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Why new homes are key to UK prosperity

The U.K. faces a significant housing challenge. In simple terms, there are not enough new homes being built each year to meet the demands of the population.

The U.K. government has set a target to see 300,000 new homes built annually by the mid-2020s in an attempt to solve the national housing shortage. So there is serious work to be done.

Lloyds Banking Group has an important role to play in helping people across Britain to get a home. The organization has made several pledges around housing as part of its most recent prosper plan and is making good progress towards them. A healthy housing market is a key indicator of broader economic strength and that’s why housing is core to the Group’s commitment to help Britain prosper.

Forming a new type of partnership

Housing Growth Partnership (HGP) is a social-impact equity investor. It was established in 2015 as a joint venture between Lloyds Banking Group and Homes England. The formation was unique — the first housing focused public—private partnership with the U.K. government.

When we established the partnership, we had two very clear and specific goals in mind: to support the sustainable growth of regional residential developers across the U.K. through investment and mentoring; and to accelerate housing delivery. We know that one of the chief obstacles preventing small firms from growing and developing in the housing industry is capital constraints, and we established the partnership to help with this. HGP invests in residential projects, freeing up housebuilder equity that can be used on other schemes.

HGP was founded with an initial £100 million of seed capital and, following additional investment, now has nearly £1 billion-worth of homes under construction across the U.K. — over 3,000 new homes.

We’ll kick start the construction of another 1,000 homes by 2020 and aim to have delivered 10,000 homes by 2025.

First and foremost we’re focused on building homes. We’re already funding the build of thousands of new houses across the country. We’ll kick start the construction of another 1,000 homes by 2020 and aim to have delivered 10,000 homes by 2025.

Funding is one part of the puzzle, but the role of HGP goes beyond simply investing money. It seeks to be a genuine partner. We’re developing long-term relationships with smaller housebuilders, helping them to grow their businesses and the number of homes they are able to build across Britain. In fact, over the last 12 months our senior adviser panel of housing experts from across the U.K. has delivered more than 1,000 hours of free mentoring to small housebuilders. We all benefit when these firms can overcome those initial entry barriers, establish themselves in the industry and grow.

Addressing systemic challenges in the housing industry

It’s clear through the conversations we have with U.K. housebuilders that they face challenges at all stages of the development process.

A fundamental issue is the supply of skilled labor. I’m meeting with more and more of our partners who are looking to address this by employing apprentices. Many have formed connections with their local colleges and education centers, and are actively encouraging young people into the sector. Getting youngsters involved and engaged in housing helps create a pipeline of future leaders and also brings in a diverse range of innovative thinking.

This is where the partnership can make the most impact. By investing in companies across the housing supply chain, we can help firms employ more people, develop specialist skills and create more opportunities in the future.

We also lobby for crucial change across the industry and drive financial innovation in the sector. The determination of planning permissions, alongside the growing number of consented conditions to satisfy ahead of starting work on-site is a particular area of concern for housebuilders.

It’s clear through the conversations we have with U.K. housebuilders that they face challenges at all stages of the development process.

This complex and often difficult process limits their ability to grow their businesses and, in turn, increase the supply of new homes to the U.K. market. We are working hard with our partners to understand the key issues within the U.K. planning system and identify what can be done to address them. Alongside this, we are also looking at how we can support developers to introduce Modern Methods of Construction into their building processes.

Finding new solutions to the challenge of a skills and labor shortage, alongside the need to increase the speed of production and develop more energy-efficient homes will be key to the future success of the industry.

New solutions to housing challenges

We’re often asked ‘what comes next?’ There is so much innovation and development in housing at the moment and it’s evolving quickly. At the moment we are seeing a strong focus on Modern Methods of Construction.

What’s fascinating about this type of production is how efficient it is to produce units in a controlled environment — an environment that crucially, is weather proof. This could be a real game changer in the U.K.

What’s clear though is that the U.K.’s housing challenges cannot be solved in isolation. Genuine collaboration, both across the industry and in partnership with the U.K. government, will be crucial in driving further innovation and overcoming the challenges that the industry faces.


Source: Politico

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UK house prices are stuck in the doldrums

UK house prices are set to tread water while incomes rise, making property more affordable, says Merryn Somerset Webb.

The numbers aren’t looking good for residential property investors. House price growth in the US fell to a mere 1% at the beginning of this year, according to the latest report from the Dallas Federal Reserve. Look at global data across the 18 largest economies in the world and things don’t look much more encouraging. This could be the year in which we see “global growth dip to its lowest pace in a decade”. Investment is slowing fast, says Oxford Economics.

