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First-time buyers losing interest in city living

City living is losing its appeal among first-time buyers, with the vast majority now preferring more subdued locations, Trussle has found.

As it stands just 29% of first-time buyers plan to buy in a city, compared to 53% in a suburb.

Miles Robinson, head of mortgages at online mortgage broker Trussle, said: “The pandemic has increased the financial pressure many first-time buyers were already feeling, as well as creating a seismic shift in what people expect from their home.

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“As a result, financial pressures and rising house prices, alongside a desire for more outdoor space, means demand in more affordable rural locations is currently outpacing that for urban destinations.

“But lenders are starting to return to the market with higher LTV products, which could make more expensive homes in the city more accessible again.

“And, we may see renewed interest in city living once the vaccine has been rolled out and things begin to return to normality.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

“As such, only time will tell if the current lust for country properties is a long-term trend or more of a spontaneous response.”

Higher house prices in urban locations are likely to play a huge factor in this trend, with 65% saying it’s ‘impossible’ to get on the housing ladder.

The research found that the average budget for a first home was £174,266.

BY RYAN BEMBRIDGE

Source: Property Wire

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Tenant rent arrears decline but industry urged to remain cautious

The percentage of tenants in rent arrears decreased during October and November, according to research from PayProp.

Payment data from the rental payment platform also shows that the typical percentage of rent in arrears fell consistently from August to November.

However, with strict COVID-19 restrictions across large parts of the country set to remain in place for the foreseeable future, PayProp said letting agents and landlords should prepare themselves for arrears increasing again in the first few months of 2021.

PayProp’s platform data offers financial evidence that the percentage of tenants in arrears dropped to 11.8% in November, down from 12.2% in October.

This is the lowest percentage recorded since before the spring lockdown in March when 9.6% of tenants were in arrears.

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The number of tenants in arrears spiked during September, to 15.1%, although this remains below the 2020 peak of 15.5% recorded in May. A rise in September could be due to increased redundancies as official figures showed that 11.3 people per 1,000 employees were made redundant as the pandemic continued to hit businesses.

Neil Cobbold, chief sales officer at PayProp, said: “The general downward trend of tenants in arrears over the autumn and winter months of 2020 is positive news for letting agencies and landlords.

“Falling arrears suggest that even though restrictions were tightened once more towards the end of the year, society has adapted to the ‘new normal’.”

The research shows that the percentage of rent owed by tenants in arrears fell to 121.1% in November, down from 124.4% in October and 125.5% in September.

The level of rent owed by tenants in arrears in November was equivalent to the level recorded in May but didn’t quite reach the peak of 127% recorded in August.

Meanwhile, 77% of tenants paid off some or all of their arrears between September and October, while a further 50% paid back arrears between October and November.

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Between August and November, the percentage of tenants reducing their arrears averaged between 44% and 48%, while the percentage increasing the amount they owed also remained high at an average of 45% to 49%.

Cobbold added: “Our research shows that on the whole, tenants who end up in arrears try to clear them. Even if they cannot afford to pay back the full amount, renters are generally open to reducing what they owe through affordable repayment plans.

“A particularly high level of tenants reducing their arrears during September could have been linked to a resumption of evictions in England and Wales, with renters agreeing to pay back what they owe in order to avoid their landlord seeking repossession.”

Despite the reduction in arrears recorded between September and November, the situation could worsen again in the early part of 2021.

PayProp said nthis is partly due to a seasonal bump in arrears as people spend more over the festive period. Meanwhile, with millions of people under the strictest tier 4 restrictions, more jobs could be at risk.

Cobbold said: “Although the situation improved towards the end of 2020, current market conditions mean that letting agents and landlords should be cautious at the start of 2021 as things could get slightly worse before they get better.

“Agents must ensure they have the systems in place to deal with arrears, while facilitating effective communication between landlords and tenants.”

Although arrears could rise again in the coming months, 70% of tenants surveyed by PayProp said COVID-19 and subsequent lockdowns have not made it more difficult for them to pay rent.

“Restrictions put pressure on sectors such as hospitality, but they also give tenants the opportunity to save money which would otherwise have been spent on socialising.

“With the extension of the furlough scheme until the end of April, as well as the ongoing national rollout of a COVID-19 vaccine, there is optimism that tenant finances will be in a stronger position by the middle of 2021,” Cobbold concluded.

