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UK Housing Market on the Up, Says RICS

The UK housing market seems to be gathering pace following last month’s General Election, according to the Royal Institution of Chartered Surveyors (RICS).

The latest RICS survey revealed an increase in both the number of sales and buyer enquiries in December for the first time in seven months. According to RICS, house prices across the country are set to rise in 2020 due to a less volatile political and economic climate following the Conservatives landslide election win last month.

The figures were boosted by a sharp increase in sales in London and the South East of England, although in Scotland and Northern Ireland property sales fell. Heightened interest from new buyers in Wales and the North East of England also helped to drive up expectations for the year ahead.

According to the survey, 66% of RICS members expect positive house sales growth over the next year, a massive jump from the 35% that expected it just a month ago.

“The signals from the latest RICS survey provides further evidence that the housing market is seeing some benefit from the greater clarity provided by the decisive election outcome,” said Simon Rubinsohn, chief economist at RICS.

“Whether the improvement in sentiment can be sustained remains to be seen given that there is so much work to be done over the course of this year in determining the nature of the eventual Brexit deal.

“However, the sales expectations indicators clearly point to the prospect of more upbeat trend in transactions emerging with potential purchasers being more comfortable in following through on initial enquiries.

“The ongoing lack of stock on the market remains a potential drag on a meaningful uplift in activity although the very modest increase in new instructions in December is an early hopeful sign.

“Given that affordability remains a key issue in many parts of the country, the shift in the mood-music on prices is a concern with even London expectations pointing to a reversal of course both over the coming months and looking further out.

“This highlights the critical importance of the government addressing the challenge around housing supply particularly with the gradual phasing out of the Help to Buy incentive.”

Independent property expert Henry Pryor said: “Transaction volumes have held up well last year but while it feels like there may be a little more life in the market and some signs of confidence returning to the middle and upper ends there is no actual evidence of a Boris Bounce just yet.

“The data won’t be available until May as it takes time for sales that are agreed to exchange and complete and then another month to appear in the official records. However, it does seem like more people are thinking of moving, more homes are coming to market, and some buyers are bored of putting their lives on hold and want to get on with their lives.

“Will it last? Well, there are still some big icebergs ahead of us – the Budget next month, ongoing negotiations with Europe, a possible return of the Beast from the East. Any one of these could knock confidence and snuff out the fragile optimism, but if you want to buy or sell it looks like 2020 may be your year after all.”

Source: Money Expert

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Investing in commercial property: a tale of three markets

Britain’s commercial property sector has traditionally been divided into three subsectors: industrial, offices and retail. In the 1980s and 1990s, retail outperformed while industrial properties struggled as consumer spending rose inexorably but the country deindustrialised. In the last ten years retail has lagged as household spending migrated online; industrial property, however, has outperformed thanks to the growth in logistics warehouses, notably to service online shoppers. But in recent years some of the best growth has come from three smaller subsectors: student housing, healthcare and self-storage – or beds, meds and sheds. Investors can gain access to each of these subsectors through real-estate investment trusts. Are they still worth a look?

The university boom

Student numbers reached 2.3 million in 2018; 75% are undergraduates and 80% are British. Despite the introduction of full tuition fees in 2012, more than half of school leavers go on to higher education. The annual number of applicants through the Universities and Colleges Admissions Service (UCAS) has doubled to 533,0000 in 25 years. Students used to live in college-owned halls of residence or in the private rental market. But demand outstripped both the willingness of the former to provide the necessary capital and the capacity of the latter.

Unite Group (LSE: UTG) was founded in 1991, initially to provide purpose-built student accommodation in the Bristol area. It now provides 75,000 beds across the country. Unite forms partnerships with universities to ensure high occupation: 92% of beds are reserved for 2019/2020 and 60% are guaranteed by universities. Occupancy of 98%-99% has consistently been achieved and rental growth is in the range of 3%-4% per annum. At mid-year the group’s assets stood at £3.2bn, of which £1bn was financed by borrowings, although the £1.4bn recent acquisition of Liberty Living will have increased gearing to around 35%.

