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Leading Banks Point to Subdued Spring Lending

[ Posted May 30th, 2010 ]

The traditional so-called ’spring bounce’ was very little in evidence this year, as the number of total mortgage approvals stayed generally unchanged. The number of loans approved for house buying was 35,729 in April, and this figure is up by 685 on the figure for March, according to the British Bankers’ Association (BBA).

The BBA stated its belief that households were, in general, focussing on paying off their debts.

The BBA also stated that net mortgage lending among the leading banks dropped to £1.8 billion in April, which represents the lowest level for these figures since February 2001, and is also a fall on March’s figure of £2.3 billion  as well as the average for the six-month period prior to April, which stood at £2.7 billion.

The actual number of mortgages approved for house-buying purposes fell on the figure for the previous six-month average, which stood at 39,309, although this figure was higher than during the same month last year. The level of house sales during the next few months is very likely to be further dampened by continuing depressed lending levels, a common complaint throughout the industry. The BBA also stated that the number of equity withdrawal and re-mortgaging approvals also dropped during April as compared to March. Analysts believe that the figures indicate a consumer trend of caution, with many attempting to live within their means, opting to pay back more of their existing debts rather than taking on new debts.

The demand for new loans was 18% lower this April than for last April, with credit lending also rising a little during this April. According to David Dooks, statistics director with the BBA, the latest figures clearly show where priorities lie within most UK households at the moment as owners prioritize the paying off of household debt rather than accruing savings in a personal banking account.Howard Archer, chief UK economist at his Global Insight stated that the latest BBA figures  qualify his suspicion that house prices will be unlikely to make definite gains over the coming months.

UK residential property prices set to slow during 2010

[ Posted May 28th, 2010 ]

Analysts have recently forecast that despite the fact that average UK house prices have so far been resilient during the first half of 2010-with price levels remaining 13% higher than the market nadir during the opening three months of 2009, there are still signs that price growth is slowing down.  The latest forecast comes from consultants Jones Lang LaSalle, and it anticipates that the annual UK house price growth will reduce markedly throughout the rest of this year, finishing down 1% throughout the UK, with the London market ending the year flat.  

James Thomas, Jones Lang LaSalle’s head of residential investment and development, stated that the current political environment was harming the recovery. He went on to explain that the structural changes made to the economy with the aim of reigning in the national debt had left both buyers and sellers very uncertain as to when they should make their buying and selling decisions. He believes that London and the south of the country are likely to fare best, mainly as a result of global investment that continues to take advantage of a weak Pound. He stated that the government’s emergency budget in June would likely determine existing stability or otherwise.

The latest Residential Market Forecast Report has illustrated the effects that eh recent general election are likely to have on the housing market. It suggests that downward pressures on prices are likely to come from plans to overhaul capital gains tax from 18% to a minimum of 40% on no-business assets, as well as the scrapping of Home Information Packs.

Analysts, however, generally anticipate that 2011 will be a stable year, which should allow the economic recovery time to become fully embedded by 2012. According to Rob Bruce, head of residential research, the  medium to long-term outlook seems positive.

UK lettings market boosted by lack of supply

[ Posted May 26th, 2010 ]

According to the Residential Lettings Survey from the Royal Institution of Chartered Surveyors, the lack of supply is nudging residential real estate rents upwards and is indicative of a recovery in the market for lettings, according to the report. The net balance of chartered surveyors that reported climbing rather than falling rents went up from 0-30%. The rise is a clear change from last April at which point 58% more chartered surveyors recorded dropping rents. This figure marked an historic low for the survey.

Surveyors are, however, optimistic that rents will keep rising, and in this vein, the rental expectations net balance rose to 36%, which represents the highest figure ever reached in the history of the survey.

Analysts believe that the more positive outlook with regards to rents is partly due to a continuing decline in the supply of houses and flats on the marketplace. Around 12% more chartered surveyors recorded a fall in the number of new landlord instructions for the periods of the survey.

