Wednesday 31 January 2018

Why building more homes will not solve Britain’s housing crisis



The problem of inflated prices lies in property speculation. That’s what we need to clamp down on

               

Everyone – from the government, to housing charities, to housebuilders – has bought into the conventional wisdom that the dysfunction that racks our housing market is a matter of demand and supply. We’re not building enough houses, so house prices have been sent rocketing, taking home-ownership out of reach for growing numbers of young people. But in reality, our housing problems are not a simple feature of supply and demand. Rather, our housing market has a bitcoin problem.

What has bitcoin mania got in common with house prices, especially in the capital? For starters, both are speculative bubbles. Vast sums of money have been poured into finite supplies of bitcoins and London property. Both have consequently exploded in value, albeit over different time periods. And so both have become financialised assets that deliver capital gains far in excess of people’s ability to earn income from work, or from investment in the real economy. And as with bitcoin, so with London property: speculators are convinced that prices will continue to rise for ever.

It’s speculation in the property market that is fuelling stratospheric house price rises, not shortage of supply. When the “fuel” of private capital, mortgage credit and cash from the bank of mum and dad is supplemented by government subsidies and tax breaks, house prices rise. Moreover, wealthy global and non-resident buyers have funnelled more than £100bn into London propertyover recent years, making the problem even worse.

So, rather counterintuitively, building more houses is not the right prescription. House prices won’t fall until the tide of cash flowing into the market abates, for example by tightening mortgage credit, or shrinking the pool of buy-to-let investors. That may already be starting to happen as real incomes continue to fall, the Bank of England toughens up buy-to-let mortgages, and stamp duty rises are phased in for second properties.

Despite this, the government pretends the real cause of unaffordable housing is a shortage of new builds. It uses this argument to provide cover for further taxpayer-funded subsidies and tax breaks that benefit its property-owning core voters, its close allies in the construction industry and property market, and its supporters in the City of London.

But the evidence is clear: increases in housing supply, and a contraction of demand thanks to a fall in the number of households, have not dampened prices. At last count, in 2014, there were 28 million dwellings in the UK, but only a predicted 27.7 million households in 2016. As the director of consulting at Oxford Economics, Ian Mulheirn, highlights, London’s number of dwellings grew faster than the number of households between 2001 and 2015. Similarly, in Ireland more than 90,000 homes were built in a country of just 4 million people in 2006, and yet prices continued rising – by a whopping 11% that year.

To make things worse, land has a financial advantage that bitcoin lacks. It is a physical, low-risk asset against which both homeowners and financiers can borrow, quickly creating new money. For many homeowners, homes virtually became cash machines in the 1980s and 90s. Today many buy-to-let owners borrow against the monthly income they get from renting out property.
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So the key to making housing more affordable in this country is not to build more, but to stop the flow of cash flooding into expensive areas. Build more without doing this, and prices won’t fall: the market will simply absorb more cash.

The best way to do this is through the tax system. First for consideration should be a property speculation tax (PST), as in Germany. This could be used to levy punitive rates on speculators, or those who own second homes and empty properties, encouraging them to invest their cash elsewhere.

Second, the government must manage speculative capital flows in and out of Britain by taxing them through a Tobin tax on global financial transactions. Corrupt politicians in the poorest countries and oligarchs in weak economies shift often-fraudulent cash into stable jurisdictions such as the UK. These mobile flows of capital inflate the price of Britain’s fixed supply of land.

Creating a managed fall in property prices through these sorts of measures would be good for young first-time buyers, and would help shrink the generation gap in property ownership.

But it would also create losers. Pensions have become markedly less secure in the past 30 years. If prices were to fall, a generation of wealthier homeowners in the south would see their retirement security slip away. To make up for this, the government must play a more active role in providing households and investors with assets such as ultra-safe government bonds that can be used to generate a steady source of income.

There’s another problem. Consumer spending makes up two-thirds of the British economy, and it is driven by the rising property prices that feed public confidence in the economy. In the economy as currently structured, a fall in confidence and consumption would undoubtedly damage growth.

But an economy such as ours – excessively dependent on consumer spending, property speculation and high levels of debt – is vulnerable to shocks. And rising land values dampen productivity: money gets channelled towards speculative property investment, starving the real economy of the investment it needs to improve productivity and boost people’s wages.

So the government must use its firepower to increase property taxes and force a shift to a different sort of economic model. It should drive investment in capital and social infrastructure in order to generate an alternative source of growth: productive, skilled, better-paid employment.

A more affordable housing market will not be achieved by building more private housing, or by channelling more subsidies into propping up the property market. Deflating that bubble is something we must do urgently – before the bubble further deflates the British economy.

Monday 29 January 2018

Annual homebuilding rates less than 50% of Government target


The number of completed new-build properties and those earmarked for construction may have edged upwards last year, but levels are falling well short of Government targets.


What’s the latest?

The number of new homes being built reached its highest level since 2008 last year – but even this figure continues to fall well short of Government targets.

According to the National House Building Council (NHBC), the warranty provider for 80% of new homes, a total of 147,278 new homes were completed in 2017, an increase of 4% on the previous 12 months.

The number is significantly under the Government’s target to build 300,000 properties a year and down on the estimated 250,000 new homes needed just to keep pace with rising demand.

A further 160,606 new properties in 2017 were registered to be built. That's 6% more than in 2016 and the highest level for a decade.