The shares, at 1,240p, trade at a 47% premium to net asset value (NAV), are valued at over 30 times earnings and yield just 2.6% but Unite says that the acquisition is “materially accretive to earnings”, while it is “confident of 3%-3.5% medium-term rental growth”. But even if the 12% growth in interim earnings and 8% growth in the dividend continues, it will take several years for the shares to look good value, despite the low-risk business model.

A turnaround story

Empiric Student Property (LSE: ESP) with 8,882 beds and £1bn of assets, seems much better value at 98p. It is on a 10% discount to NAV and yields 5%, but it is recovering from operational problems in 2017 that prompted a dividend cut. It focuses on smaller, higher-quality and more expensive buildings to appeal to graduates (46% of tenants) and overseas students (67%). GCP Student Living (LSE: DIGS), with £960m of assets, is of a similar size, but has less debt and an unblemished record. It trades on a 14% premium to NAV and yields 3.2%. It has 4,116 beds in 11 locations, but just 23% of its tenants are from the UK. As with Empiric, this may be an advantage as growth in international student numbers looks assured.

The rise of the health centre

The merger of Primary Health Properties (LSE: PHP) with MedicX leaves just two companies specialising in health centres: PHP, with £2.3bn of assets and Assura (LSE: AGR), with £2bn. Both trade on large premiums to NAV (38% and 50% respectively). But the attraction is dividend yields of 3.7% and 3.5% that are not only very safe, but also all but guaranteed to be at least inflation-indexed.

Both groups own purpose-built health centres, at least 90% of whose income comes directly or indirectly from the NHS on long-term leases, with the rest coming from pharmacies. Following the acquisition of MedicX, PHP now owns 488 of these, which are 99.5% occupied, while Assura has 560.

These health centres have replaced many of the old, small GP surgeries, but house many more doctors together with modern equipment, clinics, diagnostic testing, pharmacies and even day-surgery centres. Rental agreements provide for modest annual increases, but there is the potential for more if a property is modified or extended. Expansion comes from buying recently built premises or through funding a developer and then buying on completion, thereby avoiding risks connected with construction.

With only 20% of the PHP portfolio having a lease expiry of less than ten years, there is little opportunity or wish to trade the assets; the value of the shares lies in the rental stream. This makes them comparable to infrastructure funds, except that ownership of the assets is permanent. Strong performance in 2019 means that the shares of both are no longer great value, but they represent sound investments for those seeking secure, growing income.

The “meds” theme also covers two smaller companies that own residential care homes, Impact Healthcare (LSE: IHR) and Target Healthcare (LSE: THRL). Target, with £600m of property assets and £100m of net debt, operates 69 purpose-built care homes. Impact, with £311m of property assets and some £10m of net cash, owns 84 care homes and two healthcare facilities leased to the NHS. In both cases, the care homes are leased to high-quality operators for the long term, with built-in rental increases. Both shares seem attractive, with Target trading on a 7% premium to NAV and yielding 5.8%, while Impact trades on a 2% premium and yields 5.7%.

Note, however, that the number of care beds in the UK has fallen some 20% since its peak of around 550,000 in 1997. The NHS and local authorities have not been prepared to increase payments to operators by enough to cover escalating costs. In 2011 Southern Cross got into trouble amid an 8% drop in occupancy, the result of fewer referrals due to public-spending cuts. It could not pay its escalating rent bill and became insolvent. Well-run care homes are the most cost-effective way of caring for the elderly, but governments have repeatedly pursued the false economy of squeezing the private operators, who account for nearly all capacity. If this keeps happening, Target and Impact could find their rental income under pressure from struggling operators.

Businesses need more storage space

The self-storage market conjures up images of warehouses crammed with personal possessions. That, however, probably only accounts for a small part of the UK’s 20 million square feet of lettable area, with rates varying from £16 per square foot (sq ft)in Scotland to £28 in London. Personal storage is an important part of the market, but the business market is key. For small businesses, storing goods, records and stock at a self-storage unit or lock-up garage is likely to prove much cheaper than doing so at an office or in a shop, particularly with the increasing number of online entrepreneurs operating from home.

