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BoE figures show stakes in homes being raised

[ Posted July 31st, 2010 ]

There seems little doubt that geography is one of the main issues governing the state of the UK housing market. The latest figures have shown that UK homeowners increase the value of their stakes in their homes by £3.3 billion during the opening three months of 2010. This influx is a little lower than the £3.4 billion rise during the final quarter of last year, according the figures from the Bank of England. The latest increase was as a result of homeowners paying off a greater part of their mortgage as well as the demand for higher mortgages from lenders. It is now two years since the last withdraw of equity from UK homes.

During the course of the past two years, homeowners in the UK have upped the levels of equity in their homes by £38.3 billion, and in the two years prior to that, UK homeowners borrowed £87 billion against the overstated values of their properties through re-mortgages. These borrowing were usually used to either consolidate debts or to purchase so-called ‘big ticket’ items.

The latest figures serve to clarify how the behaviour of homeowners has altered during the course of the past decade, and also illustrates the changing nature of the housing market.

People spent money released from the climbing worth of their homes for a ten-year period from the third quarter of 1998, and they borrowed a total of £327 billion.

In fact, at the apex of equity withdrawal’s popularity, the system of borrowing money against the climbing house values was putting almost 9% per year on to the post-tax income of the whole population of the UK.

During the first three months of this year, around 1.3% of the post-tax income of the UK population has been extracted from the economy as a result of people deciding instead to reduce their mortgage debts.

Also, low interest rates plus general fears regarding possible future debts or unemployment have resulted in homeowners choosing to pay off their mortgages faster than before – even  fixed-rate mortgages with secure time periods set. Due to this, such repayments have outpaced equity release. As mortgage rates are currently at such low levels, some have chosen to ‘overpay’ whilst they are on standard variable rate home loans. Whilst house price were falling, the chance to borrow against property equity also lessened, but, in late 2009, the value of additional equity being added slowed along with the fact that house prices began another gentle climb.

"The eighth successive, and still marked, net injection of housing equity in the first quarter of 2010 is the consequence of the ongoing desire of many people to improve their personal balance sheets," stated Howard Archer, of IHS Global Insight.

"Furthermore, extremely low savings interest rates have made it much more attractive for many people to use any spare funds that they have to reduce their mortgages," Mr Archer added.

According to a recent study by Age UK, some sections of society were still using equity withdrawal as a means of last resort in order to settle debts, or to find equity when savings are reduced. Some pensioners also unlocking housing equity in order to make retirement more comfortable or to help their families, according to the report.

Eastern property investors still attracted to prime London assets

[ Posted July 30th, 2010 ]

Overseas investors‘ interest in the commercial properties located in central London continue apace as Korean, Chinese and Malaysian investors look to the prime trophy market in order to snag a prestigious piece of real estate.

More than £2 billion-worth of transactions were completed during the past month, a figure that would appear to indicate that the commercial property market in central London has retained both its resilience during tougher economic times as well as its perennial attraction to foreign buyers and investors.

According to Stephen Down, who is the managing partner at specialist central London-based investment consultancy, Gresham Down Capital Partners, the recent trend has abated fears of excess market stock dampening market appeal.

‘Five weeks ago the fear was that there was too much stock on the market but the appetite of buyers has been voracious,’ he commented.

The American opportunity fund, Carlyle, has recently acquired six office buildings in London, including the White Tower portfolio. They made the acquisition from official receivers at a cost of more than £670 million.

Stephen Down’s company has, itself, recently advised a private investor from Eastern Europe who has recently bought Mitsubishi Estate Company’s Bow Bells House, which is a prime city asset. The property was acquired for £140 million. Down commented that, as a result of the current paucity of debt, the majority of recent buyers have been largely equity rich.

City of London office rentals have climbed by nearly 12% during the past three months, and by 24% over the past half year. Construction starts have been particularly hard hit in the City, and has led to tenants landed into bidding wars over the scarce supply of Grade A property space. The end result of this is that rents are driven upwards.

