Posts with tag: first time buyers

Buy-to-let clampdown beginning to work?

Published On: January 18, 2016 at 2:36 pm

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The Chancellor’s clampdown on buy-to-let investment is already beginning to show signs of working, according to new research conducted by Rightmove.

Data released by the property website suggests that more properties have become available to first-time buyers, with prices also slowing. The firm suggests that there has been a 6.6% rise in two-bed flats, popular with this group, over the past year.

Availability

Two-bed flat availability is now at its greatest since 2007, according to the firm. In addition, their research suggests that buy-to-let landlords may be looking to sell their property before changes in tax relief and stamp duty come into effect.

‘With the monthly price increase in this sector at a near standstill, this suggests that some of the dynamics of the changing tax regime for buy-to-let investors are starting to play out sooner than expected,’ said Miles Shipside, director of Rightmove.[1]

‘For several years buy-to-let investors have been enticed by high tenant demand and attractive returns,’ he continued, before saying, ‘as their window of opportunity starts to close it already appears to be opening wider for first-time buyers.’[1]

Buy-to-let clampdown beginning to work?

Buy-to-let clampdown beginning to work?

Changes

During the summer, Chancellor Osborne slashed tax reliefs for buy-to-let landlords and went on to increase stamp duty on investment and ‘second’ homes in the Autumn Statement.

Prices in the mainstream market continued to rise, with Rightmove’s data suggesting the cost of a property coming to market was up by 0.5% in January, in comparison to December. In addition, demand on the Rightmove website in the first week of 2016 was up by 21% on the same period in 2015.

However, there was little in the way of relief for struggling tenants, with separate analysis by Countrywide suggesting rents rose by 3.1% in 2015. Company research director Johnny Morris said that, ‘2016 looks to be a complicated year for landlords,’ with the, ‘additional 3% stamp duty charge, stricter regulation and changes to tax relief from 2017 onwards will all take their toll on investor sentiment and impact behaviour.’[1]

‘With stock at a premium, the smaller landlords who decide to sell up will add upward pressure to rents although any rises will be tempered by affordability pressures,’ Morris added.[1]

[1] http://www.theguardian.com/business/2016/jan/18/jump-two-bed-flats-for-sale-landlords-selling-up?CMP=share_btn_tw

 

London Help to Buy Scheme to Launch on 1st February

Published On: January 17, 2016 at 6:30 pm

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Categories: Finance News

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The Help to Buy equity loan scheme will extend to prospective homebuyers in London from 1st February.

The Government initiative will offer loans of up to £240,000 to help buyers purchase new build properties.

The equity loan scheme has been available to buyers around the country since April 2013. Its extension in the capital sees the amount of money being offered doubling from 20% of the property’s purchase price to 40%.

Although mortgage rates are still at record lows and lenders are increasingly prepared to offer loans to first time buyers, sky-high house prices in London have priced many out of the market.

To meet affordability measures and qualify for mortgages, borrowers have been required to save huge deposits.

Figures from Halifax found that the average first time buyer in London bought a £367,990 home in 2015, with an average deposit of £91,409. Purchasing the same property with a 40% loan would mean the buyer would only need a deposit of £18,399.

The extension to the scheme, announced by Chancellor George Osborne in the Autumn Statement, will be available to buyers of new build homes in Greater London costing up to £600,000. As under the existing initiative, borrowers will need a deposit of at least 5% of the property’s value and to qualify for an ordinary mortgage.

They must also prove that they can afford interest payments on the Government loan when the five-year interest-free period comes to an end.

Despite interest starting at 1.75%, lenders are ensuring that repayments can be met at up to 4%, meaning that someone borrowing the maximum £240,000 would need to prove that they can afford to pay £800 per month, in addition to their mortgage and other outgoings.

When the scheme launches, mortgages will be available from Leeds Building Society, Nationwide and Lloyds Bank.

London Help to Buy Scheme to Launch on 1st February

London Help to Buy Scheme to Launch on 1st February

The Housing Minister, Brandon Lewis, comments on the extension: “We’re determined to help people enjoy the security that comes with owning a home and have already helped over 130,000 people into homeownership with Help to Buy.

“The scheme is helping people buy a home with a fraction of a deposit they would normally require and the new London scheme will help even more people follow in their footsteps.”1

£8.6 billion was set aside to extend the Help to Buy equity loan scheme from April this year – when it was originally due to end – to March 2021.

