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House Price Growth at 6-Year Low

Quarterly house price growth in the UK has slowed down to its lowest rate in 6 years.

According to the Halifax house price index, the average house in the UK costs £224,578, a 0.3% rise compared to this time last year. This is the lowest annual growth rate since December 2012, when the UK was in a recession.

In fact, house prices have fallen in the last month, with the average price of a house in November down 1.4% from the previous month. Halifax’s data has shown that average house prices have fallen in three out of the past four months. Overall, the average value of a UK home has dropped 1.1% over the last quarter.

Analysts have claimed that economic uncertainty over Brexit has limited the growth of the UK housing market. On Friday, property developers Berkeley Group warned that the short-term outlook is “clearly uncertain due to the ongoing Brexit process and a number of headwinds in the operating environment in London and the south-east”, and that such uncertainty has had a “consequential adverse impact on investment levels and transaction volumes”.

Last month the Bank of England claimed that in a worst-case no-deal Brexit scenario average house prices could fall by 30% once the UK leaves the EU. At the same time, if the government is successful in securing a smooth Brexit transition deal, higher borrowing costs could result in the Bank of England raising their interest rates. This could cause affordability problems for a large proportion of the population, resulting in further slowdowns or even drops in average house prices.

Price growth in the more expensive areas of the country in particular has been relatively strong in the mid-long term since the crash in 08. Average prices in London and the South East have risen by 40% over the past five years alone. Economists have suggested that a lack of new housing and the help-to-buy subsidy have contributed to the rapid increases. Higher demand from foreign investors has also helped drive up prices, especially in London.

Many economists believe that the growth trend over the last few years is not sustainable, as house prices continue to rise above real wage growth. According to the Office of National Statistics, the average full-time worker had to pay 9.7 times their yearly salary in order to buy a newly built home in 2017. This figure has more than doubled in the last twenty years, as in 1997 workers were expected to pay just 4.6 times their salary.

Also, the amount of high loan-to-income ratio mortgages offered by banks has been limited by the Bank of England, so first-time buyers need to pay even more on their deposits if they want to buy a house. All these factors have lead to decreased affordability throughout the housing market, suggesting that the housing price growth over the last few years cannot be sustainable.

Hansen Lu, a property economist at Capital Economics, said: “The fundamentals suggest that an acceleration in house price growth is unlikely. House prices are still very high relative to incomes and this is unlikely to change soon.”

Source: Money Expert

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UK house price growth slumps to six-year low

UK house prices grew by their weakest rate in almost six years last month, according to figures released today.

Boasting just 0.3 per cent growth in the three months to the end of November compared to the same period last year, house prices fell to their lowest growth since December 2012, according to Halifax.

House price growth also fell by 1.4 per cent in November compared to October, Halifax’s data showed, and by 1.1 per cent compared to the previous quarter.

That left the average UK house price at £224,578.

Russell Galley, managing director of Halifax, said: “While this is the lowest rate of growth in six years, it remains within our forecast range of zero per cent to three per cent for 2018.

“High employment, wage growth and historically low mortgage rates continue to make home ownership more affordable for many, though the need to raise a significant deposit still acts as something of a restraint on the market.

“This is largely offset by relatively limited supply of new and existing properties for sale, which continues to sustain house prices nationally.”

The figures contradict recent Nationwide statistics that showed house price growth improved by 1.9 per cent in November to push off a five-year low.

Halifax has also recorded more volatile movements in house price growth, which hit 1.5 per cent in October and 3.7 per cent in August before its latest 0.3 per cent low.

Howard Archer, economic advisor to the EY ITEM Club, said: “The recent sharp monthly movements in the Halifax measure – and the contrast between the Halifax and Nationwidedata – highlights the fact that house price measures can be volatile and differ from month to month between reporting agencies.

“It is therefore best not to attach too much importance to one particular survey but to try and take an overview.”

He pinned overall UK 2019 growth at two per cent, adding: “We suspect that the housing market will be relatively lacklustre over the coming months.”

The news comes after mortgage approvals rose to their highest levels since January 2018 in October, according to the Bank of England.

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “These figures come on the back of recent encouraging housing transaction and mortgage approvals. However, they do continue the trend from last month of a softening, not correcting, market.

“Looking forward, we don’t expect activity to change much bearing in mind seasonal and political distractions. On the ground, lethargy is replacing energy as the market seeks direction in the early new year.”

Source: City AM

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Rightmove: House prices to flatten in 2019

Rightmove has predicted flat house price growth of 0% in 2019.

It said the prediction is based on the sound fundamentals of the housing market in combination with increased political and economic uncertainty.

