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RICS: House prices, demand and supply all in decline

There has been a fall in interest from new house buyers leading to a more negative trend in house prices, according to the latest RICS UK Residential Market Survey.

While the regional picture remains varied, surveyors are doubtful that house sales momentum will pick-up over the coming months.

In the October survey, 10% more respondents saw a fall in house prices at the headline level. (-2% net balance previously). This is the weakest reading since September 2012, and mostly stems from London and the South East.

East Anglia, the South West and the North East also saw negative price balances, but prices continue to rise in other parts of the UK, with the strongest growth in Northern Ireland and Scotland.

Looking ahead, three-month price expectations are also slightly negative at a national level, and the national outlook for the year ahead is broadly flat.

First-time buyers

For those looking for their first properties, the market is relatively steady price wise. Reporting on properties listed at up to £500k and below, a slim majority of survey participants reported that sales prices have been at least level with ask prices.

However a third (34%) stated sales prices were coming in up to 5% below. Homes in the highest price brackets are noticeably below asking price.

New buyers

RICS says the weaker trend in prices is being driven by the lack of demand from new buyers, which is in part a result of heightened political uncertainty, ongoing affordability pressures, a modest upward move in interest rates and a lack of fresh stock coming onto the market.

In October, 14% more respondents reported a fall in buyer interest, which is the third report in a row in which demand has deteriorated.

Simon Rubinsohn, chief economist of RICS, commented: “Although the tone of much of the newsflow surrounding the housing market remains downbeat, this continues to disproportionately reflect developments in the south and east of England with the picture remaining rather more resilient in many other parts of the country.

“Uncertainty about the economic outlook on the back of the never-ending Brexit negotiations appears a key drag on sentiment according to respondents to the survey.”

Slowdown in new instructions

In terms of new instructions, and the supply pipeline, virtually all UK regions saw a further decline as average stock remains very close to an all-time low.

Furthermore, there appears little chance of any meaningful turnaround, as a net balance of 30% of respondents reported the number of appraisals to be down year on year.

October saw the third consecutive monthly decline in housing transactions and sales were reported to be either flat or negative across eleven of the twelve UK regions/countries.

Rents set to rise

In the lettings market, the quarterly (seasonally adjusted) data points to an improvement in tenant demand during the three months to October.

Alongside this however, landlord instructions continued to fall, remaining negative for a tenth straight quarter (the longest negative stretch since this series was formed in 1999). On the back of this, rents are expected to rise over the coming months albeit only modestly.

Source: Mortgage Finance Gazette

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Buoyant local housing market bucks the UK trend

HOUSE prices in the north have bucked the UK trend, with an increase reported last month, new figures show. Northern Ireland is the UK’s most buoyant housing market according to the RICS (Royal Institution of Chartered Surveyors) and Ulster Bank Residential Market Survey.

While UK prices dipped last month, surveyors in the north reported ongoing growth.

A net balance of 55 percent of local respondents said that house prices increased – the highest of all UK regions.

Local surveyors are also the most optimistic about the future, with a net balance of 35 per cent expecting prices to rise in the next months and 30 per cent predicting a boost in sales in the same timeframe.

By comparison most other regions expect prices and sales activity to fall or be broadly flat in the final quarter of the year.

There was a slight fall in newly agreed sales month-on-month, but there was an increase in new buyer enquiries, according to the survey.

In terms of supply, the survey pointed to a slight rise in properties coming onto the market in Northern Ireland for the first time in five months.

RICS residential property spokesman, Samuel Dickey said there is considerable positivity to be found from the latest figures.

“Interest from first time buyers and a strong rental have been two of the factors driving the Northern Ireland housing market, with first time buyers and investors both very active this year.”

“Surveyors remain confident about the market, despite political and economic uncertainty, and 2018 is shaping up to have been a more positive picture for the housing market than perhaps was initially anticipated,” Mr Dickey said.

Terry Robb, head of personal banking at Ulster Bank added:

“As the survey indicates, demand remains relatively strong and we continue to see a good-pipeline of mortgage applications. Our new paperless mortgage process has generated interest, but more fundamentally, interest in the market remains firm from a broad range of mortgage purchasers including first time buyers, home movers and those remortgaging.”

Source: Irish News

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Brexit Batters U.K. Housing as RICS Index Worst in Six Years

A key gauge of the U.K. housing market fell to the weakest since just after the financial crisis.

