Marijana No Comments

London house price boom over, at least for now

The days of London house price rises hugely outpacing inflation won’t be returning anytime soon, even if Britain and the EU strike a Brexit deal, the vast majority of economists and analysts polled by Reuters said.

Property values in the capital, long a haven for foreign investors, more than tripled in the last 20 years, but demand and turnover have crumbled since the June 2016 vote to leave the European Union and property taxes were raised.

According to the Nov 13-22 Reuters poll, London house prices will fall 1.7 percent this year and another 0.3 percent in 2019. Asking prices in London fell 1.7 percent this month from October, according to property website Rightmove.

Sterling, the stock market and businesses have had a turbulent few years since Britons narrowly voted to end their 45-year membership of the EU.

With just over four months left until Brexit day, Prime Minister Theresa May faces opposition from lawmakers in all parties to her negotiated withdrawal deal, fuelling fears the country may leave without one.

As that risk appeared to grow on Nov. 15, shares in housebuilders Persimmon (PSN.L), Taylor Wimpey (TW.L) and Berkeley Group (BKGH.L) fell between 6 and 7 percent in their worst daily performance since the referendum.

“Things are starting to look a bit bleak. Uncertainty is about the only thing we can be certain about over the next two years,” said independent buying agent Henry Pryor.

Asked if there would be a return to strong turnover and above-inflation house price growth in London and the South East if a Brexit deal was struck, 14 of 17 respondents said no. Two said it would happen regardless and one said it depended on the deal.

But Brexit is not the only factor holding back prices – a sharp increase in Stamp Duty Land Tax, paid when buying a house, has particularly affected the capital where houses are much more expensive than the rest of the country.

“The high rates of SDLT will continue to stifle transaction volumes, especially in expensive price areas like London and the South East,” said Ray Boulger, a senior manager at mortgage broker John Charcol.

After next year’s modest dip London prices will rise 1.5 percent in 2020, the poll found. A separate Reuters survey said overall inflation would be 2.0 percent that year. [ECILT/GB]

Graphic on UK and London house prices forecast: tmsnrt.rs/2Q89SKn?eikon=true

Graphic on UK house price-to-earnings ratio: tmsnrt.rs/2R1jZgW

Graphic on outlook for London’s housing market: tmsnrt.rs/2DCgt8Z?eikon=true

LITTLE CHANCE OF CORRECTION

When asked about the probability of a significant correction in London’s housing market by end-2019 the median forecast was only 20 percent, significantly down from the 29 percent given in August. That may be partly explained by the view that prices are already falling.

But not everyone was gloomy about the capital’s prospects.

“London demand is starting to poke its head above the stamp duty-laden parapet again,” said Russell Quirk, chief executive of online estate agent eMoov.

“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 2.0 percent this year, 1.8 percent year and 2.0 percent again in 2020, the poll found.

Those moderate gains are below expectations for wage increases and will likely cheer first-time buyers who are struggling to get on the property ladder.

When asked to rate the level of London house prices on a scale of 1 to 10, where one is extremely cheap and 10 extremely expensive, the median response was 8. Nationally they were rated 7, where it has been for a couple of years.

While borrowing costs are currently low, the Bank of England is forecast to raise rates again after Brexit. But the new level of Bank Rate will still be historically low at 1.0 percent and it is not expected to rise to 1.25 percent until early 2020.

Source: UK Reuters

Marijana No Comments

London house prices: Homes in the capital lose value despite the UK’s resilient property market

London house prices fell 0.3 per cent in the year to September, according to Office for National Statistics (ONS) data released today.

Growth in the capital lagged far behind the UK-wide average, which was 3.5 per cent, a small increase from 3.1 per cent last month. The growth puts the average house price across the country at £232,554.

But homes in the capital did not decline as badly as they did in August, when prices fell by 0.6 per cent.

The figures from the ONS and Land Registry show the disparity between the London property market, which has been in decline since March, and other parts of the UK. Growth was fastest in the West Midlands, where house prices increased 6.1 per cent.

