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Experts pick out markets that are too hot in the US
San Francisco's housing market has grown so unaffordable that some experts say the market is already in a bubble and it's not the only market in the United States that they are concerned about. A third of the experts surveyed in the latest Zillow Home Price Expectations Survey said the San Francisco housing market is in a bubble and another 20% believe the market is at risk for bubble conditions within the next year. The survey, sponsored quarterly by Zillow and conducted by Pulsenomics, asked more than 100 panelists about their expectations for the housing market. Of those, 66 answered a question about bubble conditions in 20 local housing markets. The survey responses revealed that some housing experts are concerned about over valuation in some of the nation's hottest housing markets and that there is significant disagreement among experts about whether the rapid home value growth in those markets puts consumers at risk. ‘A handful of markets, especially the Bay Area, are very hot right now, and it's possible home values may actually begin to fall somewhat in these places as more residents are priced out amidst rising affordability concerns, especially when interest rates rise,’ said Zillow chief economist Svenja Gudell. ‘Whether those local conditions constitute a 'bubble' is up for debate, even among economists. Without 20/20 hindsight, it's difficult to identify bubbles as they're happening, but it is very clear that nationally we are not seeing a return of the conditions that caused the last national bubble,’ she explained. ‘Tighter lending restrictions today mean we aren't seeing buyers get loans they realistically can't pay back, like we did in years past. It's significant that some experts are starting to worry about bubble conditions, but in my opinion, there's no real danger of a severe crash like the one we all remember from the last decade,’ she added. Some experts said they think bubble conditions are already present in Miami, Los Angeles, Houston, San Diego, and Seattle. A quarter of respondents said they think there is significant risk of a housing bubble in the next three years in Boston. However, the same number of panellists said there is no risk of a bubble in Boston in the next five years. The bubble fears are coming to the surface even as home values overall are expected to gradually level off over the next several years. The ZHPE panel projects an annual growth rate of 3.9% through to the end of 2015, a gradual slowing of the US housing market. Over the next five years, among all 108 panel respondents, the expected average annual home value appreciation rate is now just over 3%. This scenario would result in a national median home value of more than $215,000 by the end of 2020. ‘The long term outlook for US home values has diminished to a three year low, and a clear cut consensus among the experts remains elusive, even at the… Continue reading
Buying cheaper than renting across whole of UK
Buying is cheaper than renting in every area of the UK, especially in London where rent prices are 56% higher than the average, new research shows. Indeed, potential first time buyers would have lower monthly outgoings if they bought a property than they do renting with average monthly rental prices now surpassing those for the average mortgage repayment. According to the research from Santander Mortgages would be buyers could save themselves £2,300 a year if they were able to purchase their own property. The average monthly rent in the UK is currently £995 per household compared to monthly repayments of £805 for the average first-time buyer household, meaning homeowners could save an average of £190 a month or £2,300 a year. Prospective first time buyers in the South West could make the biggest monthly savings by making the switch from renting to property ownership as average monthly rents exceed mortgage payments by over £192. First time buyers in London would see themselves £179 better off per month. At the other end of the scale are those living in the East of England, where typical first time buyer monthly mortgage payments exceed average rents by only £2. A further breakdown of the figures shows that in Scotland buyers would be £157 better off, in Wales £127, in the North West £121, in Yorkshire and the Humber £113, and in the West Midlands £102. But elsewhere they would be less than £100 better off. In the East Midlands the difference between rent and mortgage was £88, in the North East £83 and in the South East just £28. The research found the average price across the country to be £212,610. This means that a buyer with a 21% deposit, the average deposit size for a UK first time buyer would require £44,648 in order to get on to the property ladder. ‘People assume that buying a property will put them under greater financial pressure, but often the reverse is true. With annual savings averaging well over £2,000, this can really mount up over time and of course once the mortgage is paid off you have a valuable asset to show for it,’ said Miguel Sard, managing director of mortgages at Santander UK. ‘Many prospective first time buyers see the cost of saving for a deposit as prohibitive, but there are many deals available for smaller deposits. Buying a property is a big financial commitment and there are upfront costs to consider, but over the long term the financial benefits can be very significant. Getting independent advice and looking for competitive rates either online or through a mortgage advisor is crucial to get the best mortgage to meet potential home owners individual needs,’ he added. Continue reading
Stamp duty increase for UK landlords equivalent to 11 months net income
The cost of the new 3% stamp duty rate for UK landlords announced recently in the Autumn Statement would be the equivalent to 11 months income for the average mortgaged landlord, new research has found. It is suggested that most private sector landlords buying after April 2016, when the measure is introduced, will likely try to offset the cost by offering less when purchasing. It comes at a time when the rent on newly let properties has increased by 2% year on year, led by markets in the East of England, according to research by property services group Countrywide. In the Autumn Statement, the Chancellor George Osborne announced an additional 3% stamp duty rate for landlords and second home owners. The research also suggests that the rate will put pressure on yields for landlords, unless they account for increased costs when buying. Indeed, the research shows that if the higher tax burden is not factored into the purchase price of a property, it would mean a reduction in gross yield of 0.2%. That is equivalent to 11 months income for the average landlord, taking into account borrowing costs, based on the average loan to value of 68%. Landlords in the South West and North East of England will see the highest cost relative to rental income, as the extra tax burden is equivalent to 14 months and 12 months of income, respectively. Those buying in the North West of England will see the least, with the extra stamp duty equivalent to eight months of income. The majority of landlord purchases take place in London, the South and East of England and some 60% of homes sold to landlords in England this year were in these regions. Landlords in these areas will see the biggest cash increase in stamp duty, £6,000 on average. However, high expectations of future house price growth will likely mitigate some of the impact of the tax increase. If prices grew at the same rate as the last five years, within 12 months the growth in house prices would have offset the cost of the additional stamp duty. In the Midlands and North of England, 16% and 12% of total sales respectively are to landlords. Countrywide data shows that the average property bought by landlords in these regions would previously not have faced any stamp duty but will now face a £3,200 tax bill next year. The changes to stamp duty come as the shortage of homes available to rent continues, levels of stock have decreased 5% year on year. The growing imbalance between supply and demand will continue to support rent increases in future months as tenants compete for fewer homes. ‘The stamp duty increase will impact landlords’ purchasing power. Many entering the market will be faced with a choice between making a lower offer when buying or having to cover the additional costs themselves,… Continue reading
