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Lethargic, but there’s life yet in the housing market

The national housing market is running out of puff. But there are still plenty of regional bright spots.

“Lethargy is replacing energy” in the property market. These were the cheery words of a former chairman of the Royal Institution of Chartered Surveyors (Rics) in reaction to Halifax’s latest house-price index. In the three months to November, house prices were 0.3% higher than in the same three months a year earlier, with the average cost of a home now £224,578. This is down from the 1.5% annual growth recorded in October, and the lowest rate of growth since December 2012.

But while this isn’t exactly a ringing endorsement of the state of the UK housing market, it’s important to look beyond the inevitably gloomy headlines. In the 12 months to September, the parts of the UK that saw the biggest drops in house prices were both in London – in Kensington & Chelsea and Westminster, with annual drops of 9.9% and 6.3% respectively.

The areas with the strongest growth were the Forest of Dean and Burnley. In both places, house prices rose by approximately 10.5%, according to figures from estate agent Savills. They were followed closely by Stirling, with a 10% increase.

London leads the decline

With house-price growth at its lowest rate in six years, the overall market as a whole is certainly sluggish. In cities and major towns across Britain, properties are taking longer to sell, sitting on the market for 102 days, which is six days longer than in 2017, according to the Centre for Economics and Business Research.

Moreover, the average number of sales per surveyor has fallen fallen to 14.1 across a three-month period, the lowest it has been since 2009, says Savills, drawing on data from Rics. However, it’s useful to acknowledge the extent to which the wider market can be brought down by price falls in the southeast, which has been overvalued for a long time.

Of the 20 cities monitored by the Hometrack UK Cities House Price index, prices fell year-on-year by 0.4% in London and 1.1% in Cambridge. Yet prices were up 7.7% in Leicester, 7.4% in Edinburgh, and around 6% in Manchester, Birmingham, Nottingham and Liverpool.

Leave Brexit out of this

There’s also been a lot of discussion of the idea that the UK market is struggling because people looking to buy are biding their time on Brexit. Yet there’s actually “little evidence that Brexit uncertainty has led to pent-up demand in the housing market”, says consultancy Capital Economics. If it has dampened transactions, the effect has been “minor”. Since the referendum, housing transactions have averaged 100,000 per month. That’s down only a little, relative to the average of 102,000 seen over 2014 and 2015.

There is obviously a case for suggesting transactions might have gone up if we hadn’t voted to leave the EU, acknowledges Capital Economics. But “a multitude of non-Brexit related factors have been weighing on activity in recent years”.

These include higher stamp duty for second homes, lower mortgage interest tax relief, and rising interest rates driving up the cost of borrowing. “So even if a Brexit deal is struck, we see little prospect of a rise in housing transactions next year.” Now is not the ideal time to sell your London home. And the stagnant number of transactions is hardly encouraging for estate agents and surveyors. But for most of the UK, the housing market is actually holding up reasonably well.

Source: Money Week

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The North West and Scotland have the best rental yields

The North West is the top hotspot for rental yields with an average yield of 5.4%, followed by Scotland with 5.3% and Yorkshire and the Humber with 4.9%, Shawbrook Bank has found.

Lower property prices mean it is easier to achieve better rental yields and the city is attracting students and employees from all around the country. The average UK house price is currently £228,000, which is 43% higher than the average house price in the North West – £159,000.

Emma Cox, ‎sales director for commercial mortgages, said: “Landlords have had a rough ride over the past few years with multiple tax changes, but our research shows that it’s not all doom and gloom for potential investors in 2018.

“Lower rental yields in London and affordability constraints for investors has driven interest North, where borrowers are chasing the yield and heading to locations with lower average house prices.

“There are still interesting times ahead for savvy investors and good investment opportunities remain.

“However, when landlords invest far away from their home turf, they can run the risk of falling foul to local knowledge.

“Smarter local investors may be seeing an opportunity to divest themselves of their less desirable housing stock, so it’s important for buyers to do their research to make sure they understand the local supply and demand before investing.”

