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British property rents up 2.7% annually, fastest rate in three years
Private rental prices in the UK increased by 2.7% in the 12 months to September 2015, but there are considerable regional variations, according to the latest data from the Office of National Statistics. Private rental prices grew by 2.8% in England, 1.6% in Scotland and 0.5% in Wales, while excluding London they increased by 1.8% year on year. In the capital city they were up 4.1%. Rental prices increased in all the English regions. The largest annual rental price increases were in London followed by the South East at 2.7% and the East also at 2.7%. Rental price increases have been stronger in London than the rest of England since November 2010. The ONS index report says that the rental market in Great Britain continued to show signs of strength with rental prices now growing at their joint fastest annual rate since October 2012. Increasing demand for rental properties coupled with low supply may be supporting price growth, it adds. August’s ONS House Price Index showed that house price growth has typically been stronger than rent price growth for a number of years. The Bank of England’s Agents’ Summary of Business Conditions for the third quarter of 2015 reported the long term growth in demand for rental properties continued in the three months to September. The Residential Market Survey from the Royal Institution of Chartered Surveyors (RICS) for September confirmed this robust growth, noting the strongest tenant demand since the second quarter of 2012 in the third quarter of 2015. Despite signs of a slight increase in supply growth, growth in demand continues to outpace supply. While the latest RICS release did suggest a marginal increase in new landlord instructions, the longer term trend within the wider housing market is one of under supply, the report points out. Reflecting the Bank of England’s August Inflation Report, which noted that supply remains weak within the housing market, the Association of Residential Letting Agents reported a dwindling supply as the average number of properties held per branch fell by 5.8% in August. According to Rob Weaver, director of investments at property crowdfunding platform, Property Partner, it is no surprise than rents rose the most in London, as the supply issue in the capital is especially pronounced. ‘We need to build more homes, but there are a number of obstacles getting in the way, from slow moving planning departments to the practice of land banking. Recent initiatives such as the Government's decision to make it easier to convert commercial property into residential property are a step in the right direction,’ he said. ‘Unused office space is a way to tackle the housing shortage without eroding the green belt. We need more initiatives like this from both the public and private sector if we are to get Britain building and genuinely improve supply,’ he added. Steve Bolton, founder of Platinum Property Partner, also believes that a shortage of suitable properties, coupled with strong demand, both… Continue reading
UK house prices continue to creep upward, latest index shows
House prices in the UK increased by 0.6% in October, taking the average price of a home to £196,807, according to the latest index to be published. The data from the Nationwide, one of the country’s main lenders, prices are now up 3.9% year on year. The report points out that over the past five months annual price growth has remained in a fairly narrow range between 3% and 4%, broadly consistent with earnings growth over the longer term. ‘While this bodes well for a sustainable increase in housing market activity, much will depend on whether building activity can keep pace with increasing demand,’ said Robert Gardner, Nationwide's chief economist. He also pointed out that fixed rate mortgages have remained the most popular because of ongoing uncertainty about when the Bank of England might introduce an interest rate rise. ‘Historically low interest rates have helped to offset the negative impact of rising house prices on affordability. Indeed, even though house prices are at an all-time high, the cost of servicing a typical mortgage is still close to the long term average as a share of take home pay,’ Gardner explained. He said that fewer variable interest rate mortgages should help to insulate many households from the impact of higher interest rates but he warned that the majority of recent fixes are for relatively short time periods with 65% for two years and 30% for five years. ‘Nevertheless, the housing market should be able to cope with higher interest rates in the year ahead, provided the increase is modest and the economy and the labour market remain in good shape,’ he said ‘Guidance from the Bank of England suggests that the increase in interest rates is likely to be gradual, and that they are expected to settle at a level somewhat below the average prevailing before the financial crisis, which should help ensure borrowing costs remain manageable,’ he added. Alex Gosling, chief executive officer of online estate agents HouseSimple believes that as building activity is highly unlikely to keep up with demand, average house prices are likely to continue to rise and rising interest rates could affect many home owners. ‘It's hard to believe but many home owners have never known a conventional interest rate environment, and when it finally comes it could well prove a shock. If the economy holds firm then gradual rate rises will be better accommodated, but the extent of the impact of a rate rise on the market remains a great unknown,’ he explained. ‘What we can say with near certainty is that if rates rise sharply, many borrowers could get caught out. Thankfully people are moving to fixed rate mortgages to protect themselves,’ he added. According to Mark Dyason, director of Edinburgh Mortgage Advice, borrowers know higher rates are coming sooner or later and they are thinking ahead. ‘First time buyers and people with smaller deposits are especially likely to select a fixed rate because that's what most lenders are… Continue reading
Sharp upturn in UK home owners using equity release
Equity release lending in the UK has seen its biggest rise for 11 years with levels up by £68.3 million in the third quarter of 2015 compared with the previous quarter. The Equity Release Council, which issued the figures, says that it is clear that more and more home owners over the age of 55 are making use of their housing wealth to support their finances in later life. The third quarter saw the highest annual growth rates so far in 2015 and the number of new plans exceeded 6,000 for the first time since the fourth quarter of 2008, meaning that people are withdrawing a record £5 million of housing wealth every day. Total lending in the third quarter rose 21% year on year, compared with 18% annual growth in the second quarter and just 3% in the first quarter, to reach £452.6 million. In doing so, it set a new lending record for a second successive quarter. There were 6,049 new plans taken out in Q3 2015, representing a 12% increase on the second quarter and the volume of new plans was up 9% year on year, the strongest figure of 2015 to date, compared with 3% annual growth in the second quarter and 2% in the first quarter. Growing demand for equity release to help boost retirement incomes and meet later life expenses means lending for the first three quarters of 2015 already exceeds the 2013 annual total at £1.16 billion compared to £1.07 billion, and is within £220 million of the record annual total of 2014 which was £1.38 billion. The data also shows that lending via drawdown lifetime mortgages reached a new high in the third quarter, rising 18% year on year from £231.6 million in quarter two of 2015 to £266.8 million. The Equity Release Council said that drawdown products have become increasingly popular since their introduction in the mid-2000s as equity release customers took advantage of the opportunity to boost their income with regular instalments. The value of lending via lump sum lifetime mortgages also increased by 18% year on year in to reach £183.5 million, the largest figure since the fourth quarter of 2006 when it was £204.7 million. Lump sum mortgages can prove popular for customers who have a larger one-off cost to cover, such as clearing an outstanding mortgage or making home improvements. Despite accounting for less than 1% of the total market, lending via home reversions almost tripled from £632,647 in the second quarter of 2015 to £2.37 million in the third quarter. ‘Appetite among over 55 home owners for tapping into their housing wealth continues to grow. There is increasing awareness that equity release can offer many benefits in later life by providing people with extra income or the means to meet other costs and expenses,’ said Nigel Waterson, chairman of the… Continue reading