The decline in growth reflects uncertainty around Brexit, with London taking the brunt of lower buyer confidence, according to property experts.

Richard Snook, senior economist at PwC, said: “London remains the biggest regional story as the price decline continues, albeit at a modest rate.

“London is one of the most internationally dependent parts of the UK, due to economic integration with Europe and the high share of foreign citizens in the labour market.”

“Therefore, the greatest impact of Brexit-related uncertainty was always going to be felt in the capital,” he added.

In its November inflation report the Bank of England suggested the London market has been disproportionately affected by regulatory and tax changes and lower net migration from the EU.

But the London market has also been impacted by rapidly rising house prices in the capital, which have left many potential buyers unable to afford a home.

At £482,000, the average house price in London is more than double the average of the rest of the country. The most expensive area is Kensington and Chelsea, where the average house costs just under £1.5m.

Head of residential property at Sotheby’s International Realty, Guy Bradshaw, blamed “punitive” stamp duty costs.

“When will the government start listening to the industry and stop ignoring these figures? London estate agents have been banging the drum for a stamp duty reform for years and today’s figures clearly show a suffering market,” he said.

A breakdown of growth by borough shows the fall mainly impacts central London properties, with outer London boroughs such as Brent and Redbridge seeing a rise in house prices.

North London estate agent Jeremy Leaf said: “Once again we are seeing prices softening but no dramatic change, underpinned by low mortgage rates and supply.

“The price falls in London are masking a more resilient picture elsewhere in the country, underlining how misleading it can be to judge the market as a whole by what is happening in one region.”

Source: City A.M.

Marijana No Comments

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.

Marijana No Comments

London house prices: landlord exodus opens path for first-time buyers

An exodus of buy-to-let landlords in London is opening up a unique opportunity for first-time buyers, property website Rightmove has suggested.

House price movements in the capital are at their most subdued in eight years, with prices for one and two bedroom properties falling marginally over the past year.

This is the point where aspiring first-time buyers typically have competed with investors, but a 3% rise in stamp duty for buy-to-let and second home properties has put off many would-be landlords, clearing the way for new buyers, The Times reports.

Miles Shipside, a Rightmove housing market analyst, said: “Government policy has sought to reduce [buy-to-let investor] activity and so tilt the balance back towards first-time buyers.”

He added that “landlords are clearly buying far fewer properties and that leaves a gap in the market for first-time buyers”.

While landlords were hit with the 3% stamp duty surcharge from April 2016, first-time buyers were “effectively awarded stamp-duty-free status in November 2017”, said Shipside.

The fall in prices at the bottom of the market over the same period provides an opportunity for aspiring homeowners to “negotiate harder”, says Shipside.

The muted buy-to-let sector “is also dampening demand and stifling the usual autumnal hike in asking prices”, says Homes and Property.

The Rightmove Index has found the autumn selling season, which sees vendors launch properties that have been held back over the summer, has started with a whimper as asking prices in central London fell 1.1% to £625,000 this October compared to the same month last year.

Property analysts believe this slowdown is due to deepening political uncertainty in the build-up to the UK leaving the European Union next March and the gap between house prices and household incomes in the capital, with first-time buyers still struggling to save for a deposit.

North London estate agent and former Rics residential chairman Jeremy Leaf told Mortgage Strategy: “Buyers and sellers seem worried about the two ‘B’s – not only about the impact of a good, bad or indifferent Brexit deal but also the looming Budget at the end of the month.”

All eyes now turn to Philip Hammond, with the chancellor rumoured to be looking to encourage more landlords to sell to long-term tenants for a capital gains tax relief.

This could provide a win-win situation for both investors and first-time buyers, and further boost the number of one and two bedroom properties on the market.

Source: The Week

Marijana No Comments

Four London boroughs set for rocketing house prices amid mass-regeneration

House prices in London are set to grow by an average of 12 per cent over the next five years, according to research which suggests London’s property slump might not be as severe as many in the industry had feared.

