Tag Archives: europe
Prime central London property rental values fall for first time since Feb 2014
Rental values in prime central London fell in July as stock levels held up while demand from the financial services sector became more subdued against a jittery global economic backdrop. The fall of 0.1% was the first decline since February 2014 and meant annual growth slowed to 2.9%, having peaked at 4.2% in May while prime gross yields were flat at 2.95%, according to prime central London index from Knight Frank. It explains that stock levels have been buoyed to some extent by a restrained sales market, where an increase in stamp duty for properties worth more than about £1.1 million has dampened activity and price growth. According to Tom Bill, head of London residential research at Knight Frank, as annual price growth has slowed to 2%, more property owners have opted to become landlords as they wait for the market to digest a succession of recent tax changes. He explained that this short term supply/demand imbalance means two things. First, tenants are shopping around more and securing deals has become more difficult for landlords, even after initial agreements are in place. Second, landlords have made it more attractive for tenants to remain in place, prompting higher renewal rates. ‘While seasonal demand from students has remained strong, corporate demand has become more muted despite some pockets of stronger performance,’ he said. The report points out that demand in the prime central London lettings market has traditionally been strong from the financial services sector but optimism among bankers fell sharply in the second quarter of 2015, according to a CBI/PWC survey. ‘Continued regulatory uncertainty means banks are scaling back spending plans and nervousness surrounds a possible UK exit from the European Union, the recent Greek crisis and Chinese stock market volatility,’ Bill said. ‘However, there are longer terms grounds for economic confidence, and the UK’s recovery was underlined by strong GDP figures in July. Furthermore, in an attempt to increase the appeal of London, Chancellor George Osborne plans to reduce the bank levy,’ he explained. ‘Meanwhile, Brevan Howard, one of world’s largest hedge funds, is reportedly moving senior traders back from Geneva to London, underlining the city’s dominance as a global financial centre,’ he added. Continue reading
UK house prices creep up month on month and year on year
UK house prices increased by 0.4% in July and annual property price growth edged up to 3.5%, according to the latest residential index from the Nationwide building society. The monthly rise follows a slight dip of 0.2% that was recorded in June and takes the average price of a home to £195,621. While annual growth has increased from the 3.2% recorded the previous month. According to Robert Gardner, Nationwide's chief economist, after moderating over the past 12 months, there are tentative signs that annual house price growth may be stabilising close to the pace of earnings growth, which has historically been around 4%. ‘This would bode well for a sustainable increase in housing market activity, though whether this will be maintained will depend on whether building activity can keep pace with increasing demand,’ he said. He pointed out that the outlook on the demand side remains encouraging. ‘Employment growth has remained relatively robust in recent quarters, and, after a prolonged period of subdued growth, wage growth is also edging up. With consumer confidence buoyant and mortgage rates still close to all-time lows, demand for housing is likely to firm up in the quarters ahead,’ he explained. But he added that it remains unclear whether activity on the supply side will catch up with demand. ‘The number of new homes under construction has started to pick up, albeit from historically low levels, and further increases are required if a sustainable recovery in the housing market is to be maintained over the longer term,’ said Gardner. The July index report also reveals the effect of significant changes to the stamp duty paid on sales which were introduced six months ago, resulting in bunching relating to the new tax thresholds. Gardener explained that the old slab structure used to result in significant distortions with a clustering of transactions at the tax thresholds. Under that system, paying £1 more would result in significant additional stamp duty being due. For example, paying £1 over the £250,000 or the £500,000 threshold used to trigger an additional £5,000 of tax. ‘Even though the change to SDLT only came into effect six months ago, the impact on the pattern of transactions is already evident, with much less bunching of transactions around the £125,000, £500,000 and in particular the £250,000 price points,’ he said. ‘Moreover, based on the first six months of transactions data from the Land Registry, nearly 235,000 purchasers in England and Wales have paid less tax under the new regime, with an average benefit of around £1,800,’ he added. He pointed out that the benefits are greatest in the South of England where average house prices are higher. ‘We estimate that around 85% of transactions in London, the South West and South East have benefited from the changes, compared with around 55% in the North, Yorkshire and Humberside, and the North West of England,’ said Gardner. ‘However, we estimate that around 5,000 or 2% of purchasers paid more, two thirds of whom… Continue reading
Survey suggests UK tenants concerned about rent rises due to change of tax regime
Tenants in the UK are concerned about rent rises resulting from the recent decision by the Chancellor of the Exchequer to scrap mortgage tax relief for private sector residential landlords. New research shows that some 38% of tenants are feeling uncertain as to how the cuts will affect them and over 50% are calling for greater rent control measures to be introduced. Indeed 35% of tenants say that they would move to a different property in the event of a rent increase, according to the research from comparison website Makeitcheaper. A breakdown of the survey findings show that just 20% of tenants would stay in their current housing, one in 10 said they would be forced to seek council housing and 17% would be more motivated to buy their own property. These results show that landlords may run a high risk of losing tenants by increasing rent, around 80%, as many would be simply unable to afford a price hike. There are certain rules around rent price increases that landlords must adhere to. For example, landlords cannot raise prices in a fixed term tenancy prior to the end date, without the tenant's agreement. But, even with these precedents in place, there's a good chance that tensions between landlord and tenant could grow in the event of price rises. However, the latest landlord research by buy to let lender Paragon Mortgages has revealed that 75% of landlords are confident their tenants will not get into more difficulty in the next 12 months as rental arrears will remain stable. The lender’s PRS Trends Survey results for the second quarter showed a 4% increase in those landlords who felt tenant rental arrears would remain stable, the third successive improvement. The proportion of landlords reporting an expected increase remained low and unchanged from the previous quarter at 8% whilst those landlords expecting a decline in arrears was 6%. The survey also revealed that 17% of landlords are planning to purchase additional rental properties over the summer quarter. There was little movement in the most popular property types landlords are looking to buy, with terraced properties and semi-detached houses topping the list at 38%, followed by 35% looking to buy apartments. ‘Landlords continue to experience strong tenant demand and are keen to add to their portfolios. The positive signals being picked up elsewhere around the economy also seem to have flowed through to the PRS with landlords experiencing low arrears and low, stable voids,’ said John Heron, director of Paragon Mortgages. Continue reading
