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UK buy to let tax change will restrict lending in the short term, says new report
The restriction of mortgage interest relief for UK buy to let landlords will, in the short term, curb lending in the sector, which currently makes up 15% to 16% of mortgage lending, according to a new analysis. At the same time, 2015 is on track to become the best year for buy to let mortgage deal issuance since the credit crunch, says the special report from Moody's Investors Service. ‘The government's decision to restrict buy to let mortgage interest relief reflects a willingness to put investors and owner-occupied borrowers on a more level playing field, given that the latter cannot claim tax relief on their mortgages,’ said Moody’s analyst Emily Rombeau. ‘First time buyers' affordability has declined, as they struggle to get on to the property ladder. Affordability constraints and demographic changes have increased the share of privately rented housing and this sector's evolution has strongly contributed to the rapid growth of the buy to let sector in recent years,’ she explained. ‘Repeat issuers and new players will support a robust pipeline of buy to let RMBS deals this year. Issuance for this segment has accounted for 25.6% of total UK RMBS issuance so far this year, up from 10.2% in 2014,’ she added. Over the coming months, Moody's forecasts that reduced demand for buy to let properties will soften UK house price growth. Moody's forecasts that UK house prices will nonetheless rise by up to 5% in 2015, albeit at a slower pace than in 2014. ‘Notwithstanding the softening in house price growth, the risk of an immediate house price decrease is limited given the housing shortage and the economic recovery,’ Rombeau pointed out. According to the Moody's report, the buy to let market has grown at a steady pace since early 2010, accounting for 16.8% of total gross mortgage lending and 25.3% of total house purchases as of the first quarter of 2015. Buy t let gross lending volumes have substantially increased, rising to £7.6 billion in the first quarter of 2015 from £2 billion in the first quarter of 2010. Paragon, the UK's largest buy to let specialist, has accounted for around 40% of buy to let issuance since the financial crisis, with a total of nine transactions collectively worth £3.2 billion, the report says. Mortgages also entered the buy to let securitisation sphere this year; the recently established specialist lender has already completed two buy to let transactions for a total amount of £426 million since January 2015. Moody's research says that, while UK house prices increased by 3.5% in the first half of 2015, according to data from the Nationwide, most regions, except for Northern Ireland and Yorkshire and Humberside experienced a further slowdown in annual price growth in the second quarter of 2015. The monthly year on year growth in UK house prices gradually declined to 3.3% from 11.8% in the 12 months to June 2015. David Whittaker, managing director of Mortgages for Business, said that… Continue reading
Prime property prices in prime central London up for first time since Sept 2014
Prime property prices in central London increased slightly, up by 0.8% in the second quarter of 2015, the first rise since September 2014, according to the latest index. Pimlico has seen the strongest growth in the last year with values up 5% or £66,000 compared with the second quarter of 2014, the data from estate agent Marsh & Parsons. The second quarter has also seen a 17% rise in demand for property in this sector but at the same time supply increased by only 10% while overall 42% of sales are now made by investors, a rise of 8% year on year. At the same time, there has been an upswing in foreign buyers who accounted for 34% of all sales in the second quarter of the year, up from 30% in the second quarter of 2014 although then firm says this has much to do with European buyers of all nationalities coming to live and work in London. Overall property in this sector costs 27% more per square foot than across London as a whole with the average square foot of property in central locations such as Holland Park, Notting Hill or Kensington and Chelsea valued at £1,516, some 27% higher than the capital wide average. In contrast, overall in Prime London, the typical price per square foot stands at £1,192. ‘The excellent capital appreciation and secure nature of property in prestigious central addresses of Kensington, Chelsea and Holland Park have long made them appealing particularly to the investor and it’s encouraging that we’ve seen such a rise recently,’ said Peter Rollings, chief executive officer of Marsh & Parsons. ‘Investors are a good gauge of the overall health of the London market. If there was any cause for concern about the future property market, investors would be upping sticks and moving elsewhere,’ he explained. ‘But that fact they are still putting down roots in the capital shows how fertile current conditions are. While there may not be much action to see at the moment, prices are still growing, and the foundations for fruitful capital returns are strong,’ he added. He also pointed out that price growth turned a corner and started to improve again with a 0.8% quarterly rise compared to a 0.6% drop in the first quarter of the year. Outer Prime areas of the capital have seen the strongest resurgence in price growth, experiencing 1% growth. However, house price growth in this sector is still much slower than last year, and on an annual basis, values have dipped across the prime London property market. Rollings said that it is important to place this into a longer term context, and since June 2013 the value of the average prime London home has increased by 12.1%. In terms of property type, family sized homes have experienced the biggest rise in price with four bed properties across prime London appreciating by 1.3%… Continue reading
New home permissions reach record in NZ but not enough to meet housing shortfall
Planning permission for new homes in New Zealand in the first half of 2015 was higher than any previous year, new data shows, but not enough to match current shortfall. Between January and June 2015 some12,057 new dwellings, worth almost $4 billion, were consented, according to the figures from Statistics New Zealand. The new building consent figures show the total floor area for the new homes was 221 hectares, enough to cover an area twice the size of Wellington Airport. In the month of June some 2,042 new dwellings were consented nationally, up 2% compared with June 2014. However, in seasonally adjusted terms, the number was down 4.1% from May 2015. Numbers in Auckland increased by 18% but in Canterbury consents decreased by 13%. ‘New dwelling consents growth this month was led by Auckland, which offset the fall in Canterbury,’ said business indicators manager Clara Eatherley. The data also shows that the total value of consents for all buildings in June 2015 was $1.3 billion, comprising $832 million for residential buildings and $454 million for non-residential buildings. However the number of new homes being built in Auckland continues to fall well short of what is required to meet the region's population growth. It is estimated that 13,000 new homes a year are needed in Auckland just to keep pace with current population growth, which is an average of 1,083 consents a month. That means that current consents were just under two thirds of what is required and the supply of new homes will need to increase by around 50% from current levels before demand and supply start to get back into any sort of equilibrium. A new report suggests that Auckland's housing shortage might not peak for another three years and could last for more than a decade. According to the Auckland Council's Housing Project Office (HPO) the shortfall could rise rapidly to 25,000 homes in 2018, compared to current levels of roughly 15,000. The HPO looked at the rate of population change, the number of dwellings required, and the likely rate of consenting to estimate how many homes would need to be built between over the next 15 years. Officials said consent numbers were continuing to increase and it was not unrealistic to assume Auckland could get to 12,000 dwelling consents a year by 2021 and if 90% of consented dwellings were built, Auckland's shortfall could be eliminated by 2027. Recently the Productivity Commission put the current shortfall at 32,000 homes and said 13,000 homes would be needed each year to accommodate new growth. Continue reading
