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Increase in million pound properties and the real picture

A report by Zoopla has opened up a very interesting discussion about the number of properties in the UK worth £1 million or more. We know that the figure has increased from 625,077 properties up to 768,553 since August 2016. This is a significant increase of 22.95% and while London currently accounts for 430,720 homes worth £1 million or more that still leaves nearly 340,000 million pound properties spread across the rest of the UK.

Even though million pound properties only account for 2.7% of the U.K.’s housing stock it is certainly a headline grabbing statistic. However, is the picture still as rosy if we dig a little deeper?

REAL RETURNS

Since August 2016 inflation in the UK has been in the region 3.9% and there would appear to be yet more upward pressure in the short term, something reflected in recent stock market volatility. If we look at house price inflation, between the third quarter of 2016 and the end of 2017 average UK house prices increased by just 2.5% (Nationwide UK House Price Index). So, while the headlines suggesting more properties in the UK worth £1 million and above make for good reading, it would appear that over this period house prices have fallen in real terms.

It would be interesting to learn the average debt associated with a £1 million property especially in the current low interest rate/low cost of finance environment. Time will tell but there could be a significant backlash in due course as and when the cost of finance does finally increase significantly in the UK. How many of those who have stretched their finances to the limit to acquire a £1 million plus property will struggle to cover their mortgage payments as rates tick higher?

LONDON PROPERTY UNDER PRESSURE

We know that London is one of the weakest property markets in the UK at this moment in time with experts suggesting things will get worse before they get better. The impact of Brexit talks is difficult to predict with any great certainty but what we do know is the road to an agreement will be rocky. The fact that currency weakness recently increased the number of UK exports to Europe will no doubt be used as a stick by the European Union with which to beat the UK into submission.

There is also significant concern regarding the future relationship between the City of London and its European counterparts in the area of finance. Already we have seen many businesses shipping out of London with Ireland seen as a perfect location from which to access the fruits of the European financial markets. There is no doubt that many employees will also relocate to Ireland placing downward pressure on London property prices in the short to medium term. The expected fillip from a weaker currency has yet to emerge in the shape of improved foreign interest in London property – with Brexit perhaps a greater concern than the benefits of a weaker currency.

CONCLUSION

The way in which the UK property market is structured suggests that while there will be short-term bouts of downward pressure, in the event of a recession or major event such as Brexit, the long-term trend remains upwards. A lack of newbuilds, government financial assistance for first-time buyers, and abnormally low interest rates has fed the frenzy for stock market and property investment. The recent stock market “correction” has highlighted the turn in the interest rate cycle and the immediate challenge of an increase in inflation.

Will property markets wobble in the short to medium term as stock markets have?

Source: Property Forum

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£1m properties increasing faster in Scotland than rest of UK

The number of houses in Scotland worth at least £1 million is increasing nearly twice as fast as the UK average, according to new research which shows thousands more Scots have become so-called ‘property millionaires’ over the past 18 months.

There are now more than 11,000 homes across the nation valued at least £1m, an increase of more than 2,500 since the last snapshot of the top of the housing market was carried out in summer 2016.

It means that throughout Scotland, the number of properties worth a seven-figure sum has jumped by 30.8 per cent, from 8,486 to 11,101. That accounts for around 0.4 per cent of Scotland’s housing stock.

Across the UK as a whole, the number of property millionaires has also risen over the same period, albeit at a more modest rate of 16.2 per cent, from 660,924 to 768,553.

The new research, carried out by the leading property website Zoopla, found that nearly half of the seven-figure properties in Scotland are to be found in Edinburgh, the only Scottish city to make a list of the top ten property hotspots in the UK, excluding London.

In August 2016, there were 3,477 houses in the capital worth at least £1m, according to Zoopla, but the number has since shot up to 4,759.

That represents an increase of 36.8 per cent, even higher than the Scotland-wide rate of growth, and means that £1m houses now make up around 2 per cent of the capital’s housing stock.

