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UK property market picks up but shows signs of pricing expectation gap
The UK property market is set to see a pick-up in activity due to an election result that was positive for real estate markets but there is evidence of an ‘expectation gap’ emerging, new research suggests. Buyers and vendors have different expectations when it comes to pricing, according to the latest market update report from property firm Knight Frank. It shows that UK house prices rose by 1% in April, taking the annual increase to 5.1%, while prime central London prices rose by 0.3% in April, an annual uptick of 2.8%, and prime outer London rose by 0.4%, and are up 4.8% year on year. Overall prime country house prices rose in value by 2.5% in the year to March, while prime properties in Scotland climbed 1.2%. Meanwhile, the rental market in prime central London is showing continued growth, outpacing that seen in the sales market with growth of 4.1% while overall UK rents rose 2.1% in the year to March. Rates of growth are not uniform across different areas, for example there has been 6.2% growth in Kensington and just 0.1% in Mayfair. Rents in the Home Counties climbed by 4.7% in the year to the end of March. ‘Uncertainty had been the byword in most corners of the market in the run-up to what was considered the most closely fought election in decades. Now, with a majority government, there is clarity on the way forward on housing policies and a Conservative majority means that the approach is likely to be largely a continuation of what we have seen over the last five years,’ said Grainne Gilmore, head of UK residential research. She pointed out that housing supply will continue to be a priority as the current levels of new homes being delivered is far below the generally agreed target of 240,000 homes a year. Indeed, Knight Frank’s recent house building report revealed the measures house builders and developers think should now be a priority for policymakers to boost development and these include beefing up planning departments and releasing more public sector land. ‘The Conservatives have already pledged to extend the Help to Buy Equity Loan to 2020, something which has encouraged developers to take on larger schemes. Their plans to extend Right to Buy to more Housing Association tenants will provide the opportunity for home ownership among this group,’ explained Gilmore. ‘However in terms of housing supply, the policy of replacing each home purchased with another, new, home available for rent must be implemented, otherwise the scheme will result in a net loss of affordable homes,’ she added. Knight Frank expects sales to pick up. ‘In terms of activity and pricing in the market, it is likely that transactions will pick up now that the uncertainty in many parts of the market, especially the prime market which is no longer dealing with the prospect of a mansion tax,’ said Gilmore. ‘However, there is evidence that an expectation gap in pricing may be starting to… Continue reading
UK house prices up in all regions in April, latest RICS index shows
General election uncertainty saw new instructions fall and house prices rise in all parts of the UK in April, according to the latest report from the Royal Institution of Chartered Surveyors. House prices were driven up again in April as the data showed the third consecutive monthly decline in supply with new instructions falling at their fastest rate since May 2009, the RICS residential market survey shows. While 33% more surveyors saw prices rise in April, the highest reading since last summer, new instructions slipped to a net balance of -21%, the eighth consecutive drop in the last nine months. Moreover, the flow of second hand stock onto the market dropped in most parts of the country. Alongside this, for the first time since August 2014, respondents reported an increase in prices in every area of the UK due to the shift in tone in the London market, where 28% more respondents saw prices rise compared with 6% more surveyors in March who saw house prices fall. Near term member expectations for prices and sales continue to point to relatively modest gains, but 72% of members expect prices to rise over the course of the next 12 months. Meanwhile, in the lettings sector, there is no slowing in the growth of tenant demand, which is helping to underpin higher expectations for rents. Although anecdotal evidence suggests that these trends may have in part been a result of uncertainty ahead of the election, they are also reflective of deeper underlying problems, the report points out, adding that the downward trend in owner occupation rates across the country is a visible sign that affordability constraints bite ever deeper, as does the squeeze on household budgets from higher rents. ‘It is conceivable that the decisive outcome to the election could encourage a pick-up in instructions to agents and ease some of the recent upward pressure on house prices, but it is doubtful that this will be substantive enough to provide anything more than temporary relief. Alongside an increased flow of second hand stock, it is absolutely critical that the new government focuses on measures to boost the flow of new build,’ said Jeremy Blackburn, RICS head of UK Policy. ‘The affordability and availability of homes in the UK is now a national emergency and addressing this crisis must be the priority for the new government. The last time we were building 300,000 homes was in 1963 under Harold Macmillan’s Conservative government, which utilised both public and private building,’ he pointed out. ‘We need a coherent and coordinated house building strategy across all tenures. This should include measures that will kick start a supply side revolution, such as mapping brownfield, addressing planning restrictions and creating a housing observatory to assess the underlying economic and social drivers of housing and provide the impetus for solutions,’ he added. He concluded that introducing demand side measures such as extending Right to Buy will not see the Conservatives deliver on their promise… Continue reading
Average rents rising across the UK as regions catch up with London growth
The average rent on a tenancy signed in the UK during the three months to April 2015 was £916, some 10% higher than a year ago, according to the latest index to be published. The data from the HomeLet rental index also shows that excluding London the rise is 7.4% taking average rents to £730 and rents are rising across the country apart from Wales. In Scotland average rents increased annually by 6.2% to £635, in Northern Ireland they were up 5.2% to £594, but in Wales they fell by 0.7% to £573. It also reveals that after a year of rents in London rising at over twice the rate of the UK average, growth rates have now converged with the annual increase in Greater London at 7.5%. On a regional basis the South West has seen the highest annual growth at 15.5% followed by East Anglia at 8.4%, taking the average in these regions to £877 and £778 respectively. Rents are up annually by 7.9% in the West Midlands, by 7.4% in the South East and by 4.3% in Yorkshire and Humber, taking average rents to £645, £916 and £598 respectively. In the North East they are up 3.9% to £526, in the North West 3.8% to £668 and in the East Midlands 3.4% to £588. The monthly figures show more variation with Yorkshire and Humber seeing a fall of 2.1%, a decline of 1.1% in the East Midlands and a fall of 0.5% in the North West. ‘For the first time we are seeing rent price growth rates in Greater London converge with those across the rest of the UK. During 2014, London rent price growth far outpaced other regions but in 2015 we are seeing the emergence of a different pattern,’ said Martin Totty, chief executive officer of Barbon Insurance Group, parent company of HomeLet. ‘What this tells us is that the private rental market is experiencing demand nationwide and that it is not simply a London phenomenon that increasing numbers of people are requiring privately rented property,’ he explained. ‘While there have been periods in recent years where London’s rent price growth has moved more in line with other parts of the UK, most notably during the period following the financial crisis, the capital has always remained significantly ahead,’ he pointed out. ‘The convergence suggests that after a lengthy period of substantial outperformance in terms of rental increases, the pace of growth in London has slowed while the rest of the UK is catching up,’ he added. Continue reading
