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Annual house price growth slows to five-year low in June

THE average house price has topped £215,000 for the first time – but annual growth in property values has slowed to a five-year low – according to an index.

Across the UK, the typical house price in June stood at a new record high of £215,444, up 0.5 per cent month on month, Nationwide Building Society said. House prices are 2 per cent higher than a year ago.

Robert Gardner, Nationwide’s chief economist, said: “Annual house price growth fell to its slowest pace for five years in June. However, at 2 per cent, this was only modestly below the 2.4 per cent recorded the previous month.”

Regionally, in the second quarter of this year, London was the only area where house prices are lower than a year ago – following a trend also seen in the first quarter of 2018.

In the second quarter, house prices in London stood at £468,845 on average – a 1.9 per cent annual fall.

Despite the downward price movement in London, house prices there are still more than 50 per cent above their 2007 peak.

By comparison, house prices in the UK generally are 15 per cent higher, Nationwide said.

The East Midlands had the strongest annual house price growth in the second quarter, with prices up by 4.4 per cent, followed by the West Midlands, which saw a 4.3 per cent increase, and Wales with a 4 per cent uplift.

In Scotland, house prices were 3.1 per cent higher than a year earlier, while in Northern Ireland they have seen a 2.1 per cent increase.

Mr Gardner continued: “Subdued economic activity and ongoing pressure on household budgets is likely to continue to exert a modest drag on housing market activity and house price growth this year, though borrowing costs are likely to remain low.

“Overall, we continue to expect house prices to rise by around 1 per cent over the course of 2018.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “Tight supply, a healthy labour market and a continued lengthening of mortgage terms – 30-year loans now are common – will help to prevent prices from falling outright.

“But it is inevitable that house prices will grow at a slower rate than households’ incomes during a period of rising mortgage rates.”

He continued: “We expect the official measure of house prices to rise by just 1.5 per cent over the course of 2018 and a mere 2 per cent over 2019.”

Jeremy Leaf, a north London estate agent and a former residential chairman of the Royal Institution of Chartered Surveyors (Rics), said: “On the one hand, the squeeze on incomes and unrealistic asking prices is reducing activity and confidence to move, particularly in price-sensitive areas such as London.

“On the other hand, the market continues to be supported by low interest rates and overall supply shortages, although we have found recently that listings and viewings are on the rise. This will translate into more sales if buyers and sellers recognise the new market realities.”

Here are the annual house price changes regionally in the second quarter of 2018, according to Nationwide, with the average house price:

– East Midlands, £181,549, 4.4 per cent

– West Midlands, £188,516, 4.3 per cent

– Wales, £153,964, 4 per cent

– Scotland, £148,161, 3.1 per cent

– North West, £160,419, 3 per cent

– Outer South East, £281,752, 2.5 per cent

– East Anglia, £225,768, 2.5 per cent

– South West, £243,182, 2.4 per cent

– Northern Ireland, £136,211, 2.1 per cent

– Yorkshire and Humberside, £155,075, 2.1 per cent

– North East, £127,266 ,1.6 per cent

– Outer Metropolitan, £365,514, 0.9 per cent

– London, £468,845, minus 1.9 per cent

Source: Irish News

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This is the best UK city to be a landlord, new research finds

If you’re considering buying property to rent it out for profit, it’s important to be aware of several factors that will affect how worthwhile the venture will be.

New research from GoCompare has revealed the best places to purchase property for buy-to-let across the UK, determined by comparing average property price and rental yields, the population under the age of 35 in the area, number of properties available, number of letting/maintenance agencies, number of new housing developments, properties currently available for rent and rental price growth.

The study showed Manchester as the best place in the UK for buy-to-let, with the highest average yield in the country at 5.55 per cent. Gaining the most profit is the prime concern for buy-to-let landlords and this northern city is the top location to have higher profits long term. Manchester has also seen the biggest rental price growth in the country with an increase of 5.76 per cent.

house-shaped key

Belfast is the worst city in the UK for renting property out, according to the research. Even though the average property price is one of the lowest in the country, average yield is low and there has only been a 2.19 per cent increase in rental prices over the last five years.

Find out the 31 best places for being a buy-to-let landlord in the infographic below…

GoCompare - Best City To Be A Landlord
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Buy-to-let investors told to widen search for yield

Buy-to-let investors may have to look to alternative regions if they want to secure a decent yield from their property.