Not that prices will be flat across the board, as Rightmove said the Northern half of the UK will see prices rise by 2-4%, while London commuter belt regions should see prices fall by around 2%.

Miles Shipside, Rightmove director and housing market analyst, said: “Since the property market’s recovery from the 2008 financial crisis, many parts of the Northern half of the UK have seen marginal or relatively modest price increases.

“We predict that these areas will continue to see price rises, though tempered by affordability constraints. In contrast, regions in and around the influence of London saw prices go up in a five-year period by an average of around 40%.

“Consequently, we forecast that these previously booming areas will continue to see modest downward price re-adjustments in 2019.”

Source: Mortgage Introducer

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House Prices Drop in October After Budget and Brexit Negotiations

Figures recently released by Nationwide indicate that in October, annual house price growth fell to 1.6% from the 2% reported the previous month.

Market watchers suggest that the lower activity for 2018 house prices is partly due to movers waiting to see if any of this year’s Budget include any positive changes for them, such as a reform of Land Tax and Stamp Duty.

It is also possible that buyers and sellers are holding off until more information is available on a Brexit deal before making any major decisions.

Nationwide Chief Economist Robert Gardner said that there was a slowdown in house price growth in October, moving annual growth below the 2 to 3% witnessed over the previous 12 months. He added that this was in line with expectations, as tighter household budgets and economic uncertainty would naturally reduce demand, and he expected to see 2018 house prices go up by around 1% over the course of the year.

Mike Scott, the chief property analyst at Yopa, an online estate agency, said that the October house price index reveals a renewed slowdown and that the number of house sales is well-below their 2007 peak.

He pointed out that the numbers of first-time buyers and cash buyers have resumed their pre-boom levels while the number of buys to let purchases was ascending until 2015 when the tax system put buy-to-let investors at a disadvantage and caused their numbers to fall to around one-third of the 2007 level.

Former RICS residential chairman Jeremy Leaf explained that political and economic uncertainty was causing judgments to become clouded at a time when the UK economy does not appear to be in bad shape.

He said that the good news was that first-time buyers are replacing investors, which is a bonus if sellers appreciate the importance of negotiation.

Brian Murphy, Mortgage Advice Bureau Head of Lending, also saw a mixed outlook. He suggested that ongoing economic and political uncertainty was causing movers in some areas to adopt a ‘wait and see’ attitude, which has made the market more subdued in some areas.

Mr. Murphy added that in regions like Yorkshire and the Humber, the Midlands, Wales, and Scotland, buyer sentiment remains positive and markets continue to perform well. This means that in these regions, property prices have enjoyed greater average yearly increases than the national rate of growth in the headlines.

If a Brexit agreement is finalised by November 21, there will likely be a last-minute rush of activity from homebuyers and sellers as bottled-up demand in some regions may encourage movers to get a purchase or sale confirmed before Christmas, resulting in a late-year market revival.

The Bank of England’s announcement of its intentions to keep interest rates at their present level will likely see lenders continue to make low production rates available in an effort to encourage new mortgage customers and keep existing borrowers in the last months of 2018, resulting in a market upswing. If not, and the current holding pattern continues, November housing market activity could be a disappointment.

Source: CRL

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London house price boom to end as buyer’s market returns

The London property market is slowly returning into the hands of buyers, as the days of house price growth outpacing the rise of inflation look set to come to an end.

Industry analysts and economists polled by Reuters over the last week have predicted house prices in the capital will fall 1.7 per cent this year and a further 0.3 per cent in 2019, even if the UK does not secure a Brexit deal.

Property values in London have more than tripled in the last two decades, boosted by foreign investors.

Asking prices in London fell 1.7 per cent this month from the same period in October, according to data from Rightmove.

Brexit uncertainty is not the only thing holding back prices, as sharp increases in stamp duty and land tax stifle transaction volumes.

Experts have predicted London prices to rise by 1.5 per cent in 2020 after the upcoming dip, while economists have said inflation will rise two per cent.

However online estate agent Emoov’s chief executive Russell Quirk had a message of positivity for Londoners looking to sell in the next few years.

“London demand is starting to poke its head above the stamp duty-laden parapet again,” he told Reuters.

“History tells us that you can’t subdue London long term and therefore it’s clear that the current downturn in the capital’s volumes and values is temporary.”

Nationally, house prices are forecast to rise two percent this year, 1.8 percent next year and two percent again in 2020. Though moderate, those gains are below expectations for wage increases and will likely appease first-time buyers who are struggling to get on the property ladder.

Source: City A.M.

