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Mortgage lending in UK fell in February month on month, no big change expected
Gross mortgage lending reached £17.6 billion in February, some 5% lower than January but 30% higher than February last year, according to the latest estimates from the Council of Mortgage Lenders. It is, however, the highest lending total for a February since 2008 when gross lending reached £24.1 billion. ‘Lending continues the year on a positive note, with our monthly estimate showing an increase of 30% in February compared to a year ago. This growth rate is in line with what we saw in the closing months of 2015,’ said CML economist Mohammad Jamei. He explained that the recovery is being underpinned by market fundamentals in the UK, as wages grow and unemployment falls, helped by government schemes and competitive mortgage deals but the CML thinks it is unlikely that there will be any significant acceleration in lending. ‘While there may be a slight current boost to lending as some transactions seek to complete before the 01 April tax changes in the buy to let sector, this is likely to be followed by a slight fall in activity. Affordability pressures continue to weigh on activity, as does the low number of properties coming on the market, though this has been improving very recently,’ he added. Andy Knee, chief executive of LMS, believes that apart from a slight dip in activity expected following the April tax changes, all factors are working in the mortgage market’s favour. ‘Despite a delay in the base rate rise, the remortgage market in particular is likely to continue unabated, with home owners sitting on record housing equity and capitalising on the hugely competitive rates currently available,’ he pointed out. According to Peter Rollings, chief executive officer of Marsh & Parsons, once the April deadline passes it will quickly revert to business as usual, and a subsidence in buy to let borrowing will likely water down the growth in the mortgage market. ‘The Chancellor is certainly laying the long-term foundations for future mortgage lending levels, with the Lifetime ISA announcement just the latest guise to help first time buyers save up for a deposit and get onto the property ladder,’ he said. ‘But these savers are a long way down the pipeline, and in the immediate term, borrowing is more likely to feel the brunt of measures affecting the buy to let market. Property investors were completely overlooked in the Budget, and the Chancellor’s move to exclude landlords from the tax break on capital gains seems at odds with the need for greater supply of property on the market. Any measure that discourages and disincentives selling homes is not helpful in the current climate, and for buyers trying to keep track of house prices,’ he added. Continue reading
New stamp duty rates for commercial property in the UK announced
Investors in larger commercial property in the UK see a rise in stamp duty rates but buyers of smaller properties will benefit from a reduction in the tax payable. The way stamp duty on freehold commercial property and leasehold premium transactions is calculated has changed. The rates used to apply to the whole transaction value but from today (17 March) new tax rates and bands come into force. The new rates and tax bands are 0% for the portion of the transaction value up to £150,000, 2% between £150,001 and £250,000, and 5% above £250,000. It means that buyers of commercial property worth up to £1.05 million will pay less in stamp duty. Stamp duty rates for leasehold rent transactions will also change, with a new 2% stamp duty rate on leases with a net present value over £5 million. Opinion over the effect of the change is divided. According to the British Property Federation (BPF) it is not all good news. ‘Commercial property investment can often act as the catalyst for regional growth and as the economy has recovered investment has been spreading out from London to the UK’s regions, but will now undoubtedly slow,’ said Melanie Leech, BPF chief executive. ‘The real set back is that development in places like the Northern Powerhouse and Midlands’ Engine will now be held back as a result of this out of the blue raid on commercial property transactions,’ she explained. ‘Over a decade ago, the Government of that time decided to decouple the commercial and residential rates of SDLT recognising that the sectors were driven by very different factors and there was no logic in charging the same rates of SDLT on commercial and residential property. We can only hope that today’s announcement isn’t any unravelling of that logic,’ she added. However, Mark Tighe, managing director of capital allowances tax specialists Catax Solutions, believes that the reduced stamp duty payable will drive demand in this key asset class in the months and years ahead. But he warned that the resultant increase in transactions, among both businesses and private individuals buying commercial property, will potentially cost billions as a largely unused tax relief is lost forever. ‘Capital allowances are a highly valuable tax relief available to owners of commercial property but under current legislation they are irrecoverable if they are not identified and realised at the point of sale,’ he explained. ‘Currently, very few commercial property owners, along with their accountants and lawyers, are aware of unused capital allowances tax reliefs. Therefore as transaction levels increase in volume and momentum, commercial property owners are set to lose significant tax rebates to the tune of thousands, tens of thousands or even hundreds of thousands of pounds,’ he added. Continue reading
Residential rental market in Australia weakest since 1996
Rental growth rates in Australia continue to show their weakest performance since 1996 with a rise of just 0.3% in capital cities in February and no change year on year. The latest CoreLogic RP Data Rent Review report suggests that over the coming months rental rates could begin to fall on an annual basis due to additional new rental supply entering the market. A breakdown of the figures show that rental rates have increased over the year in Sydney by 1.5%, in Melbourne by 2.2%, in Canberra by 1.6% and were unchanged in Hobart. Rents fell 07% in Brisbane, by 0.4% in Adelaide, by 8.4% in Perth and by 13.3% in Darwin. This takes the current weekly rental rates to £488 for houses and $467 for apartments, the data also shows. Overall rental rates have been sitting at around $485 per week for the past year. In the last year rental rates had increased by 1.7% highlighting that the slowdown in rental conditions has been quite sharp over the year and Brisbane, Adelaide, Perth and Darwin are currently experiencing some of their largest annual falls on record. Indeed, all capital cities are experiencing annual rental changes which are well below their decade average levels. ‘With construction activity set to peak over the next 24 months, and with many new properties still to settle, there is a real possibility that rental rates will fall over the coming months,’ said research analyst Cameron Kusher. ‘Based on our expectations, landlords have little scope to lift rental rates while for renters, it potentially means more surety in securing accommodation and the potential to upgrade into a higher level of accommodation for a similar cost,’ he explained. ‘The cause of this current slowdown in rental growth is falling wages, excess rental supply in certain areas and lower rates of population growth and population mobility impacting on demand for rental accommodation,’ he added. Continue reading
