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UK buy to let tax change will restrict lending in the short term, says new report
The restriction of mortgage interest relief for UK buy to let landlords will, in the short term, curb lending in the sector, which currently makes up 15% to 16% of mortgage lending, according to a new analysis. At the same time, 2015 is on track to become the best year for buy to let mortgage deal issuance since the credit crunch, says the special report from Moody's Investors Service. ‘The government's decision to restrict buy to let mortgage interest relief reflects a willingness to put investors and owner-occupied borrowers on a more level playing field, given that the latter cannot claim tax relief on their mortgages,’ said Moody’s analyst Emily Rombeau. ‘First time buyers' affordability has declined, as they struggle to get on to the property ladder. Affordability constraints and demographic changes have increased the share of privately rented housing and this sector's evolution has strongly contributed to the rapid growth of the buy to let sector in recent years,’ she explained. ‘Repeat issuers and new players will support a robust pipeline of buy to let RMBS deals this year. Issuance for this segment has accounted for 25.6% of total UK RMBS issuance so far this year, up from 10.2% in 2014,’ she added. Over the coming months, Moody's forecasts that reduced demand for buy to let properties will soften UK house price growth. Moody's forecasts that UK house prices will nonetheless rise by up to 5% in 2015, albeit at a slower pace than in 2014. ‘Notwithstanding the softening in house price growth, the risk of an immediate house price decrease is limited given the housing shortage and the economic recovery,’ Rombeau pointed out. According to the Moody's report, the buy to let market has grown at a steady pace since early 2010, accounting for 16.8% of total gross mortgage lending and 25.3% of total house purchases as of the first quarter of 2015. Buy t let gross lending volumes have substantially increased, rising to £7.6 billion in the first quarter of 2015 from £2 billion in the first quarter of 2010. Paragon, the UK's largest buy to let specialist, has accounted for around 40% of buy to let issuance since the financial crisis, with a total of nine transactions collectively worth £3.2 billion, the report says. Mortgages also entered the buy to let securitisation sphere this year; the recently established specialist lender has already completed two buy to let transactions for a total amount of £426 million since January 2015. Moody's research says that, while UK house prices increased by 3.5% in the first half of 2015, according to data from the Nationwide, most regions, except for Northern Ireland and Yorkshire and Humberside experienced a further slowdown in annual price growth in the second quarter of 2015. The monthly year on year growth in UK house prices gradually declined to 3.3% from 11.8% in the 12 months to June 2015. David Whittaker, managing director of Mortgages for Business, said that… Continue reading
US home prices up 6.5% year on year, latest index shows
Home prices across the United States, including distressed sales, increased by 6.5% in June 2015 compared with the same month in 2014, according to the latest index. It is the 40th month in a row of year on year price increases and values were also up month on month with growth of 1.7% in June compared to May, the CoreLogic home price index also shows. Excluding distressed sales, home prices increased by 6.4% in June 2015 compared with June 2014 and increased by 1.4% month on month with only Massachusetts (-1.5 percent) and Louisiana with an annual price fall of 1.5% and 0.1% respectively. Including distressed sales, that is short sales and real estate owned sales (REO), some 35 states were at or within 10% of their peak prices in June 2015 and 15 reached new price peaks. The firm’s latest house price forecast indicates that home prices, including distressed sales, are projected to increase by 0.6% month on month from June 2015 to July 2015 and by 4.5% on a year on year basis from June 2015 to June 2016. Excluding distressed sales, home prices are projected to increase by 0.5% month on month from June 2015 to July 2015 and by 4.2% year on year from June 2015 to June 2016. The index report also shows across the country there was 4.8 months supply but the measure varied greatly across cities. In San Jose and Denver, there was only 1.6 months’ supply of homes on the market, whereas Philadelphia had a seven months’ supply and Providence had a 6.6 months’ supply. Frank Nothaft, chief economist for CoreLogic, explained that the stronger appreciation was registered in cities with limited inventory and strong homebuyer activity, such as San Jose and Denver. According to Anand Nallathambi, president and chief executive officer of CoreLogic pent-up buying demand and affordability, together with higher consumer confidence buoyed by a more robust labour market, are a potent mix fuelling the 6.5% jump in home prices with more increases likely to come. Including distressed sales, the five states with the highest home price appreciation were Colorado with growth of 9.8%, Washington up 8.9%, New York up 8.3%, South Carolina up 8% and Nevada also up 8%. Excluding distressed sales, the five states with the highest home price appreciation were Colorado up 9.3%, New York up 8.5%, Washington up 8.3%, Oregon up 8.2% and Nevada up 7.9%. Including distressed sales, only four states experienced home price depreciation with the biggest fall of 5% in Massachusetts, while Connecticut was down 0.6%, Louisiana down 0.4% and Mississippi with a fall of 0.3. The five states with the largest peak to current declines, including distressed transactions, were Nevada with a fall of 32.2%, Florida at 28.7%, Rhode Island at 26.5%, Arizona at 25.8% and Maryland down 21.2%. Of the top 100 Core Based Statistical Areas (CBSAs) measured by population, some 93 showed year on year increases while seven showed year on year declines… Continue reading
Small developers could be hindered by UK court ruling on affordable homes
The UK courts have delivered a blow to small residential developers, potentially making schemes of up to 10 homes economically unviable, according to legal experts. The decision, which concerns the exemption small residential developers have previously had from contributions towards affordable housing, will particularly affect urban residential development and small rural sites, according to law firm Coffin Mew. The exemption was introduced by the government to encourage residential developers to bring forward smaller housing schemes and to redevelop compact urban and rural spaces to help meet the chronic housing shortage. However, two local authorities, Reading and West Berkshire, have successfully challenged this exemption, arguing that it would have a negative effect on affordable housing numbers. ‘This decision is a major blow for smaller residential developers looking to bring forward schemes in urban environments,’ said Nick Leavey, partner and head of commercial property at law firm Coffin Mew. ‘The economic viability of small schemes is often on a knife edge, and this decision is likely to pull the rug from underneath those difficult to develop sites. It is also likely to have a negative effect on land values for future deals, exacerbating the housing crisis in the South East further. Nobody wins from this decision,’ he added. Meanwhile, real estate industry in the UK has seen an 11% growth in jobs due to the recovery in the property market. Jobsite Indeed research found that opportunities for trainee estate agents, quantity surveyors and property managers are among the top five. London, Manchester and Birmingham top the list for vacancies. Also, the number of people actively looking for careers in this industry has increased 10% since 2014, which the firm says suggests that job seekers are starting to realise the potential within this market. ‘The return of positive conditions in the UK housing market for both buyers and sellers, suggest it’s prime time for job seekers in this sector to take advantage of such opportunities,’ said Gerard Murnaghan, Indeed’s vice president for the EMEA region. Continue reading
