Posts with tag: high-end property market

Over Half of £1m+ Property Purchases to Take Place Outside London for First Time

Published On: July 12, 2017 at 8:16 am


Categories: Property News

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Rising house prices, coupled with a slowdown in the capital, means that over half of £1m+ property purchases are set to take place outside of Greater London for the first time on record this year, according to a new study by independent mortgage broker Private Finance.

Analysis of Land Registry data for England and Wales shows a 195% rise in residential transactions valued at £1m or more between 2011-16. Total transactions rose by 54% over the same period, meaning that the volume of £1m+ property purchases grew almost four times faster than the overall market.

This trend continues, despite a slowdown in activity at the top end of the market following successive reforms to Stamp Duty in December 2014 and April 2016. The continuing rise of house prices across much of the country has meant that £1m+ transactions still rose by 10% between 2015-16.

Six areas outpace Greater London between 2015-16

Over Half of £1m+ Property Purchases to Take Place Outside London for First Time

Over Half of £1m+ Property Purchases to Take Place Outside London for First Time

Historically, the majority of £1m+ property purchases have taken place in Greater London, which enjoyed a 63% share of the higher end market in 2011. London also recorded by far the largest growth (7,333) in the annual volume of £1m+ sales between 2011-16. Surrey ranked second (818), followed by Hertfordshire (676) in third.

However, Private Finance’s analysis shows that this may be about to change, due to the sizeable increase in £1m+ property purchases outside the capital in recent years. From 2015-16, growth in £1m+ transactions in Greater London was outpaced by six other areas: Hertfordshire, Surrey, Essex, Hampshire, Kent and Greater Manchester.

If this trend continues, more than half (51%) of £1m+ property purchases will take place outside of Greater London in 2017 for the first time on record.

This may prove a conservative forecast, however, as the latest official house price figures show that house prices are currently rising faster year-on-year in six English regions (the East of England, South West, West Midlands, South East, East Midlands, and Yorkshire and the Humber) than in London.

Across England and Wales, Private Finance’s analysis shows some of the greatest proportional increases in £1m+ property purchases since 2011 have taken place far away from the capital. Between 2011-16, the volume of £1m+ residential transactions rose by a whopping 4,800% in South Yorkshire and 2,600% in County Durham and Swindon. Meanwhile, the biggest percentage increase in £1m+ sales from 2015-16 was in Carmarthenshire (1,200%).

Trends in £1m+ mortgages 

Data from Private Finance for mortgaged purchases in the £1m+ market over the five-year period between 2011-16 shows that the average loan-to-value (LTV) was 54%, rising to 56% last year. This suggests that homebuyers in this sector are leveraging substantial amounts of their assets as six-figure deposits.

Between July and December 2016, there were significant declines in average mortgage rates, passing monthly savings to borrowers. Private Finance’s best buy three-year fixed rate mortgage dropped from 1.79% to 1.49%, while the best buy five-year fixed rate mortgage fell from 1.99% to 1.83%. There were also declines for borrowers looking at fixing their mortgages for longer; Private Finance’s best buy ten-year fixed rate product decreased from 2.79% to 2.39%.

The Director of Private Finance, Shaun Church, comments on the findings: Sustained house price growth in London means that even for many highly paid professionals, a large family home in the capital is now out of reach. With buyers looking further afield as a result, this has contributed to significant growth in the number of £1m+ transactions in areas like Kent, Essex and the Home Counties, which are all within easy commuting distance of London.

“Buying a £1m+ property is a significant financial commitment and, with increasing numbers of buyers falling into this category, borrowers may need to look to private banks and brokers to ensure they are able to access appropriate mortgage finance. These tend to offer a more bespoke, flexible service. For example, buyers might leverage unconventional assets like jewellery, fine art or sports cars as a means of obtaining their property. The lender will take into account how liquid the assets are and make a judgement as to whether the borrower could sell an item to repay the loan.”