The upswing in the housing market has drawn a number of accidental landlords into selling up-with a rising number of sale instructions of estate agent’s books. Demand for property-to-let, however, is still strong, with 30% more of the survey’s respondents seeing a rise rather than a fall, and the survey shows the strongest result in this sense since January of last year. Houses are still slightly more popular than flats, although flats are beginning to re-assert their appeal, according to the survey.

According to Jeremy Leaf, spokesman for the Royal Institution of Chartered Surveyors, the new figures represent good news for landlords over the coming months as yields are likely to increase thanks in no small part to the higher number of properties coming onto the market.

He also added that investors may be encouraged to return to the market in response to the news that buy-to-let specialists are once again starting to lend. He went on to caution, however, that the possibility of higher levels of capital gains tax on the sale of properties might encourage some current landlords to take advantage of the tax system as it is now.

Stabilisation of European property market hints at positive outlook

[ Posted May 25th, 2010 ]

The office rental market is continuing its improvement across Europe as the economies across the continent continue their recovery from the worldwide financial crisis. A new report has shown that business confidence has now seen improvement for the last four consecutive quarters.

Incentives as well as prime rents has reached equilibrium in most markets for the opening quarter of 2010, according to the new report from consultants Jones Lang LaSalle. The company’s European Prime Office Rental Index, which is based upon the weighted performance across twenty-four markets, rose by 1.2% quarter-on-quarter, and this figure represents the first rise since the second quarter in 2008. Despite this, rents for prime offices are still 5.0% below the levels seen last year. Moscow saw the largest rise in rents for the quarter-up 14%-and the City of London also saw a healthy rise in this sector of 6%.  Brussels also saw achieved rents indicating 17% growth, although it is suspected that this figure is largely as a result of one exceptional deal in particular in the city’s Leopold district and was not indicative of the general market, according to the report.

The report, however, also saw a softening in some market-especially Dublin-which saw rents fall 7.6%, Madrid-where rents were down 2.5% and also Budapest with rents down 2.4%. Despite these figures, there has been some stabilisation in the wider market in Dublin.

According to Chris Staveley, a director in the Jones Lang LaSalle EMEA Capital Markets Team, explained that the signs of economic recovery where starting to drip down through to office demand, although tenants are still cautious and cost-sensitive. Looking towards the future Mr Staveley believes that supply dynamic, GPD and employment growth differentials throughout the EMEA area are all factors that will illustrate differences in recovery across the area.

A Tale of Two Channel Islands’ Property Prices

[ Posted May 23rd, 2010 ]

As far as property price rises are concerned, it has very much been a tale of two islands where Jersey and Guernsey are concerned. Despite only being separated by a few miles, one island has seen property price rises, whilst the other has seen them fall. Jersey  has been the unlucky island, seeing property prices fall by 5% during the first three months of 2010 as compared with the same period in 2009 according to the figures from the latest Jersey House Price Index.

The average price of a house of Jersey now stands at £473,000, which represents a fall from £507,000 in the same period in 2009. Certain types of real estate saw greater drops than others according to the figures. For instance, four bedroom houses and two-bedroom flats saw their prices fall by 10% as compared to the average for 2009. One-bedroom flats experienced the smallest fall at 3%.

The represents the first time that the island’s property prices have fallen since 1993 and are seen now coming on the back of a 2% rise in 2009.

According to Duncan Gibaut from Jersey Statistics Unit, there are two main factors for the drop: both a weak labour market as well as the economic downturn affecting financing, good mortgage rates and offerings for both first-time buyers and re-mortgagers alike that has affected the rest of the world so dramatically.

Rents on Jersey tell a different story, however, recording a 3% rise on the average for the whole of last year, according to the report. Apartment rents remained stable, rising less than 1%, although house rents rose more sharply at 6%.

Guernsey, by contrast, shows that property prices are soaring. The opening quarter of 2010 saw the average local market residential property price stood at £364,008, representing an annual rise of 25.9%. This also represents a quarterly rise of 10.2%.

According to the report, the figures are somewhat flattered as a result of a smaller volume of sales during the opening quarter of last year.

