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Coronavirus and the London property market

As the coronavirus outbreak and UK lockdown continues, many are left asking what this will mean for the property market. It’s too early to tell exactly how it will fully impact the sector and economy moving forward. However, the UK property market is robust and has shown its resilience during uncertain times in recent years.

Many professionals in the property industry have stated they believe house price growth will slow down as fewer properties will be going on the market and less transactions will likely take place. However, a major crash in prices is not expected as many believe the market will pick up pace after a period of uncertainty, similar to after the Brexit referendum.

Most buyers and sellers are still proceeding with sales that started before the outbreak of coronavirus. The majority of people are investing in property for the long-term, which means buyers, landlords and investors will be less impacted by short-term fluctuation in property prices.

London property still seen as a safe haven

Even though the short-term future of the property market is uncertain, sales are continuing to be agreed. Property, especially in London, is still being viewed as a safe haven as shares and stock investments have taken a massive blow since the coronavirus outbreak and have shown to be extremely volatile investments.

Prior to the government response to coronavirus becoming more drastic, the UK property sector as a whole had the strongest start to the year for four years. The London property market was also the strongest it had been since prior to the vote on Brexit as asking prices reached the largest annual rise since May 2016, according to Homes & Property.

Rightmove’s House Price Index for March revealed the average price of a property in London reached £638,826, which is an impressive 5.1 per cent annual increase. This is likely due to supply still not keeping up with demand. Additionally, the index also revealed the number of sales agreed in the capital grew by 34.4 per cent, and it even took 15 fewer days for properties to sell once they were put up for sale.

The private rental sector is showing growth, too. RICS have predicted rents in the UK to rise by 2% this year – and up to 3% per annum by 2025. Other property experts state that the Coronavirus isn’t negatively affecting rent prices, which are only down 0.2 per cent on the previous month.

Rising demand from prospective tenants is keeping rents high as supply remains relatively low. A large number of private landlords who have empty rental properties are now scrambling to find longer-term tenants, and are still able to advertise on rightmove and zoopla, with online letting agents Portico making this available at an extremely attractive price.

In short, London’s market fundamentals are considered solid. Even though the fast-paced market will likely slow down due to the coronavirus outbreak and lockdown, the sector is expected to bounce back after a period of uncertainty.

Technology is keeping the property market moving

As physical viewings of properties have been banned following Prime Minister Boris Johnson’s lockdown announcement on 23 March, the market is naturally expected to slow down. However, more and more estate agents are adapting to the measures by offering virtual property viewings through “walk through” video tours and Facebook Live events.

With millions of people working from home, there has been a substantial increase in virtual viewings. Property portals, such as Rightmove and Zoopla, are also seeing surges in search numbers on par with the figures for Christmas and Boxing Day.

To keep the sector moving, the market as a whole is adapting quickly as many property professionals are using a range of technology and proptech to be able to continue transacting, despite the coronavirus lockdown. In addition to virtual viewings, appointments are still being done through video conferencing tools, FaceTime and WhatsApp and contracts are able to be signed electronically.

Record low interest and mortgage rates make borrowing more affordable

The Bank of England lowered the base interest rate from 0.75 per cent to 0.25 per cent on 11 March, and then it was further lowered to 0.1 per cent on 19 March. This is lower than it’s ever been before and means it’s a great time to get a mortgage or remortgage your property as borrowing is likely to be more affordable.

Borrowers with tracker mortgages should be seeing their mortgage rates drop. If you’re looking for a mortgage, over a dozen lenders have promised to cut their standard variable rates by 0.5 per cent. More banks and building societies are expected to drop their rates in the coming weeks.

Which? found that the cheapest fixed-rate mortgages haven’t seen significant drops as they are already at historic lows. However, average mortgage rates are continuing to fall, and there are a significant number of products available.

Because of this, it could prove to be a great time to buy a property and lock in these record low rates. This means mortgage repayments will likely be more affordable and could provide you the opportunity to borrow more and get more for your money. Additionally, these low interest rates could also fuel property price growth once the crisis surrounding coronavirus is over.