He adds: “Private banks are also able to offer interest-only mortgages to such clients, giving them greater choice about when they want to repay chunks of capital, such as if they get an annual bonus. This type of flexibility can prove invaluable in ensuring borrowers can access the most affordable and suitable mortgage finance for them.”

Slow High-End House Price Growth Offsets Stamp Duty Hike for Additional Homes

Published On: March 31, 2017 at 10:10 am


Categories: Property News

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Slow house price growth in the high-end property market has effectively offset the Stamp Duty hike that buy-to-let landlords and second homebuyers are now forced to pay, according to new research from Private Finance.

The independent mortgage broker’s analysis of Land Registry figures shows that the average house price among the top 5% of property sales in England and Wales in 2016 was £1.121m. This was up by just 0.5% from 2015, as a combination of Stamp Duty changes and uncertainty following the EU referendum put the brakes on high-end property sales.

The 3% Stamp Duty surcharge that was introduced in April 2016 means that a property worth £1.121m is now liable to Stamp Duty of £89,521 if purchased as buy-to-let or second home, at an effective rate of 7.98%. This is £33,639 more than the £55,882 fee under the previous system, which still applies if the property is bought as a main residence, at an effective rate of 4.98%.

Slow High-End House Price Growth Offsets Stamp Duty Hike for Additional Homes

Slow High-End House Price Growth Offsets Stamp Duty Hike for Additional Homes

Despite the higher fee amounting to a 60% hike in Stamp Duty costs for landlords, investors and second homebuyers in the high-end of the property market, Private Finance’s analysis suggests that this extra £33,639 has been more than offset by the potential savings to be made on property values as a result of slower house price growth.

Annual price growth of 0.5% in 2016 among the top 5% of property transactions was markedly slower than across the rest of the market, where average prices rose by 4.2%.

Had the top 5% of the market risen at the same rate, buyers would have had to part with £1.162m for the average high-end home in 2016, rather than £1.121m – an extra £40,827. This saving more than compensates for the additional £33,639 Stamp Duty bill facing landlords and second homebuyers.

The difference is even larger for potential buyers of second homes or buy-to-let properties in Greater London. The average high-end property sale in 2016 was worth £2.581m in the capital, up by 1.5% on the previous year.

However, the remaining 95% of the London property market saw average prices rise by 8.2% over the same period, from £443,259 to £479,507.

Had the top 5% of the London market grown at the same 8.2% rate, it would have pushed average prices in this bracket up to £2.750m, leaving buyers to find an extra £169,410 for their purchases.

This far exceeds the additional £77,431 in Stamp Duty that would be due on a £2.581m home if it were purchased as a buy-to-let or second home (where Stamp Duty would cost £300,903) rather than a main residence (where £223,472 would be due).

The study comes after the Office for Budget Responsibility forecast rising Stamp Duty receipts from 2016/17 to 2021/22, and revised its previous 2016/17 prediction made in November 2016 on the basis of residential transactions and prices being “stronger than expected”.

The Director of Private Finance, Shaun Church, says: “Conditions have been tougher at the top of the housing market since last April’s Stamp Duty reforms, which created all manner of disruption to normal activity before and after they took effect. A healthy housing market needs movement and fluidity at all levels and across all tenures, but successive changes to Stamp Duty in 2014 and 2016 have had the opposite effect.

“If there is one silver lining for would-be buyers and investors, it’s that slower growth of high-value property prices has had a positive impact on affordability. A buyer today can pay markedly less for a high-value property at the top end of the ladder than if growth had kept pace with the rest of the market, making it easier to absorb any extra Stamp Duty fees.”

He continues: “Despite being something of a damp squib, last month’s Housing White Paper hopefully marks a shift away from an era of policy gimmicks and short-term tinkering with housing. Greater thought is needed to create a Stamp Duty system that supports homebuyers and sellers across the market.

“In the meantime, the long-term trend of rising house prices means Stamp Duty can be just as much of a psychological issue for buyers as one of affordability. There are plenty of funding options at hand to help with covering transaction costs, which mean the associated fees and taxes need not be a permanent barrier to property purchases.”