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London residential rental market strong, new reports suggest
The London rental market has bounced back to see rental values rise by more than 4% across most of central and east London with healthy gains seen across most of the rest of the city. The research by analysts at Benham & Reeves Residential Lettings cite the crippling effect of the new stamp duty rates on the sales market for the strong rental market as tenants eschew home ownership in favour of long term tenancies. The prime central London market saw strong gains last quarter after several quarters of stagnation, and continued to see strong growth this quarter, the data also shows. Many of the tenants are overseas professionals who are opting to rent long term as the cost of renting often represents a saving compared to purchasing a home in high value areas thanks to the 12% top rate of stamp duty. The rental market in east London is also very strong but for different reasons. The tenant demographic is typically younger and more likely to be British. However, many of these tenants are deliberately choosing to rent rather than own a property as a lifestyle choice, the report suggests. It explains that many of the millennial generation do not view home ownership as a goal and recognise that they can often afford to rent a much better property than they can afford to buy. Millennials are also a more mobile workforce who change jobs more frequently than previous generations. North London was one of the few areas to see rental values fall. A number of new developments in north London have seen the property supply increase. Locations on the Northern Underground Line have also fallen as the Central Line interchange at Tottenham Court Road has been suspended for several months while the station is rebuilt for Crossrail. ‘From an investors' perspective, it is very interesting to observe demographic changes. One of the reasons the rental market tends to remain so strong in areas such as east London is because these areas attract Millennials who are content to rent long term,’ said Marc von Grundherr, lettings director at Benham & Reeves Residential Lettings. ‘They're simply not willing to scrimp and save for years to afford a deposit but prefer to live for the moment. This concept even extends to where they choose to rent as they'd much rather live somewhere central close to good bars and restaurants than commute in from more affordable areas. For as long as East London remains hip and trendy, it will continue to attract good quality tenants,’ he added. Separate research from JLL also suggests that the lettings market in London is strong. According to Tom Middleditch, associate director of the firm’s Kensington office said September was particularly strong and added that landlords should still see this as the ideal month for their properties to be coming available. ‘Taking the months of August and September, we seen a 49% increase in tenancies starting than in the… Continue reading
New home building sector in Australia sees three years of growth
The new home building sector is the star performer of the Australian economy having seen three years in a row of growth, according to the Housing Industry Association (HIA), the voice of Australia’s residential building industry. The latest data from the Australian Bureau of Statistics show that despite a modest decline in new dwelling commencements in the June 2015 quarter, there was still a record number of 211,976 new homes started in 2014/2015, an increase of 16.9%. ‘That is a phenomenal result which caps three consecutive years of growth for new home building, only the fifth time in the last 60 years that this feat has been achieved,’ said HIA chief economist Harley Dale. ‘Through its broad reach the new home building sector has delivered a strong economic dividend to Australia during a period when many other sectors of the economy have struggled,’ he pointed out. He also explained that while new dwelling commencements will fall in 2015/2016 they should remain elevated at what would still be the second highest level on record. ‘The key to the short term prospects for new home building is how much work in the pipeline is converted into actual activity and it’s not coming through as quickly now. An orderly decline in commencements in 2015/16 remains the most likely outcome,’ Dale added. A breakdown of the figures shows that there were 53,314 dwellings commenced during the June 2015 quarter, a decline of 3.2% from an upwardly revised March quarter. Detached house commencements fell by 2.9% to 28,046, while ‘other dwelling’ commencements declined by 4.9% to 24,482. But there are regional differences. New dwelling commencements increased in South Australia by 12% in the quarter, by 54% in Tasmania and by 76.4% in the Australian Capital Territory. But they fell by 1.6% in New South Wales, by 0.5% in Victoria, by 9.6% in Queensland, by 10.5% in Western Australia and by 36.1% in the Northern Territory. Meanwhile, the latest data shows that prices growth for land for building new homes has eased off slightly. The latest HIA-CoreLogic RP Data Residential Land Report shows there was some relief from the tight conditions in Australia’s residential land market in the June 2015 quarter. National residential land sales increased by 17.6% while the weighted median residential lot price increased by 0.6% over the quarter to 5.2% higher than 12 months earlier. ‘A rise in land sales was accompanied by an easing off in the pace of price increase in Australia’s residential land market. This compares with previous quarters which saw strong price increases amid declining land sales,’ said HIA economist, Diwa Hopkins. ‘While the June quarter result is an encouraging development, what needs to occur is similar results being sustained over the longer run. That is, a larger and more consistent flow of shovel-ready land needs to be brought online,’ she explained. ‘For this to happen, policy reform needs to address the key land supply bottlenecks including unnecessarily long planning delays, slow… Continue reading
Tighter buy to let regulation could push up rents in UK
Measures which discourage investment in the private rented sector in the UK in the face of population growth and low housing supply can only push up rents and harm tenants more than landlords, a new report suggests. The report from the Intermediary Mortgage Lenders Association (IMLA) which examines the key issues facing the main segments that make up today’s mortgage market, warns that tighter buy to let regulation could restrain supply. Assessing the possible impacts of July’s buy to let tax changes, the IMLA argues that a higher tax burden for landlords, which will push some into losses after tax and raise the effective tax rate on their buy to let above 100%, may slightly skew the market in favour of owner occupied house hunters, by reducing the price that landlords are prepared to pay for any given property. The risk, however, is that these changes and the threat of tighter buy to let mortgage regulation will constrain the supply of available rental properties at a time when the fundamentals of population growth and low housing supply are driving an increase in demand, and that institutional investment will fail to make up the gap. The IMLA report shows total lending across the mortgage market this year was running below its 2014 level from January to May. Since then, there has been a sharp recovery and 2015 may be shaping up to be a mirror image of 2014. Subdued lending in the first half of the year may have reflected uncertainty in the run up to the general election but a clear cut election result has removed this level of doubt. The bedding down of the Mortgage Market Review (MMR), which disrupted some lending with its introduction in 2014, has also contributed to the recovery, it explains. By far the most robust recovery has come in buy to let, but this must be placed in context of an 81% decline after the recession between 2007 and 2009, the report points out. This compares with a 60% drop in remortgaging volumes, 56% among home movers and 53% among first time buyers over the same period. Buy to let lending volumes remained 40% below their 2007 peak in 2014, and the IMLA argues that it is responding to rather than driving growth in tenant demand in the private rental sector. While buy to let has rebounded, the remortgage market has been slow to respond, but conditions are ripe for a resurgence. IMLA’s analysis shows that in the second quarter of 2015 remortgage volumes were up 11% on the previous quarter to record the best performance since 2009. At just under 3%, the price differential between standard variable rates (SVRs) and discounted variable rate deals is greater this year than ever before. Interest rates are also expected to rise, and for the first time in the second quarter households’ aggregate housing equity surpassed the £5 trillion mark. Only 20% of gross UK housing wealth is now… Continue reading
