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Negative equity rates down in the US but still affecting one in 10 owners
Negative equity is still affecting more than one in 10 home owners in the United States five years after the nation’s housing market recovery began, new research shows. Home owners who owe more than their homes are worth are nearly equally dispersed among urban and suburban communities in most metros across the country, says the latest report from real estate firm Zillow. But the numbers are falling. Nationally, some 12.1% of mortgaged home owners were underwater in the second quarter of 2016, down from 12.7% in the first three months of the year and below the 14.4% recorded a year ago. A breakdown of the figures show that 13.7% of owners in urban regions are underwater and 11.2% of those in suburban regions while Cleveland and Detroit have the greatest difference between urban and suburban negative equity rates. After the housing bubble burst, nearly a third of home owners in the United States were underwater on their mortgages. As the market recovered, many home owners have gained back the lost value on their homes, freeing them to sell or refinance. In most areas of the country, negative equity is nearly equally spread across urban and suburban areas. In 13 of the nation's largest metros, the share of urban and suburban homeowners who are underwater is within two percentage points. But some metros are seeing notable gaps in the share of underwater homeowners between urban and suburban areas. Cleveland and Detroit have the biggest difference between negative equity rates in urban and suburban neighbourhoods at 13.6% and 10.8% respectively. In these metros, home values in the main urban centres are trailing behind the overall region's recovery, and are still well off from their peak levels. By contrast, negative equity is equally common among urban and suburban areas in the Seattle area, where a more balanced recovery and strong economic growth have led to home values near or exceeding their bubble peak levels in urban and suburban areas alike. ‘At its worst, negative equity touched all kinds of home owners in all kinds of markets. The type of community a given home was in, urban or suburban, mattered little. Fast forward a few years, and the relative vibrancy of a given community and how it has performed over the past few years, and not necessarily its location in the city or suburbs, matters a great deal,’ said Zillow chief economist Svenja Gudell. For the first time, all of the largest markets in the country now have negative equity rates below 20% and the data shows that Western metros with strong job and housing markets have the lowest rates of negative equity. Less than 5% of mortgaged home owners in San Jose, San Francisco, Portland, Denver, and Dallas are underwater. Continue reading
UK residential sales drop just 0.9% post Brexit vote
Residential property sales in the UK fell slightly by 0.9% between June 2016 and July 2016 and were down 8.3% lower compared with the same period in 2015, according to the latest data from HMRC. For July 2016 the number of non-adjusted residential transactions was about 0.7% higher compared with June 2016 and 13.6% lower than in July 2015. The seasonally adjusted estimate of the number of non-residential property transactions decreased by 7.5% between June 2016 and July 2016 and was 1.7% lower compared with the same month last year. The report points out that there was a large increase in transactions in March 2016 followed by a substantial reduction in April which was associated with the introduction of the higher stamp duty rates on additional properties in April 2016. However, whilst April and May 2016 are lower than the corresponding months in 2015, it should be noted that the total for March to May 2016 is still substantially higher than the corresponding period last year. Non-tax factors may have played a role as well, for example the Bank of England's plans to curb buy to let mortgages resulting in a rush to purchase before April 2016, and the European Union referendum affecting transactions in recent months. According to Andy Sommerville, director of Search Acumen, the statistics suggest the market is stabilising, as the month on month change sits at under 1%. ‘Many would have expected a sharp fall in transaction activity in what was the first full month in our post-referendum economy, yet an underwhelming change suggests the darkness in our market shows little sign of worsening,’ he said. ‘Despite the encouraging resilience the market has shown in the short term, the bigger picture reveals an 8.3% decrease in transactions since July last year, demonstrating the true hit we’ve taken from Brexit, combined with the underlying issue of affordability,’ he pointed out. ‘As our economy absorbs the shock of the past three months, it is positive that home buyers are being given a leg-up into the property market to reignite demand and boost our industry,’ he added. Doug Crawford, chief executive officer of My Home Move, believes the data shows that the property market largely shook off the short term uncertainty of the Brexit vote. ‘Following the referendum there was talk that the market would be quickly affected by the outcome, but these fears have been allayed with residential transactions falling by just 0.9% month on month. While transaction levels remain lower than a year ago, this is in the context of a market that is still feeling the effects of changes to stamp duty, which led to a frontloaded first quarter,’ he explained. ‘The figures reflect our own experiences of the market. Following the referendum the vast majority of purchases went ahead without any issue, and chains were largely unaffected. In the medium term the market will remain stable, and our view is that it is strong enough to weather… Continue reading
Interest from buyers in inner London new developments waning
A new analysis suggests that while there has been an increase in development in London the new homes are concentrated in a handful of areas and some are so pricey that interest from buyers is waning. The result is a deepening new build crisis in inner London in particular and the lack of interest in new builds is seeing prices fall. The report from London Central Portfolio shows that overall the number of new developments approved for construction has surged this year, with a substantial 20% increase in the planning pipeline since 2013, representing 106,208 new units. However, this pipeline is largely made up of projects in cluster areas around Tower Hamlets and south of the river in the Battersea-Nine Elms area where there is already a proliferation of new developments. This year, a further 33,239 and 18,665 units respectively are now scheduled to be built. New applications have also rocketed. Applications for 17,494 new units including 111 towers, buildings over 20 storeys, have been submitted, a 27% increase on 2013. This is equivalent to one new tower application every three days, of which 90% are located in Tower Hamlets and Wandsworth’s Battersea-Nine Elms development. Despite the ever increasing number of new developments, however, statistics have shown that the attraction of these new properties, where prices now average £914,532, is waning. According to LCP’s analysis of the Government’s Land Registry data, only 1,491 new units have been sold so far this year, a substantial 43% decrease on this time in 2015. This compares with older properties in inner London where transactions have remained static, 13,194 in 2016 compared with 13,190 over the same period last year. The analysis also shows that square foot prices have also fallen for new properties. Across the Battersea-Nine Elms stretch, for example, prices are down 8% on their 2014 high. This is in stark contrast to London as a whole where prices are up 23%. New build sales volumes are also significantly down, decreasing 43% on the same period last year but the prime central London market remains largely protected, due to its limited new build potential. Sales activity has been normal in the first half of this year ‘In light of the plethora of tax hits over the last few years, possibly exacerbated by the uncertainty of Brexit, it appears foreign investors, the majority buyer of new developments, may finally be turning away,’ said Naomi Heaton, chief executive of LCP. ‘These properties typically sell at a significant premium, averaging 25%, over older stock. History demonstrates that a saturation of overpriced commodity style property leads to softening prices, particularly during times of economic uncertainty,’ she explained. ‘In Tower Hamlets, for example, which undertook an extensive building programme before the Global Financial Crisis (GFC), prices took six years to reach parity with their pre-recession level. In contrast in prime central London, where there is very limited new build due to the conservation of… Continue reading
