Latest reports from chartered surveyors around the country indicate that the buy-to-let market throughout the country is gearing up for a long-term all time high as more and more people turn to renting rather than purchasing a home and the demand for property far outstretches the actual supply available. This is causing a progressive rise in rents being collected for the second straight quarter in a row according to the Royal Institute of Chartered Surveyors (RICS), with little progress being seen looking towards the coming few months to indicate a slowing of the pace.

One of the primary limiting factors that has worked to stymie the market has been that regardless of the fact that mortgage rates remain at an all-time low the lettings market for all mortgages ranging from commercial mortgages to even highly sought after buy-to-let mortgages remain low. This is due to a number of factors, including lender uncertainties over the actual viability of some properties to high initial down-payment rates preventing many additional developments to be established throughout the country that would help alleviate many of the supply issues in some areas.

Experts expect that the current trends limiting the overall expansion of the buy-to-let market will continue throughout the remainder of the year as more and more people shift their attention away from individual home purchases and towards renting as a way to save up money for purchases of their own later on down the road. The fact that many feel the UK will follow the US property market in its progressive decline and work to drive down home costs in the future adds to this anticipation and fewer and fewer people are willing to purchase homes for fear they will decrease in value while lending institutions grow more weary each day over potentially unprofitable ventures.

According to the latest research from the property adviser, Savills, the competition for developable land has begun to impact positively in development values, affecting housing and mortgage markets alike. There appears still to be, however, a gap between small sites in housing markets that are in high demand. Conversely, the higher costs that come with larger sites in terms of both preparation and promotional aspects is continuing to impact negatively in value growth, with many sites still being curtailed and others remaining impossible to sell, the research shows.

Some developers across the country have re-captitalised, and are creating competition for small, so-called ‘easy sites’ by seeking land in areas with definite housing shortages. Prices have been pushed up by the rarity aspect of sites in prime locations, with prices in certain areas currently within 20% of their levels at 2007’s peak, according to the research.

Modest growth has been seen in the average value of residential development land during the past three months. The values of greenfield sites climbed by an average of 3.2%, with urban land values climbing by 3.8%. The rises saw annual growth stand at 16.6% and 14.1% respectively.

‘Average growth figures disguise huge variations and need to be treated with some caution. The development land market is now polarised on virtually every level: between North and South; high and low value housing markets; large, infrastructure-hungry sites and small easy to develop de-risked sites,’ according to Yolande Barnes, the head of Savills residential research. This is especially true for many places that were once considered risky due to high levels of bad credit mortgages or others with less desirable fixed mortgage rates.

‘More than ever, those in the market need to evaluate sites on a case by case basis, since the value of each site and, ultimately, its ability to generate revenue, will be determined by regional and, in many cases, highly localised factors,’ Ms Barnes added.

According to the research, the divide between the north and the south has become more marked, and more definite. The value of greenfield sites in the south-east are growing at the fastest rate, and currently stand only 37% below their peak levels of 2007. This has largely been as a result of the strong demand for ready-to-build greenfield sites. Ms Barnes commented that the figures reflect the burgeoning confidence of developers based on the residential market’s in-built strength as well as a definite shortage of available land. Conversely, the value of urban, brownfield sites in the north of the country has continued their decline, falling -2.2% for the quarter, and now 71% below peak levels. ‘Such sites require promotional capital beyond the means of a fundamentally cautious and under capitalised market. Urban land values, particularly the larger sites, therefore continue to languish,’  according to Ms Barnes.

Plans have been recently announced by the social development minister, Margaret Ritchie, to make an investment of 38 million Euros in brand new housing in North Belfast. The large investment will go towards ensuring that the majority of the old, inadequate and run-down housing currently in the area will be pulled down in order to make space for newly-built, fully modern family homes in the Parkside, Upper Long Streets and Queen Victoria Gardens areas.

Coming towards the end of her term in office, Margaret Ritchie spoke of her pleasure in fulfilling a promise she made earlier in her term as social development minister: “I have visited each of these areas and seen at first hand the poor housing people were living in. I made a promise to the residents in each community I visited that they would not be forgotten, and I am pleased that in my last days as Minister, I can now make good that promise,” she said.

In total, 276 old terraced houses will be pulled down in North Belfast, and all work will be carried out in full consultation with the local community.

The minister further added: “I made it clear when I launched the New Housing Agenda that I wanted to increase both the quantity and quality of our housing. When I launched the redevelopment of the Village I said North Belfast was the next priority. North Belfast is an area of high housing need and this investment will make a significant difference to the lives of so many people living in these communities.”

