Tag Archives: investment
No interest rate cut in UK unlikely to affect property market
The surprise decision by the Bank of England not to announce a cut in the UK’s already historic low interest rates is unlikely to have much impact on the property market with some experts believing it could boost real estate. Even if the bank rate had been cut to 0.25% from 0.5% there would have been little room for improvement, according to David Whittaker, managing director of Mortgages for Business, who pointed out that mortgage rates are already at record lows and there is little room for them to go much lower. ‘Inter lender competition has played a significant part in this and with yields on swaps and UK gilts remaining near record lows, mortgage borrowers will continue to benefit from enhanced affordability for some time. Property investors with sound financial planning and a long term outlook are therefore well placed to take advantage of continued generous pricing,’ he said. ‘Property prices could be a little bumpy in the short term and the Monetary Policy Committee has highlighted a weakening of activity in the housing market. This might trim some short term capital gains on offer but in the long term, the outlook for investors remains positive. Supply of housing in the UK remains significantly out of sync with demand which will support price increases over coming years. Furthermore, high levels of demand for rental accommodation will provide landlords with strong yields,’ he added. Lucian Cook, Savills UK head of residential research, explained that the two year fixed rate has already levelled out. ‘We may now see lenders margins edge up. However, this is likely to be no more than a squeeze on affordability for mortgaged home owners, suggesting that what happens to the housing market in the short term will have more to do with sentiment than the cost of debt,’ he said. ‘The cost of borrowing will become more important once we see the economic impact of the decision to leave the EU, but for now the Bank still has the option of reducing rates up its sleeve,’ he added. ‘A greater level of political stability following the appointment of the new Prime Minister probably helped to steer the decision to hold interest rates, according to Andrew Burrell, head of forecasting at JLL. ‘This can also be taken as a move to reassure the market that the Bank will not take knee jerk reactions and will remain calm under pressure. The market itself is also operating at low rate levels which may have removed the urgency to cut rates this month,’ he pointed out. ‘Indeed, interest rates continue to soften along the yield curve with most maturities at record lows. A cut shouldn’t be ruled out in August, however, after the market has been given more time to adjust and longer term sentiment is clearer,’ he concluded. Adam Challis, head of residential research at JLL, pointed out that even if there had been a cut… Continue reading
London residential rental market disparate due to Brexit uncertainty
Rents in London have peaked in many locations with the market currently stagnant and facing uncertainty due to the UK deciding to leave the European Union, the latest analysis suggests. While Benham & Reeves Residential Lettings' Heat Map generally shows relatively consistent trends across the capital, second quarter results show a disparate market. For example rents were up more than 4% in Chelsea but in nearby South Kensington they were down more than 4%. Similar contradictory results were to be found across London with adjacent areas showing wildly different fortunes. The report explains that even in the early part of this year, uncertainty over Brexit was affecting the prime central London rental market. Non-nationals were awaiting the result of the referendum while UK nationals were finding better value in East London and the suburbs. Rents in central London were falling, much to the frustration of landlords who were also suffering from the double blow of stagnating capital growth. Rental value growth was to be found in outer London until recently. However, the most recent figures from Benham & Reeves Lettings demonstrates that rental values have finally peaked there, as well. Most areas outside of prime central London saw rents plateau or boast only nominal growth. The report says it is perhaps noteworthy that there is a lack of definable trends. Hampstead Garden Suburb saw growth of over 4.5% while adjacent North Finchley saw rents fall by over 10%. The report suggests that the contrast may be due in part to the reopening of the Northern Line interchange at Tottenham Court Road. The eastern part of the City also saw double digit growth, thanks in part to the release of some highly anticipated new developments in the area, while the western part of the City saw rents fall by over 4%. ‘There is nothing the property market hates more than uncertainty. While the referendum result may not have been what many London residents wanted, it has provided us with an answer,’ said Marc von Grundherr of Benham & Reeves Lettings. ‘Our quarter two results are a reflection of what was happening in the market in the run up to the vote. If anything, the referendum result could be just what the market needed. The rental market always benefits in financially volatile times as people would rather rent than commit to buying a property,’ he explained. ‘Demand is still strong and since the referendum, we are receiving an average of 17 applicants per property compared to 13.9 at this time last year. Notably, many of the applicants have been from the EU,’ he added. Continue reading
UK housing market sees marked drop in activity, particularly in the south
Uncertainty fuelled by the European Union referendum has resulted in a marked drop in activity in the UK housing market with new buyer enquiries down significantly across the country. In June some 36% more chartered surveyors nationally reporting a fall in interest, the lowest reading since the middle of 2008, according to the latest month residential market survey from the Royal Institution of Chartered Surveyors (RICS). The South of the UK has been the hardest hit, with anecdotal evidence suggesting both the EU result and the tax changes, which took effect at the beginning of April, as having an impact on sentiment. There was a further fall in the supply of properties coming available for sale across the UK in June, with the exception of Northern Ireland. This highlights the continuing challenge presented to the market by the lack of stock, according to Simon Rubinsohn, RICS chief economist. The report also shows that 45% more chartered surveyors saw a fall in new instructions in June from a net balance of -31% in May, the steepest fall on record and extends a trend that has been in place since 2014. The market has also seen further decline in sales this month with a third successive monthly drop in activity. Contributors expect this trend to continue with 26% more respondents anticipating a further drop in sales across the UK over the next three months. This is the most negative reading for near term expectations since 1998. House price growth saw a reduction in June and although prices are still rising, they are doing so at a more moderate pace with 16% more respondents reported having seen prices rise rather than fall across the UK. London remains the only region where respondents are seeing prices fall with a -46% net balance but this is largely being concentrated in the central zones. ‘That said, near term price expectations are now in negative territory across the whole of the UK with 27% more respondents across the UK expecting to see prices fall rather than rise over the next three months,’ Rubinsohn pointed out. He also pointed out that looking further ahead over the next 12 months, sales expectations have turned negative for the first time in four years with 12% more contributors expecting transactions to fall rather than rise. Significantly, over the next 12 months the dip in prices is only expected to persist in London and East Anglia with net balances of -39% and -34% respectively, and longer term, prices are still expected to rise, albeit a little less than previously anticipated, with a cumulative increase of 14% projected for the next five years. Rent expectations over the same time horizon remain more resilient and are still broadly consistent with an increase of just over 20%, the report also shows. ‘Big events such as elections typically do unsettle markets so it is no surprise that the EU referendum has been associated with a downturn in activity. However, even without… Continue reading