Research by Direct Line for Business showed rental yields varied significantly depending on where investors bought.

Direct Line found that while house prices had risen 17 per cent over the past three years, rents were up just 4.7 per cent.

While the average yield achieved across the UK is 3.6 per cent, some buyers could earn as much as 7.1 per cent.

Burnley had the highest annualised rental yield in the country, according to the analysis. Average house prices in the town were £76,300 while the typical annual rent landlords could achieve was £5,388.

Making up the rest of the top three are the City of Glasgow and Belfast where yields were 6.9 per cent and 6.4 per cent respectively.

By comparison, homes in London, the south east and east of England had the poorest yields, largely because property prices were higher.

In London landlords achieve average annual rents of more than £20,000 but, with the average house price more than £480,000, the yield was 4.4 per cent.

In the east of England, where the typical property cost £289,000, the average rent was the lowest in the country at just 3.5 per cent.

Daniel Bailey, principal at Middleton Finance, said: “Most of my buy-to-let investors don’t tend to pay more than £125,000. If they go beyond that then the yield tends to not be as good.

“Purchase price is a major factor and some areas will attract a better monthly rent. I have some clients achieving yields of 7 to 10 per cent .

“There are still good yields to be achieved but it is important to speak to a broker and property tax expert to understand all of the implications.”

Direct Line said increased competition in the private rented sector was hitting yields.

Christina Dimitrov, business manager at Direct Line for Business, said: “While property prices have increased in recent years, it’s a different story for the rental markets where growth in rents in lower than wage growth.”

Source: FT Adviser

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Calls to cut Stamp Duty as mortgage approvals for house purchase slide

The boss of Spicerhaart’s mortgage broking arm has called for a Stamp Duty cut for everyone as bank data revealed yet another slump in mortgage approvals for house purchase.

Banking trade body UK Finance estimates that high street lenders approved 45,549 mortgages for home purchase last month, down 3.8% annually.

Meanwhile, remortgages continued to dominate the market, with approvals growing 18% annually to 31,748.

John Phillips, group operations director at Just Mortgages and Spicerhaart, said Stamp Duty was stifling the whole market so it would be better if that tax was cut for everyone.

He said: “This spike in remortgaging is most likely due to short-term deals coming to an end and home owners looking to lock in low rate fixed deals amidst ongoing speculation that rates will go up later in the year.

“For house purchase to really pick up, the Government needs to think about making some real changes. First-time buyers have seen some good initiatives – Stamp Duty cuts and Help to Buy – but they are obviously not enough to really get things moving.

“Data released by Hamptons International revealed that it now takes an average of ten and a half years for first time buyers to raise a 15% deposit, rising to 17 years for a single Londoner.

“This is crazy – it shouldn’t be that difficult for people to purchase their first home and more needs to be done to help. Ideally, I would like to see Stamp Duty cut altogether, for everyone, because it is really stifling the market.”

Eric Leenders, managing director of personal finance at UK Finance, said: “May’s increase in mortgage approvals was driven by strong growth in remortgaging, as a large number of fixed-term mortgages came to an end and home owners took advantage of a competitive market to shop around for attractive deals. Increased efforts by lenders to contact their customers before their current mortgage deal expires have also contributed to this rise.”

Commenting on the figures, Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “This is more of a spring bump rather than bounce as approvals for house purchases were lower at a time when we would have expected increased activity, even though gross lending is considerably higher, boosted by remortgaging.

“Many buyers and sellers are sitting on their hands and those that are recognising the new reality in this price-sensitive market are negotiating hard but transactions are taking longer as a result.

“Encouragingly, the number of listings and viewing appointments is rising, but choosy buyers are taking their time to make decisions.”

Source: Property Industry Eye

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UK House Price Data Beats Analyst Expectations, but Confirm Entrenched Slowdown is Here to Stay

The latest set of Nationwide house price data showed a rise in residential property prices to the tune of 0.5% on a month-on-month basis in June, beating the consensus forecast for 0.3%.

The year-over-year growth rate decreased to 2.0%, from 2.4% in May, but again the number exceeded the consensus forecast for a rise of 1.7%. Despite the beat, the number represents a five-year low in June and “is another milestone in the housing market’s slowdown,” says Samuel Tombs at Pantheon Macroecnomics.