Hence the success of the two listed specialists, Safestore (LSE: SAFE) and Big Yellow (LSE: BYG), trading at premiums of 52% and 75% to NAV and yielding 2.2% and 2.8% respectively. Safestore, with 149 stores (including 22 in the Paris region) has 6.5 million sq ft of lettable area valued at £1.4bn and Big Yellow, with 75 stores, has 4.6 million sq ft valued at £1.5bn.

Big Yellow’s recent interim results revealed revenue and profit growth of 3.4% and 6% respectively, thanks to a small increase in like-for-like occupancy and a 1.9% increase in rent per sq ft. Lettable area increased only 0.7%, although there are 13 development sites, of which six have planning permission. Big Yellow also owns 20% of Armadillo, with 25 stores, which it presumably hopes to buy the rest of. That would give it 6.6 million sq ft in all.

Safestore’s recent final results showed a 5.6% increase in revenue and a rise in earnings per share of 6.3%, thanks to increases of 3.5% in average occupancy and a 1% in average rates. It plans four new stores in 2019/2020, but insists that its “top priority remains the growth opportunity of the 1.5 million sq ft of currently unlet space”. Big Yellow’s occupancy of 83.4% is higher, despite its larger stores, giving less unlet potential and its net rent per sq ft of £27.73 is 6% higher than Safestore’s, despite the latter’s focus on London and the southeast (70 stores). Both shares trade on 27 to 28 times underlying earnings, so they look expensive despite the solid record and prospects.

ASR strategist Zahra Ward-Murphy acknowledges that “the beds, meds and sheds theme is not new and these sectors have been outperforming for some time. Nonetheless, we like these sectors because they are underpinned by secular demand drivers and therefore should prove relatively resilient to any further slowdown in growth”. Business risks look low and dividend yields are reasonable in relation to low interest rates and bond yields, while dividends should climb steadily.

However, with the exception of the recovery story of Empiric and the historically risky care-home owners, valuations are high and vulnerable to market setbacks, so investors should wait for the next general sell-off before eyeing them up.

By Max King

Source: Money Week

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How landlords are tackling the biting tax changes

Landlord clients are tackling the tax and regulatory changes hitting their pockets by taking advantage of low mortgage rates, using limited company structures, opting for higher yielding properties and branching further afield, brokers have said.

The buy-to-let market grew rapidly after the financial crisis but has since taken a beating as a number of tax and regulatory changes have made the private rental sector a less lucrative option.

In fact more than a third of landlords are planning to sell at least part of their portfolio in 2020 as the changes continue to bite in a system “weighted against them”.

Accumulate Capital polled 750 investors in December and found 37 per cent of landlords were planning to sell one or more of their properties, with 61 per cent of them blaming increasing regulations and taxes.

How the rules changed:

An additional 3 per cent stamp duty surcharge, introduced in April 2016, was closely followed by the abolition of mortgage interest tax relief for landlords.

Landlords then took a further hit when a shake up of rules by the Prudential Regulation Authority meant buy-to-let borrowers were now subject to more stringent affordability testing.

The changes to mortgage relief have been phased into the system since April 2017, but by April 2020 landlords will be unable to deduct any of their mortgage expenses from taxable rental income.

Instead, they will receive a tax-credit based on 20 per cent (the current basic tax rate) of their mortgage interest payments.

Following the changes, landlords who were higher or additional-rate taxpayers would now only get refunds at the 20 per cent rate, rather than top rate of paid tax.

On top of this, landlords could also be forced into a higher tax bracket because they would need to declare the income that was used to pay the mortgage on their tax return.

The changes led many to predict the buy-to-let market would shrink in size leaving only ‘professional landlords’ able to make viable returns.

Of those keen to sell, 72 per cent thought the current tax and regulation measures were unfairly weight against them while 69 per cent said the costs of managing their portfolio had risen “considerably” over the past five years.

But brokers have said many of their landlord clients were sticking with the private rental sector and diversifying their portfolio or shaking up their own system to deal with changes.