Among the London boroughs pipped to undergo the fastest growth are Hackney, Camden, Tower Hamlets, and Haringey, according to new research from real estate advisor CBRE.

The report also found that Harrow experienced the strongest house price growth over the last 12 months, rising 14 per cent compared with the London average of two per cent, the figures revealed.

However, over the last five years the area with the strongest growth has been Waltham Forest, which saw an 83 per cent increase in the price of property; almost double the London average.

“The figures in this report suggest that London’s population will grow 12 per cent over the next decade, as people continue to flock to the one of the world’s top cities for education, business and heritage,” said Jennet Siebrits, head of residential research at CBRE UK.

Siebrits added: “We estimate that nearly 65,000 new homes are currently under construction and it is crucial that this rate continues if we are to safeguard the future of London as a thriving home for people from all over the world.”

According to the report, London’s growth has been “encouraged by the mass-regeneration of previously unloved areas of the capital. It’s encouraging to see much more thought being given to the role that safe roads, open spaces and green areas play in people’s lives when regeneration projects are planned”.

The news comes despite a swathe of recent forecasts predicting London could suffer a sustained decline in house prices up until 2020.

A YouGov survey last month suggested public expectations for house prices over the next year have hit their lowest level in 12 months, while a recent Reuters poll of 30 housing market specialists estimated that house prices in London are set to tumble as much as 1.6 per cent by the end of 2018 and a further 0.1 per cent next year.

Caution has lingered in the run up to Britain’s discussions with Brussels over leaving the EU, with activity slowing down in many parts of London as homeowners wait to see what type of deal is achieved from the Brexit negotiations.

Yesterday’s Office for National Statistics data showed that London house prices plunged to their lowest rate of growth in nearly a decade in July, falling 0.7 per cent over the 12-month period.

Source: City A.M.

Marijana No Comments

London house prices show biggest fall since 2009 with 0.7% annual decline

Falling London house prices have helped drag annual growth in UK property values down to a five-year-low, according to official figures.

House prices in London fell by 0.7% annually in July – the biggest tumble there since September 2009 when there was a 3.2% decline, according to
figures released jointly by the Office for National Statistics (ONS), the Land Registry and other bodies.

The report said London has shown a general slowdown in its annual property price growth rate since mid-2016 – hitting a recent peak of 14.8% in March that year.

Across the UK, house prices increased by 3.1% in the year to July – the lowest annual growth rate since August 2013. The average UK house price stood at £231,000 in July.

The report said the slowdown in UK house price growth over the past two years has been driven mainly by a slowdown in the south and east of England.

Price declines in London have particularly hit the value of flats – with the city accounting for around a quarter (25%) of all UK sales of flats and maisonettes.

The average price of flats and maisonettes crept up by 0.6% in the year to July 2018, to £208,000 on average – the weakest growth of all property types looked at in the report.

By comparison, the price of detached houses was up by 4.6% annually.

Across England, house prices have increased by 3% annually, reaching £249,000 on average.

Within England, the North West showed the highest annual growth, with prices increasing by 5.6% in the year to July 2018. This was followed by the South West and West Midlands regions (both 4.4%).

The lowest annual growth was in London, followed by the South East, where prices increased by 1.8% in the year to July 2018, followed by the East of England, where prices increased by 2.4%.

The report said: “This is the first time since May 2009 that London, the South East and the East of England have been the lowest-ranked regions for annual growth.”

Wales saw house prices increase by 4.2% over the previous 12 months to stand at £157,000.

In Scotland, average house prices increased by 3.2% over the year to July to reach £152,000.

The average price in Northern Ireland was £133,000, up 4.4% over the year.

Earlier this week, property website Rightmove said it has recently seen some signs of confidence returning to the London market, particularly at the higher end where price reductions are helping to pull more buyers in.

Releasing its housing market report for September, Rightmove said there are signs that price reductions in parts of London have led to an upturn in buyer activity as sentiment improves.