On current trends Pantheon say the year-over-year rate will slow further, given that month-to-month gains in the first half of 2018 have averaged just 0.1%.

Note too that Rightmove’s measure of online asking price rose by just 1.7% year-over-year in June, while the balance of surveyors expecting prices to rise over the next three months was its lowest since the referendum in May, according to RICS.

“Slowing growth in prices largely reflects the impact of recent increases in mortgage rates on affordability. Tight supply, a healthy labour market and a continued lengthening of mortgage terms—30 year loans now are common—will help to prevent prices from falling outright. But it is inevitable that house prices will grow at a slower rate than households’ incomes during a period of rising mortgage rates,” says Tombs.

There was no notable reaction in Sterling to the data.

UK house price dynamics

“Looking further ahead, much will depend on how broader economic conditions evolve, especially in the labour market, but also with respect to interest rates,” says Robert Gardner, Chief Economist with Nationwide.

Concerning the outlook, Gardner says there are few signs of an imminent change. “Surveyors continue to report subdued levels of new buyer enquiries, while the supply of properties on the market remains more of a trickle than a torrent.”

Pantheon Macroeconomics meanwhile expect the MPC to provide the housing market with some relief by passing over the opportunity to raise Bank Rate in August, though they join markets in assuming the decision will be a close call.

“The MPC is committed to a tightening cycle and we see two rate hikes coming in 2019. As such, we expect the official measure of house prices to rise by just 1.5% over the course of 2018 and a mere 2.0% over 2019,” says Tombs of Pantheon’s forecast for UK house prices.

Source: Pound Sterling Live

 

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Parents Failing To Save For Their Children As Interest Rates Stay Low

From help with university living costs to a helpful leg up onto the housing ladder, the so-called ‘bank of Mum and Dad” is increasingly expected to do at least some of the financial heavy lifting when children leave home and begin to make their way in the world. But according to a new report from peer-to-peer lending platform, Zopa, many parents are failing to put money aside to help the next generation. Some because they find it impossible to save, others because they want to encourage self-reliance. But as the peer-to-peer lender sees it, low-interest rates are also acting as a disincentive.

The so-called millennial generation arguably faces a tougher set of financial challenges than their immediate predecessors – not least in terms of getting onto the property ladder. In the wake of the financial crisis, Mortgage lenders typically ask for a deposit of at least  5.0% and with the average price of a flat now standing at more than £200,000, that means a deposit in the region of £10,000. With wages remaining fairly stagnant and rents high, saving the initial amount required to purchase a home can be tough, especially for those who are also repaying student debt.

And as a report published in May by the Resolution Foundation think tank highlighted, the generation born since 1980 are decidedly gloomy about their financial prospects. Most expect to be worse off than their parents. That, in turn, puts pressure on previous generations to help out.

Can’t Save/Won’t Save

First the good news. A  majority of parents are making an effort to save and 62% have a long-term strategy stretching over four years or more.

But  Zopa’s research suggests that around 20% of parents are not saving, either for themselves or for their children. Out of that group, more than half say they simply can’t afford to set money aside.  Meanwhile a small but significant minority – one fifth – say they want their children to stand on their own two feet.

As Andrew Lawson, chief product officer at Zopa pointed out, low wage growth and high inflation have made it more difficult to put money aside. However, lack of cash is not the only factor. With interest rates still at very low levels, there is perhaps very little incentive to save.

“Unfortunately, the British public will struggle to find a savings account paying out interest higher than two per cent,” he said.  “And with the most recent UK inflation rate being posted at 2.4 per cent, anyone using one of these accounts as their primary “long term” savings vehicle can most definitely find a better route.”

The survey suggests that Most savers are not seeing their money grow. For instance, 50% of those questioned in the Zopa poll are using standard bank savings accounts. This compares with the 34% who use Junior ISAs (potentially offering better returns) and just 9% investing via Stocks and Shares ISAs.

Savings Options

So-called ‘Easy Access’ savings accounts are attractive to those who want to set money aside in a separate account while also keeping open the option to dip into the pot from time to time and get cash out immediately. However, the price for the convenience of having instant access to funds is low interest rates. Even the best performing easy access accounts offer an annual return of not much more than 1.3% and in many cases, it is lower.

“Notice Accounts”  tend to offer slightly higher rates (the best is currently) between 1.6% and 1.7% but savers can’t access their money immediately.