Across the UK, the number of new home registrations rose in nine out of 12 regions, with the East Midlands and Wales seeing the biggest jumps.


                             
  Above: This new-build, three-bedroom detached home in Cardiff is on the market for £282,500


Why is this happening?

The climbing figures are due to a steady recovery of the housebuilding sector since the last recession. The industry has also received a boost from the Government's Help to Buy initiative, with the equity loan part of the scheme only applicable to new-build properties.

However, the country was failing to build enough new homes even before the financial crisis struck.

Despite ambitious targets being set by the Government, such as its pledge to build one million new homes by 2020, a number of factors are still hindering developers. These include delays in getting planning permission and a shortage of suitable land.



Who does it affect?

Social housing tenants, and those eligible for Government homebuying schemes, will be at an advantage in 2018 with the affordable housing sector seeing the biggest

rise in new home registrations.

NHBC recorded a total of 41,781 properties earmarked for affordable housing, a 14% jump on the year before and the highest annual total since its electronic records began 30 years ago.

By contrast, the number of private sector registrations in 2017 edged ahead by just 3% to 118,825.

Nearly a third (30%) of all new registrations in 2017 were for detached homes, 26% were apartments, a further 26% were semi-detached, 16% were terraces and just 2% were for bungalows.
Sounds interesting. What’s the background?

The Government announced an ambitious target of building 300,000 new homes each year until the mid-2020s in its most recent November Budget.

The Chancellor also pledged £44bn of capital investment and other measures to get ‘building projects started’, including initiatives to speed up the time taken between planning permission being granted and homes being completed.

Extra cash for the Home Builders Fund, which helps small builders access finance, was also promised, while other initiatives put in place included changing planning regulations to make it easier to convert agricultural or industrial buildings into housing.

But, despite all of these measures, and previous drives to boost building levels, the number of homes being built each year still remains stubbornly below the 200,000 mark.



https://www.zoopla.co.uk/discover/property-news/housebuilding-rates-increase-to-decade-high/?utm_source=twitter.com&utm_medium=social&utm_campaign=discover&utm_content=news#f8QcowmO1xcZuXlv.97

Friday 26 January 2018

BTL product availability up 32% despite regulatory changes

The UK mortgage market saw an additional 2,007 products introduced in 2017, representing a 24% jump in availability, according to Mortgage Brain.


However, despite seeing a raft of regulatory changes throughout 2017, the same data showed that buy-to-let (BTL) mortgage products saw the strongest growth out of all the sectors, jumping by 32% to a record high of 2,959 as of 15 January 2018.

Charlotte Nelson, finance expert at Moneyfacts, says this trend of growing BTL product numbers is due to lenders having to diversify their offerings to accommodate landlords’ changing needs, and stand out in a competitive market.

“With all the changes that have happened, it’s caused providers to rethink what they offer,” said Nelson.

“Whereas previously one or two products could’ve satisfied [landlords], now perhaps lenders have to offer limited company options, and higher LTVs as well.

“It boils down to having a low rate environment – prices have got so low that lenders have to compete in other areas, such as removing product fees or giving cashback options.

“They have to offer a diverse range of products just to stand out from the crowd.”

With more lenders entering the market as well as a more diverse product range, Nelson says that consumers stand to benefit.

“It’s a good thing for borrowers – because they get to look at the whole of market, they can almost tailor the mortgage to fit their needs,” said Nelson.

She added: “It means they have to look through a vast array of products to find a good deal, but there are advisers for that if they’re unsure.”
Healthier place

Mortgage Brain’s first and second charge sourcing systems now list a total of 10,380 mainstream mortgage products, up from 8,373 in January 2017.

The data showed that 60%+ loan to value (LTV) products saw a big increase over the year, growing by 22% over the 12-month period, and currently accounts for 8,407 of all mainstream products available.

For products with 70%+ LTVs, an additional 1,090 products were added over the year – showing a 21% increase – there are now 6,364 products in this category available to advisers.

Mark Lofthouse, chief executive officer of Mortgage Brain, said: “While our latest data continues to show strong movement in product numbers over the past 12 months, our short term analysis is showing that product availability could be stabilising with less movement seen in the number of additional products for most types during the last quarter of 2017.

“There’s no doubt, however, that the market is in a much healthier place for all concerned in terms of product choice and availability when compared to the past two to three years.

“We’ll just have to wait to see what 2018 will have in store for us.”

Wednesday 24 January 2018

Want to sell your luxury London home? Then take £1m off





Owners of luxury London properties are having to knock more than £1m off their house prices to sell them because super-rich overseas buyers are giving the UK a wide berth due to “eye-watering” stamp duty and uncertainty surrounding Brexit.


Mayfair-based property buying agent Garrington said homes in the capital’s most exclusive neighbourhoods have been reduced in price by an average of 9%. In Knightsbridge, the most expensive area, prices have been cut by an average of 12% – £927,000.

Jonathan Hopper, managing director of Garrington, said sellers are having to take drastic action to realise the value of their homes. “There is huge discounting of super prime properties above £5m at the moment,” he said. “A lot are being discounted by 10 or 20%.

“Acute price sensitivity among buyers continues to force sellers to reduce their expectations, and in the most expensive areas this is throwing up some striking discounts.”

