Evans, also the author of the report, said, ‘getting onto the housing ladder is becoming harder and harder for young people. Our failure to build enough homes means this problem threatens to stretch into the future. Property crowdfunding could be the means to tackle both demand and supply.’[1]

[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/2/another-report-shows-younger-people-locked-out-and-forced-to-rent

 

 

House price growth rises again

Published On: February 5, 2016 at 10:38 am

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The January Index from the Halifax indicates that house price growth continued to accelerate in Britain during the last three months.

Data from the report shows that house values rose by 2.2% in the period, taking the average value to £212,430. Prices were also found to be up 9.7% year-on-year and by 1.7% compared to December 2015.

Upward pressure

Martin Ellis, Housing Economist at the Halifax, said that the quarterly increase followed two months of below 2% rises.

‘The imbalance between supply and demand continues to exert significant upward pressure on house prices,’ Ellis noted. ‘This situation looks set to persist over the coming months. Further ahead, increasing affordability issues, as price increases continue to exceed wage growth, are likely to curb housing demand and cause price growth to ease.’[1]

Mr Ellis went on to say that confidence in market remains strong, according to the most recent Halifax Housing Market Confidence Tracker. The final quarter of 2015 showed that a majority of people believe that typical property values will be higher in twelve months time.

Supply shortage

An increase in price growth is being driven by a lack of supply, according to Randeesh Sandhu, Chief Executive Officer of finance provider Urban Exposure. Sandhu also noted that the lack of housing supply is due to developers having a lack of skills and key materials.

‘Far more needs to be done to boost development, particularly in London where average house prices in over half of London neighbourhoods are now £500,000 or more,’ he observed.[1]

Rob Weaver, director of Investments at property crowdfunding platform Property Patner, agrees with Sandhu’s observation. He also said that sales in central London continue to drop off, but those in the outer boroughs are thriving.

‘Potential buyers are hunting for more affordable housing, attracted by regeneration in places like Thamesmead and Woolwich and of course, Crossrail,’ Weaver said. ‘We’re also seeing a spike in activity in the market as buy to let landlords rush to seal deals before the stamp duty 3% hike in April.’[1]

House price growth rises again

House price growth rises again

Rush

‘Britain simply can’t build homes fast enough to keep up with demand,’ observed Jonathan Hopper, Managing Director of Garrington Property Finders. ‘With demand likely to be boosted even further by the Bank of England’s admission that an interest rate rise could remain firmly off the table for the rest of the year, 2016’s strong start is unlikely to be a blip.’[1]

Mark Posniak, MD of Dragonfly Property Finance, believes that further house price growth is almost inevitable. He said, ‘with interest rates unlikely to move for some time and people generally confident about their jobs and the economy, demand is also very strong. People’s fear of being priced out of the market is tangible at present. This is especially the case in London and the South East.’[1]

‘While logic suggests house price growth will ease as affordability issues increase, our relationship with the property market is nothing if not emotive. Prices rise in this way only adds to demand and so the growth continues,’ he added.[1]

[1] http://www.propertywire.com/news/europe/uk-house-price-index-2016020411522.html