The Royal Institution of Chartered Surveyors said its index of prices fell to the lowest in six years in October, pointing to a modest drop in values. Uncertainty about the U.K.’s impending exit from the European Union and a lack of new buyers have battered the market, RICS said on Thursday.

The report follows others from Halifax and Nationwide Building Society showing slower house-price growth, though home ownership remains out of reach for many after a three-decade property boom. Brexit has furthered clouded the outlook as potential purchasers stay on the sidelines awaiting clarity on the U.K.’s divorce from the EU on March 29.

“Uncertainty about the economic outlook on the back of the never-ending Brexit negotiations appears a key drag on sentiment,” said Simon Rubinsohn, RICS chief economist. While prices remain more resilient in some parts of the country, negative news about the overall market primarily stems from the south and east of England, he said.

Respondents to the RICS survey were “doubtful” that U.K. sales momentum will pick-up over the coming months, as prices, demand and supply all decline. Here’s a roundup of some London agents’ views in the RICS survey:

Allan Fuller, Allan Fuller Estate Agents:

“The final quarter of the year traditionally sees a slowdown in sales, this year was more so due to Brexit uncertainty, some vendors switching to letting rather than take a drop on price.”

Ben Temple, Regent Property:

“The sales market is tough and only cheap properties get buyers interested.”

J.J. KING, Andrew Scott Robertson:

“Having reported more sales last month, the rate of fall-throughs has risen. Purchasers appear spooked, any form of negativity slows down sales. Negotiators are working very hard to retain sales.”

James Gubbins, Dauntons:

“The post-summer buyer activity has cooled. More and more buyers are saying they will delay a purchase until they know what the Brexit strategy is to be.”

Source: Investing

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North-South Property Price Divide To Shrink

The North-South property price divide is expected to shrink over the next five years according to new research.

Estate agents Savills are predicting an average property price rise of 14.8 per cent in England and Wales over the next five years, but they expect big variations across the country.

The North-South property price divide will become smaller as property values in the North West grow at the highest rate of 21.6 per cent, while values in the South East are expected to rise by 9.3 per cent, and London by just 4.5 per cent.

Savills has scaled back its predictions for London amid changing conditions in the housing market – with growth in the North and Midlands reversing some of the North-South property divide.

Savills believe that rather than Brexit it is more an affordability issue that is limiting the growth in house prices in the long term.

Savills head of residential research, Lucian Cook, explained: ‘Brexit angst is a major factor for market sentiment right now, particularly in London. But it’s the legacy of the global financial crisis – mortgage regulation in particular – combined with gradually rising interest rates that will really shape the market over the longer term.’

He continued: ‘That legacy will limit house price growth, but it should also protect the market from a correction.’

Savills also predicted however that the top end of the market in London would increase by significantly more, due to it being less dependent on mortgage borrowing.

Areas outside London and the South are expected to see stronger growth as prices are more affordable, leading to shrinkage of the North-South divide.

However, the opposite is expected for growth in rents over the next five years, with Savills predicting rental growth of 13.7 per cent countrywide, but slightly higher in London at 15.9 per cent.

That would result in typical rents for a two-bedroom property rising from their current level of £793 to £902 by 2023. In London, the rise would be from £1,572 to £1,822.

Source: Residential Landlord

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Buy-to-let mortgage lending for house purchase falls way short of forecasts

The trade body for the mortgage sector has warned that buy-to-let purchase lending is set to come in at below its forecasts for 2018.

UK Finance had predicted £12bn of buy-to-let lending for house purchase this year, but Jackie Bennett, director of mortgages, has warned this is heading for around £9bn.

Speaking at UK Finance’s annual mortgage conference, she said: “Our forecast for 2018 was for around £12bn for buy-to-let purchase. The market looks like it will considerably undershoot this, coming in more around £9bn.

“This is undoubtedly the impact of the various tax, regulatory and legislative changes that have happened to landlords in the buy-to-let sector.

“With the 2018 tax bills dropping through landlords’ letterboxes, or more likely in their inboxes these days, we are yet to see what further impact this may have on the market.”

She was more positive about the overall mortgage market, predicting gross lending would hit a decade-high of £270bn this year.

Bennett also expressed caution about the growth of online mortgage brokers.

She said: “The Financial Conduct Authority  wants it to be easier for customers to understand the products they may be eligible for earlier in the process. This is a laudable aim.

“However, as customers have ever more complex circumstances – multiple incomes, self-employment, contracting to name but a few – it is more difficult for any ‘tool’ to narrow down the products available for a particular customer. Based on our conversations with lenders it would take several hundred questions to ensure that all bases were covered.

