House Price Index

This month sees the number of sales agreed at this time of year up 7% on the same month a year ago, and it is the highest seen in May for ten years with the exception of a slightly better figure in 2014. However, there is a fall in the price of property coming to market of 0.4% (-£1,172), the first price fall at this time of year since 2009, and the first monthly fall this year. As a consequence, the annual rate of price increase has slowed to 1.8%, the lowest since April 2013.

Miles Shipside, Rightmove director and housing market analyst comments: “It now seems certain that we will have continuing political uncertainty, which the housing market traditionally dislikes, and with the first fall in June prices for eight years there is no doubt that the lack of stability is a factor. The price of property coming to the market had increased in June in every year since 2009, so buyer confidence has clearly been affected by inflation outstripping their pay packets and current political events. However, demand is still high and markets in some parts of the country seem to be getting used to coping with instability and are still strong. The high levels of sales being agreed show that the underlying fundamentals are largely unchanged with high first-time buyer demand which drives movement higher up the ladder, all aided by the cheap cost of borrowing.”

Markets performing at different speeds and levels depending upon geography and sector 
The national average figures conceal large differences between different local markets and property sectors, which appear to be reacting in widely variant reactions to the country’s overall air of uncertainty.

The typical first-time buyer sector with two bedrooms and fewer is now the fastest growing sector, and has seen newly-listed prices surge by 3.5% month-on-month and 5.5% year-on-year.

Shipside observes: “Those at the traditional starter level are brushing aside uncertainty, with demand being fuelled by the ongoing desire for home-ownership, government assistance, and mortgage repayments often being cheaper than rent for a similar property. Increasing prices in this sector have not been enough to shake off the wish to own your first home, whilst in contrast sectors higher up the ladder with a larger proportion of discretionary movers have seen the greatest recent price wobbles.”

The number of sales agreed compared to a year ago is up markedly more in the northern regions than in the South. All regions are up on the post-stamp-duty lull period of May 2016, with a national uplift of 7%, but the northern average of 11% far outstrips the southern average of 3%. This follows through to property prices with the London (-2.4%) and South East (-0.9%) regions recording the largest monthly falls in the price of property coming to market. These London and South East figures account for a significant proportion of the total market and have dragged down the national figure which would be in positive territory without these two slower-performing regions.

Shipside adds: “The swingometer may be leaning towards a buyers’ market in some parts of the country, having been given another tilt in that direction by political uncertainty, but demand for housing and lack of buyer choice are maintaining a sellers’ market in others. London and its commuter belt are proving to be a drag on the national figures, but are currently counter-balanced by continuing momentum in other parts of the country. Markets traditionally slow in the second half of the year, and with a slowing in the pace of asking price rises and the forthcoming months of political and economic confusion, the usual slower market in the second half of the year seems to be one of the few certainties in 2017. Having said that, the historic under-supply of the right property at the right price and ongoing strong housing demand are evidenced by buyer enquiries to agents picking up to a degree after the surprise election result. They were 3% higher on the Monday after the election than the Monday before, showing that people are getting on with addressing their housing needs.”

Agent’s View
Kevin Shaw, national sales director at estate agency Leaders, comments: “May was a bumper month for Leaders in terms of sales, despite the general election. Since the 8th June, even with the continuing political uncertainty, it’s very much business as usual for the property market. Whilst some people may be adopting a wait and see approach, many more are wanting – or needing – to press on with their property transactions. We have, however, started to see a slight hardening of attitude from buyers so sellers need to have realistic expectations and be prepared to be flexible in negotiations.”

Best questions to ask an estate agent for buy-to-let investors

Communication with an estate agent before buying a property is always key, and this is particularly important for buy-to-let investors. There are key questions that should be asked, and they can differ from the standard question that a house hunter would think of. I share my top tips to ensure that investors have all the information they need before making an offer.

Is the property freehold or leasehold? 
I would always recommend buy-to-let investors to check whether the property is freehold or leasehold initially to factor in any service charges and ground rents which could impact yield.

Find out if you are buying a leasehold apartment and what the annual service charge is, because you the landlord are liable for this annual cost. Also, what is the size of the managing agents Sinking Fund in the building regarding cover for future works planned?

For first time landlords, my advice is to be prepared. If looking to buy a leasehold property, ask what is the service charge, what does it cover, and how will large maintenance and repair works be paid? How long is the lease?

Has the property been rented before? What is the demand like? 
I would want to see a copy of the current tenancy and deposit protection, together with a schedule of rent history. Having a good feel for the kind of tenant in the area is important for future lets.

An agent can advise you on the quantities of people looking to rent this style of property. Consider the competition. Find out from local agents whether there is there good rental demand for your proposed purchase plus if this might be effected in the near future.

Investigate the rental demand for that area and ascertain the rental level from agents in the area to do their homework to see how quickly similar properties are let.

Is the area safe and desirable? 
Looking at local amenities such as train stations, schools, and local amenities such as sports centres all helps. The shops can suggest something about the local area as well. Lots of boutique coffee houses and trendy bars suggests professionals with a higher disposable income – these are often the dearer properties though which could impact yield.

Location is key in lettings, as much as it is in selling. Choose a property that suites the market, so if you’re looking in a family area, buy a family house.
There is more to consider about the area, too. Is it a good area? Are there signs of regeneration, and is it on the up if it hasn’t already been regenerated. Look at the demographics of area to decide.