Mr Downs also commented that there is more and more evidence that Korea, Chinese and Malaysian investors are entering the prime London market.

 ‘Chinese entrepreneur Joseph Lau has been reported at the preferred bidder on the £300 million Tower 42 but we know there are a number of other Far Eastern institutions and private investors that have targeted London because of the liquidity and transparency of the market but also because of the weakness of sterling,’ Mr Downs commented.

Fears that funding cuts to housing associations could leave thousands homeless

[ Posted July 29th, 2010 ]

There are suggestions that any cuts in government support for housing associations in England may well risk pushing the associations deeper into debt as well as forcing them to sell property assets. This view is particularly espoused by Moody’s in their post-Budget overview of the social housing sector.

The agency, despite these fears, has not gone the whole way towards downgrading the investment grade ratings of the ten housing associations it is responsible for as it feels that the current regulatory framework will still be strong enough – even after changes are implemented – to support the sector’s credit strength in regards to both standard and bad credit dealings. The planned changes that were unveiled in the recent Budget caused some alarm among associations and have led to fears among some that, as a result of the proposed cuts in housing benefits, more than 200,000 people could find themselves homeless. The representative body of the housing associations, The National Housing Federation, also fears that a large number of tenants will find it difficult to pay their rents and will subsequently fall into arrears.

As a result of these fears, the Treasury has proposed to reduce the level of proposed cuts by roughly £400 million. It also appears that the Treasury may well have stepped in to prevent the dismantling of the Tenants Services Authority which is the
regulatory body for the associations and may negatively impact the buy-to-let market. The proposed dismantling was as a result of the government’s announced intention to cut back on the number of quangos. It is understood that the Chancellor, George Osbourne, has had doubts about the move as dismantling the body might put at risk the £50bn of mainly bank borrowing held by the associations. It is widely expected that, over the course of the next five years, associations may well be in the market to raise a further £20bn for the purposes of social housing whilst also refinancing £5bn of existing debts.

It is also expected that M&G Investments will step into new territory by raising £1bn in order to invest it in index-linked social housing debt. This initiative comes on the back of discussions with associations and pension funds regarding the plus points of matching funding with index-linked rents paid by tenants.

NI Housing market sees slight increases, but tough times ahead

[ Posted July 28th, 2010 ]

According to new figures from the Ulster Bank-sponsored Royal Institute of Chartered Surveyors housing market survey, May saw a slight improvement in the majority of housing market indicators in Northern Ireland. The surveys’ price balance improved a little during May, and there was also a suggestion that there was an increase in the number of enquiries from potential buyers – both those looking for second homes and first-time buyers looking to enter into the market. Also, expectations for prices and transactions up to the end of August improved a little, according to the study.

Despite all of this however, there was still rather subdued transaction activity, and the net balance for transaction activity remained at zero; 38% of respondents to the survey stated that there had been no change in the number of transactions, and the remaining respondents were evenly split between those stating that transactions have risen, and those saying that they had fallen.

The price balance, which, standing at -18%, still remains some way behind other regions in the UK; almost three-quarters of respondents in Northern Ireland reported flat price levels.

"There remain big sectoral and geographical variations in the local market, and the likelihood is for this to continue during the remainder of the year. On the whole, the scale of public spending cuts that are to come will impact on Northern Ireland significantly, creating a difficult environment for the housing market. ” stated Tom McClelland, the Northern Ireland spokesman for the Royal Institute of Chartered Surveyors.

He went on to say that "Unemployment will remain high for some time and increasing pressures on household budgets, such as water-charging and rises in interest rates, will also inevitably come. That said, we foresee a prolonged period of largely flat average house prices rather than a further significant correction in average prices.

Derek Wilson, the head of lending products at Ulster Bank had a slightly different perspective, however. "The expected headwinds will bring challenges for the housing market, but a range of indicators are pointing to evidence of increasing stabilisation in both residential and commercial sectors. This is leading to an expectation that pent-up demand from those who have been putting off a home purchase will start to be realised,” he commented.