The ‘UK Buy to Let’ report, produced by Shawbrook Bank and compiled by the Centre for Economics and Business Research (CEBR) has predicted annual property price inflation to be more subdued in the five years up to 2023 than over the last few years.

The report forecasts average annual house price predictions for the years 2017 to 2023 to be at 4.5%, compared to an average of 7.0% for the high-growth years of 2014 to 2016.

Stretched affordability ratios, years of weak wage growth and the prospect of further interest rate rises all weigh in on the outlook for house prices in the UK for the next few years.

House price growth has slowed in the capital particularly, with Brexit and the resulting uncertainty regarding the future of the financial services sector in the City of London looming over activity in the prime end of the market as have higher stamp duty land tax rates.

The report expected price growth in London to continue to trail behind the rest of the country for the next two years.

Furthermore figures from estate agent Aston Chase already show the percentage of high-end purchases from overseas in London’s most expensive postcodes dropping from 44% in 2016 to 35% last year.

Source: Mortgage Introducer

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UK house prices fall sharply in September amid Brexit wariness

According to mortgage lender Halifax, house prices in the UK dropped unexpectedly for nearly six months in September, as the number of homes for sale this year dropped to a decade low.

The country’s largest mortgage lender said that the average price of a home in the UK dropped in September to £225,995, a reduction of 1.4% from the average reported in August. Property prices still remain 2.5% higher than they were a year ago.

City economists had anticipated month-on-month expansion of 0.2% last month.

The most recent overview of the UK housing market, taken only six months before Britain leaves the EU, indicates reduced levels of demand for homebuying amid the political uncertainty created by Brexit.

Economists responded that the picture presented by Halifax concealed some regional variations. Although Brexit property prices in London are dropping for the first time since 2009, prices elsewhere are going up.

They also warned that the Halifax house price index is more subject to change than other residential property barometers because it is done every month.

Earlier this week, the Prime Minister announced that the British government would raise the cap on the amount that local councils can borrow to build homes, which can help increase the number of homes produced by local authorities.

Many people are being priced out of the market by high average property prices relative to household incomes, which in turn is impacting the rate of Brexit property price growth. The Bank of England has also started to slowly raise interest rates, which in turn causes mortgage costs to go up.

Pantheon Macroeconomics chief UK economist Samuel Tombs said that not many British households believe that housing is a wise investment at the moment.

Mr. Tombs explained that the combination of heightened economic uncertainty and growing mortgage rates will impact demand in the months leading up to Brexit, ensuring that house price growth barely passes zero on a year-over-year basis.

Source: CRL

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House prices fall again in September to four-month low

Halifax reported a steadying of house price inflation as last month’s prices dropped to their lowest since May. The latest Halifax house price index found annual growth slowed to 2.5 per cent in September from 3.7 per cent in August, as quarterly change – July to September – remained at 1.8 per cent for the second month.

On a monthly basis, house prices fell by 1.4 per cent in September to sit at an average of £225,995 – the second consecutive monthly fall and down from July’s year high of £229,776.

Russell Galley, managing director at Halifax, said the measures suggested house price inflation was steadying.

He said: “This is set amongst mortgage approvals and completed house sales remaining broadly unchanged, although a gradual pickup in wage growth has helped to support household finances.

“The annual rate of growth is near the top of our forecast range of 0-3 per cent for 2018, as a low supply of new homes and existing properties for sale, combined with historically low mortgage rates and a high employment rate, continue to support house prices.”

Kevin Roberts, director at Legal & General Mortgage Club, said limited housing supply was still hindering the ambitions of borrowers in the UK.

He said: “Whether it is first-time buyers, second steppers or people looking to downsize, a lack of suitable housing is still preventing many from making their first or next purchase.

“There is good news – steadier house price growth, schemes like Help to Buy and a wider choice of mortgages are making it easier for some first-time buyers to take a step onto the ladder. However, more support from the government is needed.”

Steve Seal, director of sales and marketing at Bluestone Mortgages, said despite the steadying in price growth there were still “significant” barriers when it comes to securing funding.

