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How Has Brexit Uncertainty Affected The London Property Market?

The effect of Brexit on the UK property market is not a straightforward topic and there are many factors to consider. However, when it comes to London property in relation to Brexit, optimism is in short supply. Falling house prices, the weakening of the pound and a drop in property transactions seem to have affected the capital far more than other areas of the UK. Uncertainty around the London property market was brewing even before the Brexit vote. London property prices had been the highest in the country for several years, with record rents and a great number of properties selling for well over the million-pound mark. However, the market had been slowing down as the referendum got closer, with many properties selling for less than their asking price and fewer properties being put on the market.

The possibility of a no-deal Brexit has had a further negative affect on the London property market. Across London and the South East, property experts like surveyors, investors and estate agents have all witnessed a depression in the sales market. There has also been a dramatic decline in the number of properties put on the market, with many homeowners deciding to hold onto their property rather than selling in such an uncertain market. The London market sees a far higher number of overseas buyers than the rest of the UK, which mean that bad news about Brexit has taken an effect. Huge asking prices mean large investments and for risk-averse investors, it isn’t worth investing in London at this time. Transaction levels are down across London, with high-end luxury properties also experiencing a notable downturn.

UK property has long been regarded as one of the most stable asset classes in the world and the British property market has weathered bigger storms than Brexit. Though it took time, it definitely recovered from the global recession of 2008, before pulling through the housing market slumps experienced during 2009 and 2010. Many cities in the North of the UK have remained resilient despite the Brexit vote. On the whole, UK house prices are rising by around 3%, and in certain cities this growth is even higher, like Liverpool where house prices grew by 6.9% in 12 months. Property investment firms like RW Invest have noticed a real change in demand, with investors turning away from London and choosing to invest in property in the North of the UK.

Research conducted in 2018 found that 77% of UK-based property investors believed that Brexit will not affect their long-term investment strategy. It was also found that 53% of those surveyed would still rather invest in a traditional asset class like property instead of a newer, potentially less stable asset class like cryptocurrencies. The study also revealed that 18% of investors, which works out at 1.23 million people in the UK, will consider investing in the next 12 months in a property. As well as this, over three-fifths of property investors regard UK property as a safe and secure asset class in the current market. This report on investors and their views about the property market is relatively positive, showing that buy-to-let investment is still a viable alternative. For many buy-to-let investors, Brexit uncertainty has shifted their focus from the instability in London to the more lucrative North which continues to be less affected.

Source: Shout Out UK

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

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

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

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

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

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

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

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

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

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

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

Source: City A.M.

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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.

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Lack of supply pushes rents outside of London to £800 per month

Typical asking rents outside London have hit £800 per month for the first time.

There was a quarterly rent rise of 0.8%, the biggest jump recorded in this time of year since 2015.

Notably there are 8.7% fewer rental properties available compared to this time last year and 19.4% fewer in London.

The slowdown in the buy-to-let market has contributed to this lack of choice, as there was a 14% drop in mortgage approvals compared to the same period last year and a 53% fall from three years ago.

Miles Shipside, Rightmove’s commercial director and housing market analyst, said: “Rental demand is currently outstripping supply in many locations, especially in the capital.

“The exit of more landlords from the buy-to-let market in recent years has been due to a raft of different factors, from the more onerous tax regime and more stringent borrowing criteria, to the higher stamp duty on second home purchases and extra legal obligations.

“What we’re left with is a lack of available homes for tenants looking to find their next place to rent, meaning that when the right kind of property does come along it isn’t sticking around for very long before it’s snapped up.”

Shipside added: “Although some of the shortfall in supply will be met by quality housing provided by Build to Rent schemes in the coming years, it’s likely stock shortages will remain in areas with a high concentration of renters.

“Given this backdrop and rents likely to rise, private landlords should try and look beyond the current challenges if they can and stay in the sector.

“If they concentrate on improving the spec of their existing properties and buy better quality accommodation to add to their portfolios, tenant demand should steadily improve rental yields.”

Source: Mortgage Introducer

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UK house prices: Growth slows again, falling to a six-year low in September as London sees prices plummet

UK house price growth slowed again in September, down to its lowest annual rate in six and a half years at 0.9 per cent.

The south east became the first region to report negative annual growth, with house prices dropping a modest 0.1 per cent year on year, according to Your Move’s House Price Index.

Almost every region saw a significant slowdown in the rate of annual growth, while transactions fell 16 per cent from August, with around 72,500 sales completing last month.

While most regions saw annual price rises, month-on-month growth continued to slow across the UK, falling by 0.1 per cent in September from August.

That left the average house price in England and Wales at £302,626.

In London, Westminster saw prices plunge 9.4 per cent in the last year despite growing 4.9 per cent month to month from August.

Tower Hamlets, whose market Your Move said is comprised predominantly of flats sold to staff working near Canary Wharf, saw September prices plummet by 9.7 per cent year on year.

However, cheaper boroughs sustained the capital’s market, while in greater London prices rose 3.9 per cent year-on-year, and grew 0.4 per cent from August to September.

Oliver Blake, managing director of Your Move and Reeds Rains estate agents, said: “The chancellor will face a difficult balancing act for housing when he comes to do his Budget at the end of this month.

“He’ll probably be keen to tackle the continuing problems with affordability whilst addressing ways to stimulate the market.”

