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Tighter buy to let regulation could push up rents in UK
Measures which discourage investment in the private rented sector in the UK in the face of population growth and low housing supply can only push up rents and harm tenants more than landlords, a new report suggests. The report from the Intermediary Mortgage Lenders Association (IMLA) which examines the key issues facing the main segments that make up today’s mortgage market, warns that tighter buy to let regulation could restrain supply. Assessing the possible impacts of July’s buy to let tax changes, the IMLA argues that a higher tax burden for landlords, which will push some into losses after tax and raise the effective tax rate on their buy to let above 100%, may slightly skew the market in favour of owner occupied house hunters, by reducing the price that landlords are prepared to pay for any given property. The risk, however, is that these changes and the threat of tighter buy to let mortgage regulation will constrain the supply of available rental properties at a time when the fundamentals of population growth and low housing supply are driving an increase in demand, and that institutional investment will fail to make up the gap. The IMLA report shows total lending across the mortgage market this year was running below its 2014 level from January to May. Since then, there has been a sharp recovery and 2015 may be shaping up to be a mirror image of 2014. Subdued lending in the first half of the year may have reflected uncertainty in the run up to the general election but a clear cut election result has removed this level of doubt. The bedding down of the Mortgage Market Review (MMR), which disrupted some lending with its introduction in 2014, has also contributed to the recovery, it explains. By far the most robust recovery has come in buy to let, but this must be placed in context of an 81% decline after the recession between 2007 and 2009, the report points out. This compares with a 60% drop in remortgaging volumes, 56% among home movers and 53% among first time buyers over the same period. Buy to let lending volumes remained 40% below their 2007 peak in 2014, and the IMLA argues that it is responding to rather than driving growth in tenant demand in the private rental sector. While buy to let has rebounded, the remortgage market has been slow to respond, but conditions are ripe for a resurgence. IMLA’s analysis shows that in the second quarter of 2015 remortgage volumes were up 11% on the previous quarter to record the best performance since 2009. At just under 3%, the price differential between standard variable rates (SVRs) and discounted variable rate deals is greater this year than ever before. Interest rates are also expected to rise, and for the first time in the second quarter households’ aggregate housing equity surpassed the £5 trillion mark. Only 20% of gross UK housing wealth is now… Continue reading
Less than one in five house sales fell through in UK in third quarter
Less than one in five house sales fell through between July and September in the UK, taking the house sale fall through rate to its lowest level since late 2012, new research shows. The figures from home buyer Quick Move Now indicate a house sale fall through rate of 19.62% in the third quarter of the year, down from 36.34% in the second quarter of 2015. The six month average fall through, which offers a greater overview of how the property market is performing generally, shows that at the end of the second quarter it was 28.44% but this fell to 27.99% in the third quarter. ‘As the property market becomes more competitive, buyers are coming to the market better prepared in order to make themselves more attractive to vendors when competing for property,’ said Danny Luke, business manager at Quick Move Now. ‘Often, buyers will already have sought financial advice, have mortgage offers in place, and taken time to really consider affordability so they know what they can afford and they know what they're looking for, so when they find a good property they want to snap it up as quickly as possible and not risk losing out to another buyer,’ he added. He also believes that due to continued market buoyancy and predicted interest rate rises, buyers are keen to secure properties quickly before they're priced out of the market. Meanwhile, separate research shows that demand for London property at below £2 million is set to remain strong, with the city’s population forecast to grow by more than 100,000 every year for the next decade. As house prices grow across London, it will create new markets where properties cross the £1 million threshold, according to the latest London Residential Review from real estate firm Knight Frank. The analysis is based on postcode districts where at least 20% of sales have been above £1 million in at least one quarter since the start of 2014. The minimum threshold was five sales and no postcode district was allowed to have more than one quarter with 20% of sales above £1 million before 2014. The data shows that Hammersmith (W6) had five such quarters since 2014, making it the area that has undergone the biggest transformation in terms of £1 million plus sales. Other areas include Maida Vale (W9), Queen’s Park (NW6), East Finchley (N2) and Muswell Hill (N10). Further south, Battersea (SW11) and Vauxhall (SW8) have consolidated their positions as £1 million markets. Continue reading
Data shows foreign buyers are back in the Spanish property market
The number of international buyers back in the Spanish property market is rising with British people now representing almost 20% of foreign sales, new data shows. In absolute terms, the number of purchases by foreigners is increasing to over 42,000 in a year with close to 11,000 transactions quarterly, and over 42,000 in a year. According to figures from the Ministry of Public Works sales to foreign residents in Spain increased year on year in the latest quarter by 17.2%, the 16th quarter on a row of growth to this sector of buyers. The nationality with the greatest volume of home purchases is the British, amounting to 19.8%, and it is suggested that this is due to the UK’s economic recovery and currency rates which give buyers more euros to the pound. French buyers accounted for 8.1% of sales to foreigners, Germans 7.6%, Belgians 6.4%, the Swedish some 5.5% and Italians 5.3%. But sales to Russian buyers have dropped from 9% during 2012 and 2013 to less than 4% currently, and this is likely due to the fall of the rouble and the price of oil. Asian buyers still only account for a small percentage of sales. Quarter on quarter sales to foreign non-residents reached 17,307 while sales to foreigners who are not residents increased by 5% to 1,244 transactions. A rise in foreign demand has also been recorded by the Association of Registrars whose latest data suggests that while there was a slight decline in the first quarter of the year, in the second quarter sales reached 12.8% of the total home transactions. In the first half of the year, foreign home buyers accounted for between a third and a quarter of all the home purchases in some regions. For example, in the Balearic Islands, some 33.5% of all the home purchases in the second quarter were made by international buyers, while in the Canary Islands they accounted for 27.5%, and in Valencia some 25.7% of all transactions. The regions of Murcia, Andalucía and Catalonia recorded percentages of home purchases by international buyers of between 12% and 15%, while in Madrid they accounted for only 4.7% of sales. The data also shows that in Aragón foreigners bought 4.5% of homes, in La Rioja it was 2.8%, in Navarra 2.3%, in Asturias and Cantabria 1.9%, in Castilla-La Mancha 1.8%, in the Basque Country 1.7%, in Castilla y León 1.1%, in Galicia 0.6% and in Extremadura just 0.4%. Meanwhile, the latest house price data suggest the housing market in stable with average national prices down by just 0.8% in the 12 months to the end of September, according to data from appraisal company Tinsa. A second set of figures from Idealista suggests year on year property prices fell 1.6% to a national average of €1,574 per square meter. According to Mark Stucklin of Spanish Property Insight, these latest figures back an overall trend of stabilisation in the country’s real estate market. But he is sceptical about official figures from… Continue reading