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House prices in Manchester fastest growing in UK

New research from estate agency Cushman & Wakefield shows that house price growth in Manchester has risen higher than anywhere else in the UK, exceeding the UK average in five out of the past six years.

This culminated in a significant gap in 2017, when the average house value rose 11%, against a regional average of 6%, and a UK average of just 5%.

Manchester also leads the way in house price inflation when compared with all other core UK cities.

In the 12 months to July 2018, prices rose just under 9%, compared with Leeds at just 3.8%. In London house price inflation saw a drop of -1%.

Julian Cotton, associate director at Cushman & Wakefield, said: “Our research demonstrates that year-on-year growth within the Greater Manchester residential market has continued apace, outperforming the wider region and once again exceeding the national average, a trend that has been consistently evident in five of the last six years.

“Greater Manchester is the UK’s largest and fastest growing economy outside of London, having transformed itself into one of Europe’s most dynamic and exciting cities in which to live and work.”

The new homes market is also looking bright in Manchester, with forecasts showing that house prices in the city are expected to rise to 57% by the end of 2028.

Bristol is second at 53%, Birmingham and London expected to rise at a similar level of 46%, with Liverpool faring the least at 20%.

Once again, Manchester is showing the greatest increase of all core UK cities.

Despite this upward pressure on house prices, the Manchester new homes market still benefits from a very strong domestic demand due to only a 16% difference between the average price of a new home and existing homes in the city.

This is not the case in a number of other core UK cities, where, in some cases such as Newcastle, new homes can cost nearly 50% more than the average existing home.

Julian added: “Seen as the regional centre for finance, commercial and retail with world class transport links, Manchester is now one of the best cities in Europe to do business in.

“Major corporations – Co-operative Group, Amazon, Royal Bank of Scotland, BBC and ITV – have all chosen to establish key operations within the city.

“The relocation and start-ups of these major corporations and small independent businesses has resulted in the creation of new jobs.

“It is expected that around 3,100 new jobs will be created per year across Manchester to 2034.

“Many of these jobs will be high salaries based in the city centre. As a result, Manchester’s population is anticipated to grow by 3,500 people per year over the same period, creating an ever-growing demand for housing.”

He said: “A fundamental driver in the popularity of the North West as a region in which to invest has been price.

“Price points perceived as affordable, particularly from an emergent overseas market and a somewhat overpriced, oversaturated London investor market, have proved popular with buy-to-let investors acquiring new-build and second-hand stock.”

Manchester’s rental market is also rising higher than in any other UK city.

Rents were up by 10% to April 2018, compared with Leeds in second place at 8%. London again shows a negative where rents have fallen by -8%, beaten only by Newcastle where rents have fallen by -9.5%.

Julian said: “The rental market absorbs many of the 100,000 students studying at The University of Manchester, Manchester Metropolitan University, The University of Salford and The University of Bolton, as well as young professionals requiring the convenience of a central, vibrant location.

Cushman & Wakefield said Manchester has a huge, talented workforce and a super economy of £300bn, being home to a host of FTSE 100 companies.

With an average age of 29 it has a large student population, many of which stay on after graduation.

Manchester has the second best graduate retention in the UK after London.

According to the Higher Education Statistics Agency, 50% of Manchester’s graduates stay in the city for work, while 60% of Manchester-born students who study in other locations return after graduation.

Source: The Business Desk

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UK rents outpacing house price growth but are below the cost of living

UK rents are now rising above the rate of house price growth but are just below the UK inflation rate.

Figures from tenant referencing service HomeLet found that new average rents were up 2.1% annually in October to £928 a month.

In comparison, data from the latest Halifax House Price Index showed average growth was at just 1.5%.

Rental growth is, however, still below the inflation rate of 2.4%, suggesting prices are below the cost of living but still higher than the growth in property values.

The biggest increase in rents during October was in Northern Ireland, up 4.5% to £653 per month, while London still has the highest rents, at £1,619 – up 4% annually.

When London is excluded, the average UK rental value was £768 in October, up 1.7% on last year.

Martin Totty, chief executive at HomeLet, said: “Average UK-wide rents continue to increase year-on-year broadly in line with the current rate of inflation and the growth in average wages, meaning affordability in most parts of the country is little changed.

“The exception is London and the south-east, where average rents have increased above both inflation and average wage growth. In contrast to house price trends in this region of the country, activity levels in the private rented sector remain resilient.

“Landlords committed to the sector here seem able to command higher rents, potentially providing some offset to the negative headwinds of taxation changes some will have experienced.”

Commenting on the figures, Adam Male, director of lettings at online agent Urban.co.uk, said: “While many are resigned to the rental sector due to the inflated cost of home ownership, the continued escalation of rental costs is, in fact, a second facet of the UK housing crisis.