Despite the unexciting returns, bank accounts provide a great way to get adults and also children into the savings habit. Robert Gardner is the co-founder of RedStart, a charity set up to teach young children about money. He recommends that children have their own accounts.

“Shop around. Most banks and building societies have a children’s savings account. Again a child can learn that if they save £1 a week they can have over £50 at the end of the year to buy a bigger toy,” he says.

Gardner is also keen that children learn about the benefits of longer-term savings.

“If you want to teach your children how to ‘grow’ their money and benefit from compound interest then you should consider either a Junior ISA (JISA) and invest in stocks and shares and or a pension,” he adds.

It Pays to be Adventurous

Investing in the share and bond market takes savers away from the safe comfort zone of the bank account and into the rather more volatile world of the financial markets. But according to Ben Faulkner, Communications Director for wealth management company  EQ Investments, it pays to be adventurous.

“In almost all cases an investment for a child implies a long timescale. This situation is ideal for adopting an adventurous investment strategy, where you accept the greater volatility that comes with the potential for greater returns in the long term,” the spokesman says.

ISAs are an obvious first port of call. The Junior ISA (JISA) in particular has been designed to encourage young people between the age of five and eighteen (or more likely parents acting on their behalf) to save for the future. Under JISA rules, £4,260 can be saved every year and the returns are tax-free. There are risks, though. Returns on Stocks and Shares JISAs are not guaranteed and, in theory, any downturn in the stock market could mean the saver receiving less than has actually been put in. Alternatively, parents could invest in a standard Stocks and Shares or Cash ISA.

Robert Gardner urges parents not to forget pensions, which can provide huge benefits to children later in their lives.

“The advantage of a pension is you get tax relief. That’s free money from the government. Just 50p a week from birth until the age of 10 will grow to be worth over £100,000 by the time they retire. And they can’t access it and spend it when they turn 18,” he says.

There is also a new kid on the savings block in the shape of peer-to-peer lending platforms – of which Zopa is one. These platforms lend to individuals and businesses, with the money sourced from thousands of individual investors who are rewarded with returns that are higher than those offered by bank savings accounts. Zopa itself offers a fund with a 4.6% return to lenders.

So there are a lot of options to consider, each with their own characteristics in terms of the risk involved and the potential return. If the rate of return over a long timescale is the priority, Ben Faulkner says that evidence points to shares and property.

“A child’s portfolio should be invested largely in equities (shares in companies) and property, since these are the types of asset that, historically, have always produced the highest returns, over the long term.”

But the starting is a commitment to saving.

Source: Cash Lady

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UK house price growth slows to five-year low – Nationwide

British house prices rose at their slowest annual rate in five years this month and look set to remain subdued due to modest economic growth and squeezed household budgets, mortgage lender Nationwide said on Wednesday.

House prices across the United Kingdom were on average 2.0 percent higher this month than a year ago, slowing from 2.4 percent growth in May. This was the weakest in five years, though less of a slowdown than the drop to 1.7 percent forecast in a Reuters poll.

In June alone, prices rose 0.5 percent compared with a forecast rise of 0.3 percent.

 “There are few signs of an imminent change. Surveyors continue to report subdued levels of new buyer enquiries, while the supply of properties on the market remains more of a trickle than a torrent,” Nationwide economist Robert Gardner said.

Nationwide expects house price growth for 2018 as a whole to slow to around 1 percent – a view broadly shared by Pantheon Macroeconomics economist Samuel Tombs.

“Tight supply, a healthy labour market and a continued lengthening of mortgage terms … will help to prevent prices from falling outright. But it is inevitable that house prices will grow at a slower rate than households’ incomes during a period of rising mortgage rates,” he said.

Most economists polled by Reuters expect the Bank of England to raise interest rates by a quarter of a percentage point to 0.75 percent in August, only the second increase since the global financial crisis.

 The pace of increase after that is expected to be gradual, as the BoE assesses the effect of Britain’s departure from the European Union in March 2019.

London’s housing market was hardest hit by the June 2016 Brexit vote, due to reduced demand from foreign investors and fears for the city’s financial services industry.

Tuesday’s data showed London was the only region of the United Kingdom to record an annual price fall in the second quarter, with average prices 1.9 percent lower than a year earlier, compared with increases of 4 percent or more in Wales and central England.