“That’s not to say that technology developments won’t help more standard customers – they will do and they are – but I think we have to be realistic about what proportion of the market can be served in this way.”

Source: Property Industry Eye

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London house prices set to slide as caution lingers in the UK property market

Fears of flat activity in London’s housing market were underlined by a new closely-followed survey this morning, which suggested property prices will continue to sink as buyer caution looms over the capital.

According to data released today from the Royal Institution of Chartered Surveyors, 41 per cent more respondents have predicted a further fall rather than a rise in house prices over the next three months.

However, some 47 per cent more respondents also said they witnessed a drop as opposed to a bump in London property prices during October, improving from the same month last year when 67 per cent more respondents reported weakened prices.

“The London numbers remain disappointing with current activity subdued and the forward-looking indicators providing little prospect of an improvement anytime soon. Ongoing uncertainty about what a Brexit deal, or a no-deal outcome, might mean for the capital’s economy is clearly weighing on sentiment at the present time,” according to Rics chief economist Simon Rubinsohn.

He added: “But it is not the only issue holding back potential purchasers. At the higher end, stamp duty land tax remains a key impediment while elsewhere, affordability/ deposit requirements present a greater challenge. Unfortunately, I struggle to see where relief for either of these obstacles likely to come from.

The news comes a day after the Halifax house price index showed that property values in the UK slowed to their lowest annual rate of growth in more than five years last month.

Brian Murphy, head of lending for Mortgage Advice Bureau, said: “What would appear to be consistent.. is the continuing lack of properties available as even in those areas where demand is still significant and prices are still on the ascendant, the numbers of new listings over the last month would appear to have remained subdued. This may well assist with underpinning current values in some areas where demand is significant, although in others a lack of homes being listed for sale may add to the current market malaise as buyers can’t find what they are looking for, leading to a stagnating environment.”

Source: City A.M.

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Mortgage rates on the rise

The cost of the most popular two, three and five year mortgages has increased over the past three months after two quarters of cost reduction, new data have shown.

With a current rate of 2.27 per cent (as of 1 November 2018), the cost of a typical 60 per cent LTV five-year fixed rate mortgage is now 2 per cent higher than it was in August, according to product analysis provider Mortgage Brain.

At the same time some two, three and five year fixed rate mortgages have recorded increases of 1 per cent.

The Bank of England increased the base rate of interest from 0.5 per cent to 0.75 per cent in the beginning of August and has kept it there since.

Since the start of August, the cost of a 70 per cent and 80 per cent LTV two year tracker has increased by 4 per cent, while its 60 per cent and 90 per cent counterparts have increased by 3 per cent over the same period, according to Mortgage Brain.

Based on a £150k mortgage, borrowers looking to take out one of these mortgages now face an annualised increase of up to £288, the provider said.

Mark Lofthouse, CEO of Mortgage Brain, said: “With the Bank of England maintaining the base rate at 0.75 per cent for the third consecutive month, it’s looking more and more likely that any future rate increases will be at a slow and gradual pace.

“A lot of the movement that we saw in our latest product analysis has happened since the start of September, however, so once again, the UK mortgage market could be on the verge of change where we revert back to seeing a period of increases in the cost of residential mortgages.”

For the first time in many months, Mortgage Brain’s longer term analysis also showed a number of annual cost increases.

The cost of the 70 per cent two year tracker, for example, is now 5 per cent higher than it was at the start
of November 2017, while a 2 per cent increase in cost has been recorded for some two and five year fixed rate mortgages too.

Kevin Roberts, director at Legal & General Mortgage Club, said despite the increases mortgage rates continued to remain at near-record lows and there was a growing number of innovative solutions, particularly for first-time buyers and retirees available on the market.

Andrew Montlake, director at mortgage broker Coreco, agreed. He said: “Specialist mortgage lenders, most of whom only go through brokers, have some really good offerings in this arena at present and there is no need for any borrower to feel that they have no options.”

Source: FT Adviser

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UK housebuilders under pressure

The UK housebuilding sector faces several challenges, all of which have weighed on its performance, but valuations still remain interesting.

