TSI
House prices in key cities growing faster than UK as a whole
House prices growth in key cities in the UK was 4.2% higher in the first quarter of this year, the highest for 12 years, the latest index shows. The normal seasonal upturn in demand was boosted by investors rushing to beat the stamp duty deadline in April which saw a 3% rate on buy to let properties and second homes, according to the cities house price index from Hometrack. It suggests that tougher lending criteria and tax changes are likely to push investors into higher yielding, lower priced markets, and city level house price growth is expected to moderate in the second quarter of the year. Overall the annual growth for the 20 city house price index is running at 10.8%, ahead of 8.7% across the UK as a whole, the data also shows. Liverpool recorded the fastest increase in the first quarter of the year but the index report explains that this was due to priced rising off a low base. But it does mean that Liverpool is closing the gap to other major cities such as Manchester and Leeds where house price growth is running at over 7% per annum, the highest year on year growth since 2007. ‘The acceleration in growth in the last quarter has, in part, been down to stronger demand from investors, especially those searching for higher yielding property. Tougher lending criteria for buy to let investors and changes to tax relief on mortgage interest payments are likely to push investors to search for higher yielding property which means more focus of investor demand in lower value cities, with lower buying costs, and further support for house price growth,’ the report says. ‘With the rush to beat the stamp duty deadline now over, the question is how weaker investor demand will impact house price inflation in the second quarter of 2016. This at a time when home buyers start to consider the implications of the European Union referendum for the economy and mortgage rates,’ it points out. ‘We believe house prices will continue to rise but a moderation in investor demand and greater caution in the run up to the EU vote will limit further acceleration in house prices. We expect the rate of house price growth to slow more rapidly in high value, low yielding cities such as London where house prices will be more responsive to weaker investor demand,’ it adds. Continue reading
New property tax in Scotland raises less than expected on residential properties
Revenue from the Land and Building Transaction Tax (LBTT) in Scotland failed to reach forecasts for residential sales in the 2015/2016 financial year. The Scottish Government has hoped to raise £235 million but the published figures show it was £201 million, some £34 million below expected and 26% below the £270 million collected the year before. However this fall is likely to have been exacerbated by property market activity brought forward at the end of 2014/2015 as buyers raced to beat the new LBTT when it was introduced in April 2015. LBTT replaced stamp duty on all residential purchases in Scotland and the new rates make it more expensive to purchase property with a value above £333,000 compared to the rest of England and Wales. This is especially the case in the prime market where costs are as much as 90% higher than under the previous system. ‘While the introduction of LBTT in April 2015 resulted in a welcome reduction in purchase costs for a significant number of home buyers in Scotland, the flipside of this was a substantial increase in taxes for those at the top end of the market,’ said Oliver Knight, a senior analyst with Knight Frank Residential Research. ‘Last year, we raised concerns that levying these rates for higher value homes could reduce transaction volumes and ultimately have a negative impact on tax receipts. Policymakers may need to consider allowing some room for manoeuvre on LBTT rates if they find that they continue to impact on activity at this end of the market, and if they want to hit next year’s forecast of £295 million in revenue,’ he added. He explained that one reason for the shortfall in forecast versus actual revenue in 2015/2016 has been the effect of forestalling whereby some transactions were completed earlier than they otherwise would have been to ensure they were assessed under the old SDLT regime. The latest available data from the Registers of Scotland shows that 62% of all residential sales above £1 million in Scotland in 2015 occurred in the first three months of the year, prior to the introduction of the levy. However the amount for commercial property was higher than expected. The Scottish Government had expected to raise £146 million on non-residential property but actually raised £214.2 million, some £68.2 million more than predicted. Blair Stewart, partner in Strutt & Parker's Edinburgh office, pointed out that the LBTT residential shortfall was significant and highlights a weakness in relying on too narrow a band of high value sales. ‘While the commercial LBTT tax revenues came to the rescue this year, the forecast for the next five years is steadily more dependent on high value sales. Equally, the end of the year was distorted because significant numbers of people were buying properties before the LBTT surcharge kicked in. This will not be the case in future years,’ he said. ‘While the whole housing market is improving in terms of sales volumes the… Continue reading
Majority of Australians feel the housing market is heading for a downturn
Two thirds of Australians now think the housing market is vulnerable to a sustainable downturn with the sentiment affecting all regions of the country, a new poll shows. While the survey results suggests that respondents are concerned about a crash in home values, this remains unchanged from a year ago, and lower than the 68% of respondents who indicated ‘yes’ to this question six months ago. The higher proportion of respondents who were concerned about a large correction in the housing market was broad with all regions indicating at least 61% of respondents were concerned about a housing market crash, according to the CoreLogic-TEG housing market sentiment survey. The result indicates that a significant proportion of the community are wary of substantial value falls across the nation’s largest and most important asset class, which according to CoreLogic RP Data is currently worth an estimated $6.5 trillion. Recent housing market forecasts from CoreLogic RP Data and Moody’s Analytics indicate dwelling values are likely to experience falls, however the peak to trough declines are likely to be short lived and relatively slight, followed by a longer period of relatively sedate housing market conditions. Home values are already trending lower in Perth and Darwin with both cities recording a peak to current fall of 4.6%. Additionally, the pace of capital gains in Sydney and Melbourne, where dwelling values have surged higher over the past two growth cycles, is moderating in what has been a controlled trajectory to date. The survey also revealed a slowdown in the proportion of survey respondents who think now is a good time to buy; 61% indicated they would consider buying a home, however a year ago the reading was much higher at 71%. Perceptions around buying conditions worsened across most regions over the past 12 months, with Tasmanian and Sydney buyers the most pessimistic about buying conditions. Only 40% and 50% of respective respondents in these cities indicated they felt it was a good time to buy. However, buying sentiment improved over the past year in some of the weakest markets where listing numbers are higher and housing prices have reduced. The proportion of survey respondents who indicated that current market conditions represent a good time to buy increased by 1% over the year in Perth while buyer sentiment in the Northern Territory increased by a substantial 20% compared with a year ago. When survey respondents were asked whether they thought home values would rise, fall or remain stable over the coming six and 12 months, most respondents expect values to remain stable, however 17% of respondents are expecting values to fall over both the next six and 12 months. A year ago, 49% of survey respondents were expecting dwelling values to rise over the coming six months compared with only 31% over the most recent quarter. Respondents based in Sydney have seen the most substantial deterioration in the proportion expecting values to rise over the next half year. A year ago,… Continue reading