UK construction industry recovery still patchy

[ Posted May 22nd, 2010 ]

UK Property construction workloads became positive for the first time in two years, according to the newest industry quarterly survey. The survey also says, however, that the recovery is still fragile, with some areas suffering from a lack of development finance. Around 5% more chartered surveyors have recorded rising workloads during the first quarter of this year in the industry that is worth £80 billion. The figures compare with a net balance of 12% of chartered surveyors recording falls during the final quarter of last year. The new positive territory sees a turnaround in a decline that has continued for seven previous consecutive quarters, and the new figures also represent the first time that the net balance has regained positive territory since the opening quarter of 2008 when the figure stood at 1%, according to the new figures from the Royal Institution of Chartered Surveyors.

The improvement, though, distorts large variation within sectors, with some surveyors reporting worries due to a lack of development finance in terms of mortgages – even for first-time buyers, despite the low fixed-rate mortgages available from many lendors. The net balance for Private commercial workloads rose from -11 to 17, with both public and private housing workloads regaining positive territory, if only modestly.

Surveyors in the private industrial and infrastructure sectors recorded dropping workloads, standing at -9 and -4 respectively. Performances were also very much at variance with respect to regional levels, with surveyors in London and the south east reporting a big workload turnaround, with a net balance of 21, up significantly from -15. The Midlands and East Anglia saw a less dramatic shift, seeing a net balance increase from -9 to 10. In the north and Scotland, however, net balance remained negative, standing at -7 and -6 respectively.

Forecasts for the coming year sees stable workloads, with an increase of net balance from 2-4%.  However, rather downbeat forecasts for employment and profits see surveyors anticipating a contraction in margins.

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, a lack of development finance is stymying a sustainable recovery, keeping surveyors pessimistic about the future. “Worries over potential cuts in public sector spending is also contributing to the cautious response we are getting,” he added.

UK Property Shortfall Identified

[ Posted May 20th, 2010 ]

According to new figures released recently, the number of newly-built residential properties constructed in Britain  went up during the opening three months of 2010 to reach their highest point since Q2 of 2008. Analysts and commentators warn, however, that the figures still fall some way short of peak levels and are not nearly healthy enough to prevent a crisis in the housing sector.

According to Simon Rubinsohn, chief economist with the RICS, starts are now at approximately 50% of the development level witnessed at the apex of the last cycle, and he also pointed out that the majority of the recent improvements have emanated from the rapidly-improving private sector development, leaving the housing associations’ output staying relatively stable.

Research carried out by the Royal Institution of Chartered Surveyors indicates that more output increases may be somewhat modest. Mr Rubinsohn stated that a lack of mortgage financing was one factor, especially for first-time buyers and bad credit mortgages, alongside a shortage of finances for development holding back what could be a more meaningful and sustainable recovery in local residential construction.

The Institution anticipates that housing starts throughout 2010 will reach around 120,000, and Mr Rubinsohn added that the number compares poorly with the number fo starts seen in the middle potion of the past decade.

According to Stewart Baseley, chairman of the HBF, mere guidance rather than clear reform could serve to derail the recovery seen in recent months, and this has clear implications for both jobs and those people seeking to buy a home.

The Federation believes that the new coalition government agreement document merely commits to a reform of the house-building planning system ‘in the longer term’, with the government eyeing a localism-based approach.

Beasley also stressed that housing planning policy must be clarified if the pre-election pledge to construct more homes was to be realised.

Billionaire Rows on the Rise

[ Posted May 19th, 2010 ]

With property prices on the rise the number of "Billionaire Rows" where the average house price is over £1 million has nearly reached 2,000, currently hitting just shy at 1,995 according to recent surveys of homes throughout the country. The most expensive of these, the Kensington Palace Gardens in London, boasts an average property value of £18 million, leading the way for the roughly 36% increase in the number of regions breaching the £1 million break line over the past 15 years.