The UK is no outlier here. The Nationwide index and the Rightmove Asking Prices index show prices and asking prices respectively to be all but flat. The Halifax House Price index shows a better annual number but suggests prices fell mildly in June. You can see the same trend in Hometrack data, which suggests that the falling prices we have seen in London are beginning to spread: over a third of homes are now in areas with annual price falls (the higher value the market the more likely this is), although the absolute levels of falls is small. So what next? Most analysts expect the market to tread water from here (at best) – although if a new PM were to pull a Brexit deal from the hat we could of course see a little London bounce.

A flat market…
This is probably correct. There is still some support for prices. Housing starts are falling slightly (so the supply of housing is not rising much). Interest rates are low and will go lower if Brexit goes horribly wrong. The banks’ wholesale funding costs have also edged down, and that should soon feed into mortgage rates. At the same time wages have jumped (year-on-year growth excluding bonuses hit an 11-year high in April) and household disposable incomes are also on the up.

That makes houses – even at today’s silly prices – seem more affordable. Prices, says Nationwide, are likely to be at least supported by “healthy labour market conditions and low borrowing costs.” That said, there isn’t much to push prices up either. They are still high relative to incomes. The tax and regulatory hit to buy-to-let is discouraging buyers in that market. An unwelcome (to big property owners, at least) overhaul of property taxation may be on the way. And the Help to Buy scheme (which has played a clear part in pushing prices up) is likely to be at least scaled back soon. Put all those factors into the mix and it is hard to see a rebound in prices in 2019 “or beyond” says Capital Economics.

… is good news
The key thing to bear in mind there is that this is not bad news – unless you very recently paid too much for a house. One thing we have all agreed on in the UK for decades now is that houses are too expensive relative to average earnings. That makes it tough to get on the ladder and tough to move up the ladder. Add today’s high levels of stamp duty to your cost of buying and it’s nasty out there.

But the fact that house prices are not really rising in nominal terms, combined with the small real rise in wages over the last two years, is beginning to change this situation. In 2007 Nationwide’s house price to earnings ratio for the UK was 5.42. At the end of 2016 it was 5.25. Today it is 5.03 times. That’s not ideal – but if this gentle drift down continues and we end up at more like four times, it will suddenly be an awful lot easier to buy (and sell) houses. That would be a very good thing.

Head for Hampshire
Nevertheless, for those of you determined to find the next hot location in the property market and make your fortunes the easy way, Anne Ashworth writing in The Times has an idea for you. She suggests checking out age profiles. Why? Because the younger the crowd, the higher the potential for growth. In areas with an older demographic, you can expect to see sales and downsizing (the cash from which then gets spread around children and grandchildren who won’t necessarily live in the area). In one with a younger demographic you can expect to see the opposite.

Look back over the last decade, says Lucian Cook of Savills and you will see this in action. Those areas with large concentrations of people in their 40s have seen much greater price appreciation (up 56%) than elsewhere. With that in mind, look at somewhere such as Aldershot in Hampshire. There 39% of households are headed by someone between 31 and 40. They won’t be downsizing any time soon.

By: Merryn Somerset Webb

Source: Money Week

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UK housing market shows some signs of recovery – RICS survey

UK housing market showed tentative signs of recovery in June as interest among buyers rose for the first time since shortly after the 2016 Brexit referendum and sales also staged a rare increase, a survey showed on Thursday.

The Royal Institution of Chartered Surveyors (RICS) house price measure – the difference between members reporting price rises and falls – improved to -1, the strongest reading since August last year, from a revised -9 in May.

The reading was stronger than a median forecast of -12 in a Reuters poll of economists and RICS said it pointed to flat property prices over the next two quarters.

Prices in London and the south east of England continued to fall but rose across the rest of the country.

Britain’s housing market slowed sharply after voters decided to leave the European Union more than three years ago, but several indicators have suggested a stabilisation in recent months.

“The latest data provides further evidence of the sales market settling down,” Simon Rubinsohn, RICS chief economist, said in a statement.

“But I don’t get the impression from the insight provided by contributors that this is fuelling hope of a significantly more active market going forward. Many of the factors that have provided a challenge during the first half of the year remain unresolved.”

EU leaders in April delayed Britain’s deadline for the leaving the bloc until the end of October and investors are increasingly worried at the lack of clarity.

Both contenders to become Britain’s next prime minister have said they are prepared for a no-deal Brexit if necessary.