What is most important for you? 
I recommend a more bespoke approach, which requires some thought from the landlord beforehand.
I ask buy-to-let buyers what is most important to them - is it yield, potential void periods, hassle factor, capital growth or ease to let now and in the future?

For example, a buy-to-let purchaser of a five-bedroom property in a University City could obtain a yield between 12% and 15%, which on the face of things may appear very attractive, but the stress of finding five sharers, dealing with the fact that they may fall out with each other and the additional wear and tear may put off certain purchasers.

If maximising yield is not the main driving force, the ease of letting the unit and minimising maintenance may appeal, for instance we have clients who are just looking for a greater yield than can be currently obtained from more traditional investments where a return above 5% would suffice.

It is important to decide which type of let is preferred before starting a property search.
Is your investment long term? Natural growth is often underrated. For some people, if costs are covered, the yield the property can generate is not as important. If you are looking to cover costs in the long term, there can be no greater asset than having the right tenant in your investment for as long as possible. Most new investors, however, turn to short term investments.”

What is the energy efficiency like? 
Be mindful of energy performance ratings. The Law is changing from April 2018 and properties which have a poor energy efficiency rating will be required to upgrade. Tenants expectations rise year after year and a low cost energy-efficient property is more important than ever, and will ensure you don’t have any surprises next year.

Is the continued slowdown in house price growth 'a blip' or due to uncertainty over this month's General Election, asks the Nationwide Building Society.

What’s the latest?

House prices fell for the third month in a row during May, marking the worst quarter for the property market since 2009.

 

Homes in the UK saw 0.2% sliced off their value during the month, leaving the average property costing £208,711, according to Nationwide Building Society.

 

The annual rate at which prices are growing also eased to 2.1%, the weakest level for nearly four years, as the housing market continued to lose momentum.

 

The latest price slide comes after property values fell by 0.4% in April and 0.3% in March.

 

But Nationwide stressed it continued to expect house prices to end 2017 around 2% higher than they started the year.

Why is this happening?

The slowdown in the property market may have been caused by uncertainty due to this month’s General Election.

 

But Nationwide pointed out that previous elections had not had much impact on buying and selling decisions.

 

Instead, it suggested the trend may be indicative of a wider slowdown in the household sector as people feel the pinch from higher inflation.

 

It could also reflect growing affordability pressures after house prices have increased significantly faster than average earnings in recent quarters.

 

Robert Gardner, Nationwide’s chief economist, said: “It is too early to conclude whether the slowdown in house price growth is merely a blip, a reflection of the impact of the squeeze on household budgets, or is due to mounting affordability pressures in key areas of the country.”

 

There has been a shortage of stock for some time, as reported recently by Zoopla

Who does it affect?

While the fall in house prices might sound like good news for first-time buyers, it is likely to exacerbate the current stalemate.

 

The property market has been dogged by a shortage of stock for some time, with the number of homes on estate agents’ books remaining close to record lows.

 

This lack of choice is prompting existing homeowners to sit on their hands and delay trading up the housing ladder, which in turn leads to fewer properties being put up for sale.

 

The shortage of homes on the market has created a significant mismatch between supply and demand, which has then forced house prices higher.

Sounds interesting. What’s the background?

Today’s data is the latest in a raft of figures pointing to a slowdown in the housing market.

 

The Council of Mortgage Lenders said mortgage advances dropped by 11% in April, while the number of homes changing hands fell by 22% in the same month, according to HM Revenue & Customs.

 

But research by Zoopla found that consumers remained upbeat about the property market’s prospects with nine out of 10 people expecting house prices to rise in the coming six months.

 

Nationwide said given the current uncertainty about the UK’s future, housing market trends would depend crucially on developments in the wider economy.

 

But it added that while it expected activity and house price growth to slow in the coming months, in line with an easing in household spending, the subdued level of house building and the shortage of homes for sale were likely to provide support for property prices.

‘Fake agents’ are crippling independents’ reputations and livelihoods

Think ‘fake agents’ are no threat to your business? Think again. The rise of online agents - dubbed by some as ‘fake agents’ - are costing every agent without exception.

For as long as agency has existed, people have been setting up businesses which seek to cut out or undermine traditional estate agents.

The majority have failed, but not without doing some damage to the industry on their way down. They all make the attack on incumbent businesses the main thrust of their marketing - ‘Nobody really needs an estate agent’ is always the underlying pitch.

Their existence is not a problem but their marketing is.

These quirky, flash-in-the-pan, and sometimes very well-funded ventures (easier.co.uk in the late 90s spent £13 million and easyProperty is rumoured to have spent £18 million) always attract great publicity on the back of the notorious public loving-to-hate estate agency message.

This fact only serves to underline how even those who consider themselves successful, wealthy and experienced business people can completely fail to understand what good agents really do, and get their fingers burnt or lose their shirts in the process.

So, I agree with the commentators who ask why people are wasting time worrying about the increasing number of 'listing agents' - companies calling themselves estate agents but who in reality offer nothing more than an upfront paid advertising service.

Their existence alone is no more a threat to the industry than private sellers used to be in the pre-internet days. There will always be a small portion of people who will choose not to use full service agency, and either try to sell privately, or pay for an advertising service - almost always something they regret afterwards.

But, the marketing by these so-called ‘fake agents’ and the consequences of it are an altogether different matter.

It is the most damaging phenomenon the industry has experienced in the 20 years I have been involved, and directly impacts every single remaining company in the business, especially independent agents.

Even if you believe that your business is so strong in its reputation for outstanding service that you will continue to win as many instructions, you will have local direct competitors who have been affected, who will have lowered their fees as a result, which in turn means further downward pressure on your fees.

