TSI
UK property prices broadly stable with policy changes and a potential EU vote on horizon
Average UK house prices rose by 0.3% in January, and are up 4.4% year on year, remaining broadly stable, according to the latest analysis report. Prime central London prices rose by 0.1% last month to take annual growth to 1.2% while prime central London rents dipped by 0.3%, says the report from real estate firm Knight Frank. The data also shows that price growth for prime property in some regional hubs continues to outperform the wider prime country house market. The stability in UK property prices is likely to be underpinned by a further period of ultra-low interest rates and a solid, although slowing, economic recovery but the report warns that the political outlook is less clear as an European Union referendum draws closer. Grainne Gilmore, head of UK residential research at Knight Frank, pointed out that interest rates being left unchanged by the Bank of England for the 83rd consecutive month in February was not a surprise. ‘But the data released by the Bank when announcing its decision has led economists and markets to change their expectations about when rates may start to rise. Whereas many had forecast a rise around the middle of the year, the verdict is now that rates are on hold until the final quarter of the year, if not 2018,’ she said. ‘This change was prompted by the Bank’s forecasts, showing muted inflation and wage growth in the coming years as well as a downgrade in forecast GDP growth. The central bank now expects 2.2% GDP growth this year, instead of 2.5%. The slower growth is attributed to global economic conditions, not least the effect lower oil prices are having on many economies around the world,’ she explained. ‘However, senior bank officials were clear that the UK economy was still experiencing a solid recovery and that the fall in oil prices was a net good for UK consumers, helping boost consumption and therefore wage growth,’ she added. Households expect prices to continue rising this year according to the latest House Price Sentiment Index (HPSI) from Knight Frank and Markit Economics. Any reading above 50 on this index, which is a bellwether for house prices, suggests prices are rising, or are set to rise. The future index has now been above 50 for 35 consecutive months. However, Gilmore also said that the outlook for 2016 must take into account the policy changes and political decisions which will be made this year, not least another change to the stamp duty regime in April, the Mayoral Elections in London in May and a possible decision on whether the UK should stay in the European Union. ‘As seen following the stamp duty changes in December 2014, and last year’s General Election, the market can adjust to political and policy changes, but periods of uncertainty can take their own toll on market activity,’ she added. While prime central London property prices edged up by 0.1% in January, taking the annual increase to 1.2%, a breakdown… Continue reading
UK mortgage arrears at lowest rate for more than a decade in 2015
Mortgage arrears in the UK are at their lowest for more than a decade with fewer than one in 1,000 ended in repossession in 2015, according to the latest data from the Council of Mortgage Lenders. Beneath the headline figures, the CML quarterly data shows home owner mortgage arrears running at 1.03% of all loans at the end of 2015, with buy to let at a lower rate of 0.31%, continuing the recent trend of a lower prevalence of arrears in the buy to let market. However, the picture is reversed on repossessions, with around one repossession per 2,500 mortgages in the buy to let market in the fourth quarter of the year, compared with one in 5,000 in the homeowner market. Across the whole market, most had relatively modest levels of arrears at under 5% of the mortgage balance. The number of loans with arrears in the most severe band, representing 10% or more of the mortgage balance, was 23,700, down from 24,200 at the end of 2014. The CML report says that the modest decline in the most serious arrears band may partly reflect distortions in the timing of possessions, but the overall arrears trend is clearly down. At 10,200, the total number of repossessions in 2015 was less than half the number in 2014, down from 20,900 but the report says that caution is needed on the year on year comparison, because the timing of some possessions may have been affected by the aftermath of a court case which has been causing lenders to review their processes. However, it is likely that the underlying trend is still emphatically down. ‘It is good news that the levels of mortgage arrears and repossessions remain low and falling. But, at the risk of sounding as if we are crying wolf, we would continue to urge all borrowers to plan ahead for a time when the interest rate environment may be less benevolent. Lenders do not wish to see borrowers who are coping currently falling into difficulty if and when rates do eventually rise,’ said CML director general Paul Smee. The figures are a sign of a period of relative stability for both owner occupiers and landlords when it comes to managing borrowing, according to Kevin Purvey, chairman of the Intermediary Mortgage Lenders Association (IMLA). ‘Lending volumes forecast to rise, the rigours of lenders’ affordability checks will help borrowers avoid a future scenario where they become overstretched. However, continuing delays to the Bank of England’s first rate rise should not breed complacency,’ he explained. ‘With mortgage rates at record lows, there is still plenty of reason for households to think ahead, weigh up their monthly balance sheet and consider remortgaging to help prepare for the inevitable rise. Changes to tax allowances will give landlords added incentive to look at their remortgage options in 2016,’ he pointed out. ‘Lender competition remains high, which means intermediaries will be at the heart of the continuing… Continue reading
Severe shortage of properties for sale pushing up asking price, says latest index
The supply of property coming onto the market in England and Wales has fallen by 8% year on year and as a result prices are set to keep rising. The latest index shows that in the East England asking prices have already risen 2.1% this year as supply is overwhelmed by demand while overall the average asking price for England and Wales is up 0.7% month on month. The date from Home.co.uk also shows that asking prices have increased in all regions except the North West and North East during the last month. And year on year asking prices are up 8.1% overall. In the East of England the supply divide is the most acute and in this region asking prices are up 12.2% year on year, meaning it has overtaken both Greater London and the South East which saw annual rises of 12% and 10.3%. The index report says that across England and Wales, prices remain on a strong rising trend and this looks set to continue as interest rates are currently on hold until at least 2017. It also points out that the total stock of property for sale remains very low, and scarcity will continue to be one of the key drivers of the 2016 property market in the UK. The second key driver is ultra-low interest rates. The number of properties entering the market is down 8% compared to a year ago. The hardest hit is the West Midlands where 17% less new stock arrived on estate agents' books this January compared to January 2015. The East of England is also in the midst of a property drought and 14% less stock was registered on agent portfolios last month. Looking to the North and Wales, the picture is very different. Only small drops in numbers of properties entering the marketplace have been observed in the North East, North West, Wales and Yorkshire. Supply in these regions remains relatively buoyant and, consequently, prices show little if any upward progress. ‘With interest rates on hold at super low levels for the foreseeable future, we are likely to witness price growth continuing to ripple out from London across the rest of the country. Lack of supply will be the key driver and, as buy to let investment continues to soak up many of the available properties, so supply will continue to dwindle,’ said Doug Shephard, Home.co.uk director. ‘The London market is now maturing and is slower and with more moderate price rises. Investment capital is now making its presence felt further afield in the East and South East where prices are leaping ahead and supply of stock for sale is crashing,’ he explained. ‘We may expect the same or a similar market dynamic to become manifest in the West Midlands, the South West and the East Midlands towards the end of the year, together with significant price growth,’ he added. ‘What is clear is that this property boom is not going away while borrowing… Continue reading
