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Average home price in London set to reach £1 million by 2020
If the current annual rate of price growth in London continues, the average price of a home would be £1 million by the end of 2020, new research has found. The prediction is made as the price of property coming to market in London has rebounded from its holiday season lull to jump by 2.2% or £13,177, according to online property portal Rightmove. Indeed, the average price of a newly marketed home in the capital is at a new all-time high of £620,003, up by 0.8% or £4,888 on the previous record set in July of this year. ‘This month’s 2.2% rise more than reverses the seasonal slowdown over the last two months when the average price of property coming to market fell by 0.6%,’ said Miles Shipside, Rightmove director and housing market analyst. ‘It’s a volatile time of year for average prices however, as potential sellers of higher priced properties tend to refrain from coming to market in the holiday period, but then get on with their home moving plans again in September partly influenced by children going back to school. The back to normal service has resulted in new seller asking prices reaching another milestone, with a new record high,’ he explained. The annual rate of increase is now up to 9.5% as London’s long term supply/demand imbalance and international allure result in underlying upwards price pressure, enabling the capital’s property market to maintain its upward trajectory through temporary upheavals such as the recent election. Rightmove calculates that if the current annual rate of price growth was maintained for the next five years the average price tag of a London home would be £1 million by the end of 2020. ‘The average price tag on a newly-marketed property is £53,923 higher in September this year than last and if this trend were to continue it would hit £1 million in just over five years. While we are not suggesting that this level of growth can or will be maintained, this extrapolation illustrates the desperate need for more building and more affordable housing in and around the capital,’ Shipside added. Lee James Pendleton, director of James Pendleton Estate Agents, confirmed that the summer has been good for London property. The firm has experienced a huge upturn in the market around Wandsworth, Lambeth and Hammersmith and Fulham. ‘While there have been less buyers overall, there are more quality buyers. One example of a place that’s booming is Nine Elms in Battersea, where studios that had been selling for £450,000 are now selling for over £600,000. These new developments have had a ripple effect on Wandsworth in general, with prices up around 15% in some places,’ he pointed out. Continue reading
Cooling house market growth in California affects US market as a whole
A California cooling effect could put a freeze on US property market growth with affordability in many of the state’s markets out of reach, says the latest analysis report. Since 2012 price growth in California has buoyed the West of the nation and helped support nationwide prices appreciation, according to the report from Clear Capital, but now there is evidence of cooling price appreciation across the state. It explains that typically, price increases are driven by increases in demand, however, a look at the San Francisco housing cycle shows that between 2011 and 2015 the spike in prices has not been the result of increases in overall transactions. Rather, the tight supply is pushing prices on an upward trajectory placing the market even further out of reach for new buyers. It also shows that in slower growth markets like Los Angeles, a mortgage payment requires upwards of 70% of a potential first time buyer’s income, certainly quelling demand. Even the San Jose MSA’s appreciation, which began experiencing dramatic bubble like growth in 2013, is beginning to slow down with quarterly growth of 2.5%, less than half of the 5.8% quarterly growth seen two years ago. While the West continues to lead in sustained gains, markets outside of California will need to work harder to defend the region’s top position, according to the report. Las Vegas and Portland have both seen boosts of 0.2% in quarterly growth since last month. Denver, Seattle and Sacramento continue to hold steady at 1.7%, 1.6% and 1.5% quarterly growth, the data also shows. The Midwest and South continue to ride the wave of the peak summer real estate season with quarterly growth rates at or above the national benchmark of 0.8%. The South ends the quarter at 0.8% growth, and the Midwest ahead at 0.9%. Subsiding losses in the Southern region is a good sign for a region that has exhibited volatility in price trends, the report points out. The Northeast continues to lag behind the rest of the nation in both quarterly and yearly growth at 0.2% and 2.1% respectively. While most of the MSAs in the region are still experiencing positive quarterly growth, with the exception of Providence with a fall of 0.8%, the rate of growth in markets like Boston and New York are over double that for the rest of the region, driving down affordability. ‘The strong continued growth in the Midwest, South and West, in particular the California Bay Area, suggests strong consumer and investor confidence has been seemingly unaffected by talk of looming interest rate hikes,’ said Alex Villacorta, vice president of research and analytics at Clear Capital. ‘However, if and when interest rates do rise, likely occurring by the end of 2015, it will be timed with a decrease in real estate market activity typical through the fall and winter seasons,’ he explained. ‘Unfortunate pairing will most likely cause a slowdown in price growth for most markets,… 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