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Six facts you need to know about commercial mortgages in the UK

Commercial mortgages are the mortgages that are acquired on different commercial properties. These properties can include shops, office buildings, industrial buildings, factories, apartment complexes, and other such buildings. Simply put it is the loan that you secure on a property that you own but it is not your residence and is being used for some commercial activity. The loan is usually used to acquire, redevelop or refinance the commercial property against which it is being taken. As every commercial property holds a different value it one of the challenges of commercial mortgage is that it has to be assessed differently for each property. To find out more about commercial mortgages you need to go through the following 6 facts about commercial mortgage in the UK.

Difference between commercial mortgage and business loans is that business loans that are usually up to £25,000 don’t need to be secured and can be acquired easily from most of the lenders across the UK. However, if you want to get a loan that is higher than £25,000 then the lenders require you to give them some sort of security in return. This is to make sure that the risks to the lender are reduced. Furthermore, there are many legal and administrative costs that are involved in the when you take a loan on a commercial property which is one of the reasons that most of the lenders don’t advise you to take this loan if the amount is less than £50,000. Some lenders have a minimum limit of £75,000 when the commercial mortgage is involved.

Most of the people are confused about how much they can borrow while when they are thinking about taking a commercial mortgage. Well if you are the owner of the property you will easily find the loan between 70% to 75% of the value of the property against which you are taking a loan. If you want to acquire a loan against an investment it will be determined by the money it is generating through rental income but it will not exceed 65% of the value of the property. If it is a business which includes stocks and goodwill etc. then the amount will be further reduced accordingly.

People often get confused about the arrangement fee and why it is being added to the loan. Most of the lenders ask their clients to deposit a non-refundable arrangement fee that is usually 1% to 2% of the actual loan. This fee is sometimes added to the total loan that you are asking for and sometimes the lenders ask the clients to deposit it along with the application form. This fee is considered as a fee of the lender for processing your loan application. Even if your loan application is rejected this fee will not be returned to you. With loans up to £ 1 million the fee is usually 1-2% but as the mortgage amount decreases this percentage increases.

A valuation fee is also a topic of concern for many people who are seeking commercial mortgage in the UK. As mentioned earlier commercial properties are far too variable in their value as compared to residential properties. If you want a loan against any residential property you will not be required to pay a valuation fee but for commercial value an expert has to visit your property and prepare a document of 20 to 30 pages indicating the current value of your property and for that you have to pay the lender or the third party used for evaluation.

Legal fees are also to be paid by the person who is seeking a commercial mortgage and they have to pay for themselves and the lender. The legal fee depends upon the complexity of the contract but they usually start for £500 for each party. If you choose different lawyers in the same firm to represent you and the lender this amount can be reduced.

Commercial mortgages are usually long-term loans and their time can range from 3 years to 25 years. If you are looking for something that is a little short-term there are loans available for that too. These are called bridging loans or property development loans and their time period is usually from a few weeks up to 2 years.

Source: London Loves Business

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40% of young adults unable to enter the housing market

There are many benefits to being a young adult – better health, more freedom, and almost-endless career options.

But being able to purchase your own home and moving out from under your parent’s wings is becoming increasingly difficult for many.

Over the last two decades, UK home ownership figures have revealed that approximately 40% of young adults are unable to enter the housing market. This is regardless of whether they have managed to work and save the necessary 10% deposit.

While only twenty years ago, 90% of young adults had the means to supply a deposit and obtain a loan for the remainder of the cost, data from 2016 shows it is now only possible for approximately 60%. Perhaps the area worst hit in the UK in London.

IFS (Institute of Fiscal Studies) research states that just one-in-three young adults will have enough money for a deposit and still be eligible for a loan on the remainder. Worryingly, these figures relate to houses on the low-end of the property market, those which would be ideal for people just starting out.

So why aren’t the younger generation able to participate in this ‘right of passage’ when their parents and grandparents before they were able to? The IFS states two main reasons for the current UK home ownership figures.

The first is the dramatic rise in house prices. Records indicate the price of a house in England has surged an astounding 173%. With most properties not benefiting from increased space or luxuries.

The other reason the UK home ownership figures indicate a lock-out of young adults from the housing market is due to their income not increasing at the same rate as general expenditures.

With their wages increasing only 19% over the last two decades, being able to support themselves while saving up for the deposit is only possible by an estimated 10%. For those already living outside of a home, the often high rent rates for small, or even shared-houses, eats away at any of these savings.

One possible solution that has been suggested is to ease planning restrictions. By allowing developers more flexibility and freedom, the creation of more new houses could help even out the market.

Other initiatives are also underway to aid young adults in entering the housing market, including the removal of stamp duty for those trying to buy their first home.

Source: CRL