Source: Mortgage Introducer

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Rental Market Buoyant Except In London

Rents in London have fallen during the Coronavirus pandemic, property portal Zoopla has reported. However, London is the exception and rents risen in a buoyant rental market across the UK as a whole, it said.

‘Average rents in London have fallen by 5.2 per cent over the last 12 months, reaching levels last seen in 2014’, Zoopla found. It puts this down to ‘new working patterns and lack of tourism during pandemic’.

In contrast, rents increased outside London by 1.7 per cent and rental has increased by a fifth over last year – strong demand that is being driven by a squeeze on lending to potential first-time buyers, said Zoopla.

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‘At the same time, supply remains constrained with levels of investment in buy to let still reduced following the changes to Stamp Duty (the additional 3 per cent surcharge on second properties) and the wider tax regime introduced from 2016 onwards’.

Renters are showing increasing interest in larger properties, especially those that may have access to outside space.

‘The search for space, first seen in the sales market, is now being firmly replicated by renters. Zoopla’s top searches for rental properties include the terms gardens, parking, garages, balconies and pets, reflecting a need for outdoor space and freedom necessary to cope with lockdown. There is also evidence that while the market as a whole is moving more quickly, the market for rented houses is moving more quickly than that for rented flats, reflecting this desire for more space among renters’.

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‘For most of the UK, the demand/supply gap is underpinning moderate levels of rental growth’, said Zoopla head of research Gráinne Gilmore.

‘The split in the rental market caused by COVID-19 has now crystallised and we are seeing the two-speed market firmly entrenched.

‘We haven’t seen the exodus of students from cities and, as more people are staying in the rental market given the squeeze on mortgage lending, higher levels of demand will continue to underpin rents. At the same time however, muted earnings growth will start to limit the headroom for rental growth in some markets.

‘The search for additional space, both indoor and outdoor, within the rental sector is also set to continue as the country goes through additional periods of lockdown’

Source: Residential Landlord

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Rise in first-time buyers searching for buy-to-let properties

Demand has grown among first-time buyers who want to enter the buy-to-let market, according to Legal & General Mortgage Club.

Data from its mortgage criteria search tool found the search combination for first-time buyer, first-time landlord and non-owner occupier increased by 18 per cent since the start of September.

The mortgage club also found that ‘holiday lets’ was the second most searched for term among advisers this month.

According to Legal & General, its findings showed many first-time property investors were looking to purchase buy-to-let properties in response to an increase in demand from consumers to holiday in the UK, rather than abroad, amid international travel restrictions.

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Kevin Roberts, director at Legal & General Mortgage Club, said: “Despite the impact of coronavirus, we are seeing rising demand across the housing market with buy to let in particular enjoying a mini-boom.

“Our latest findings from SmartrCriteria suggest a growing number of first-time buyers are searching for mortgages for buy-to-let ventures, including those engaging with the growing trend towards staycations this year.”

Mr Roberts added: “Amidst this continued high demand we are seeing in the mortgage market, thousands of borrowers are clearly turning to independent advisers to help them with their plans and these experts are playing a vital role for consumers”.

Akhil Mair, managing director at Our Mortgage Broker, commented: “The data L&G have shared today is a very accurate reflection on the type of business and enquiries we have been receiving in the last few months.

“We are witnessing an unprecedented amount of first-time buyer, first time landlord enquiries, including expat and foreign nationals wishing to invest in the UK property market.”

Mr Mair added the “huge interest” his firm had encountered was due to incentives such as the stamp duty holiday.

By Chloe Cheung

Source: FT Adviser

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UK house prices fall at fastest rate in seven months – RICS

UK house prices dropped last month by the most since April, as uncertainty about Brexit and the election weighed on the property market, the Royal Institution of Chartered Surveyors (RICS) said on Thursday.

The RICS survey – released on the day Britain votes in a national election intended to break a parliamentary deadlock over Brexit – showed home-buyers and sellers stuck on the sidelines.

The monthly house price balance declined to -12 in November, its lowest since April, from -5 in October.

The number of new buyers and sellers continued to fall – though the drop in sales seemed to be bottoming out and the proportion of surveyors who expected a rebound in activity over the next year rose to its highest since February 2017.

“Whatever happens in the general election today, it is important that the new government provides reassurance both over the stewardship of the economy and the ongoing challenges around Brexit,” RICS chief economist Simon Rubinsohn said.

