Tag Archives: asia
Majority of home owners in Australia concerned about property values
More than two thirds of Australians are concerned that Australia’s housing is vulnerable to a significant correction in values, according to the latest housing sentiment survey. Some 68% of respondents to the September CoreLogic RP Data TEG survey said they believe the housing market is vulnerable to a significant correction in values. However, the findings are a reduction from the previous quarter results where 75% of respondents indicated they were concerned about a significant downturn, but despite the apparent improvement in consumer perceptions, a significant proportion of the community are wary of substantial value falls across the nation’s largest and most important asset class, which according to CoreLogic RP Data is worth an estimated $6.2 trillion. ‘While we don’t envisage dwelling values will fall substantially, the probability of declines in Sydney, and to a lesser extent in Melbourne, after such a strong run of capital gains isn’t unlikely,’ said CoreLogic RP Data head of research Tim Lawless. ‘Home values are already trending lower in Darwin and Perth. It was less than three and a half years ago that capital city dwelling values fell by 7.4% between October 2010 and May 2012,’ he pointed out. Additionally, 95% of survey respondents believe that foreign demand is pushing property values higher, with 19% indicating that foreign buyers were responsible for placing ‘extreme’ upwards pressure on home values. Only 5% of survey respondents thought foreign buying activity wasn’t pushing home values higher. According to Lawless, the results are a stark reminder that the true extent of foreign buying of residential properties across Australia continues to lack transparency, despite the House Economics Committee Report on Foreign Investment in Residential Real Estate being handed down almost a year ago. He added that the latest statistics haven’t been updated since the 2013/14 financial year. Some 55% of survey respondents thought that the current housing market conditions represented a good time to buy a property, down from 60% in June. Respondents based in Sydney, where housing market conditions have been running the hottest, were the most pessimistic about buying conditions, however 29.7% of respondents still thought that now was a good time to be getting into the market. Alternatively, more than 70% of survey respondents thought buying conditions were ripe in the Australian Capital Territory, Adelaide, regional Queensland and Perth. The proportion of survey respondents who thought property values will rise over the coming six months has been trending lower, with respondents who thought home values will rise over the next six months dropping from 49% in March and 48% in June to just 40% of all respondents in September. Continue reading
UK property price set to rise by an average 17% by end of 2020
House price growth across the UK’s mainstream markets has exceeded expectations in 2015 but there is still room for further increases providing interest rates do not rise too steeply, according to new research. The timing and pace of interest rate rises, coupled with patterns of economic growth at a regional level, will dictate the distribution and sustainability of any increases, says the report from international real estate adviser Savills. The firm forecasts that prices will rise by an average of 17% by the end of 2020, ranging from 21.6% in the South East to 12% in the North East, assuming that mortgage rates do not exceed 4.5%. Any combination of higher house price growth or high mortgage rates could leave affordability looking stretched. Much depends on the speed at which interest rates rise. If rates rise too quickly mainstream house price growth will be quickly curtailed. On the flipside, if rates remain low for too long, there is a risk that prices will rise too far, creating affordability issues further down the line when they do eventually rise,’ said Lucian Cook, head of Savills residential research. ‘That risk has been mitigated by recent mortgage regulation which, by stress testing affordability, caps the amount people can borrow relative to incomes. That is likely to cap price rises, particularly in London, where house price to household income ratios are highest, thanks to growth seen over the past 10 years,’ he added. London’s mainstream markets are expected to underperform its hinterland, with average growth of 15.3% forecast over the next five years, though this will range from 20% to just 10% depending on specific location and post downturn levels of house price growth. Lower value outer London boroughs have greater remaining capacity for house price growth than higher value parts of the capital, having grown in line with the South East and East of England rather than London itself over recent years. While Walthamstow and Lewisham are expected to show the strongest growth, outperforming the mainstream submarkets of boroughs such as Hammersmith and Fulham and Richmond. The strongest price rises are therefore expected in parts of the south and east of England, which offer value relative to the capital so should benefit as the ripple gains traction. Growth beyond will depend on the strength of regional wealth generation and the ability of cities such as Manchester and Birmingham to act as catalysts to reinvigorate their housing markets. At the same time, annual transaction levels, at just over 1.2 million this year, are expected to reach 1.3 million in 2020, far short of the pre-crunch norm of around 1.7 million, as deposit affordability continues to act as a brake on demand and the changes to the taxation of buy to let property restrict the ability of some landlords to expand their portfolios. Continue reading
UK home buyers unlikely to see mortgage costs rise in short term
Home buyers in the UK are set to see mortgage rates remain at historic lows for some time yet despite original forecasts that they might rise by the end of this year. The Bank of England has indicated that the current 0.5% base rate is likely to be around for some time yet with a rise not looking likely until well into 2016 or even 2017. Rates have now been this low for 80 months. But there are concerns that home buyers will get too used to low interest rates and this could backfire in the future when interest rates do rise. According to James Jones, head of Consumer Affairs at Experian, buyers need to work out what they can afford, and plan ahead for unforeseen costs that may make repaying debts harder over the years ahead. A survey of people who had failed to secure a mortgage last year suggests that many are failing to do the basic research needed to get proper control of their finances. Some 13% did not know how much money they have left over at the end of the month and 18% did not know what monthly repayments they could afford. The research also found that 14% did not have a big enough deposit for the property they wanted and 12% were unable to secure the size of mortgage they needed. Another piece of research has found that almost three quarters of home owners with interest only mortgages are worried they may not be able to repay their loan. Interest only deals mean borrowers pay the interest on the loan during the life of the mortgage and then must repay the capital when the mortgage term ends. Just 31% of those interest only borrowers questioned said they have a separate investment policy in place, such as an endowment or an ISA, to pay the capital, according to the research by mortgage broker Ocean Finance. While 16% said they plan to switch to a repayment mortgage before their current loan ends, 31% said they expect to have to sell their home to settle the outstanding capital. And a fifth of home owners said they don’t have a plan in place to repay the capital. ‘Interest only has become a time bomb because so many people took out the products to cut the cost of their mortgage, with no view of how they would repay the capital element. Borrowers who have an interest only mortgage with no repayment plan need to take action,’ said Gareth Shilton, Ocean’s spokesperson. ‘It’s advisable to seek advice on whether they can overpay on their current interest only deal, switch to a repayment mortgage, or use an ISA or pension to settle the capital payment,’ he added. Interest only mortgages became popular in the 1990s as a way for consumers to afford homes at a time when property prices were soaring. Lenders often agreed interest only loans without confirming borrowers could repay the capital owing… Continue reading