Unsurprisingly, the research revealed that more than half of the UK’s property millionaires are to be found in London. It accounts for 430,720 of the overall total, with the boroughs of Westminster, Kensington and Chelsea home to the most expensive properties.

As well as the large concentrations of property millionaires in London and the south-east of England, Zoopla also found there are more than double the number of million-pound properties in Guildford, Surrey than there are across the whole of Wales. Guildford was identified as the top million-pound property hotspot outside London, with 5,889 homes valued at £1m plus.

Wales was found to have just 2,223 homes worth £1m or more. Lawrence Hall, a spokesman for Zoopla, pointed out that despite the rise in the number of houses valued at £1m or more, such properties only accounted for 2.7 per cent of the country’s housing as a whole.

He said: “Whilst there might be a greater number of £1m plus properties than ever before, the data shows that they still only represent a small fraction of all UK housing stock.”

Zoopla released the research to mark the launch of its new property calculator tool which lets homeowners gauge when the value of their own property may reach the £1m mark.

Source: Scotsman

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Investment in Leicester commercial property hits £256m

Commercial property in Leicester has seen an increase in prime retail rents and a greater supply of large industrial units coupled with £256m of investment into the property sector last year, according to Innes England’s Market Insite report.

he 2017 report highlights:

– £256m worth of investment transactions were completed in the county
– The £43m funding of Sowden’s PRS scheme was a highlight in 2017
– Prime High Street retail rents increased to £216 per sq ft as Highcross secured new letting and retailers
– Office take-up dropped 25% below the previous five-year average because of lack of availability
– Leicester cemented its position as a strategic distribution hub within with Midlands as rental values rise

Peter Doleman, director at Innes England, said: “No one sector dominated the commercial property market this year, but there have been some positives to take from the report.

“In retail, High Street prime rents increased to £216 per sq ft and the out-of-town retail rates have remained stable at £110 per sq ft. Investments by Next and Debenhams on the former Everards Brewery site have strengthened the importance of Fosse Retail Park as the major out-of-town shopping centre.

“One of the biggest highlights from last year was the £43 million deal to deliver 300 new residential flats in the city. Sowden’s PRS (private rented sector) scheme is likely to create new opportunities for the city once complete in 2019 and highlights the appetite for London-based investment funds to seize opportunities in the regions.”

Availability of industrial space received a welcome boost in line with an increase in prime rental rates which jumped to £6.50 per sq ft. Take-up matched the long-term average and supply is expected to increase further throughout 2018.

Doleman added: “The industrial sector is set to benefit from several mid-size developments this year which will continue to improve supply. Leicester has consolidated its position as an important part of the Midlands distribution hub after a lift in take-up during quarter four.”

Analysis of the office sector revealed it to be one of the poorest performing areas. Take-up was 25% below the previous five-year average and the city recorded its lowest supply of grade A office space for ten years. Despite this, prime rates remain stable at £17.50 per sq ft.

Doleman said: “Overall the market performed well with £256 million invested into the region. There could be some challenges which could affect growth – particularly in the office sector – but industrial and retail growth is forecast as positive for this year.”

Source: The Business Desk

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Huge increase in properties for sale across UK

The number of properties on the market shot up in January, with 40 per cent more properties listed, and 79 per cent more in London.

According to research from online estate agents HouseSimple.com, 10 per cent of the major 100 towns and cities in the UK saw new property listings more than double last month.

Almost half saw new listings up at least 50 per cent in January.

London, which has seen property prices falling over the past couple of months, saw a huge increase in new sellers in January, with every borough in the capital seeing more new property listings compared to December.

New property supply was up 78.7 per cent in January, and a fifth of London boroughs saw new seller numbers double last month, with property listings up 118.7 per cent in Hillingdon and 117.3 per cent in Bromley.

Sam Mitchell, chief executive of online estate agents HouseSimple.com, said: “After 2017 ended with a whimper, the property market has enjoyed a much-needed New Year bounce in new supply.

“This boost does need to be put into context though, as new listings are still at very low levels.

“We expect 2018 to be another challenging year for the UK housing market as the country’s exit from the European Union draws closer.

