Uk
Prime property rents in London set to see recovery in 2016, report predicts
January will be the start of the prime property lettings season in London, kick starting a recovery in top end rents in 2016, according to a new outlook report. Throughout 2015, the pace of rent rises in London slowed, and weaker activity at the top tiers of the lettings market in particular have created a difficult climate for rent growth, says the report from estate agents Marsh & Parsons. However, the firm is predicting a rental resurgence in 2016, forecasting prime London rents to rise 5% in the next 12 months, a significant uplift from a the 1.9% rise in the past year. While rents at the highest tiers of the market, namely over £750 per week, are unlikely to experience major pick up, rental prices below this benchmark have significant room to grow. And much of this growth will come at the very start of the year, with January typically the strongest month outside of the summer for lettings activity. Over the past three years, there has been on average a 34% monthly boost in lettings exchanges from December to January, as people use the New Year for fresh starts. ‘Come January, households will be picking up where they left off on big life decisions – be this downsizing, starting a new job, relocating overseas or even separating. All of these combine to give new impetus to the rental market at the very start of the year, and it’s a time when we experience some of our most zealous lettings activity,’ said Patrick Littlemore, director of lettings at Marsh & Parsons. ‘This initial activity will feed into stronger and more sustained rent growth throughout 2016 as a whole. It is the lower price brackets of the private rented sector that have the biggest room to grow next year, especially in popular hot spots such as Queens Park, lauded for retaining the style and atmosphere of Kensington with more affordable prices,’ he added. The report also points out that the average length of a tenancy on a rental property in prime London has grown 18% in the past year, from an average of 19 months in the third quarter of 2014 to 23 months during the third quarter of 2015. Marsh & Parsons expects the popularity of two year leases to continue growing in 2016 as tenants are increasingly entering into these longer tenancies in search of greater stability in the face of reduced rental properties available on the market, but it is the guarantee of housing they are securing, not rental prices over this period. The report explains that the stock of homes to let in London has decreased significantly in 2015. The total supply of available rental properties across 2015 was 9% lower than in 2014, while the levels of demand experienced throughout the last year has been 7% higher than during 2014. As… Continue reading
Average UK property price up to £200,000, latest index shows
Property prices in the UK increased by 0.8% month on month in December to an average of £196,999 and up 4.5% year on year, according to the latest monthly index to be published. The data from home lender, the Nationwide, shows that after moderating during the first six months of 2015, house price growth has remained in a narrow range between 3% and 4.5% in the second half of the year. All regions except Scotland saw increases in house prices in 2015, though all recorded slower rates of annual price growth than in 2014. London was the strongest performing region for the fifth year running, with average prices up 12% year on year. The Nationwide’s quarterly index, however, shows that average prices in London are now 50% above their pre-crisis peak in 2007, while in the UK overall prices are around 7% higher. The neighbouring Outer Metropolitan region took second place, with prices up almost 11% compared with the fourth quarter of 2014. Yorkshire and Humberside was the weakest performing English region, with prices up 0.4% year on year. House prices continue to recover in Northern Ireland, with annual growth of 6.5% in the fourth quarter, although average prices are still 44% below their pre-crisis peak. Wales saw a 0.7% year on year increase in average prices, similar to the 1.4% increase recorded in 2014. Scotland was the only region to see prices fall over the year, with prices down 1.9% compared with the fourth quarter of 2014. The full data also suggests that in England the North/South divide has widened further. Average house prices in England increased by 2.2% in the fourth quarter and were up 6.9% year on year. Price growth in the South exceeded that in the North for the 27th consecutive quarter. Prices in Southern England, that is the South West, Outer South East, Outer Metropolitan, London and East Anglia, were up 8.9% year on year, whilst in the West Midlands, East Midlands, Yorkshire & Humberside, North West and North prices rose by just 1.6%. In cash terms, the gap in average prices between the South and the North of England widened further and now stands at nearly £159,000, around £23,000 higher than a year ago. Looking ahead to 2016, the risks are skewed towards a modest acceleration in house price growth, at least at the national level, despite the likelihood of interest rate increases from the middle of next year, according to Robert Gardner, Nationwide's chief economist. ‘Further healthy gains in employment and rising wages are likely to bolster buyer sentiment, while borrowing costs are expected to rise only gradually. However, the main concern is that construction activity will lag behind strengthening demand, putting upward pressure on house prices and eventually reducing affordability,’ he said. ‘Overall, we expect UK house prices to rise by 3% to 6% over the next 12 months. It remains an open question whether the striking divergence in regional house price performance evident in… Continue reading
UK government launches consultation on buy to let regulation powers
The UK government has launched its promised consultation on the powers that the Bank of England’s Financial Policy Committee should have over the buy to let mortgage market. This consultation aims to gather views on how the operation of the nation’s buy to let mortgage market may carry risks to financial stability. It also seeks respondents’ opinions on the specific tools in relation to which the FPC has recommended it be granted powers of direction, including in their impact on business activity and prosperity, on the draft legislation, and on the consultation stage impact assessment. The consultation is primarily targeted at individuals, institutions and associated bodies that would be affected by the FPC’s powers of direction but the government said that it also welcomes the views of other parties interested in housing market policies. Following the consultation, the government will examine the consultation responses and use them to help to define the instrument that will place the powers in legislation. The government will set out how it intends to proceed in a consultation response document in 2016. It comes at a time when the private rented sector (PRS) has grown rapidly in recent years, from 2.5 million properties in 2002 to 5.2 million in 2013, from 10% of the market to 19% respectively. The government believes that the Bank of England should have more tools at its disposal to cool the buy to let market if necessary such as directing regulators to require lenders to place limits on buy to let lending. The amount buy to let investors could borrow as a proportion of the property price, or the loan to value ratio, could be capped or the Bank could also increase the required ratio of expected rental income to mortgage interest payments. Lenders are not fully supportive of more controls currently for the buy to let market and are warning that the market does not necessarily need more regulations and that new rules for by to let landlords, including an extra 3% stamp duty from April 2016, should be allowed to take effect. ‘We understand the rationale for putting the macro prudential tools at the Bank of England’s disposal, but also recognise that this does not necessarily mean they will be used. In our view, buy to let does not constitute a market that currently requires further macro prudential intervention, especially as the effect of several recent tax changes is yet to be fully felt and evaluated,’ said Council of Mortgage Lenders director general Paul Smee. ‘We urge policymakers to be mindful of the risk of unintended consequences that could adversely affect the private rented sector, alongside their focus on ensuring that the buy to let market does not pose a threat to financial stability,’ he added. Peter Williams, executive director of the Intermediary Mortgage Lenders Association, suggested that the industry is confused by what the government is trying to do. ‘In the autumn the Chancellor, in giving evidence to the Treasury… Continue reading
