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UK house prices stage rapid recovery in third quarter

UK house prices enjoyed their strongest quarterly increase since before the financial crisis in the third quarter as lockdown restrictions eased.

Prices rebounded quickly in the third quarter after the broadbased closure of the market during the previous quarter.

Prices rose 3.3 per cent in the three months to September, according to the Halifax Property Index, the strongest increase recorded since the end of 2006. On an annual basis prices were 5.5 per cent higher, the sharpest rate of inflation since the final quarter of 2016.

The housing market has been buoyed by government interventions such as the stamp duty holiday introduced over the summer.

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And last week Boris Johnson announced plans to turn “generation rent” into “generation buy” by allowing people to purchase homes with a five per cent deposit.

Paul Smith, economics director at IHS suggested the resurgence in prices was also due to “strong demand driven by a desire for more space – either as a reaction of the lockdown or the structural economic effects of increasing home working”.

The upturn in prices meant the standardised house price edged close to the £250,000 mark during the third quarter. Price inflation has picked up across all buyer and property types, with existing property inflation – 5.8 per cent – outstripping that of new houses – +4.1 per cent.

Properties in greater London remain comfortably the most expensive, with the typical house now costing more than £500,000 and around 1.5 times higher than in the South East.

Wider economic issues, particularly the rise in unemployment due to coronavirus, suggest activity and the rapidly rising prices are unlikely to be sustained.

The recent rise in prices has led to a tightening of affordability constraints, with the house price-to-earnings ratio reaching a record high level of 6.5 by the end of the third quarter.

It surpassed the previous records of 6.4 set prior to the financial crisis.

Unsurprisingly London has the highest ratio of close to 9, and the immediate regions surrounding the capital, with ratios all above 7, where affordability remains a key issue.

By Angharad Carrick

Source: City AM

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More Brits invest in holiday homes across UK

Brits are investing in their own staycation spaces at a record-breaking pace, ahead of the autumn and winter months, according to holiday home operator Park Leisure.

YouGov data shows that over three quarters of Brits (77%) have no intention of travelling abroad this year. In fact, 43% say they intend to take more or the same number of UK trips than they usually would.

As British holidaymakers increasingly seek UK getaways and look for a long-term solution, Park Leisure has reported a staggering 47% year-on-year increase in holiday home sales this summer across its 11 locations.

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Lisa Williams, director of marketing and holiday sales at Park Leisure, said: “It goes without saying that this year has been completely unpredictable and there were challenges to overcome to make sure we were able to welcome holiday home owners and holiday makers to our parks safely and comfortably.

“Alongside the benefit of avoiding international travel regulations, our holiday homes are completely self-contained with everything you need for your prefect break. Staying in our holiday homes mean any unnecessary social interaction is avoided and our guests can cocoon themselves in their own little sanctuary or explore the beautiful great outdoors!

“We have, of course, redesigned our processes to keep people safe, as well as introducing hand sanitising facilities and regular signage displaying the guidelines and best practice, alongside a host of other measures to give holiday home owners and holidaymakers peace of mind.”

Of all the locations, Littondale (pictured), based in the Yorkshire Dales, has seen the biggest increase, taking a huge 91% more bookings this summer (June – August) compared to the same period last year.

WRITTEN BY RYAN BEMBRIDGE

Source: Property Wire

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First-time buyers commit to homeownership despite pandemic

The pandemic has strengthened the resolve of first-time buyers who have become more determined to follow their homeownership dreams and save more to get a foot on the housing ladder according to new research.

Three in five (61%) of respondents said that buying a home is more important to them now than it was at the start of the pandemic in March. The research, commissioned by Yorkshire Building Society, shows that over a third expected to buy their home sooner due to the pandemic and nearly half said they had been able to save more for their deposit as a result of the impact of COVID-19.

The research shows that buyers still face challenges when securing their first home. With the average monthly saving for those wanting to buy their first home now standing at £336, Yorkshire Building Society has estimated it will take a single person seven years and five months to save a 15% deposit for the average first-time buyer home, which is valued at £198,512.

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In order to meet the demands for a higher deposit, half of first-time buyers are looking for financial help from relatives. The number seeking support increases to 59% for those buying in the capital.

Ben Merritt, mortgages acquisition manger at Yorkshire Building Society, said: “Getting on the housing ladder seems to be more important now than it ever was. Whether it’s being in shared rented accommodation whilst juggling home and work life, or spending lockdown back in the family home, the pandemic has clearly increased the resolve of first-time buyers who have increased their savings and are more determined than ever to buy their first home.