“House price growth is likely to be single digits this year at best. However, the property market has proven over the past 12 months that it is robust enough to handle the blustery economic headwinds coming its way.”

Figures from Halifax earlier this week showed that house prices had slowed for a second consecutive month, surprising analysts, who had forecast a small increase.

The 0.6 per cent fall in house prices in January came after a similar fall in December.

Prices have still risen by 2.2 per cent in the last year, compared with 2.7 per cent growth the previous year.

Source: FT Adviser

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Half of landlords feel unaffected by PRA rules and still want to buy

Nearly half (48%) of landlords feel unaffected by the Prudential Regulation Authority’s stress tests and portfolio buy-to-let changes, Mortgages for Business’s Property Investor Survey has found.

Mortgages for Business suggested this is because landlords haven’t applied for finance since those measures were introduced.

Despite the range of changes dampening down the buy-to-let market, nearly half (44%) of landlords plan to expand their portfolios before July this year.

Steve Olejnik, chief operating officer at Mortgages for Business, said: “The results show that many landlords are more optimistic about the future of property investment than some commentators would have you believe.

“Of course, there will be some who will choose to leave the sector but this will create opportunities for those who are in it for the long-term.”

In terms of what properties landlords are interested in three quarters (75%) said vanilla buy-to-let would form part of the mix, with HMOs also being a preferred option.

Limited companies as borrowing vehicles are the most popular choice for those expanding their portfolios, with 58% favouring this route, while 20% advised they will be purchasing both personally and via a corporate structure.

Source: Mortgage Introducer

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Homeowners will be able to add two storeys to their property

Homeowners, buy-to-let landlords and property developers could be given the go-ahead to build upwards by two storeys to extend their property.

Secretary of State for Housing, Communities and Local Government, Sajid Javid, said the government will make planning guidance more flexible in order to help fix the broken housing market and boost supply of housing stock.

The move could also ease pressure on the green belt if it becomes easier to build upwards in towns and cities.

Homeowners would still need planning permission to build two extra storeys under the proposals, but guidance to local authorities is likely to be changed, so they are encouraged to approve such applications.

Mark Hayward, chief executive of NAEA Propertymark, said he welcomed any move to create housing stock. “The market is in crisis with a severe lack of available properties, which is pushing prices up and pricing first-time-buyers (FTBs) out of the market.

“The fact that this will enable existing residential areas throughout the UK to expand is especially welcome, as it should increase stock in the areas which most need it, rather than being confined to more expensive urban areas.”

Paresh Raja, CEO of Market Financial Solutions (MFS), added that landlords and property developers could also take advantage of the more relaxed guidance, creating more rented accommodation, and benefitting tenants.

“In this sense, recent reforms to housing planning rules are a definite step in the right direction, and I believe this will have positive ramifications,” he said.

“Buy-to-let landlords can now consider adding additional storeys to their property, increasing the number of rental spaces on offer. At the same time, property developers can also look to build a further two storeys on existing developments, increasing the number of houses available on the market.

“Ultimately, this type of reform will only contribute to housing supply and will help alleviate current market demand.”

Source: Your Money

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UK house prices fall for second month in January – Halifax

British house prices fell unexpectedly last month as inflation continued to squeeze household budgets, dragging annual house price growth down to one of its weakest rates in years, figures from major mortgage lender Halifax showed on Wednesday.

Average house prices fell 0.6 percent in January after a 0.8 percent decline in December, Halifax said, well below a consensus forecast of a 0.2 percent rise in a Reuters poll of economists and the first time prices have fallen for two months in a row since just after June 2016’s Brexit referendum.

British annual house price growth has slowed since the vote to leave the European Union, though the impact has been concentrated in London and neighbouring areas, with most other parts of the country relatively little affected.

House prices in the three months to January were 2.2 percent higher than the same time a year earlier, down from 2.7 percent in December and the weakest increase since July, when prices rose at the slowest pace since April 2013.

