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Economists forecast property price growth of just 1.5% in UK, fall in London
UK house prices will grow only by 1.5% in 2015 but they are set to fall by 3.6% in London before growing again but slowly over the next five years, according to economists. The report from the Centre for Economics and Business Research (Cebr) is an upward revision from its previous report in January when it forecast a fall of 0.6% in prices this year. It said that the impact of December’s stamp duty changes has been felt sooner than expected, with some buyers putting cash saved towards a deposit but while expectations have been revised up it is a more subdued outlook for London. The property market in the capital continues to show signs of cooling. Average house prices in London are expected to decline by 3.6% over 2015 but the report also points out that they increased by 17.4% in 2104. Cebr continues to expect London house prices to underperform the rest of the UK this year, following years of over performance. It points out that the strength of sterling against the euro, fears of a mansion tax and hefty new stamp duty rates on high value properties have all hit housing demand from overseas buyers. In 2015, for the first time since 2009, house price growth will be stronger outside the capital than in London itself. Leading indicators such as fewer new buyer enquiries and properties taking longer to sell already point to falling prices in the capital. Outside of the capital, the decline in overseas interest in UK property will be much less strongly felt. At the same time, most home buyers have benefited from December’s stamp duty changes as well as an improving labour market which has boosted consumer spending power. The YouGov/Cebr Household Economic Activity Tracker (HEAT) shows that consumer expectations for property price growth across the UK have been picking up in recent months after declining in October, something that is feeding through into rising consumer confidence in the run-up to the general election. ‘Outside of London, the outlook for house prices this year has improved after a few months when the market appeared to be coming off the boil. December’s stamp duty changes, as well as rising household incomes, are lifting prices in many parts of the UK,’ said Nina Skero, Cebr economist and main author of the report. ‘In London, however, we expect prices to decline by 3.6%, driven by a significant weakening at the prime end of the market. A potential mansion tax, reduced overseas interest and hefty new stamp duty rates have hit demand for high value property,’ he added. Continue reading
Planning permission in London too low to meet new housing targets
The current rate of planning permissions in London mean that just two thirds of the target number of homes that government officials say are needed will actually be built, according to new research. London’s planning system is allowing new homes at an annualised rate of just 27,470 as of the end of 2014, or just 69% of the target for 40,000 finished new homes each year announced by Chancellor George Osborne and London Mayor Boris Johnson in February and underlined in March’s Budget. An analysis of planning applications across the city by London estate agents Stirling Ackroyd shows just 6,780 homes were given planning permission in the last quarter spread over 826 different sites. These approvals represent 80% of all potential homes receiving a planning decision in the fourth quarter 2014. This is out of plans for 8,632 possible homes in the quarter. By contrast, if 100% had been approved, this could have allowed an annualised rate of up to 34,530 new homes, or 86% of the official target rate. In reality the number of homes reaching completion stage currently stands at an annualised rate of just 18,440 after the final quarter of 2014 saw just 4,610 properties finished in the space of three months. Despite this low base, London has seen an acceleration in finished homes. Last quarter’s figure represents a 30% increase from the third quarter of 2014. This is almost twice the acceleration in home completions seen outside the capital as across the rest of England there was a 17% uptick. However, new home starts were far lower last quarter, at just 3,040 or an annualised rate of just 12,160 homes per year. If this pace of housing starts continues and is reflected in the annual rate of completed homes it would mean failing to reach even a third of the government’s annual target. Out of all London’s boroughs, Tower Hamlets gave permission for the greatest number of new homes in the final quarter of 2014 at 1,197 dwellings spread over 25 different sites. This means more than one in six homes receiving planning permission in the capital was in Tower Hamlets, or 17% of the quarterly total. Second to Tower Hamlets in absolute terms was Croydon, where 682 homes came through the planning system, followed by Richmond with 591 dwellings approved in the quarter. At the other end of the scale Lewisham allowed just 11 new homes in the final quarter of 2014 out of a potential 18, while Kensington and Chelsea approved 13 out of 16 possible new homes and Lambeth only 17 homes out of a total of 40. Comparing the number of homes given permission to the total number of potential dwellings applied for via planning applications, boroughs vary by the leniency or rigour with which they have interpreted their guidelines. Greenwich and Hammersmith and… Continue reading
Home affordability in UK cities deteriorates to 2009 levels
The past year has seen a deterioration in affordability in UK cities, driven by rising house prices across the country, with Oxford names as the least affordable. Stirling in the most affordable and Aberdeen as seen the highest house price growth since 2005, according to the latest Lloyds Bank Affordable Cities Review. The average UK city house price has risen by 7%, from £181,667 in 2014 to £195,107 in 2015 and this has resulted in affordability in the nation’s cities worsening in the last 12 months from 5.8 to 6.1 times gross average annual earnings, the second successive annual decline in affordability. Affordability in UK cities is, on average, now at the same level as in 2009 but is 15% lower than the peak of 7.2 times earnings in 2008 at the height of the last housing market boom. The overall improvement in affordability across UK cities as a whole over the past seven years has been caused by a combination of an average house price decline of 6% and an increase in the gross average annual earnings in UK cities of 11%. Oxford’s average house price is 11 times the gross average earnings in the city. At an average price of £361,469, houses in Oxford are more expensive compared with local average earnings than any other UK city. This is partly due to Oxford’s attractiveness to commuters working in London. Winchester at 10.11, Cambridge at 9.76, Chichester at 9.19 and Brighton and Hove at 9.10 make up the top five least affordable cities. Greater London is not far behind with average property prices 8.75 times average gross annual earnings. This average figure disguises considerable variations across the capital with central boroughs being significantly less affordable than the Greater London average. The data also shows that Lichfield at 6.95, York at 6.83 and Leicester at 6.54 are the least affordable cities outside southern England. Stirling remains the UK’s most affordable city despite a deterioration in affordability over the past year. The average property price in the Scottish city of £158,645 is 3.9 times gross average annual earnings. Four of the 10 most affordable UK cities are in Northern Ireland due primarily to the relatively low house prices in the country with Londonderry at 3.92, Belfast at 4.49, Newry at 4.51 and Lisburn at 4.63. The most affordable cities in England are Lancaster at 4.03 and Bradford at 4.17. ‘House price rises in the past two years have resulted in a deterioration in home affordability in the majority of UK cities, and generally widening the north/south affordability divide as the market has been strongest in the south,’ said Andy Hulme, Lloyds Bank mortgages director. ‘The UK’s most successful cities economically have tended to see the strongest property price rises. Aberdeen, the country’s oil and gas capital, has recorded the biggest gains over the past decade whilst London has been the top performer during the economic recovery,’ he added. An analysis reveals a significant north/south divide in city… Continue reading