Prime English country houses continue upward price rise

[ Posted July 27th, 2010 ]

According to figures from a new report, the price of prime country real estate in England climbed by 2.5% on average during the second quarter of this year, and prices are currently nearly 8% higher than compared to a year ago.

The figures mean that prices have now climbed throughout each quarter during the last year, and price growth has been most marked in the south west with prices here climbing by 3.3% during the second quarter of this year, as indicated by the newest set of figures from the Knight Frank Prime Country House Index.

On a yearly basis, the largest rise in the price of prime country houses has been seen in the Home Counties, where values have risen 10.7% year-on-year. The latest Knight Frank report also illustrates that the rural property market has become rather more divided between the genuinely decent properties and the over-valued ones.

The total growth for the year so far now stands at 4.6%, with the latest quarterly rise meaning that prices have now been climbing for a year. Prices are still, however, almost 15% down on values seen during the market peak back in the autumn of 2007.

‘A continued shortage of property for sale and a resurgence in demand is helping to boost prices in most parts of the UK, but the austerity measures proposed by the Chancellor in his emergency budget means prices are unlikely to rise at the same pace during the rest of the year and some of our offices are reporting that values have already started to flatten out,’ stated Andrew Shirley, Knight Frank’s head of rural property research.
‘Areas around London, Henley and Tunbridge Wells, for instance, with quarterly price growth of 6.6% and 7.9%, respectively, are still performing strongly, but are predicting that this upwards trend will diminish over the course of the year, Mr Shirley added.

The opening six months of 2010 have been rather stacato for the property market, with heavy snow, the general election and the emergency budget. Rupert Sweeting, who is head of Knight Frank’s country department, feels that these reasons in conjunction have been more than enough to cause people to delay either buying or selling a house.

‘But now the landscape is pretty clear and people are starting to get on with things again. The volume of pages we are taking in Country Life, which is a good barometer of the health of the market, is up by around 15% this year. The economic outlook is admittedly looking tough following the emergency budget’s wave of cost cutting, but at least we know where we stand in relation to taxation, in particular Capital Gains Tax, which was not increased by as much as many expected. Interest rates also look set to remain low for some time,’ Mr Sweeting commented, highlighting that the continued low rates offered for both fixed-rate mortgages and even re-mortgages may help assist in maintaining purchasing power for many individuals.

Land in Gloucestershire hits peak prices as demand outstrips supply

[ Posted July 24th, 2010 ]

Gloucestershire, located in south-west England, a place often spoken of as the royal county’ as it is home to both Price Charles and Princess Anne, is currently in hot demand and is showing substantial property value increases across the county, with land there now selling for £10,000 per acre.

In a recent example, two farms located near Cirencester reached this mark, with the average price of farmland sold in the county by the real estate consultants, Knight Frank during the past year averaging out at nearly £9,000 per acre.

This figures compares to the average farmland price in England, which stands at £5,769 per acre as defined by the Knight Frank Farmland Index, as well as £5,145 per acre as stated by the latest numbers from the Royal Institution of Chartered Surveyors.

Clive Hopkins, the head of farms and estates sales at Knight Frank commented that sales had been particularly helped by the fact that farmland has been exempted from inheritance tax, with landowners benefiting from prices standing over 30% higher than the national average and the ability for these private individuals to sell discreetly. He added that low interest rates have also aided the market with re-mortgagers able to wield greater leverage for purchases and many fixed-rate mortgages being available at the lowest rates seen in decades.

Additionally demand for Gloucestershire farmland is currently outstripping supply, with the farmland market in England demonstrated excellent resilience as compared to a range of other assets during the global financial downturn. Average values rose by 20% during the course of the last year as stated by the Knight Frank Farmland Index, which currently stands at an all-time high.