Howard Archer, an economist at consultants EY Item Club, predicted house prices would rise by two percent this year, as high inflation and Brexit uncertainty kept a lid on prices.

“Housing market activity is expected to remain lacklustre as the marked squeeze on consumer purchasing power only gradually eases, confidence is fragile and appreciable caution persists over engaging in major transactions,” he said.

British consumer price inflation hit its highest rate in more than five years in November, and the Bank of England raised borrowing costs for the first time in more than a decade.

November also saw Chancellor Philip Hammond scrap a tax on house purchases for almost all first-time buyers. Halifax said it was too early to see any impact from the change.

Archer said a shortage of housing made outright year-on-year price falls unlikely.

The Halifax data contrast with figures published last week by rival lender Nationwide which showed a surprise pick-up in growth to 3.2 percent in January, the biggest rise since March 2017.

Nonetheless, the figures would make the BoE’s Monetary Policy Committee reluctant to signal a rapid pace of further interest rate rises when it publishes its next rate decision on Thursday, Samuel Tombs of Pantheon Macroeconomics said.

“The MPC … can’t ignore the evidence of a housing market slowdown now in front of them, so we doubt that they will signal to markets tomorrow that interest rates could rise as soon as May,” he said.

Source: UK Reuters

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Buy-to-let still growing despite tax hurdles

The buy-to-let sector is still growing despite tax changes and other disincentives for investors, a new analysis of government figures by the Nationwide shows.

The number of privately rented households in England has reached a record high of 4.7m – an  increase of around 75 per cent over the past decade – according to the latest English Housing Survey from the Ministry of Housing, Communities & Local Government.

Around 20 per cent of households in England are now privately rented, up from 13 per cent in 2007.

Nationwide’s chief economist, Robert Gardner, said: “Within the 35 to 44 age group, the number of households renting has increased by 126 per cent over the past 10 years to 1.1m.

“There has also been a significant increase in the number of privately rented households in the 45 to 54 age group.

“It is interesting to note that the private rental market has continued to show steady growth despite a significant slowing in buy to let mortgage lending, suggesting a shift amongst landlords towards cash purchases.

“Changes to the tax system, limiting deductibility of mortgage interest, may be one of the factors behind this” he adds.

“Within the owner occupier sector, we’ve also seen a further uptick in the number owning outright, which stands at a record high of 7.9m.

“This is an increase of 1.4m over the past decade, nearly all of which has been amongst homeowners aged 65 or above.”

Meanwhile, an online agency claims that ‘serious portfolio landlords’ are remaining with buy-to-let despite recent tax and regulation changes making the sector more challenging for investors.

Having analysed its own registration data for the final quarter of 2017, Upad says it has seen a 20 per cent overall increase, year-on-year, in landlords registering.

During the final quarter of 2017, registrations by landlords holding portfolios of five or more properties rose by 56 per cent compared to the same period in the year before.

And within the first four weeks of 2018, registrations have risen by 14 per cent compared to the same period a year ago.

James Davis, founder of Upad, said: “Legislative changes introduced by the government in the last couple of years will, no doubt, place doubt in the minds of some accidental and less committed landlords.

“It would be foolish, however, to think that those who have made the strategic decision to invest in property would be so easily put off.”

Source: Simple Landlords Insurance

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LendInvest completes £16m development deal in three weeks

Property finance lender LendInvest has completed a £16m financing deal with established development finance borrower, Yogo Group, in just three weeks.

The development finance loan will fund the part-conversion and rebuild of a Grade II listed building, the former Thomas Lipton Care Home, as well as the construction of new units.

LendInvest completed this loan in record time of three weeks from initial introduction to site purchase, after the borrower was let down at the last minute by another lender. If finance had not been secured immediately the borrower would have lost the site to another potential buyer.

Steve Larkin, director of development at LendInvest, said: “Time is undeniably crucial for any developer. In this instance it was make or break, with the developer facing the prospect of losing a coveted site to other purchasers having been let down by their initial lender.

“Our team went the extra mile to ensure that this did not happen again, delivering fast, and affordable finance in record time.