Britain’s housing market has slowed since June 2016’s Brexit referendum. Prices have fallen in London and surrounding areas, where a rise in property purchase taxes bit hardest and concerns about Brexit were high.

Official data has shown that British house prices rose by 1.3% in the year to September and a Reuters poll of economists has forecast a 1.5% rise for 2020.

Prime Minister Boris Johnson intends to take Britain out of the European Union by Jan. 31, if he wins Thursday’s election. Most opposition parties have said they want a second referendum.

Reporting by David Milliken

Source: UK Reuters

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London house price boost helps overall growth

UK city house price growth has picked up to 2.9% supported by a 1% increase in London house prices, the October Zoopla UK Cities House Price Index has revealed.

Prices have risen by 1% in London over the past year, the highest rate of growth for two years, following a period of year-on-year price falls.

Richard Donnell, research and insight director at Zoopla, said: “After a three-year repricing process accompanied by a sizable decline in housing sales, the London housing market is finally showing signs of life.

“The shift in momentum is clear, resulting from a lack of supply, increased sales and more realistic pricing, which bode well for higher sales activity in 2020, rather than a pick-up in house price growth.

“While the London housing market has been in the doldrums, market conditions in regional cities have been stronger over the last two years with demand supported by employment growth and attractive housing affordability.

“The rate of growth is slowing, and all cities are registering annual growth of less than 5%.

“The announcement of the General Election has brought forward the usual seasonal slowdown, but the last few weeks of the year pre-Christmas tend to be much quieter than after Boxing Day, when consumer interest in housing springs back to life.”

House prices are now registering month-on-month price falls in less than a quarter of London’s housing markets, a huge drop from the 85% of markets registering price falls a year ago.

Over three quarters of London’s homes are in markets registering small month-on-month price increases, which have lifted the overall annual growth rate to 1%.

The shift in London house price momentum is down to a decrease in the number of new properties for sale, which has restricted supply.

This is a trend that has been developing for the last 12 months and has been accelerated by the announcement of the General Election on 12 December.

In addition, there has been a notable increase in the number of sales agreed per agency branch in London.

While this increase is off a low base, it indicates that there is renewed demand for housing in London after a sizable drop in sales volumes over the past three years.

Despite London’s housing market having been through an extended slowdown, accompanied by lower sales, large regional cities are starting to show signs of slower growth.

House price growth since the start of 2017 has exceeded 15% across Edinburgh, Leicester, Manchester and Birmingham, but the pace of growth is slowing.

North of the border, house price growth remains steady in Edinburgh and Glasgow at 4.0% and 2.6% respectively.

By Michael Lloyd

Source: Mortgage Introducer

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Buy To Let Repossessions Up In The UK

The number of buy to let repossessions of investment properties in the UK rose substantially in the third quarter of 2019.

Figures released this week from banking trade body UK Finance revealed a 40 per cent rise in buy to let repossessions on last year.

Around 800 buy to let repossessions were carried out in the third quarter of 2019, compared to 570 in the same quarter of the previous year.

However, there were 4,550 buy to let mortgages in arrears of 2.5 per cent or more of the outstanding balance in the third quarter of 2019, five per cent fewer than in the same quarter of the previous year.

The number of buy to let investors in arrears of between 5 per cent and 7.5 per cent of the outstanding balance also fell by 21 per cent over the year.

In contrast, the number of buy to let investors in arrears of between 7.5 and 10 per cent grew by 9 per cent, while the number in arrears of over 10 per cent dropped just 1 per cent, according to the UK Finance figures.

However, the banking trade body has stated that it believes the large increase in buy to let repossessions due partly to a ‘backlog of historic cases’.

Rules were changed two years ago by the city regulator on how lenders have to calculate how much a borrower owes each month if they fall into arrears. This has led to lenders reviewing a large number of cases on an individual basis and applying for buy to let repossessions ‘only when all other options have been exhausted’ according to UK Finance.

However, David Smith of the Residential Landlords Association (RLA) said: ‘Repossessions for mortgage arrears take place for many different reasons.

‘Mortgage interest relief changes, which are now almost fully implemented, the increasing cost of regulation and the ever-increasing time to repossess a property are all major factors.’

‘Since most repossessions of this kind lead to tenants being evicted it is vital that the next government actively supports the majority of landlords doing a good job to provide the homes to rent the country needs.’