Jeremy Leaf, a north London estate agent and a former residential chairman of the Royal Institution of Chartered Surveyors (Rics), said the ONS/Land Registry figures “reflect the market as it was in the summer months – since buyers and sellers have returned from their summer breaks, there has been a little more enthusiasm to sell homes than we have seen for a while.

“This is the time of year when we would expect to have more activity and on the ground we are certainly seeing more property coming onto the market and more demand. But it is still hard to gain commitment from buyers because property needs to differentiate itself from the competition in order to attract interest and offers.”

Dan Tomlinson, policy analyst at the Resolution Foundation, said: “The UK’s housing market shows some signs of cooling, with growth in the house price index slowing to its lowest level since 2013. But we should be cautious about thinking this signals an imminent easing of cost of living pressures.

“This slowdown is driven almost entirely by trends in London and the South East.

“House price rises are still outpacing wage growth across many other parts of the country.”

 Source: Yahoo Finance UK
Marijana No Comments

Five charts to help you understand London’s falling house prices

House prices in London fell by 0.6% in June, according to the UK’s official statistics body, the ONS. It might not sound like much but follows years in which prices grew by an annual average 7.5% between the end of 2009 and the end of 2017.

Prices have been broadly unchanged since the end of 2017, following years in which London has been the mainstay of the UK’s housing market. There has been a lot of speculation over the effect of Brexit on the London property market, but there is little data yet to back this up. There have been a number of factors at work that we can see, which have led to the weakening of prices, however, some of which are national in character – notably low real earnings growth – and some more local, including additional internal migration flows away from London.

In addition, since London prices have increased relative to the rest of the south-east, we might have expected the London market to have eased rather earlier. If so, recent changes could simply be an unwinding of the overvaluation of recent years. It is important to remember that London prices remain very high with an average price of £475,000.

Below are five charts that explain what is going on.

1. The ripple effect

Over successive cycles since the early 1970s, the UK has seen a phenomenon known as the ripple effect. In economic booms, house prices have tended to rise first in London and the south-east and then gradually, over time, the other regions have caught up. London has always stayed out in front, but the percentage difference typically has not become bigger.

As the graph above shows, prices in London, on average, have been about double those in the north (represented here by Yorkshire and Humberside, which is used as a comparison because the regional boundaries have not changed over time). The exception to the relative changes is the period since the mid-1990s, where historical positions have yet to be restored.

2. Income growth

Changes in regional prices are strongly influenced by national factors, including the low levels of interest rates and the growth in real incomes. We know that real incomes have a strong effect on house prices. As a rule of thumb a 1% increase in real incomes leads to a 2% increase in real house prices, because households can afford to pay more. And so, typically over the cycle, house prices exhibit more volatility than incomes.

It is particularly noticeable that the Office for Budget Responsibility (OBR), the UK’s independent fiscal watchdog, has scaled down its national house price forecasts, recognising that weaker productivity is leading to lower real income growth. For example, in March 2016, the OBR expected nominal house prices to rise by 4.7% in 2019; by March 2018, this had been revised downwards to 2.7%.

3. Supply, demand and regional patterns

Poor income growth explains why London is operating in a weaker national housing environment, but it does not explain the regional price pattern. Higher demand in London, supply shortages and internal migration patterns also play a role.

For this, it helps to look more closely at the south-east – so inner London relative to outer London and relative to the south-east as a whole. The key feature is that we are now looking at areas that are not physically very distant from each other and we know that most moves take place over very short distances – according to the 2014-15 English Housing Survey, 74% of movers, where the household head was under the age of 55, relocated by under ten miles and 24% moved under one mile.

London has long had more people leaving the city than entering it. While it attracts the young, London loses the slightly older age groups. This loss was declining sharply until 2009, but then accelerated again, particularly in 2016 and 2017 to exceed 100,000 people.

This pattern is broadly consistent with the observed path of house prices. Since a high proportion of people leaving London go elsewhere in the south-east, we expect to see a fall in the ratio of house prices in London relative to the south-east in the last two years and this appears to have been the case.