RICS said its survey showed new buyer interest rose for the first time since November 2016 and newly agreed sales edged into positive territory for the first time in 28 months.

There were also signs that sellers were feeling more confident — RICS’ new instructions indicator turned positive for the first time in a year.

Reporting by William Schomberg, editing by Andy Bruce

Source: Yahoo Finance UK

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Action plan to solve the housing crisis

Major but pragmatic changes are needed to combat the UK’s housing crisis according to an economist, broadcaster and author.

Liam Halligan was guest speaker at a talk arranged by Lupton Fawcett law firm at DoubleTree Hilton Hotel, Leeds.

He has written a book called Home Truths, about why the UK faces such a chronic housing shortage and what can be done to address it.

Halligan stressed the importance of ensuring local authorities benefit from “Planning gain uplift”, so when new housing developments are approved they have cash to fund the infrastructure needed to support the additional properties.

He explained: “It means that if you sell land, you sell it either at its existing use or the state compulsorily purchases it and the gain from when planning permission is awarded is shared between the landowner and the state at the local level.

“So the local authority awarding the planning permission shares in the planning uplift, which can amount to millions of pounds.

“This money is ring-fenced to go into building the infrastructure that makes those new homes into a place where people will want to live.

“If you share the gain and the local authority is legally obliged to use that money to build new amenities, there will be far more willingness among elected officials to grant planning permission.

“We also need to provide more land more cheaply so small to medium sized businesses can build houses. SMEs don’t just sit on housing permissions because they can’t afford to.

“The Government has to get real about selling off its own land for housing.

“The NHS has a lot of central city sites which it will never use. But this land is not being sold because the Treasury says you have to get ‘best value’ for it, and no one can agree what the best value is.”

Halligan warned failure to solve housing shortages would cause social and political upheaval.

“Generation rent is getting older and angrier,” he said. “They are less likely to follow their parents’ generation in terms of voting Tory once they own their own home – because they are not being able to own.

“We’re no longer a nation of home owners in the way we once were. You can’t support capitalism if you don’t have any capital.

“Unless we solve this, popular consent for liberal capitalism is going to be severely dented.

“We built 2.8m homes in the 1950s, 1.8m in the ’80s, 1.5m in the 2000s and and 1m in the eight years since 2010. We have a backlog shortage of 3.4m-3.8m homes since the late 1960s and early 1970s.

“The average home is now worth eight times the average wage. ‘Beds in sheds’ has become a national problem, not just in London. These are slums – that’s the situation we’re now in.”

Halligan said: “My own parents were working class people who were able to buy their own home by working hard. That revolutionised their attitude to the UK and to England.

“Now however, we have the sons and daughters of immigrant communities who can’t buy, so they have no stake and no incentive to maintain order. Home ownership is a bulwark against populism.

“We are losing the social progress and societal cohesion that comes with home ownership. There’s a lot of tension at the moment. It feels like 1981 again.”

Halligan said big house building companies had far too much power.

Citing the 2008 breakdown of private housing supply, he noted that back then small companies building 1 to 100 units per year, constructed 28% of homes, medium sized companies building 101 to 2,000 units per year, constructed 40%, while big companies developing 2,000 or more units per year, were responsible for 32%.

He compared this to the figures for 2015 which saw the proportion of homes made by big housing companies leap from 32% to 60%, while the equivalent figure for small firms slumped from 28% to 12% and medium sized firms fell from 40% to 29%.

“One in three planning permissions that are granted lapse,” he said. “In London it is one in two. That is crazy.

“I think planning permissions should be planning contracts. If you don’t deliver you get fined.

“We’re in a logjam. Large volume house builders admit they don’t always want to build at once, in order to maximise local prices.

“The eight big house builders who build 60% of homes are so powerful in local areas they can drip-feed the market.”

By Miran Rahman

Source: The Business Desk

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Little sign of ‘back to work bounce’ as house prices fall for second consecutive month

House prices fell for the second month in a row, Halifax data shows.

The September Halifax House Price Index shows that average prices fell by 1.4% to £225,995 on a monthly basis.

This followed a 0.2% monthly decline recorded in August.

Annual growth also slowed from 3.7% in August to 2.5% in September, the index shows.

This is still higher than Nationwide’s rival index which puts annual price growth at 2% for September.

Russell Galley, managing director at Halifax, said: “We are seeing a steadying in house price inflation across these more stable measures.