Source: Residential Landlord

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UK business pessimistic about economy

The consensus from UK boards is that the combined effects of Brexit, trade wars and consumer slowdown is going to have a negative effect on the UK economy over the next 12 months

More than two-thirds (69%) of respondents from FTSE 350 companies believe that the UK economy will deteriorate in the next year, according to a recent Boardroom Bellweather survey from the Chartered Governance Institute (ICSA) and the Financial Times.

Only 7% expected improvement – a slight uptick in confidence since the end of 2018 when only 2% expected improvements and 81% expected a decline – however still less than pre-referendum, when 24% expected a decline and 13% an improvement.

“The continuing uncertainty about what a post-Brexit Britain might look like, muddled even further at the time of the survey by the Conservative Party leadership contest and differing views with regard to a no-deal Brexit, has undoubtedly contributed to the pessimism that people are feeling,” said Peter Swabey, director of policy and research at ICSA.

Meanwhile, the research found that 40% of respondents thought a no-deal Brexit would be damaging to business, while 40% thought it would not and 20% were unsure.

More generally, 3% of respondents believe leaving is positive, compared to 59% who see it as damaging – down from 73% at the end of 2018 – while the number predicting no change has increased from 28% to 38% since the end of last year.

Swabey suggested that more companies enacting contingency plans might explain why nearly half (49%) of respondents see Brexit as a principal risk and why only 29% have increased inventory in preparation for a no-deal.

However, he noted that the proportion of those considering Brexit as a principal risk has increased since summer 2018 – up from 39%.

“With companies unsure of what trade and non-trade barriers might be in place come the end of the year, it seems evident that they are acting with a certain amount of caution,” Swabey said.

Meanwhile, 51% of respondents expected a decline in global conditions over the next 12 months, while 10% predicted an improvement and 23% thought conditions would stay the same.

“With trade war between the US and China still playing out, over twice as many people now fear a decline [in global economic conditions] than was the case in summer 2018, when just 24% predicted a decline,” Swabey said.

Business optimism in both business and professional services sectors plummeted in the three months to August from -8% to -31%.

The decrease almost matched the decline seen at the start of 2019, according to the Confederation of British Industry (CBI).

Although business volumes stabilised in Q3, businesses expect a decline over the following three months, with respondents pointing to overseas business as a limiting factor.

“UK services firms are operating in a tough environment: activity is sluggish and profits are expected to fall in the coming months. It’s little wonder that business sentiment has plummeted again,” said Rain Newton-Smith, chief economist at CBI.

She described outlook for services companies as “bleak”, pointing to Brexit uncertainty as a dampener on investment and expansion.

“The idea of a no-deal Brexit is clearly weighing down the economy and is affecting businesses both big and small. So the economy can get back on track, the government must re-double its efforts in securing a deal,” she said.

By Danny McCance

Source: Economia

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Glasgow beats Edinburgh for property deals

INVESTMENT from Asia helped the value of commercial property deals in Glasgow exceed Edinburgh for the first time since 2015.

However, the overall value of deals continued to fall in the second quarter, according to the Scottish Property Federation (SPF).

Deals worth a total of £172 million were concluded in Glasgow in the second quarter, up from £104m for the same period last year, compared with £108m in Edinburgh, down £14m.

It was the first time the value of deals in the west exceeded the capital total since the first quarter of 2015, with the market in Glasgow boosted by the £48.4m purchase of 110 St Vincent Street by South Korean investors. The building is occupied by Bank of Scotland.

While deal values rose in Glasgow, the overall value of sales in Scotland slipped to its lowest in five years, at £641m.

SPF director David Melhuish said: “Glasgow was very impressive this quarter, outperforming Edinburgh for the first time in four years against a wider Scottish market that saw a reduced value of sales activity.

“Glasgow’s sales increase was fuelled by a number of £5m-plus deals, totalling £129m, whereas Edinburgh only secured £33m in the same category.

“A notable feature of Scottish commercial property investment in the Q2 period was the rise of capital sourced from Asia, which topped £250m for the first time on record, according to CoStar data.”

By Scott Wright

Source: Herald Scotland

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UK house prices drop in March amid Brexit uncertainty after shock rise, says Halifax

UK house prices grew 2.6 per cent year on year in March, but fell compared to the month before, according to data released today.

The value of the average UK home hit £233,181 last month, after growing 1.6 per cent between January to March compared to the three months to the end of December.