“Working with an award-winning developer is always a comfort for a lender, and we have full confidence in the Yogo Group to deliver the quality bespoke living spaces they are so well known for.”

After completion, the project in its entirely will deliver 24 apartments and six houses, ranging from one to four bed units of bespoke design and available for first-time buyers.

The site is in Southgate, Enfield, North London and sits in five acres of its own grounds, providing privacy for prospective buyers and tenants.

Construction is expected to be completed by March 2019. The total gross development value is forecast to exceed £26m

George Philippou, managing director of Yogo Group, added: “Yogo Group is delighted to be working with LendInvest to deliver another one of its high quality residential developments in a unique enclave of Southgate.

“We would like to express our immense gratitude to LendInvest who have been extremely supportive of Yogo Group not only by funding the majority of the scheme but also by achieving the unachievable and ensuring a quick and smooth three week completion.

“The service and support provided by LendInvest and its lending managers have been exemplary.”

Daniel O’Neil of SPF Private Clients introduced and advised on the deal.

Source: Mortgage Introducer

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Bank of England to send new rates message in last year before Brexit

The Bank of England is expected to say on Thursday that another interest rate increase could be nearing as Britain’s economy grows faster than expected ahead of its departure from the European Union in just over a year’s time.

The BoE raised borrowing costs for the first time in more than a decade in November, reversing a cut made in 2016 as the country reeled from the Brexit vote shock and taking them back to 0.50 percent.

The world’s sixth-biggest economy is lagging behind a strong global pick-up, due to a rise in inflation and fall in business confidence since the referendum.

But it has fared better than most forecasts made at the time of the Brexit vote, and it ended 2017 stronger than the BoE expected. The central bank has said it plans to gradually scale back its emergency levels of stimulus.

It is widely expected to keep rates on hold on Thursday as it weighs up the impact of November’s move on the economy.

Investors are more focused on whether any of the nine rate-setters voted for a hike. That would be seen as adding to the likelihood of an increase in May, the next time the BoE is due to update its economic forecasts.

Investors also want to see what the central bank’s updated forecasts for the economy say about its rate plans.

Investors see a nearly 50-50 chance of a new hike in May and some economists are predicting two increases this year alone. That would represent a big change from the BoE’s signal as recently as November of two hikes over the next three years.

One major factor beyond the control of Governor Mark Carney and the rest of the Monetary Policy Committee is what will happen to Britain’s attempts to negotiate a new trade relationship with the EU, its main trading partner.

Prime Minister Theresa May wants to clinch a transition deal next month to secure full access for Britain to EU markets for about two years after it leaves the bloc in March 2019.

“Although the MPC won’t explicitly say so given political sensitivities, we expect their decision in May to be almost entirely determined by whether or not a transitional deal has been fully agreed and signed by then,” UBS fixed income strategist John Wraith said.

After May, the BoE risks being unable to hike rates because soon after London and Brussels could be wrangling over their long-term relationship, weighing on the economy, he said.

SIGNS OF LIFE

There are signs that Britain’s economy is finally working off the hangover of the 2007-09 crisis.

Pay growth has gathered a bit of pace and Carney says it might overtake inflation this year, restoring some spending power to households. At the same time, many exporters are riding a wave of demand from the world economy.

The BoE is expected to raise its growth forecasts on Thursday. But it might also lower its view on inflation in two or three years’ time after sterling rose recently and bond yields in financial markets jumped, potentially reducing the chances of an intensification of its rate hike plans.

Reminders remain of the fragility in Britain’s economy as it faces up to leaving the EU.

The services, factory and construction sectors all showed weaker-than-expected growth in January, according to surveys. The housing market, which is key for consumer confidence, has steadily lost momentum since the Brexit vote.

Alan Clarke, an economist with Scotiabank, said stronger pay growth in the coming months was likely to seal the case for a rate hike in May, even if the BoE was unlikely to be explicit about this on Thursday.

“I think the message will be subtle and they will keep their options open,” he said.

Source: UK Reuters