Tag Archives: housing
UK parents lending to offspring to help buy a home set to reach £5 billion in 2016
Parents are set to lend over £5 billion to their offspring to buy a home by providing deposits for over 300,000 mortgages, purchasing homes worth £77 billion in 2016, according to new research. It means that the so called Bank of Mum and Dad is the equivalent of a top 10 mortgage lender in the UK and will be involved in 25% of all property transactions that take place in the country this year. Research from financial services group Legal & General and economics consultants says that this is likely to continue as long as the supply problem persists in the UK housing market. ‘The Bank of Mum and Dad plays an increasingly vital role in helping young people take their early steps on the housing ladder,’ said Nigel Wilson, chief executive officer of Legal & General. He pointed out that younger people today don’t have the advantages the baby-boomers had, including cheap housing that delivered windfall gains. ‘People will always want to help family members as it is a natural thing to do. Relying so heavily on the Bank of Mum and Dad however risks increasing inequality as many young people today are not lucky enough to be able to access parental support when buying a home, or can’t afford to buy even with parental help,’ Wilson explained. ‘We have a supply problem in housing as we are simply not building enough houses. We need to build more, especially as the Bank of Mum and Dad could soon start to experience a funding crisis of its own,’ he added. The research also found that the Bank of Mum and Dad’s average financial contribution is £17,500 or 7% of the average purchase price. Some 256,400 purchases are likely to be assisted by parent with a further 22,500 and 27,000 supported by grandparents and other family members or friends respectively. Some 57% of Bank of Mum and Dad contributions are gifts, 18% are loans with no interest and 5% are loans with interest. The report suggests that the Bank of Mum and Dad will not run into a nationwide ‘funding crisis’ for another generation, around 2035, but the regions with the highest and fastest growing house prices will face this problem much sooner. London is already at the tipping point when it comes to such funding. In 2016 London home owners that received some financial assistance from family and friends, got an average of 6.2% of their home’s total purchase price from the Bank of Mum and Dad. This represents 51% of the average Bank of Mum and Dad household net wealth in London, excluding property assets. In the South East, the average family contribution towards a loved one’s home purchase will cross the 50% mark in 2025 while for the East of England this will happen in 2028. Families clearly cannot continue to use all of their net wealth to help their offspring onto the housing ladder without putting their own financial stability at risk. This… Continue reading
UK house prices increase almost five time more in areas with low unemployment
Houses prices in the UK have increased by an average of almost £90,000 in the past decade in areas with lowest unemployment rate, the latest research data shows. This is almost five times more than in those area with high unemployment and the 10 areas with largest drop in unemployment saw house prices increase by 76%, according to the research report from Lloyds Bank. It means that the gap in house prices between areas with the highest and lowest levels of unemployment has widened significantly over the past 10 years. Average house prices in the 20 local authorities with the lowest rate of unemployment have risen by £89,446 since 2006, nearly five times the rise for those with highest unemployment, which increased by just £18,657 over the same period. The average house price for those high unemployment areas is £139,520 which is £102,655 or 42% below the national average price of £242,175. By contrast, areas with the lowest unemployment rates have an average price of £352,224 to £110,049, some 45% higher than the national average. ‘Employment boosts consumer confidence, helps put more cash into customers’ pockets and makes it easier to secure a mortgage, all of which drives increased housing activity,’ said Lloyds Bank mortgage products director Andrew Mason. ‘Unfortunately, in areas where more people find themselves out of work, house prices can stall as people are financially less able to progress up the property ladder, reducing demand. There are, however, other factors which affect house prices such as lower mortgage rates, improved affordability and low housing supply which will have contributed to rising prices in the past decade,’ he added. The 10 areas which have seen the largest falls in unemployment since 2006 recorded an average price increase of £200,155 or 76% to £464,373. Nine of these local authorities are in London, with Haringey, Hackney, Southwark and Waltham Forest seeing average home values almost doubling in the past decade. Over the same period these 10 areas recorded an average decline in unemployment claimants of 2.4% from 4.7% to 2.3%, four times the national decline of 0.6% from 2.5% to 1.9%.This is in marked contrast to the 10 areas with the poorest unemployment performance where unemployment claimants increased by an average of 0.5% since 2006, with average house prices growing by only £24,587 or 18%. Seven of these 10 areas are in the North West. In the UK as a whole over the past 10 years, average house prices grew by 34% or £61,575, whilst the average unemployment rate was 3%. Excluding London, the average price growth for Great Britain fell to £47,920 or 29%. The Lloyds Bank report also reveals that: The 10 areas with the lowest unemployment rates show an average house price rise of £107,000 or 36% since 2006. The four areas with the lowest average unemployment rate of 1% over the decade, Hart, West Oxfordshire, Mole Valley and North Dorset, recorded house price gains of between 33% and 44%… Continue reading
Almost 60% of prime London properties sold to second home owners and buy let investors
Buy to let investors and second home owners were behind three in five property purchases made in the prime London market in the first quarter of 2016, new research shows. This boosted the overall proportion of purchases made in cash, according to the latest London Property Monitor report from estate agent Marsh & Parsons. Accounting for 36% of all sales from January to March, buy to let investors were the most prolific type of buyer across the prime London market in the three months immediately preceding the 01 April implementation of an additional 3% stamp duty on additional homes. This represents a significant rise from 26% of purchases during the previous quarter, and a sudden reversal of the recent trend of weakening investor influence. Investor share of the market has been in slow decline last year since it peaked at 37% in the fourth quarter of 2014. Those purchasing an additional residence became the second most prominent type of buyer in the prime London sector during the first quarter of 2016. This buyer group saw an even bigger jump in market share quarter on quarter, with second home owners accounting for 23% of all purchases, up from just 14% in the fourth quarter of 2015. Together, buy to let investors and second home owners accounted for 59% of all purchases in the prime London market in the first quarter of 2016 and in the prime central London market it was even higher at 76%. The research also shows that second home owners overtook investors as the most common type of buyer witnessed in prime central London during the first quarter of the year. Some 41% of all property purchases were made by those buying an additional residence, a significant leap from 24% in the final quarter of 2015. Property investors also seeking to circumvent the extra 3% levy accounted for a further 35% of property sales. This preponderance of second home owners and buy to let investors has translated into a much higher proportion of cash purchases in the prime London market. Some 40% of property purchases were made by cash buyers in the first three months of the year, an increase from 34% in the previous quarter and up 36% year on year. In Prime central London areas this rose to 46%. ‘Investors will always be the stalwarts of the prime London property market as it’s the golden goose of capital returns. But second home owners were much more prominent in the market than we would typically expect,’ said David Brown, chief executive officer of Marsh & Parsons. But he pointed out that this was by no means a typical quarter and sales activity in the opening three months of this year has been exceptionally skewed by the additional layer of stamp duty for both buy to let and second home purchases. ‘Naturally, the knee jerk reaction among these groups has been to hurry… Continue reading