But house prices dropped 1.6 per cent from February to March, according to Halifax’s latest house price index, to offset a 5.9 per cent surge the bank reported last month that experts viewed very sceptically.

Russell Galley, Managing Director, Halifax, said: “This reduction partly corrects the significant growth seen last month and again demonstrates the risk in focusing too heavily on short-term, volatile measures.

“Industry-wide figures show that the number of mortgages being approved remains around 40 per cent below pre-financial crisis levels, and we know that lower levels of activity can lead to bigger price movements.”

While young people struggle to save up deposits, the combination of fewer homes for sale and fewer buyers has propped up growth, Galley added, underpinning the annual price rise.

However, these factors in addition Brexit impasse currently deadlocking parliament continue to weigh on the housing market, and London house prices in particular.

“These conflicting challenges, when combined with the ongoing uncertainty around Brexit, have had an impact across the country but most notably in London, meaning that we continue to expect subdued price growth for the time being,” Galley said.

Drop corrects ‘bizarre’ Halifax house price rise

Howard Archer, chief economic adviser to the EY Item Club, said last month’s drop corrects the “eye-watering and frankly bizarre” six per cent surge in house prices Halifax suffered criticism over in February.

That contrasted heavily with Nationwide’s own measure of 0.4 per cent growth.

Archer again criticised Halifax’s comparatively volatile measure, pointing to other sharp rises of three per cent in January and 2.5 per cent in December.

“The overall impression is that the housing market is currently soft as it is being hampered by challenging conditions with buyer caution currently being reinforced by heightened Brexit and economic uncertainties,” Archer added.

“The overall picture [is] being dragged down by the weakness in London and the south east.”

Lack of homes hurting buyers’ options

Brian Murphy, head of lending for Mortgage Advice Bureau, said Brexit uncertainty is too easy an answer for the lower level of mortgage approvals.

“The lower levels of homes currently available could be another obvious contributory factor, as this somewhat reduces buyer choice,” he said.

“However, those who are moving home at the moment are likely to find that lender competition has seen rates remain low, providing a silver lining in otherwise cloudy times.”

Lucy Pendleton, founder director of independent estate agents James Pendleton, concurred, saying: “It’s no surprise to see prices fall back this month as low stock levels and general buyer malaise plagues the market.”

London lows continue to drag down UK housing market

Pendleton added that the more reliable annual rise in house prices shows that regions are underpinning the rise, while London lags behind

“There are few signs of improvement in the number of transactions across the capital,” she warned.

“Buyers are understandably showing caution while we remain in this period of limbo, possibly in the belief there will be better opportunities to broker a deal after we leave the EU.”

Sam Mitchell, boss of online estate agent Housesimple, said the market almost looks healthy without London.

“If you take London out of the equation, we are seeing more normal market conditions in other parts of the country, particularly in the north, with healthy levels of transactions during this early spring period, when traditionally there’s more activity in the market,” he said.

Jonathan Hopper, managing director of Garrington Property Finders, said buyers who are committed to London and the southeast are doubling down as they realise momentum is with them.

“Buyers are feeling increasingly emboldened and we’re seeing some very aggressive offers succeed – with sellers who need to move quickly having no choice but to accept big price reductions,” he warned.

Brexit uncertainty continues to weigh down UK housing market

The latest UK house prices show Brexit is still harming the market despite record employment, wage increases and low interest rates, said property lender Octane Capital.

Boss Jonathan Samuels said: “Brexit has torpedoed consumer confidence.

“Strong economic fundamentals count for nothing when the UK body politic is in such fundamental disarray.

“A drought of buyers and lack of homes for sale has been the defining narrative of the property market for the past two years.

“Prospective sellers and buyers alike are holding back as an unprecedented political drama plays out. For most people, the inclination is to play it safe rather than make a move.”

Jeremy Leaf, north London estate agent and a former Rics residential chairman, said the UK housing market is holding up better than expected under the pressure of Brexit, but that the prolonged political problems are hurting activity.

“On the ground, we are seeing more buying activity in the buildup to the traditionally busier spring market but it is patchy, encouraging in some areas, disappointing in others, even sometimes very close to one another,” he said.

“On the other hand, many sellers are still cautious, awaiting a small sign at least that their Brexit nightmare will soon be over and they will have more confidence about taking on additional debt.”

By Joe Curtis

Source: City AM