“It’s a real priority and life ambition for many people, but getting there still remains a challenge which is why we are seeing many lean on relatives for support with deposits. Despite the lower availability of higher LTV products, there are options available to first-time buyers and so it pays to do your research to help you get the support you need.”

Source: Property Wire

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UK house prices jump again in September as market defies gravity

UK house prices rose at the fastest pace in four years in September despite the raging coronavirus pandemic as people working from home sought more space, according to the Halifax house price index.

Yet the lender said it is “unlikely” that the British housing market will “remain immune” to the historic economic slowdown.

House prices grew 1.6 per cent month on month in September, Halifax said, after climbing by the same amount in August. The rise took the average price to a new record high of £249,870.

Properties were worth 7.3 per cent more on average than they were a year earlier, the biggest year-on-year rise since June 2016.

However, Halifax said the annualised figure was flattering because the property market was subdued a year ago due to worries over Brexit.

Russell Galley, managing director at Halifax, said the housing market had been “extremely strong” since restrictions on it were lifted in May.

“There has been a fundamental shift in demand from buyers brought about by the structural effects of increased home working and a desire for more space,” Galley said.

He added that “the stamp duty holiday is incentivising vendors and buyers to close deals at pace before the break ends next March”.

Rising house prices are the UK’s ‘iron lung’

Chancellor Rishi Sunak in July raised the threshold at which stamp duty is paid to £500,000 until the end of March 2021. Analysts say the policy has combined with demand that built up during lockdown to fuel buying.

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North London estate agent Jeremy Leaf said: “These figures very clearly show the impact of pent-up demand, the stamp duty holiday and low interest rates on the market post lockdown.”

Lucy Pendleton of estate agents James Pendleton said: “The often frothy Halifax index has lived up to its reputation and is pushing the bounds of credibility here.

“However, it underlines just how much the housing market has become the economy’s iron lung of late, while its other vital signs flash amber at best.”

Yet Leaf said that “demand has lost a little momentum over the past few weeks”. He put this down to “the resurgence in Covid-19 and new restrictions on businesses… making some buyers a little more nervous”.

Coronavirus cases have risen sharply in the UK in recent weeks. It has caused the government to put vast swaths of the country in local lockdowns.

Sunak produced a new package of economic support in September. But he confirmed that the furlough scheme – which has supported around 10m jobs – would end this month.

Economists say rising Covid cases and unwinding government support are likely to weigh on UK house prices towards the end of the year.

House prices could fall by five per cent

Halifax’s Galley said: “It is highly unlikely that the housing market will continue to remain immune to the economic impact of the pandemic.”

Howard Archer, chief economic advisor to the EY Item Club, said the housing market “will come under increasing pressure over late-2020 and the early months of 2021”.

He said there is likely to be “a significant rise in unemployment and waning pent-up demand”.

Archer said UK house prices could be around five per cent lower by mid-2021 than they are now.

“The EY Item Club expects housing market activity to gradually improve over the second half of 2021,” Archer said.

“Very low borrowing costs should also help matters with the Bank of England unlikely to lift interest rates from 0.10% during 2021.”

Source: City AM

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RICS: Buyer enquiries continue to pick up

A net balance of 52% of RICS surveyors noted an increase in new buyer enquiries in September.

New instructions coming onto the sales market also rose for a fourth month in a row, which now signifies the longest stretch of rising supply going back to 2013.

Tenant demand mostly increased, though it fell in London.

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Alan Cleary, managing director for mortgages at OneSavings Bank, said: “Evidence from the latest RICs market survey shows house prices rising strongly and tenant demand remaining firm in September, though falling a little from the high levels reached in July and August.

“Rising house prices should provide a natural support to rental growth. The immediate outlook is for a period of robust growth in overall levels of housing market activity, with transactions and prices continuing to drift upward.”

BY RYAN BEMBRIDGE

Source: Property Wire

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House Price Trend Continues Upwards

House prices increased by 2 per cent in September, according to the latest Nationwide index. This pushed up the annual rate of house price growth to 5.0 per cent, the highest rate since Sep 2016

Commenting on the figures, Robert Gardner, Nationwide’s Chief Economist, said:

‘Housing market activity has recovered strongly in recent months’, said Nationwide chief economist Robert Gardner. ‘Mortgage approvals for house purchase rose from around 66,000 in July to almost 85,000 in August – the highest since 2007, well above the monthly average of 66,000 prevailing in 2019.

