TSI
UK starter homes initiative could create infrastructure shortfall
UK Government plans to create 100,000 cut-price homes for first time buyers risks creating a shortfall in local infrastructure, according to the British Property Federation (BPF) has warned. In its response to a government consultation on its ‘Starter Homes’ initiative, the BPF said that exempting developers from providing necessary infrastructure could mean that other sites in the area will find themselves under additional pressure to cope with a resulting shortfall in amenities. While praising the government for its ambitious approach to increasing the supply of housing, the trade body said the overall effect of the proposals may hold back development in surrounding areas. The BPF suggested that there should perhaps be the option for developers to provide some of the necessary infrastructure in exceptional circumstances, over and above the contributions suggested for site-specific development mitigation. The initiative proposes to bring forward 100,000 homes for first time buyers. Developers will be encouraged to see the homes at a discounted rate in return for building on brownfield sites and being exempt from infrastructure requirements. ‘While the Starter Homes initiative is welcome and holds a lot of potential, the detail does need to be worked through more carefully if it is to work in practice,’ said Melanie Leech, chief executive of the British Property Federation. ‘Infrastructure is vital for places to succeed – not only transport infrastructure, but space for people to work and relax, and the right social infrastructure for a healthy society. Many brownfield sites are lacking in amenities, so we would urge government to act carefully to make sure that starter homes do not hamper the wider growth of their surrounding areas,’ she added. Meanwhile, the property industry has today backed Labour’s plans to consider designating large scale housing as national infrastructure. Labour’s draft remit for a new National Infrastructure Commission (NIC) sets out 10 national infrastructure goals. It includes making sure that the enabling infrastructure is in place to support rapid housing development and that housing investment is integrated with investment in transport and utilities. The British Property Federation has consistently lobbied government to include residential into the Nationally Significant Infrastructure Plan (NSIP) regime, repeatedly pointing out that the National Planning Policy Framework (NPPF) advocates mixed-use development, and that sustainable communities need to include a mix of both commercial and residential units. Including a provision for residential in the NSIP regime could help unlock significant amounts of much needed housing development. ‘If we are to deliver housing at scale at the same time as creating commercial hubs that will drive economic growth, we need to encourage the development of well connected, mixed use communities where people can both live and work. Including residential within the NSIP process would be a significant step forward in this respect, and we hope that whoever is in power after the next election takes this forward,’ said Leech. Continue reading
Central London property prices still falling, latest index shows
Further evidence is emerging that the central London housing market bubble has burst and price falls are spreading throughout the rest of Greater London, the latest index suggests. Prime central London prices are still falling as the supply of properties rises and confidence in property as an investment ebbs away,’ according to the data from Home.co.uk. Central London locations dominate the latest list of biggest house price falls across the UK, with Walworth in the London Borough of Southwark seeing a 15% fall in average house prices between January 2014 and January 2015. House prices in Belgravia fell by 10.3% over the same period and Cromwell Road in Kensington saw a slump of 8.3%. Of the 20 UK areas with the biggest annual fall in sales prices, 11 are in London. Landlords' return on investment on central London properties is also falling. Of the 15 UK locations recording negative real % yield, which occurs when the value of the property depreciates by more than the annual rent, 12 are in central London. The index shows that in January 2015, landlords with a property in Walworth recorded a negative real % yield of 11.3%, while in Belgravia the negative real % yield stood at 7.1%. Central London flat prices are among the hardest hit. On average, the price of a flat fell by 9% in central London between January 2014 and January 2015. Over the same time, the number of flats for sale in central London has increased by 64%. Since November 2013, the price of a typical flat in Belgravia has fallen 20%, from £1,995,000 to £1,600,000. A similar price correction has already spread into Islington, where the typical asking price of a flat has dropped 11% since March 2014. This represents a loss of £85,000 for flat buyers in Islington over the last 10 months. There is further evidence that price falls are rippling out to more remote areas of Greater London and look set to spread further into the South East. The spectre of negative equity is looming large for recent buyers. Further out in Greater London, Holloway flat prices peaked in May 2014 but have since dropped by 13%, while the typical time on market for flats in the area has more than doubled. Meanwhile, Muswell Hill in North London has seen flat prices fall 4% since October last year. ‘Optimism in the UK housing market is still riding high in the?rest of the country, but it comes as a?shock to many to?learn that prices are?crumbling in the?most expensive streets in London,’ said Doug Shephard, Home.co.uk director. ‘These price movements may soon have a knock-on effect for the rest of Greater London and, later, the Home Counties,’ he added, pointing out that prices in central London went up too far, too fast during 2012 and 2013. ‘In a synthetic property boom and bust such as London has experienced, on account of ultra-low interest rates and other stimulus measures, it is hard to… Continue reading
CML warns Scottish Govt that rent controls could have adverse effects
Proposals by the Scottish Government to introduce new rules for the private rented sector could have a negative impact on buy to let lending, according to the Council of Mortgage Lenders. It has sent a detailed response to a consultation document issued by the Scottish Government, and while it recognises that some of the proposals will benefit the sector, others are likely to have a detrimental effect. In particular the CML is concerned about rent controls. In its reply it says that rent levels in Scotland are complex picture and while some areas such as Aberdeen and Edinburgh may have seen above average increases in rent levels these are very much as a result of demand exceeding supply. It points out that these areas are also seeing above average house price increases for the same reason and the long term solution has to be to increase the supply of housing in areas where this is an under supply. ‘We believe that the introduction of rent control is likely to dampen appetite amongst institutional investors to invest in the sector, will impact adversely on the availability of buy to let mortgages, will result in higher rents being set at the outset to compensate for lower rent increases during the rental term and could impact on quality if a rental yield cannot be achieved to allow continued investment in the property,’ the CML says. ‘Overall we believe the introduction of any form of rent control is likely to reduce investment in the sector thus reducing the supply which is badly needed to meet housing need. Currently we do not believe there is any need for the Scottish Government to take any action as there is no evidence base which would justify it doing so,’ it adds. The CML explains that while there are a number of models which could be selected in terms of rent controls, any such model would have to be an effective, transparent and a fair way of increasing rents so that it was attractive to both landlords and tenants. ‘A careful balance would need to be struck between landlords’ expectations over future rental yields and the expectation of tenants,’ it adds. The CML document welcomes the development of a model tenancy agreement and modernised grounds for possession. ‘However we believe that a number of the proposals contained in the paper are likely to have the unintended consequences of both reducing investment in the sector and the supply of private rented sector housing,’ it points out. These include the removal of the no-fault ground for re-gaining possession, the removal of the ability to continue tenancies on a month to month basis at the end of their term and potential controls over rents. ‘We believe that landlords need to have confidence in their ability to end a tenancy when they need to do so otherwise this may discourage future investment in the sector. Existing arrangements provide flexibility for both landlords and tenants…. Continue reading