Every single independent agent in the country, without exception, is experiencing harder conditions as a result of the marketing campaigns of online competitors.

There is no single independent agent who has the firepower, profile or resources to combat these high-profile and expensive advertising campaigns.

The existing corporate agents, rather than fighting the threat, are jumping on the bandwagon and launching their own (or purchasing) hybrid businesses. Savills, once the paragon of first class estate agency service, has twice invested in YOPA. I see this as almost a tacit admission of defeat (and I say this as someone who has both friends and family who work at Savills).

This is why a group of leading independent agents have joined forces to create an organisation that, with the support of all independents, will have the firepower, resources and teeth to fight back against this destructive marketing which is damaging an already-poor industry reputation further.

CIELA exists solely to promote the collective interests of independent estate and letting agents by forming a collective voice, correcting public perception and lobbying government on behalf of the group of businesses who make up more than 80% of the industry, and more than 95% of the brands.

Without it, and in the absence of any other organisation representing exclusively independent agents, the industry is powerless to defend itself against the effective marketing by the so-called 'fake agents'.

I believe the powerful and relentless marketing continuously drip feeding from these firms is destroying the industry and agents must unite, or face the inevitable further damage to their reputation.

*Charlie Wright is CEO of The Charter for Independent Estate and Letting Agents

**This article was amended on May 18 to remove several references to Purplebricks.

Moving to be near a good school?

Have you been using Rightmove’s School Checker to look for a new home near a good school? We all know it’s important to do research before choosing the ‘right’ school, and there’s much more to it than Ofsted ratings…

What should be your main contributing factors when deciding whether a primary school is right for your child?

• Ofsted reports
• Department for Education Performance Tables
• School’s website
• Their local offer for Special Educational Needs
• Additional activities i.e. breakfast club and after school clubs

What should you be looking for when you visit the school?

• Visit a range of schools so you can compare them
• Look at the classrooms and corridors – what are the displays like?
• What are the interactions like within the classroom? Between children or between the children and their teachers?

How can you improve your chances of getting into a school?

• Know the admissions criteria from school to school
• Know the order in which the criteria are set by the Local Admissions Authority

Find out more information Rightmove’s School Checker here.

What damp issues to look for before buying a house

Regional Trends

Brighten up your home

Nothing makes us more motivated to make changes to our home than the small wonders of spring. With nature coming to life and the evenings lingering on, now is the perfect time to think about brightening up your home with subtle updates to make sure it’s summer-ready.

Emma Brindley, interior design manager for Redrow, talks us through five ways to make the most of your space during this delightful time of year.

Start from the outside

Take a moment outside your home and consider how you can turn up the kerb appeal a notch for spring/summer. Even a small lawn can look stylish and inviting with clever planting and shaping of shrubs, softened with blooming hanging baskets and classic lighting.

 

 

Let the sun shine

 

Open up your windows and doors at the first opportunity to let the idyllic scents of nature flow in to your home. Nothing beats the smell of freshly cut grass at this time of year and it’s a great way of naturally boosting your mood too. Allowing the natural light flood into the most used spaces in the home, such as the kitchen and dining area, will guarantee to make you smile and improve overall wellbeing.

Grow your own

Whether it’s herbs and spices planted in the garden or on the window-sill in stylish zinc containers, my favourite thing to see in the home right now is ‘greenery.’ Not only is this bang on trend for 2017, it’s a practical and positive addition to the home. Cook up a rustic, home cooked meal with the kids using your home grown herbs and teach them how important it is to invest in their hard work.

Fix it up

Now is the time to get all those little jobs done around the home that you might have been ignoring through the colder months. Give some time to fix up furniture, steam your fabrics and touch up your decorating. Think about injecting a fresh look with a feature wall. The colour doesn’t have to be stark – we love the rich, classic tones of Dulux’s Heritage Colour palette and we guarantee there’s something for everyone.

Spring styling

Use plants throughout the home as a starting point for your spring styling. Incorporate artwork inspired by nature, such as botanic prints and fern carvings, which can easily be found on the high-street. Contrasting textures are key so refresh your fabrics with new cushions and throws in light linens and chunky knits (it might be getting warmer but those evenings can still be chilly) for a look that will create the perfect sanctuary.

Regional Trends

House Prices in Bury St. Edmunds, Suffolk

The majority of sales in Bury St. Edmunds during the last year were terraced properties, selling for an average price of £260,724. Detached properties sold for an average of £385,379, with semi-detached properties fetching £269,849.
Bury St. Edmunds, with an overall average price of £276,208, was similar in terms of sold prices to nearby Ixworth (£284,593), but was cheaper than Great Barton (£423,439) and Thurston (£322,288).
Overall sold prices in Bury St. Edmunds over the last year were 4% up on the previous year and 18% up on the 2014 level of £234,351.

Surveyors expect residential property prices and rents in Ireland to increase in 2017

National property prices in Ireland are set to rise by an average of 7% in 2017 while rents are expected to increase by between 8% and 10%, according to the latest outlook review report from surveyors.


The report from the Society of Chartered Surveyors Ireland (SCSI) predicts that the biggest prices rises are likely to be outside of Dublin with the Leinster region named as the location likely to be the hottest in 2017.


The price of three bed semi-detached houses, the most popular house type in the country, is predicted to rise by an average of 9.4% nationally with the greatest increases across all housing unit types likely to be 11% for one and two bed apartments.


