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Prime central London rental market in recovery mode
The prime central London rental market continued its recovery in August as uncertainty surrounding next May’s general election turned more prospective buyers into tenants, a new report suggests. It is not happening to any significant degree but a growing number of buyers are adopting a wait and see approach regarding the next 12 months as growth slows in the sales market, says the report from international real estate firm Knight Frank. For the same reason, sellers are increasingly exploring the possibility of becoming landlords in the short term, the report explains. ‘Price growth is slowing due to uncertainty surrounding the outcome of the general election and the possibility of tax changes in relation to high value residential property. The likelihood of an interest rate rise before the election is adding to the mood of uncertainty,’ said Tom Bill, head London residential research at Knight Frank. He added that by the end of a 12 month tenancy signed in August 2014, landlords and tenants will have a clearer outlook, three months after the general election and in a relatively normalised interest rate environment and the trend contributed towards more milestones being passed in the prime central London rental market in August. Rental values rose for the sixth consecutive month, which was the longest run of growth in three years. A rise of 0.5% in August pushed the index to its highest level since November 2012 and meant annual growth was 1.2%, the highest rate in more than two years. In addition, rental yields increased for the second consecutive month to 2.82%, the first time that has happened since the middle of 2011. Bill explained that there is also a more fundamental change taking place in the London market that is likely to underpin rental values in future. ‘A lower degree of stability in the labour market since the financial crash and the emergence of London as Europe’s dominant centre for technology businesses have created a more footloose workforce,’ he said. The report also shows that the percentage of telecoms, media and technology workers using Knight Frank Corporate Services in the year to April 2014 was 11%, ahead of oil and gas at 6% and retail also at 6%, and third only behind finance at 29% and law at 13%. Continue reading
Detailed figures reveal the success of UK’s Help to Buy scheme
Prime Minister David Cameron has hailed his government’s flagship Help to Buy scheme which aids people buying a new home, as a great success after figures show over 17,000 benefitted in the months since its launch. Figures shows that it is overwhelmingly benefiting first time buyers and contrary to critics it is not benefitting people in London and the South East with the vast majority of buyers outside these areas. The newly published figures reveal that 17,395 people have already bought a home through Help to Buy and the number of aspiring homeowners using the scheme continues to grow. Over 80% of sales were to people taking their first step onto the housing ladder with 89% part of the equity loan scheme and 82% the mortgage guarantee scheme. The highest number of people buying a home through the mortgage guarantee scheme is in the Scotland and the North West, while the equity loan part for new build properties, was at its highest in the South East. But overall some 77% of those supported by Help to Buy were from outside London and the South East, 85% for Help to Buy Mortgage Guarantee completions. ‘Help to Buy is a key part of our long term economic plan, giving thousands more people the security and independence that comes from owning their own home,’ said Cameron. His officials pointed out that Help to Buy continues to support responsible lending, with the average cost of a house bought under the mortgage guarantee at £148,048 and the average cost of a house bought under the equity loan scheme at £203,137, both of which remains below the UK average house price. An average house price bought under Help to Buy as a whole costs £194,992. The data also shows that the mortgage guarantee continues to be a success with home buyers, with completions tripling from 750 to over 2,500 in just over one month and mortgage lenders from both ends of the scale continuing to see strong demand. Two of the largest lenders, Lloyds and RBS have received 9,569 applications, and one of the smallest lenders in the scheme, Aldermore has received 2,313. The figures were published after the announcement confirmed in last week’s Budget that the equity loan part of the scheme has been extended to 2020. That means a further £6 billion to help 120,000 more households buy a new build home. There are currently 10,424 reservations already in the pipeline. Continue reading
Majority of IFAs expect UK house prices to rise in next three years
Nine out of ten Independent Financial Advisers expect UK house prices to increase during the next three years. Some 40% of IFAs would increase their own personal exposure to residential if it were easier to do so in a tax efficient way and 42% of IFA clients also more interested in residential property, according to new research. The survey from Castle Trust, which offers investment products that track or beat the Halifax House Price Index, shows that between now and 2019, 86% of advisers expect house prices to rise with one in 20 anticipating a dramatic increase. Also, when looking at the next 10 years, only 6% expect prices to fall and one in 14 think they will rise by over 50%. By 2024, financial advisers on average think that house prices will increase by around 21%, which would add £37,773 to the value of a typical home. According to the survey, the most common barrier to investing in a buy to let property is concerns about tenants or lack of tenants with 51% mentioning this followed by 49% saying it is the deposit and 41% thinking it is a hassle. ‘It is clear that confidence in the entire UK housing market is finally taking hold and is no longer just confined to London and the South East. This is starkly apparent from our own results as we have witnessed record flows into our Housa products, presumably because their returns are tightly pegged to the Halifax House Price Index,’ said Sean Oldfield, chief executive of Castle Trust. He explained that the firm’s Housa products provide a simple alternative to buy to let which has never before existed which opens up the chance for more people to invest in residential property who previously weren’t able to do so. Investors across Castle Trust’s range of Housas have seen growth since they were first launched in October 2012 and its unique Protected Housa investment product which both protects the capital invested and tracks the Halifax House Price Index (HHPI), has delivered capital growth of 3.1% in its first month alone. Oldfield described Housas as a low cost and tax efficient way to get exposure to the housing market. ‘Unlike property funds, there are no upfront or ongoing management fees. Housas typically qualify for inclusion as an ISA, Junior ISA or SIPP with a minimum investment of just £1,000. Investors are eligible for protection by the Financial Services Compensation Scheme of up to £50,000 per individual,’ he pointed out. UK residential property is one of the most stable asset classes. Analysis by Castle Trust reveals that over the last 30 years, it has historically delivered annual returns of about 6% per annum, which is comparable with equities, and superior to commercial property, but with much less volatility than both. Continue reading
