Investment
First time buying costs almost £700 a year less than renting, new research shows
The cost of buying a home for first time buyers in the UK is £670 a year lower than renting, according to new research by the Halifax. The average monthly costs associated with buying a three bedroom house in the UK for a first time buyer was £666 in June 2015, some 8% lower than the typical monthly rent paid on the same property type which was £722 a month. This is in contrast to June 2009, during the financial crisis, when the average cost of buying was 16% or £1,154 per year more than the average rent paid. Even though the average price paid by first time buyers for a three bedroom house is 25% higher than six years ago, the monthly costs of owning has come down as the average mortgage rate has fallen to 2.91% from 4.92%. Average rents have grown by 23% in the same period. In the past year, with the price of a typical first time buyer home rising by 8%, the difference between the cost of owning vs. the cost of renting has narrowed from £85 in 2014 to £56 in 2015, a fall of 34%. This is partly as a result of average monthly mortgage costs rising by £40 while average monthly rents have only increased by £8. The report also shows that first time buyers in London will have, in cash terms, experienced the largest benefit from buying rather than renting a home in the last year. The average monthly cost of £1,338 for those who have bought in London in 2015 compares to an average monthly rental price of £1,419, a saving of £81 a month or £973 over the year or 6%. The second largest difference is found in the South West where first time buyers were paying 9% less a month or £67 a month or £808 annually than the typical private tenant in the region. In the South East rental costs are marginally lower by 1% or £8 per month than buying, largely as a result of house price rises, but in all other regions buying costs are on average seven per cent lower than rental costs. According to figures from the Council of Mortgage Lenders, there were 136,100 first time buyers in the first six months of 2015. Compared with the same period in 2014, this represents a 9% fall in purchases, the first annual decrease on this basis since the first half of 2011. However, in context, with the exception of 2014, it is still the highest total for the first six months since 2009 and was 87% higher than in the first half of that year. Part of the reason for the slowdown is that supply remains restricted, with the stock of homes available for sale falling further to new record lows. ‘Looking at monthly costs, the combination of lower mortgage rates and declining rental value over the past six years has made it cheaper to buy than… Continue reading
Housing affordability falls in the United States
Housing affordability at a national level in the United States is down from a year ago and is struggling to keep pace with the growth of home prices, according to new research. The analysis from the National Association of Realtors shows that housing affordability is down from a year ago in June as the median price for a single family home in the US is up from a year ago. Regionally, the West had the biggest increase in price at 10% while the Northeast experienced the slowest price growth at 4.4%. The Midwest and the South both contributed solid price gains of 7.2%. Nationally, affordability is down from 155.2 in June 2014 to 153.1 in June 2015 and down month on month in all regions. The Midwest had the largest drop of 4.8% while the West fell only 3.5%. From one year ago, affordability is down in all regions except the Northeast which had an increase of 1.1%. The West saw the biggest decline in affordability at 3.6% and the Midwest had the smallest decline of 0.7%. Despite month to month changes, the most affordable region is the Midwest where the index is 191.1. The index is 161.4 in the South, 150.7 in the Northeast, and 113.9 in the West. With rates on the rise potential home buyers may try to hasten their search and purchase process. Lending options with low down payments are now more widely available. Mortgage applications are currently up but demand may level off if prices and rates continue to increase, the report explains. It also points out that new home construction has favoured the multifamily inventory stock while single family homes have been lagging in production. An increase in single family construction will help ease the inventory shortage issue and slow down price growth, it suggests. Continue reading
UK households positive about property market, latest sentiment index shows
Households in all regions of the UK perceived that the value of their home rose in August, and at a faster pace than in July, according to the latest house sentiment index. It is the first rise in the index from Knight Frank and Markit Economics in the month of August, which is typically a quieter summer period, since 2009. The index, regarded as a bellwether for house price growth across the country, says that it reflects the upward pressure on house prices due to a lack of sock across the residential property market. Households in all UK regions expect house prices to rise over the next 12 months, although the rate of expected increases eased in many regions including London and the South East and some 6.6% of households expect to buy a home over the next 12 months, up from 5.3% in the previous month and the joint highest since July 2014. Some 23.6% of the 1,500 households surveyed across the UK said that the value of their home had risen over the last month, the second highest reading since October last year. Just over 4% said that prices had fallen, resulting in a HPSI reading of 59.5. This is the twenty ninth consecutive month that the reading has been above 50. Any figure over 50 indicates that prices are rising, and the higher the figure, the steeper the increase. Any figure below 50 indicates that prices are falling. August’s reading marked a rise from the 58.6 recorded in July, and while matching June’s reading, it remains well below the record high of 63.2 achieved in May last year. Households in all 11 regions reported that prices rose in May, with those in the South East at 64.3 reporting the biggest rise. This is only the second time in the last four years that the perceived increase in South East prices has outstripped that in London. In fact, the reading for London eased notably after a spike in July, dipping from 69.6 to 63.4, the second largest monthly drop since late 2010. While Londoners still perceive that prices are rising, they are reporting that the pace of increases has eased. Tim Moore, senior economist at Markit, pointed out that UK house price sentiment has now strengthened considerably from the year and a half low reached in February. ‘While still below the high water mark reached last May, the latest survey indicates that perceptions of rising property values are more widespread than at any time seen during the five years leading up to 2014,’ he said. ‘The uptick confounds the usual seasonal summer lull and comes in spite of heightened expectations of a Bank of England rate rise next year. In particular, August’s spike in current price perceptions across the South of England suggests that an acute shortage of supply remains the major factor driving up property values,’ he explained. ‘Looking ahead, the prospect of a rate hike next year does appear… Continue reading