Hopper said that in one example a Knightsbridge home first listed on the market for £20m in the summer of 2016 was in the process of being sold “very quietly” for £15m. “They are frustrated sellers who just want to move,” he said. “But this is not happening on the open market, it is all happening behind closed doors.”

The steepest discounts are currently to be found in St James’s and Victoria, where the average prime property price has been reduced by 14.1% (£766,000) and where more than three-quarters of homes have been on the market for more than six months. In Knightsbridge, prices have been reduced by 12.1% on average, followed by Mayfair (11.4%) and Temple and the City (10.5%).

Hopper said Brexit had dented overseas buyers enthusiasm for UK property, but that the main deterrent was stamp duty. The tax on properties selling for more than £1.5m is 12%, rising to 15% if it is a second home. “The slowing of the capital’s prime market predates Brexit – it was triggered instead by 2015’s punitive increases to the highest rates of stamp duty,” he said. “With the buyers of high value homes facing the prospect of paying hundreds of thousands in tax, vendors are frequently sharing the pain by offering corresponding discounts.”



Henry Pryor, an independent luxury property buying agent, said sales of high-end properties had all but dried up and he expected sales to slow further as the date for Brexit approaches. “It’s a Siberian winter out there, and there are still significant icebergs ahead for the top end of the market as Brexit looms closer,” he said.

Pryor said more than 65% of properties on the market in Belgravia, west London, had been on the market for more than a year, and many sellers were refusing to reduce their prices. “Players in the prime central market are discretionary,” he said. “Not many of them have to sell, and there are very few who must buy and if they do they’re helped by their companies. Everyone is just waiting.”

The overall property market is also suffering with the number of homes changing hands in December falling to 99,100, the lowest level since November 2016, according to data published by HM Revenues and Customs on Tuesday.

Monday 22 January 2018

Prime London rents - Savills report



Although rents fell in 2017, the lower and super-prime ends of the market are fuelling demand. Property condition, location and closeness to schools remain key factors in a rental decision


Summary

■ Over the course of 2017 prime London rents fell by 3.1%. Yet this was a slower fall than seen previously, suggesting the imbalance between supply and demand in the current market has eased a littleDownload the full PDF report >>



■ Despite falling rents, the market has remained active. This activity has been from needs-based tenants at the lower end of the market, fuelling demand for smaller properties, as well as from super-prime tenants at the top end and affluent students.

■ Rents in the prime rental markets outside London have also fallen by 1.5% over the last year, but their longer-term growth has remained stronger than the capital. Properties that remain popular are those of the highest condition in the most convenient locations.

■ Schools remain an important source of appeal for larger family properties – international tenants choosing markets located close to the best international schools. As our exit from the EU unfolds, we expect to see more demand from relocators within the diplomatic community moving with their families.

■ Completing stock from the new build pipeline is likely to suppress rental growth in the capital in the mid-term. We expect confidence to return to the market once we have a better understanding of our future relationship with the EU.
Prime London rental market is active

Prime London rents continued to soften over the last three months of 2017, leaving them 3.1% down over the year. A high level of supply has continued to hold back rents, with tenants remaining cost conscious in the current economic climate.

But, while rents are sliding, they are doing so at a slower pace. This suggests that the imbalance between supply and demand has eased a little.

The high levels of stock brought to the market in the immediate aftermath of the stamp duty surcharge of April 2016 appear to have worked through the market. However, increased new build volumes and, to a lesser extent property brought to the rental market by those struggling to sell, provide tenants with significant choice.

Despite falling rents, the market remains active. This is especially true at the lower end of the prime market, where demand has been propped up by more needs-based renters.

At the upper end of the market, demand has been supported by those choosing to rent rather than buy, given the high costs of stamp duty and the underlying political and economic uncertainty.



Prime country rentals have long-term strength

The story for prime markets within an hour of London is similar to that of the capital. However, rental falls have been to a lesser extent, decreasing by 1% in the fourth quarter of 2017, and by 1.5% over the year. Yet, this was a smaller fall than earlier in the year.

Over the longer term, prime country rental markets have remained stronger than London, with five-year growth of 3.7% compared with falls of 5.7% in prime London.

Across the market, activity levels vary by location. For example, while there has been an increase in corporate demand for top-end family houses in Esher from the recovering oil & gas industry, most other locations are seeing more activity at the lower end of the market from cost-conscious tenants.

Supply at the top end of country rentals has remained high in most markets, especially with an increase in accidental landlords renting out their property in an uncertain sales market.

As such, we are seeing an increase in void periods. In Beaconsfield, for example, the average time between tenancies has increased from just under one month in 2016 to just over two in 2017.

Properties that remain popular are those in the best possible condition, situated in the most convenient locations.
Schools: international appeal

Larger properties in both London and the country markets continue to remain popular with families looking to live close to good schools, especially international schools.

While Americans favour St John’s Wood for the American School in London (above), eastern Europeans prefer central markets for the International School of London. Western Europeans look to Chiswick, Fulham and Richmond, as well as prime markets in Surrey, for international schools located there.

As the Brexit process unfolds, we expect an increase in the number of international tenants working in the diplomatic sector being relocated to London with their families.
Size issues in London

In prime central London, markets which provide better value for money, such as Earl’s Court, Pimlico and Marylebone, have fared better than the more expensive areas.