The survey predicts that residential rents will rise on average by between 8 to 10% outside of the rent control areas of the four local authority areas of the Dublin Region and Cork City Council area.


Annual rent increases are capped at 4% in these designated zones. The Government is reported to be planning to extend these zones to 20 more towns.


A lack of supply, public policy and projected economic growth may continue to inflate house prices, according to Ronan O’Hara, chair of the SCSI’s residential agency group, but he warned that the latter could not be taken for granted given the uncertainty caused by the UK’s decision to leave the European Union.


Indeed, 78% of surveyors outside Dublin believe Brexit will have a negative impact on Ireland’s economic growth and 50% in Dublin also doing so while 36% of surveyors across the country believe that Brexit has already had a negative impact on property activity market levels.


O’Hara believes that the figure show that there is uncertainty for the coming year. ‘The drop in Sterling has reduced the buying power of people looking to move here,’ he said.


However, he pointed out that the changes which the Central Bank made to its lending rules and the introduction of the Help to buy scheme are likely to contribute to an increase in activity in the short to medium term.


Some 80% of surveyors said that Help to will lead to price increases in the coming year. ‘While this is good news for vendors, struggling first time buyers will be disheartened. While rising prices will probably encourage more builders to start building houses it really is up to Government to tackle some of the underlying issues, including high construction costs, and to make housing more affordable,’ said O’Hara.


The report anticipates continued and strong rental price growth over the coming 12 months across all regions, fuelled by a sustained demand combined with a continuing housing shortage particularly in and around the regional cities.


Overall the greatest increases are forecast for both two and three bed apartments and townhouses at over 10%. The survey took place before the new restriction on rent increases were announced so while increases of over 11.5% were predicted for two and three bed units in Dublin, these will clearly not be happening now.


O’Hara said that while the proposals to extend the designated pressure zones to 20 more towns might be well intentioned they were also short sighted and in the survey the introduction of permanent rent control measures was ranked as the highest negative measure that will impact upon the supply in the rental market.


‘If this goes ahead it will discourage landlord investment in the rental market. Similarly anyone involved in buy to let properties will exit the market and it’s likely a lot of owner occupiers will purchase them. That might be good news for them but not for those renting as rents will continue to rise. The Government may be putting out one fire, but they are simply starting another,’ he added.


According to the report the estimated figure for new builds at the end of 2016 will be 14,800 which falls significantly short of the 20,000 to 30,000 required. O’Hara said that while demand for housing is greatest in Dublin the fact that commencements outside the capital are running three times higher is a concern.


‘This is a huge issue for first time buyers hoping to get on the property ladder. But given the concerns raised by our members over Brexit, it is also a huge issue for the country as a whole,’ O’Hara explained.


He added that the SCSI is urging the Government to cut the Vat rate on new houses. ‘It has worked for the hospitality sector, it would also work for the construction and property market,’ he said.

Ban on letting agent fees divides UK rental industry

Opinion is divided over whether or not the decision to ban letting agent fees in England is a good move for the private rental market.

The announcement by Chancellor Philip Hammond that the ban will be introduced as soon as possible was met with dismay by letting agent and landlord organisations who warned that agents will pass the cost of administration onto landlords who will in turn pass it onto tenants in the form of higher rents.

Some experts pointed out that when a ban was introduced in Scotland it led to higher rents while others said that it did not lead to direct rent hikes. This issue aside, some other pertinent points have now emerged such as landlords possibly avoiding using letting agents which is not always advisable if they are not aware of current legislation and short cuts being taken in terms of tenant checks to keep costs down.

Charles Curran, principal at Maskells, pointed out that lettings agents do incur costs in setting up a new tenancy such as credit checks. Landlords are also now required to check that a prospective tenant has the right to live in the UK so there is paperwork involved.

He also pointed out that a lot of questions remain to be answered. For example, there are costs involved in carrying out checks and if fees cannot be charged it is not clear how these costs will be paid for.

‘We do expect landlords to seek to increase rents to take into account any additional costs. We will have to see the language of any proposed law before making our final analysis,’ he said.

While it is known that there are unscrupulous lettings agents who may be charging more than the average of £220 in fees for a new tenant, Mark Pollack, director at Aston Chase, said that the majority are reasonable.

‘We believe our charges are reasonable in comparison to many of the larger corporate agencies who also charge their landlords an administration fee. Indeed, we have always considered it surprising to charge for a tenancy agreement that we already have on file, although this is an industry norm.

However, the reference fees are a cost that we have to pay to a third party so under the new legislation, in the future agents would presumably have to pay for these themselves,’ he added.

Ali Carter, head of lettings at Russell Simpson, believes there is no place for some of the high fees that are charged. ‘Letting agency fees are in place to cover the cost of drawing up a tenancy agreement. This cost is split between the tenant and landlord. The tenant will also be charged a fee for their reference check,’ he said.

‘This could be a good opportunity for us, as well as other agents, to say that they are no longer charging an administration fee which is usually £150 plus VAT from today. Quite often we will promote a particularly property with a no admin fee tagline. In general we don’t charge the landlord their portion as they are paying us a fee already so we’ve always felt it was unjustified to ask for anything else on top. Overall, we’re quite in line with Hammond’s thinking,’ he added.

Others in the industry believe that regulation of letting agents might have been a more positive view. ‘I can’t help but feel that this is an issue of overall high rental costs and lack of trust in letting agents that do little to earn the respect of their tenants,’ said Bevan Smith, director of BPM Estates, which has offices in central London, Barnet and Potters Bar.