The Housing Executive will soon begin a period of consultation with each affected local community in order to discuss and then reach agreement on implementation plans for every area. Although the work will be gradually phased-in during the coming years, Minister Ritchie has made available the necessary funding for work to begin immediately on the new homes to support both existing home owners looking to downsize, encourage further overseas investment and at the same time allow greater opportunity for first-time buyers. She spoke further of her belief in the importance of the scheme and that it was the right decision to have ring-fenced the funding for the project after past disappointments. “Despite financial pressures, we are delivering on all aspects of the New Housing Agenda,” she concluded.

According to one of the country’s foremost economic forecasters, house prices are set to drop by more than 20% during the course of the next two year, caused by a combination of imposed government spending cuts, a sharp spike in unemployment and tax rises.

Capital Economics, which is a consultancy firm headed by Roger Bootle, has anticipated that house prices will drop by 5% over the course of 2010, followed by falls of 10% in both 2011 and 2012. The group has predicted a total fall in house prices of 23% from the beginning of 2010, which represents a far more substantial fall than the crash of 19.3% experienced during the recession.  The numbers from Capital indicate that the second half of 2010 could see house prices coming in for a very difficult time as house prices are at the moment 3% higher than at the beginning of the year according to the Nationwide Building Society. The figures from the Nationwide map those from Capital Economics.

"Higher taxes, spending cuts and rising unemployment all point to fresh house price falls this year and next," the forecasters stated in a report. "The benefits of low interest rates for tracker, fixed-rate and even bad-credit mortgages will be undermined by a fresh tightening in mortgage lending criteria."

This comes as the second report in under a week that makes depressing reading for homeowners in the UK. Further to this, PriceWaterhouseCoopers issued a similarly portentious warning: "There is a 70pc chance that UK house prices will still be below peak 2007 levels in 2015 in real terms … and that real house prices [after inflation] may not regain their previous peak levels until around 2020".

Average house prices hit their peak of roughly £187,000 in October 2007, and then crashed for 16 consecutive months, according to figures from Nationwide. The recent recovery has left the average house price standing at £170,111, a figure 9% lower than at the apex of the boom period. Capital Economics underscored their rather gloomy outlook by indicating that the house price-to-earnings ratio still stands far higher than its 4% long-run average at 5.5%. They also stress that mortgage rates are only likely to get more expensive still. They anticipate that London will be “hardest hit by the second leg of the correction.” The firm also went on to caution, however, that the forecast for 2012 is “highly uncertain.”

Their outlook is principally founded on a far worse economic outlook than has been postulated by the treasury. Capital Economics have forecast that the economy will grow by only 1% in 2010, 1.5% in 2011 and 2% in 2012, as opposed to the treasury’s figures of 1.2%, 2.3% and 2.8%, respectively.

According to the very latest property price index produced by the UK government, house price values continued to rise during May, which seems to suggest that the housing market, despite the fact that it is slowing, is still performing better than has been suggested in other market reports.

The UK House Price Index is published by the Department of Communities and Local Government, and it incorporates data which is based upon mortgage completions during May of this year, and the Index itself indicates that house prices rose by 0.7% during May, and are also 11% higher as compared to the same month last year – particularly good news for first-time buyers concerned over the sustainable value of a newly purchased property.

The latest government index seems to be rather out of step with other recently published reports, although this could be due to the fact that each report will be calculated on a different basis.

The latest index does, however, contribute to the mounting uncertainty as to the condition of both the commercial and residential property markets, and this view was espouses by Simon Rubinsohn, who is chief economist at the Royal Institution of Chartered Surveyors. Mr Rubinsohn stated that May’s 0.7% increase is certainly a stronger rise than was indicated by the Nationwide Building Society for the same month, and that the report also contradicts the falls shown in reports published by both the Halifax and the Land Registry.

 ‘This divergence in part reflects the fact that the indices are gathering price data at different points in the house purchase process. However, relatively low transaction volumes may also be adding to the volatility of the individual series,’ said Rubinsohn.
 
‘The regional dimension is likely to remain significant, however. Price expectations are still positive in London, the South East, Scotland and the East Midlands but strongly negative in Wales, East Anglia and much of Northern England,’ he concluded.

The average house price Index for the UK-which is mid-adjusted-reached £209,505 during May of this year, and the figures rose on a quarterly basis by 1.7% for the quarter, which compares with a 2.9% rise for the quarter that ended in February of this year.