‘The rebound reflects a number of factors. Pent-up demand is coming through, with decisions taken to move before lockdown now progressing. The stamp duty holiday is adding to momentum by bringing purchases forward. Behavioural shifts may also be boosting activity as people reassess their housing needs and preferences as a result of life in lockdown’.

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Nationwide said its recent research indicated that, of the people who had been considering a move before the Coronavirus Crisis, a fifth had put their plans on hold – a quarter of these saying they had concerns about the property market.

‘Younger people were much more likely to have put off plans than older people, which may reflect concerns about employment prospects’, said Gardner.

‘Indeed, most forecasters expect labour market conditions to weaken significantly in the quarters ahead as tighter restrictions dampen economic activity and the furlough scheme winds down. While the recently announced jobs support scheme will provide some assistance, it is not as comprehensive as the furlough scheme it replaces’.

Of those moving or considering a move, around a third were looking to move to a different area, while nearly 30 per cent were doing so to access a garden or outdoor space more easily.

‘As you might expect, the majority of people are looking to move to less urban areas, with this trend becoming increasingly evident among older age cohorts’, said Gardner.

Source: Residential Landlord

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Sterling holds near $1.30 as optimism over Brexit deal grows

Sterling held near $1.30 on Tuesday as signs of progress in Brexit talks helped cement gains after investors pushed back expectations for when the Bank of England would cut interest rates below zero.

The pound was last down 0.1% at $1.2966 after topping $1.30 for the first time since mid-September. Sterling later fell into negative territory, before making up ground after Reuters reported that Britain and the European Union were moving “closer and closer to a deal”.

European Union diplomats told Reuters that Brussels was gearing up to negotiate until as late as mid-November — rather than cutting talks off at the start of next month — to avoid a damaging “no-deal” scenario when Britain’s standstill transition with the bloc ends on Dec. 31.

Sterling last traded down 0.1% against the single currency at 90.91 pence.

Cautious optimism that London and Brussels would reach a deal has been growing in recent days, and most analysts now expect the two sides to do so before the transition deadline.

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“We’re getting closer and closer — the talks are miraculously getting slightly warmer,” said Mark Holman, CEO at TwentyFour Asset Management.

“For us looking from financial markets, it does seem stupid not to get a deal done … If you ask me today, I think it’s probably 50:50.”

Earlier, sterling had touched $1.3007, its highest since Sept. 18.

NEGATIVE RATES

That mark came as money markets pushed back bets that Britain’s interest rates would turn negative, with investors now seeing rates falling below zero in May 2021. Previously they had expected the Bank of England to cut rates into negative territory in March.

The BoE, which cut borrowing costs to a record-low 0.1% in March, is looking at whether it is technically feasible to cut its main interest rate below zero, something that has already been done in Japan and the euro zone.

Bank of England rate-setter Jonathan Haskel said on Monday he saw downside risks to the economy — and also some possible benefits — from cutting interest rates below zero.

“They are still keeping the option open that negative rates could help support the recovery,” said Lee Hardman, currency strategist at MUFG.

Sub-zero rates would likely weaken the pound, at least in the short term, he added.

Reporting by Tom Wilson

Source: UK Reuters

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Boris Johnson plans low deposit mortgage scheme

Prime minister Boris Johnson has vowed to create ‘Generation Buy’ with a low deposit mortgage scheme that he says could be ‘revolutionary’ for young people.

First-time buyers have been finding it particularly hard to buy a property since the pandemic began as lenders have cut maximum loan to values (LTVs), meaning they require a bigger deposit to buy a home.

The stamp duty holiday in England and Northern Ireland was also granted to landlords and second home owners, further squeezing those looking to buy their first home as house prices have been pushed up and demand has increased.

In an interview with the Telegraph before the start of the Conservative Party conference, Johnson said a “huge” number of people were excluded from owning a home and he wanted to solve the problem with a mortgage scheme that permitted deposits as little as 5%.

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Speaking to the newspaper he said: “I think a huge, huge number of people feel totally excluded from capitalism, from the idea of home ownership, which is so vital for our society.

“And we’re going to fix that – Generation Buy is what we’re going for.”

According to the report, Johnson has asked his ministers to work on a scheme to encourage the availability of long-term fixed deals with 5% deposit mortgages.