‘Rather than the removal of fees entirely, we would have liked to have seen stricter restrictions on what can and can’t be charged for and what fee levels are justified. This would have helped to put a curve on the immoral practices without punishing the honest, reputable agencies,’ he added.

Sarah Bush, director of Cheffins Residential Lettings, also things regulation would be a better option. ‘The Government needs to focus on the regulation of agents rather than banning upfront fees in their entirety. Rogue agents charging astronomical fees create the headlines and subsequently all agents are deemed guilty by association,’ she said.

‘Fees that are charged by reputable agents can be accounted for and justified at every step of the letting process. The banning of fees across the board will ensure that the costs are passed directly to the landlord, who in turn will increase rental prices to cover their respective costs,’ she explained.

‘A prohibition by the government on fees, combined with mortgage interest relief, will stifle a housing market that is already at breaking point and landlords are likely to leave the private rental sector en-masse. By trying to help tenants and pour cold water on the private rented sector, in reality the Government is doing nothing but heating up the situation for both tenants and landlords alike,’ she added.

Lucy Morton, head of agency at JLL, flagged up that the ban could lead less scrupulous agents to cut corners. ‘It is essential that agents do not cut corners and fail to carry out stringent referencing checks. At JLL and W.A.Ellis we have always advocated complete transparency of all charges made by agents to both landlords and tenants. We have also historically campaigned for the Government to regulate letting agents which it still fails to address,’ she said.

Paul Shamplina, founder of Landlord Action, warned that there could be a surge of landlords opting to self-let and manage and he believes that this would have a detrimental effect on rental property standards.

‘Agents will need to be forward thinking about how they can absorb some of this cost and the loss through other areas of their business. It has never been more vital for agents to educate less experienced landlords on the importance and benefits of a managed service, making sure they are compliant with industry legislation and preventing them from exiting the sector altogether,’ he added.

Property Tops The List For Investment Options Over The Last Decade

Since the financial crisis in 2008 the economy seems to have been in a constant state of uncertainty, leaving many questioning where exactly is the best place to invest their money.

There are plenty of options from the stock market to savings accounts, but what may surprise some is that findings from a recent study have shown property to bring the biggest return on investment over the last 10 years.

A recent study from estate agents Romans and Leaders has shown property to be the best investment option by some margin, by carrying out a comparison between the four most popular investment options, which are savings accounts, FTSE 100, property and gold.

This research looked into how much return you would see from an investment of £50,000 in 2006 into each of these investment options.

The results showed property at the top of the table by some distance. An investment in FTSE 100 would’ve seen a profit of £3,000, a savings account would bring in roughly £15,000 of profit and an investment in gold would fetch an extra £50,000 across the 10 years. While £50,000 is still a great return, property showed to be the clear leader with approximately £90,000 higher return than gold and an overall profit of £140,000 based on annual house price increases.

Managing Director at Leaders, Allison Thompson spoke on the results explaining why property comes out on top, she said “Despite many changes over the last ten years to the housing market and wider economy, buy-to-let is still the clear winner. As well as the most rewarding, it is also the safest of all the investment options over the long-term. We have seen historically that, although cyclical, house prices always rise in the long run. With the acute shortage of housing across the UK, this is only likely to continue.”

Thompson also suggests that while many are looking for the right time to jump into property investment, short term fluctuations in the market shouldn’t deter potential investors:

“Understandably, a lot of investors want to get the timing right when purchasing a property, but inevitably if you’re in it for the medium to long term, just learn to accept these fluctuations as any short term gains or losses. Second guessing and predicting the market will more than likely pale into insignificance in comparison to your overall return after ten years.”

Remortgages drive growth in UK home lending market

Gross mortgage lending in the UK held steady in October but is being driven more by remortgages than new buyers due to a lack of supply in the current housing market.

It reached an estimated £20.6 billion, according to the latest figures from the Council of Mortgage Lenders and closely matches September’s gross lending total of £20.5 billion, but is 5% lower than October last year when it was £21.8 billion.

‘Housing market sentiment is holding up well, with demand still strong. This has led to a pickup in approvals, as expected. The more pressing issue is on the supply side, where the lack of private sellers continues to be an obstacle for would-be borrowers,’ said CML senior economist Mohammad Jamei.

‘For this reason, we expect lending in the months ahead to be driven more by remortgaging activity and less by house purchases. Remortgaging will be helped by competitively priced mortgage deals, which are encouraging borrowers to refinance,’ he added.

According to Ishaan Malhi, chief executive officer of Trussle, the figures conceal two very different stories in the mortgage market. ‘On the one hand, new purchases are seeing a slight fall as first time buyers continue to face challenges saving for a mortgage deposit. This is having a long term impact on home ownership,’ he said.

‘On the other, we’re witnessing a surge in remortgaging, up 17% in the last 12 months, as existing home owners take advantage of record low rates to secure better deals,’ he added.

John Goodall, chief executive officer of peer to peer platform Landbay, also believes that the push is coming from home owners changing to lower interest products. ‘Many existing homeowners are choosing to take advantage of low interest rates to refinance their mortgage. However, this growth in lending volumes belies a much more mixed picture across the sectors. Buy to let lending levels remain around 24% down on this time last year, as April’s 3% stamp duty hike caused an initial wave of transactions, but left in its wake a much more subdued market,’ he pointed out.

‘The fundamentals of the buy to let market are still pointing toward long term sustainable growth, but landlords have had a white knuckle ride over the last 12 months, and we hope to see them given some relief at next week’s Autumn Statement,’ he added.

