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Property prices in England and Wales down slightly month on month
Residential property prices in England and Wales increased by 6.1% in the year to February 2016 taking the average value to £190,275. The latest data from the Land Registry also shows that overall month on month prices fell by 0.2% but most regions have seen prices rise. London has seen the greatest increase in average property values over the last 12 months with a rise of 13.5% to £530,368 but at the opposite end the North East saw prices fall by 3.2% year on year. The North East also saw the most significant monthly price fall with a decrease of 1.2% the North West saw the greatest monthly price rise with a rise of 1.8%. According to David Brown, chief executive officer of Marsh & Parsons, the monthly dip in property prices disguises the fact that the majority of regions are experiencing striking growth. ‘There have been a lot of stimulants spurring on the housing market this spring To beat the 01 April implementation of additional stamp duty, second home buyers and buy to let investors have been frantically pushing through purchase completions as quickly as possible,’ he pointed out. ‘We’ve had documents collected and delivered by hand across London to solicitors to avoid postal delays, and our teams have been in at the crack of dawn to make sure all parties involved in the transaction are meeting their deadlines,’ he explained. ‘This short term whirlwind should go some way to balance out the slower sales activity seen at the end of last year, but only time will tell how buy to let demand tapers off as we enter into new territory. As buy to let investors face yet another blow from the banks, the incredibly strong buyer demand we’re seeing will take the reins, and keep the market on a stable course,’ he added. Rob Weaver, director of investments at property crowdfunding platform Property Partner, pointed out that price rises in London are more than double the rate compared to all other regions excluding the South East and the East. ‘High demand, a shortage in supply and out of reach properties in prime central London, has seen potential buyers flocking to outer London boroughs for more affordable housing and in turn that’s pushed prices ever skyward. Six of the outer boroughs have experienced annual price rises of more than 15% with Hillingdon top of the league at 17.1%,’ he said. ‘Again the upward trends continue west of the capital along the M4 corridor with Slough notching up a 19% annual increase. There’s a widening gulf with the rest of England and particularly Wales with the average house at a fifth of the price you pay in London. And sadly, we’re likely to see downward pressure on prices in south Wales over increasing uncertainty around Steel jobs in Port Talbot,’ he added. 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
Housing affordability falls in Scotland for third year in a row
Rising house prices in Scottish cities has led to a further deterioration in affordability with average values up 3% from £176,009 in 2015 to £181,077 in 2016. This has resulted in average affordability in Scotland’s cities worsening in the last 12 months from 5.25 to 5.36 times gross average annual earnings, the third successive annual decline in affordability. The data from the Bank of Scotland Affordable Cities Review also shows that on average, affordability in Scottish cities is now at its lowest level since 2009 but is still 12% lower than the peak of 6.12 times earnings in 2008 at the height of the last housing market boom. The overall improvement in affordability across Scottish cities as a whole over the past eight years has been driven by a combination of an increase of 10% in the gross average annual earnings and an average house price decline 3%. Edinburgh is Scotland’s least affordable city where the average house price is 6.12 times the gross average earnings in the city. With an average price of £220,099, houses in Edinburgh are more expensive compared with average earnings than in any other Scottish city. Inverness at 6.03, Aberdeen at 5.72, Dundee at 5.38 and Perth at 5.24 make up the top five least affordable cities in Scotland while Stirling is the most affordable city and the second most affordable in the UK with an average property price of £165,658 which is 4.11 times the gross average annual earnings. Glasgow is the second most affordable city in Scotland and 10th in the UK, with an average house price of £159,580, which is 5.07 times the gross average annual earnings in the city. House price growth has been highest in Aberdeen over the past decade and since 2011 Aberdeen has recorded the biggest price rise of any Scottish city over the past decade and with a gain of 58%, is the only Scottish city to appear in the top 10 UK cities with highest house price growth in fifth place. The report explains that this is as a result of rising housing demand due to the strong performance of the oil and gas sector over most of the period. More recently, Aberdeen has seen a 22% rise since 2011 but prices are not declining due to a decline in the resources sector. ‘The rising house prices over the past three years have resulted in a deterioration in home affordability in Scotland’s cities. Although affordability is at the lowest level since 2009, it is still much lower than the height of the last housing market boom in 2008,’ said Nicola Noble, mortgages director at Bank of Scotland. ‘Aberdeen has recorded Scotland’s highest house price growth over the past decade and more recently during the economic recovery, due to strong performance in the oil and gas sector,’ she added. Continue reading
