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UK property prices broadly stable with policy changes and a potential EU vote on horizon
Average UK house prices rose by 0.3% in January, and are up 4.4% year on year, remaining broadly stable, according to the latest analysis report. Prime central London prices rose by 0.1% last month to take annual growth to 1.2% while prime central London rents dipped by 0.3%, says the report from real estate firm Knight Frank. The data also shows that price growth for prime property in some regional hubs continues to outperform the wider prime country house market. The stability in UK property prices is likely to be underpinned by a further period of ultra-low interest rates and a solid, although slowing, economic recovery but the report warns that the political outlook is less clear as an European Union referendum draws closer. Grainne Gilmore, head of UK residential research at Knight Frank, pointed out that interest rates being left unchanged by the Bank of England for the 83rd consecutive month in February was not a surprise. ‘But the data released by the Bank when announcing its decision has led economists and markets to change their expectations about when rates may start to rise. Whereas many had forecast a rise around the middle of the year, the verdict is now that rates are on hold until the final quarter of the year, if not 2018,’ she said. ‘This change was prompted by the Bank’s forecasts, showing muted inflation and wage growth in the coming years as well as a downgrade in forecast GDP growth. The central bank now expects 2.2% GDP growth this year, instead of 2.5%. The slower growth is attributed to global economic conditions, not least the effect lower oil prices are having on many economies around the world,’ she explained. ‘However, senior bank officials were clear that the UK economy was still experiencing a solid recovery and that the fall in oil prices was a net good for UK consumers, helping boost consumption and therefore wage growth,’ she added. Households expect prices to continue rising this year according to the latest House Price Sentiment Index (HPSI) from Knight Frank and Markit Economics. Any reading above 50 on this index, which is a bellwether for house prices, suggests prices are rising, or are set to rise. The future index has now been above 50 for 35 consecutive months. However, Gilmore also said that the outlook for 2016 must take into account the policy changes and political decisions which will be made this year, not least another change to the stamp duty regime in April, the Mayoral Elections in London in May and a possible decision on whether the UK should stay in the European Union. ‘As seen following the stamp duty changes in December 2014, and last year’s General Election, the market can adjust to political and policy changes, but periods of uncertainty can take their own toll on market activity,’ she added. While prime central London property prices edged up by 0.1% in January, taking the annual increase to 1.2%, a breakdown… Continue reading
UK mortgage arrears at lowest rate for more than a decade in 2015
Mortgage arrears in the UK are at their lowest for more than a decade with fewer than one in 1,000 ended in repossession in 2015, according to the latest data from the Council of Mortgage Lenders. Beneath the headline figures, the CML quarterly data shows home owner mortgage arrears running at 1.03% of all loans at the end of 2015, with buy to let at a lower rate of 0.31%, continuing the recent trend of a lower prevalence of arrears in the buy to let market. However, the picture is reversed on repossessions, with around one repossession per 2,500 mortgages in the buy to let market in the fourth quarter of the year, compared with one in 5,000 in the homeowner market. Across the whole market, most had relatively modest levels of arrears at under 5% of the mortgage balance. The number of loans with arrears in the most severe band, representing 10% or more of the mortgage balance, was 23,700, down from 24,200 at the end of 2014. The CML report says that the modest decline in the most serious arrears band may partly reflect distortions in the timing of possessions, but the overall arrears trend is clearly down. At 10,200, the total number of repossessions in 2015 was less than half the number in 2014, down from 20,900 but the report says that caution is needed on the year on year comparison, because the timing of some possessions may have been affected by the aftermath of a court case which has been causing lenders to review their processes. However, it is likely that the underlying trend is still emphatically down. ‘It is good news that the levels of mortgage arrears and repossessions remain low and falling. But, at the risk of sounding as if we are crying wolf, we would continue to urge all borrowers to plan ahead for a time when the interest rate environment may be less benevolent. Lenders do not wish to see borrowers who are coping currently falling into difficulty if and when rates do eventually rise,’ said CML director general Paul Smee. The figures are a sign of a period of relative stability for both owner occupiers and landlords when it comes to managing borrowing, according to Kevin Purvey, chairman of the Intermediary Mortgage Lenders Association (IMLA). ‘Lending volumes forecast to rise, the rigours of lenders’ affordability checks will help borrowers avoid a future scenario where they become overstretched. However, continuing delays to the Bank of England’s first rate rise should not breed complacency,’ he explained. ‘With mortgage rates at record lows, there is still plenty of reason for households to think ahead, weigh up their monthly balance sheet and consider remortgaging to help prepare for the inevitable rise. Changes to tax allowances will give landlords added incentive to look at their remortgage options in 2016,’ he pointed out. ‘Lender competition remains high, which means intermediaries will be at the heart of the continuing… Continue reading
Home prices set to rise 5.4% in the United States in 2016
Home prices across the United States, including distressed sales, increased year on year by 6.3% in December 2015 and increased month on month by 0.8%, the latest index shows. And forecast data from the CoreLogic House Price Index also indicates that home prices are set to rise by 5.4% this year. ‘Nationally, home prices have been rising at a 5% to 6% annual rate for more than a year,’ said Frank Nothaft, chief economist for CoreLogic. However, he added that local market growth can vary substantially from that. For example, some metropolitan areas have had double digit appreciation, such as Denver and Naples, Florida, while others have had price declines, like New Orleans and Rochester, New York. ‘Higher property valuations appear to be driving up single-family construction as we head into the spring. Additional housing stock, especially in urban centres on the coasts such as San Francisco, could help to temper home price growth in the longer term,’ said Anand Nallathambi, president and chief executive officer of CoreLogic. ‘In the short and medium term, local markets with strong employment growth are likely to experience a continued rise in home sales and price growth well above the US average,’ he added. Meanwhile, research from real estate firm Zillow shows that buyers in Boston, New York, and Washington, D.C. have to stay in a home for at least three years to break even on a home purchase, and buyers in the Bay Area would have to stay nearly that long to make buying financially advantageous. In general, Americans can break even on a home purchase in less than two years in 70% of US metros and the firm says that this is thanks to low interest rates, healthy home value forecasts, and the relatively fast pace of rents in recent years. The Breakeven Horizon index shows that on average you don't need to plan on living in a home for even two years to make purchasing the home more financially advantageous than renting it over the same time period. Among large housing markets, the Breakeven Horizon is longest in Washington, D.C. at 4.5 years and shortest in Dallas at 1.3 years. Around the country over the last year, the Breakeven Horizon quickened in most of the Midwest and Southeast as well as in the Northeast corridor from New York to Boston. The Horizon stretched longer in Florida, Northern California, and in the Northeast from Virginia Beach to Philadelphia, but it remained clear that financially, it's still a better deal to buy a home than rent it, assuming you're planning to stay in the home for at least a couple years. ‘Even with record high rents in places like San Jose, Boston and Washington, D.C., putting off a home purchase might be the best financial decision for a young person who has saved enough for a down payment, depending on how long they intend to stay in their jobs and homes,’ said Zillow chief economist Svenja… Continue reading