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

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

Commenting on the index, Lucy Pendleton, founder director of independent estate agents James Pendleton, said: “September is a month that normally sees a burst of activity as people return from holiday and go back to work.

“A fall of this scale is quite a retreat at a time when increased competition among those racing to move by Christmas would normally give the market a bit of buoyancy.

“The concern is that legions of Brits didn’t get back from holiday and head straight out again to the estate agent like they normally do. The back to work bounce is nowhere to be seen.”

Source: Property Industry Eye

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Figures reveal only fraction of empty homes have been brought back into use

Only a fraction of empty homes across Scotland have been brought back into use over the past eight years, according to figures.

In a parliamentary answer in June, Housing Minister Kevin Stewart said 2,800 properties have been revived through the Scottish Empty Homes Partnership since 2010.

Owners of empty homes are being encouraged to bring them back into use, with measures including legislative changes, provision of funding and practical advice and assistance, the Scottish Government has said.

However the Scottish Liberal Democrats contrasted the figure provided by Mr Stewart with statistics on the number of long-term vacant private sector homes, which totalled more than 20,000 across Scotland at January 2018.

The party said it would take more than 50 years to refurbish the existing backlog at the same rate of progress since 2010.

The Lib Dems called for efforts to bring properties back into use to be fast-tracked, pointing to the cost difference between doing so and building new homes.

The Scottish Empty Homes Partnership says it costs between £6,000 and £25,000 to refurbish an empty home, compared with the average £100,000 new-build cost, with the added benefit that the infrastructure and local services are already in place, the party said.

Data gathered using freedom of information requests to local authorities showed that at January 2018, there were 20,027 private sector homes which had been vacant for six months or more.

Of these, 5,583 were vacant for more than two years and 2,053 were vacant for more than five years.

Lib Dem MSP Alex Cole-Hamilton said: “The Scottish Government should fast-track new efforts to get these properties back into use and introduce a new help-to-renovate loan to get existing vacant properties up to scratch.

“With the right incentives and help, many of these could be resurrected to help alleviate the housing crisis, tackle homelessness and give young people a better chance of a home to call their own.”

Mr Stewart said: “Privately-owned empty homes can be a blight on communities and are a wasted resource.

“Such homes can become empty for a number of reasons, which is why tailored individual support and advice for owners of these properties from local empty homes officers across the country is often the most effective way of bringing these homes back into use.

“We recently doubled funding for the Scottish Empty Homes Partnership and network of empty homes officers. The dedicated support and advice provided has helped return 742 homes back into use in the last year, bringing the total to more than 3,200 since 2010.

“In addition we are on track to deliver 50,000 affordable homes this term and are proud of our delivery of over 72,500 homes since 2007.”

Source: Herald Scotland

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House prices broadly flat in June with 0.3% month-on-month increase, says index

House prices remained “broadly flat” in June, edging up by 0.3% month-on-month, Halifax has reported.

It followed a much stronger month-on-month jump of 1.7% in May, which came after a 3.1% decrease in April.

Across the UK, the annual pace of house price growth slowed to 1.8% in June, from 1.9% in May, taking the average property value to £225,654.

On a quarterly basis,  prices were 0.7% lower between April and June than than they were between January and March. Halifax said the quarterly figure “appears to be a symptom of the monthly volatility”.

Russell Galley, managing director, Halifax, said: “House prices continue to remain broadly flat, with the annual rate of growth marginally slowing from 1.9% in May to 1.8% in June.

“Activity levels, like house price growth, have softened compared with the final months of last year.

“Mortgage approvals have been in the low range of 63,000 to 67,000 since the start of the year, whilst home sales have remained flat so far this year.

“This is in contrast to the continuing strength of the UK jobs market, with job creation still strong and pressure on household finances easing as real income growth edges up.”

He said that, at the halfway stage of 2018, the annual rate of house price growth is within Halifax’s forecasts of 0% to 3%.

Mr Galley continued: “We continue to see very positive factors of continuing low mortgage rates, great affordability levels and a robust labour market.

“The continuing shortage of properties for sale should also continue to support price growth.”

Mike Scott, chief property analyst at estate agent Yopa, pointed out that house prices are now sitting at similar levels to those seen in October 2017, when Halifax said the average house price was £225,664.

He said: “We agree with Halifax’s overall assessment that the market will continue to rise slowly for the rest of the year.”

Jeremy Leaf, a north London estate agent and a former residential chairman of the Royal Institution of Chartered Surveyors (Rics), said: “Once again, we are seeing a market in subdued mode supported broadly for some time by low interest rates and unemployment, as well as more specifically by low stock.”

