Strong Start for Help to Buy, say Lenders

This article by BBC News Business on November 11th, 2013 reveals that house prices in the UK have returned to their pre-crisis levels.

 

House prices in the UK have returned to their pre-crisis levels according to some figures

 

Two major lenders have reported a strong uptake in the first month of the government's extended Help to Buy mortgage guarantee scheme.

Royal Bank of Scotland (RBS) and Halifax said they had received a total of 2,384 applications, potentially worth £365m in mortgages.

The scheme is designed to encourage lenders to offer mortgages with deposits as low as 5%.

But critics are concerned it could help to create a UK housing bubble.

RBS and its subsidiary NatWest, and Halifax - owned by Lloyds Banking Group - are among the few lenders to offer mortgages under the government's extended scheme.

The first phase of Help to Buy was launched in April, but only provided help to first-time buyers buying new-build homes. The extended scheme applies to all buyers and all types of homes.

RBS said it had so-far approved 169 of its 1,075 applications, and five customers had already completed their purchases.

It said the majority of applications had come from young couples with a joint salary of less than £50,000. The average price of the property being bought was £167,565.

Halifax said more than 80% of its applications under the scheme were from first-time buyers.

It said the majority of applications had come from outside London and the south-east of England, where property prices are rising fastest.

It also said that five purchases had so-far been completed.

Bubble worries

  The government welcomed the figures, saying that the scheme was supporting "responsible lending", helping borrowers would can afford mortgage repayments, but not a large deposit.

"Four weeks in and its clear that Help to Buy is already delivering," said Prime Minister David Cameron.

"Most Help to Buy applicants are first-time buyers, young and have a roughly average household income. This is all about helping hardworking people get on the first rung of the property ladder."

But critics have expressed concern that the scheme could create a bubble in the housing market, making home affordability an even bigger problem.


The latest figures from the Office for National Statistics suggest average house prices in the UK have now recovered from the slump seen during the recession.


Figures from Halifax suggest house prices have yet to hit their 2007 peak, but have risen steadily for the last nine consecutive months.

Nationwide Building Society says prices are currently 5.8% higher than a year ago.

But estate agents argue that much of those price rises are seen in London and the south-east of England, while prices in other parts of the country are rising more slowly, or in some cases actually falling.

Article Source: http://www.bbc.co.uk/news/business-24892649

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House Prices Soar by £7,000 in Past Four Weeks

This article by Sarah O'Grady of Express on October 21, 2013 reveals the figures that market burts back into life while house prices have soared in the a month.

The £6,923 jump in the past four weeks is confirmation that Britain is enjoying a housing boom.

The £1,750 weekly uplift puts the price of a typical three-bedroom semi at £252,418, according to ­analysts Rightmove.

The biggest leap was recorded in London where new sellers added an extra £50,484 to their average asking prices this month. Experts said the rise was being driven by renewed interest from buyers following the introduction of the Government’s Help To Buy mortgage scheme.

Fears of a housing bubble were also eased as the number of new sellers coming to market was up eight per cent – although shortages were ­driving up prices in some regions.

James Hall, director of estate agents Fishneedwater, said: “Wow, the property market is back, and then some. We’re seeing a huge amount of pent-up demand hit the market at the same time.

“People feel a lot more confident about the economy and, due to the introduction of Government schemes, are finally able to get mortgage finance.

“Even mortgage rates at higher loan-to-values are exceptional.

“People are piling back into property. Owners and sellers will be pinching themselves. 

Bidding wars are becoming an everyday occurrence in some areas of the UK. There’s just not enough property going round and this is sending prices ever higher and creating levels of interest for individual properties not seen for many years.”

 
Bidding wars are becoming more regular as there is not enough property to fuel demand [GETTY]

Government initiatives like the £80billion Funding For Lending Scheme and the £12billion Help To Buy plan have helped push mortgage lending to a five-year high, figures showed last week.

Buyers taking advantage of record low interest rates and easier borrowing criteria meant total home loans hit an estimated £49.3billion in the three months to September, the Council of Mortgage Lenders said.

That was a third higher than the same period last year and the greatest quarterly total since autumn 2008.

Average house prices are now higher than the previous peak seen in January 2008, according to the Office for National Statistics which also revealed first-time buyer house price inflation is just under five per cent.

Miles Shipside, Rightmove director and housing market analyst, said: “Some agents currently report that there is a buying frenzy in parts of the UK with available stock so low that their shelves are now bare.”

The Rightmove research to mid-October showed that across England and Wales asking prices rose by 2.8 per cent month-on-month, following two months of falls, to reach £252,418 on average.

Prices across the country are 3.8 per cent higher than they were a year ago.

Alexander Gosling, director of online estate agents Housesimple.co.uk, said: “The property market really is gathering a head of steam and not just in London.”

