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Higher rents and continued lack of supply set to dominate 2016 UK housing markets
Residential rents are set to go up in 2016 and in the home buying market there is likely to be a growing struggle for those seeking to get on the housing market, according to a joint report from agents. According to the Association of Residential Letting Agents (ARA) there are various pieces of legislation coming into play in 2016 which will result in increased compliance costs for landlords, and as a result push up rents for tenants. ‘We urge the Government to re-think its proposals around reducing Mortgage Interest Relief, scrapping the Wear and Tear Allowance and hiking up Stamp Duty by 3% on buy to let properties,’ said David Cox, ARLA managing director. ‘Whilst these remain, the Government’s goal of increasing the percentage of people in home ownership is getting further out of reach. The issue of supply and demand in the rental market will be increasingly pushed to its limit with rising demand outstripping supply,’ he added. He pointed out that the good news is that regulation in the industry looks like it will be tightening up in 2016. ‘We hope that the provisions of the Housing and Planning Bill, when brought into force, will give enforcing bodies and the courts more teeth in tackling rogue and criminal landlords and agents. This will develop in 2016 to enforce harsher penalties for landlords and unregulated agents that aren’t complying with basic laws,’ explained Cox. ‘The Right to Rent checks introduced in the Immigration Act 2014 will be rolled out nationally from 01 February 2016 following a successful pilot scheme in the West Midlands. However, we worry that the goodwill established towards the scheme may be tested by the increase in volume, disenfranchising landlords from the process,’ he added. Cox said that the industry is pleased that Rent Smart Wales will re-visit the Licensing Fee for agents in January. ‘We feel it is punitive and should be a graduated fee and not a flat rate. We also caution the Welsh Government to consider what resources are being put in place ahead of the enforcement roll out of Rent Smart Wales next November in order to achieve the stated aims of the Welsh Government,’ he pointed out. ARLA also backs recent plans from the Scottish Government for regulating the lettings industry which it described as ‘bold’. ‘We look forward to working with them during 2016 on the roll out of the proposals. However, we caution against the introduction of rent controls and the withdrawal of no-fault possession route for landlords as this will reduce investment in to the Scottish private rented sector at a time when rental housing is needed more than ever before,’ Cox added. Mark Hayward, managing director of the National Association of Estate Agents (NAEA), believed that next year we will see a growing struggle for those trying to get onto the home ownership ladder, with house prices further beyond the reach of low to middle earners… Continue reading
Surge in mortgages available in UK for small deposit buyers
A surge of product launches over recent months means the number of 95% loan to value (LTV) mortgage products available in the UK rose by 84% year on year, new research shows. In November some 260 different products in this range were available, the highest amount since the recession according to the latest Genworth/Moneyfacts Mortgage LTV Tracker. Analysis by Genworth, a mortgage insurer, reveals the number of mortgage products available to buyers with a 5% deposit has risen by 119 over the last year, from 141 in November 2014 to 260 last month. There are now more than six times as many 95% LTV loans available compared to September 2013 at 260 compared to 43, before the Government’s Help to Buy mortgage guarantee scheme launched. It means there are more deals available for home buyers with a 5% deposit than at any other time since the recession as the number of available products has surged in recent months, rising by 68 in the last three months alone. In comparison, competition in other areas of the market has stayed relatively stable or, in some cases, even declined. The number of 75% LTV products fell by 38 between August and November this year. The number of 90% LTV loans fell by one, while 80% LTV products rose by just nine in the same period. 85% LTV loans remained constant, with 669 products available. The tracker report also shows the average rate of a 95% LTV mortgage fell 1.15% from 5.27% in November 2014 to 4.12% last month, also the lowest amount since the recession. Average 75% LTV mortgages also fell by 0.27% annually to 1.90% in November from 2.17% at the same point last year. However, this was 0.07% higher than the record low of 1.83% seen in June 2015. Nevertheless, this means the price gap between 95% and 75% LTV decreased year on year by 0.88% to 2.22%, the smallest since the recession. Off the back of low rates, the number of first time buyers has also increased. Indeed, the third quarter of 2015 saw the highest number of loans to first time buyers so far this year at 86,800, up by 13% from the second quarter of 2015 and 6% more than the 82,100 loans made in the third quarter of 2014. The average first time buyer LTV in the third quarter rose from 82% in the first quarter of the year and the second quarter to 84%, giving the average first time buyer a deposit of 16%, down from 18%, unchanged from the third quarter of 2014. However, Genworth’s analysis raises concerns that lending at 90 to 95% LTV is actually in decline. There was £1.61 billion lent through 90% to 95% LTV loans in the third quarter of 2015, down by 27% from the £2.20 billion lent in the third quarter of 2014. This means… Continue reading
Buying is still cheaper than renting in many US housing markets
Buying a home in the United States is still more affordable than renting in the majority of markets, according to the latest analysis from real estate data firm RealtyTrac. But the opposite is true in markets with the biggest increase in the millennial share of the population over the last six years, the research also shows. In the 473 counties covered by the research, the fair market rent for a three bedroom property in 2015 needed an average of 27% of median household income, while buying a median priced home required an average of 25% of median household income based on the median sales price in November. Buying a median priced home was more affordable than renting a three bedroom property in 68% of the counties analysed, representing 57% of the total population in those counties. But in the 25 counties with the biggest increase in millennials between 2007 and 2013, fair market rents for a three bedroom property in 2015 required 30% of the median household income on average while buying a median priced home required 36% of median household income on average. For the analysis millennials were defined as anyone born between 1977 and 1992. ‘First time buyers and potential boomerang home buyers are stuck between a rock and a hard place in today’s housing market. Many of the markets with the jobs and amenities they want have hard-to-afford rents and even harder to afford home prices while the more affordable markets have fewer well-paying jobs and tend to be off the beaten path,’ said Daren Blomquist, vice president at RealtyTrac. ‘Those emerging markets with the combination of good jobs, good affordability and a growing population of new renters and potential first time buyers represent the best opportunities for buy and hold real estate investors to buy low and benefit from rising rents in the years to come,’ he added. The top markets with the biggest increase in the percentage of millennials over the past seven years were counties in Washington D.C., San Francisco and Denver, all of which saw an increase of more than 50% in the share of the population that is millennials. Other markets in the top 25 for biggest increase in millennials included counties in New York, Nashville, Portland, St. Louis, Seattle, Charlotte, Minneapolis, Indianapolis, Atlanta, Orlando, Austin, Des Moines and Midland, Texas. The average 2015 fair market rent in these top 25 counties is $1,459, some 19% above the national average for all counties analysed, the data also shows. On average 2015 fair rents increased 3% from a year ago in these counties, with the standouts being Denver County and Midland County, Texas, both of which saw fair market rents increase more than 2%. Median home prices increased 8% from a year ago in these counties on average compared to an average 7% increase among all counties analysed nationwide while the average unemployment rate among these counties was 5.2% in October compared to an average of 5.5% for all… Continue reading
