Tag Archives: london
Stamp duty levels to continue to affect prime central London property market
The prime central London property market has seen a year of two halves but uncertainty over stamp duty levels is set to continue to affect the upper part of the sector in 2016, new research suggests. Just over a year the prime market was hit by increased stamp duty on properties worth more than £1.1 million and now this year extra duty of 3% is to be levied on buy to let investors and second home owners. The latest report from real estate firm Knight Frank explains that while the new measure is an attempt to address concerns surrounding affordability and house price inflation, it raises fresh questions over the dampening effect on tax revenues just as buyers and sellers in prime London were showing tentative signs of absorbing the previous increase. ‘Transactions and revenue have declined across London in the period following the December 2014 increase. It highlights concerns over the financially viability of the stamp duty reform, which had the welcome aim of increasing liquidity and affordability below £1 million but runs the risk of becoming a counterproductive deterrent above that level,’ said Tom Bill, head of London residential research. Meanwhile, the sub-£2 million market outperformed the rest of prime London in the second half of 2015, continuing a trend of recent years. In particular, properties worth less than £1 million have grown by more than any other price bracket. Bill explained that the highest growth has largely been outside the higher price brackets of prime areas of central London over the last 20 years. The Knight Frank analysis report highlights the markets where price growth was strongest during each year since the first quarter of 1995 and on a journey that began in Lambeth Walk and ends in Turnpike Lane, £50,000 would have become £1.18 million after stamp duty and moving fees are taken into account, representing a rise of 2,264%. The theoretical journey began in south London before moving further east to areas like Barking and Dagenham in the early 2000s as east London matured as a residential market. It then moved to prime central London in the run-up to and immediate aftermath of the financial crisis, including Marylebone, Belgravia and Fulham. Finally, as price growth pushed outwards from central London as the UK economic recovery consolidated after 2013 the strongest growth was found in the north London markets of Walthamstow and Turnpike Lane. Continue reading
UK Mortgage intermediaries set for record lending in 2015
Mortgage intermediaries in the UK are expected to have secured a record breaking share of new mortgages in 2015, according to a new report from the Intermediary Mortgage Lenders Association (IMLA). Its research into the changing face of mortgage distribution has found that its share of new mortgages by value passed 70% for the first time during the second quarter of 2015 to reach 71%. The third quarter witnessed brokers arranging loans valued at £33.3 billion, the highest quarterly total since the beginning of 2008. As a result, IMLA’s analysis shows brokers were responsible for 69% of new lending by value during the first nine months of this year, up from 61% for the same period in 2014. It puts them firmly on track to surpass the record 66% annual share achieved during 2007. The £85.9 billion of lending intermediaries arranged from the first to the third quarters of 2015 already exceeds the annual totals of 2009 to 2013, and was just 12% short of the 2014 total of £98 billion. The IMLA report examines how mortgage distribution has changed following the deregulation of the market in the 1980s, and looks at how technological advances could change distribution in the future. It attributes the general upward trend in brokers’ market share over the past three decades to several key changes; the widening range of lenders, including the emergence of lenders exclusively using broker distribution; growing complexity of mortgage features and pricing; and most recently regulatory changes including the Mortgage Market Review (MMR). By requiring mortgage sales staff to provide advice rather than just information, with the additional qualifications that requires, the MMR has led many lenders to de-emphasise their branch networks and some smaller lenders to end direct distribution altogether. With increased lender competition, a greater range of products and more would-be borrowers falling into ‘non-standard’ categories, today’s market also leaves brokers well positioned to identify those products that are best suited to a particular customer’s needs. However, IMLA’s analysis also shows brokers’ increased share of activity has not been uniform across the market. Proportionally remortgagers and home movers are using the intermediary channel more than ever, yet the proportion of first time buyers arranging their mortgages directly with their lender increased from 32% to 37% between 2006 and 2014. Despite brokers reclaiming market share this year, the percentage of first time buyers going direct remains higher than it was in 2007 when the intermediary channel was at its strongest. This may be influenced by lenders’ marketing activities to first time buyers. While technological advances have traditionally strengthened direct channels within financial services, the IMLA report observes that this has not happened in mortgage lending where the majority of customers still feel the need to speak to a professional. It suggests this is partly due to the complexity of mortgages as a product, and the sheer number of products available on the market. Furthermore, considerations such as term length and the size of the… Continue reading
Annual property rental values in prime central London fell last month
Annual rental value growth in the prime central London residential property market eased to 0.7% in December on the back of falling demand in the financial services sector. Rental values fell 0.4% from November, taking the annual rate of growth to its lowest level since July 2014, according to the latest analysis report from real estate firm Knight Frank. However, Tom Bill, head of London residential research at Knight Frank, explained that there is also an element of seasonality and a quarterly drop of 1.1% in the last three months of the year was the weakest since December 2014 and repeats a pattern of previous years. Rental value growth peaked in May this year at 4.2% and the subsequent decline has resulted in prime gross rental yields dipping from 2.96% to 2.93% over the same period, the report says and demand has fallen over the last six months as a number of banks have implemented restructuring plans. ‘European banks in particular have been slower to cut jobs than their US counterparts following the financial crisis. Profitability has fallen due to new regulations that force banks to hold more capital, which has contributed to job cuts at European banks that have been in excess of 100,000 in recent months,’ said Bill. ‘As well as the macroeconomic backdrop, including uncertainty over China and falling commodity prices, the situation is compounded by the fact many large European banks have new chief executives, who typically take a more radical approach to cost savings in the early stages of their tenure,’ he pointed out. ‘The result is that optimism at financial services companies fell markedly in the third quarter of this year across a range of sectors. However, there have been signs of stronger demand from boutique financial services companies like private equity businesses and hedge funds as clarity emerges surrounding the level of 2016 bonus packages,’ he added. The report also says that demand at the super prime level of £5,000 plus per week remains strong as uncertainty continues to surround taxation and price growth in the higher price brackets of the sales market. ‘Equally, demand remains strong in lower price brackets among workers of all professions, bolstered by the strength of the UK’s economic recovery,’ Bill said. Continue reading
