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UK rents continue upward trend but growth slowing
Rents in the UK continued to rise over three months to May 2016, although increases slowed more in line with house price growth, according to the latest index report. Average rent in the UK, excluding Greater London, is now £771 per month, some 4.4% higher than a year ago while the average rent in London is £1,563, up 6.2%. The data from the HomeLet rental index also shows that Scotland leads the way with rents rising faster than in any other part of the country. The report said that the figures provide some encouragement for both landlords and tenants. Landlords may have been expecting some impact from the increase in the supply of rental property in May, as those who rushed to complete buy to let property purchases before higher rates of stamp duty came into force in April 2016 began offering their properties to tenants. But HomeLet’s data suggests landlords continue to enjoy healthy rental yields after costs. As for tenants, they will be encouraged to see the pace of rent rises now beginning to moderate, particularly compared to a year ago. While an average rise of 4.4% means increases are still running ahead of inflation, there is some evidence of moderation of the long term trend, perhaps as affordability ceilings are approached. The slowing of the pace of rent rises in May is broadly in line with a similar cooling in the rate at which house prices are rising and may be part of a broader story about economic uncertainty ahead of this month’s referendum on the UK’ s membership of the European Union. Nevertheless, the May 2016 HomeLet rental index reveals that rents continue to rise in almost every area of the country, with 11 out of the 12 regions surveyed seeing an increase over the three months to the end of May. In Scotland, rents are currently rising faster than anywhere else in the UK, with new tenancies costing 10.6% more than in the same period a year ago. However, the East Midlands with a rise of 8.3% in rents compared to last year, is also showing strong gains. London’s rental market, where the average rent on a new tenancy is now £1,563, up 6.2 per cent, also continues to see rents rise more quickly than in most other areas of the country. The rental market is characterised by steady growth in rents as the number of tenants looking for property runs ahead of the supply in the market, according to Martin Totty, chief executive officer of Barbon Insurance Group, HomeLet’s parent company. He pointed out that this remains the picture in most regions of the country. ‘While this growth has begun to slow, which tenants will welcome, landlords will also be encouraged by the vote of confidence in the sector evidenced by the increase in buy to let completions in the past few… Continue reading
Pending home sales in US reach highest level for over a decade
Pending home sales in the US rose for the third consecutive month in April and reached their highest level in over a decade, according to the latest index data to be published. All major regions saw gains in contract activity last month except for the Midwest, which saw a meagre decline, the pending homes index from the National Association of Realtors shows. The index, a forward looking indicator based on contract signings, increased by 5.1% to 116.3 in April from an upwardly revised 110.7 in March and is now 4.6% above April 2015 when it was 111.2. After last month's gain, the index has now increased year on year for 20 consecutive months and Lawrence Yun, NAR chief economist, said that vast gains in the South and West propelled pending sales in April to their highest level since February 2006. ‘The ability to sign a contract on a home is slightly exceeding expectations this spring even with the affordability stresses and inventory squeezes affecting buyers in a number of markets,’ he explained. ‘The building momentum from the over 14 million jobs created since 2010 and the prospect of facing higher rents and mortgage rates down the road appear to be bringing more interested buyers into the market,’ he added. On the topic of mortgage rates, which have remained below 4% in 16 of the past 17 months. Yun pointed out that it remains to be seen how long they will stay this low. Along with rent growth, rising gas price and the fading effects of last year's cheap oil on consumer prices could edge up inflation and push rates higher. For now, he foresees mortgage rates continuing to hover around 4% in coming months, but inflation could potentially surprise the market and cause rates to increase suddenly. ‘Even if rates rise soon, sales have legs for further expansion this summer if housing supply increases enough to give buyers an adequate number of affordable choices during their search,’ he added. Following the housing market's best first quarter of existing sales since 2007, Yun expects sales this year to climb above earlier estimates and be around 5.41 million, a 3% boost from 2015. After accelerating to 6.8% a year ago, national median existing home price growth is forecast to slightly moderate to between 4% and 5%. A breakdown of the figures show that in the Northeast it climbed 1.2% to 98.2 in April, and is now 10.1% above a year ago. In the Midwest the index declined slightly by 0.6% to 112.9 in April, but is still 2% above April 2015. Pending home sales in the South jumped 6.8% to an index of 133.9 in April and are 5.1% higher than last April. The index in the West rose 11.4% in April to 106.2 and is now 2.8% above a year ago. Continue reading
Latest mortgage research shows shift in investors’ choice of property type in UK
Real estate investors in the UK looking to expand their property portfolios are looking to do so with the purchase of more complex property types, new research has found. In particular 28% of those looking to expand said they were considering purchasing HMOs, up from just 10% six months ago, according to the latest report from Mortgages for Business. Commercial and semi-commercial property are also interesting of investors but those looking to purchase vanilla property has fallen slightly to 79% from 83% in November. David Whittaker, managing director at Mortgages for Business, pointed out that with higher yields it is no surprise that there has been a sizeable shift towards the more complex property types. ‘The interest in commercial and semi-commercial property may have also grown as these asset classes do not incur the Stamp Duty Surcharge imposed on residential property,’ he explained. The report also shows that the number of investors looking to expand their portfolio has dipped slightly to 41% from 46% in November 2015, probably due to the tax change announcement and the introduction of the 3% stamp duty surcharge. However, the good news is that an even smaller proportion, some 14%, plan to shrink their portfolios, down from 18% in November 2015. Despite an increase in investors keeping their portfolio size as it is now, 39% still plan to remortgage some of their properties in the next six months. ‘It is positive to see that fewer landlords are looking to sell property and shrink their portfolios and that a large proportion are still seeing the benefits of remortgaging,’ said Whittaker. ‘After the government’s tax crackdown on private landlords I can understand why investors are being more cautious about expansion. It will be interesting to see how long this cautious approach will last,’ he added. The research also shows that 30% of respondents said they owned a property in a limited company vehicle up from just 22% a year before. ‘We expect this figure to continue to rise in light of the pending tax changes which will peg relief on finance costs, including mortgage interest, to the basic rate of 20% to individual tax payers. Since the tax relief announcement we have seen a notable rise in limited company applications, which doesn’t show any sign of slowing down,’ Whittaker said. The survey found that 59% of those looking to expand their portfolios will need to refinance to raise the necessary funds, up marginally from 58% in November 2015. There was also a fall in the number of respondents who felt that lenders were not doing enough to support investors. The most common gripes felt by landlords were extremely similar to the responses given in November’s survey including wanting more lending options for limited companies, wanting the removal of upper age restrictions and wanting more of a human/common sense approach to underwriting. Continue reading
