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Housing market sees post-Brexit slowdown

Published On: August 11, 2016 at 10:30 am

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Categories: Property News

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A new report has revealed that the UK housing market slowed slightly following the Brexit vote. However, the Royal Institution of Chartered Surveyors (RICS) believes that the market could well take off again in the next year.

The investigation from RICS revealed that house prices in Britain slowed substantially during the three months to the end of July. In addition, new buyer inquiries, property sale transactions and new instructions also slipped.

More pleasingly, there was renewed confidence in commercial property.

Resilience

In the residential property market, the number of surveyors that recorded price increases fell to its lowest for 3 years. This meant they outnumbered price falls by 5%, in comparison to a margin of 15% evident in June.

Prices were found to have fallen outright in London, East Anglia, the North and the West Midlands.

RICS said that results from the survey suggest that house price inflation could rise within a year. One month ago, just after the historic Brexit decision, surveyors were divided on what would happen to prices in the next twelve months.

Housing market sees post-Brexit slowdown

Housing market sees post-Brexit slowdown

Now, 23% believe that values will increase over the period. This said, any such growth is likely to be modest in comparison to last year.

A separate survey from commercial property company CBRE reveals that demand for office space in the capital has recovered since the vote. The amount of space taken by businesses in London rose to fractionally under a million square feet in July, a 24% rise on June’s figures.

Subdued

Simon Rubinsohn, chief economist at RICS, said, ‘it’s not altogether surprising that near-term activity measures remain relatively flat. However, the rebound in the key 12-month indicators in the July survey suggests that confidence remains more resilient than might have been anticipated.’[1]

[1] http://www.bbc.co.uk/news/business-37037964

 

 

Buy-to-Let Lending Continues Recovery, but Borrowing is Still Down

Published On: August 11, 2016 at 10:03 am

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The buy-to-let lending market has continued its recovery, but borrowing is still down in the sector, according to the latest Council of Mortgage Lenders (CML) report.

Buy-to-Let Lending Continues Recovery, but Borrowing is Still Down

Buy-to-Let Lending Continues Recovery, but Borrowing is Still Down

The study found that buy-to-let landlords borrowed a total of £2.9 billion in June, up by 12% on May. However, the value of these loans was significantly lower than the volume recorded in June last year.

The amount of landlords purchasing property has fallen substantially since the higher rate of Stamp Duty was introduced at the start of April, as reflected by a 15% annual decrease in lending to buy-to-let investors in June. However, the CML claims that this decline was caused by a boost in the market ahead of the Stamp Duty deadline.

The Director General of the CML, Paul Smee, says: “Buy-to-let house purchase activity remains lower than before the Stamp Duty changes at the beginning of April, but showed a large month-on-month increase. As might be expected, buy-to-let remortgage seems to have been less affected by the changes and remains consistent with lending last year.”

But while many buy-to-let landlords have been deterred by the tax changes, first time buyers are taking advantage of less competition from investors in the property market.

First time buyers borrowed a collective £5.5 billion in June, up by 28% on May and 25% on June 2015. June’s figure represents the greatest volume of loans for first time buyers since August 2007.

Overall, mortgage lending in June was up by 29% on the previous month, and 12% year-on-year.

The Director of London estate agent Greene & Co., Stephen Matthews, believes that property purchase activity has remained fairly robust, despite wider uncertainties in the market.

He explains: “The data shows first time buyers continue to be a driving force in house purchase lending, outperforming home movers for the third month running and up 25% annually. Nevertheless, the number of home movers has risen by a healthy 5% year-on-year, despite Brexit jitters and the accompanying uncertainty surrounding future economic stability.

“Buy-to-let house purchase activity still remains lower than before the changes to Stamp Duty at the beginning of April, which has had a bigger impact to annual lending than the EU referendum. However, it is clearly evident that private landlords are beginning to return to the market, as we see a large month-on-month increase.”

The findings arrive as recent data from LSL suggests that a drop in property transactions was caused by the Stamp Duty changes, rather than the Brexit vote.

Council leaders call for Right-to-Buy reform

Published On: August 11, 2016 at 9:24 am

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Council leaders in England have today called for the Government to make reforms to the right-to-buy scheme in light of new figures.

Analysis completed by the Local Government Association reveals that 12,246 council properties were sold to tenants under the scheme in 2015/16. However, just 2,055 replacements were started by councils, a fall of 27% on the previous year.

Right-to Buy

The Right-to-Buy scheme was designed to allow low-income tenants to purchase their council-owned home at a discounted price.

