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UK residential property market saw strong start to the year, report confirms
The UK property market started 2016 at breakneck speed with even stronger and more buoyant activity than the positive sentiment seen during the final quarter of 2015, according to a new report. The number of active buyers entering the residential property market reached new heights, partly driven by the continuation of positive economic trends, such as low interest rates, says the analysis from Connells Group. This has tempted those on the fence to make their first move onto the property ladder sooner rather than later, according to David Livesey, group chief executive. But he pointed out that with the current level of available stock at historic lows, the additional demand from these new buyers combined with increased buy to let activity from investors looking to extend their portfolios before the higher stamp duty changes came into effect on 01 April, many of these first time buyers faced restricted choice and additional competition as they sought to find their ideal property. However he explained that the ratio of applicants to new instructions has evened out in the short term, while property price growth has not been as rapid as it has been in previous quarters, making climbing up or onto the housing ladder a less daunting feat for many. ‘This slight cooling has by no means turned into a chill, with property remaining a valuable asset that will continue to increase in value for the foreseeable future. Supply side initiatives, driven by the Government’s attempts to stimulate housebuilding in particular, may need further support if they are to have any meaningful impact on the level of available stock in the short term,’ said Livesey. The report shows that landlords and tenants have also enjoyed a positive and productive start to the year. It says that activity from renters has grown at a healthy pace, as this group often uses the start of the New Year as an opportunity to move into new accommodation. Despite the fresh demand from new applicants entering the lettings market in the first quarter of the year, the ratio of registered applicants to new instructions is by no means as high as it was during the first quarter of 2015 and average agreed rents have broadly stabilised across England, in the short term at least, the report points out. Livesey said that an increased supply of rental stock is easing pressure on the sector, as buy to let landlords purchase less expensive properties, some of these new build. ‘This may not be what the Government had in mind when it aided the construction of such properties, but it has given tenants respite nonetheless. In addition, tenants are also driving harder bargains, securing longer leases at a cheaper monthly rate meaning they need to return to the market less often, which is also attractive to landlords,’ he explained. ‘The mortgage market has also sprung back to life this quarter, largely propelled by high activity levels in the residential and… Continue reading
Mortgage payments for UK first time buyers have fallen sharply
First time buyers in the UK with small deposits are making savings of more than £790 a year, when comparing monthly mortgage payments to the same time last year, new research suggests. This is in part due to competitive interest rates now available as monthly mortgage costs for first time buyers have fallen sharply, according to the latest Genworth Moneyfacts LTV tracker report. The average house price for a first time buyer is £154,559 and for those with a 10% deposit, lower mortgage interest rates mean they can save £67 a month compared to what they would have paid if they’d taken out the same loan a year ago. This adds up to savings of £800 over the course of a year. For those with 5% deposits, the monthly payment on a 95% LTV mortgage for an average first time buyer home was £66 per month lower in March 2016 compared to 2015, equating to annual savings of £792. The report explains that part of the reason for the attractive rates is increased competition as the number of mortgage products at high LTVs has risen in recent months. The number of mortgages available for those with a 5% deposit jumped sharply from 195 in March 2015 to 267 in March 2016. As a result, rates for 95% LTV mortgages reached a record low of 3.92% in March 2016, 0.80 bps lower than a year before. Rates for 90% LTV loans are also much cheaper, having fallen 0.92 bps to 2.82%. However, the total amount of high LTV lending has stagnated even while overall lending has increased revealing that while lenders may be competing for the best customers in the high LTV bracket, they are more focused on increasing lending to customers with larger deposits. Despite a climate which is ripe for high LTV lending and a rising numbers of available mortgages, lending to those with a 5% deposit, which saw a notable boost following the introduction of the Help to Buy Mortgage Guarantee (HTB2) Scheme, has subsequently flat lined. Lending to those with 5% deposits received a much needed boost following the introduction of HTB2, with the proportion of lending at this level climbing from 1.7% in the fourth quarter of 2013 to 3.1% in the first quarter of 2014. It reached a high of 4.2% of total mortgage lending in the second quarter of 2014 but stagnated at around 3% in 2015. The stagnation in lending to those with small deposits is particularly concerning given that the Help to Buy Mortgage Guarantee scheme is due to end after this year. With nothing scheduled to replace the scheme, the fear is that lending to this part of the market could continue to fall. ‘Competitive rates available for those with just 5% or 10% deposits mean they are able… Continue reading
UK property prices fall in April and could soften further ahead of EU vote
Property prices in the UK fell by 0.8% in April and annual house price growth eased to 9.2%, taking the average price to £212,321, the latest index data shows. The figures from lender, the Halifax, also show that house prices in the three months from February to April were 1.5% higher than the preceding three months. Martin Ellis, Halifax housing economist, pointed out that both the quarterly and annual price rates are at their lowest since November 2015. ‘Current market conditions remain very tight as the severe imbalance between supply and demand persists. This situation, combined with low interest rates and rising employment and real earnings, should continue to push house prices up over the coming months,’ he said. ‘Weakening sentiment regarding house price prospects and a dip in consumer confidence, however, suggest that annual house price growth may ease,’ he added. The 0.8% between March and April, combined with February’s 1.5% fall has offset March’s 2.2% gain. But according to Ellis monthly house price changes can be volatile and he pointed out that the quarter on quarter change is a more reliable indicator of the underlying trend. Confidence in the UK housing market is at its lowest level in over a year, according to the latest quarterly Halifax Housing Market Confidence Tracker. The latest fall continues the downward trend since a high point in May 2015, and comes as consumers feel increasingly uncertain about the wider economy. Nonetheless, a clear majority of 65% still believe that average UK property prices will be higher rather than lower 12 months from now, double the 32% found when the Tracker was launched five years ago in April 2011. Jonathan Hopper, managing director of the buying agents Garrington Property Finders, believes that double digit annual price rises are unlikely to return any time soon but the cooling of the market may mark an opportunity for buyers, as some sellers are being forced to reassess their overly ambitious asking prices. ‘For the first time in more than a year, we’re seeing many mid-range properties in the most desirable locations selling for below asking price, hinting that the power dynamic is shifting from a seller’s to a buyer’s market,’ he said. ‘But with demand still strong and supply still chronically low, the net effect is likely to be a gradual return to more normal rates of price growth rather than a serious slowdown. With the Halifax also finding that levels of confidence in the housing market have fallen to their lowest level in more than a year, sellers must think urgently about pricing competitively,’ he added. On top of the slightly cooling of the market there is also uncertainty over the referendum on the future of the UK on the European Union on 23 June. Mark Posniak, managing director at Dragonfly Property Finance, thinks prices are likely to edge down further. ‘People are starting to understand the magnitude of the Brexit vote and that will lead many to… Continue reading
