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Low housing supply in the US squeezing affordability
Rental affordability is as bad as it's ever been across the United States, in part because there are not enough new, affordable homes to meet demand, new research suggests. Overall, renters can expect to spend 30.1% of their income on rent, while home buyers can expect to spend about 15.3% of their monthly income on a mortgage payment, according to a study by real estate analyst Zillow. It also found that affordability is worst in fast growing cities that have fallen behind in building homes to keep up with population growth. The firm’s latest rental index is up 3.4% year on year to $1,355 per month while its property price index is up 4.9% to £178,700. Affordability is best in places that either have slow population growth such as Detroit or have met new growth by building new housing units. Chicago, for example, permitted 906 new housing units in 2012 and 2013 for every 1,000 new residents between 2013 and 2014. The index report says that in Chicago renters can expect to spend about 31% of their income on rent, while homebuyers there can expect to put 13.9% of their income toward house payments. It suggests that it is easy to see how San Francisco has become one of the country's least affordable housing markets. Zillow's analysis showed that for every 1,000 new residents, there were just 193 new housing units permitted. Residents of the San Francisco metro can expect to spend 44% of their income on rent, or 39.2% on a monthly mortgage payment. The short supply is no secret to policy makers. The mayor of San Francisco, for example, has pledged to add 30,000 housing units by 2020 and a Boston city report made a similar recommendation to meet demand with 53,000 new housing units by 203o. ‘As the economy continues to improve, more Americans are slowly moving off of their buddies' couches and out of their parents' basements into homes of their own, first likely as renters and then eventually as home buyers,’ said Zillow chief economist Stan Humphries. ‘Unfortunately, the supply of affordable homes, especially affordable rentals, is insufficient in many areas to meet this growing demand. As a result, the competition for those homes that are available can often be fierce, driving up prices and contributing to worsening affordability,’ he explained. ‘More construction will help ease the crunch, and getting a mortgage is also getting easier, which will help more current renters transition to home ownership and further ease rental inventory shortages. But these fixes won't happen overnight,’ he added. Since 2000, rents have grown at roughly twice the pace of incomes. Partially as a result, the percentage of Americans citing cheaper housing as a reason they moved to a different home has almost doubled since then, from 5.6% to 9.6% currently, according to the US Census Bureau. Over the past several years, renting, historically a budget minded choice, has become increasingly less affordable. Meanwhile, recovering home prices, along with historically… Continue reading
UK annual house price growth falls again
Annual house price growth in the UK slowed to 5.1% in March from 5.7% in February and prices were up just 0.1% month on month, according to the latest index figures. It means that annual house price growth has now slowed for seven months in a row, taking the average price of a property to £189,454, the data from the Nationwide Building Society shows. UK house prices are currently around 2% above their pre-crisis levels. However, the pace of housing market activity has remained subdued, with the number of mortgages approved for house purchase in January around 20% below the level prevailing a year ago. ‘Economic conditions have remained supportive, with labour market conditions continuing to improve and mortgage interest rates close to all-time lows,’ said Robert Gardner, Nationwide's chief economist. While house price growth has moderated across the UK, there is still significant regional variation. Prices in London and the South of England continued to see the strongest rates of annual growth, though there was a noticeable softening this quarter, particularly in London Price growth also continued to cool in the North West of England, Scotland and Wales, even though prices in these regions remain some way below their 2007 peak. Indeed, in annual terms, prices in Wales declined by 0.5% in the first quarter of 2015. A breakdown of the figures show that all regions except the North of England saw a further slowing in annual price growth in the first three months of 2015. Across the UK as a whole, prices rose by 0.6% over the quarter, after allowing for seasonal effects. Prices were up 5.9% compared with the first quarter of 2014. London remained the strongest performing region, with average prices up 12.7% year on year, although annual house price growth has slowed noticeably compared with recent quarters, with growth down from 17.8% in the fourth quarter of 2014. Amongst the other English regions, the Outer Metropolitan area continued to outperform, with annual price growth not far behind London at 12%. Yorkshire and Humberside was the weakest performing English region, with prices up 1.3% over the last 12 months. Northern Ireland saw a slowing in annual price growth to 5.7%, while annual price growth in Scotland moderated to 1.3%. Wales remained the weakest performing region and was also the only region to see a fall in average prices, which were down 0.5% compared with the first quarter of 2014. There was a further slowing in annual house price growth in Scotland, from 4.2% last quarter to 1.3% this quarter. Edinburgh was the best performing area, with prices up 11% on the previous year. The Highlands and Islands saw the weakest growth, with prices up 2%. The Land and Buildings Transaction Tax (LBTT) is set to be introduced in Scotland on 01 April. Under LBTT, those purchasing properties above £333,000 will pay more tax compared with marginal stamp duty land tax (SDLT) system now in use in the rest of the… Continue reading
Exchange rates and golden visa encouraging overseas buyers in Spain
Currency exchange rates are encouraging even more foreign buyers back to the Spanish property market and this is reflected in increased sales, especially in popular areas. New legislation to relax the requirements for Spain’s golden visa which allows non-European Union buyers to gain citizenship if they invest in the real estate market is also set to encourage more buyers from overseas. In the Balearics the currency rates are currently by far the biggest influencing factor in the property market, according to Alejandra Vanoli, managing director of Mallorca Sotheby's International Realty. ‘Thanks to negative interest rates, affluent Germans are currently paying to keep their money in the banks and some would rather see it being put to good use in real estate investment. Mallorca is an obvious choice, German tourists have been coming to the Island for more than 50 years and represented 38.6% of all foreign arrivals to Mallorca in 2014, they have their own weekly newspapers, radio station and Air Berlin dominates the Airport. There is a strong bond,’ he said. He explained that with the British pound is at a seven year high against the euro, a two million euro property would have cost £1.67 million a year ago, but just £1.44 million today, some 14% more affordable. Swiss buyers are in a similar situation. The Swiss Franc soared when the National Bank abandoned its euro peg in the middle of January and a property costing 2.54 million Swiss francs a year ago would now cost 2.11 Swiss Francs, a saving of around 17%. The golden visa, which was introduced in September 2013, has seen 530 foreigners granted a visa so far with the majority, some 490 people, doing this through putting at least the minimum of €500,000 into property. Most of the property investors have been Chinese, Russian or Arab with business entrepreneurs coming largely from the United States and it has earned the Spanish economy an estimated €700 million so far. Previously the visa was granted to the applicant, their spouse, children under the age of 18 and disabled children of any age. This has now been extended to unmarried couples, economically dependent relatives and children of any age. Also, while the economic criteria remain the same, the path has been made smoother with applicants able to start the process upon arrival in Spain rather than applying from overseas. The visa will also be given within six months even to those who haven't formalised a property purchase, provided they've signed a contract and paid a deposit. ‘We are expecting more non-European purchasers but at the moment Mallorca is still very much dominated by British buyers who have been coming en masse since the 1960s, the Germans, and the Swedish who also have a long standing love affair with the Island,’ said Vanoli. ‘Mallorca is reported to be the most popular holiday destination for Swedes in 2015. Like the Germans, they have… Continue reading
