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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
Mortgage lenders concerned about impact of banking reforms on UK housing market
First time buyers and housing associations in the UK could bear the brunt of banking reforms which affect credit risk, it is claimed. Proposals from the Basel Committee on Banking Supervision to revise its standardised approach for credit risk could adversely affect parts of the UK housing market, according to the Intermediary Mortgage Lenders Association (IMLA). The Basel framework ensures that banks, building societies and other deposit taking institutions have sufficient capital for the underlying risks they bear. While supporting this objective, the IMLA has raised significant concerns over some proposed revisions in the latest Basel consultation, which it argues are not justified by differences in risk and could limit access to mortgage finance in key areas of the UK housing market. In particular, one of the most serious impacts could be on lending to UK housing associations. By preventing lenders from taking into account borrowers’ financial strength, the Basel proposals could see loans to many housing associations redefined and subject to much higher capital requirements, despite the exemplary payment track record and their government regulated status. The same proposals mean the regulatory cost of buy to let lending could far outweigh the risks involved, as they do not accommodate the fact that many buy to let borrowers are substantially more financially secure than the average owner occupier. IMLA also strongly disagrees with proposals which could distort mortgage pricing and push up the cost of higher loan to value (LTV) mortgages, which are relied on by many first time buyers to become home owners. Doing so could incentivise them to seek out unsecured ‘top up’ loans to fund their house purchases with a lower LTV mortgage, which would be potentially harmful to their finances. The IMLA’s consultation response highlights how aspects of the Basel proposals could create a ‘bizarre’ situation where unsecured lending can be given a lower risk weighting than secured lending to the same borrower. It could also penalise lenders that have adopted conservative lending standards and create an artificial incentive to lenders to remortgage or ‘churn’ customers, creating outcomes that would not be deemed good for either the customer or the lender. ‘It is vital to have the right checks and balances in place so lenders can provide mortgage finance where there is a legitimate need while maintaining a stable UK housing market,’ said Peter Williams, IMLA executive director. ‘The Basel consultation sets out with the important aim of ensuring capital requirements are appropriate to the underlying risk, but we are concerned that the current proposals will not meet this goal,’ he explained. ‘Government and industry need to work together to bring greater balance to the UK housing market. This includes ironing out the technical details of the Basel proposals to defend consumer interests across all housing tenures,’ he added. Continue reading
Average rents in Scotland down 0.7% in March, biggest monthly fall on record
Average residential rents in Scotland fell by 0.7% in March, the first decline in six months and the biggest monthly drop on record, the latest index data shows. This took the typical rent in Scotland down to £544 per month and suppressed annual growth to just 1.1% in March, a significant downturn from 2.1% in the year to February 2016, according to the buy to let index from lettings agent network Your Move. Annual growth in the rental market is now at a 13 month low and Edinburgh was the only place to see rents rise in March to a new peak for the city of £645 a month. One reason for the growth in Edinburgh is a lack of available properties, according to Brian Moran, lettings director at Your Move Scotland. He believes, however, that rents could start to rise again with buy to let landlords now facing an additional 3% stamp duty and the effects of the new Private Tenancies Bill still to come. ‘What we do know, is that if landlords hit the brakes and cause a roadblock of supply in the private rented sector, tenants will be the casualties paying higher rents in the longer term,’ he said. Rents fell across the majority of Scotland. The steepest monthly drop in rents was experienced in Glasgow and Clyde, with the average rent in March 1.5% lower than in February, taking the average monthly rent to £544. In the Highlands and Islands there was a 1.4% fall in rents since February, and rents in the East dropped 0.8% on a monthly basis. The South of Scotland saw a more modest 0.2% dip in rents month on month. Edinburgh and the Lothians was the only region to buck this trend, with the average monthly rent climbing 0.2% to reach a new peak price of £645 per month in March. However, taking a longer term view, only two of the five regions of Scotland have seen rents fall on an annual basis. Edinburgh and the Lothians are continuing to see record annual rent rises, up 8.5% year on year in March. Rent growth in the capital has been accelerating steadily since June 2015. After this, rents in the South of Scotland have seen the next fastest annual rise, with rents up 3.2% since March 2015. The Highlands and Islands saw a 1.6% uptick in rents compared to a year ago. But two regions have seen rents fall compared to a year earlier. Both Glasgow and Clyde and the East of Scotland have witnessed a 2.5% drop in rents across the twelve months to March 2016. The index report also shows that despite the widespread monthly falls in rents in March, the proportion of late rent in Scotland has risen for the first time since October 2015. Reversing the recent trend of improving tenant finances, tenant arrears… Continue reading