The lack of homes for sale is also highlighted by comments from John Eastgate, sales and marketing director at OneSavings Bank. ‘Mortgage activity is in good health, reflecting growing consumer confidence after the European Union referendum and impressive resilience in a quite exceptional year. Borrowers are benefitting from record low interest rates, with remortgage activity buoyant, although purchases are constrained by lack of homes for sale,’ he said.

‘However, with the Government set to fall short of the 200,000 new homes it had committed to providing annually, the UK’s chronic housing shortage, and resultant rising house prices, are set to remain a major barrier towards lending growth. Tax changes on buy to let will only make matters worse. The mortgage market needs to be supported by house building of all tenures which is the only long term solution that can prevent further deepening of the housing crisis,’ he added.

Henry Woodcock, principal mortgage consultant at IRESS, believes that the mortgage market remains vibrant. ‘Low interest rates, a levelling of house prices and continued consumer confidence have all combined to maintain market momentum,’ he said.

‘It’ll be interesting to see if the Chancellor has any good news for the mortgage and housing markets in the Autumn Statement. It’s expected he will confirm earlier announcements of funds towards new homes to be built by small firms, but many would like to see further investment into rental properties,’ he added.

New buy to let powers granted to Bank of England committee from early 2017

The Bank of England’s Financial Policy Committee (FPC) will be granted new powers by the Government to help it protect the financial system from future risks in the buy to let mortgage market.

The FPC is responsible for identifying, monitoring and taking action to remove or reduce systemic risks in the financial system and these new powers are aimed at enhancing the tools it has at its disposal to head off potential threats to financial stability should they arise.

From early 2017 the FPC will be able to direct the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) to require regulated lenders to place limits on buy to let mortgage lending in relation to loan to value ratios and interest coverage ratios.

It follows the FPC recommending that it be given additional powers of direction over both the residential mortgage lending market and the buy to let mortgage market in September 2014. The Government granted the FPC powers over the residential mortgage lending market in April 2015 and then consulted on the buy to let market.

The consultation noted the positive impact of buy to let landlords in the economy and the role they play in widening and balancing the overall housing market. They provide good quality accommodation for those who cannot at this point afford to buy a home, or who do not wish to commit to home ownership for personal or employment reasons.

At the same time, the consultation set out the financial stability risks that buy to let lending may pose and how the FPC’s recommended tools would address these risks and ensure long term economic stability.

‘It is crucial that Britain’s independent regulators have the tools they need to keep our financial system as safe as possible,’ said Chancellor of the Exchequer Philip Hammond.

‘Expanding the number of tools at the Financial Policy Committee’s disposal will ensure that the buy to let sector can continue to make an important contribution to our economy, while allowing the regulator to address any potential risks to financial stability,’ he added.

Home lenders urged to take rental payments into account

Home lenders in the UK should recognise rental payments when making lending decisions, as new research unveils that rental rates are rising rapidly when typical monthly mortgage payments for first time buyers are falling.

In the UK private tenants paid more for their accommodation in 57% of districts during the third quarter of this year, compared to the same period in 2015, according to the first time buyer index from Experian.

At the same time, the monthly mortgage payments a first time buyer could expect to pay has dropped in 65% of districts, assuming their loan was for 90% of the property on a two year fixed rate mortgage over 25 years.

The amount renters pay for their accommodation is either above or within 10% of the monthly payments they could expect to pay for a mortgage in 27% of UK districts and the research says this suggests that, if they could raise a deposit, many of the UK’s 4.3 million private renters would find monthly mortgage payments to be manageable and in line with their current rental commitments.

Scotland is home to six of the 10 districts where rental rates exceed monthly mortgage payments by the greatest margin. Manchester, Salford and Hull in the North of England also offer among the most favourable conditions for renters to become first time buyers.

‘What our research shows is that while a mortgage is a major ongoing commitment, renters often have a track record of making monthly payments which are often similar to what they might pay on a mortgage,’ said Experian’s Jonathan Westley.

He explained that lenders already apply rigorous checks to assess whether mortgage payments will be affordable for would be home owners, following the Mortgage Market Review but by taking rental payments into account, lenders can get a more complete picture of a borrower’s financial track record and make more suitable lending decisions.

The research also found that in 36% of districts the cost of renting had increased in the third quarter year on year, while mortgage payments had fallen. The reverse was true in only 4% of places, suggesting the balance across the country is shifting towards mortgage payments becoming more affordable compared to those who are currently renting.

‘Lenders take more into account than simply the amount you have raised for a deposit and what multiple of your earnings you are looking to borrow. The responsibility of ensuring mortgage payments are affordable for borrowers in the long term is one lenders take seriously,’ Westley pointed out.

‘They want to get a complete picture of a would be home owner’s financial commitments and see a strong track record of making regular payments. This helps lenders to understand how a borrower would manage mortgage payments now and in the future,’ he added.

Experian has developed the Rental Exchange to help renters get a mortgage. It allows rental payment information to be submitted to Experian, which will help strengthen renters’ credit histories and ease their difficulties when they buy a home.

UK property prices still rising, up 1.4% in October, despite Brexit uncertainty

Residential property prices in the UK continued to grow in October, up 1.4% and are now 5.2% up year on year, taking the average cost of a home to £217,411, the latest lender index data shows.

On a quarterly basis they were up just 0.1% but experts point out that this reflects a slowdown caused by the political uncertainty around the referendum in June on the UK’s membership of the European Union.

