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.”
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
Yorks & H
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.
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.
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.”
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.
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.
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.
Across the UK as a whole, house price growth remains slow, with northern areas and Wales seeing stronger growth, the report, released jointly by the Office for National Statistics (ONS), Land Registry and other bodies said.
Average UK house prices increased by 1.2% in the year to May, slowing from a 1.5% increase in April.
The average UK house price stood at £229,000 in May.
While London house prices fell over the year, the area remains the most expensive place to purchase a property with an average price of £457,000.
The report said London house prices have been falling over the year since March 2018.
ONS head of inflation Mike Hardie, said: “Annual house price growth remained slow but was once again strong in the North West and Wales.
“However, London experienced its biggest annual fall since August 2009.”
Average house prices increased annually by 3% in Wales to reach £159,000; by 2.8% in Scotland to £153,000; by 1% in England to £246,000 and by 3.5% in Northern Ireland to £135,000.
The North West was the English region with the highest annual house price growth in May, with values increasing by 3.4%. This was followed by the West Midlands, where house prices increased by 2.7%.
While prices fell in London by 4.4% over the year to May 2019, affordability is still an issue for those buying in the capital and South East as prices remain relatively high compared to incomes
Jonathan Harris, mortgage broker at Anderson Harris
Jonathan Harris, director of mortgage broker Anderson Harris, said: “House price growth is slowing as sentiment continues to weaken, partly as a result of Brexit uncertainty.
“While prices fell in London by 4.4% over the year to May 2019, affordability is still an issue for those buying in the capital and South East as prices remain relatively high compared to incomes.
“Mortgage rates remain low and continue to support transactions. Re-mortgaging remains strong as many people stay and improve rather than footing the considerable bill for a move to another address.”
Gareth Lewis, commercial director of property lender MT Finance, said: “The South West (where prices increased by 2.6% annually) and North West have shown reasonable growth over the past year and are propping up UK average property prices.”
Sam Mitchell, chief executive of online estate agent Housesimple, said: “House price growth remained somewhat subdued in May, but this does not tell the whole story…
“London’s price fall has plagued the UK average partly due to uncertainty but mainly because of the punitive stamp duty regime, while slowdowns in the South and East of England over the past three years have also taken their toll.
“Yet economic factors that underpin the property market are looking strong.
“Plus, the housing market is still showing sturdier than expected signs of resilience amid political uncertainty.
“Low unemployment and historically low interest rates are leading to high demand from buyers supporting house price growth, particularly in the North West and West Midlands.”
Marc von Grundherr, director of lettings and estate agent Benham and Reeves, said: “Although price growth may remain muted, these ‘slower’ markets are still home to the highest property prices in the UK.”
Foreign buyers are returning to London property despite the subdued state of the housing market, according to new figures.
Property prices are still falling in Greater London, with the latest LSL/Acadata house price index showing a 0.2% annual drop in April.
Sales have also plummeted in and around the capital, down 12% in the three months to April compared to the same period in 2017.
But foreign buyers “have returned in numbers” to the London market, according to a report by Peter Williams, Acadata’s chair, and John Tindale, its housing analyst.
International investors are taking advantage of lower prices and favourable exchange rates as they bet on future growth, “taking the view that this is a good long-term investment.”
The market is also picking up among British buyers and sellers, particularly “those prepared to take a risk or who must move,” according to the report, released on Monday.
With Britain’s scheduled exit from the EU delayed from March of this year to October, and no end in sight to the political crisis, people are “taking the plunge” to buy or sell.
“With seemingly no immediate end in sight to the political situation in Westminster, there is some evidence that pent-up demand held back by events of the last few months is breaking through,” the report said.
Record levels of employment and recent wage growth will also give some households more buying power, amid strong competition in the mortgage market and low interest rates, according to the report. But it notes many would-be buyers are still struggling to get a mortgage.
The rate of decline in property prices in London has narrowed significantly as demand has risen over the past few months.
In February, prices were 3% down on a year earlier, but by April this year the decline had dropped to just 0.2% on April last year.
Sales volumes are also down across England and Wales compared to 2017, but up 3% on 2018.
English and Welsh figures for house prices show prices ticking upwards 0.3% over the year, a rise of around £1,000.