To cut your interest costs further, it’s also recommended to get an up to date online property valuation on your property. Your lender will then need to recalculate your loan-to value ratio (LTV). A lower LTV usually means you’ll receive a better interest rate and have access to a wider selection of lenders.

Get ahead of the competition

The government has recently urged both buyers and renters to delay moving house if possible as it’s important for people to stay at home and away from others during the coronavirus outbreak. However, this could still be a smart time to get ahead of the competition if you’re interested in buying or investing in property.

The property buying process could take longer than normal, and you might need to delay completion depending on how long the coronavirus lockdown lasts. However, you can still get the ball rolling and invest in property with record low interest and mortgage rates. And as the UK, including London, is in a housing shortage, there is still expected to be strong demand for property and rental properties moving forward.

Source: London Loves Business

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London house prices rebound with 2.3 per cent growth after election

London house prices grew at their fastest rate in 15 months in December following Boris Johnson’s election win, official figures showed today, as UK house prices also rose.

Homes in the capital enjoyed a 2.3 per cent rise to £484,000 after a 2019 full of falls, according to the Office for National Statistics (ONS).

The south east also posted growth of 1.2 per cent, the UK’s lowest rate of growth.

London house prices jump

“London has languished at the depths of the house price rankings for months on end but has… shifted through the standings considerably,” said Marc von Grundherr, director of lettings at Benham and Reeves estate agent.

“If ever there were a sign that the tides are turning, this is it, and it won’t be long before London starts to lead from the front once again.”

Jamie Durham, an economist at PwC, hailed London’s post-election jump after the capital’s rate of growth sank compared to the north’s.

“Price growth in London in particular has rebounded,” he said. “This may suggest an end to North-South divide in house price growth that has been evident over the last couple of years.

“Price growth rates have been trending upwards since the middle of 2019. It appears that greater certainty in the economy, particularly related to the Brexit agreement and General Election result, has unlocked pent-up demand and helped push up prices.

“Assuming everything goes smoothly during the transition period, and the economic environment remains resilient, we expect continued positive house price growth in 2020.”

All regions climb in house price bounce

UK house prices climbed 2.2 per cent on an annual basis in December to beat November 2019’s 1.7 per cent growth rate. But they only rose 0.3 per cent on a month by month basis.

The average UK house price stood at £252,000 in December 2019, according to the ONS.

It is the first month since February 2018 that all UK regions posted a growth in house prices.

Yorkshire and the Humber experienced the highest rate of growth at 3.9 per cent. The east Midlands enjoyed growth of 2.8 per cent, and the West Midlands rose 1.4 per cent.

“In particular London has returned to strong growth,” said Yopa property analyst Mike Scott. He hailed the 2.3 per cent rise as London’s best since September 2017.

“London’s average price of £482,842 is also a new record, beating the previous high of £479,942 from February 2018,” he added.

“We anticipate that it will continue to strengthen over the next few months as the renewed market confidence following the decisive election result feeds through into completed sales.”

‘Normal service resumed’

“Normal service has most definitely been resumed,” added Jonathan Hopper, managing director Garrington Property Finders.

“Such a resounding return to normality at the end of 2019 shows just how far the housing market has come since the dark days of a year ago.

“London, for so long the fallen idol of the national property landscape, has powered back not just to growth, but to become the fourth best performing English region in 2019.

“Both buyers and sellers appear to have a renewed sense of clarity and purpose, and in many areas prices are playing catch up.”

‘Nationwide revival’ underway

Sam Mitchell, CEO at online estate agent Housesimple, added that today’s figures amount to a “nationwide revival”.

“This positive sentiment has continued into 2020,” Mitchell said. “Buyers have flocked to the property market with more gusto thanks to the so-called Boris boom and greater clarity on Brexit.

“The months of March to June are typically when we see a real boost in buyer activity, though this spring awakening appears to be starting a little earlier this year.”