David Hollingworth, associate director of communications at L&C Mortgages, said: “[The changes] will no doubt lead some to hold their position rather than add more properties, particularly the more amateur landlord whilst they review their approach.

“However, many are taking action in controlling their costs by taking advantage of low mortgage rates and the use of limited company lending to grow investments.”

Due to the tax shake up, limited company status is more attractive to landlords as changes would not affect them and they can offset mortgage interest against profits which are subject to corporation tax instead of income tax rates, which is cheaper.

Average mortgage rates have also been slashed over the past few years as lenders battle in a “race to the bottom” which has seen two-year fixed rates for buy-to-let properties fall below 1.3 per cent.

Mr Hollingworth added: “While some will be considering whether it might be the right time to sell certain properties in light of the tougher conditions, there’s little to suggest that landlords are offloading property in significant numbers.”

Rachel Lummis, mortgage and protection adviser at Xpress Mortgages, said although buy-to-let enquiries from new and smaller landlords had plummeted, the larger portfolios were still transacting.

She said: “Larger portfolio landlords are still transacting, just differently from a few years ago.

“Clients are remortgaging existing properties to not only secure decent long-term fixed rates but to also raise capital for further investment.”

Ms Lummis said the properties being added to portfolios had moved from standard flats and houses to more high-yielding houses of multiple occupancy or multi-unit blocks, as well as in locations around the country not previously considered.

Meanwhile Ruth Whitehead, director at Ruth Whitehead Associates, warned against the “relative flatlining” of property values over the next few years and urged anyone considering selling property to “think very carefully”.

She added: “In short, it’s something that needs more careful consideration than ever before and clients should only stay in this market for the long haul.”

By Imogen Tew

Source: FT Adviser

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UK economy sees worst growth since 2012

The UK economy grew at its slowest rate since 2012 in November, meaning an interest rate cut from the Bank of England (BoE) could be on the cards soon.

UK GDP grew at 0.6% in the 12 months to November, the Office for National Statistics said today (13 January), down from 1% in October, representing the slowest annual growth rate for more than seven years.

The figures come after Monetary Policy Committee member Gertjan Vlieghe told the Financial Times he would “need to see an imminent and significant improvement in the UK data to justify waiting a little longer” to cut rates.

Sterling continued its decline on the news, with a 0.6% decline on Monday (13 January) seeing the currency drop below $1.30 once more. That buoyed the stockmarket, though, with the blue-chip FTSE 100 index rising 0.5% and FTSE 250 advancing 1%.

The economy declined by 0.3% in November alone, well below consensus expectations of zero month-on-month growth.

This was likely due to businesses bringing activity forward to before the 31 October Brexit deadline, said Andrew Wishart, UK economist at Capital Economics.

Upwards revisions of 0.2% and 0.1% to September and October’s figures respectively left growth in the three months to November at 0.1%, meanwhile.

However, November’s sharp decline “nonetheless leaves the economy on course to contract by 0.1% in Q4 as a whole”, Wishart said.

Rob Kent-Smith, head of GDP at the ONS, said growth in construction was offset by “weakening services and another lacklustre performance from manufacturing”.

“Long term, the economy continues to slow, with growth in the economy compared with the same time last year at its lowest since the spring of 2012,” he added.

Interest rate cut more likely

The figures fuelled speculation an interest rate cut could be closer than previously thought, particularly allied with Vlieghe’s comment.

Last week, both BoE Governor Mark Carney and fellow MPC member Silvana Tenreyro spoke positively about the possibility of a rate cut sooner rather than later.

Michael Saunders, one of two who voted for a cut at the last meeting, is set to speak on Wednesday.

Matthew Cady, investment strategist at Brooks Macdonald, said markets are currently pricing in close to a 50/50 chance of a 25 basis point cut to the UK’s current 0.75% Bank Rate.

“The weaker GDP print today puts beyond doubt that the next Bank of England meeting at the end of January is going to be a ‘live’ meeting,” said Cady.

