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Property tax changes in England and Scotland weigh on prime country house market
Prime country house prices in the UK rose by 0.7% between July and September, continuing the modest upward trend of growth that started in early 2013, the latest research report shows. Prices have shifted upwards now for 11 consecutive quarters with annual growth also up slightly to 2.7% on average, up from 2.3% in the second quarter but down from a recent high of 5.2% in 2014. The market continues to feel the impact of the increased cost of stamp duty, following the Autumn Statement in December 2014, according to the report from real estate firm Knight Frank. It says that this continues to weigh on both price growth and activity at the top end of the market. In fact, the latest figures from the Land Registry show that between January and July there have been 35% fewer sales with a value above £1.5m outside of London compared to the same period last year. The prime market below £1.5 million has been less affected by these tax changes and prices for homes in this sector have risen by nearly 4% annually over the year to September. In comparison, over the same time properties priced above £1.5 million, the point at which the 12% rate of stamp duty kicks in, have risen by 2%. Under £1.5 million, price growth has generally been underpinned by demand for homes in urban centres. Price growth in town and city markets including Bristol, Bath and Oxford for example, where buyers continue to be attracted by good schooling, amenities and transport links, has outperformed the wider prime market. ‘There remains a significant price differential between property prices in the prime country market and in London, while anecdotal evidence from agents suggests that there is pent up demand from buyers in the Home Counties and the South West. This could help underpin prices and an increase in activity levels across the market as the year progresses,’ the report says. However, the average prime country house price is still 14% below its 2007 peak. In contrast, prime prices in London are, on average, 34% higher than their previous peak values. ‘The rise in London prices in the last few years means that buyers looking to swap the city for the country are able to get a lot more property for their money, with such buyers able to take advantage of the relative discount which currently exists,’ the report adds. In Scotland the country house market has also been affected by tax changes with the new Land and Buildings Transaction Tax (LBTT) being introduced in April 2015. The report shows that as a result prices fell by 0.7% between July and September, the first time that prime prices have fallen on a quarterly basis in over two years. The report points out that the levy, which replaced Stamp Duty Land Tax, has resulted in a significant increase in purchase costs for buyers in the prime market and adds that negotiations between buyer and… Continue reading
UK landlords now have choice of almost 1,000 buy to let mortgage products
The number of available buy to let mortgage products has leapt in Q3, according to the latest Complex Buy to Let Index from specialist brokers Mortgages for Business. Landlords in the UK now have the widest choice of mortgage options on record, almost 1,000 in the third quarter of 2015, a rise of 11% since the previous quarter. On an annual basis this represents an increase of 35% in buy to let mortgage products, according to the latest index from specialist brokers Mortgages for Business. The report also shows that standard ‘vanilla’ buy to let properties already offer the lowest gross yield to landlords, but this has now dropped 0.8% in the space of three months, to the psychologically important level of 5%. On an annual basis, yields on vanilla properties have fallen further by 0.9% since the third quarter of 2014. Similarly, between the second and third quarters of 2015, the yield on a multi-unit freehold blocks (MUFBs) fell from 7.1% to 6.1%. Compared to a year ago, when the average MUFB yield was 8.6%, yields for such properties have seen a 2.5% fall. However, at 6.1%, the absolute level remains considerably higher than for ‘vanilla’ properties. Houses in multiple occupation (or HMOs) have seen yields perform comparably well. Between the second and third quarters HMO yields fell by only 0.1% to 9%. As well as more modest yields overall, this means the spread between the lowest yielding property type (vanilla) and the highest yielding (HMOs) has widened to 4%. ‘The number of new mortgages coming onto the market has rocketed in recent months. There is huge interest in mortgages suitable for limited companies as landlords take advice from their accountants,’ said David Whittaker managing director of Mortgages for Business. ‘Meanwhile, as rents fail to keep pace with racing property prices, yields are continuing to plateau. Returns on vanilla buy to let have now fallen to the 5% mark. Landlords with reasonable borrowing costs and a strong portfolio of these sorts of properties will still be making a solid income from such investments but this changes the case for those considering new purchases. With average yields on HMOs still nearer 10%, more complex property types are likely to attract a growing portion of new investment,’ he explained. The research also shows that remortgaging has outperformed new purchase loans for the fourth quarter running. In the third quarter some 66% of new vanilla buy to let loans were for remortgaging, compared to 34% for new property purchases, a 4% increase in favour of remortgaging since the previous quarter. Similarly, for MUFB properties, remortgaging made up 89% of new mortgages in the third quarter of 2015, compared to 82% remortgaging in the second quarter and just 67% in the third quarter of 2014. In the second quarter new purchases made up just one in 10 mortgages for homes in multiple occupation, some 10%, however, the third quarter has seen the proportion revert to… Continue reading
Rental values in prime central London down to lowest level for a year
Annual rental growth in prime central London fell to 2.4% in September, which was the lowest level it has been since September last year, the latest data shows. The report from international real estate firm Knight Frank also shows that the number of tenancies agreed in the three months to August fell 5.9% versus 2014 while prime gross rental yields remained at 2.96%. The slowdown came against the backdrop of jittery financial markets, with nerves over the state of the Chinese economy spreading to commodity and mining stocks, compounded by declines among carmakers, according to Tom Bill, head of London residential research at Knight Frank. ‘This current overriding mood of uncertainty means companies are more hesitant about recruiting and are more conservative with relocation budgets for senior executives, which has dampened demand in the prime central London lettings market,’ he said. ‘As a result, the number of tenancies agreed in the three months to August fell 5.9% compared to the previous year and the number of viewings declined 10.2%. Such declines suggest the trend for falling rental value growth will persist in the short term,’ he added. He pointed out that the trend is less marked in both lower and higher price brackets. ‘Demand among younger professionals remains strong while demand at the super prime level of £5,000 per week and above has been buoyed by the fact tenants have moved across from the sales market due to last December’s stamp duty increase,’ explained Bill. Continue reading
