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UK home owners should factor in interest rate rise sooner rather than later
Home owners and those thinking of buying a home should budget for an interest rate rise after the Bank of England indicated that it expects to see interest rates rise sooner rather than later. But Banks of England governor Mark Carney refused to be drawn on whether this would be before the end of the year and indicated that it will depend on factors such as the state of the euro and what happens in Greece. Interest rates in the UK have been at a record low of 0.5% since March 2009 but Carney said that the time for an increase is ‘drawing closer’. He said that the decision would be determined by looking at economic data including wage growth, productivity and import figures. He also said that the increases, when they came, would be gradual and limited to a level below past averages and line with his previous forecasts of how rates will change. Experts are divided as to when the rise might happen. Andrew Burrell, head of forecasting at JLL, believes it is unlikely that rates will rise before the first quarter of next year. ‘Despite wage rises and a recovering UK, a muted inflation forecast and global economic headwinds mean that interest rates are likely to stay the same for a couple more quarters,’ he said. Barry Naisbitt, chief economist of Santander UK, also believes that economic uncertainties still exist to prevent an immediate rate rise and John McNeill, co-manager of the Kames Absolute Return Bond Global Fund, thinks it will not happen until 2016. Property buyers need to recognise that rates will move sooner rather than later, according to Nicholas Leeming, chairman of agents Jackson-Stops & Staff. ‘The decision to maintain interest rates at the current, historically low levels comes as no surprise. However Mark Carney has been careful to flag that interest rates will edge higher in the longer term as the economy continues to grow and inflationary pressure on wages increase,’ he said. ‘Property buyers should recognise that rates will move towards more sustainable, long term levels and so budget for higher mortgage costs accordingly. Vendors should be aware that any such increases will create resistance to overly high guide prices,’ he added. Steve Bolton, founder of Platinum Property Partners, pointed out that the UK housing market as a whole has enjoyed six years of historically low interest rates. He believes that those who have invested in buy to let property over this period have also benefitted from high levels of demand for private rental accommodation across the country. ‘This has meant that the return on investment for buy to let has been strong, with many investors also seeing an impressive growth in the value of their properties. But the announcement that the base rate could start to rise soon has implications for the housing market,’ he said. ‘On the one hand, more expensive mortgage rates will possibly put a dampener on demand for borrowing, but on… Continue reading
Ireland needs 21,000 new houses a year, but smaller homes are required
Demand for new housing In Ireland will continue to increase in accordance with population trends and a reduction in household sizes with 21,000 new homes needed per year for the next three years. Details from the National Housing Statement by the Housing Agency points out that the population is currently at its highest for 150 years at 4.5 million and demand for homes is high as a result. It also shows that affordability is an issue for those looking to buy in the greater Dublin area. Overall house prices have increased across the country with the median price nationally at €152,000, up from €140,000 in 2013. In Dublin it is €260,000, up from €220,000 in 2013. Rental prices have also increased, particularly for apartments. Nationally rents were 6.9% higher in the first quarter of 2015 compared with the same period in 2014 with growth of 9.6% in Dublin and 5.3% outside Dublin. Mortgage arrears and negative equity remain a serious concern, the report says, with a total of 110,366 mortgages in arrears at the end of 2014 but it adds that changes mean that smaller homes will be needed because household requirements have changed and the average household size has fallen dramatically. ‘Proportional household composition has changed and we see an increase in smaller households and a corresponding decrease in larger households. The average household size in the country has fallen significantly over the last nine years from an average of 3.04 in 2002 to 2.77 in 2011. Based on an assessment of regional trends, it has been calculated that it will fall further to 2.67 by 2018 so the majority of new housing will now accommodate fewer people,’ it says. Minister for State with responsibility for Housing, Paudie Coffey, said that the report provides a much needed analysis of the true picture of housing supply and demand in Ireland along with future projections, allowing for emerging imbalances to be identified and rectified at an early stage. ‘It contributes greatly to an overall understanding of housing needs in Ireland, ensuring that the most up to date and comprehensive data is available relating to current housing supply and emerging needs. Importantly, this data will help ensure policy responses are evidence based and needs led, as we endeavour to build sustainable communities for the present and future generations,’ he added. According to Conor Skehan, chairman of the Housing Agency, the data is now in place to ensure housing needs are met through a whole suite of initiatives which are underway including those addressing issues such as housing supply, housing land availability, and provision of social housing ‘Keeping those initiatives on target requires accurate data and progress reports on extent to which these needs are being met. This is the first of a series of annual reports to deliver a state of the nation picture of what housing needs are and how we are addressing housing supply,’ he explained. Continue reading
Rent controls not best way forward for young people to access housing in Europe
A group of over 30 private housing and property bodies from across Europe have come together to find solutions on how to improve younger people’s participation in the housing market. The International Union of Property Owners (UIPI), which represents more than five million property owners around Europe, says that there enormous challenges for young people accessing housing and rent controls are not necessarily the best way forward. At its Annual Congress, UIPI committed to continuing to discuss solutions on how to improve young generations’ participation in the housing market, by fostering home ownership and promoting access to affordable housing. ‘Young generations’ access to the housing market is a major issue of the running decade and it needs to be tackled. UIPI has a clear role to play in this debate and we have to promote solutions that stimulate the inclusion of young Europeans in the European housing market,’ said UIPI president Stratos Paradias. He pointed out that the new generation faces higher unemployment which is reaching some worrying rates in a number of European Union countries, and many have low and unstable incomes. ‘This is the harsh reality owed to the financial crisis making difficult for them to access home ownership market through mortgage loans despite current low interest rates,’ he explained. ‘Even our own children, who should inherit our own home and properties, are reluctant to do so, because they might be unable to cope with the payment of the transfer and inheritance taxes, not to mention the annual property taxation imposed in more and more countries, at ever increasing and alarming levels,’ he pointed out. ‘This situation forces an increased number of young Europeans to live with their parents, or to be financially dependent on them, postponing their family plans. It also puts additional pressures on the residential rental market,’ he added. He also explained that the burden on both the private and social housing sectors is amplified by population migration, notably of young EU citizens leaving their country of origin in search of suitable jobs, in already densified areas of the European centres of economic activities. ‘Low incomes, tightened lending and demand pressure on rental housing is a combination that generates political demands for stricter rent regulation, rent control or further investment in public housing and/or housing allowances. Rather than imposing rent control and high taxation, we believe that we have to correct the damages of the crisis in a way that does not endanger financial as well as macroeconomic stability,’ Paradias concluded. Richard Price, director of operations at the UK’s National Landlords Association (NLA) and executive director at the Association of Letting Agents (ALA) explained that younger generations are finding it much harder to enter the housing market across Europe. ‘Increasing the supply of affordable housing is the most likely factor to improve the situation in the UK, but this needs to go hand in hand with a stable economy and confidence in employment prospects,’ he said. The meeting… Continue reading