In overall terms, average house prices climbed 11.7% in England, by 3.7% in Scotland and by 10.9% in Wales. Despite this overall trend, the figure dropped by 1.1% in Northern Ireland. As compared to a year ago, the average annual prices paid by first-time buyers in May 2010 stood 11.6% higher than at the same time last year; and average prices paid by former owner-occupiers stood 10.8% higher.

The report also indicated that average prices paid for new properties throughout May 2010 were 6.5% higher than at the same time last year, and the average prices for pre-owned houses were 11.3% higher.

According to the results of a recent survey, the last decade has witnessed a five-fold increase in the number if real estate millionaires in the UK, and more than 100,000 new property millionaires have been created since 2000. The figures amount to an amazing 393% increase with the research also indicating that for the period during the global credit crunch, there has been a three-in-ten decrease in actual millionaire properties as the financial downturn really begins to take hold – unsettling news for some who may have been looking at getting into the market at that time by purchasing for the first time.

The research from Santander Mortgages also showed that there are also now almost 332,000 residential properties in the UK that are valued at more than £1 million, which represents an almost five-fold increase on the figure for 2000 which stood at 26,776. The vast majority of the million pound-valued properties (around 78%) are located in London.

Despite the fact that the credit crunch has resulted in more than 40,000 homes losing the coveted million-pound status (between 2008-9), which represents a value reduction of 29%, the market for million pound-plus houses has certainly recovered. During the course of just the last year, the number of million pound-plus houses has climbed to roughly 29,000, taking the market for such properties back close to its peak figure as it stood in early 2008.

Roughly 78% (103,168) of such properties are located in the Greater London area, and the capital’s south west postcode lays claim to almost 29% of the UK’s millionaire properties. In fact, the top ten places in the Santander Mortgages’ Property Millionaire League Table are occupied by postcodes in the Home Counties and London, including such towns as Kingston-upon-Thames, Hemel Hempstead and Guildford.

London’s south east area postcodes lay claim to an incredible 23-fold increase in its number of property millionaires during the past ten years.

‘For many of us our home is our castle and in recent years we’ve often viewed our home as a key investment, too. Whether you’re a property millionaire or not, prospective buyers and those re-mortgaging need to make sure that they get a fair deal on their house and mortgage,’ commented Phil Cliff, director of mortgages at Santander.

According to a new report from PriceWaterhouse Coopers, residential property prices in the UK will most likely not recover over the course of the next five years, and it is even likely that the real cost of properties will be lower in 2015 that in 2007.

The PwC report and analysis stems from real house prices-or the actual value of property when the impact of inflation is ignored-and their analysis indicates that property prices might stay below peak levels for the course of the next decade, which would directly impact on roughly 3.6 million people that have bought properties since property prices achieved their record levels back in 2007.

The analysis also serves as an indicator of the massive uncertainty surrounding the future of house price prospects, and that property is a somewhat risky asset that will not guarantee definite future returns.  It also indicates that the  trebling in house values between 1997 and 2007 might be reversed, which would seriously impact on home owners, speculators, buy-to-let investors as well as those investing in real estate as part of their pension plans.

Current indications in income growth, housing supply and interest rates result in the fact that property owners will be unable to rely on the fact of their homes climbing in value, the report indicates.

In the middle part of 2007, the average property was over-valued by roughly 25%, and despite the fact that this figure has now dropped to around 5-10%, prices continue to remain vulnerable to further market knocks, the Economic Outlook report states.

The reports gravest warning comes when it states that there exists a 70% possibility that the real cost of a property is likely to be less in 2015 than it was in 2007. It also indicates that the second half of this year will most likely witness falling house prices.

‘The possibility of a renewed fall in house prices over the next few years, particularly in real terms, cannot be ruled out as mortgage interest rates start to rise again,’ commented John Hawksworth, head of macroeconomics at PricewaterhouseCoopers.

‘While it can be argued in theory that house price changes have little effect on overall UK wealth, our econometric analysis suggests that an unanticipated future fall in house prices could have a significant impact in dampening the speed of the recovery in consumer spending in the medium term,’ Mr Hawksworth added.

According to the latest survey from property consultants Cluttons, parents who left London to live in the Home Counties a generation ago to bring up their children are now returning to the capital. As a result of the children having finally left home and with prices in certain areas of London now at their most affordable levels for a few years, Cluttons have noted a rise in the number of middle-aged and retired homebuyers eyeing a return to the bright lights and excitement of the London lifestyle.

