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Housing development land prices in UK down by 2.3% quarter on quarter
Residential development land prices in the UK fell by 2.3% between April and the end of June and activity remained steady in the run up to the historic vote on the future of the country in the European Union. The quarterly reduction extended annual declines in pricing for prime central London and greenfield development land, but urban brownfield land is still recording strong annual growth, according to the latest index from real estate firm Knight Frank. Greenfield development land prices declined by 2.3% between April and the end of June taking the annual fall to 3.8%. In prime central London, average residential development land prices fell for the third consecutive quarter, dropping by 6.9%. Average values are down 9.4% on an annual basis, but the report points out that this follows several years of very strong growth, so the index has returned to 2014 levels. Developers reported that activity continued in the run-up to the EU referendum vote, with house purchase rates remaining steady, especially in the regional markets. ‘The fundamentals of the market, characterised by an imbalance between supply and demand and ultra-low mortgage rates, remain unchanged,’ said Grainne Gilmour, head of UK residential research at Knight Frank. However, she pointed out that some house builders and developers are increasing their margins and hurdle rates on greenfield and prime central London land deals. ‘This is in order to allow for increased uncertainty over the future economic landscape as the UK negotiates its way to a new position within the Europe. This is feeding into land prices,’ she explained. In terms of greenfield sites, smaller plots for around 150 to 200 units close to urban areas and transport links are still the most in demand, with higher levels of competition for such opportunities and the report also points out that construction costs, which have risen notably over the last two years, are also a factor in land prices, especially in the central London market. Indeed, in London the cost of construction is altering the viability of some sites and in some cases this has led to a trimming of land costs. Urban land values are up by more than 9%. There is still strong demand for city centre sites in key regional locations, and in outer London boroughs, although the dynamics of each market are closely aligned with the demand and supply fundamentals at play in the local area. Continue reading
Landlords in UK should plan ahead for new energy regulations
New Government plans in the UK will require buy to let landlords to spend up to £5,000 to make their rental properties more energy efficient. The new legislation, which kicks in 2018 will require landlords to raise the energy efficiency of their homes to at least Band E for new tenancies by carrying out improvements such as insulation, cavity wall filling and new boilers. It has been suggested by the Residential Landlord’s Association that a total of 330,000 buy to let homes, typically Victorian and Edwardian properties, will be affected and the RLA has warned the new so called ‘green tax’ could push rents even higher. The Government has proposed a £5,000 cap, claiming that most landlords will pay no more than £1,800 but according to Peter Armistead of Armistead Property, the Government should be providing alternative support, now the Green Deal has ended, to help fund energy efficiency improvements. ‘Landlords have been bombarded with new tax measures over the last 12 months and this is yet another cost that some landlords will have to face. Landlords can’t be expected to absorb all these new taxation measures and just stand back and watch their profits being eroded. Unfortunately, it will be tenants that will have to bear the brunt of these costs through higher rents,’ he said. ‘While it is a good move to improve the quality of rented accommodation, there should be another scheme to help landlords make the improvements. The Green Deal gave loans to improve energy efficiency and these loans were then repaid by tenants, who as a result of the works were paying lower bills,’ he explained. To help spread the improvement costs, landlords should start upgrading their properties, before it becomes mandatory in 2018 for new tenants. Buy to let mortgage providers will require borrowers to comply with the regulations and valuers are likely to amend their criteria in the run up to 2018, making buy to let mortgage applications more difficult. ‘Most insurance policies require landlords to comply with all relevant statutory requirements. This may mean that it could be more difficult to get insurance unless landlords comply with the forthcoming regulations. Landlords with F and G rated properties need to manage the upgrading and improving their properties to avoid potential prosecution and fines,’ added Armistead. Continue reading
Metro area home prices soar in US with first plus $1 million median value recorded
Home prices are continuing to rise in the United States with the median value for a single family home reaching more than $1 million in a metro location for the first time. The record prices was reached in San Jose, California, while the vast majority of metro areas seeing prices rise in the second quarter of 2016, the data from the National Association of Realtors shows. Overall the median existing single family home price increased in 83% of measured markets, with 148 out of 178 metropolitan statistical areas showing gains based on closed sales in the second quarter compared with the second quarter of 2015. Just 29 metros recorded lower median prices from a year earlier and 25 saw double digit increases. According to Lawrence Yun, NAR chief economist, a faster pace of home sales amidst languishing inventory levels has pushed home prices higher in most metro areas during the second quarter. ‘Steadily improving local job markets and mortgage rates teetering close to all-time lows brought buyers out in force in many large and middle tier cities,’ he said. ‘However, with homebuilding activity still failing to keep up with demand and not enough current homeowners putting their home up for sale, prices continued their strong ascent and in many markets at a rate well above income growth,’ he added. The national median existing single family home price in the second quarter was $240,700, up 4.9% from the second quarter of 2015, which was previously the peak quarterly median sales price. The median price during the first quarter of this year increased 6.1% from the first quarter of 2015. Total existing home sales, including single family and condos, rose 3.8% to a seasonally adjusted annual rate of 5.5 million in the second quarter from 5.3 million in the first quarter of this year and are 4.2% higher than the 5.28 million pace during the second quarter of 2015. ‘Primarily from repeat buyers moving up or trading down, existing sales increased each month last quarter and could’ve been even higher if not for a few speedbumps. Closings were slowed a bit by meagre supply levels and home prices in many areas that are still rising too fast,’ Yun explained. At the end of the second quarter, there were 2.12 million existing homes available for sale, which was below the 2.25 million homes for sale at the end of the second quarter in 2015. The average supply during the second quarter was 4.7 months, down from 5.1 months a year ago. According to Yun, without enough new construction being built, existing inventory seriously failed to keep up with the growing demand for buying. As a result, homes typically stayed on the market for around a month throughout the second quarter and over 40% of listings sold at or above list price, with June being the highest share since NAR began tracking in December 2012. Yun pointed out that many listings in… Continue reading