He said: “Whilst the average growth of house prices remains steady, this does not necessarily mean all doors are open for aspiring homeowners.

“Lifestyle and financial habits are changing – and it is unfair that some potential buyers are turned away for not fitting an outdated computer scoring system.

“A missed phone or credit bill, or unforeseen costs for an accident shouldn’t mean you are barred from home ownership.”

Mr Seal said these customers instead need a personalised underwriting experience that ensures the nature of their situation is fully understood.

He said: “It is vital that specialist lenders continue to find the best solutions for all of their clients, based on a rounded and fair view of their individual financial situation.”

Source: FT Adviser

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Property investment has a bright future despite Brexit uncertainty, panel says

A panel of industry experts has agreed that the outlook for property investment in the UK remains positive, despite the uncertainty around continued Brexit negotiations.

Paresh Raja, chief executive of Market Financial Solutions, said that although there’s much certainty, the ambiguity has not dampened the spirits of prospective homebuyers and property investors.

He said: “Historically, real estate has proven itself to be a safe and secure asset by offering stable, long-term returns.

“As a result, demand for property remains high. Recent figures revealed that the average house price in the UK rose by 3% in the 12 months to June 2018 and this positive trend has been met with enthusiasm from landlords, with new research saying that more than half feel positive about the current state of the market.

“Inspiring confidence throughout the sector, this development signifies a positive outlook for the future of the property market over the coming year, particularly in light of the fast approaching Brexit deadline.”

Mario Berti, chief executive of Octopus Property, agreed, adding despite wider market uncertainty, the returns available from owning, investing in and developing the right type of real estate continue to be favourable versus other asset classes, something that we expect to continue moving forward.

“This is for a number of reasons including: the supply/demand imbalance (not enough houses being built), the continued availability of cheap credit and a healthy economy. Let’s not forget the fact that the UK remains a great place to do business.”

And this positive sentiment is reflected by James Bloom, managing director of short term lending at Masthaven. He said that while the UK has suffered a housing slowdown, with many investors choosing to hold until market conditions become clearer after Brexit, the market continues to be upbeat.

Bloom added: “The short-term sector has remained buoyant and continues to perform well. We are seeing more new entrants coming into the market which is increasing competition and providing customers with an even wider choice of products.

“This has led to even more product innovation as lenders compete in this increasingly popular market. We have exciting updates as we further enhance our product range and look forward to sharing the news with the market in due course.”

Intermediaries can learn more about upcoming developments and the future of the market after March 2019 at The Finance Professional Show, which takes place at Olympia London on 7 November.

The show features a CPD-certified multi-format conference programme, with an opportunity to quiz industry experts on their view foe the market, and almost 100 lenders and providers, including Market Financial Solutions, Octopus Property and Masthaven.

Bloom said: “We have a long-standing relationship with The Finance Professional Show and are confident that the show this year will be another great success – it’s a great opportunity to have such a large part of the broker community all under one roof.”

This year’s show takes from 9.30am to 4.30pm and is sponsored by 365 Business Finance, Market Financial Solutions, Octopus Property, Kuflink Bridging, Just Cash Flow and Nucleus Commercial Finance.

Source: Mortgage Introducer

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Don’t panic! Stagnant house prices are great news for us all

Last month, annual house price growth in the UK fell to the lowest rate seen since mid-2013. According to Nationwide, house prices in August were up just 2% compared to the same time last year. That’s compared to year-on-year growth of 3.2% seen in January.

What’s responsible for the shift?

First and foremost, it’s the great buy-to-let sell-off.

Why house prices are roughly flat

There are masses of different house price indices in the UK, reflecting the national obsession with property values.

But they all point to roughly the same thing happening: house prices nationwide are rising roughly in line with inflation, which means they are flat in “real” terms.

This average covers the fact that house prices in London are falling a bit, they’re flat in the southeast, and they’re gently rising in other parts of the UK.

