Tag Archives: government
Income producing potential of UK property set to top the agenda for investors in 2016
The income producing potential of various property asset classes is expected to be top of investors’ agendas in 2016, according to a new outlook analysis report. Average UK house prices are set to rise 5% in 2016, but the speed and timing of interest rate rises will dictate the pace and sustainability of price growth, according to the predictions from real estate advisors Savills. In the commercial market, average total returns on UK property investments are likely to slow to approximately 7.5% while in the agricultural market Savills has downgraded its forecasts for the next five years given recent market evidence and the short to medium term expectations for commodity prices and therefore farm profitability. The firm says that income and the ability to unlock the latent value of individual assets through active management are likely to be priorities, due to the current stage of the property cycle and the medium term prospect of interest rate rises, regulation and tax policy in the residential sector, and the outlook for commodity prices in the agricultural sector. In the commercial and residential markets Savills expects a shift towards investment in regional markets, given where recent capital growth has left yields. The referendum on membership of the European Union (EU) presents the greatest uncertainty for UK real estate in 2016/2017, according to Savills, as the outcome has potential implications for all three sectors. The prospects for a pre-referendum investment slowdown may well depend on how close polling companies believe the outcome will be, the report suggests. The report explains that annual house price growth stood at just 3.9% at the end of October, with annual housing transactions appearing to have peaked at 1.2 million per year so the forecast for 2016 is 5% for average UK house prices. It points out that stamp duty changes have left the top end of the London market looking both fully priced and fully taxed suggesting a further delay in the return to trend rates of house price growth. Meanwhile, the mainstream market is more dependent on what happens to the cost of borrowing. ‘Capacity exists for short term price growth if rate rises are delayed further, but rising interest rates will squeeze affordability, making house price growth dependent on earnings and the pace of economic growth,’ the report says. It adds that in some areas in London, for example Ealing, Acton, Greenwich, Lewisham and Waltham Forest, may buck this trend as they attract more affluent buyer groups. Attractive commuter towns will also continue to offer good medium term price growth, particularly where travel times are shortened by rail improvements. Also demand for private rented accommodation will continue to rise. The restriction in tax relief and additional 3% stamp duty charge for buy to let landlords may result in rising private rents and shift investor focus towards higher yielding sectors of the market, particularly key regional cities, it suggests. While Government policy… Continue reading
New £1 million scheme launched to train housing industry staff in UK
A big increase in the number of homes being built in the UK over the past two years and a raft of new home being promised by the Government means that more training is needed in the property construction industry. As a result the Home Builders Federation (HBF) and the Construction Industry Training Board (CITB) have launched a new £1 million scheme to train non-construction staff such as marketing, sales and business development employees. This new fund, which will run throughout 2016, is aimed at ensuring the thousands of staff working in these areas are, like their construction counterparts, getting the required level of training to ensure the industry can deliver more, high quality homes. The fund will help HBF members to target training to employees, graduate scheme trainees and those on undergraduate placements to ensure that best practice is applied and high standards upheld. A portion of the fund has also been set aside to fund further training for sales and marketing staff. Driving up levels of customer service is a particular area of focus for the industry as more potential customers visit sales offices and more homes are sold. ‘The past two years have seen tens of thousands of new people recruited into house building and a significant increase in the number of homes being built. As we look to increase output still further it is imperative we continue to increase industry capacity and develop the skilled workforce required to build the high quality homes the country needs,’ said Stewart Baseley, HBF executive chairman. ‘The house building process is an extremely complex one requiring a great number of people with very different skills. If we are to provide the high quality homes and the level of customer service today's new build customer demands we need to ensure every member of staff in every part of the process is trained to the best possible standard,’ he added. ‘Industry told us that more needed to be done to address the range of skills challenges in the housebuilding sector. Working with HBF, this new pilot fund is a first step in addressing that important issue and testing how this approach could be employed in other parts of construction,’ said Steve Radley, director of policy at the CITB. ‘This £1 million pot of money will boost technical skills in the sector to ensure that we can build the homes the country needs,’ he added. Continue reading
UK government launches consultation on buy to let regulation powers
The UK government has launched its promised consultation on the powers that the Bank of England’s Financial Policy Committee should have over the buy to let mortgage market. This consultation aims to gather views on how the operation of the nation’s buy to let mortgage market may carry risks to financial stability. It also seeks respondents’ opinions on the specific tools in relation to which the FPC has recommended it be granted powers of direction, including in their impact on business activity and prosperity, on the draft legislation, and on the consultation stage impact assessment. The consultation is primarily targeted at individuals, institutions and associated bodies that would be affected by the FPC’s powers of direction but the government said that it also welcomes the views of other parties interested in housing market policies. Following the consultation, the government will examine the consultation responses and use them to help to define the instrument that will place the powers in legislation. The government will set out how it intends to proceed in a consultation response document in 2016. It comes at a time when the private rented sector (PRS) has grown rapidly in recent years, from 2.5 million properties in 2002 to 5.2 million in 2013, from 10% of the market to 19% respectively. The government believes that the Bank of England should have more tools at its disposal to cool the buy to let market if necessary such as directing regulators to require lenders to place limits on buy to let lending. The amount buy to let investors could borrow as a proportion of the property price, or the loan to value ratio, could be capped or the Bank could also increase the required ratio of expected rental income to mortgage interest payments. Lenders are not fully supportive of more controls currently for the buy to let market and are warning that the market does not necessarily need more regulations and that new rules for by to let landlords, including an extra 3% stamp duty from April 2016, should be allowed to take effect. ‘We understand the rationale for putting the macro prudential tools at the Bank of England’s disposal, but also recognise that this does not necessarily mean they will be used. In our view, buy to let does not constitute a market that currently requires further macro prudential intervention, especially as the effect of several recent tax changes is yet to be fully felt and evaluated,’ said Council of Mortgage Lenders director general Paul Smee. ‘We urge policymakers to be mindful of the risk of unintended consequences that could adversely affect the private rented sector, alongside their focus on ensuring that the buy to let market does not pose a threat to financial stability,’ he added. Peter Williams, executive director of the Intermediary Mortgage Lenders Association, suggested that the industry is confused by what the government is trying to do. ‘In the autumn the Chancellor, in giving evidence to the Treasury… Continue reading
