Tag Archives: real-estate
Gap between residential rents and income widens in the US
The gap between rental costs and household income is widening to unsustainable levels in many parts of the United States and the situation could worsen unless new home construction meaningfully rises, it is claimed. According to new research by the National Association of Realtors which reviewed data on income growth, housing costs and changes in the share of renter and owner occupied households over the past five years, renters are being squeezed in many metro areas. This is due to the disproportionate growth in rental costs to incomes and New York, Seattle and San Jose, California, are among the cities where combined rent growth is far exceeding wages. Lawrence Yun, NAR chief economist, said that the disparity between rent and income growth has widened to unhealthy levels and is making it harder for renters to become home owners. ‘In the past five years, a typical rent rose 15% while the income of renters grew by only 11%. The gap has worsened in many areas as rents continue to climb and the accelerated pace of hiring has yet to give workers a meaningful bump in pay,’ he explained. He also pointed out that the share of renter households has been increasing and home ownership is falling. Those financially able to buy a home in recent years were insulated from rising housing costs since most take out 30 year fixed rate mortgages with established monthly payments. Furthermore, a typical home owners’ net worth climbs because of upticks in home values and declining mortgage balances. The result has been an unequal distribution of wealth as renters continue to feel the pinch of increasing housing costs every year. ‘Meanwhile, current renters seeking relief and looking to buy are facing the same dilemma: home prices3 are rising much faster than their incomes. With rents taking up a larger chunk of household incomes, it’s difficult for first time buyers, especially in high cost areas, to save for an adequate down payment,’ added Yun. NAR’s research analysed changes in the share of renters and home owners, mortgage payments, median home prices, median household income for renters and the rental costs in 70 metro areas. The top markets where renters have seen the highest increase in rents since 2009 are New York with growth of 50.7%, Seattle up 32.38%, San Jose up 25.6%, Denver up 24.14% and St. Louis up 22.26%. Looking ahead, Yun says a way to relieve housing costs is to increase the supply of new home construction, particularly to entry level buyers. Builders have been hesitant since the recession to add supply because of rising construction costs, limited access to credit from local lenders and concerns about the re-emergence of younger buyers. Yun estimates housing starts need to rise to 1.5 million, which is the historical average, yet housing starts have averaged about 766,000 per year over the past seven years. ‘Many of the metro areas that have experienced the highest rent increases are popular to millennials because… Continue reading
UK property markets likely to see more capital growth in 2015, but at slower rate
UK property markets are likely to see continued capital value growth in 2015, especially in prime sectors, but perhaps at a slower late, according to an outlook analysis report. Strong capital value growth was undoubtedly the key theme of 2014 and growth across all sectors was stronger than forecast at the beginning of the year, according to the spotlight report from Savills. Growth could be slower in 2015 and the general election in May will definitely have some effect on sentiment, though in the agricultural and commercial sectors the firm expects the effects to be relatively muted. In the residential markets the threat of a mansion tax, combined with the Mortgage Market Review introduced in 2014 could lead to a more sustained hiatus in capital value growth in 2015. ‘Generally we expect that the macroeconomic story for the UK will remain benign, with base rates remaining unchanged until early 2016, and the combination of low oil prices and recovering incomes giving a boost to the UK consumer,’ the report says. ‘The high returns that will be thrown off by all property sectors in the UK will continue to attract attention, and we expect that UK real estate will continue to deliver high returns in comparison to other asset classes,’ it explains. ‘This will mean that domestic and international demand for prime and good secondary assets will be strong, though we expect to see more focus on supply and demand fundamentals in 2015, rather than just the potential for yield shift,’ it adds. As far as the residential outlook is concerned the report suggests that returns will be less driven by yield shift in 2015, with the best performance coming from understanding where local markets and sectors are in the rental cycle. Following a year of strong mainstream house price growth in 2014 that ran well ahead of the economic recovery, Savills expects much more subdued price growth in 2015. This is particularly the case in London, which has now outperformed the rest of the UK for over nine years and where correspondingly, affordability is likely to look increasingly stretched as interest rates rise. ‘In addition, the mortgage market review is likely to restrict the amount which people are able to borrow. In turn, this is likely to restrict mortgaged buyers' ability to get on or trade up the housing ladder, thereby continuing to drive demand into the private rented sector and underpinning rental growth,’ the report says. ‘The ongoing debate around the taxation of high value property is likely to mean a relatively muted prime market in the run up to the election. While the mainstream market may receive a one off fillip from the stamp duty changes in the 2014 Autumn Statement, prime markets that are bearing an increased tax burden will also have to contend with political rhetoric regarding a potential mansion tax, even though the medium term prospects remain positive,’ the report adds. In the agricultural perspective, Savills expects further growth in UK… Continue reading
UK property prices increase more than earnings in London and South East
Over the past two years average house prices have increased by more than the average employee’s net earnings in almost one in five local authority districts across the UK, according to new research. The vast majority of these areas are in London, the South East, and East, representing 68 of the 73, the data from lender the Halifax shows, and eight London boroughs appeared in the top 10. The largest difference was in Hammersmith and Fulham, where house prices increased by an average of £199,930 over the last two years, exceeding average take home earnings in the area by £143,232. Cotswold was the best performer outside London, the South East and East with house price gains exceeding earnings by £31,222. The Leicestershire areas of Melton and Harborough also saw average house prices increase by more than earnings in 2013 and 2014 with price gains in excess of earnings by £9,358 and £6,938 respectively. The research also shows that over the past five years some 23 local areas in the UK have seen average house prices increase by more than total average pay. In Islington, average property prices have increased by £258,498, surpassing average take-home pay during the period by £123,041. Again, the top six performers are all in London, but outside the capital, Elmbridge in Surrey has seen the biggest rise in prices in relation to total earnings in the past five years at £51,854. All 23 areas are in London and the South East. House prices nationally increased by 9% in 2014, the biggest annual rise since 2007. Average prices rose particularly sharply in London at 16% and the South East at 11%, and as a result, average prices increased by more than total take home pay in one quarter of districts. The majority of these areas are in London and the south of England. Most of the best performers outside the south are in the West Midlands including Malvern Hills, Wychavon and South Staffordshire. While, over the past decade, house prices have increased by more than total pay in just two areas across the UK; Hackney and Hammersmith and Fulham, all in London. ‘The housing market recovery over the past couple of years has resulted in some substantial prices rises in some areas of the country, particularly in London and the South East. This has resulted in homes increasing in value by more than total take home earnings for the average home owner in some areas of the country,’ said Martin Ellis, housing economist at the Halifax. ‘This is good news for some home owners. At the same time, it is challenging news for those looking to buy their first home in such areas, with prices being pushed out of range for many young people,’ he added. Continue reading