UK house prices rise at end of 2019

UK house prices have bounced back since the turn of the year after a subdued 2019.

Prime Minister Boris Johnson’s General Election victory has been credited as a major driver behind a 4.1 per cent rise in house prices recorded by Halifax for January.

That increase led accounts EY to raise their forecast for housing market growth in 2020 from two per cent to 2.8 per cent.

But major factors like the Brexit trade deal talks, which must conclude by the end of 2020, are still putting downward pressure on UK house prices.

And Howard Archer, chief economic adviser at EY, today sounded a note of caution on 2020 house price growth.

“However, the economy still looks set for a pretty challenging 2020 and there will still be appreciable uncertainties,” he said.

“The upside for house prices in 2020 is likely to be limited. Additionally while the fundamentals for consumers should still be pretty decent in 2020, we suspect that earnings growth will be below the peak levels seen around mid-2019 and that employment growth will be slower overall.”

Today’s UK house prices data arrives after Rightmove predicted a spring bounce that could set new house price records from March.

Rightmove director and housing market analyst Miles Shipside said: “There is a boom in buyer activity outstripping the rise in the number of new sellers, which we expect to lead to a series of new price records starting next month.”

By Joe Curtis

Source: City AM

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London rental growth at three-year high

Annual rental growth in London reached 2.8% in Q4 2019, the highest growth rate for three years, Zoopla’s Rental Market report shows.

In York, Bristol and Nottingham the average cost of renting has increased by more than 5%, more than double the UK average of 2.6%.

Aberdeen, Middlesbrough and Coventry were the only three cities where the cost of renting has fallen compared to last year.

Mary-Anne Bowring, managing director at Ringley, said: “Rental prices in London have increased by 2.8% – the highest rate in the capital for almost four years – and providing the Brexit deal doesn’t prove too damaging, this will likely continue.

“Zoopla’s prediction that anticipates a 3.5% growth in rental prices over 2020 is welcome news for landlords and the institutional investors eyeing the UK rental market, with recent Savills research showing there are now over 150,000 build-to-rent homes in the pipeline.”

The Office for National Statistics estimated that average rents grew by 3.8% in 2019, compared to the 2.6% cost of renting.

Bowring added: “Rental growth has largely been driven by higher wages but there are al-ready signs wage growth may be slowing. Lack of supply is also another factor, with many private landlords looking to exit the market following tax and regulatory changes.

“A drop off in available rental homes combined with reduced wage growth could leave renters out of pocket. To that end, the government should rethink its approach to buy-to-let landlords.”

BY RYAN BEMBRIDGE

Source: Property Wire

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London house prices rose twice as fast as the rest of UK in 2010s

London house prices rose twice as fast as the UK average during the 2010s, a new report has shown, notching up a 66 per cent growth rate that was far faster than any other region.

In the country as a whole, the average house price rose 33 per cent over the last decade as it recovered from the financial crisis, the report from Nationwide said. The figure was far lower than the 117 per cent rise seen in the 2000s.

Andrew Harvey, Nationwide’s senior economist, said the London price expansion came “despite recent weakness”. Political wrangling caused big-ticket purchases to dry up in 2019, sending prices in London tumbling by 2.9 per cent.

Houses in Britain once again became less affordable in the 2010s as price growth outstripped the 20 per cent increase in earnings.

Price growth in the housing markets in Britain’s northern regions was weak over the last decade, with prices slow to recover from the financial crisis of 2008-9. House prices in the north grew by 11 per cent during the 2010s, for example.

“The 2010s has been the weakest decade for house price growth since the 1990s.”

Andrew Harvey, Nationwide’s senior economist

In the 1990s, house prices grew by 21 per cent. This followed an enormous 180 per cent increase in the 1980s, when policies such as Margaret Thatcher’s Right to Buy and the relaxation of mortgage lending rules led to a property boom.