Some of the markets are those with a large new build supply pipeline – a situation that has brought them to the attention of a wider range of tenants. This is especially true for Marylebone, with half of Savills renters relocating here for the lifestyle. But as delivery of new build units increases, existing landlords are likely to find these markets becoming ever-more competitive.

The focus on value also means we are continuing to see more demand for smaller properties than larger ones. This is particularly true for markets in the capital which are popular with affluent students.

A good example of this is Westminster, where such tenants have accounted for 29% of demand over the last two years. As such, rent for one-bedroom properties across prime London fell by just 0.9% over the last year, compared with a fall of 3% for three-bedroom properties and 5.4% for properties with six or more bedrooms.
Wider choice for tenants

With rents falling in and outside London, we are seeing a shift in the traditional relocation routes of tenants. In 2015, 23% of Savills tenants renting in country markets had moved from the capital. In 2017, it was 19%.

High supply in the London market is allowing tenants to get more for their money, and they have become increasingly footloose in their choice of location. However, the country market still holds significant value compared with London markets – a move from Wandsworth to Weybridge, for example, would save 40% in renting the same-sized prime property.
Outlook

Following the stamp duty surcharge, we have seen a decrease in the proportion of people buying a property for investment across the prime markets. This higher tax bill is likely to make potential investors think twice before expanding their portfolio, and the recent interest rate rise and cut in interest tax relief will limit how far mortgaged investors can stretch themselves. This is likely to mean there is less secondhand stock coming to the market.

However, new build completions across the prime London market, some of which were delayed following the Brexit vote, are expected to peak in 2019 and 2020. This means the current imbalance of supply could continue, limiting rental growth.

In terms of demand, we expect there will be continued uncertainty surrounding the UK’s exit from the EU, which could also impact the corporate relocation market. It could also lead to longer-term accidental tenants who choose to wait out the sales market.

Given current market stock levels, we expect rental falls to continue in the short term, with a fall, over 2018, of 3% in London and 1% in the commuter belt. But, by 2019, we should have a better understanding of where we stand with the EU, bringing a degree of confidence to the market, though stock levels from the new build pipeline will result in a slow recovery of prime rental values.

Markets outside the capital have far less new build stock in the pipeline and have experienced smaller falls, with a view that they will recover slightly more strongly over the next five years.

Landlords will need to bear the current climate and supply in mind, remaining flexible on price and focused on the condition of their properties to remain competitive with the new build stock.

The rising popularity of short-term lets means tenant’s expectations have changed – to appeal to a younger demographic landlords should also consider what they include in a rental package and remain flexible on terms.

We believe capital values are likely to increase at a stronger pace than rental values over the next five years, with a forecast of 20.3% growth in prime central London, 10.2% in outer prime London, and 14.2% in the commuter zone by 2022. Landlords will need to take a mid-term view to see the forthcoming years as an opportunity for asset wealth generation.

http://www.savills.co.uk/research_articles/141280/226706-0

Friday 19 January 2018

House price growth remains flat at 5%







House price inflation has continued to remain broadly flat over the course of 2017.


The latest figure published by the Office for National Statistics showed house prices rose by 5.1 per cent in the year to November 2017.

This was down from 5.4 per cent for the previous month.

House price growth has been slowing since mid-2016, when it was at 8.2 per cent, but since the beginning of 2017 it has been fluctuating around 5 per cent.

The average UK house price was £226,000 in November 2017, up £11,000 from the same month in the previous year.

John Goodall, chief executive of buy-to-let specialist Landbay, predicted house price inflation would begin to pick up in 2018 as the stamp duty cut for first-time buyers takes effect.

In November chancellor Philip Hammond announced stamp duty would not be paid on first-time buyer purchases up to £300,000.

But analysis of this decision predicted the move would increase house prices because sellers would demand more money knowing first-time buyers do not have to pay stamp duty.

Mr Goodall said: "The government’s stamp duty cut for first-time buyers came too late in November to have directly pushed up house price growth, but by giving young tenants a small directional nudge onto the housing ladder, it is likely to have that very effect as we move through 2018.

"Of course the chancellor's cut to stamp duty for first-time buyers wasn't the only big ticket event in November.

"Earlier in the month the Bank of England increased the base rate, which made mortgages more expensive, and all at a time of high inflation and stagnant wage growth.

"Young first-time buyers might have been counting their blessings after the Budget, but affordability remains constrained across the rest of the market, and this is keeping a lid on house price growth.

"It is time the government offered a concrete housing strategy to build homes for both first-time buyers and those in the private rented sector. Hopefully the new minister for housing and Homes England agency, will be well placed to make good on the promise of both."

Wednesday 17 January 2018

Huge deal with up to £350,000 cash out AND up to £140,000 yearly cashflow


Hi ,

We have a fantastic opportunity near Derby to buy refurb and get cash out of the deal of up to £350,000 after re-financing. Then a yearly cash flow £140,000 after operating the three buildings as large professional HMOs. Planning has already been granted. Near train station. There will be a huge demand for this deal, so please get in touch

Finders fees, finance and legal costs apply. See headline figures below.



