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All regions of the UK see a year on year rise in residential rents
Rents in the UK have continued to increase steadily throughout the year with the average rent in the third quarter of 2014 reaching £903 per calendar month, according to the latest index. This is an increase of £21 per calendar month, up from £882 per calendar month in the second quarter of 2014, the data from Countrywide Residential Lettings shows. In September, the average UK rent increased to its highest level for 32 months to £916 per calendar month, a growth of 5.2% year on year. All regions saw a year on year increase in rents apart from the Midlands, which saw no increase in the third quarter of 2014 while Greater London saw the greatest increase, up 9.8% on the third quarter of 2013, followed by the East of England which saw an increase of 7.3%. The data also shows that arrears have remained relatively stable with many regions seeing a decrease and some seeing less than a 1% increase. In terms of the size of properties, all properties saw an increase in rent quarter on quarter and year on year. Four bedroom plus properties saw the greatest increase in rent year on year, up 5.8% to £1,524 per calendar month, followed by three bedroom properties up 4.8% to £956 per calendar month. Two bedroom properties saw the smallest growth in rent, up 4.1% to £822 per calendar month. Meanwhile, Countrywide says that the Bank of England’s request for extra powers, in order to direct lenders as to how much buy to let investors are able to borrow, could mean that landlords in the South East and London will have to find a 40% deposit in order to secure mortgage finance. According to an analysis by the firm the powers, if granted, will allow the Financial Policy Committee to ask lenders to stress test how much new landlords can borrow and ensure that the income landlords receive is greater than the interest payments on their mortgages. Lending on investment property is typically secured against the rental income a landlord can generate. For most lenders, landlords are assessed on whether the rent generated from the investment property will cover 125% of the interest component of the mortgage. This gives both the lender a degree of security against interest rate rises and takes into account the money a landlord will reinvest back into the property for general maintenance and improvements. At present, the interest rate against which the borrower’s ability to meet repayments is at the discretion of the lender. Over the past two years, this rate has typically been around 5%, translating into 1.2% above the 3.8% rate at which the average landlord secures their loan. For the average landlord who has purchased during 2014, the rental income from the property covered 205% of the mortgage interest, well inside the 125% limit. Tested against an interest rate of 5%, generally the rate which lenders currently use to test affordability means the rent will cover 165% of the mortgage… Continue reading
Farm land values in England up 2% in third quarter of 2014
The average value of farm land in England increased by 2% in the third quarter of 2014 and has increased 12% so far in 2014, the latest index shows. The average value of commercial farm land without any land or buildings now stands at an average of £7,689 per acre, or exactly £19,000 per hectare, the results from the Knight Frank farm land index show. Year on year, farm land prices are up 15% and over a 10 year period, farm land has risen in value by 187%, second only to gold at 224%. The 2% growth in the third quarter of the year builds on the 9% growth seen during the first half of 2014. This comes at a time when there is limited supply. The amount of publicly advertised land is down 15% compared with 2013, according to the Farmers Weekly Land Tracker and the ongoing demand from both farmers and investors continues to push up prices. Despite recent falls in the price of agricultural commodities such as wheat and milk, farmers are still focused on the long term and are keen to acquire neighbouring or nearby land when it becomes available. With house builders increasing their output and acquiring more development sites, the number of farmers with roll-over funds to spend on land is growing. As farmland is acquired for the controversial HS2 rail scheme this could also bring new buyers into the market, says the Knight Frank report. Investors’ hunger for land remains undimmed, as highlighted by the recent purchase of the Co-op farms portfolio for almost £250 million by the Wellcome Trust. Part of the problem for investors, particularly funds, is the lack of suitable investment grade land available, combined with strong competition from neighbouring landowners prepared to pay a ‘legacy’ premium for land that they may only have one opportunity to buy and once purchased may stay in their families for generations to come. Because of this, many investment led deals are happening off market. Knight Frank’s Agricultural Investments team, which is acting for a number of wealthy individuals and funds, estimates private deals are outnumbering public ones by as much as two to one. Although large tracts of arable land with relatively little value tied up in high value period farm houses are selling quickly and the market for estates with large residential properties is less fluid, according to Clive Hopkins, head of the firm’s Farms and Estates team. ‘In some instances, this has led to large chunks of an estate’s farm land being sold off separately for a premium price. I think this trend really highlights the strength of the farmland market. Traditionally it has been the house leading the sale, now often it is the land,’ he added. Continue reading
Third of new homes in London in next five years set to be in the east
Almost a third of all new homes planned for London over the next five years will be concentrated east of the city’s financial district, a new analysis shows. A total of over 55,000 homes will be built in just four boroughs, according to the report from international property adviser, Savills, which identifies a shift in the capital’s centre of gravity towards the east. It says that the boroughs of Newham, Tower Hamlets, Greenwich and Barking and Dagenham will account for 29% of all new homes planned for London in the five years to the end of 2018. ‘The Olympics played a hugely important role in opening up the area to investment and transport improvements are now driving occupier, investor and developer demand in previously overlooked east London postcodes,’ said Susan Emmett, Savills residential research director. ‘This is changing the shape of London and its property market, with a discernible pattern of emerging development hugging the East London Line portion of the new London Overground. The network extension to Barking Riverside and the completion of Crossrail with give a further boost,’ she added. The analysis report points out that lower average capital values in the east of London have provided developers with the opportunity to build much needed homes that are affordable for those living and working in London. However, while central boroughs such as Westminster and Kensington and Chelsea remain the most expensive, the biggest increases in value have been seen away from London’s core over the past year, particularly in cheaper locations to the east. But, not only have prices increased ahead of the Greater London average, transaction volumes have also received a dramatic boost. In Tower Hamlets, the number of homes changing hands is now double the pre-peak norm, while deals in Newham are up almost 50% year on year. Key emerging residential areas include Stratford with 6,500 new homes, including 2,800 in East Village, Canning Town and Royal Docks with 8,000 homes, Canary Wharf with 4,500 homes at Wood Wharf and 850 at Asda Crossharbour and Greenwich Peninsula with 10,000 new homes. Average prices currently range from £500 to £700 per square foot in Canning Town and Royal Docks and £550 to £750 in Stratford, accessible to households with an average income of over £70,000. In Canary Wharf, popular with financial sector employees both as owners and tenants, values range from £700 to £1,200 per square foot. Greenwich Peninsula is expected to achieve values in the £550 to £850 range. ‘It is this dynamic of rapidly rising prices, albeit from a low base, and the strength of demand that will present developers with their biggest challenge. Market strength has pushed the value of new build in Canary Wharf, the most established East of City location, to £700 to £1,200 per square foot, out of the reach of the… Continue reading