By the end of September last year, 3,548 households had used a Help to Buy equity loan to buy properties in the capital and the Government believes more than 10,000 more buyers could benefit from the extension.

It appears that developers have been one of the main beneficiaries of Help to Buy, reporting high demand for homes.

Ray Boulger, of mortgage brokers John Charcol, comments that the scheme is “a massive benefit to people who want to buy in London”.

He says buyers that are able to raise large enough deposits will effectively be able to double the amount they can spend, while keeping their monthly repayments at the same level.

However, he adds that there will be borrowers who are unable to clear the loan at the end of the five-year period and at that point, some homeowners will not be able to move up the housing ladder.

He explains: “People who use the scheme will stay in the property a lot longer – this is likely to happen with the existing scheme too. A lot of people will find that their ability to move is limited unless they want to downsize, but if they are buying a bigger property at the outset, that shouldn’t be a problem.”1 

Indeed, the scheme has also received criticism.

Property expert Henry Pryor believes the scheme will fuel demand and house price growth in London.

He says: “First introduced as a measure to encourage house builders to take off the tarpaulins off their moth-balled sites and get building again after the 2007-8 crash, the initiative has worked well with more homes being built, but the by-product is toxic – higher prices that require even more help to buy.

“Results from the quoted developers illustrates who is really being helped and a London version of the scheme is wrong, both from a moral and practical perspective. There are no work-shy builders in the capital; in fact, we need more sites to satisfy demand. Giving people help to afford what they otherwise could not is potty and will end in tears.”1

And the Chief Executive of homelessness charity Shelter, Campbell Robb, insists: “What we need to tackle the housing crisis in London isn’t more gimmicky schemes that are only available to higher earners, but investment in genuinely affordable homes.

“Without this, millions of Londoners on ordinary incomes will continue to be stuck in unstable, expensive private renting.

“To solve the housing crisis for the long term, both central Government and the Mayor need to prioritise building homes that people on low or average incomes can actually afford to rent or buy.”1

1 http://www.theguardian.com/money/2016/jan/12/london-help-to-buy-scheme-launch-in-february

 

 

How will the property market change in 2016?

Published On: January 11, 2016 at 1:59 pm

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Categories: Property News

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2016 looks to be a key year for the property market. Certainly, there is much more to consider than whether property prices will go up or down!

It looks increasingly likely that the Bank of England will follow the decision of the US Federal Reserve and raise interest rates in the coming months.

So just who and what will be most affected in the market over the coming year?

Landlords

Unfortunately, it seems as though buy-to-let landlords will see a particularly difficult 2016.

Stamp Duty

One alteration certain to have an impact on the market is the stamp duty hike coming into force on April 1st. Buy-to-let landlords and property purchasers buying a home that is not their main residence will face an extra cost of 3% in tax.

It is suggested that these changes will deter some potential buyers. With sales and mortgages being revived over recent years, the property market is set to receive some setbacks in 2016.

Tax Breaks

On top of stamp duty rises, a reduction in tax break privileges has been slated for, after an announcement in the Chancellor’s summer budget

What’s more, the Bank of England has indicated that it wants power to limit lending to buy-to-let borrowers and it appears likely that the Chancellor will side with this view.

The Government seemingly puts the blame for lack of affordable housing at the feet of private landlordism, with a booming private rental sector seeing potential home-owners out in the cold.

Buy-to-let

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors (RICS) noted that, ‘the Government is very motivated to reverse the trend in owner-occupation-this is now a very important part of the Government’s housing strategy.’[1]

‘Buy-to-let landlords have had a very good run-holding property has been a very lucrative investment, so if the Government has to squeeze the buy-to-let landlord it will take that in it’s stride,’ Rubinsohn added.[1]

Property commentator Henry Pryor called the moves, ‘an extraordinary about-turn for landlords.’ He went on to say, ‘because rents are unlikely to rise to compensate for the increase in stamp duty, capital values are likely to fall-which is the Government’s intention.’[1]

How will the property market change in 2016?

How will the property market change in 2016?

Right to Rent

Just next month on February 1st, the controversial Right to Rent scheme will be rolled out in full across the country. Landlords will be responsible for checking the immigration status of potential tenants and could be fined up to £3,000 for non-compliance.

Pryor suggests, ‘many landlords are finding this is a rather frightening prospect and are talking of giving up as a result.’[1]

The Council of Mortgage Lenders forecasts that the number of new loans made to landlords will dip substantially, from 116,000 in 2015 to 90,000 in 2017.