Source: City A.M.

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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

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Bunged up housing market sends total value of London sales back below 2007 levels

London’s housing market has shrunk by a fifth since its last peak in 2016 as fewer homeowners move house.

The total value of all homes sold in the capital has tumbled by more than 20pc since 2016 and is worth 4pc less than it was in 2007, just before the financial crisis, according to the Office for National Statistics.

This is despite a 62pc rise in prices in the past 11 years.

The drop in total value of transactions illustrates the extent to which the market is bunged up, with a sharp drop in the number of sales taking place.

Nationally the number of home purchase mortgages fell to 42,581 in August, a drop of 4.2pc on the year according to industry data from UK Finance. It compares with a peak of more than 70,000 in August 2007.

A lack of supply and low transaction levels mean those sales which do take place are relatively expensive. The average home buyer borrowed  £197,800 last month, up 7pc on August 2017.

There are several reasons why the housing market is slowing down, particularly in the capital. Extra taxes on landlords, tighter lending restrictions and high prices have put off would-buyers in recent years, while last month’s rise in interest rates must also be factored in by buyers.

“Essentially, prices are very high and this has priced out a lot of buyers from the market,” said Hansen Lu at Capital Economics. “Deposit sizes are restrictive, credit is not as free flowing as it was before crisis – not that you would necessarily want it to be – and so transaction levels are down.”

Mr Lu said that while the number of first-time buyers entering the market was nearly close to pre-crisis levels, people who already own homes are the ones who have stopped moving up – or down – the housing ladder.

“That is where there is a reduction in transactions,” he said.

Economist Mike Jakeman at PwC expects the market in most of the UK to grow slowly while London’s prices edge down.

“That is partly because of Brexit-related uncertainty,” he said, calling the London market “stodgy” as a result.

“Bearing in mind buying a house is probably the single largest transaction you will ever make, when you don’t know what the outlook is going to be it just makes sense to sit on your hands for a bit, and of course that clogs it up for buyers and sellers.”

He predicts house prices will keep rising in the rest of the UK with particularly strong growth in Scotland and the Midlands.

Across England and Wales, housing transactions by value have fallen by more than 8pc since 2007. Unlike London, the market as a whole has never recovered to its 2007 level.

At the height of the housing market in late 2006 and early 2007, around 150,000 properties were sold every month nationally.

This plunged to below 60,000 in late 2008, before rising once more to plateau at around 100,000 a month since 2013.

By 2020 London should start recovering too, provided a Brexit deal is reached. Transaction volumes should improve too, Mr Jakeman said.

Source: Yahoo Finance UK

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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
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London rents fall for third consecutive month on newly let homes

London rents on newly let homes, homes advertised on the open market to let, fell for the third consecutive month, down -0.8% year-on-year, the Hamptons International Monthly Lettings Index has found.

This is despite 21% fewer homes available to rent than last year. However rents on newly let homes in Great Britain excluding London, rose 2.0% year-on-year.

Aneisha Beveridge, analyst at Hamptons International, said: “Despite low stock levels, rents on newly let properties (i.e. homes advertised on the open market to let) fell in London for the third consecutive month. Moving is costly for both tenant and landlord.

“In a period of uncertainty, where tenants’ incomes and landlords’ yields are squeezed, more tenancies are being renewed.

“With affordability stretched and less choice available on the open-market, more tenants are choosing to stay put.  And with landlord yields under pressure from high property prices and tax changes, fewer landlords want to run the risk of looking for a new tenant and suffering void periods.

“But rents outside London continue to rise.  Wales and the Midlands have driven rental growth outside the capital to increase 2.0% year-on-year, the strongest growth in nine months.”

However, rents on those properties where tenants renewed their rental agreement are more robust.  In London, rental growth on renewed tenancies increased 3.2% year-on-year as 3.7% more tenants stayed put than last year.

The capital remains the only region across the UK where rents are falling.  But rents on new lets in Great Britain, excluding London, rose to 2.0% in August, the strongest growth in nine months.

Newly let rents are falling in London despite stock levels continuing to decrease.  This is because, since April 2016 when the stamp duty surcharge on second homes was introduced, landlords have sold considerably more buy-to-let homes than they’ve purchased.

So far this year, there were 6% fewer homes available to rent in Great Britain than at the same period last year.  But in London stock levels were down 21%.

Across Great Britain the average rent of a new let rose to £975 pcm in August 2018.  The Midlands and Wales saw the strongest rental growth, with rents on new lets up 3.3% year-on-year and 4.4% respectively.

Over August, inner London rents picked up for the first time in six months (0.4%), while rents in outer London continued to fall (-1.1%).

However, rents on renewed tenancies (where tenants chose to stay put, rather than move) remain robust.

In August there were 2.5% more tenancies renewing across Great Britain than last year, which means that rental growth on renewed tenancies has risen 2.8%, the highest level in 10 months.

This is particularly true in London.  Renewal rents in London have risen for the last three months, reaching 3.2% year-on-year in August, despite rents on new lets in the capital falling. In fact, London has seen the second strongest renewals rental growth across the country.

With less stock available on the open market to choose from, particularly in the capital, more tenants are choosing to renew their current tenancies than move on.  In London, the number of tenancy renewals has risen 3.7% so far this year compared with the same period in 2017.

Source: Mortgage Introducer

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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