Since its inception in the early 1980’s, nearly 2m properties have been sold to these tenants by councils across England. As a result, the proportion of homes that are social housing have fallen from 31% to 17%.

Numbers of people using the scheme were on the downturn, until the Government re-launched the scheme in 2012, offering quadruple discounts for London tenants.

The scheme has already been scrapped in Scotland, with the Welsh assembly also confirming plans to abolish it. Now, the Local Government Association has said that the scheme could become defunct in England, if more is not done to fund replacement homes.

Replacements

Representing 370 local authorities across England, the Local Government Association said it expects 66,000 council properties to be sold to tenants by the year 2020. Councils are expected to struggle to replace many of them.

A further 22,000 properties will be sold should councils be forced to offload higher-value properties to fund an extension of the scheme to housing associations. In their manifesto before last year’s general election, the Government promised to make discounts available to 1.3million housing association tenants.

The Local Government Association warns that a fall in council homes would exacerbate the housing crisis, with an increase in homelessness and spending on housing benefit.

Council leaders call for Right-to-Buy reform

Council leaders call for Right-to-Buy reform

Re-launch

Since the re-launch, the Government has pledged to provide one-for-one replacements for additional homes sold. The Local Government Association said that prompt reform is necessary to ensure councils replace stock efficiently.

The Association believes authorities must keep 100% of receipts from sales, as opposed to the one-third they can currently retain. In addition, it has called for discounts to be set to reflect regional variations in property values.

Nick Forbes, senior vice chair of the Local Government Association noted, ‘Right to Buy will quickly become a thing of the past in England if councils continue to be prevented from building new homes. Housing reforms that reduce rents and force councils to sell homes will make building new properties and replacing those sold even more difficult. Such as loss in social housing risks pushing more people into the more expensive private rented sector, increasing homelessness and housing benefit spending.’[1]

Commitment

The Department for Communities and Local Government (DCLG) said that the Government was prepared to undertake action to ensure the provision of additional homes.

It noted, ‘we’re committed to building the homes this country needs and investing £8bn to build 400,000 more affordable homes. There is a rolling three-year deadline for local authorities to deliver an additional affordable home and so far they have delivered well within their sales profile.’[1]

‘However, we have always been clear that if local authorities don’t start building replacement homes within the three-year deadline, then we will step in and build them for them.’[1]

[1] https://www.theguardian.com/society/2016/aug/11/right-to-buy-reform-urged-as-council-leaders-fear-for-social-housing?CMP=share_btn_tw

Drop in Property Transactions Caused by Stamp Duty, Not Brexit, Says LSL

Published On: August 11, 2016 at 8:35 am

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Drop in Property Transactions Caused by Stamp Duty, Not Brexit, Says LSL

Drop in Property Transactions Caused by Stamp Duty, Not Brexit, Says LSL

Property transactions dropped by 20% in the second quarter (Q2) of the year, caused by the rush to purchase ahead of the Stamp Duty deadline in April, rather than the Brexit vote, reports LSL/Acadata.

The report suggests that the annual decrease in house sales has more to do with the tumble recorded after the 3% Stamp Duty surcharge was introduced than uncertainty surrounding the EU referendum in June.

The study found that although annual house price growth slowed to 5.5% in July, transaction levels edged up over the past month. The average house price in the UK now stands at £293,318.

Although the huge spike in sales recorded in March caused a massive decline in April, sales in the first half of the year are still likely to be 4% higher than in the same period last year.

The report claims that the “exceptional” sales level seen in March has more than compensated for the decrease since.

It also points out that while property transactions rose in July, the Land Registry would have recorded these figures before the EU referendum took place.

The Director of Your Move and Reeds Rains, which are owned by LSL, Adrian Gill, comments: “Brexit may well have an impact on the housing market, but it’s not showing yet.

“Even when it does, there will be positive as well as negative influences on the market, which clearly has some strong long-term drivers for continued house price inflation.”

According to the research, house prices increased by an average of 0.2% in July, making it the fifth consecutive month that the annual rate of house price growth has dropped. Despite this, the 5.5% rise in house prices over the year has added an average of £15,422 to property values.

An Analyst at Acadata, Peter Williams, says: “The market was contracting pre-Brexit and the question remains, how will it perform post the Brexit vote and ultimately, on exit?”

Do you believe that the Stamp Duty surcharge has had more of an impact on property transactions than the Brexit vote? How have you been affected?

Property market shows referendum resilience

Published On: August 10, 2016 at 11:09 am

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An interesting new report from London based estate agent, Jackson-Stops & Staff has revealed there has been little change in the property market post-Brexit.

