Uk
Uncertainty creeping into UK housing market likely to be short term
Uncertainty is set to creep into the UK housing market due to stamp duty changes, the European Union referendum and forthcoming regional elections, it is claimed. Overall short term confidence in the market has flattened following the rush from buy to let investors to beat the extra 3% imposed on additional homes at the start of April, says the latest monthly survey report from the Royal Institution of Chartered Surveyors (RICS). Survey respondents say that the uncertainty is fuelled by stamp duty changes, a weaker pound, the UK potentially leaving the EU (Brexit) and devolved elections in Scotland and Wales and local elections in England. The report also shows that the rate of house price inflation is slowing with indicators pointing to more modest house price gains and house prices have fallen further in London than elsewhere. These factors have been most strongly felt in central London, where 38% more respondents expected to see house prices fall over the next three months. The report also says that across the UK, while expectations around the number of new house sales peaked following the Chancellor’s Autumn Statement, this trend has reversed with 2% more respondents expecting to see the number of sales fall rather than rise over the coming months. Confidence around house price inflation has also dampened with 17% of respondents (net balance) expecting to see prices rise over the next three months, compared to 44% (net balance) in December. However, the longer term outlook suggests that prices will still be expected to rise by more than 4% each year for the next five years across England and Wales, with prices in London projected to grow by a broadly similar amount rising by 3% each year over the same period. Despite, the increased rates of stamp duty tax, now expected to be paid by prospective landlords, rent inflation, while expected to increase, is not predicted to rise any faster than it has in previous months. Although over the next five years respondents continue to anticipate rents will increase by an average of 4.5% per annum, there is no indication yet that tax increases are being passed on to the tenant. The expected rate of rent of inflation has remained constant for the past year at around 3%. ‘As expected, the buy to let rush has now run its course and, as a natural result, the market is starting to slow. But there are other significant factors that are currently weakening short term confidence in the UK property market,’ said Simon Rubinsohn, RICS chief economist. ‘Elections inevitably bring with them periods of uncertainty in the market, and our figures would suggest that next May’s devolved elections are no exception. Likewise, the EU referendum, is likely to be an influencer in terms of the damper outlook for London in particular,’ he added. ‘However, all indications suggest that whatever the outcome of the forthcoming elections and referendum, in the long term, the imbalance between demand and… Continue reading
UK referendum on European Union membership set to hit real estate markets
The forthcoming UK referendum on the country’s future in the European Union poses risks for the re sector due to the uncertainty it is creating, according to a new analysis report. This uncertainty leading up to the vote on 23 June is likely to have a somewhat paralysing effect on investor decisions on real estate purchases, says the report from Standard and Poor’s. It also says that should the country decide in favour of leaving the EU, known as Brexit, then the uncertainty will be prolonged during the subsequent exit negotiations and this may turn investor sentiment more negative. ‘This could potentially reverse the significant boost to real estate asset values that the UK and London in particular has experienced in recent years. Added to this, financial services firms, already under pressure to contain costs, may find an additional reason to reduce office space in London,’ the report explains. ‘Consequently, we consider the risks to the real estate sector of a Brexit may be most pronounced in the commercial real estate sector, particularly in the office segment, more than in retail and logistics,’ it points out. ‘We also think the effects will be more concentrated in London than other parts of the UK. Within the capital, the City of London would be hardest hit, because of a high concentration of international financial services firms,’ it adds. Given the possible negative consequences of Brexit, Standard and Poor’s said that its ratings on real estate investment companies, home builders, and structured financing in commercial and residential mortgage backed assets will require ongoing monitoring. It suggests that in the next few months ahead of the referendum, the uncertainty regarding the outcome of the vote may slightly disrupt the real estate markets. ‘We think it could lead to some deferrals in deals, timed to close after, rather than before the June 2016 vote. We expect that commercial real estate may be more heavily affected than residential overall, as businesses may delay their investment decisions and investors may put on hold contemplated transactions pending more clarity on the referendum result,’ the report says. ‘In our view, a vote in favour of Brexit would accentuate and prolong this period of paralysis since it would most likely take several years for the terms of the exit to be defined. Since the 2009 downturn, wealthy individuals and institutional investors have considered the UK real estate sector a very safe asset class. These assets attracted sustained investor demand primarily for their value preservation characteristics,’ the report explains further. ‘A vote in favour of a UK exit from the EU in June 2016 would likely threaten that perception of safety, at least for some time. A falling UK currency may also contribute to such a change in perception but would also make real estate in the UK less costly to international investors in foreign currency terms,’ it states. It makes the point that residential real estate would not be immune to a Brexit. ‘The… Continue reading
Storm damage and burst pipes cause the most damage in UK buy to let properties
Storm damage, burst pipes and damage from break-ins were the top reasons that buy to let property investors make insurance claims, new research has found. The most common claim was for storm damage, which cost an average of £1,500 to repair, followed by damage to ceilings, walls and carpets caused by burst pipe with an average £4,500 repair bill. The analysis of data from 100,000 policies by Simple Landlords Insurance also found that the third most common reason for making a claim was property damage caused by burglars with an average claim of £2,300. The most expensive claim in the top 10 is £25,000 to repair the damage caused by an electrical fire and the report also explains how insurance premiums can vary significantly according to property type, location, and tenant type. Andrew Weston from Simple Landlords Insurance said the research is useful for landlords as it helps them to find out the practical measures they can take to avoid the hassle and time of making an insurance claim, all of which will benefit them further by keeping premiums low. ‘Saving money will become even more important for landlords in coming years as tax increases announced by the Chancellor are phased in, which for many investors could make the difference between profit and loss,’ he pointed out. ‘Buying insurance is often one of the last things buy to let investors consider. Having a clear understanding of the key factors that can influence a premium will save landlords money in the long run,’ he added. The report warns landlords about damages that are not covered by insurance policies. The most common reason that a landlord did not have cover was that they hadn’t purchased accidental damage cover in their policy. The report also explains that while you never know where a storm will hit, certain features can make properties particularly vulnerable to harsh weather conditions. Properties with conservatories attached and dormer windows are especially likely to be damaged by high winds and excessive rain during a storm. An example is a property in Edinburgh which needed more than £11,000 worth of repairs, including Perspex roof covering to the buildings’ exterior and solid oak flooring to its interior after two panels from its conservatory roof were ripped off during high winds in January 2015. In Keighley, West Yorkshire, another landlord sustained damage worth just under £5,000 when their conservatory roof was replaced after every single roof pane was punctured by hailstones during a storm in July 2015. A landlord in the West Midlands was contacted by his student tenants following a break in. The burglars smashed through the back door and tried to enter all the bedrooms upstairs. All the doors were locked but the thieves damaged the doors and frames with the damage amounting to almost £5,000. Continue reading
