Tag Archives: middle-east
UK monthly property price growth slowed to 0.2% in May, activity expected to slow further
Residential property prices in the UK edged upwards by just 0.2% in May in the run up to the historic vote on the future of the country in the European Union, according to the latest index. This meant that annual price growth slowed to 4.7%, taking the average price to £204,368, but activity in the market is expected to slow in the coming months due to a spike in March due to stamp duty changes and now the Brexit vote. Robert Gardner, Nationwide's chief economist, pointed out that the annual pace of house price growth remains in the fairly narrow range between 3% and 5% that has been prevailing for much of the past 12 months. ‘In the near term, it’s going to be difficult to gauge the underlying strength of activity in the housing market due to the volatility generated by the stamp duty changes which took effect from 01 April,’ he said. ‘Indeed, the number of residential property transactions surged to an all-time high in March, some 11% higher than the pre-crisis peak as buyers of second homes sought to avoid the additional tax liabilities,’ he explained. He also pointed out that while cash purchases accounted for a significant proportion of the increase in activity it is not possible to determine whether or not these were purchased by landlords. Mortgage data suggests that, while buy to let purchases were a major driver of the increase, the purchase of second homes also accounted for a substantial proportion. The number of home mover mortgages, which is where second home purchases with a mortgage would show up, increased sharply in March. ‘House purchase activity is likely to fall in the months ahead given the number of purchasers that brought forward transactions. The recovery thereafter may also be fairly gradual, especially in the buy to let sector, where other policy changes, such as the reduction in tax relief for landlords from 2017, are likely to exert an ongoing drag,’ said Gardner. ‘Nevertheless, healthy labour market conditions and low borrowing costs are expected to underpin a steady increase in housing market activity once stamp duty related volatility has passed, providing the economic recovery remains on track,’ he added. ‘However, it is possible that the recent pattern of strong employment growth, rising real earnings, low borrowing costs and constrained supply will tilt the demand/supply balance in favour of sellers and exert upward pressure on price growth once again in the quarters ahead,’ he added. Gardner also explained that it is difficult to gauge how sentiment from overseas buyers will be impacted by increased economic uncertainty caused by Brexit on the one hand and the sharp decline in Sterling on the other, which, if sustained, reduces the cost of UK property in foreign currency terms. He pointed out that property prices in London have been supported by extremely robust labour market conditions as well as strong investor demand in recent years. Indeed, the price of a typical London property… Continue reading
Easier monetary policy could weaken Brexit effect on UK real estate
The hit to UK real estate sentiment that many experts predict will be sparked by the vote to leave the European Union may be limited by easier monetary policy, it is claimed. While uncertainty in the run up to the referendum had little effect on domestic real estate pricing this year, investment activity slowed but an analysis report suggests that this hasn’t been exclusively caused by Brexit fears but largely reflects greater investor caution as the market reaches the top of the cycle. However, according to Chris Unwin, head of global research at Aviva Investors, the vote to leave suggests there is now little hope of any bounce in sentiment. ‘Indeed, it may be many years until we have clarity on the UK’s constitutional arrangements and trading agreements,’ he said. He pointed out that the financial markets’ reaction to the vote was swift and dramatic with Sterling falling to its lowest against the US dollar in over 30 years and 10 year gilt yields reaching a record low. And, as equities plunged, real estate shares were particularly badly hit. He believes that mounting fears of an economic shock and in the short term, uncertainty as to the UK’s constitutional arrangements and trading agreements, will dampen activity and may trigger a recession by the end of 2016. In the longer term, the economy is likely to be impaired by reduced access to European markets and poorer demographics, weakening the UK’s fiscal position and potentially damaging productivity growth. On top of this calls for a second referendum on an independent Scotland will grow and great further uncertainty. ‘Domestic capital values now look likely to decline moderately over the remainder of the year. It is worth noting, however, that some commentators believe Brexit will hit real estate returns, and the economy, more severely. By contrast, we had expected to see a slight increase in capital values over coming months had the UK voted for the status quo,’ explained Unwin. He expects to see prolonged illiquidity in real estate markets pending renegotiation of international agreements and transaction activity to be low while heightened risk aversion will reflect lower growth expectations and political risk. ‘To compensate, some widening in yields is probable. Secondary assets are likely to be hit even more,’ he added. However, Sterling depreciation could support demand from overseas investors but Unwin pointed out that this needs to be balanced against the UK real estate market’s diminished ‘safe haven’ status along with additional caution in Scotland resulting from pressure for a further independence referendum. Unwin thinks UK occupier markets could be affected significantly less than investment markets. ‘In the short term, a rapid deterioration in the labour market is not expected. Demand for space is not set to fall rapidly,’ he said. ‘If the weakness of sterling is maintained, UK retailers could be hit, particularly those operating on low margins. On the other hand, it may boost prospects for markets dependent on tourist spending, like prime central… Continue reading
Research reveals how student debt is affecting the US housing market
New research suggests that the vast majority of would be first time buyers in the United States believe they can’t afford to buy because of student debt. Some 71% of non-homeowners repaying their student loans on time believe their debt is stymieing their ability to purchase a home, and slightly over half of all borrowers say they expect to be delayed from buying by more than five years. The survey from the National Association of Realtors (NAR) and SALT, a consumer literacy programme provided by American Student Assistant, also revealed that student debt postponed four in 10 borrowers from moving out of a family member's household after graduating college. Nearly three-quarters of non-homeowners polled in the survey believe their student loan debt is delaying them from buying a home. Broken down by each generation and debt amount, the percent share is the highest among older millennials approximately aged 26 to 35 at 79% and those with $70,000 to $100,000 in total debt. Regardless of the outright amount of student debt, more than half of non-homeowners in each generation report that it's postponing their ability to buy. The survey, which only polled student debt holders current in their repayment, yielded responses from borrowers with varying amounts of debt from mostly a four year public or private college. Some 43% of those polled had between $10,001 and $40,000 in student debt, while 38% had $50,000 or more. The most common debt amount was $20,000 to $30,000. Lawrence Yun, NAR chief economist, said that the survey findings bring to light the magnitude student debt is having on the housing market and the budget of even those financially able to make on-time payments. He pointed out that while obtaining a college degree increases the likelihood of stable employment and earning enough to buy a home, many graduating with this debt are putting home ownership on the backburner in part because of the multiple years it takes to pay off their student loans at an interest rate that's oftentimes nearly double current mortgage rates. ‘A majority of non-home owners in the survey earning over $50,000 a year, which is above the median US qualifying income needed to buy a single family home, reported that student debt is hurting their ability to save for a down payment,’ he said. ‘Along with rent, a car payment and other large monthly expenses that can squeeze a household's budget, paying a few hundred dollars every month on a student loan equates to thousands of dollars over several years that could otherwise go towards saving for a home purchase,’ he added. Among non-homeowners who believe student debt is delaying their ability to buy, over three quarters, including over 80% of millennials, said their delay is because they can't save for a down payment. Additionally, 69% don't feel financially secure enough to buy, and 63% can't qualify for a mortgage because of high debt to income ratios. Some 52% of those polled expect to be… Continue reading