The investigation shows that despite a marginal weakening, reports of a crisis are wide of the mark.

Referendum resilience

The estate agent took data representing 90% of the entire UK property market on the 22nd June, the day before the historic vote took place.

Results from this data showed there were 866,179 properties for sale. Of those, 352,301 were under an agreed offer, making up 40.7% of the market.

Jackson-Stops & Staff undertook the same investigation on Monday (8th August.) Key results from this research show:

  • The total number of properties on the market, including those under offer, has risen by 1.7% to hit 872,953
  • The total number of properties under offer has dropped by 4.3% to 335,176. This is 38.4% of the market, showing a 2.3% since 22nd June
  • Average asking prices for property in Britain have risen to £1,040-from £20,470 on 25th July to £241,510 on 8th August
Property market shows referendum resilience

Property market shows referendum resilience

Seasonal slowdown

Nick Leeming, Chairman at Jackson-Stops & Staff, notes, ‘whilst the market has weakened slightly followed the Brexit result, we usually see a slowdown in activity over the holiday months and these figures suggest we are yet to see a property crisis. Although agreed offers have marginally decreased, many thousands of buyers are still making offers to buy homes in the present economic environment. As a result, many sellers are feeling confident, demonstrated by the fact that asking prices themselves have not fallen-and have in fact seen a moderate increase.’[1]

Analysis of properties under agreed offer or sold subject to contract signing indicates that the average house price currently stands at £232,699. This is 3% lower than the average of all properties just two weeks ago.

The asking price of all properties on the market that are not under offer or sold is currently £247,026. This is 3% higher than the typical price recorded two weeks ago and suggests sellers with agreed offers were more realistic in pricing their property.

No decline

Leeming concluded by saying, ‘while sellers may have to drop their asking price a little to get an agreed offer, there is no evidence of sharp house price decline nationally. Indeed, sellers accepting an offer 3% to 5% below asking price is normal in a healthy housing market.’[1]

‘Despite the scaremongering being issued by a number of gloomy commentators, these figures show that the housing market continues to remain remarkably resilient. There is life after Brexit-the housing market is driven by need and these needs continue to motivate thousands of buyers.’[1]

[1] http://www.propertyreporter.co.uk/property/there-is-life-after-brexit-and-its-the-same-as-before.html

Rental Yields of 8%+ Still Possible in London

Published On: August 10, 2016 at 11:07 am

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Categories: Landlord News

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Although soaring house prices in London make it difficult for landlords to achieve high rental yields, London estate agent Portico has found that returns of 8%+ are still possible in the capital.

The agent has used its innovative Interactive Yield Map to analyse each London borough on a street level to find the highest potential yields for landlords.

Rental Yields of 8%+ Still Possible in London

Rental Yields of 8%+ Still Possible in London

The data found that the highest rental yield, of 8.3%, was found in the borough of Havering, in the Romford postcode area around Whybridge Junior School. The average monthly rent price for a two-bedroom flat in the area is just £1,156, which is £600 less than the average monthly rent of £1,756 across the capital as a whole.

Portico found that outer London boroughs offer the highest yields generally, with areas within Barking and Dagenham, Bexley, Redbridge and Bromley all offering yields of 6% or over.

The suburban district of Chadwell Heath in Barking and Dagenham – where the Crossrail service is set to launch in 2019 – offers landlords an impressive yield of 7.6%. Here, landlords can expect to charge a monthly rent price of £1,278.

In inner London, the strongest rental returns and most affordable monthly rent can be found in Greenwich. On the Pelton Road, Bellot Street, Blackwall Lane, Armitage Road and Millennium Way roads around north Greenwich station, landlords can expect a 6% yields with an average monthly rent of £1,477.

If you are thinking of investing in prime central London, however, yields range from 2-4%. The highest, 4.8%, can be found on the northern end of Finchley Road in Westminster, while the area around the World’s End Estate in Kensington and Chelsea offers a 3.8% return.

The Managing Director of Portico, Robert Nichols, comments: “The rental market has remained strong post-Brexit, but landlords still need to be smart about where they are investing, as a very small difference in yield can determine whether they make a profit or a loss.

“If you’re thinking of buying to let, transport links are key. London’s commuting tenants want to be within close proximity of a Tube, so look for properties near new developments such as Crossrail and Crossrail 2.”

He suggests: “Havering, Barking and Dagenham, and Bexley, which will soon have stations on the eastern edge of the Elizabeth Line, are clearly key investment hotspots where landlords are achieving extremely impressive yields.”

Landlords, will you take advantage of the high rental yields still on offer in the capital?