4. Property types consistent

The relative prices for different types of property (detached houses, semis, terraced houses and flats) have gone up and down in a similar manner, although there are, of course, absolute differences in the prices. Just as households can move between locations, they can substitute between property types which leads to similar price movements.

Source: Yahoo Finance UK

Marijana No Comments

There’s a realistic way to save for a London property deposit

If you’re looking at getting on the UK housing ladder, especially in London, it looks like 2020 is the time to buy.

According to a Reuters poll of analysts and experts, house prices in Britain’s capital are set to fall by 1.6% this year and 0.1% in 2019, with property prices in the capital having a one in three chance of crashing. While this is worrying for people looking to move or cash out on their property, it is a good sign for those looking to get on the housing ladder as analysts think London is currently overvalued.

“The weight of evidence suggests that housing is overvalued once more,” said Hansen Lu at Capital Economics to Reuters. Tony Williams at property consultancy Building Value says that a “disorderly Brexit,” which also means a no-deal Brexit, “will exacerbate” the trend of traditional international buyers are staying away from the London housing market.

Currently property prices in the UK’s capital hover around £500,000 ($644,663) and are consistently above anywhere else in England.

How to save for a deposit

That may seem daunting for someone who isn’t even on the property ladder yet. After all, the average amount for a deposit is 10% of the value of the property.

Yahoo Finance UK spoke to price comparison website MoneySuperMarket (MONY.L) about how it’s possible to save for a deposit when the bar of entry is so high in places like London, where the cost of living is high and wage growth is stagnating.

According to MoneySuperMarket’s report “Hotel of Mum and Dad,” it found that the number of adult children who have moved back in with their parents has grown 8%, more than the population of London within the last 20 years.

“Despite the housing market in London levelling out slightly in recent months, it’s still incredibly hard for first-time buyers to get on the property ladder,” MoneySuperMarket’s Caoimhe Keogan told Yahoo Finance UK.

“With the average London house price coming in at over £480,0001, it’s understandable that many prospective homeowners living in the capital can’t afford both to rent and save for a deposit at the same time. Luckily, as our research shows, parents are willing to welcome their children back home in order to support their financial wellbeing. And with the average London rent for a one bed property standing at £1,901, there are huge savings to be made by staying at home.”

The group looked at various average costs that can be saved while staying at home. For example, laundry, food shopping, toiletries, as well as gas, electricity and water bills. While not everyone will have parents that can supplement when they are at home, the research shows that, on average, Londoners are paying their parents just £6.50 a night, or £198 a month, for staying with them.

Couple that with the amount saved on rent and how if parents supplement a variety of other living costs, like evening meals and laundry, as well as staying frugal, staying at home would allow you to save a sizeable amount for a deposit.

Source: Yahoo Finance UK

Marijana No Comments

The current state of the London property market

As we enter the second half of 2018, the London property market continues to struggle says Dave Beard, Lending Expert from specialist second charge mortgage broker Feasible.co.uk.

Once a bastion of high prices and sales activity, the London market has struggled through much of the year. In July 2018, it was reported that London prices have fallen by 0.5%. In some ways, this could be considered an improvement; the fall in June 2018 was 1.9%. However, the continual downward trend is undoubtedly concerning.

The discrepancy between boroughs

However, it is worth noting that the continual downward trend is not displayed throughout every borough. The most expensive borough, Kensington & Chelsea, reported a 4.1% rise in house prices in July. This was by far the biggest increase, with the next largest rise – 1.5% in Greenwich – falling far behind. Tower Hamlets and Camden also saw house prices rise, but not enough to offset a grim picture elsewhere in the capital. Hackney, for example, saw house prices drop by 3.3%, while Hammersmith & Fulham and Lambeth fared little better.

London compared to the rest of the UK

The statistics above are particularly of note, given that house prices across the UK have continued to – albeit modestly – rise to the tune of 3.34%. London, once the leading light of the UK housing market, now appears to be losing its status – and Bank of England policy maker Ian McCafferty has offered speculation as to why: Brexit.

