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Bank of England already has power to regulate buy to let, it is confirmed
The UK’s expanding buy to let sector could be hit if plans announced by Chancellor George Osborne to regulate mortgages in this part of the lending market go ahead. The sector has been taken aback by Osborne’s announcement during a Treasury Committee hearing that he has already given the Bank of England additional powers to regulate the buy to let market. He had already said he would consult about such a move after Bank Governor Mark Carney said that the buy to let market could be a threat to the UK’s economic recovery. But now it seems that the Bank can regulate the sector anyway, should it wish to do so. It already has the power to regulate the rest of the residential mortgage market in a move that was designed to prevent the housing sector from overheating as demand is pushing prices ever higher. Banks must now ensure that no more than 15% of residential mortgages are given to people borrowing more than 4.5 times their income and are also required to ensure that borrowers can repay their loans even when interest rates rise. However, it was thought that until now these rules do not currently apply to buy to let mortgages which account for around a sixth of the home lending market. Indeed, Osborne confirmed that he took Carney’s views on the buy to let market ‘very seriously’, adding that one of the biggest challenges is managing credit booms and house price cycles. ‘We have given the FPC powerful tools to, for example, tighten mortgage standards if they feel there’s a credit bubble developing. The governor of the Bank and the FPC have asked for additional powers over buy to let mortgages which weren’t included and we have granted those powers so they have that tool as well,’ he told the committee. Peter Williams, executive director of the Intermediary Mortgage Lenders Association (IMLA), said he is disappointed that the promised consultation does not seem to be happening. ‘The Government stated its intention earlier this year to hold a post-election consultation to assess the evidence for granting powers of direction over buy to let lending to the Financial Policy Committee (FPC),’ he pointed out. He explained that the Chancellor’s statement to the Treasury Select Committee suggests ‘stage of evidence-led policy making has been removed, and that the consultation may be limited to what those powers will be when, rather than if, they are granted’. ‘It seems somewhat ironic that this development comes just days after Mark Carney also spoke to the Select Committee about the need for a wider stock take of financial regulations. There is a common interest in ensuring we have a stable market for buy to let, and we feel this would be aided by an open debate about the case for additional FPC powers based on the strength of evidence,’ he added. He also pointed out that the FPC itself recently judged that there is ‘no immediate cause to take action… Continue reading
UK rental market sees sharp rise in demand for one bed flats
Rent rises for one bedroom flats in the UK accelerated sharply in September, sparked by high demand from recent graduates renting to live near their first job, new research has found. Rents for one beds saw an annual rise of 3.9%, from 2.9% in August, reaching an average of £1,054 according to the monthly Landbay Rental Index. The new index, which launched last month, is the first to track rental trends to the county and London borough level in combination with the number of bedrooms. Edinburgh with a rise of 12%, Swindon up 11% and Southend on Sea also up 11%, saw the biggest rises in rents for one bed flats, albeit from lower average rents than some of the other areas to see big year on year increases. The index also shows that rents for three bed properties are seeing the biggest overall rental rises, up 4.8% year on year to £1,489 in September. Across all properties, UK rents rose by 3.7% in the last year to an average £1,288. This was the first increase in annual growth since February, when the average monthly rented price was £1,277. ‘The upward trend in UK rents can simply be explained with one word, jobs. The UK’s job market is going from strength to strength and the rental market is staying hot on its heels,’ said John Goodall, chief executive officer of Landbay. ‘The sharp seasonal jump in rental growth for one beds reflects a buoyant graduate job market as people move to their first job. Flexibility and freedom is the order of the day for first jobbers, and one bedroom flats offer the perfect springboard to take the plunge into full-time working life. One bed flats are also popular for couples and young professionals who don’t want to flat share,’ he explained. ‘Higher housing costs can be a nightmare for tenants when other costs are rising and their wages are stagnating. Fortunately these rent increases come at a time of growing wages and falling costs, according to the latest inflation figures, so while they may not be welcome they don’t leave the same dent in consumers’ pockets,’ he pointed out. ‘For potential investors, these rental figures show how resilient residential property is as an asset class, even when you have unusual economic forces combining like the current mix of low inflation, low interest rate, and high wages,’ he added. Across all property sizes, the top rental risers outside of London were in the southeast, with all but two of the top 10 rental risers of Swindon and Edinburgh, clustered around London. By contrast only one of the top 10 rental fallers, Buckinghamshire, was located in the southeast. According to Joe Macklin, director of index compilers MIAC, there is likely to be a small decline in data volume in the run up to… Continue reading
Demand from overseas buyers in the Alps rising, says latest index report
Demand for Alpine property is rising, spurred on by a more resilient Eurozone, greater clarity over tax and the second home cap in Switzerland, as well as a weaker euro, the latest index report says. Val d’Isere and Meribel in France have seen the biggest annual growth in property prices with a rise of 5.8% and 4.5% respectively, according to the 2015 Ski Property Index from international real estate firm Knight Frank. The index, which tracks the price performance of prime ski chalets across 15 key resorts in the French and Swiss Alps, indicates that prime sales activity in the French Alps is focussed between €1.5 and €2.5 million with resorts such as Chamonix and Courchevel 1550 increasingly popular. It also shows that the number of sales completed in Megeve in the first half of 2015 was double the number of sales agreed during the whole of 2014 and adds that previous uncertainty in the Swiss market is giving way to renewed optimism as clarity emerges surrounding taxation and the second home cap. Overall it says that the market is broadly stable with only 13% percentage points separating the strongest and weakest performer and currency movements have played a pivotal role in determining demand across the region. French resorts occupy the top five rankings this year as uncertainty surrounding Lex Weber in Switzerland dampened sales, and as a result price growth. In the past year ski homes in Europe’s top resorts have continued on the same trajectory that they have been following since 2008; no radical acceleration or deceleration just small single digit shifts year on year. Overall, the index proved largely static with only a marginal 1% fall recorded in the year to June 2015 and explains that in the case of a resort like Val d’Isere, for example, the length of its ski season explains its long standing appeal, particularly with British buyers. Few other Alpine resorts can guarantee sufficient snow to ski during both the Christmas and Easter holiday periods, it continues and in Meribel’s case, a combination of its location in the heart of The Three Valleys and its pricing explains its annual growth. Meribel provides better value than Courchevel 1850, but can compete with 1550 and 1650 in terms of facilities. Investment in the form of new residential developments such as Olympe in Les Allues and Point de Vue in Meribel Village has also helped to build confidence amongst buyers. In real price terms, the exclusive resorts of Courchevel 1850 and Gstaad come out on top, with prime prices typically around €25,000 and CHF30,000 per square meter respectively. A prime ski chalet in Gstaad is, on this basis, four times the price of an equivalent property in the French resort of St Gervais. The report also shows that in the French Alps, the focus of sales activity in the last 12 months has been within the €1.5 million and €2.5 million price bracket. The super prime market at… Continue reading
