Tag Archives: europe
European Bank measures risk house price bubbles in UK, Germany and Norway
Quantitative easing by the European Central Bank could drive prices even higher in overvalued property markets in Germany, Norway and the UK, a new analysis suggests. House prices in these countries have risen quickly over the last year and a half and as a result the risk of house prices bubbles have re-emerged, according to a report from Moody’s Analytics. It explains that while the International Monetary Fund’s Global Housing Watch shows prices rising, it is case of a two speed market. Some have rebounded quickly after just moderate price declines during the financial crisis, the other group is still recovering from much steeper price drops. The first group includes Germany, the UK and Norway where house prices have shot up over the last few quarters and where the formation of a housing bubble is a real possibility and QE feeds asset bubbles, the report points out. Since March every month the EWCB has been buying €60 billion worth of euro-denominated assets issued by euro one governments, agencies, and European institutions and the programme will last at least until September 2016. This has seen yields on the government debt of countries viewed by investors as safe fall and this in turn has encouraged investment in property markets which yield higher returns. In Germany, house prices have been steadily rising since the middle of 2009 as its property market is viewed as a safe haven investment in an environment of increased uncertainty. Indeed, Germany was one of the few European countries to avoid a housing market slump during the 2008/2009 downturn, thanks to prudent bank lending regulation. However, the report says that growing demand for German properties is leading to overvaluation, especially given the insufficient supply. Only recently has construction finally picked up. In the first half of this year, German building authorities granted 10% more building permits than in the same period a year earlier. But it will take a few years before supply catches up to demand. German house prices have therefore been rising more quickly than rents and incomes. Although the price-to-income and price to rent ratios are still relatively low compared with Germany’s long term average, the report says that if this trend persists the housing market could overheat. While the outright risk of a housing bubble forming in Germany is relatively low, the Bundesbank is monitoring the situation. So far, it has not intervened. However, in the UK the authorities are doing so. Last year the Bank of England in 2014 warned of a possible housing bubble which could derail the country’s recovery and introduced tighter mortgage loan standards designed to reduce the supply of credit, taking some heat out of the housing market. The UK’s Financial Conduct Authority also introduced stricter underwriting rules for mortgages to ensure that banks assess borrowers’ ability to repay loans after interest rates start to rise. Yet loan standards are still relatively loose, largely the result of the UK government’s Help… Continue reading
CML expected improved mortgage market activity ahead in UK
A benign economic backdrop should underpin a gentle improvement in housing and mortgage market activity in the coming months, according to the latest forecast from the Council of Mortgage Lenders. The CML market review report points out that this follows a softer patch over the past year, which has dragged down our expectations for gross mortgage lending to £209 billion this year, from the £220 billion the CML had expected previously. ‘Several of the government’s fresh housing initiatives will take time to take effect and so do not fundamentally reshape market prospects this year or next, as far as we can judge at this stage,’ said Bob Pannell, CML chief economist. The report explains that with house price levels already elevated and continuing to outpace earnings across much of the country, the upside potential for regulated lending is likely to be constrained by affordability pressures, reinforced by the recent MMR mortgage rules and macro-prudential rules. It also points out that perceptions of the buy to let sector can be distorted by the fact that remortgage activity accounts for a much larger share of overall buy to let lending, more than half, than is the case for home owner loans. ‘Although buy to let business volumes continue to expand, the underlying pace of growth in buy to let activity, both for house purchase and refinancing, has been slowing, following its strong recovery over the past few years. Policy interventions in the buy to let space may reinforce this downward trend,’ said Pannell. ‘We expect a further improvement in arrears and possessions this year and anticipate that the overwhelming majority of borrowers will cope with the modest interest rate increases that start in 2016,’ he added. Overall the CML is slightly more optimistic about housing market developments than it was at the turn of the year and Pannell explained that this is largely because of the continuing resilience of cash transactions, amounting to nearly 37% of all transactions over the past year. He added that regulated house purchase activity has continued to edge down relative to the market as a whole over the past year, and this has acted to drag down our overall mortgage lending total for 2015. ‘We now expect gross lending of £209 billion, compared with our earlier estimate of £222 billion,’ he concluded. Continue reading
UK homes market sees more properties coming up for sale online
The number of UK home owners putting their properties on the market online has increased by 7.1% in the past month compared to the previous month, the latest research shows. Some 67% of major towns and cities in the UK have seen a rise in the number of new properties being marketed in the same period, according to the data from online estate agents House Simple. The index, compiled from the number of new properties listed every week on the property portal Rightmove in more than 100 major towns and cities across the UK and all the London boroughs, also shows that although new stock levels remain low overall across the country, home owners are finally starting to put their homes on the market. The largest increases in new listings in the past month compared to the previous month was in Swindon with growth of 47.3% followed by Liverpool and Leicester, both at 30.4%, then Lancaster at 24.3% and Sunderland at 22%. Next came Halifax at 21.1%, Coventry at 21.1%, Hereford at 19%, Lincoln at 17.6% and Oxford and Dundee both at 17.5%. These towns and cities were followed by Edinburgh and Blackpool at 17.2%, Hartlepool at 17.1% and Bolton at 16.3%. The figures also reveal a distinct north/south divide, with home owners in the north of England and Scotland appearing to be more active in June and July in marketing their properties. Nine out of 15 of the new property listings risers are in the north of England or Scotland, while four towns/cities in the Midlands also feature in the list. Winchester saw the biggest drop in new properties coming onto the market in the past month compared to the previous month with a fall of 17.9%, followed by Hull down by 13.7%, Doncaster down by 12.5% and Cambridge down by 8.7%. Next came Nottingham with a fall of 8.1%, Torquay at 7.6%, Grimsby at 6.2%, Norwich at 5.8% and Glasgow at 5.7%. The London property market has slowed in recent months. However, Rightmove figures analysed by HouseSimple reveal that the capital has seen an 8.1% increase in new properties being listed in the past month compared to the previous month. Some 78.1% of London boroughs have seen an increase in new properties being marketed in the past month and the biggest rise was in the City and Westminster at 29.5%, Islington at 28.8% and Southwark at 27.1%. Meanwhile the biggest fallers have been Bromley, down 11.2%, Kingston upon Thames down 6.6% and Havering down 4.4%. ‘A stampede of sellers coming to market was expected after the General Election result, but that stampede never materialised. In fact, for the first few weeks there appeared to be a fair amount of caution and reluctance amongst sellers to market,’ said Alex Gosling, chief executive officer of House Simple. ‘This may have been a case of waiting to see if property prices might start to rise rapidly with the confidence generated by a stable, majority government. Now it… Continue reading
