News
Consultants say anti-London political rhetoric is harming the city’s property markets
The uncertainty fuelled by this week’s general election on the London housing market is unparalleled and has resulted in a near flat lining of performance in both the sales and lettings markets, it is claimed. The situation is having a stifling impact on the ability of vast swathes of the capital to retain any momentum, according to leading international real estate consultant Cluttons. While the behaviour of the residential market mirrors what has been seen in previous election years, the anti-London political rhetoric has and is damaging the capital's real estate landscape, the firm says. ‘We are in the midst of one of the toughest forecasting environments in a long time. The likelihood of a hung parliament is just adding to the widespread election anxiety,’ said Cluttons' international research manager, Faisal Durrani. ‘Furthermore, the emergence of London as a scapegoat to win votes is having a damaging impact on the performance of the market, which could have ramifications for the rest of the country,’ he added. He explained that with nearly a quarter of the UK's GDP activity emanating from London, it is difficult to understand why the commercial nerve centre of the UK is being targeted, adding that proposals for a mansion tax has reignited the debate of whether or not London's property millionaires should be taxed, giving further momentum to the anti-London political rhetoric. ‘The mansion tax really is a tax on London and the South East, where almost 90% of the UK's £2 million plus properties are concentrated. Some 27% of the population resides in London and the South East and hard working families will feel the biggest squeeze from any additional tax on higher value properties,’ said Durrani. ‘The reality is that £2 million no longer buys you a mansion in London and hasn't for some time. Two bedroom properties in Shad Thames, St. John's Wood and Pimlico are all in close range of the £2 million barrier and will be netted by any new London housing tax well before the end of the next parliament. A smarter approach might be to make adjustments to council tax pay bands, which no party has been willing to look at,’ he pointed out. Among the Labour Party's housing policy initiatives is a controversial rental cap. The proposal calls for an effective freeze in rents for a period of three years, with CPI-linked increases allowed during this period. ‘In a deflationary environment, this is an easy promise to make, but what happens when inflation climbs above the level of rental value growth, or when rents decline? Our international experience tells us that rent caps are tough to police and artificially choke growth, creating unnatural cycles that are far removed from economic realities,’ Durrani explained. He pointed out that in Abu Dhabi a decision was taken last year to remove the emirate's 5% rent cap as it was artificially holding back the market and was far too broad-brushed and didn't really accurately… Continue reading
UK help to buy schemes continue to benefit first time buyers, latest data shows
The UK’s flagship housing schemes aimed at boosting the property market continue to flourish with first time buyers benefitting the most, the latest published data shows. In the first two years of the Help to Buy Equity Loan scheme to the end of March 2015, some 47,018 properties were bought with the total value of these equity loans at £1.99 billion and the value of the properties sold under the scheme totalling £10.01 billion. The mean purchase price of a property bought under the scheme was £212,932, compared with a mean equity loan of £42,394 and some 82% of the homes were bought by first time buyers. Figures for the Help to Buy NewBuy scheme saw 17 home purchases were made in the first quarter of the year, bringing the total number of house purchases up to 5,706 since the launch of the scheme in March 2012. The Help to Buy Equity Loan scheme can be used to purchase a new build property up to the value of £600,000, with a maximum equity loan of £120,000. The numbers of homes purchased in the scheme to the end of March were greatest in the £150,001 to £200,000 price bracket, representing 30.9%. The data also shows that of total sales some 22.1% were for properties between £200,001 and £250,000. These two price brackets combined therefore accounted for over half of the total completions in the scheme. The median purchase price for all purchases in the scheme was £191,000 with the majority of sales are bunched in the lower price brackets. The mean equity loan was slightly higher at £42,394, and 19.9% of the mean purchase price. This reflects that the majority of completions in the scheme used the full 20% equity loan available. The most frequent type of property sold under the scheme were terraced houses, representing 29% of total completions, followed closely by semi-detached properties at 28.7%. Detached properties and flats made up 26.4% and 15.9% of completions respectively. The numbers of homes purchased in the scheme to date in terms of total applicant household income were greatest for purchasers with a household income between £30,001 and £40,000 a year, representing 25.2% of total completions. Some 17.8% of completions had applicants with a registered household income of between £20,001 and £30,000 a year, with 3.2% of completions with applicant household incomes lower than this. Some 80.3% of completions had applicant incomes of £60,000 or less, whilst 3% of completions had applicants with a registered household income in excess of £100,000 a year. The quarterly figures for the NewBuy Guarantee scheme are based on legal completion dates for transactions in the scheme as reported by participating mortgage lenders. This covers England only and shows data from the launch of the scheme on 12 March 2012 to 31 March 2015. The total value of the Government Guarantees for these completed sales was £59.5 million. To date, there have been no claims made with respect to the guarantees made… Continue reading
Research suggests many young people need help from parents to buy first home
Almost half of parents in Britain whose children haven't bought a home, think the only way they will be able to do so is with inheritance from them new research suggests. Many parents feel high house prices and a lack of affordable homes are leaving their children priced out, according to the report from housing charity Shelter. It says that the latest government figures suggest they are right to be concerned, with home ownership levels having collapsed among young adults in the last decade. With the housing shortage making it much harder for young people to get a foot on the property ladder the Shelter poll shows that of those 25 to 34 year olds who have been able to buy, one in six of them relied on inheritance money from a relative, and nearly a third were gifted money for a deposit. This follows another recent report from Shelter which found that those locked out of homeownership have less stability in their finances and careers. Whilst many are also put off parenthood because they don't have a stable home of their own. Richard is one of those currently priced out. He's 28, and has a good job, but is currently living with his parents in their semi-detached home at the opposite side of London to his workplace. 'Even though I save every penny I have and cut costs wherever I can, it never seems to be enough with today's house prices. I hate the thought that losing the people I love most in the world could be the one chance I'll have to secure my own home,’ he said. Campbell Robb, chief executive of Shelter said no parent wants to think the only way for their children to ever own a home of their own is through losing someone they love. ‘It's a tragic consequence of our housing shortage that, even when they are working hard and saving what they can, a generation of young adults have no choice but to rely on the prospect of inheritance to have any hope of buying their first home,’ he added. He believes that the failure of successive governments to build anywhere near enough affordable homes is leaving millions of young adults facing a lifetime of uncertainty. ‘Politicians should give back hope to the priced out generation by making a real and lasting commitment to building the affordable homes we desperately need,’ he added. Buying a home is simply unaffordable for many first time buyers across England, particularly in London and the south, according to a new report by a housing charity. Shelter research says that first time buyers are being placed under increased financial pressure. Analysing homes listed on property listings website Zoopla across England it found that 16.9%, or 42,185 homes, were affordable and suitable for families earning the median income of £30,748 a year. For single people looking to buy a home, only 7.5% of homes were listed at an affordable price while for… Continue reading