For comparison, land values in 2006-7 were £3,500-£4,000 per acre in Gloucestershire and the Cotswolds, whereas values currently stand at £8,842 per acre on average, meaning that values have more than doubled over the course of the last few years, states Atty Beor-Roberts, head of Knight Frank’s Cirencester office.

‘Land in the Cotswolds and Gloucestershire is a rare and sought after commodity. Supply is limited and demand remains strong. When land comes onto the market in the area, it presents a once in a lifetime opportunity to buy,’ she explained.

‘Gloucestershire offers some stunning countryside and a train journey into London Paddington of just one hour. Commuters can travel from door to desk in under two hours. People also like to own tangible assets such as farmland in these tough economic times,’ she added.

UK house prices apparently stabilising

[ Posted July 23rd, 2010 ]

According to the figures published in the very latest Halifax House Price Index, June represented the second monthly fall in a row for house prices, coming in the wake of May’s 0.5% drop. Looking, however, at more long-term indications, house prices actually leveled off and achieved stability during the second quarter of 2010, and are only 0.1% lower than they were in the first quarter of this year. This, for the longer-term, hints that the housing market is likely to achieve stability rather than lapsing into freefall. The latest Halifax data indicates that the average property in the UK  currently has a value of £166,203 – potentially good new for first-time buyers in particular and those looking to take advantage of some of the latest fixed-rate mortgage offers.

Martin Ellis, who is a housing economist at the Halifax, made the following comment:

"This continued the slowing down of house price growth since the beginning of this year ,following the moderate recovery in prices during much of last year.  This pattern is in line with our view that house prices will be largely unchanged over 2010 as a whole.

"A shortage of properties for sale last year contributed to an imbalance between supply and demand and was a key factor in driving up house prices last year.  An increase in the number of properties available for sale in recent months has helped to reduce the imbalance, relieving the upward pressure on prices. The low level of interest rates however, continues to support housing demand."

Nigel Lewis,another analyst, made the following observation:

"It doesn’t surprise me that the latest Halifax house price index shows a drop in house prices; our own figures show that there has been an influx of stock during the last few months and this has helped to drive prices down.

"There are now 23% more properties for sale on our site than there were a year ago and this imbalance between supply and demand is currently affecting pricing.

"We are reverting back to a buyer’s market and therefore sellers must vie for their attention with more competitive prices."

UK Surveyors anticipate falling house prices for second half of 2010

[ Posted July 22nd, 2010 ]

According to a report published today (July 13th), residential property prices look set to drop in the UK during the second half of the year due to the fact that supply will outstrip demand, although sales appear set to increase. Increased supply as well as weaker demand are the factors affecting the current fragile recovery in UK residential real estate prices, according to the June Housing Market survey produced by the Royal Institution of chartered Surveyors.

Despite the fact that chartered surveyors continue to record rising house prices in most regions of the UK, the increase in supply appears to be nudging most of the regional net balances close to negative territory. London and Scotland are two areas that buck this trend. Buyer interest dropped for just the second time since October 2008, which appears to highlight increased uncertainty regarding the short-term economic outlook, and roughly 5% more chartered surveyors have recorded a fall in new buyer enquiries-down from May’s level of 8%.

These figures are in real contrast to the constant rise in supply, with surveyors reporting rises in new instructions staying positive for more than a year successively.  The latest increase in instructions appears to be, in part, fuelled by the recent scrapping of Home Information Packs (HIPS), according to the report. As a result, the report indicates that more surveyors now anticipate that house prices will likely fall in the coming months.

New buyer enquiries, which are used to gauge demand, dropped for just the second time since the end of 2008, with the net balance for new instructions climbed to its highest point for over three years. These factors have had a knock on effect on sentiments for future price rises, according to the report. Around 10% more chartered surveyors recorded a rise and then a fall in house prices, dropping from 22% in May, the report states.

Greater stock coming onto the market should, however, encourage activity in the more depressed regions which have been held back by a lack of choice for those looking to buy homes – especially with many affordable fixed-rate mortgages available on the market today.

