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Buy to let mortgage lending still the star in the UK housing market
Mortgage lending to first time buyers in the UK increased by volume month on month and on an annual basis in September, the latest data from the Council of Mortgage Lenders shows. However, in contrast, lending to people moving home saw a dip in September compared to August, but grew by volume and by value compared to a year ago while home owner remortgage activity rebounded after a dip in August to increased levels in September both compared to a month ago and the same time last year. The buy to let sector continues to grow and saw year on year increases by volume and by value in both buy to let house purchase and buy to let remortgage sectors. The CML data also shows that first time buyers increased in number of loans advanced and amount borrowed both in comparison to quarter two and the third quarter last year and home mover lending saw a similar trend to first time buyers but the percentage increases by volume and by value were higher. Home owner remortgage activity saw an increase compared to the second quarter of the year, but a more substantial increase compared to the third quarter 2014 while buy to let saw large quarter on quarter and year on year increases by number of loans and amount borrowed. Paul Smee, director general of the CML, pointed out that the mortgage market had a slow start to the year. ‘This quarter shows it is now firmly on an upward trajectory. With competitive rates and high levels of product choice currently available, alongside generally improving economic conditions, we expect this to continue as we head into the New Year,’ he explained. ‘Buy to let continues its growth this period, but at 18% of new lending in September remains the fourth largest lending type behind first time buyers, home movers and remortgage. There were five times as many house purchase loans to home-owners as buy to let landlords in September, and the growth in buy to let lending largely continues to reflect its more belated recovery from recession,’ he added. According to Rishi Passi, chief executive officer of Oblix Capital, on the one hand Help to Buy has driven up borrowing by first time buyers both in volume and value and on the other, there is little sign that impending buy to let tax restrictions are dissuading landlords from expanding their portfolios. ‘Meanwhile cheap money is allowing lenders to offer historically attractive rates to the market and as a consequence lenders are enjoying their best spell since 2008, enticing first time buyers and developers alike to move and borrow,’ he said. Rob Weaver, director of investments at property crowdfunding platform Property Partner, the growth in buy to let lending underlines the continued confidence UK investors have in this asset class. ‘As an asset class buy to let is also… Continue reading
Country house market in UK above £2 million seeing recovery
The UK’s country house market has seen a marked recovery in the £2 million plus sector in the third quarter of 2015 compared to the previous two quarters, according to the latest research. The analysis report from Strutt & Parker also shows that sales levels are now not far off where they were in the fourth quarter of 2014, suggesting that the market uncertainty from the general election has perhaps filtered out. Strutt & Parker’s UK outlook for the remainder of 2015 looks positive and it predicts that there will be sufficient growth in the final quarter of the year to hit the forecast of 5.0% for 2015. Growth over the next few years is also forecast as positive with 5% per annum anticipated. There are, however, uncertainties for the UK market and the upcoming European Union referendum and potential interest rate rises adds further pressures. Despite this, sensibly priced and good quality properties, both regionally and in prime central London, will continue to do well, the firm believes. ‘There remains some uncertainty over the near term outlook for the national housing market. The gradual strengthening in growth within the UK economy is still being met by some caution against risk and interest rates are expected to begin rising early to mid 2016,’ said Stephanie McMahon, head of research at Strutt & Parker. ‘Once rates do begin to rise they may have a dampening effect on the national housing market, most specifically in the mainstream markets where the majority of purchases are dependent upon mortgages,’ she explained. ‘However, two factors should cushion this impact. First, interest rate rises are likely to be gradual, estimated to reach circa 2% to 2.5% over the next five years. Secondly, the majority, 75% to 80%, f recent mortgages have been at fixed rates. Both of these factors should mean that any adjustments in purchasers’ behaviour should also be gradual,’ she added. Her colleague, James Mackenzie, head of the country house department at Strutt & Parker, also agrees that the prime country house market is showing signs of improvement with a lack of high value property on the market and growth in demand over the quarter. ‘However, buyers are incredibly price sensitive as the cost of stamp duty is still a major hurdle. We are hopeful for a normalised autumn and winter,’ he added. Guy Robinson, head of regional residential agency at Strutt & Parker, pointed out that activity in the summer and early autumn months has shown encouraging signs of an improving market. ‘Last quarter, there was strong demand from buyers which has translated into agreed sales. The number of new instructions has remained static, consistent with the previous period,’ he said. Continue reading
Central London office rental values hit double digit annual growth
Rental values in central London’s booming office market grew by 10.3% in the year to October 2015, the first time annual growth has hit double digits since April 2008. The capital saw 1.1% growth in October, as demand for office space continues to overwhelm limited availability, according to the latest CBRE Monthly Index. Despite rapidly rising rents, take-up of offices in central London continues to outpace the 10 year average. Some 3.6 million square feet of space was snapped up by businesses in the third quarter of 2015, with a further 3.8 million currently under offer and expected to complete before the end of the year. Office rents aren’t just rising rapidly in London. Rental values in the office sector grew by 1% across the UK last month, only the third time rents have grown this quickly since the financial crisis, and much faster than the 0.4% seen across commercial property as a whole. Capital values are also growing fastest in the London office market, at 1% in October, some way ahead of the 0.6% for offices outside London, and twice as fast as the 0.5% growth seen across all commercial property. Together, the rising rents and capital values in the UK office market are giving investors total monthly returns of 1.2%. This strong rental value growth means that UK offices are now highly reversionary. The average initial yield for UK offices is now 4.1%, below the pre-crisis low of 4.2%. This compares with the average equivalent yield of 5.4%. The position is even more marked in central London Offices where the average initial yield of 3.1% compares to an average equivalent yield of 4.5%, although strong income growth has closed the gap over the last few months. ‘London’s office market has been heating up for some time now, but there is still strong business demand across the capital,’ said Kevin McCauley, head of central London research at CBRE. ‘Rental value growth has not been this sustained since before the financial crisis, and together with rapidly rising property values, landlords and investors are experiencing a booming market,’ he added. Continue reading