The Opportunity


Summary

Purchase £650,000.00         
Conversion £728,000.00+VAT        
Total Investment £1,378,000.00 Available Loan £1,747,200.00     
Completed Value £2,329,600.00 Cash Out £369,200.00     
Net Rental £141,364.00 



Financial analysis    Only adjust YELLOW cells

Calculation Assumptions
Room No Rental P.W Total P.W Total P.A Investment Value Loan@given LTV Multiplier Used: 8
56 £100 £5,600 £291,200 2329600 1747200 Loan Value 75%
Total Cost Conversion per unit £13,000+VAT
Conversion £728,000 Purchase Price £650,000
Purchase price £650,000 Mortgage rate 5*
Total £1,378,000 Maintenance £5,000
Cash out/in £369,200 Management(12%) £29,120
Income/Expenditure 10%
Voids 8%
Income £291,200 interest only
Expenses
Mortgage £68,900
Voids £23,296
Utils £23,520
Maintenance £5,000
Management £29,120
Total £149,836
Net Rental PA £141,364

Monday 15 January 2018

Global housing markets are warning that the cheap money is running out



House prices in the UK are still extremely high. No secret about that.

But we’ve known for a while that prices at the high end (and increasingly the lower end) in London are struggling. They’re still unaffordable, but they’re a tiny bit less unaffordable than they once were.

However, while it’s tempting to look at our market and wonder what’s going on (is it Brexit? Is it the Northern Powerhouse?), the reality is that it’s not just London.

In fact, house prices across the globe – particularly the expensive bits – are starting to come off the boil.

Coincidence? We doubt it…
From Scandinavia to North America, property markets are wobbling

It’s early days, but house prices across the world’s most expensive markets seem to be starting to struggle.

Here are a few headlines for you. In Norway, prices across the country started falling last year, after rising by 12% in 2016. By December 2017, they were falling at an annual rate of 2.1%. In the capital of Oslo, they fell by 6.2%.

Now, Norwegian houses are not cheap. Indeed, credit ratings agency Moody’s concluded that – compared to the historic norms, as judged by the rents to house prices ratio – Norway had the single most expensive market of 20 advanced economies (including Britain, although that’s partly a function of Britain’s consistently bubbly housing market).

Not coincidentally, the central bank’s main interest rate sits at 0.5%. However, the bank has hunted at raising rates. And at the start of last year, it also imposed a few mortgage lending restrictions – including a requirement for higher deposits and lower income multiples.

Elsewhere in Scandinavia, we have Sweden. In November, house prices were down by 0.2% – the first annual fall since May 2012. “The drop,” says Bloomberg, “is being led by high-end apartments in Stockholm.”

The country has introduced tighter mortgage rules, but there has also been a steep increase in supply.

Or how about Canada? Once a blisteringly hot market – with prices rising at an annual rate of more than 30% at one point last year – house prices in Toronto have fallen by 8.9% since May 2017, according to the Toronto Real Estate Board. According to Bloomberg, that’s the steepest decline on record – although said records only go back to 2000. Prices are now up just 0.7% on an annual basis.

What’s changed here? A foreign buyer tax has been introduced (although apparently not a big driver of sales in the city). The government has introduced tighter mortgage guidelines. And the number of new listings has picked up (although presumably that’s a side effect of people realising the fun’s over).

And then there’s an anecdote from another very expensive area – Manhattan. New York’s answer to Mayfair has seen rents starting to fall hard. In December, rents fell by 2.7% year on year (you’re still having to pay an average of more than $3,000 a month). And that doesn’t include “sweeteners” such as “free” months or gift cards.

In this case, it’s being put down to rising supply – too many new luxury developments coming on stream at once.

Even in Australia – the “lucky country” – there are signs of house price growth easing off, although you’re still talking about 6.1% annual gains in November, compared to 9.7% to the end of June.

My colleague Merryn has written about the state of the UK housing market in a piece we’ll have on the website early next week, but there are elements of similarities – tighter rules, higher supply at the luxury end, concerns about rising rates.

So what’s going on?
The real driver of rising (and falling) house prices

It does seem odd that we’re seeing a bit of a global synchronisation with house price wobbles here.

There seem to be a few things going on. Firstly, politically, the climate has turned against property speculation. So you’ve got foreign investors being targeted. There are few things more politically popular than blaming a foreigner – even better, a rich foreigner – for a domestic problem, and governments across the globe have lapped this story up.

There are also moves in many countries to tax owners of second homes more vigorously, be they landlords or simply people who own more than one home.

Underlying all this however, is the more significant point – it’s not about the specifics, it’s about the tone. If you’re a “globalist” rich person, you now want to keep your wealth liquid. The number of guaranteed safe havens has been narrowing steadily – it’s all part of the anti-globalisation swing – and nowadays there just isn’t anywhere obvious where you might want to set up a permanent base where you can be reasonably sure that the political environment won’t swing against you badly.

So that’s politics. The next shift is supply: this is mainly affecting the high-end areas. Usually with house prices, we tend to focus on demand – and that makes sense. Unleashing more money for mortgage lending (and thus more money for buying houses) takes two seconds. Unleashing more supply (building actual houses) takes forever in Britain and isn’t much faster in most countries.

So usually demand is all that matters. Because demand is, in theory, effectively infinite (there’s no technical limit to the volume of money that can be created to pump into the housing market), whereas supply is pretty tightly restricted by comparison.

But eventually, given enough incentive, supply does grow. And if you have demand remaining static or being curbed (in the form of mortgage restrictions), then you have a (probably brief) window in which that supply can actually make a difference to prices. And that seems to be happening right now too.

However, that leads us to the real key point on this: it’s not really about supply rising, it’s about the volume of money going into the property market having reached a peak.

