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UK buyers less concerned about interest rates, survey suggests
The drop in inflation in the UK to 0.5% in December 2014 has corresponded with a steep drop in the proportion of consumers viewing interest rates as one of the main barriers to buying a property, it is claimed. According to the latest Halifax Housing Market Confidence Tracker index over the last 12 months, the proportion of consumers citing concern about rises in interest rates as a barrier to buying property rise steadily from 14% in the fourth quarter of 2013 to 19% in the third quarter of 2014, the highest since the Tracker began at 22%. However, this fell back to 13% in the fourth quarter of 2014, the lowest level in over a year, at the same time as inflation began to fall sharply in the last few months of the year. ‘Speculation over a potential rate rise was high on the news agenda at certain times in 2014 and the Housing Market Confidence Tracker showed consumers becoming increasingly anxious about interest rate rises,’ said Martin Ellis, housing economist at the Halifax. ‘But with inflation falling sharply in the last few months it’s taken away some of risk of an imminent rise and worries have fallen accordingly. While a rate rise will happen eventually, lenders take this into account as part of our affordability checks in the mortgage application process. Going forward the key factor in how they adjust to any changes in rates will be the way in which borrowers manage their disposable income,’ he explained. It is not only interest rates that consumers perceive as being a barrier to buying a property. The largest single barrier is perceived to be the ability to raise a deposit, cited by 61% in the fourth quarter of 2014. However, in the last few years there have been a number of schemes launched specifically aimed at supporting borrowers with smaller deposits such as the Help to Buy scheme, which has loaned buyers deposits and guaranteed loans. ‘Mortgage affordability has improved significantly in recent years with record low mortgage rates a major contributor behind this improvement. Figures from the 2014 Halifax First Time Buyer annual review show that the number of first time buyers is at its highest level since 2007 and last year the number of first-time buyers increased by 22%. This was the third successive annual increase with a 50% rise in the past two years,’ Ellis pointed out. Continue reading
Demand for prime rental properties in London set to continue in 2015
The strengthening London economy and the continued expansion of sectors such as technology and telecommunications will underpin demand for prime rental property in London, a new analysis suggests. This will also filter out into the wider commuter zone, though demand from the financial and business services sector is forecast to remain relatively subdued, according to a new report from real estate firm Savills. The firm is forecasting rental growth of 17% over the course of the next five years unless a mansion tax is introduced and levied on the owners of homes worth £2 million or more. The Labour party has said that if it wins the general election in May it will introduce such a tax. On the supply side, a more muted sales market in the run up to the election could result in more would-be sellers bringing stock to the rental market, according to Lucian Cook, director of residential research at Savills. ‘In the short term this is likely to continue to suppress rental growth. In addition, in certain locations on the fringes of prime London, where high levels of new build stock have been bought by overseas investors, we expect rents to come under pressure over a longer period,’ he said. ‘Beyond London we expect the preference for prime family housing in key commuter towns to continue, with existing demand supplemented by that from those relocating to these areas and temporarily renting before buying,’ Cook explained. ‘On the supply side, we believe a stronger sales market is also likely to reduce the impact of the accidental landlord over the medium term, causing a reduction in available rental stock at the top end of the market and supporting rental growth,’ he added. He also pointed out that the reform of the stamp duty system in December may impact on future investor behaviour. ‘Stamp duty costs will be lower for all acquisitions below £937,500. However, across Kensington and Chelsea the average stamp duty bill is expected to rise by over £40,000. This may drive investor demand to higher yielding, lower value parts of the market that equally are less likely to be affected by the continued political rhetoric around a mansion tax,’ said Cook. ‘The Autumn Statement also contained provisions to increase the levy on those long term UK residents who wish to retain their non-dom status. Though many will be home owners, this may impact on the budget of long-term renters,’ he explained. ‘A similar differential in rental performance was seen in the prime regional market. Smaller properties servicing core market demand have generally performed the most strongly, with one and two bedroom units delivering annual price growth ?of 4.3%, bringing total growth over the three years to 11.7%,’ he added. ‘By contrast, there has been a much thinner market for large properties at the top end, which continue to be price sensitive. Rental value for properties with six or more bedrooms rose by just 1.1% over the course of 2014, with… Continue reading
Gross mortgage lending in UK stalled in December, latest CML figures show
Gross mortgage lending in the UK reached £16.5 billion in December, unchanged month on month compared to November but down 1% compared to December 2013, the latest data shows. The figures from the Council of Mortgage Lenders also shows that the gross lending estimate for the fourth quarter of 2014 is £51.6 billion, down 8% on quarter three but up 1% on the fourth quarter of 2013. Overall, for 2014 the gross lending estimate is £205.6 billion, up 17% on 2013's £176 billion gross lending figure. ‘Housing market activity has been cooling and house price growth slowing in recent months, but 2014 was still the strongest year for mortgage lending since 2008,’ said CML chief economist Bob Pannell. ‘First time buyers were a key driver, helped by government initiatives such as Help to Buy. As a result, the number of first time buyers topped the 300,000 mark. While a far cry from the half million that we might regard as normal, this was the highest number of first time buyers since 2007,’ he pointed out. ‘Although lending remained muted in December, the previous monthly pace of decline in approvals appeared to moderate. So, alongside the big picture of a softer market, we are beginning to detect signs that underlying market conditions may be stabilising,’ he added. Adrian Gill, director of Your Move and Reeds Rains estate agents, said that while many places across the country have witnessed a recent lull in house price growth, the underlying sentiment in the market remains strong. ‘It will continue to carry the housing recovery further forwards, with unprecedented fundamentals for growth this year and 2014 will stand out as the best year for new buyers since the recession,’ he explained. ‘Towards the latter end of the year, demand was slightly spooked by the introduction of loan to income caps, but stamp duty reform provided some new comfort for prospective buyers. Along with the continued support of the Help to Buy scheme, aspiring home owners can more easily stomach the upfront costs of buying a home and save up for the necessary deposit,’ he added. Continue reading