With the BoE having already cut both growth and inflation forecasts and the next Brexit deadline of 31 January looming, Cady said “UK investors will need this monetary and fiscal support to fall back on, and any disappointment here could be difficult for markets to swallow”.

However, Wishart said a weak UK economy is “old news”, meaning today’s GDP figures “won’t seal an interest rate cut”, despite noting “it will be a close call”.

“In normal times, the MPC would already have cut rates. But it held off to see if the general election produced a revival in sentiment,” Wishart said.

“What really matters is what happens in the data for January. At the moment, we think the MPC may hold off from cutting rates.”

By David Brenchley

Source: Professional Adviser

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Are UK house prices really on the rebound?

UK house prices rose by 2.2% in the year to November, to an average of £235,000, according to the latest data from the Office for National Statistics (ONS).

Average prices rose by 1.7% in England (to £251,000), with a 7.8% jump in Wales (to £173,000), a 3.5% rise in Scotland (to £155,000), and a 4% rise in Northern Ireland (to £140,000). In London, prices rose by 0.2% – not much, but a big improvement on the negative readings seen for most of last year.

In all, it paints a picture of a housing market that is showing signs of rallying. Particularly if you look at it on a chart, as per the ONS one below.

Putting it bluntly, that’s not necessarily good news. As we’ve been pointing out at MoneyWeek for a couple of years now at least, it would be best if house prices continued to flatten or fall gently, to allow earnings to play catch up.

In the absence of a better solution – which would involve a lot of political finesse, long-term thinking, and the tackling of a lot of vested interests, and thus seems unlikely – this is the easiest and least painful way to return house prices across the UK to some sort of semblance of affordability.

A rebound now would jeopardise that. So how seriously should we take the figures?

One point to note is that the ONS figures, while official, are relatively new compared to other long-running surveys such as those compiled by Nationwide or Halifax. You can see that they still need to iron out aspects.

That near-8% jump in Wales does rather stand out. Apparently, it’s down to two things – there was a rise in the number of expensive properties were being bought and sold in the likes of Cardiff (in other words, the typical house sold last month was more expensive than ones in previous months), and also, the large year-on-year rise was exaggerated by a “fall in prices during the same period in 2018.”

So the figures are worth taking with a pinch of salt.

That said, there are some reasons that you might expect a rally of sorts, and it’s worth considering them. November’s figures are unlikely to show any bounce related to politics – after all, these deals were all done before the election.

However, house prices have been flat or falling for some time, and importantly, mortgages have grown cheaper over the year – according to Moneyfacts.co.uk, the cheapest five-year fix for someone with just a 5% deposit, came in at 3.37% in January, but 2.75% in November. So the availability of cheaper credit combined with a sense that it might be a buyer’s market, may be helping things.

Meanwhile, the worst of the landlord exodus may be behind us – while there are still tax changes to come, those who are still hanging on in there must surely have some idea of what it’s now costing them to do so.

If indeed, cheaper loans are helping to boost prices, then it could continue – particularly if the Bank of England does decide to cut rates again. Combine it with a sense that foreign buyers are back in the market at the top end to bag a bargain while sterling is still weak ahead of Brexit, and we could see a sustained bounce in 2020.

Frankly, we hope it doesn’t happen. And arguably, credit conditions can only slacken so much further. But that’s the key thing to watch if you want an idea of where prices will go – what price is a mortgage and how easy is it to get? If they get even cheaper and more accessible than they are now, then all else being equal, prices will go up.

By John Stepek

Source: Money Week

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Fixed rate mortgage costs at historic low

Two, three and five-year fixed rate mortgages have all come down in cost over the past 12 months and witnessed some big reductions compared to five years ago, according to Mortgage Brain’s latest product data analysis.

The cost of a 60% LTV, five-year fixed rate, for example, is now 5.7% lower than it was this time last year, while a 60% LTV two-year fix is now 4.1% lower.

In the 80% LTV space, five and two-year fixed rate products now cost 3.2% less than they did at the beginning of January 2019.

Five years ago

The fixed rate market also shows a big improvement in terms of cost compared to five years ago.

