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Rents overtake home values in the US, latest index shows
Residential rents in the United States grew 4% year on year in April, overtaking home values growth which was at an annual rate of 3%, the latest data shows. It means that rents grew at their fastest pace in two years in April, and surpassed home value growth in 20 of the 35 largest US housing markets, according to the data from real estate market report firm Zillow. Rents reached $1,364 and home values reached an average of $178,400 and growth in home values is expected to slow further in the second half of the year as the for sale housing market stabilises. The switch comes after years of rapid home value increases and has been boosted by the improving economy. The Zillow report points out that US home values peaked in 2007, and then crashed during the recession between 2008 and 2010. Since then, they have risen rapidly, returning to their peak levels in many markets. Home values have both risen and fallen over the past decade, but rents have been steadily rising. Indeed, rental growth has been outpacing home value growth for several months in some of the nation's hottest markets. In San Francisco, rents started rising faster than home values in July 2014, and have been growing faster ever since on an annual basis. In Boston, annual rental growth has outpaced home value appreciation since August 2014. The report points out that low mortgage rates have helped make buying a home much more affordable than renting. On average, US home buyers can expect to spend about 15.3% of their income each month on a typical house payment. Renters can expect to spend about 30% on a monthly rent payment. ‘There are tremendous incentives to get into home ownership these days: mortgage access is improving, interest rates are low, and home values remain below prior peaks,’ said Zillow chief economist Stan Humphries. ‘But it will be increasingly difficult for many renters to realize these benefits as this country's growing rental affordability crisis continues to worsen. More income going to rent means less going to savings for a down payment and other costs, keeping renters renting longer and feeding into the high demand that is contributing to rising rents in the first place,’ he explained. ‘This cycle will be difficult to break, and is a symptom of the imbalances that still exist in the housing market as we struggle to get back to normal. New construction and rising wages will help, but neither is coming very quickly,’ he added. Over the next year, home value growth is expected to slow even further, to 2% annually, according to the Zillow home value forecast. In 2014, home values rose 4.9%. Continue reading
New proposals for UK landlords welcomed by the industry
The UK’s National Landlords Association has welcomed new government proposals on immigration that will affect the country’s residential private rented sector. Prime Minister David Cameron announced a number of proposals to be tabled in a new immigration bill which will be a central part of the new Government programme to be announced in the Queen’s speech, next week. They include new powers for councils to crack down on unscrupulous landlords, allowing landlords to evict illegal migrants more quickly and a nationwide Right to Rent scheme. The announcement also includes a new mandatory licensing regime and there will be a consultation on cancelling tenancies when visas expire. ‘We welcome the initiative taken by government to tackle the problem of criminals acting as private landlords to exploit illegal migrants,’ said Richard Lambert, NLA chief executive officer. But he pointed out that it important that councils are given the necessary funding to ensure that they can enforce these powers effectively. ‘This would help drive up standards in the sector and send a powerful message to criminals. One of the fundamental reasons that a minority of criminal landlords are able to get away with providing poor living conditions is that councils do not have the resources to make use of their already significant powers,’ Lambert explained. ‘We would like to see the Treasury allow councils to keep the proceeds of the fines from prosecutions so that councils have both the powers and finances for enforcement, without going cap in hand to the Treasury,’ he added. The NLA is also pleased that the government has given landlords the ability to deal quickly with illegal migrants and Lambert said he hopes this deters those that want to stay in the UK illegally. ‘We are, however, a little concerned regarding the Right to Rent scheme. Landlords are happy to help to check that tenants are who they claim to be. However this should not be a way for the Government to pass the buck on to landlords when tacking illegal immigration,’ Lambert said. ‘We hope, before the scheme is rolled out nationally, that the Government take the time to review how the first phase in the West Midlands has worked and draws on the lessons from that, rather than ploughing ahead regardless,’ he added. He also said that the introduction of a new mandatory licensing regime also raises concerns. ‘We are therefore urgently seeking clarification on whether this would be new policy or related to the current licensing schemes,’ said Lambert. Continue reading
UK city home prices see highest three month price growth for a decade
House prices in key UK cities increases by an average of 1.4% in the three months to April, the highest three month rate of growth for a decade. Overall growth is being supported by house prices playing catch-up with average prices in 11 cities still below their 2007 peak with Belfast down 49.1%, Liverpool down 14.9% and Glasgow down 13.6%. The data from the Hometrack UK Cities House Price Index also shows that despite a recent pick up in housing turnover, the average time between moves in some cities is up to 28 years, twice the average between 2003 and 2007 which was a move every 14 years. It explains that a 30% decline in the proportion of moves by existing mortgaged home owners over the last decade is starving the market of a source of new supply and driving prices up. House price growth across the index is running at an average of 9% and continues to exceed the overall UK rate of growth of 6.8% year on year. At a city level the annual rate of growth ranges from 3.5% in Liverpool to 11% in London. This is the smallest spread in city level house prices since 1996, as the rate of growth in high value markets such as London and Cambridge moderates whilst house prices in regional cities continue to recover off a low base. However, 11 of the 20 cities have house prices that are still below their 2007 peak. The index report says that house price increases are being driven by the improving economic outlook boosting market sentiment, record low mortgage rates and a low churn of housing stock which is creating scarcity of supply. The average number of years between moves is calculated from the number of housing sales in a year relative to the stock of private housing in each city. In the 1980s, the average house was changing hands every 10 years and this increased to an average of 14 years between 2003 and 2007. This has now climbed to an average of 21 years cross all cities and is as high as 28 years in some cities such as Liverpool. ‘Home buyers and investors shrugged off the run up to the general election and continued to bid up the cost of housing,’ said Richard Donnell, director of research at residential analyst Hometrack. ‘Record low mortgage rates, which are more than half the level of 2007, are boosting buying power, while low rates of housing turnover creates housing scarcity and is keeping an upward pressure on house prices,’ he explained. He pointed out that one factor driving housing scarcity has been a marked decline in the proportion of housing sales by existing mortgaged home owners, down to just 35% of all sales in 2014 and almost half the level seen in 2007. ‘This group owns half of all owner occupied housing but fewer… Continue reading