In other words, prices are falling in the places where houses are most expensive, and they’re rising slowly in areas where they are at less unreasonable levels. That makes sense.

What’s driving this change and will it continue?

We’ve discussed this several times here before but it’s worth keeping an eye on. Firstly, because residential property is a critical yet oft-neglected component of the economy and the financial system. Secondly, because we want to see if our thesis is panning out as expected.

The first factor behind the gentle cool down in the property market is that residential property has been made far less attractive as an investment. There’s an extra layer of stamp duty for second homes. The tax treatment of buy-to-let landlords is becoming steadily less favourable and that will only continue over the coming couple of years. And foreign investors now have more hurdles to leap over.

So that has knocked a big chunk of demand out of the market. Capital Economics points out that, according to the latest available data, the stock of privately rented homes fell by 46,000 in the year to March 2017, and that the rate of growth slid sharply in the previous year.

According to the research group, this drop appears to have continued and perhaps even increased in scale, judging by changes in the number and value of buy-to-let loans outstanding.

“And given the further reduction in mortgage interest tax relief that is on the way, stagnant house prices and rising interest rates, there are few reasons to think that sell-off will soon abate”, notes property economist Hansen Lu.

This was always the point of the changes to the tax treatment of landlords, made when George Osborne was chancellor: to replace the would-be buy-to-let landlord with the would-be first-time buyer.

The Tories (certainly since Margaret Thatcher) always wanted Britain to be a property-owning democracy. This – plus the much less sensible Help-to-Buy scheme – was their “nudge” scheme to get that ideal back on track.

The second factor, of course, is that interest rates are rising and houses are already very expensive. If house prices are already as high as they can go, and the cost and availability of credit to buy a house is stable or rising, then prices can only remain the same or fall, barring a massive increase in wages.

This is very good news – let’s hope it continues

Just to be very clear – this is all good news. As we’ve said many times before now, this is what a healthy housing market correction would look like.

You want house prices to fall in real terms (ie, after inflation – specifically, in this case, wage inflation). A drop in real terms makes houses more affordable and would go a long way to addressing the anger that a lot of younger people feel about being shut out of the market.

At the same time, a fall in real terms doesn’t panic people in the way that a fall in nominal terms does. Most people (perhaps excluding Londoners) are mentally equipped to cope with the idea that their house is still worth roughly what they paid for it, even if they bought it a decade or more ago.

But they struggle a lot more with the idea that their primary asset has lost value. That’s bad for confidence. And given sufficiently big falls, it’s bad for banks’ balance sheets too.

So here’s what we’re crossing our fingers for: at the margins, the housing market balance of power continues to shift towards first-time buyers from buy-to-let landlords. The fact that mortgages simply can’t get any cheaper keeps house prices frozen or gently falling. Those things seem likely.

The missing component for now is wage inflation. Pay (including bonuses) rose at an annual rate of 2.4% in the second quarter of the year. So while that’s just about keeping up with house price growth, it’s hardly shooting the lights out.

Source: Money Week

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Mortgage lending drops to ‘disappointing level’ as buyer interest falls away

Nationwide this morning reported the biggest monthly drop in house prices since July 2012.

The lender said that the average house price is currently standing at £214,745 this month, down 0.5%  from £217,010 in July.

The fall brought annual house price inflation down to 2%, and Nationwide said it expects house prices to finish this year 1% up.

Meanwhile, mortgage lending fell to £3.2bn in July, the lowest figure for 15 months, according to the Bank of England.

Mortgage approvals for house purchase dipped to 65,000, while the number of approvals for remortgages fell 5.5% to 45,000.

Estate agent Jeremy Leaf said the figures were disappointing “in that they reflect a period when we would have expected a pick-up in the market over the spring buying season”.

John Eastgate, sales and marketing director at OneSavings Bank, said: “Buyer activity remains pretty depressed as the market comes to terms with economic uncertainty on top of existing obstacles of a lack of supply and increasing affordability challenges.”

Separately, NAEA Propertymark said that in July the number of properties available per estate agency branch rose for the third consecutive month, from an average in 33 in April, to 37 in May, to 39 in June, and to 41 last month.