But London property prices still remained 50 percent above their level before the financial crisis, while in much of northern England there had been no overall increase over the past decade, Nationwide said.

Source: UK Reuters

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Why the tenants are choosing private rented sector

With reports that a quarter of the population will be privately renting by the end of 2021, it is clear that the UK’s Private Rented Sector (PRS) is becoming an increasingly popular alternative to property ownership.

New data from insurers Direct Line for Business only goes to strengthen this argument, with a recent study revealing that 70% of UK renters have no intention of buying a home. The research supported the idea that the UK is moving toward a German Housing Model, where the majority of the population opt to rent, supported by government policy and encouraging attitudes toward long term renting.

In fact, further research shows that more people rent in Britain than almost anywhere else in Europe, with only Denmark, Austria and Germany having a lower percentage of home owners.

The reasons for this are varied but often come down to financial cost. With the average first-time buyer looking at prices double what they were just five years ago, it is understandable that home ownership is slipping through the fingers of younger generations, but interestingly that is not the only reason cited by responders for wanting to stay in the PRS.

The Direct Line for Business study shows that of the 12 million adults who said they don’t intent to buy property 22% said that the financial commitment of buying was a turn off, 9% said that they chose to rent so they could freely travel and 12% didn’t want to be tied to one place. An additional 22% commented that they didn’t want the hassle and cost of maintaining a property and would instead prefer a landlord to hold responsilbity for repairs.

Business manager at Direct Line for Business, Christina Dimitrov, said: “The UK housing market continues to change and we are seeing a major attitudinal shift when it comes to renting. While price is a factor, many people are increasingly comfortable with the flexibility afforded by renting a property rather than jumping into home ownership.”

The transition toward a new model of long-term renting is positive news for the future of the buy-to-let sector, with landlords able to support a growing pool of tenants and renters able to have greater choice in the market.

Source: Property Forum

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UK mortgage approvals hit four-month high in May

LONDON (Reuters) – The number of mortgages approved by British banks for home purchases hit a four-month high last month, according to industry figures that differed from other signs of weakness in the housing market.

Banks approved 39,244 mortgages in May, up from 38,327 in April but still down more than 4 percent compared with a year ago, seasonally-adjusted figures from trade body UK Finance said on Tuesday.

Britain’s housing market slowed after the 2016 referendum decision to take Britain out of the European Union, especially in London. The vote hit consumer confidence and spending as a fall in the pound that followed that vote pushed up inflation.

Gauges of house price growth remain muted.

UK Finance described modest growth in credit card spending, reflecting a recent boost to retail sales spurred by good weather and celebrations around the marriage of Prince Harry and Meghan Markle.

Source: Investing

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Agents warn on plummeting rental supply as number of landlords quitting sector hits a high

The number of landlords heading for the exit has hit a 12-month high.

Belvoir’s first quarter rental index, based on feedback from its franchisees, found that 5.6% of offices saw 11 or more landlords selling up – the highest percentage for over a year.

Almost a third, 31.5% of franchisees, also said they had seen four to five landlords deciding to quit, while 46.3% had seen up to three landlords selling up.

The main reasons given for selling properties were tax and regulatory changes.

The Belvoir index also showed a supply issue as these high numbers of landlords exits are not being replaced by a similar figure for new properties being added to portfolios.

Fewer offices saw landlords add significant numbers of properties in the first quarter, with just 3.7% seeing six to ten add to their portfolios and 1.9% saying 11 or more landlords had made additions. This was down from 9.6% and 5.8% respectively at the end of 2017.

There was some good news for landlords, with tenants continuing to stay in their properties for longer, with 33% preferring a tenancy of 13-18 months and 40% staying for 19-24 months – almost double the previous quarter and the highest percentage for the past two years.

Overall, average rents in the first quarter were flat on an annual basis at £784 per month.

Dorian Gonsalves, chief executive of Belvoir, said: “The trends that Belvoir is reporting are very much in line with our predictions at the beginning of this year.

“As 2018 progresses, there is no doubt that landlords and tenants will find themselves shouldered with an extra burden of cost due to continued government interference in the rental market, which includes the implementation of punitive tax changes.

“As more landlords see their profits eroded, and more legislation is in the pipeline, more landlords are likely to exit the market.

“We are still seeing new investment in the buy-to-let market, but the number of properties being bought has decreased.”

Source: Property Industry Eye