The government withdrew the Help to Buy mortgage guarantee scheme at the end of 2016 which offered lenders the option to obtain a guarantee on a 95% mortgage.

If the borrower defaulted on the loan, the government would share in some of the losses.

In the two years it was available, the scheme helped to more than double the amount of 95% LTV deals available on the market.

Written by: Samantha Partington

Source: Your Money

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A positive outlook for BTL: Seeking more than a room with a view

As the final quarter of 2020 begins – following an unprecedented six months – the buy-to-let (BTL) market is bouncing back strongly, in a way that few commentators predicted a few months ago, in my opinion.

The residential and buy-to-let markets both felt a significant impact during the initial stages of the pandemic. Public health measures made it difficult for surveyors to visit properties, contributing to nearly two months of disruption in the housing market. However, since property valuations became possible again, demand has returned, and the UK property market is demonstrating its resilience.

It has quickly become apparent to me that landlords and investors have not lost their appetite within the buy-to-let sector either. Demand for new tenancies has risen and historically such increases have often continued when supported by a growing market for property sales, as we are seeing now. The Chancellor’s stamp duty cut has further fuelled interest.

In fact, by July the number of new tenancies was nearly back to pre-pandemic levels, according to The Deposit Protection Service’s (DPS) quarterly Rent Index.

Most of the growth in new tenancies has been at properties owned by professional landlords, and we expect to see this trend increasing. Professional landlords with reliable portfolios of good properties are often in a better position to absorb financial shocks.

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According to the Savills Global Market Sentiment Survey, concerns over the pandemic are driving more UK residents to seek properties in rural locations.

The rise of home working means there are fewer benefits in living close to workplaces, particularly those in city centres. More people seem to be taking up the chance to find a property with a garden or a garage – or simply a bigger home, whether to accommodate greater home working or simply to enjoy more space. Such properties are more plentiful in the shires, meaning demand in urban areas may continue to fluctuate.

The Royal Institute of Charted Surveyors’ (RICS) August survey found that 83% of surveyors in the UK anticipate greater demand for homes with gardens or balconies in the next two years and that 68% expect the desirability of properties with a ‘more private’ outdoor space to grow. The increased demand for properties with specifically ‘roomier’ features has led to confidence in the housing market rising to a four-year high.

Overall, I believe this represents a relatively positive picture for brokers, professional landlords and buy-to-let investors. The fact that rates are low, loan-to-values (LTVs) are almost back to pre-pandemic levels can only go to support this positive picture.

Demand for rental properties is likely to increase in many areas, as renters seek tenancies with more than just ‘a room with a view’ to make staying and working at home more comfortable.

By Paul Fryers

Source: Mortgage Introducer

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Housing fuels service sector recovery

With interest rates at a record low and buyers benefitting from the current stamp duty holiday, the property market is going from strength to strength, with both transactions and prices increasing, and it is this improvement that is helping to drive the service sector recovery, according to new figures.

Estate agents and related businesses enjoyed strong growth last month, the latest analysis from the IHS Markit/CIPS’s services purchasing managers’ index (PMI) shows.

The index stood at 56.1 last month, up from just 13.4 at the peak of coronavirus restrictions and lockdown in April. Anything above 50 is considered a sector in growth.

However, September’s reading is down from 58.8 in August, primarily due to the end of the Eat Out To Help scheme.

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Chris Williamson, chief business economist at IHS Markit, which compiles the survey, commented: “The UK service sector showed encouraging resilience in September, with business activity continuing to grow solidly despite the government’s Eat Out To Help Out scheme being withdrawn.

“Unsurprisingly, spending in the restaurant sector slumped after spiking higher in August, and many other consumer services activities showed a similar slide back into contraction as renewed lockdown measures were introduced, causing the overall rate of expansion to moderate.”

Despite recent growth, there are signs that optimism in the service sector is starting to cool amid concerns that there could be a second Covid-19 wave, while Brexit uncertainty is also having an adverse impact.

Growth in the service sector has been hindered by tighter restrictions introduced during the past few weeks, while the lack of international tourists is hurting businesses, and this in turn means potential job cuts.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: “Once again job losses remained the black spot amidst these pockets of recovery.

“With the seventh consecutive monthly drop in job numbers, redundancies have replaced job hiring in an attempt to shield firms from rising input costs, but these strategies will devastate local communities.”

Source: Property Industry Eye