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Average house prices in UK’s biggest cities up 6.4% in first half of 2015
House prices across the UK’s 20 largest cities increased by 6.4% in the first half of 2015, led by Oxford, London and Glasgow, the latest index data shows. Oxford was the fastest growing city with a ride of 8%, followed by London with house price growth of 6.6% and Glasgow with growth of 6.4%, according to the Hometrack UK Cities House Price Index. Aberdeen was the weakest performer with house prices flat in the first half of the year, while northern cities like Leeds, Manchester, Liverpool and Sheffield, while seeing growth, still have average prices below the peak of the market in 2007. The data also shows that on a quarterly basis prices in these top cities increased by 4.3% while Oxford and Cambridge continue to perform overall like direct extensions of the London market. On a year on year basis growth across all 20 cities covered by the index is 8.4% with an average price of £226,200. At a city level this ranges from 11.6% in Cambridge to 2.9% in Liverpool. Looking to the second half of the year, the index report suggests that the headline rate of growth across the 20 cities index looks set to move higher as continued growth in house prices pushes the year on year rate towards 10% as the recovery spreads and households continue to price low mortgage rates into house prices. The greatest risk on the horizon is an increase in interest rates, recently highlighted by the Bank of England Governor. The report points out that 57% of outstanding mortgage debt is on variable rates, which is lower than the 73% high registered in the middle of 2012. While a year’s worth of new buyers have been subject to tougher affordability tests, the majority of mortgagees have not, Hometrack director of research Richard Donnell pointed out. Donnell explained that many home owners have continued to pay off debt while rates have been low, so any increase in mortgage rates is likely to impact market sentiment which, given the shortage of supply, would result in a marked slowdown in the rate of house price growth. ‘Rising demand for property against a backdrop of low supply continues push city level house prices higher. At 8.4%, city level house price inflation is running higher than the overall UK rate. While house price growth might moderate slightly in the second half of the year, it looks increasingly likely that city level house price growth will return to double digits by the year end,’ said Donnell. ‘The greatest risk facing the housing market is an upward movement in interest rates which would check market sentiment, cool demand and result in a marked slowdown in house price growth,’ he added. Continue reading
More people expected to rent than buy in UK by 2025
By 2025 there may be slightly more people renting privately in the UK than owning with a mortgage, according to new research, with average prices rising to £360,000 by 2020. There will also be a greater number of mostly older people than ever before owning their home outright, amounting to almost 35% of all households, says the analysis from accountants PricewaterhouseCoopers. The analysis also says that UK house price growth is projected by PwC to average just over 5% per annum over the period to 2020. So the average residential property in the UK could be worth around £279,000 in 2015, rising to around £360,000 by 2020. Overall the total UK owner occupation rate is projected to fall from a peak of nearly 70% before the financial crisis to around 60% of households by 2025 and house price growth is projected to moderate to around 5% per annum. The report also points out that as house prices have risen much faster than earnings and social housing supply remains constrained, the number of households in the private rented sector has more than doubled since 2001. This trend is predicted to continue with an additional 1.8 million households becoming private renters by 2025. This would take the total to 7.2 million households, almost one in four of the UK total in 2025. The trend is particularly strong in the 20 to 39 so called generation rent age group where more than half will be renting privately by 2025, according to PwC’s latest UK Economic Outlook report. Also by 2025, PwC analysis finds that there could be slightly more people renting privately than owning with a mortgage. The number of households who own their home with a mortgage fell from around 10 million in 2001 to only around eight million in 2014. This is projected to decline further to just under 7.2 million by 2025 as limited housing supply and mortgage availability make it harder for first time buyers to get on the housing ladder. There will also be record numbers of people owning their own home outright. This accounts now for 8.4 million households and PwC projects this will rise to 10.6 million households by 2025, around 35% of the total. A key driver is the rising proportion of over 60 year olds in the UK, who are far more likely to have paid off their mortgages. ‘Driven by a decade of soaring house prices pre-crisis and lower loan to value ratios post crisis, the deposits needed by first time buyers have risen significantly. As a result, a generation of private renters have emerged and this will increasingly be the norm for the 20 to 39 age group,’ said Richard Snook, senior economist at PwC. ‘There is also a rising dichotomy in the market between those, mostly older, households who own outright and those, mostly younger, households who still have a mortgage or rent to pay,’ he explained. ‘Overall, we project that the proportion of owner occupiers,… Continue reading
New South Wales leads Australian new home building boom
New South Wales has become Australia’s top state for new home building with the state of Western Australia, dropping to second place and Victoria in third. The latest biannual house report from the Housing Industry Associations shows that New South Wales is seeing strong levels of multi-unit dwelling construction and detached homes. ‘The buoyant housing market has played a significant role in elevating New South Wales up the rankings,’ said HIA economist, Geordan Murray, but he warned that the rapid price growth has intensified affordability pressures. ‘Lending figures reaffirm the challenges facing first home buyers. First home buyer lending highlights this as the weak spot in the housing market, and ranked New South Wales as the third weakest jurisdiction on this indicator,’ he explained. The recovery in Queensland continued to gather momentum. The analysis shows the improvements can be attributed to a boost in multi-unit home building. The improvements lifted the state one place up the league table. ‘To maintain the positive momentum we’ll need to see the recovery broaden its base through improvements in detached house building and renovations activity,’ added Murray. He also pointed out that in the post mining boom era, the focus has been on shifting the drivers of economic growth, which would see eastern states gain prominence. The latest Housing Scorecard highlights that it has been residential building that has picked up the first baton and led the charge. Meanwhile, the HIA is warning that increasing the GST property tax on new housing to 15% will add tens of thousands of dollars to new home prices, crushing the dream of home ownership for many Australians. ‘New housing is already weighed down by the burden of tax. It is usually seen as an easy cash grab by governments Adding another 5% or more on top of the price of a new home will put housing out of reach of many people that are trying desperately to get into the market,’ said HIA chief executive for industry policy Graham Wolfe. He pointed out that a 5% increase on a typical house and land package in Sydney, for example, would increase the cost of a mortgage by around $60,000 over the life of the loan. ‘Independent research has demonstrated that the total combined taxes, levies and charges on a new home can be up to 44% of the price of a new house and land package in Sydney. GST currently applies to new housing but not Wolfe. ‘We need more housing stock to accommodate our growing and aging population. Lifting the GST on new housing will dampen new housing activity. Increasing the burden on home buyers should be a no-go area for governments if they are really concerned about housing affordability,’ he added. Continue reading