Average housing costs drop in UK

[ Posted July 21st, 2010 ]

According to the latest research from the Halifax, the average cost of running and owning a home in the UK has dropped by 6% during the course of the past two years, which is chiefly as a result of cheaper mortgages.

The average yearly cost of owning and running a home dropped from £9,564 to £9,020 between April 2008 and April 2010. Allowing for retail price inflation, housing costs have fallen by 9% in real terms, and housing costs in the UK are currently comparable to 27% of gross average earnings on a full-time basis-having dropped from 30% in 2008, according to the Halifax’s latest review.

The review calculates such costs as mortgage and remortgage payments, the costs incurred by maintenance and repairs, council tax, gas, electricity and water bills, general household appliances, toiletries and household insurance.

The drop in housing costs since 2008 is largely the result of a 19% drop in mortgage payments, according to the research. On average, existing borrowers paid an average mortgage rate that fell by 2.13% in the two year period between April 2008 and April 2010, with the rate dropping from 5.80% to 3.67% – particularly good news for many fixed-rate mortgage offers.

The report also indicates that mortgage payments are responsible for the largest part of total housing expenses, standing at 41%, with electricity and gas bills coming second at 15%, followed by domestic rates and council tax charges at 14%. In general, nine out of the eleven categories of housing costs analysed in the research saw above-inflation rises between April 2008-April 2010. The cost of electricity and gas bills, household appliances and maintenance all rose by 10% over the two year period.

In regional terms, the highest annual costs are seen in London, standing at £11,762, with costs in the South East at £10,457. The lowest costs have been seen in Northern Ireland, at £7,331.

‘Over the last two years, the cost associated with owning and running a home in the UK has fallen, entirely as a consequence of reduced mortgage payments. The drop in housing costs has helped to ease the strain on household’s finances, providing some relief to homeowners during the economic downturn,’ commented Suren Thiru, housing economist at Halifax.

Slight CGT rise welcomed in wake of fragile recovery

[ Posted July 14th, 2010 ]

UK property market experts have predicted that although the difficult measures implemented in the recent emergency budget are generally for the best in what are difficult and parlous circumstances, they will, nevertheless, do little or nothing to stop the fall of residential property prices in the UK. Despite the fact that the lower-than-expected increase in Capital Gains Tax has been widely welcomed within the UK real estate industry, many analysts have commented that the rise will impact upon the buy-to-let sector, thereby discouraging private rental landlords.

According to Yolande Barnes, the head of residential research at Savills, the emergency budget supported Savills’ analysis that the general UK housing market will experience a second fall in values during the course of the next one-two years. ‘We anticipated as long ago as the summer of 2009 that the housing market would see further falls in 2010. The Chancellor today outlined some of the forces and factors behind this prognosis and gave us no reason to revise our views,’ Ms Barnes commented.
‘The pain will fall on just about every household in Britain and this will undoubtedly curb consumer confidence. The effect will be to suppress spending and that will include spending on homes. Some markets have already stalled in the run-up to the Budget and it is probable that post Budget sentiment will continue to suppress transaction levels,’ she added.

As the cuts put forward in the emergency budget are harder on some regions than others, properties in the north of England may well suffer the most, according to Ms Barnes. ‘More worrying is that austerity measures will work against mortgaged owner occupiers and will pose a real threat to those seeking to re-mortgage,’ she concluded.

On more welcome news, she enthused about government plans to examine the effects of the recent stamp duty holiday, perhaps in an efforts to transfer the burden of the stamp duty tax from the buyer to the seller.

 ‘We continue to urge the Government to consider transferring the burden of this tax from buyers to sellers. This would have the effect of removing the barrier to first time buyers at no cost to revenue,” she said.  aims to provide every client with cheap, affordable and best mortgage loans in the UK market, however the actual mortgage rate available will depend on client's financial circumstances and credit history. Although, has made every effort to ensure that the mortgage rates listed are correct, it bears no responsibility in case of an error. 
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