Mortgage Brain’s latest data shows reduction in cost for the two-year fixes at 60, 70, 80 and 90% LTV of between 9.8 and 17.8% and the equivalent five-year fixed products have fallen between 12.1% to 14.4%.

Monetary savings

In monetary terms the 5.7% reduction in cost over the past 12 months equates to an annual saving of £432 on a £150k mortgage.

Compared to five years ago, however, borrowers can secure a potential annual saving of £1,584 for the 90% two-year fix, and £1,206 and £882 for the five and two-year 60% LTV products respectively.

While favourable reductions in cost have been seen over the past 12 months and longer, Mortgage Brain’s short-term analysis shows little movement with mortgage costs for the majority of mainstream products remaining static with those offered at the beginning of October 2019.

Comment

Mark Lofthouse, CEO of Mortgage Brain, commented: “Our latest product data analysis shows that while there’s little to get excited about in terms of rate and cost movement over the past three months, the UK mortgage market has seen some big cost reductions over the year and particularly over the last five year

“With mortgage costs down by up to 17.8% compared to January 2015, there are savings across the board that advisers are able to offer their customers. Mortgage costs remain at historic lows and forecasters are predicting that this will continue in to 2020.”

By Joanne Atkin

Source: Mortgage Finance Gazette

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Scottish Building Society: Lack of supply leading to higher Scottish house price growth

House prices in Scotland are growing faster than the rest of the UK, however, Scottish Building Society chief Paul Denton has warned that demand outstrips supply.

House prices in Scotland are growing faster than the rest of the UK with the average property £154,798 – an increase of 3.5% year on year, according to government House Price Index (HPI) figures released today.

The UK average was £235,298, up 2.2% on November 2018 and an increase of 0.4% on the previous month.

The volume of residential sales in Scotland in September 2019 was 8,628, an increase of 1.8% on the original provisional estimate for September 2018. This compares with an increase of 3.3% in England, 1.3% in Wales and 4.9% in Northern Ireland.

The HPI report says: “Prices vary across Scotland, with the highest-priced area to purchase a property being City of Edinburgh, where the average price was £277,600, and the lowest-priced area being East Ayrshire, where the average price was £95,941.”

Paul Denton, chief executive of Scottish Building Society, said: “The figures relate to November, so it is too early to assess the long-term impact of the General Election result on the Scottish market.

“Many commentators predict economic uncertainty to ease in 2020 with a resultant increase in transactions. However, while consumer confidence is important, demand continues to outstrip supply. We would support any initiative to help people on to the property ladder, including accelerating the number of new homes being built.

“Last month, we became one of the first lenders to take applications from the Scottish Government’s First Home Fund . This will make the housing market fairer by providing £150 million until March 2021 to help 6,000 people buy their first home.”

The UK HPI is calculated based on completed sales at the end of the conveyancing process. This means that while the UK HPI may not be as timely in publishing as the other measures, it is however ultimately more complete with coverage of both cash and mortgage transactions for the whole of the UK.

Source: Scottish Construction Now

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Bank of England policymaker maintains interest rate cut view

Bank of England (BoE) policymaker Michael Saunders has said he is sticking to his view that interest rates should be cut because of weaknesses in the UK’s labour market and wider economy.

“It probably will be appropriate to maintain an expansionary monetary policy stance and possibly to cut rates further, in order to reduce risks of a sustained undershoot of the two per cent inflation target,” Saunders said in a speech on Wednesday morning.

“With limited monetary policy space, risk management considerations favour a relatively prompt and aggressive response to downside risks at present.”

Saunders was one of two of the BoE’s monetary policy committee’s (MPC) nine members who voted to cut interest rates late last year.

Since then, several other MPC members — including outgoing BoE governor Mark Carney — have suggested a rate cut may be necessary.

Saunders said that while some recent surveys had suggested Britain’s economy had improved, while others had worsened and remained sluggish.

“But, taken as a whole … business surveys are generally soft and consistent with little or no growth in the economy,” he said.