Measured year on year, this is 17% up on July last year, when agent branches had an average of 35 properties.

While supply rose, demand shrank for a second month running, to 303 applicants per branch. However, the NAEA said this was entirely in line with seasonal trends.

Source: Property Industry Eye

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From Yorkshire to London, house price performance is extremely mixed

Even the quickest of glimpses through the latest housing news will have you scratching your head and wondering what exactly is going on. While historically we have all tended to look at the UK market as one, splitting down to local house price performance where applicable, maybe this is the wrong way to track house prices.

Before we look at some of the latest news in the UK housing market let us not forget that while London is under serious pressure at the moment, London property prices in the past have led the UK market higher. Whether recent London house price performance can be put down to a reality check or a serious change in trend remains to be seen.


A recent report by PricewaterhouseCoopers has cast a very interesting light on the Yorkshire housing market. The UK market as a whole is expected to post average annual increases in house prices of 3% between 2018 and 2025. When you bear in mind the ongoing concerns about Brexit this certainly injects a little optimism into the UK property market. However, the same report indicates that Yorkshire property could present an interesting opportunity in the short to medium term.

House prices in Yorkshire are expected to rise by 3.5% in 2018, 2.7% in 2019 and an average of around 3.4% between 2020 and 2022. When you also take into account the relatively high rental income in northern markets, compared to their southern counterparts, this is certainly worth further research. Between 2018 and 2022 the average house price in Yorkshire is expected to rise from £155,000 up to £182,000.


Data from the Office for National Statistics tends to be slightly behind some of the more popular house price indexes because they work on completed transactions. However, what we do know is that over the last 12 months the rate of increase in UK house prices has fallen from 3.5% down to 3%. Interestingly, house prices in the East Midlands have increased by 6.3% during the period while London is bottom of the charts with a reduction in house prices are 0.4%.

As we touched on in our early introduction, many people are blaming the overall reduction in UK house price growth on the London property market. However, London is going through a serious seachange in light of Brexit and, have investors really forgotten how the London property market has been dragging the rest of the UK higher for many years?


The Scottish government is currently fighting its UK Westminster counterpart with regards to the distribution of responsibilities and budgets after Brexit. There is also the dark cloud of independence which continues to hover above the Scottish property market. Against this background, you might be forgiven for assuming that Scottish property prices may be under pressure. However, you would be wrong…

Recent reports show that average house prices in Scotland increased by 5.8% to the year May 2018. This despite a fall of 0.2% between April and May which was attributable to a monthly fall of 3.8% in Edinburgh property prices. The average house price in Scotland now stands at £186,626 and while the Edinburgh market registered a sharp fall between April and May, the annual increase for the city is still a very impressive 10.6%. As you would expect, performance was mixed across all areas of Scotland but the general consensus seems to be that Scottish housing stock offers good value for money at this moment in time.


It will be no surprise to learn that London house prices fell for a fourth straight month equating to a 0.4% reduction in the 12 months to May 2018. The average property in London is now valued at £478,853 according to the Land Registry with many experts predicting further falls in the short to medium term. While sceptics suggested that London property prices would collapse in light of the 2016 Brexit vote this has not been the case. In reality we are seeing a slow deflation of the London housing market although it is difficult to say with any great certainty how long this will last.

PricewaterhouseCoopers believes that London property prices will fall by 1.7% in 2018 and 2019 with a levelling off from 2020 to around 0.2%. In reality it is very difficult to predict property price movements with any great certainty when you consider the very fluid and fast-moving Brexit situation.

Source: Property Forum

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What’s going to happen to property prices in 2018 and 2019?

Annual UK house price growth is projected to slow to around 3% in 2018 and is likely to remain around this level until 2025, according to new analysis from PwC.

The average UK house price is estimated to rise from £221,000 in 2017 to around £285,000 by 2025 according to PwC’s projections. Price growth at this pace means the ratio of house prices to earnings is likely to remain broadly stable, but still at high levels by historical standards.