He continued: “On the ground, we have reached the limit of what many buyers can afford so this is not a correction, more a realignment of prices to reflect changes in circumstances and to address the potential stand-off between buyer and seller.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “Halifax’s house prices index now has fallen for two consecutive quarters – by 0.1% and 0.7% quarter-on-quarter in quarter one and quarter two, respectively – and the trend likely won’t improve soon.”

Mr Tombs said that while scope for average mortgage sizes to increase is limited: “We doubt that a sustained period of falling house prices is imminent, given that the labour market still is robust and the recent cut to stamp duty for most first-time buyers has offset some of the hit to affordability from rising mortgage rates.

“As a result, a further period of broadly flat house prices remains likely.”

Howard Archer, chief economic adviser, EY ITEM Club, said: “Housing market activity is still lacklustre and finding it hard to really gain traction amid challenging conditions. We continue to suspect that any meaningful housing market upturn will remain elusive over the coming months.

“We expect house price gains over 2018 will be limited to a modest 2%. At this stage, we expect prices to rise no more than 3% in 2019.”

Source: Yahoo Finance UK

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House prices fall for third month in a row

House prices are down for the third month in a row, and the annual rate of growth has now fallen for almost a solid year – 11 months in succession, LSL Property Services/Acadata’s House Price Index for England and Wales has found.

It now stands at just 1%, down from 9% at its height in February 2016. Many areas continue to prove resilient, however.

Excluding London and the South East, prices in England and Wales remained 3% up year-on-year and only London is currently recording an annual fall in prices.

Oliver Blake, managing director of Your Move and Reeds Rains estate agents said: “London remains the exception, rather than the rule when it comes to the strength of the market in the major cities of England & Wales, which remain strong.

“The market remains slow, though, when it comes to the number of transactions.”

Overall, the average price in England and Wales at the end of April stood at £302,252, up from £299,374 a year ago. While annual price growth continues to fall, the decline is slowing.

Estimated sales of 50,000 in April were down by a quarter on March –significantly greater than the usual 5% seasonal decline.

Compared to London, the housing market in the rest of England and Wales looks robust. About three quarters of all unitary authorities (80 out of 108) have recorded a price rise over the last year.

A number continue to record fairly strong growth, including the East Midlands and North East, both up 3.9% annually, and the North West, up 3.6%.

In Wales prices have grown 4.8% annually with Cardiff and Swansea are up 9.7%, the Vale of Glamorgan 10.2%, Torfaen 10.4%, and Monmouthshire 11.3%.

These are the top five annual price increases in the whole of England and Wales after the 13.6% price growth in North Somerset.

This is because Wales introduced a new Land Transaction Tax in April, starting at a higher base, of £180,000, than stamp duty in England (£125,000) but at a higher rate, particularly for properties priced £400,000 to £925,000, with tax rates at 7.5% and 10%.

Anticipating this, buyers have brought forward purchases of high value homes to avoid the new tax, just as they did ahead of the stamp duty hike in April 2016.

Consequently, six of the eight most expensive local authority areas in Wales set a new peak price in March, including Monmouthshire, the Vale of Glamorgan and Cardiff, as well as Powys and Newport, up 5.5% and 8.0% annually, respectively. Such high price growth in Wales is likely to prove short-lived.

Major cities other than Cardiff have also set new peak prices in the month. They include Merseyside in the North West, up 3.9% annually; Tyne and Wear in the North East (5.4%); the West Midlands conurbation, which includes Birmingham, up 5.2%; and Derby in the East Midlands (2.4%).

Struggles with affordability are most pronounced in London, which, not coincidentally, is also the only region in England and Wales to see prices fall on an annual basis.

Prices are down 2.5% on the same time last year in the capital. The average property price is now £15,415 lower than a year earlier, at £601,808.

Price falls continue to be concentrated at the top of the market. Eight of the 11 most expensive boroughs in the capital have seen prices drop in the last year, including Westminster, the second most expensive borough, down 13.3%, Wandsworth, down 13.6%, and the City of London, down a huge 31.4%.

The big exception to the rule is Kensington and Chelsea, right at the top of the market, where prices are up 23.7% – still buoyed by a small number of extremely expensive (£10m plus) properties.

Ignoring this, the top 11 boroughs would be down 5.8% annually on average. At the bottom of the market, things are less volatile and, overall, more positive.

Source: Mortgage Introducer