TSI
Price growth and new buyer demand declines in UK housing market
House price growth and new buyer demand in the UK both tailed off in December 2014 but stamp duty reforms are still expected to support market activity in the months ahead. Overall, the number of potential new house buyers dipped for the sixth consecutive month in December and price growth fell to its slowest pace since May 2013, the latest residential survey from the Royal Institution of Chartered Surveyors shows. Across the UK, 10% more surveyors saw the number of potential new buyers decrease in December and London saw the weakest demand, with 45% more surveyors reporting a decline in enquiries, the eighth consecutive monthly decline. The North of England and the South West saw strong rebounds in demand, albeit the underlying picture remains most upbeat in Northern Ireland and Scotland. Despite the slowdown, there is optimism that the stamp duty reforms will deliver a 2% to 5% boost in both sales and prices over the next 12 months, despite members in London expecting sales to decrease by between 5% and 10% and prices to decrease by 2% to 5%, with larger properties and/or those in prime areas expected to see the biggest price decreases. Nationally, as a result of the weaker trend in buyer interest, sales expectations slipped to a net balance of 21%,down from 27% in November, and just 11% more surveyors saw prices rise in December, rather than fall. The volume of agreed sales during December was little changed, while the average number of sales per chartered surveyor slipped to 19 compared to 21.2 in the preceding December. In the month that also saw mortgage approvals fall to their lowest in 18 months, December’s data showed that perceived Loan to Value ratios across properties for first time buyers and existing home owners remained stable at 84.9% and 77.6%, although they are lower compared with the early part of 2014 following the adoption of a more cautious approach to lending as a result of the introduction of the recommendations of the Mortgage Market Review. ‘The changes to stamp duty are expected to provide a timely boost to activity in the housing market across most of the country but there remain significant challenges particularly for first time buyers seeking to take an initial step onto the property ladder,’ said Simon Rubinsohn, RICS chief economist. ‘Critically, the stock of property on the market continues to hover close to historic lows with new instructions to agents falling in ten of the last twelve months. Indeed, there is a risk that with so little housing available any pick-up in demand could rapidly feed through into higher prices rather higher sales,’ he explained. He pointed out that the RICS lead indicators do provide some encouragement that the level of housebuilding will continue to increase over the course of this year but even with further growth, the volume of home starts will still fall well short of the number of new household being formed… Continue reading
More UK landlords opting for low cost short term buy to let mortgages
The proportion of landlords in the UK favouring shorter two year fixed rates for mortgages has doubled in a year, new research suggests. It means fewer are looking at longer term fixed rate mortgages as the shorter terms loans are offering much lower deals at a time when the prospect of an interest rate rise recedes. The research from specialist broker Mortgages for Business also found that despite cheaper borrowing costs, some 73% of landlords want buy to let lenders to relax their lending criteria, up from 47%. A breakdown of the data shows that as of the final quarter of 2014, the proportion of property investors favouring two year fixed rates has increased to 23% from just 12% in the first quarter of the year. By contrast there was a decline in the proportion of landlords who would choose longer term fixed rates. In a marked reversal, fewer would now fix their mortgage repayments for three years than would prefer a two year deal. Just 15% prefer three year fixed rate products, down from 21%. The proportion of property investors who would fix for five years has fallen less dramatically, from 34% in the first quarter of 2014 to 31% in the final quarter. Moreover, in the latest figures only 8% would opt for a 10 year fixed rate if available, down from one in 10. ‘Tempted by cheap rates, landlords are deciding to take their chances with a shorter term deal. It’s true that these ultra-competitive mortgage rates will probably continue for some time as the financial world increasingly predicts virtually zero inflation in the UK and Eurozone, plus a cooling rate of economic growth,’ said David Whittaker, managing director at Mortgages for Business. ‘That doesn’t mean there’s no room for caution. Even in such an exceptional situation, rates are still expected to rise in due time. However, landlords now seem willing to take the chance that won’t happen for at least a couple of years,’ he explained. ‘However, we maintain our recommendation to fix for longer, particularly where the pricing difference between three and five year fixed rates is narrow,’ he added. Overall, the proportion of landlords who say lenders should be doing more to support property investors has risen since the start of last year. This is now 64%, up from 58% in the first quarter of 2014. As borrowing costs have fallen, substantially fewer property investors feel mortgage rates should be lower, 10%, down from 19% at the start of 2014. Similarly, fewer respondents said they would like lenders to reduce fees at 12%, down from 20%, and only 5% felt that lenders should be lending more, down from 14%. The survey revealed that landlords with larger portfolios continue to feel marginalised by the majority of lenders. They would like to see lenders remove age restrictions and non-property related income requirements, increase lending to limited companies and take a more common sense approach to underwriting. ‘Unfortunately for the more seasoned… Continue reading
Asking prices still rising in many parts of UK, latest index suggests
Prices are rising in more regions in the UK than might be expected for the time of year and price discounting is at a four year low, according to the latest asking price index. The current mix-adjusted average asking price for England and Wales shows that properties on the market are valued 7.8% higher than they were in January 2014, the data from Home.co.uk shows. The biggest price growth was in Greater London over the last month with a rise of 0.6%, despite falling prices in the prime central London market. Prices also rose in the North East during the last month by 0.4%, which the firm says is encouraging given that the recovery has not yet been evident in the most northerly English region. Asking prices increased in seven English regions and in Wales with prices up 0.1% overall in England and Wales during the last month. Only Scotland and East Anglia showed significant month on month falls of 0.6% and 0.8% respectively. The index report suggests that the positive momentum gained through the course of 2014 has clearly been carried through into 2015. Demand remains ahead of supply in most parts of the UK and looks set to stay that way as mortgage deals seemingly get better and better. The only dark clouds on the current property horizon would seem to be the price falls in prime central London and various potential housing policy changes that will be debated in the run-up to this year's election. Flat prices have fallen by an average of 9% over the last 12 months in central London. Over the same time, the number of flats for sale in central London has increased by 64%. ‘We consider that there is a significant risk that the same price correction will be perpetuated throughout Greater London and the South East over the course of 2015/2016,’ said Doug Shephard, home.co.uk director. ‘Possible changes in property taxes and rent capping also carry uncertainty and risk for the market in a year that will be coloured by political policy change,’ he added. The firm’s analysis of the situation in London shows that Belgravia was the first area to see prices fall. Prices peaked in November 2013 and since then, the typical price for a flat has fallen from £1,995,000 to £1,600,000, a drop of 20% and much more than the price of the average UK home. Shephard says this causes concern as history indicates that booms and busts always start in central London and then, quite slowly, emanate out to the rest of the country. He also pointed out that prices peaked for flats in Islington in March 2014. Since then, the typical asking price has dropped 11%, which represents a 10 month loss of £85,000. Over the same period, the typical time on market for flats in Islington has risen 220% from a frantic 35 days to a lethargic 112 days. Further out, Holloway flat prices peaked in May 2014… Continue reading