The little surprise of most people as well roughly 75% of all of these Billionaire Rows are located within the London city limits. The reason for this primarily is that the prime property sector where properties in the top range such as these reside has seen little impact from the recession that has affected so many other areas of the global economy. This has meant that even in the midst of a string of economic burdens that many people have simply found debilitating other prime properties have remained in demand – especially as the lack of supply of suitable homes in the UK has worked to drive prices up in select locations.

For any locations near these price rows this could be seen as a highly positive trend as well due to the fact that neighbouring high valued areas tend to affect nearby areas quite positively – especially in the eyes of lending institutions considering whether to give a borrowing a low mortgage rate or not due to the risk involved. For other potential purchasers looking into take advantage of the record low fixed-rate mortgages this could also be a positive trend as lending institutions tend to offer lower rates on those purchases they consider to be significantly less risky than other possible ventures.

Regardless the growing number of high values homes has drawn additional attention from the upscale international market, especially with overseas mortgages offering competitive rates over banks in many overseas investors’ local lending agencies. This will most likely only work to continue to push home prices up throughout the country and the 2,000 landmark number of Billionaire Rows may soon be surpasses.

Second Home Tax In The Works

[ Posted May 18th, 2010 ]







Proposed policy changes immediately following the election results have put many home owners up in arms and the Prime Minister on the defensive as Cameron proposes a hike to the value added tax rate for all properties that are a home owner’s second home – raising the current 18% rate for the same homes up to 40 to 50 percent.

 

This move, as explained by Cameron, is designed to help curb the current market trend where many home owners already with substantial portfolios of their own are looking to take advantage of the currently low mortgage rates offered on both tracker and fixed-rate mortgages to expand into the market, pushing many other prospective buyers – including nearly a whole generation of first-time buyers – out of the market entirely.

 

Opponents to the move claim that this will effectively target the backbone of the UK society, the middle class, and force them to pay penalties to help support other struggling families that have found themselves in a difficult position due to poor debt management. Additionally they feel that this will be a direct blow to many who have developed their own wealth through hard work and dedication to developing their surroundings while offering jobs to countless individuals.

 

Supporters for the move, including Cameron, have backed this proposed tax rate increase as a fair way to provide greater opportunities for all and encourage much more comprehensive support for all residents throughout the country. Additionally they feel this will be a boon rather than a burden to those entrepreneurial individuals that wish to develop businesses as the new tax does not target any business-related dealings and will enable businesses to still benefit from significantly lower tax rates than they may face otherwise.

 

The proposed bill is still up for discussion, though as of this moment Cameron is losing many of the Tory supporters he relied upon to secure the election over the past few weeks due to this new possible new change and the lack of trust in many of the promises he made pre-election.

CML Foresees Slowing Market

[ Posted May 16th, 2010 ]




Following recent reports that the housing market has taken on a new direction in recent months the Council of Mortgage Lenders (CML) has cautioned that there may be somewhat of a lowdown occurring in both the buying and selling aspects of the real estate sector.

 

This prediction is based on the fact that as of right now reports show that the actual supply of homes on the market has outstripped demand by roughly 2.2%, coupled with the fact that many prospective home owners are finding low mortgage rates on a number of deals – ranging from bad credit mortgages to even overseas mortgages for international investment. This combination of factors has led to what many experts are calling a slowdown in the volatile nature the real estate market has shown over the past few months as well as a potential reversal of the substantial appreciation trend found throughout the various markets.

 

For many landlords this news may not necessarily be music to their ears given that the over-saturation of supply of homes on the market could easily work to drive down home costs. Lending institutions may also find this trend somewhat of a concern as well as any instability in the development of the real estate sector and potential value decline generally means less security for home lending – with the lack of trust in the market eventually coming back to hurt prospective home owners over anyone else.

 

On the plus side for many first-time buyers this shifting in trends can be seen as a boon should prices successfully drop in the coming months. Due to the significant price changes and rising values over the past year many first-time buyers have been effectively excluded from the market due to the fact that minimum requirements to lock-in the most favourable mortgage rates possible. With lowering house costs, however, this may be mean opportunities for many individuals opening up that would simply be impossible to realize otherwise.

 
 
 
 
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