UK house price growth over the last 40 years

Region1980s1990s2000s2010s
London215%40%111%66%
Outer Met222%29%95%54%
Outer SE219%18%114%43%
E Anglia227%6%115%43%
S West206%19%122%38%
E Mids244%3%120%36%
W Mids196%16%108%33%
Wales163%7%135%17%
N West183%23%124%17%
Yorks & H203%-9%137%17%
North178%9%127%11%
Scotland125%28%127%8%
N Ireland23%115%123%2%
UK180%21%117%33%

Harvey said that over the last decade it was not just central London houses that rose rapidly in price. “The neighbouring outer metropolitan region – which includes places such as Slough, Guildford, Crawley and Chelmsford – also significantly outperformed, with prices rising 54 per cent during the 2010s,” he said.

Harvey added that although London has long been the least affordable region in Britain, the issue has grown in recent years.

London’s house price earnings ratio reached 10.2 in 2016, Nationwide said, meaning a house was 10.2 times more expensive than the average yearly earnings in the region.

By 2019, it had dropped to 8.8, but this was still well above the 6.1 figure seen at the start of the decade.

By Harry Robertson

Source: City AM

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London house price boost helps overall growth

UK city house price growth has picked up to 2.9% supported by a 1% increase in London house prices, the October Zoopla UK Cities House Price Index has revealed.

Prices have risen by 1% in London over the past year, the highest rate of growth for two years, following a period of year-on-year price falls.

Richard Donnell, research and insight director at Zoopla, said: “After a three-year repricing process accompanied by a sizable decline in housing sales, the London housing market is finally showing signs of life.

“The shift in momentum is clear, resulting from a lack of supply, increased sales and more realistic pricing, which bode well for higher sales activity in 2020, rather than a pick-up in house price growth.

“While the London housing market has been in the doldrums, market conditions in regional cities have been stronger over the last two years with demand supported by employment growth and attractive housing affordability.

“The rate of growth is slowing, and all cities are registering annual growth of less than 5%.

“The announcement of the General Election has brought forward the usual seasonal slowdown, but the last few weeks of the year pre-Christmas tend to be much quieter than after Boxing Day, when consumer interest in housing springs back to life.”

House prices are now registering month-on-month price falls in less than a quarter of London’s housing markets, a huge drop from the 85% of markets registering price falls a year ago.

Over three quarters of London’s homes are in markets registering small month-on-month price increases, which have lifted the overall annual growth rate to 1%.

The shift in London house price momentum is down to a decrease in the number of new properties for sale, which has restricted supply.

This is a trend that has been developing for the last 12 months and has been accelerated by the announcement of the General Election on 12 December.

In addition, there has been a notable increase in the number of sales agreed per agency branch in London.

While this increase is off a low base, it indicates that there is renewed demand for housing in London after a sizable drop in sales volumes over the past three years.

Despite London’s housing market having been through an extended slowdown, accompanied by lower sales, large regional cities are starting to show signs of slower growth.

House price growth since the start of 2017 has exceeded 15% across Edinburgh, Leicester, Manchester and Birmingham, but the pace of growth is slowing.

North of the border, house price growth remains steady in Edinburgh and Glasgow at 4.0% and 2.6% respectively.

By Michael Lloyd

Source: Mortgage Introducer

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London homes take longer to sell than other UK cities

Property owners seeking to sell their homes in London could be forced two wait an extra two weeks compared to other major UK cities, as the capital suffers from weak market conditions.

Residential properties now take 14.5 weeks to sell, more than one month longer than it took to complete a sale in 2016.

Sellers in the London market are accepting offers from buyers that are on average 5.7 per cent below their asking price, up from 1.8 per cent three years ago, according to the latest Cities House Price Index by Zoopla.

The discount to asking prices is even more in inner boroughs, with agreed prices averaging 7.9 per cent below asking prices in central London compared to the 4.7 per cent gap in the suburbs.

Richard Donnell, research and insight director at Zoopla, said: “Market conditions are set to remain weak in southern cities until pricing levels adjust to what buyers are willing, or can afford to pay.

