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UK prime country house market affected by stamp duty change in first quarter of 2016
Prime country house prices in the UK increased by 0.3% on average in the first quarter of 2016, taking annual growth to 2.4%, down from a high of 5.2% in 2014. The easing of price growth since 2014 reflects a greater sensitivity to pricing from buyers in the prime market following successive increases in stamp duty that culminated in the changes introduced in December 2014. The details from the latest prime country house index from Knight Frank also shows that homes under £1 million have outperformed other sectors, rising by over 4% annually. Sales volumes in the first three months of 2016 were up by nearly a quarter year on year and Knight Frank forecasts price growth of 3% across the prime country market in 2016. This first quarter of the year has probably been affected by the announcement in November 2015 that buy to let investors and those purchasing second homes would be subject to an extra 3% on the rate of stamp duty from April 2016, the index report explains. It says that the November announcement has acted as a catalyst for some buyers looking to forestall a higher tax bill. This contributed to a notable rise in activity in the first three months of 2016, with Knight Frank figures showing a 24% rise in sales volumes across the prime country market compared to the corresponding period of 2015. During this time, activity has primarily been concentrated on the sub-£1 million market, boosted further by a growing economy and continued low interest and mortgage rates. As a result this sector experienced the strongest price growth. In contrast, homes worth £5 million or more saw values fall by 2.7% over the same period, with the higher transactional costs increasingly factored into pricing. With Knight Frank forecasting price growth of 3% on average this year, the report also says that key town and city locations are likely to outperform, as the trend for urban living continues to grow and more Londoners make the move out of the capital. In the short term, however, uncertainty surrounding the outcome of the European Union referendum could have an impact on the market, causing some buyers to adopt a wait and see approach until after the vote, the report concludes. Continue reading
Figures confirm UK landlords rushed to beat April stamp duty surcharge
Some 50% of homes sold in the UK in the last two weeks of March were bought by landlords as they sought to beat the new stamp duty deadline on 01 April, new research shows. There has been a lot of anecdotal evidence that buy to let landlords had been rushing to beat the additional homes surcharge of 3% but the monthly lettings index from Countrywide confirms this. It says that 50% of homes were bought by landlords in the final 15 days of March compared to 18% during the same period in 2015. Countrywide’s whole market estimates also show that £28 billion worth of home sales were completed in March, a 76% increase on the previous year, and overall landlords accounted for 23% homes sold in March compared to 13% in the previous year. This surge in landlord activity means more housing has been made available for tenants to rent and some 22% more homes were brought to the rental market in the first quarter of 2016 than in the same quarter in 2015 and has contributed to lower rental growth rates compared to last year. The percentage increase in the number of homes to rent has not been matched by the increase in the number of prospective tenants looking for a home which has put further downward pressure on rents. The number of tenants registering was up 16% in the first three months of 2016, compared to the same time last year. London experienced the largest increase in new rented homes, up 40% on the first quarter of 2015, but lower growth of tenant numbers, up only 8% over the same period. This has resulted in a rapid deceleration in rental price growth with rents in Greater London growing 2.9% in March, less than half the 7.4% recorded in 2015. The average UK rent rose 3.4% in the year to March 2016, two thirds of the rate in March 2015. Rents grew fastest in the East of England, increasing by 8.5% over the year. Growth in the East of England was driven by increasing numbers of new tenants registering in the first three months of the year, up 34% year on year, the highest increase of any region. ‘Quite at odds with the intentions of the policy, the first measurable effect of the introduction of the new stamp duty rate has been to increase the number of homes owned by landlords, although this will likely be a temporary affect as we see reduced investor activity in future months,’ said Johnny Morris, Research Director at Countrywide. ‘The increase in supply of homes to rent from landlords bringing forward purchases seems to have taken the edge off rental growth. A similar increase in tenants looking for a home to rent though would indicate this may not persist,’ he pointed out. ‘The large number of sharers, and people living with parents means there is a big store of pent up demand in the… Continue reading
UK mortgage industry welcomes removal of affordability clause from hybrid lifetime loans
The UK home mortgage industry has welcomed a decision by the Financial Conduct Authority (FCA) to remove the need for an affordability assessment on home owners taking out hybrid lifetime mortgage products. The FCA said it has made the modification because it does not consider that an affordability assessment is required where there is no risk of arrears and repossession in the event of missed payments. ‘The modification works by dis-applying the requirement to carry out an affordability assessment where interest payments are anticipated or required, providing that the specific lifetime mortgage allows the consumer to exercise at any time an option to convert the product to interest roll-up,’ the FCA said. Lifetime mortgage contracts that give consumers the option to pay interest for a period became subject to affordability rules based on the requirements of providers following the Mortgage Market Review in 2014. But the Equity Release Council has been campaigning for the FCA to review its affordability assessment of these products and said it is pleased the argument has been taken on board. ‘This has the potential to help more consumers make use of options already offered by equity release providers in later life and encourage further innovation within the market,’ said Nigel Waterson, chairman of the Equity Release Council. ‘The optional payment of interest within a lifetime mortgage is different to that of a residential mortgage with the opportunity for consumers to switch to roll-up when they wish,’ he explained. ‘This change highlights the growing recognition that equity release has an important part to play in the planning of funding for later life and we look forward to continuing to work with the FCA in the future,’ he added. The Council of Mortgage Lenders also welcomed the decision. ‘This may look like a small change, but it is a really significant one that should allow the lifetime mortgage market to develop in a far more sensible and consumer friendly way. It removes one barrier to the provision of sensible, safe and worthwhile lifetime mortgage products,’ said Paul Smee, CML director general. Alice Watson, product and communications manager at Retirement Advantage Equity Release, said she believed that the affordability assessments were an unintended consequence of the Mortgage Market Review (MMR) and added an extra and unnecessary step to the application process. ‘The FCA’s decision is yet further recognition that the equity release market continues to grow and is a serious option for increasing numbers of over 55s across the country. The good news is that ultimately it is consumers who will benefit from this change, which will make access to lifetime mortgages more straightforward for more people and should allow providers to develop even more innovative solutions,’ she pointed out. Continue reading