Mortgages

It is now nearly seven years since the Bank of England cut interest rates to a record low of 0.5%. From then, economists have predicted that rates would begin to rise again, but have consistently been wrong.

However, it looks as though 2016 could well be the year where rates do eventually rise. The majority of independent economists believe that the first rises since July 2007 will occur in this year and will come in two increments of 0.25% each.

Ed Stansfield, forecaster at Capital Economics, thinks, ‘the economy is probably a little bit healthier than the collective wisdom of the Bank’s Monetary Policy Committee thinks. We think that one of the things that will convince the Bank to act is continued signs that incomes are recovering.’[1]

Thankfully, a growth in incomes should soften the blow of any interest rate hike.

Troubled Times

For many years, the low base rate has led to very low mortgage rates, making large mortgage rates seem affordable.

Schemes such as Help-To-Buy have buoyed house prices and sales, meaning many thousands of potential homeowners have received money to buy a property when previously they would not have been able to do so.

A steady growth noted in the economy, coupled with rising employment and income, means that prices and sales should remain at least even.

However, Ray Boulger, of mortgage brokers John Charcol, suggests that there could be some turbulence in the early months of this year. He believes that many people will rush to purchase buy-to-let property before the higher rates of stamp duty take effect.

‘Those people who want buy-to-let properties are clearly going to be incentivised to complete before 31 March. Till then I think we will see some quite strong growth in prices, then I expect to see prices falling for the next few months as that element of demand is taken out of the market,’ Boulger added.[1]

[1] http://www.bbc.co.uk/news/business-35135639

 

First-time buyer numbers fall slightly in 2015

Published On: January 11, 2016 at 10:39 am

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Interesting new data from the Halifax has revealed that first-time buyer numbers decreased marginally in 2015, but passed the 300,000 mark for the second consecutive year.

The total of 310,000 represents a slight fall from the 311,700 recorded in 2014 and is the first dip in first-time buyer numbers since 2011. Despite this, numbers are still up by 60% from the 193,700 recorded four years ago.

Price is right

Numbers of first-time buyers may have marginally fallen, but the average price paid for a property by this particular group increased by 10% during the last year. The average price paid by first-time buyers increased from £172,563 to £190,180.

In terms of deposit, the average amount put down by would-be purchasers was £32,927. This was 13% greater than the £29,094 recorded in 2014 and 88% more than the average deposit in 2007.

25 year mortgages have been the norm for a considerable amount of time. However, increasing numbers of first-time buyers are taking out mortgages where payments are spread out over a longer period. In 2007, the proportion of first-time buyers looking for a 35 year mortgage was 16%. In 2015, this had risen to 26%. In the same period, the share of mortgages with terms between 20-25 years fell from 48% to 30%.

First-time buyer numbers fall slightly in 2015

First-time buyer numbers fall slightly in 2015

Favourable

‘For the second year in succession, the number of buyers getting on the first rung of the housing ladder has reached 310,000,’ noted Craig McKinlay, Mortgages Director at the Halifax. ‘Although the average price of the typical first-time buyer home has grown by 10% in the past year, the number of buyers taking that first step onto housing ladder has been supported by favourable economic conditions; namely, record low mortgage rates, rising employment and real pay growth.’[1]

Of all house purchases made with a mortgage during the last year, 46% were made by first-time buyers. In addition, first-time buyers were given a shot in the arm by Stamp Duty changes announced in December 2014.

This change benefited first-time buyers in London the most, with purchasers buying property at the average price of £367,990 paying £8,399 in stamp duty, as opposed to £11,039 before the alterations.

‘Whilst affordability has improved since 2007, in many parts of the country the ratio of the average house price to earnings is still significantly above the long-term average of 4.0. This is a concern as it could prevent many potential buyers from entering the market.,’ McKinlay concluded.[1]

[1] http://www.propertyreporter.co.uk/property/ftb-numbers-pass-300000-mark-for-second-year.html

 

Number of homes for sale in UK falls again

Published On: January 5, 2016 at 9:29 am

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The latest monthly report from the National Association of Estate Agents makes bleak reading for potential homebuyers.

According to the research, there are 10 buyers for every property listed for sale in Britain, as the supply of homes available has dipped once again.

Decline

There was also bad news for first-time buyers. Following a positive period between July and October, where the number of sales to this group increased, purchases made in November fell by 10%.