“An increase in rental prices across 11 out of 12 regions highlights the plight of tenants across the UK and the uphill struggle they face just to put a roof over their head.

“Rather than work with the nation’s buy-to-let landlords, who act as the backbone of the UK rentals sector, the Government has introduced numerous legislations to ‘level the playing field’ between landlord and tenant.

“The reality of this excessive and consistent campaign against the buy-to-let sector has been a reduction in rental properties, an uplift in rogue landlords and unsuitable living conditions and a spike in costs for UK tenants.”

Source: Property Industry Eye

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House prices still picking up but inflation sinks to lowest level for over five years

Annual house price growth is now at its slowest level for more than five years, Nationwide claims.

The Nationwide House Price Index for October put annual price growth at 1.6%, the slowest rate since May 2013 and down from 2% in September.

Average prices are now at £214,534, which Nationwide said was flat on a seasonally adjusted monthly basis but is actually down 0.18% without seasonal adjustments.

Robert Gardner, chief economist for Nationwide, said housing market activity was particularly subdued among home movers and buy-to-let investors, but the building society is still expecting house prices to rise by around 1% this year.

News of the slow rate of growth produced a temporary break from the silence of Emoov founder Russell Quirk, clearly determined to keep going in the PR stakes amid rumours that the online agent is up for sale.

Quirk said: “The slowest rate of price growth in more than five years is to be expected given the mix of seasonality and wider market instability.

“While many were hoping the market may catch a second wind heading towards Christmas, this has failed to materialise, and a predictably disappointing Budget where housing is concerned will ensure this air of lethargy remains prevalent over the coming months.

“Although the market will end 2018 with a limp, not a sprint, it should still match industry predictions where annual performance is concerned.”

Source: Property Industry Eye

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House price growth expected to rise more in the North than in the South

The traditional north-south divide in house price growth will turn on its head, with the Midlands, North and Scotland expected to see the strongest increases, according to Savills.

New forecasts from the international real estate adviser predicts UK house prices will rise on average by 14.8% between 2019 and 2023.

Savills is projecting a wide range of growth from 21.6% in the North West to single digit growth of 4.5% in London and 9.3% in the South East and the East.

London’s prime market will perform more strongly, with prime central London expected to rise by 12.4%.

Housing transactions are likely to stabilise, with first-time buyer and cash buyer numbers most resilient.

Savills expects rents to rise 13.7% over the next five years with London rents up by 15.9%.

Lucian Cook, Savills head of residential research, said: “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.

“That legacy will limit house price growth, but it should also protect the market from a correction.”

Transactions, rather than house prices, are often seen as the ultimate measure of market strength.  Sales volumes have fallen only -6.9% since the Brexit vote to 1.145 million, demonstrating the resilience of the UK housing market, Savills says.

The firm expects this figure to decrease by 1% over the next five years.  But a continued rebalancing of the composition of the market is expected, with mortgaged buy-to-let investor purchases falling by -23%.  This will add to upwards pressure on rents, particularly in London, as investors look to lower value, higher yielding markets.

London

London house prices have risen by 72% over the past ten years, well ahead of any other region. The average home buyer with a mortgage now pays just under £429,000 and has a household income of almost £76,000 (58% higher than the UK average).  Even with borrowing at over four times that income, these households still need a deposit of £123,000.

Small falls (-2.0%) are expected in London’s mainstream market next year, before values bottom out in 2020 and tick up steadily from 2021.  Price growth in London over the next five years is forecast to total 4.5%.

The prime London markets are less dependent on mortgage borrowing and will outperform the mainstream, Savills says.  The UK capital is expected to remain an attractive place to live, work and own residential assets, supporting12.4% price growth in prime central London by the end of 2023.

Regional story

At this point in the cycle, the highest price growth is expected in the lower value markets much further from the capital, which have seen nothing like the 10-year price rises seen in London – just 1.9% in the North and 5.8% in Scotland.

The Midlands, the North of England, Yorkshire and Humberside, Scotland and Wales all have the capacity for borrowing to increase relative to incomes, even allowing for higher interest rates, and this will support price growth ranging from 17.6% to 21.6% across these regions.

Key regional economies – most notably the metros of Manchester and Birmingham – have the capacity to outperform their regions attracting both local and investor buyers.

Wales will perform in line with the Midlands as it has done in previous cycles, but it is a hugely diverse market.  There may be increased housing demand crossing over from Bristol once the Severn bridge tolls are abolished.