In London, however, the average house price could drop by nearly 2% in 2018 compared to last year and house price inflation could continue to be negative in 2019.

Richard Snook, senior economist at PwC, commented:

“UK house price growth remained resilient in 2017 despite a weakening economic backdrop, but has shown signs of moderating during the first half of 2018, particularly in London. Affordability in the capital has been stretched due to three factors: a high deposit saving hurdle, increased economic uncertainty relating to Brexit acting as a drag on international investment, and reduced numbers of housing transactions due to stamp duty changes.

“However, London house price growth should pick up again from 2020. We project the average price of a London home in 2022 to be £509,000, compared to £141,000 in the North East. This means the large affordability gap between the capital and other UK regions is set to remain.”

Projected UK and regional house price growth and house price values (£000’s)

Average house price growth Average house price values (£’000s in cash terms)
Region 2018 2019 2020-2022 (average) 2017 2022
East of England 4.0% 4.5% 3.4% 283 340
East Midlands 4.4% 3.7% 3.4% 180 216
South West 4.3% 3.7% 3.6% 245 295
West Midlands 4.8% 4.3% 3.6% 185 225
South East 2.3% 3.1% 3.3% 318 369
North West 3.2% 2.7% 3.5% 155 182
London -1.7% -0.2% 2.6% 480 509
Wales 3.0% 2.1% 3.4% 150 175
Scotland 4.8% 3.4% 3.6% 143 172
Yorkshire & the Humber 3.5% 2.7% 3.4% 155 182
Northern Ireland 3.4% 3.9% 4.0% 128 154
North East 1.2% 0.7% 3.1% 127 141
UK 2.9% 2.8% 3.4% 221 259

Source: ONS, PwC analysis

Increased stamp duty for higher valued properties has been one of the factors dampening London house price growth recently. Rob Walker, head of real estate tax at PwC, commented:

“While, in theory, 95% of buyers are winners from the removal of the previous slab system, the increase in stamp duty for homes above this threshold appears to have contributed to an overall slowdown in the property market.  High stamp duty rates are dissuading people from upsizing and downsizing which is affecting both ends of the market. Government should look at other options to kick start the housing market.”

Past rises in UK house prices have been driven by a number of factors, but one of these has been a lack of new housing supply. PwC’s new analysis at the local authority level across England suggests a clear link between a lack of new housing supply, relative to population growth, and local house price growth since 2011. This has been particularly marked in London, PwC estimates around 110,000 more homes would need to have been built between 2011 and 2016 to keep up with population growth.

Looking ahead, if the government can achieve its target of building 300,000 new homes a year in England by the mid-2020s, then this should exceed the increase in housing demand from projected population growth and therefore start to make up the backlog from past under-supply. But PwC’s local analysis suggests that many of these homes need to be built where demand is highest in London and the South East and the East of England to prevent a further worsening of affordability in those regions.

Source: London Loves Business

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UK housing market still weak despite sign of more sellers – RICS

British house prices edged up from a five-and-a-half-year low in May and there was a tentative first sign of more properties for sale but it was too early to call a change in the sluggish property market, a surveyors group said.

The Royal Institution of Chartered Surveyors’ (RICS) house price balance rose to -3 from -7 in April, once again dragged down by a weak market in London and echoing other measures of British house prices.A Reuters poll of economists had pointed to a lesser improvement to -5.

A measure of new properties coming on to the market turned positive for the first time in 27 months.

However, RICS said its survey was consistent with a generally flat month for price changes and inventory levels remained near record lows.

“Against this backdrop, it is likely that the headline picture regarding activity in the housing market will remain subdued for some months to come,” Simon Rubinsohn, RICS’s chief economist, said.

Britain’s housing market has cooled since the 2016 Brexit vote which led to a rise in overall inflation and increased uncertainty among investors.

London’s housing market remained a weak spot in May with surveyors reporting that the capital was the only area of the country where prices were expected to fall over the next 12 months.

Source: UK Reuters