The “exodus” of EU bankers

McCafferty told LBC listeners that he believes an “exodus” of EU bankers is taking place, and drew direct correlation between this and the ongoing uncertainty regarding the UK’s withdrawal from the EU. With EU negotiations not set to resume until October at the earliest – and political turmoil predicted as a result – then, if McCafferty is right, it looks likely that the London property market may take a while to stabilise yet.

Foxton’s loss reflects growing fears

Unfortunately, it appears the current stagnation of prices has claimed a victim, with well-known agency Foxtons reporting a loss in its recent financial data. The company had already issued four profit warnings recently, and its share value has fallen from 250p to just 45p in two years. In the first half of 2018, Foxton’s lost £2.5 million, with the problems in the London property market being identified as one of the major causes.

The rental market

However, there is some sign of life in the London property market: average rental rates have risen to a new record high of £1,615. This is a 3.3% rise from this time last year, and is the first time ever that London rental figures have broken the £1,600 barrier.

This surge was particularly welcomed, given that rents in the capital fell – for the first time in seven years – in June.

In conclusion

Unfortunately, the current state of the London property market is rather unhealthy. While the rental market returns to a gentle boom, London is falling behind the rest of the UK in terms of house prices. Foxton’s loss has demonstrated the very real consequences of the continued difficulties facing the London property market, they are likely to be just the first casualty.

Source: London Loves Business

Marijana No Comments

London house prices to fall this year and next, 1-in-3 chance of a crash

House prices in London’s overvalued market will fall this year and next, a Reuters poll of analysts and experts predicted, and will tumble if Britain fails to reach a deal ahead of its departure from the European Union.

The quarterly poll of around 30 housing market specialists, taken in the past week, said house prices in the capital – where foreign investors have previously fuelled skyrocketing prices – will fall 1.6 percent this year and 0.1 percent next.

“Central London is tanking because the traditional international buyers are staying away – and the quantum of buyers is falling. A disorderly Brexit will exacerbate this trend,” said Tony Williams at property consultancy Building Value.

Uncertainty over how Brexit negations pan out has already spooked foreign investors. When asked what effect a disorderly departure would have on London prices, responses ranged from “short-term fall” to “damaging” to “disaster”.

“In the short term the additional uncertainty will disproportionately affect London, causing the value of some properties, particularly high value properties, to fall further,” said Ray Boulger at mortgage broker John Charcol.

Britain is due to leave the EU in March and sterling fell to a near one-year low against the euro on Tuesday amid no-deal angst. A weaker currency should make UK houses more attractive to foreign buyers but Brexit uncertainty is keeping them away.

When asked about the likelihood of a significant correction in London’s housing market before the end of 2019 the specialists gave a relatively high median of 29 percent. The highest was 75 percent.

But that might not be a bad thing – certainly for first-time buyers.

When asked to rate the level of London house prices on a scale of one to ten, where one is extremely cheap and ten extremely expensive, the median response was nine. Nationally they were rated seven.

“The weight of evidence suggests that housing is overvalued once more,” said Hansen Lu at Capital Economics.

In August the average asking price for a home nationally was 301,973 pounds and in London a whopping 609,205 pounds, according to property website Rightmove, putting home ownership out of the reach of many – despite historically low borrowing costs.

The Bank of England pushed interest rates above their financial crisis lows this month but signalled it was in no hurry to raise them further. It will add another 25 basis points in the second quarter of next year, taking Bank Rate to 1.0 percent, another Reuters poll predicted.

So with mortgage rates staying low house prices are expected to increase nationally by 2.0 percent this year and next – slower than inflation – and then 2.3 percent in 2020.

“We see little upward or downward pressure on house prices at current near-zero interest rates. However, risks lie substantially to the downside,” said Andrew Brigden at Fathom Consulting.

“Were interest rates to return to pre-crisis levels or higher, which may prove necessary if there were a sharp fall in sterling after a General Election, for example, then house prices could fall by around 40 percent.”

Source: UK Reuters