There was concern that the vote to leave the EU might be catastrophic for the housing market and the annual rate is down from a peak of 10% in March but Halifax Housing economist Martin Ellis pointed out that a slowdown was not unexpected and there are factors other than Brexit.

‘Annual house price growth has nearly halved from a peak of 10.0% in March this year, but remains robust at 5.2%,’ he said, but added that the slowdown appears to have been largely due to mounting affordability pressures, which have increasingly constrained housing demand.

He also pointed out that activity levels, like house price growth, have softened compared with a year ago. ‘Home sales, however, appear to have stabilised in recent months following the distortions earlier in the year due to the changes to stamp duty in April,’ he explained.

‘Whilst house price growth may ease further in the coming months, very low mortgage rates and a shortage of properties available for sale should help support price levels,’ he added.

Mark Posniak, managing director of Octopus Property, believes that the market is proving to be more resilient than anticipated. ‘In a politically and economically uncertain time, both at home and overseas, the resilience of the UK property market will certainly be tested. Demand may well be down amid such uncertainty, but as the latest mortgage approvals statistics reveal, it’s by no means out,’ he said.

‘The low cost of borrowing, weak supply levels and a robust jobs market are preventing prices from falling more sharply. Confidence is likely to play an increasingly prominent role in the short to medium term,’ he pointed out.

‘As inflation rises, people will feel less well-off and will become more cautious, and this could result in subdued transaction levels. Brexit related uncertainty remains the key narrative for the UK housing market at present, and last week’s high court ruling on Article 50 could see that uncertainty prolonged for longer than anticipated,’ he added.

Randeesh Sandhu, chief executive officer of Urban Exposure, also thinks the court ruling could have an effect as continued uncertainty about the Brexit process could hit confidence but at the same time there is still more demand than supply.

‘We still view the overall UK housing market picture as positive in light of enduring supply and demand fundamentals and no sign that the government will halt its long-term support of the sector. There are a number of issues that must be remedied on the supply side if the UK is to meet the government’s building targets, so in parallel we see opportunities for continued growth as and when these opportunities are unlocked,’ he concluded.

UK housing market expected to be strong and active throughout Brexit process

The path towards Brexit will dictate what happens in the UK housing market over the next few years but it is expected to remain reasonably strong and active, according to a new analysis.

There may be some turbulence along the way with article 50 to be enacted by march 2017 and the country set to leave in 2019, but the latest forecast from real estate firm JLL says that there will still be moderate growth with the residential market picking up again from 2020 onwards.

‘Demand will be undermined in the short term by uncertainty and a more subdued economy while supply issues will exacerbate, lending support to prices. The perennial issue for the housing industry remains supply and we are pleased that there seems to be fresh impetus in this regard,’ it says.

‘The big question, however, is whether policy initiatives target short term supply improvements, or look beyond the immediate horizon to create lasting, long term solutions,’ it adds.

JLL forecasts growth of 0.5% across the UK in 2017 and 1% in 2018 followed by 2% in 2019, then 4% in 2020 and 5% in 2021 but there is regional variations. Scotland is expected to be flat in 2017 then see 1% growth in 2018, 2% in 2019, 3% in 2020 and 4.5% in 2021. Wales is expected to do less well but catch up by 2020 with a forecast of prices falling by 1% in 2017, up 0.5% in 2018, up by 1% in 2019, by 3% in 2020 and then 4% in 2021.

Greater London is predicted to do well with growth of 1% in 2017, some 2% in 2018, then 3% in 2019, 5% in 2020 and 7% in 2021 but the prime central London market will not see as much growth with the JLL prediction showing prices likely to be flat in 2017 then 1% in 2018, 3% in 2019, 5.5% in 2020 then a slight reduction to 5% in 2021.

According to Neil Chegwidden, head of JLL residential research the real key to the outlook for the property market is the widespread positive attitude adopted within the UK. ‘Much will depend on the trade agreements negotiated, but with greater certainty the economic outlook should brighten along with consumer and business confidence as we head into 2019,’ he said.

‘We expect the UK housing market to be more subdued over the next two to three years. However, it will remain reasonably active with little chance of meaningful price corrections. Assuming Brexit negotiations are not too detrimental, we could see a rebound in London housing markets in 2020, before the rest of the country follows,’ he explained.

One concern on the horizon is that house builder activity could pull back from current rates of construction. ‘Although levels of new housing delivery were still woefully low prior to the referendum at least the direction of travel was positive and encouraging. This will now fall back again. We are predicting England starts to drop to 134,000 units next year,’ Chegwidden explained.

‘In London, we expect the house building slowdown to be more marked. Not only is London’s economy more vulnerable to Brexit but the housing market is also more reliant on investors, both domestic and international, and is hence more susceptible to buyer confidence,’ he pointed out.

But he also explained that the short term London supply prognosis implies that prices should bounce back when confidence returns. ‘The work stream of new supply should then pick up, albeit slowly.

While central and local government policies will be pro-development, we question whether they will really be able to outweigh the more cautious approach adopted by house builders in response to weaker market forces. Most worryingly, both the UK’s and London’s housing shortages will be even more acute by this point,’ he added.

The report also points out that the forthcoming five year UK economic outlook is particularly uncertain and much depends on the nature and detail of the EU exit. JLL’s base economic forecast assumes a hard Brexit with access to the single market sacrificed in favour of immigration controls.

