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Prime London property market still adjusting to tax changes
Prices of prime London residential properties fell marginally in the first quarter of 2016, as uncertainty regarding the global and domestic economic outlook continued, says a new analysis. Overall values across the whole of the prime property market in London fell by an average of 0.3% in the three months to the end of March, according to the report from real estate firm Savills. But there continues to be a distinction between the higher value, discretionary prime central London markets and the more domestic, needs-based outer prime London locations. In the most expensive markets of prime central London prices fell by 0.8% in the first quarter. This leaves values at the very top end of the market some 6.7% below their 2014 peak, when an adjustment was triggered by the Chancellor’s announcement of new stamp duty rates for higher value properties in his autumn statement. By contrast, in the less expensive and more domestic outer prime London housing markets, which run from Richmond and Wimbledon, though Battersea and Wandsworth in the south and west, and Islington, Wapping and Canary Wharf in the north and east, prices remained flat in the first quarter of the year, having risen between 2.6% and 4.2% over the past 12 months. The report points out that it is notable that price growth across all prime London markets has been slower than the mainstream over the past three years. It says that this is because the lower value outer London markets were slower to recover post downturn, have benefited from stamp duty reform and remain more accessibly priced. ‘Unlike other parts of the London housing market, the prime markets remain fairly price sensitive and increasingly dominated by needs based buyers,’ said Lucian Cook, Savills head of UK residential research. “’he recent Budget statement confirmed that the stamp duty take form the top end of the market has risen following the reforms of December 2014, despite lower transactional activity, effectively signalling that this policy is here to stay and will continue to influence buying and selling decisions and assessment of value,’ he explained. ‘Given historic levels of price growth, the increased tax burden and political uncertainty stemming from the pending mayoral election and EU referendum, our view is that we are unlikely see any price growth over the course of 2016 as the market continues its adjustment,’ he added. Continue reading
Pending home sales in the United States up solidly in February
Pending home sales in the United States rose solidly in February to their highest level in seven months and remain higher than a year ago, according to the National Association of Realtors. Led by a sizeable increase in the Midwest, all major regions except for the Northeast saw an increase in contract activity in February, the date from the forward looking index based on contract signings show. Overall the index rose 3.5% to 109.1 in February from a downwardly revised 105.4 in January and is now 0.7% above February 2015. Although the index has now increased year on year for 18 consecutive months, last month's annual gain was the smallest. ‘After some volatility this winter, the latest data is encouraging in that a decent number of buyers signed contracts last month, lured by mortgage rates dipping to their lowest levels in nearly a year1 and a modest, seasonal uptick in inventory,’ said Lawrence Yun, NAR economist. ‘Looking ahead, the key for sustained momentum and more sales than last spring is a continuous stream of new listings quickly replacing what's being scooped up by a growing pool of buyers. Without adequate supply, sales will likely plateau,’ he added. According to Yun, the one silver lining from last month's noticeable slump in existing home sales was that price appreciation lessened to 4.4% which is still above wage growth but certainly more favourable than the 8.1% annual increase in January. ‘Any further moderation in prices would be a welcome development this spring. Particularly in the West, where it appears a segment of would be buyers are becoming wary of high asking prices and stiff competition,’ Yun pointed out. Existing homes sales this year are forecast to be around 5.38 million, an increase of 2.4% from 2015. The national median existing home price for all of this year is expected to increase between 4% and 5%. In 2015, existing home sales increased 6.3% and prices rose 6.8%. A breakdown of the figures show that the index in the Northeast declined 0.2% to 94 in February but is still 12.6% above a year ago. In the Midwest the index shot up 11.4% to 112.6 in February and is now 2.5% above February 2015. Pending home sales in the South increased 2.1% to an index of 122.4 in February but are 0.4% lower than last February. The index in the West climbed 0.7% in February to 96.4, but is now 6.2% below a year ago. Continue reading
UK buy to let landlords face tougher lending rules
Some buy to let landlords in the UK face tougher regulation when it comes to getting a mortgage for expanding their portfolio, the Bank of England has announced. In what may be seen as another blow to the buy to let market but the Bank’s Financial Policy Committee (FPC) says that some lenders are applying ‘weaker’ standards when it comes to applications in this sector. The FPC also believes that the rapid rise in buy to let lending, while likely to slow when the new stamp duty levy comes into play on 01 April, the sector is still not without potential threats in terms of financial stability. So there will be stricter affordability checks. Landlords with four or more properties will be expected to declare the rental income they expect to receive from tenants and also their own income and spending habits. This is to ensure they can still afford the mortgage if a tenant defaults on their rent or the property is left vacant. Landlords will also have to prove they can cope if interest rates rise sharply and can afford all the costs associated with renting out a property. This includes tax, which will rise on buy to let properties from next year. ‘The FPC remains alert to potential threats to financial stability from rapid growth in buy to let mortgage lending,’ the statement says, showing that the outstanding stock of buy to let mortgages has risen by 11.5% in the year to the fourth quarter of 2015. ‘The macro prudential risks centre on the possibility that buy to let investors could behave pro-cyclically, amplifying cycles in the housing market, as well as affecting the resilience of the banking system and its capacity to sustain lending to the wider real economy in a stress,’ the FPC explains. ‘The FPC welcomes and supports the Supervisory Statement issued by the Board of the Prudential Regulation Authority (PRA) to clarify its expectations for underwriting standards in this market, including guidelines for testing the affordability of interest payments,’ it points out. ‘The PRA's review of lenders' plans revealed that some lenders are applying standards that are somewhat weaker than those prevailing in the market as a whole. The PRA's action is a prudent supervisory measure intended to bring all lenders up to prevailing market standards. It will guard against any slipping of underwriting standards during a period in which rapid growth plans could be challenged by the impact of forthcoming tax changes,’ it adds. The FPC statement also points out that the growth of buy to let mortgage lending is likely to slow in the second quarter of this year as changes to stamp duty take effect and that forthcoming changes to mortgage interest tax relief and the implementation of the PRA Supervisory Statement will probably dampen growth further. ‘The FPC will continue to monitor closely these developments and potential threats to financial stability from the buy to let mortgage market,’ it adds. The… Continue reading