We now know that – barring another deflationary collapse event, which would of course be bad news for all asset prices, including houses – interest rates have now bottomed. Central banks across the globe are now talking about pushing them higher, or at least easing off on the quantitative easing.

That means the cheap money impetus to drive these ultra-sensitive markets higher just isn’t there any more.

What’s next? We’ll see. Property markets are among the most politically manipulated in the world, so don’t be surprised if governments step in to ease the restrictions they’ve imposed almost as soon as prices show signs of wobbling.

But it’s a valuable lesson – more so even than bond prices, the global property market is proving to be a real canary in the coal mine in terms of warning of higher interest rates. I’ll be keeping a close eye on developments all over the world as a result.

Friday 12 January 2018

Where to buy in 2018: The 10 boroughs with the cheapest average property prices for London home buyers



Home buyers on a budget should look to east London according to the latest asking price data from Rightmove, which reveals London's top 10 cheapest areas to buy as the new year begins.

1. Barking and Dagenham
Average asking price: £312,248
Average annual increase: 3.1%

Asking prices in Barking and Dagenham are almost half the London average. Huge regeneration plans are coming to fruition in this east London borough, especially in Barking town centre, which is in Zone 4 on the District line with a direct journey to the City. By 2021, a riverside district with almost 11,000 homes will be connected to the Overground network, too.

2. Bexley
Average asking price: £371,996
Average annual increase: 3.8%

Bexley remains one of London's cheapest boroughs but it's on the rise. An area you may now have heard of is Abbey Wood, which is getting a significant boost thanks to its new Crossrail station. Once the Elizabeth line opens at the end of this year you’ll be able to hit the West End in less than half an hour and Heathrow in 51 minutes.

3. Havering
Average asking price: £412,698
Average annual increase: 5.4%

The London borough of Havering, in Essex, is also home to a stop on the high-speed Crossrail network in its main town, Romford. It is voted one of the top 10 happiest boroughsand there are plans for 3,500 new homes to be built across the borough over the next 10 years.

4. Newham
Average asking price: £415,700
Average annual increase: 9.8%

Asking prices in Newham, east London, rose the fastest of the top 10 cheapest boroughs in 2017. The borough has benefitted from the ongoing legacy of the Olympic games regeneration to the north, while the south of the borough is plugged in to the Crossraill route that will connect Reading and Heathrow in the west to Abbey Wood and Shenfield (via Forest Gate) in the east.


5. Croydon
Average asking price: £421,782
Average annual increase: 0.6%

The south London borough of Croydon stretches from Thornton Heath to Old Coulsdon. But it's Croydon town centre that has seen significant regeneration over the past few years, with new-build homes ranging from family friendly-houses to micro flats for first-time buyers.

6. Sutton
Average asking price: £427,686
Average annual decrease: 2.2%

Ten miles south-west of central London, Sutton offers plenty of open green space, and homes remain relatively affordable. The town is popular with parents who move for the excellent state schools, including five grammar schools, while the commute into Victoria and London Bridge is half an hour.

7. Lewisham
Average asking price: £455,129
Average annual decrease: 1.3%

There is a strong possibility there will be a Bakerloo line Tube extension from Elephant & Castle to Lewisham within the next 10 years and, if all goes to plan, house prices in the borough will increase. In the meantime, the south-east London borough is fairly well served with DLR and rail stations and interest from buyers in popular areas such as Blackheath, Brockley and New Cross remains strong.

8. Greenwich
Average asking price: £461,666
Average annual increase: 5.9%

This south-east London borough is home to two stations on the Crossrail network: Abbey Wood (which also straddles Bexley) and Woolwich. As such, there has been an uplift in house prices along with significant regeneration in the borough, with 5,000 new homes due to be built on the The Royal Arsenal Riverside development.

9. Enfield
Average asking price: £472,069
Average annual increase: 0.4%

Enfield Town in north London is served by three train and three Tube stations. It is also very well-connected to the motorway network. There is huge regeneration underway at Meridian Water, which will have up to 10,000 new homes and a new train station offering 25-minute commutes to Liverpool Street. The first phase of 725 homes and the station is due to be ready year. The below average price increase of 0.4 per cent is likely to be because the market is levelling out after a year in which the borough consistently had some of the biggest price growth in the capital.


10. Hillingdon in west London is home to West Drayton where homes are snapped up the fastest in London, selling in just 37 days. This is almost four times quicker than the slowest (and significantly more expensive) housing market in west London's Knightsbridge. West Drayton's relatively modest prices — a a two-bedroom flat costs around £300,000 — and a station on the Elizabeth line both contribute to the area's desirability.10. Hillingdon
Average asking price: £473,681
Average annual decrease: 0.9%

Wednesday 10 January 2018

No house price collapse in 2018



                            


Nationwide reported house price growth saw a modest slowdown in 2017, with London the weakest performing region. According to its latest House Price Index, average prices have grown by 2.6% over the past 12 months, down from the 4.5% recorded in 2016 and 2015. In London, average house prices actually fell, although by a modest 0.5%, the lender said.


Perhaps more newsworthy was the fact that London was the worst performing area for the first time since 2004.

New figures by property data agency Lon Res show that 47.6% of London homes valued £1m–£2m have been reduced in price, with an average discount of nearly 10%. Five years ago, only a quarter of homes in this price band had been reduced.