It is widely held that London has undergone significant changes during the last five years or so both in terms of residential as well as commercial developments, having become mainly a cultural centre with new and improved public transportation links. Many middle-aged and retired homeowners are subsequently returning to the capital as they relinquish large home with time-consuming and high-maintenance gardens to take up residence in less demanding properties.

One particularly popular area is the South Bank, and the area’s constantly-changing river views and closeness to the city’s ever-growing cultural attractions-as well as the borough market, which is renowned for its local eateries and fresh produce, makes it especially attractive.

‘Traditionally, this stage of the cycle involves downsizing to release equity and relocating to a more rural or coastal setting. However, we have seen a growth among so called empty nesters, who are postponing their retirement dates and seizing the chance to return to London to rediscover a lifestyle they had at the beginning of their career,’ commented James Hyman, partner for residential sales at Cluttons.
  
‘Many are looking to trade in their large detached homes with substantial gardens for apartments with good internal amenities and security such as porterage and based in locations easily accessible to the cultural attractions London has to offer,’ Mr Hyman explained.

Such properties south of the river have also become increasingly attractive to foreign buyers-particularly those from the Middle East, and new developments have particularly caught the eye around Tower Bridge and London Bridge. Much improved transportation links giving access to the City and the West End along with the attractions of such cultural icons as the Globe Theatre, the Tate Modern and the South Bank Arts Arena being especially popular with such buyers.

A new report has shown that activity in the £500,000 and above mortgage market in the UK has increased by a massive 162%, year-on-year. This significant rise clearly reflects  that dampened market conditions took prominence during the first half of last year, although recent market trends illustrate that market growth still has forward momentum, according to the newest prime mortgage market briefing from UK property firm, Knight Frank.

In the three months to May, the market saw a 26% increase in £500,000 and above property completions, although May’s general electricity definitely had an impact on all market activity in the early part of the mortgage process. This was illustrates by the fact that the total number of offers fell by roughly 40% in May as compared to February, according to the report.

However, although the prime mortgage market is certainly far healthier than at the same point last year, there appears to be a growing swell of  evidence that mortgage lenders have become more particular about just whom they will actually make offers to in terms of loans.

‘After a long period of steady decline the average LTV for £500,000 plus mortgages rose in May for the second month in a row to hit 68%, up from 53% in March, lenders are widening their spread of products on the market, despite this uplift in average LTV the market at this level is still being driven by equity rich purchasers,’ commented Simon Gammon, head of Knight Frank Finance.
 
‘Average rates on newly agreed mortgages have moved up slightly over the past month, from 3.27% to 3.40%, but are still lower than average rates last May of 3.96%. The rise in average rates is related to the trend towards higher LTV products. Borrowers are increasingly looking at fixed rate deals with concerns from many to secure deals before rates rise,’ added Mr Gammon. He further commented that activity at the £1 million and over market level is now being more and more driven by those coming fresh into the market. Asian and Middle Eastern banks have become more and more active in the UK market, and are increasingly looking to the higher end of the market through overseas investment.

According to figures in a new report, the real estate sector in Edinburgh is exhibiting marked signs of recovery, and prime properties in the West End and New Town districts have produced the strongest performance this year so far. The registered number of potential house buyers including overseas investors has risen by more than 120% over the last six months, with the value of Edinburgh’s prime houses rising by an average of 0.7% for the year so far according to the figures from the latest report by Knight Frank.

Top end residential properties with values of less than £1 million rose by nearly 3% during the first half of 2010. However, sellers’ price expectations will need to stay realistic in order to garner continued interest, according to Knight Frank’s report.

Knight Frank’s Prime Edinburgh Residential Index illustrates that average property prices rose by 0.3% during the second quarter of 2010, and this took total growth to 0.7%. For the annual overview, prices have climbed by 0.3%, and this illustrates the current tough market conditions.

‘It is very encouraging to be able to report that the market for Edinburgh’s best houses and flats has started to show some signs of recovery. Values are by no means recovering across the board and are still some way below the levels seen prior to the credit crunch, but some sectors of the market are undoubtedly in far better health than they were at the end of 2009,’ according to Matthew Munro, head of Edinburgh city sales, Knight Frank.

The report also indicates that the most demand has been seen in the market for properties valued at under £1 million. A rise of more than 1.5% during the second quarter of this year has taken total growth for the year to around 3%. Properties in this price bracket are now worth more than 4% more than a year ago, according to the report. Mr Munro went on to explain that properties valued at less than £1 million are in especial demand, and benefit from the fact that buyers with a high net worth have set their sights slightly lower, thus creating greater competition amongst buyers at closing dates.