‘Despite this, the economic prognosis is not too detrimental for the UK. There is clearly downside risk to this quite benign outlook, if trade agreements and financial sector passporting rights are not favourable. However, this base assumption also implies that there is significant upside potential too, so the economy could prove more robust next year and could also expand faster thereafter,’ it concludes.

Residential rents up 2.3% year on year in UK

Private rental sector prices paid by tenants in Britain increased by 2.3% in the 12 months to September 2016, unchanged compared with the year to August 2016, the latest official data shows.

There is some regional variation with the data from the Office of National Statistics (ONS) showing rents up by 2.5% in England and 0.1% in Wales but down by 0.1% in Scotland.

Rental prices increased in all the English regions over the year to September 2016, with rental prices increasing the most in the South East with growth of 3.5% while prices across the country excluding London increased by 2.1%.

All areas have seen rises in their private rental prices since 2011 with those in England up more than those of Wales and Scotland.

According to Nick Davies, head of residential development at Stirling Ackroyd, there is a lack of properties available to rent in London where demand is highest, partly due to a high number of international students.

‘While London draws in the some of the world’s brightest students and graduates, it lacks rental homes to accommodate them. With rents already unaffordable for many young people, we are witnessing the rent rises ripple out to the South East as potential tenants are forced to look further afield,’ he explained.

He believes that Chancellor Philip Hammond should consider scrapping the stamp duty surcharge for buy to let properties in his autumn statement in November as a way of encouraging more buy to let landlords into the market and making renting more affordable.

He also believes that this would make it make a huge difference to the cost of living for young people, making it easier to save for a deposit to buy their own homes as competition for rented homes is particularly fierce due to the 3% stamp duty surcharge being introduced earlier this year.

‘While the 2.7% increase in London rents may not seem severe when compared to the house price rises, it’s important to remember that average weekly earnings are only increasing by 2.3% year on year in nominal terms. And this suggests it will be even harder for first time buyers to save for a deposit,’ he added.

 

Historic low rates encouraging more UK home owners to remortgage

Two thirds of remortgagors in the UK plan to remortgage again in the next four years, spurred on by record low rates, new research has found.

Some 46% change their mortgage product to suit circumstances, two year fixed rates are falling in popularity while five year fixes grow as rates fall and borrowers seek stability.

The research from conveyancing panel management specialists LMS also shows that choice of lender is driven by rates available with 11 out of 20 picking a lender for this reason and only one in 20 doing so due to customer service.

Overall, in September some 85% of remortgagors were able to lower their mortgage rate at a time when the interest base rate is at an historic low of 0.25%.

Home owners can reap the rewards of rising house prices and competitive rates by remortgaging, something many appear to be aware of, the research suggests. Indeed, 64% of people who remortgaged in September believe they will do so again within the next four years.

However, 62% of remortgagors in September only remortgaged when they did because they had come to the end of their current deal. The report says this suggests complacency or lack of awareness among some home owners who could switch to make monthly savings earlier than they realise, something that may prove invaluable for many households who face higher costs for essentials as a result of rising inflation.

Following the Bank of England’s move to reduce the base interest rate from 0.5% to 0.25%, the majority of remortgagors do not expect any further changes to interest rates in the immediate future and 69% expect interest rates to remain the same for the next year.

Perhaps surprisingly, given fairly widespread commentary to the contrary, 14% believe interest rates will increase in the next year while 9% believe they will be lowered again within the next year.

‘Record low mortgage rates after the cut to the base interest rate make this a great time to remortgage. Mortgage interest rates were already falling but this cut may have been the catalyst to encourage more people to remortgage and August had the highest number of remortgages for seven years, after the base rate was cut,’ said Andy Knee, chief executive of LMS.

The LMS survey also examined customer preference relating to product choice and found that in September 46% of remortgagors changed the type of their mortgage product to suit their current financial situation and expectations. In the process two year fixed products declined in popularity among remortgagors while repayment and the popularity of five year fixes have risen.

Of those who changed their mortgage product, some 38% had a two year fixed mortgage for their previous term, a figure that decreased to 26% who opted for this type of product in their new mortgage.

In contrast, just 8% of remortgagors had a five year fixed mortgage before remortgaging, but this number has since climbed to 22% as average rates for this type of product have fallen and they became more attractive to customers.

However, five year fixes remain more expensive than two year fixes, supporting anecdotal evidence that, in the current environment of political and economic uncertainty, people are looking for longer term security even if this involves slightly higher costs in the short term.

Just 13% of remortgagors who changed their mortgage had a repayment product, a figure that has risen to 19% for those who have one since remortgaging. Variable mortgages, on the other hand, fell from 18% who had this in their previous term to 17% who have that product now.

The survey also found that saving money is by far the most important factor when choosing a lender and 55% of remortgagors said the main reason they chose their lender was because it offered the cheapest mortgage deals or best interest rates. This is more than twice as many as the second most popular option for 22% who opted for a lender based on a recommendation from their broker or adviser.

Only 8% said a lender’s reputation was the most important factor when choosing a product, while just 5% said customer service was the most decisive factor.

Knee explained that while two year fixed products remain the most attractive to remortgagors, the growth in popularity of five year term fixed mortgages is interesting and suggests that home owners are either keen to take advantage of competitive rates and lower costs with short term fixes or are more cautious, prioritising greater stability in a period of uncertainty by fixing for longer.

‘As the terms of Brexit remain unclear and its impact on prices and costs are not fully realised, it will be interesting to see whether more people start erring on the side of caution or wait for more information,’ he concluded.