A cause for concern? Some analysts think so. Lucian Cook from Savills suggested that the weakness in London was starting to affect commuter zones. “Prices in Surrey are down 1% while those in commuter towns such as Sevenoaks and St Albans have fallen by 0.7%,” he said. Market watchers believe big price reductions will occur elsewhere. Property analyst Henry Pryor said: “I have worked through three property cycles and, every time, trends that start in London eventually filter out to the rest of the country.”

Hmmm. Well, I too have been around for a while and I’m not sure I agree with Mr Pryor. Why? Because London is a market in itself and is increasingly isolated. It almost its own micro-environment and what happens there does not necessarily repeat in other parts of the country – although I accept that nearby commuter towns may suffer some of the same outcomes.

There was certainly a time when the London market led the UK, whether prices were rising or falling. That is no longer the case. The capital has largely disconnected itself from the rest of the country, apart from the South East. It can be argued that the remarkable rise in jobs and population produced the price surge in the last few years. Just look at employment which has grown by 22% in London in the past decade compared with 8% for the rest of the country. Also, the average house price in the capital is significantly greater than anywhere else: £471,000 compared to £211,000.

Significant disparities therefore remain in price levels and affordability. And let’s put this into perspective. Nationwide said house prices in London were still about 55% higher than they had been in 2007, whereas in the North of England, Yorkshire and Humberside, prices were lower than their 2007 peaks. My view is that house prices in London are likely to fall in 2018, albeit marginally. However, what happens in the capital is likely to stay in the capital.

Outside London, I am more optimistic than many of my peers, who suggest house price growth will fade to ‘produce a virtually flat output for 2018’. While the outcome of Brexit negotiations, consumer confidence and mounting pressures on household incomes remain concerns, they will not have much of an impact on house price growth.

My prediction is that house prices in the rest of the country will continue to grow this year, although at subdued levels of 1%–2%. Just look at the supply constraints. The National Association of Estate Agents said that the average number of properties listed per agent has almost halved from 60 to 34 over the past five years, so it seems logical that demand will continue to outstrip supply. Also building activity doesn’t seem to be occurring at the levels projected by government so this will support house prices. All this against a backdrop of historically low interest rates and low unemployment rates.

I can’t see any reason why house prices will fall in the medium term but let’s see what the year brings.

https://www.mortgageintroducer.com/no-house-price-collapse-2018/


Monday 8 January 2018

House prices to rise by 1% in 2018

House prices to rise by just 1% this year, says leading lender.

Shrinking household incomes and affordability problems in London and the SE will subdue demand for homes, according to report out this morning from the Nationwide.




House prices will rise by just 1% this year, the latest house price report from the Nationwide reveals, returning to growth only in the “the longer term”.

The lender says the average house price increase last year was 2.6%, down from 4.5% during 2016 as housing affordability problems and mounting pressure on household incomes continued to put the brakes on activity within the property market.

Despite this, during 2017 all regions of the UK experienced house price gains except London, where they dipped by half a percent.

“The major surprise during 2017 was undoubtedly the slowdown in London house prices. It’s been 13 years since the Capital sat at the bottom of the house price growth table, and since then we have seen prices surge to unprecedented and unaffordable levels,” says Alex Gosling, founder of HouseSimple.com (pictured, left).

“Fortunately, there’s no longer the reliance on the London market to prop up the rest of the country. Growing regional business hubs have seen other major UK cities prosper, while London has suffered as property prices have become unaffordable for the majority.


The West Midlands was the top performing region in the UK last year for house prices, where they rose by 5.2% year on year to an average of £182,861. The UK average is currently £211,433, the Nationwide reckons.

The Nationwide is also worried about the size of deposit that many first time buyer must now save up, particularly in London and South East. In the capital its figures show that the average deposit has risen from £55,000 in 2007 to £80,000 last year, and from £38,000 to £50,000 in the South East.

“It is arguably even more challenging to save for a deposit than it was a decade ago, due to falling real earnings – i.e. after taking account of inflation – and lower interest rates for savers,” says Robert.

https://thenegotiator.co.uk/house-prices-2018-nationwide/

Friday 5 January 2018

Rent rises remain below inflation



Rental price inflation has slowed down again, with HomeLet’s latest data revealing that the average monthly rent in the UK now stands at £904.


What’s the latest?

The cost of letting a home is falling in real terms as rent rises fail to keep pace with inflation.

Rents increased by an average of just 0.7% in November, compared with a jump of 3.1% to the Consumer Price Index, marking the 11th consecutive month during which they have lagged the general rate of inflation.

The rise left the cost of renting a home at £904, just £6 more than in November 2016, according to the HomeLet Rental Index.

But the headline figure masked significant regional variations, with rents falling in some parts of Great Britain but rising by more than 4% in others.

Martin Totty, chief executive officer of HomeLet, said: “So far this year we have seen very modest rental price inflation; rents are now higher than a year ago in most parts of the country, but there has been no return to the more rapid increases we last saw during the first half of 2016.”




Why is this happening?

One reason rents are currently lagging inflation is likely to be the fact that inflation is higher than normal and ahead of the Bank of England’s 2% target due to the weak pound, following the UK’s decision to leave the EU.

But the weak rise in rents may also reflect the fact that affordability for tenants is becoming increasingly stretched.

It is notable that the regions in which rents fell year-on-year, are those that have the highest average rents.