“My own view is that, even if the economy improves slightly from the recent pace, risks for the next year or two are on the side of a more protracted period of sluggish growth than the MPR (Monetary Policy Report) forecast,” Saunders added.

Sterling was 0.2 per cent down against the dollar in morning trading on Wednesday.

By Anna Menin

Source: City AM

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November year-on-year mortgage lending falls

The number of mortgages completed in November 2019 was down by around one tenth on the same time last year for both first-time buyers and home movers, figures from UK Finance show.

There were 30,620 new first-time buyer mortgages, down 10.5% from November 2018, and 30,750 home mover mortgages, a drop of 10.6%. This movement reflects particularly strong home-purchase activity in November 2018.

The value of first-time buyer mortgages was £5,271 million while home mover lending stood at £7,012 million.

Remortgaging

Remortgaging with additional borrowing in November 2019 rose by 5.7% year-on-year to 18,610 cases with the average additional amount borrowed being £51,470.

There were 18,470 new pound-for-pound remortgages (with no additional borrowing), which is down 12.4% from November 2018.

Buy-to-let

Buy-to-let home purchase loans fell in November 2019 to 6,300, which was 4.5% fewer than the same time last year. Remortgaging in the buy-to-let sector was also down, by 5.1% to 15,000 cases.

Comment

Rob Barnard, director of intermediaries at Masthaven, said: “These are mixed figures from UK Finance, however the mortgage market was resilient in 2019, particularly for first time buyers. This slight dip in completions could be a reflection of pre-election jitters. As certainty starts to build around the country, we should see a bounce bank in figures.

“However, the industry needs to ensure they are working to support the market. We need to capitalise on growing positive consumer sentiment and continue to offer products which suit modern lifestyles.

“As we move into 2020, we need to ensure later life and self-employed borrowers also benefit from increasingly flexible and innovative products and rates and we don’t leave any borrower groups locked out of the market”.

Nick Chadbourne, CEO of conveyancing solutions provider LMS, commented: “The continuation of low interest rates and competitive products from lenders ensured 2019 ended with a stable remortgage market.

“LMS data shows the gap between purchases of 5-year fixed rate products and 2-year fixed rate products has been closing steadily in recent months as borrowers take advantage of lower rates in place of longer-term certainty. It will be interesting to see if the balance will shifts one way or another moving into Q1 2020.

“All eyes are on the upcoming base rate decision. It will be interesting to see how lenders and borrowers react if there is a cut, as has been hinted at by prominent policy makers, given that it has been a while since rates last fell.”

By Joanne Atkin

Source: Mortgage Finance Gazette

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Savills shares jump after UK housing market improves post-election

Savills has seen shares jump after the estate agency said it saw the UK commercial and residential markets pick up after last month’s general election.

The real estate business said its full-year results for 2019 will be at the “upper end” of expectations, following an “excellent” performance in the UK.

It said Brexit uncertainty had restrained UK growth until mid-December, but saw “a strong close to the year as confidence to transact returned to the market”.

The London-listed firm also said it was particularly “resilient” as it faced challenging backdrops in both the UK and Hong Kong.

In Hong Kong, Savills said the political unrest had a severe impact on trading from the middle of 2019 and continues to press on performance in the region.

It said that, as a result of the political backdrop, its Asia Pacific region has performed “slightly below” expectations, while the company has also seen an increase in the time taken for its Australian business to bear fruit.

Elsewhere, the company delivered significant year-on-year growth in the US, as well a “strong performance” from its investment management arm.

In continental Europe, trading was broadly in line with expectations, despite declining markets in some countries.

In the trading update, Savills said: “Despite the backdrop of uncertainty, the UK performed well across all business lines, latterly benefiting from improved investor sentiment in both commercial and residential markets.

“Our residential business continued to outperform the overall market conditions, in particular taking share in the core London market.”

Savills said it believes increased political stability in the UK means it “should maintain improved sentiment”, but said it remains cautious until the full impact of Brexit is better understood.

Shares in the company increased by 7.1% to 1,231p in early trading on Monday.

By Henry Saker-Clark

Source: Yahoo Finance UK