As a whole, sales were down by 1%. This is typical at this time of year, but the sharp decline in sales to first-time buyers has given estate agents reason to fear the worst.

In the Autumn Statement, Chancellor George Osborne outlined his plans to assist first-time buyers in making it onto the property ladder. However, 53% of NAEA members believe that first-time purchasers will become more and more squeezed out of the market due to the continued lack of affordable housing.

The growing demand for property shows no sign of abating, with 336 house-hunters registered per NAEA branch in October, rising to 403 in November.

What’s more, the report shows that available housing dipped marginally in November, from 43 to 41 properties per branch.

Number of homes for sale in UK falls again

Number of homes for sale in UK falls again

Problems

‘It’s very normal at this time of year that demand is high and supply is low,’ noted Mark Hayward, MD of the NAEA. ‘House hunters hoping to find their dream property in the New Year have registered interest with agents, whilst those hoping to sell are holding off putting their properties on the market before January. However, supply is outweighing demand so heavily now that it can’t solely be attributed to seasonality,’ he continued.[1]

He went on to say that, ‘it’s clear that we’re faced with a crisis here and the housing market needs addressing as matter of urgency. Our recent Housing 2025 report compiled with Association of Residential Letting Agents and Centre for Economics and Business Research found that by 2025, house prices are set to rise by 50%-and if we don’t act now, this will impact first time buyers, second steppers and last steppers, forcing many out of home ownership.’[1]

Concluding, Mr Hayward said, ‘the Government has made efforts to address the issue of supply and demand, with Osborne outlining plans to build 200,000 new starter homes in his Autumn Statement, but four fifths of our agents think it simply isn’t enough.’ He believes that, ‘it’s all very well planning to build houses, but we need to move to action and get the bricks and mortar on the ground if we’re to solve the crisis we’re faced with.’[1]

[1] http://www.propertywire.com/news/europe/uk-homes-supply-crisis-2016010411388.html

 

 

Prospective Buyers Must Now Save for 24 Years

Published On: December 26, 2015 at 2:44 pm

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Prospective homebuyers must now save for up to 24 years for a deposit large enough to secure them a mortgage, claims new research.

The Resolution Foundation think-tank has used the Bank of England’s latest study of household finances to suggest that as house prices are rising sharply, it will now take almost 25 years for low and middle-income households to raise a deposit if they save 5% of their disposable income every year.

Prospective Buyers Must Now Save for 24 Years

Prospective Buyers Must Now Save for 24 Years

This is lower than the time needed just before the recession, but is significantly lower than the three years needed in the 1980s and 90s. Additionally, this news arrives despite interest rates remaining at the record low of 0.5%, as set by the Bank of England (BoE) during the financial crisis.

Chancellor George Osborne has launched a series of Help to Buy schemes, including shared ownership and taxpayer mortgage guarantees for first time buyers, promising to turn generation rent into generation buy.

However, Chief Economist at Resolution, Matt Whittaker, warns that Help to Buy may boost house price rises, pushing housing further out of reach for low-income households.

He says: “To the extent that these schemes have stoked demand so propped up house prices in recent years, they have served to make homeownership even less attainable for many, while increasing the gains flowing to older homeowners who have been the main beneficiaries of the sustained housing boom.”1

The think-tank has raised concerns that the increasing cost of homeownership is aggravating a generational divide – the baby boomers having accumulated financial stability and young workers struggling with lower wages.

Having analysed the BoE’s data, Resolution found that among households headed by under-45s, 28% of non-homeowners believe they will never be able to buy. Among the poorest fifth of households, this grows to 39%.

Co-founder of the Intergenerational Foundation think-tank – which campaigns for benefits for younger households – Ashley Seager, comments: “Today’s wealthy baby boomers found it easy to buy housing a generation or two ago, especially as MIRAS tax relief on mortgages was available to them.

“But now their children and grandchildren cannot access housing in anything like the same way.”1

However, he welcomes Osborne’s recent crackdown on the buy-to-let sector through the restriction on tax relief that landlords can claim.

The BoE’s Financial Policy Committee (FPC), which has the job of preventing future financial crises, also warns that it is becoming increasingly concerned about whether buy-to-let investors are driving an unsustainable boom.

Osborne is currently consulting over whether to give the FPC further powers over buy-to-let, which could cause the mortgage market to dry up.

1 http://www.theguardian.com/money/2015/dec/20/uk-home-buyers-save-24-years-housing-ladder-deposit-study