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Mortgage lending in UK fell in April, but no surprise due to March buy let boost
Gross mortgage lending in the UK reached £18.5 billion in April, some 29% lower than March’s lending total of £26.2 billion, but 16% higher than the £16 billion lent in April last year. CML economist Mohammad Jamei pointed out that a fall was expected due to a rush in buy to let lending in March as landlords rushed through sales to beat the new 3% surcharge on additional homes that was introduced on 01 April. ‘As we move past the stamp duty change that came into effect at the start of April, we expect to see a quieter second quarter, as some transactions that were due to take place were brought forward to the first quarter of this year,’ he explained. ‘This is likely to mean that over the next few months buy to let takes a back seat as lending is driven by first time buyers, movers and remortgage customers. The underlying picture still shows signs of growth, as the market remains underpinned by strong fundamentals such as increasing wages and rising employment,’ he pointed out. ‘But it is possible that the uncertainty around the upcoming European Union referendum in June will weigh on activity in the upcoming months,’ he added. According to David Brown, chief executive officer of Marsh & Parsons, April lending was never going to live up to the March boost which was characterised by massively increased borrowing to landlords and second home owners. ‘But while we’ve seen a bit of a monthly comedown since then, the annual fundamentals are indicative of strength in the mortgage market. Widely expected to be an underwhelming month, April has still set an impressive benchmark for this time of the year, with lending levels harking back to the pre-recession era,’ he said. ‘Buy to let investors are just one type of buyer after all, and borrowing isn’t going to ground to a halt while they have a breather. The stamp duty changes didn’t affect the plans and intentions of hordes of other first time buyers and home movers, and in these areas buyer demand is still bursting at the seams,’ he added. David Whittaker, managing director of Mortgages for Business, pointed out that underneath the month on month lending patterns, there is a strong and steady current of buy to let lending critical to meet growing public demand for private rented accommodation. ‘Underlying annual growth in April shows a more sustainable path aside from any short term fluctuations and the need for buy to let mortgages to support the role of landlords,’ he added. The extremes of March make it futile to try to extract any meaningful insight from April's numbers, according to John Eastgate, sales and marketing director of OneSavings Bank. More importantly, market feedback suggests that normality has returned at enquiry level, although it will be the third quarter before we see this in new lending,’ he said. ‘A strong undercurrent of demand and a growing UK population means… Continue reading
Property slowdown a myth for majority of London, new research shows
Price growth at the top end of the London residential property market has slowed but the majority of the city is seeing real estate values grow. Across most of the city property prices are up 8.2% year on year but for the top quarter prices are down by 2.4% year on year and 0.6% quarter on quarter, according to the latest report from Stirling Ackroyd. A breakdown of the figures shows that the traditional top quarter accounts for two thirds of Greater London’s postcode districts experiencing price falls with Kensington High Street seeing prices fall by 11.8%. This is followed by Notting Hill with a decline of 10% and Hampstead but areas such as Soho’s W1, Sutton and Tottenham are now driving London property price growth instead. By contrast, if London’s old luxury postcodes are excluded, the remaining three quarters of the capital saw a 2% rise over the same period, or annualised house price growth of 8.2% for the overwhelming majority of London’s neighbourhoods. Across the board, house prices in the capital rose by 1.6% in the fourth quarter of 2015, with the average London property now worth £533,000. As a broad average this translates to a 6.6% annualised growth rate for the whole of Greater London. Out of a total 272 postcode districts in the capital, 47 saw local drops in average property values. However 32 of these districts fall within London’s traditional prime top quarter of the property market. Within the top quarter of London’s property market, a given postcode has a roughly 50:50 chance of hosting falling house prices whereas for the rest of the capital a given postal district has a 93% probability of price rises. ‘London’s hugely diverse property market is undergoing a serious readjustment, with the traditional old heart of prime London under pressure from many fronts; from a low global oil price and China’s economic slowdown, to stamp duty reform and international fears of Brexit,’ said Andrew Bridges, managing director of Stirling Ackroyd. ‘Yet for most of London’s communities, these factors affecting luxury buyers are less important. There are still too few new homes coming onto the majority of the market compared to demand from a growing population and the majority of the London market is still in tune with, and restrained, by those fundamentals. Anyone who thinks that London property is synonymous with international jet setters is only looking at a very small part of what London has to offer,’ he explained. He also pointed out that there is also an outwards wave of interest, away from the old peaks of property prices. ‘Within the wider spread of London home buyers, a growing band of increasingly affluent people can no longer afford the most overcrowded traditional areas of London,’ he said. ‘This demographic of professionals are redefining the map of the capital’s up and coming locations. New, dynamic parts of London are emerging further east, driven by a… Continue reading
UK landlords looking for cheaper properties due to stamp duty surcharge
Landlords in the UK are looking for cheaper properties in response to the new 3% stamp duty charge on additional homes, according to the latest lettings index to be published. Average price paid by investors in April fell by 8.3% month on month, from £194,000 to 178,000 and London saw the biggest change in behaviour with landlords buying homes costing 16.4% less than the previous month. At the same time, the number of homes sold to first time buyers increased by 19% between April 2015 and April 2015, while the number of homes bought by landlords halved, the data from the Countrywide Lettings index shows. It also reveals that average UK rental growth continued to slow. The rise of 2% in April was less than half the 4.7% recorded in April 2015. London saw the biggest fall in average price paid, down from £436,000 in March to £365,000 in April. While overall house prices in London rose 13.9% over the last year, the capital’s landlords paid an average of 8.2% less than they did in April 2015. However, generally lower priced markets saw a less marked response from landlords with average prices paid by investors rising month on month in the North East and Yorkshire. April also saw fewer landlords purchasing homes, after a spike in activity in the first three months of the year. Landlords rushed to complete on their purchases before 01 April to avoid a bigger stamp duty bill with 61% more landlords buying in the first quarter of 2016 compared to the first quarter of 2015. The report points out that many sales which would otherwise have normally completed in April were pulled forward into March. Around half the number of landlords bought in April 2016 compared to April 2015. The number of sales to first time buyers rose by 19% over the same period. Average rents increased 2% over the last year, leaving the average monthly UK rent at £932. Rental growth is now half the rate it was in 2015 and the report suggests that affordability constraints and the increase in the number of homes coming onto the rental market continues to slow rental growth. ‘April’s fall off in investor activity seems to be the consequence of landlords bringing forward purchases to beat the stamp duty deadline. Rather than being dissuaded by the new 3% charge it seems that landlords are already adjusting their behaviour. In response to the extra purchasing costs many are choosing to buy cheaper homes that offer a higher yield and of course a lower stamp duty bill,’ said Johnny Morris, research director at Countrywide. ‘There’s early signs that first time buyer numbers are increasing in as investor activity has declined. But it’s too early to tell whether this is simply the after effects of the stamp duty rush or the start of a longer term trend,’ he added. Continue reading