“London is three years into a re-pricing process, and we expect sales volumes to slowly improve over 2020, while house price growth remains subdued.

“There are large parts of the country where housing affordability remains attractive, fuelled by continued economic growth that supports demand for homes, resulting in reasonable sales periods and only modest gaps between sales and asking prices.”

The strongest market conditions were in Scotland, where homes in Glasgow and Edinburgh sell within five to six weeks as a different system is used for sales transactions and more information is provided to buyers up front.

Glasgow and Edinburgh were also the only UK cities not to register a discount.

Donnell added: “There is a continued polarisation in housing market conditions across the country set by underlying market fundamentals, albeit Brexit uncertainty has been a compounding factor for lower market activity.”

By Jessica Clark

Source: City AM

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London house prices suffer steepest fall since financial crisis

London house prices fell at their fastest rate since the financial crisis in the third quarter, according to Halifax.

Homes in the capital saw their values sink 1.7 per cent year on year, their worst performance since autumn 2009. Meanwhile south east house prices dropped 1.3 per cent.

UK house prices grew at their slowest rate in six-and-a-half years in the third quarter of 2019, the bank’s house price index showed.

The value of British homes rose just 1.5 per cent year on year in the third quarter, a drop from 1.8 per cent in the previous three months. That is its worst quarterly increase since the start of 2013.

That left the average UK house price at £233,808, a drop from the second quarter average of £234,026.

Quarter to quarter, house prices rose 0.4 per cent in the three months to the end of September, versus a 0.4 per cent decline in the three months to the end of June.

Paul Smith, economics director at IHS Markit, which compiled the data, warned the UK housing market is still “fragile”.

He said Brexit uncertainty is stoking fears for buyers and sellers alike.

“Despite the low mortgage rate environment and rising earnings growth helping to ease affordability constraints, UK-wide house price inflation sank to a six-and-a-half year low,” Smith added.

“We suspect that political and economic uncertainty associated with Brexit continues to weigh on the market. This is especially the case in the south of England, where prices are falling and, in the case of London, at the fastest rate since the height of the financial crisis.”

Still, London house prices still remained above £480,000, almost £160,000 more expensive than prices in the south east, where buyers can expect to pay an average £323,055.

By Joe Curtis

Source: City AM

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Prime lettings market in London seeing highest demand or five years

The lettings market in London’s prime property market is improving, with the number of tenancies agreed rising at its highest level for more than five years, new research shows.

Overall tenancies agreed were up by 34% in the 12 months to August 2019, according to the figures from real estate firm Knight Frank and demand has been particularly strong in lower price brackets, with average rental values between £250 and £500 per week up by 3% in the year to September.

While demand is also strong in the super prime £5,000 plus per week market, average annual rental values between £1,000 and £5,000 per week are declining, and Knight Frank’s report says that this reflects more subdued demand among senior corporate tenants.

The data also shows that month on month rents in the prime central London lettings market have increased by 0.1%, quarter on quarter they were up by 0.5% and they are now just 0.1% down from September 2018.

In the prime outer London residential market rents are down by 0.1% on a monthly and an annual basis but quarter on quarter they increased by 0.3%.

The report says a decline in the level of new lettings listings in the prime central London market has moderated as more property owners respond to current levels of political uncertainty by letting rather than selling.

‘The impact has put downwards pressure on rental values, however the strength of demand has kept the average annual change broadly flat over the last 12 months. Record low interest rates have helped to underpin market liquidity and mean that a growing number of buyers are fixing for longer periods of time,’ the report says.

‘Some 96% of all mortgages issued in July were fixed rate, with the percentage of five year fixed rate mortgages climbing to 47%, which compared to 27% in the same month two years ago,’ it adds.

Source: Property Wire

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Londoners pay highest UK house price premium to live closer to a station

London home buyers are willing to pay almost 10 per cent more on a house in order to live closer to a station, according to Nationwide.

The building society found Londoners are willing to pay a whopping 9.4 per cent premium for a house located 500 metres away from a station.

That amounts to approximately £42,900 based on averages London house prices.