Even so, the muted increase is surprising, given the higher costs landlords now face as result of tax changes, which many commentators had predicted would be passed on to tenants.



Who does it affect?

Rents in the south east were 1.9% lower in November than they had been a year earlier.

Annual falls of 0.3% and 0.2% were also recorded in the east of England and Greater London respectively.

At the other end of the scale, rents jumped by 4.4% year-on-year in the East Midlands, while rises of above 3% were seen in Northern Ireland, the south west and north east.

Despite the fall, Greater London remains the most expensive place in which to be a tenant at an average cost of £1,530 a month, followed by the south east at £976 and the east of England at £894.

The north east is the cheapest place in which to rent a home at £533, while costs are in the low £600s in five regions, including the East Midlands, Wales and Scotland.

                        



Sounds interesting. What’s the background?

Landlords have been hit by rising costs following a raft of government tax changes, including a 3% stamp duty surcharge when they buy a property, a reduction in mortgage interest tax relief and an end to the ‘wear and tear’ allowance.

Despite these rising costs, rental increases are expected to remain subdued in 2018 in line with muted growth to house prices.

One reason for this is that rental affordability has become increasingly stretched following sharp increases seen in previous years when demand for rental property outstripped supply.
Top 3 takeaways
The cost of letting a home is falling in real terms as rent rises fail to keep pace with inflation
Rents increased by an average of just 0.7% in November, compared with a jump of 3.1% to the Consumer Price Index
The rise left the cost of renting a home at £904, just £6 more than in November 2016



https://www.zoopla.co.uk/discover/property-news/rents-edge-ahead-by-less-than-inflation/?utm_source=twitter.com&utm_medium=social&utm_campaign=discover&utm_content=news#JEuRcQEMz7s1mqZ3.97


Wednesday 3 January 2018

Can you buy property with Bitcoin?






A new-build home in Essex has become the first UK property to officially be purchased using controversial cryptocurrency Bitcoin. The £350,000 detached home was purchased last week – and for the first time, the Land Registry has agreed to register the sale in Bitcoin, a new type of payment that has surged in value in recent weeks. Could this be start of a trend towards property investors using Bitcoin? Which? explores how the transaction worked and the potential dangers – including concerns about security and volatility.


First homes sold using Bitcoin Last week, a developer announced it had completed on the first two UK homes to be bought using the cryptocurrency Bitcoin. 
The first home, an off-plan new-build property in Colchester, was bought by a ‘Bitcoin miner’ who now intends to let the property out in the cryptocurrency. 

This transaction marks the first time the Land Registry has agreed to register a sale using bitcoin, though the buyer is yet to decide whether to take up this option due to the uncertainty around how capital gains tax would be calculated.

Previously, the Land Registry had insisted sales could only be registered in Sterling due to concerns over money laundering.

Is buying by Bitcoin a growing trend?
The developer listing these two properties, Go Homes, claims that property sales using Bitcoin will become common in the next five years, and will accept the currency on any of its upcoming 250 homes. 
At this stage, however, there is no sign that the major players are set to join the craze, though there has been a couple of headline grabbing listings. 

Earlier this year a mansion in Notting Hill, London was put on the market as a Bitcoin-only listing for the equivalent of £17m. 

Elsewhere, another developer, The Collective, has announced it will allow tenants to pay their rent using the cryptocurrency. 

What is Bitcoin? 

Launched in 2009, Bitcoin is a digital currency that isn’t backed by a government. 

Rather than using a bank to transfer assets from one account to another, Bitcoin sales are processed by a technology called Blockchain. The Bitcoin value is transferred directly from payer to payee, and recorded on an electronic ledger system. 

It is an extremely volatile currency – though its value has soared over 2017, the value of a bitcoin can fall quickly too. A £10,000 bitcoin investment made on 20 December would have been worth around £7,000 two days later. 

Why make a property purchase with Bitcoin? 

Bitcoin transactions don’t involve a financial institution, so money can be transferred instantaneously. This means exchange and completion can happen at the same time, speeding up the process for both buyer and developer. 

For those who made an early killing on Bitcoin, investing in a tangible asset like property may allow them to convert their digital fortune into real returns. 

The seller, meanwhile, has the opportunity to receive a large number of Bitcoins in a single transaction – and given only 21 million Bitcoins will be created, this could be an appealing prospect, though there is no guarantee the currency will maintain its value. 

But there are also complexities around how taxation works on a bitcoin property purchase. As with a traditional house purchase, you’ll have to pay stamp duty. This will be calculated on the Sterling value of the bitcoin at the time of the transaction. 

Sellers may also face additional capital gains tax when they cash in their cryptocurrency.

It may also be difficult to find conveyancers or solicitors with expertise with these exotic purchases. 

Risks of paying via Bitcoin 

While Bitcoin has enjoyed significant growth recently, its value is extremely volatile – and accepting payment via Bitcoin means running the risk that its value could drop overnight. 

Bitcoin also doesn’t enjoy the protection offered with mainstream currency, and no central government or bank regulates it. There is no guarantee that any given financial institution or government will recognise the value of your Bitcoin assets or accept payment via these means. 

Questions have also been raised about the security of Bitcoin, with Bitcoin wallets and exchanges presenting a ripe target for hackers. If your Bitcoin holdings are stolen, you have no recourse for compensation and it may be difficult – it not impossible – to recover your losses.