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Call for UK housing policy to be revised as number of first time buyers remain flat
The number of first time buyers in the UK has remained flat despite mortgages becoming more affordable than ever, new research has found. Record mortgage affordability is keeping the housing market afloat, but current housing policy needs to be revised to meet home ownership targets according to a new report by the Intermediary Mortgage Lenders Association (IMLA). Overall, it forecasts a continuing recovery in mortgage lending during 2016 and 2017, with a particular pickup in lending for house purchases by owner occupiers from an estimated £142 billion in 2015 to £155 billion in 2016 and £169 billion in 2017. However, reviewing 2015 activity, the report finds that even though mortgage affordability has hit its highest level ever, with buyers spending a record low 8.6% of their income on interest by the third quarter of 2015 and even first time buyers spending only 9.7% by November. It adds that first time buyer numbers have fallen marginally year on year, suggesting the government may need to revisit housing policy to successfully increase owner occupation levels. IMLA’s research shows that as a result of this increased affordability, first time buyer mortgage repayments are lower than average rents in every region of Britain, although this is not yet being translated into the desired increase in home ownership with factors including deposit affordability issues and tighter lending criteria also having an effect. The rise in affordability over the past year has been supported by cheap mortgage deals, alongside rising incomes. Mortgage rates are at record lows. February 2015 saw the average two year fixed rate at 75% LTV fall below 2% for the first time and by October the average two year fixed rate at 90% LTV slipped below 3% for the first time. In a trend particularly benefitting first time buyers, the last year has seen high LTV loans become substantially more affordable, with those borrowers opting for higher LTV options facing a smaller marginal cost for borrowing between 75% to 90% and between 75% to 95%. IMLA’s analysis finds the implied marginal cost of borrowing between 75% and 90% LTV, which was as high as 21.3% in the middle of 2010, had fallen to 12.9% by the end of 2014 and was only 7.8% by December 2015. However, improving affordability of higher LTV loans in 2015 did not spark a rise in aggregate high LTV lending or the number of first time buyers, which fell back slightly in the year to November 2015 compared to the same period of 2014. Deposit affordability issues and tighter lending criteria mean that not all buyers can access the deals available, even though high LTV loan repayments are now more affordable than ever, the report points out. The IMLA is concerned that the government’s decision to terminate the Help to Buy mortgage guarantee scheme at the end of the year could make it harder for first time buyers, as it may reverse the recent improvements in high LTV loan pricing. Continue reading
Average UK rents up 1.2% in January compared to the same month in 2015
Average rents in the UK rose 1.2% to £906 a month in January compared to the same month in 2015, the slowest increase in three years, the latest rental index shows. But average rents are some 12% above their pre-recession peak, reaching the highest level on record, according to the data from the Countrywide monthly lettings index. The data also shows that London has seen the largest growth in rents anywhere in the country since 2007, with rents 34% higher than their pre-recession record. Between 2007 and 2016 the average Londoner has seen their rent rise from £966 to £1,295 a month. However, despite rising rents, over the past nine years the majority of the country has experienced rents growing steadily in line with incomes. Average income has increased by 12% since 2007 according to the ONS compared to a 12% increase in average rents. But there is a classic North/South divide. In the North West, North East and Wales the average tenant is still paying less than they were in 2007 by £12 a month. Across the UK as a whole, one in five tenants is still paying less rent than they were in 2007. In London rents have grown well beyond incomes. Incomes have only increased by 10% since 2007 in London whilst rents have grown by 34% fuelled by a lack of supply and high demand. As a result tenants have had to either share, downsize or move further from the centre in order to accommodate this rise, the report suggests. It also points out that at current rates of rental growth the three regions where rents remain below their previous peak will see average rents surpass 2007 levels by the middle of 2016. In these regions landlords have increasingly looked to renegotiate with long term tenants, some of whom have enjoyed years without any increase in their rent. This January more landlords were able to increase the rent for tenants who renewed their contract in the North East, North West and Wales than at any time since 2012. In 2007 the average monthly rent for a home in the UK peaked at £809 before the recession hit. Between the end of 2007 and 2008 the average cost of renting a newly let home fell 11%, equating to a fall in the average monthly rent of £87. This brought the cost of renting the average home down to £720. It wasn’t until the start of 2010 that rents started rising again. ‘Nationally rents in January rose at the slowest rate since 2012, as some of the upward pressure on prices subsided and affordability limited further rises. Across most of London and the South East the slowdown in rental growth is the first since 2010, where rents have been growing for the past six years,’ said Johnny Morris, research director at Countrywide . ‘The most sustainable way of creating a more affordable rental market in London and the South… Continue reading
Property prices and rental values expected to continue rising in Ireland in 2016
Property values increased across all regions in Ireland in 2015 and that trend is likely to continue in 2016 according to the annual residential property review and outlook report from the Society of Chartered Surveyors Ireland (SCSI). SCSI members expect the price of an average three bedroom semi-detached property to increase by between 4% and 8% in 2016 depending on location. According to the national survey of over 700 estate agents and chartered, property values are estimated to have risen by approximately 8.8% nationally in 2015 but to have moderated to 4.8% in Dublin. In 2014 Dublin property values rose by 19.5%. In Leinster values are estimated to have increased by 9.4% while in Munster and Connacht/Ulster they rose by 10.4% and 8.8% respectively. John O’Sullivan, chairman of the SCSI Residential Agency Professional Group said that the Central Bank’s lending rules had dampened price growth in Dublin and displaced it to neighbouring counties which have experienced an uplift in values over the past 12 months. ‘This happened because potential buyers were unable to justify the cost of buying in Dublin or were unable to access the necessary finance. According to our survey, 47% of Dublin based respondents believe that, in the absence of the Central Bank rules, values in Dublin would have grown by between 9.8% and 14.8%. That’s 5% to 10% more than the actual increase,’ he pointed out. ‘Most of the growth in values nationally accrued from the regions. The ongoing economic recovery is starting to spread across the country and further increases in property values in the regions can be expected in 2016 as incomes and expectations for the future continue to improve. The outlook remains fragile however and is dependent largely on the employment opportunities and investment for regional towns,’ he added. The report also shows that the private rental market experienced another year of continued growth with average rental values increasing by 12% nationally. The growth in rental prices is now outperforming the growth in property values across each of the regions. Respondents to the survey have attributed this trend to the shortage of supply in the sales market which is putting disproportionate pressure on the rental market. According to the survey SCSI members predict further increases in rental values in 2016, with the average rental value for a three bed semi-detached property expected to increase by a further 5% to 7% depending on location and two out of three said they believed that the new rent freeze legislation had increased the cost of renting for tenants. O’Sullivan noted that the rental increases have come about not just as a result of the broad undersupply of housing nationally, but also because of the difficulties that potential buyers are having accessing finance to purchase a house. ‘Allied to this, the collapse in construction output has resulted in virtually zero supply of social housing units to accommodate the growing social housing lists. Consequently, this cohort of tenants has had to seek accommodation… Continue reading