Scotland, which has only recently returned to pre credit crunch peak, is performing strongly, particularly Edinburgh and Glasgow, which have seen prices rise 8.9% and 7% over the past year, respectively.

Transactions

Housing  transactions have fallen from 1.619 million in 2007 to around 1.145 million this year, but are forecast to remain stable over the next five years, though the market mix has changed.

Cash buyers now account for almost a third of all sales (31%).  The bank of mum and dad has provided important support to first-time buyer numbers and, judging by receipts from the 3% surcharge for additional homes, cash is also an important component of investment demand, Savills says.

Mortgaged first-time buyers, the only buyer group to have expanded since 2007 – from 359,000 to 370,000 this year – continue to be supported by Help to Buy and the bank of Mum and Dad.  Numbers are expected to remain robust despite the prospect of a less generous, more targeted Help to Buy, with a fall of just -2.7% anticipated by 2023.

Mortgaged home mover numbers have fallen dramatically since 2007 as existing home owners move home less frequently.  Numbers are down from 653,000 to 370,000, but having adjusted for stress testing of borrowing, are expected to remain constant over the next five years.

Buy-to-let buyer numbers will continue to come under pressure.  Stamp duty and mortgage-interest tax relief changes have led highly leveraged investors to rationalise portfolios or pay down debt.

Rental growth to outpace income growth

Rental growth is expected to track house price growth, averaging 13.7% over the next five years. Tightening access to mortgage finance and limited social housing supply is driving demand for privately rented homes at all price points.

Cook concluded: “Until the market sees a significant injection of build to rent stock, rental demand will outstrip supply and rents will rise.

“Investor buyers requiring borrowing are expected to focus on higher yielding markets and this will put further upwards pressure on rents in some of the most expensive rental locations.”

Source: Mortgage Finance Gazette

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UK house price growth slumps to five-year low in October

House prices grew at their slowest annual rate for five years in October, Nationwide data revealed today. House price growth slumped to 1.6 per cent last month, with prices flat month on month as the latest figures paint a miserable picture for housing activity across the UK.

October’s 1.6 per cent growth rate fell from two per cent growth in September, and is the lowest monthly rate since May 2013.

Meanwhile the average house price actually fell month on month, from £214,922 in September to £214,534 in October.

Robert Gardner, Nationwide’s chief economist, expects house prices to grow by just one per cent over 2018, saying squeezed household budgets and an uncertain economic outlook has dampened demand despite low borrowing costs and high employment.

“Looking further ahead, much will depend on how broader economic conditions evolve. If the uncertainty lifts in the months ahead, there is scope for activity to pick-up throughout next year,” he added.

“The squeeze on household incomes is already moderating and policymakers have signaled that interest rates are only expected to raise at a modest pace and to a limited extent in the years ahead.”

Yesterday City A.M.’s own shadow monetary policy committee unanimously voted to hold interest rates ahead of Brexit, with the Bank of England set to deliver its verdict later today.

Howard Archer, chief economic advisor at the EY ITEM Club, said August’s interest rate hike to 0.75 per cent meant house buyers would be more exposed to further rate rises, even if they prove to be incremental.

“Consumers have faced an extended serious squeeze on purchasing power, which is only gradually easing,” he added. “Additionally, housing market activity remains hampered by relatively fragile consumer confidence.”

However, against the background of a subdued housing market, activity among first-time buyers saw a small recovery, with Nationwide’s data showing purchases are roughly in line with pre-financial crisis levels.

“The improvement in credit availability, including the introduction of schemes such as Help To Buy, historically low interest rates, in particular fixed rate deals, together with a steady improvement in labour market conditions in recent years have all helped boost activity,” Gardner said.

But the housing market as a whole remains soft – the 1.2m transactions in the 12 months to September were 30 per cent lower than the number in 2007.

Mortgages for house movers remains subdued while buy-to-let activity has seen a significant reduction since the government upped stamp duty on such purchases.

However, Nationwide’s measure of house price inflation is lower than Halifax’s measure of 2.5 per cent for the last quarter, while Office for National Statistics data pegged inflation at 3.2 per cent in August.

Ratings agency Moody’s said it still expects house price growth to soften in 2019, though.

“This reflects lower demand from Brexit-related uncertainty, weak consumer confidence, low wage growth and a recent pickup in consumer inflation,” said Rodrigo Conde, assistant vice president and analyst at Moody’s.

“Specifically, migratory and rental market changes expose London and the south east to greater house price deceleration, which will slow the most given the relatively large gains made over the last decade.

“In the event of a no-deal Brexit, the macroeconomic outlook for the UK would weaken, leading to outright declines in house prices nationally.”

Source: City A.M.