Data shows that – naturally – this premium falls the further away from a station a house is located.

A property located 1,250 metres away commands only a 1.9 per cent premium. At 1,000 metres this increases to 4.1 per cent and at 750 metres the premium rises again to 6.6 per cent.

London homebuyers are willing to pay much more to live closer to their nearest train station – particularly in comparison with inhabitants of Greater Manchester and Glasgow.

Nationwide suggests that “this probably reflects the greater reliance on public transport in the capital, with residents less likely to drive”.

In comparison to London’s 9.4 per cent, a premium for a property 500 metres from a station in Manchester stands at 7.8 per cent, or £12,600.

This falls to 3.8 per cent, or £5,700, for properties 500 metres from a station in Glasgow.

Average London house prices on every Tube line

While Londoners are willing to pay a premium on a home closer to a station, their average house price differs greatly depending on what Tube line they use.

Average house prices in London are most expensive where the nearest station is the Circle line, where the average cost of house is £801,000.

TfL rail serves the least costly homes, at an average cost price of £359,000.

Of the London Underground lines, average house prices are least expensive where the nearest station is on the Metropolitan line, at a £439,000 average.

Nationwide suggests that “this probably reflects that the line stretches towards the outer suburbs, with only a short section in central London.”

London house prices on every Tube line:

LineAverage House Price
Circle£801,000
Bakerloo£624,000
Victoria£573,000
Northern£563,000
Jubilee£553,000
Hammersmith and City£524,000
Docklands Light Railway£505,000
Overground£490,000
Piccadilly£485,000
District£478,000
Central£450,000
Metropolitan£439,000
TfL Rail£359,000

By Emma Tyrrell

Source: City AM

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Lack of homes to rent supporting growth in London lettings markets

A scarcity of lettings stock is supporting rental growth in the prime property market in London, but high levels of renewals resulted in fewer new lets in the second quarter of 2019.

The LonRes prime London lettings index recorded a 2.3% rise in achieved rents in central London, a 1.4% increase in prime fringe, and a 0.9% fall in prime London overall compared with the second quarter of 2018.

The data also shows that 34% of properties let had a rent reduction before securing a tenant, down from 39% in the second quarter of 2018 and 47% in the second quarter of 2017.

In the prime central London market the average rental value in the second quarter of 2019 stood at £50 per square foot.

Looking ahead, 50% of respondents to the LonRes agent survey expect rents to rise over the coming 12 months while 5% thought rental values would stay the same and 15% expect them to fall.

The report also reveals that gross rental yields have been increasing annually since the fourth quarter of 2017 across the three prime areas. Over the past five years rents in prime central London have risen 6% while house prices have fallen by 13.4%.

Demand from prospective tenants is rising. Some 47% of respondents to the survey reported an increase in applicants registering in the second quarter of 2019 while 13% saw a fall, compared with the first quarter of the year.

Properties priced at £1,000 per week or below were most in demand while agents reported less interest for homes priced at £3,000 per week or more.

Stock remains scarce. In the second quarter of 2019 new instructions across the three prime areas fell 4.3% compared to the second quarter of 2018 and compared to the second quarter of 2016, new instructions have fallen by 22.9%.

New lets agreed over the first three months of 2019 fell 12% compared to the same period a year ago. In prime central London they were down by 3%, in prime they were down 11% and in prime fringe by 20% compared to 2018.

‘This year, with a Tory leadership contest and Brexit negotiations stalled, many would-be movers could have postponed their decision to transact. In some areas they did, yet in prime central London more properties changed hands this year than last, with sales up 3% on the second quarter of 2018,’ said Marcus Dixon, head of research, LonRes.

‘In the lettings sector, agents reported an increase in demand this quarter. This, coupled with an ongoing lack of stock, meant rents rose again this quarter, up 2.3% on the same three months last year. But, with renewal rates remaining high, less stock came back to the rental market, resulting in another fall in the number of new lets this quarter,’ he added.

Source: Property Wire