Article Source: http://www.express.co.uk/news/uk/438168/House-prices-soar-by-7-000-in-past-four-weeks

UK Property Market Comes Back to Life

This article by Richard Watts of Investment Europe on October 7th, 2013 reveals the recovery of the UK property market after the series of breakdown.

As the UK property market comes back to life, the UK mid-cap equity market is increasingly the place to find interesting opportunities, according to Richard Watts,portfolio manager of the Old Mutual UK Mid Cap Equity Fund. 

Housing has a unique place in the UK economy. There is a special sense of fulfilment in home-ownership. ‘First-time' buyers have a priority on the political agenda, while rising home values translate to near-instant voter gratification. A revival in the housing market is front-page news.

This national attitude to our homes creates a number of anomalies. One is the traditional approach to investing in the housing market through direct purchase, buying or upgrading a home or taking on buy-to-let. Home-ownership can be immensely rewarding, but a house is a particularly illiquid investment, while mortgages create a conduit from Bank of England base rates to disposable income that is short, brutal and sometimes nasty.

The flotation of Foxtons, the London-area estate agent, is a sign that the equity market is increasingly providing an alternative route to participation in the property market. A basket of shares might not keep you warm at night, or not in a literal sense, but it is a lot more liquid, shouldn't require a six-figure mortgage and its sensitivity to interest rates is a little less direct.

The Foxtons IPO was heavily over-subscribed, rising 16% on the first day, valuing the business at over £650m. Foxtons have some 40 offices, mainly in central London. It is an exceptionally well-run company, with special strength in marketing. The average price of its house sales is £400,000, which puts it in the sweet spot in terms of transaction growth as the recovery develops. It is the right section of the market for the second phase of Help to Buy, which will provide mortgage indemnity for homes worth up to £600,000. In our view, Foxtons is in a position to increase its footprint potentially to 100 offices and possibly more.

Foxtons is not the first estate agent to come to the market. Countrywide floated in March and has outperformed the FTSE All Share (ex investment trusts) by 40% since then (to 24 September). Savills, since its near-term trough in the midst of the eurozone crisis on 4 October 2011, has outperformed the FTSE All Share by 134%.

Estate agents are an interesting and expanding area of the equity market, but the heart of the sector in equity terms is the housebuilders. The sector has seen tremendous outperformance in recent years, with key companies such as Persimmon and Barratt Developments, which over the past three years have outperformed the FTSE All Share by 126% and 156% respectively. In our view, despite inevitable set-backs, the sector should continue to offer robust, market-leading returns.

Current demographics suggest the demand for new housing in the UK should run at around 260,000 units per year, but the market is only supplying half that, around 130,000. It is highly unlikely that supply will reach, let alone overtake demand, on almost any scenario.

The block has been financing, with capital constrained banks requiring significant cash deposits. The government - and everybody who reads a newspaper or watches television or listens to the radio - is aware of this and given the economic benefits of house-building it has taken some bold measures.

The first phase of Help to Buy, under which the government lends new home-buyers 20% of the price towards a 25% deposit, is already having a significant impact, with 30% of new-built homes being reserved through the scheme. The second phase starts in 2014, providing mortgage guarantees, and should stimulate the market further. The schemes are intended as temporary kick-starts, but the first phase is proving so popular its £3.5bn funding is likely to expire at some point in 2015 - a date whose proximity to the next election suggests to us that it could be replaced, should need arise, by something either as good or better. In the meantime, the banking sector should by then be further on the road to recovery, opening the possibility that affordable commercial mortgages will increasingly become available.

A less publicised but important change is in planning law. Under the new National Planning Policy local authorities are required to maintain a five year plan. In the absence of such a plan, where any planning application is denied, it will be automatically granted on appeal.

This has unleashed fresh tracts of buildable land, a flow unlikely to be completely staunched as plans come to be adopted more widely. So much for the environment - what about the stock specifics? Housebuilders have done well - is there more to come? In my view there is and the numbers tend to support a positive argument. The key decision is whether the UK property market will continue to recover into the medium to longer term.

Let's take Barratts as an example. We believe they are capable of achieving a return on equity of around 18% on a 2-3 year view as they build out land acquired in recent years at attractive profit margins. We expect the industry to be building around 170,000 units a year by the end of this period, significantly higher than current levels but still well below the demographic requirement. From this level, we believe it fair to assume that Barratts' unit sales can continue to grow at relatively modest minimum of 4%-5% a year - given natural demand, government support and ongoing economic recovery - that would leave Barratts with around 75% of its earnings free to distribute as cash to shareholders, which at current share prices implies a dividend yield at around 10%. That is a high yield for a well-run business in a growing market and we would expect most investors to accept something significantly lower, possibly down to around 5% - and that, in turn, implies a much higher share price.

One of the most satisfying aspects of investing in UK mid-cap equities is the dynamism and variety of the opportunities. As the property market comes back to life, it is likely there will be mid-cap companies there to reap the benefits. And as they say in the property business - we are eager for further developments!

Article Source: http://www.investmenteurope.net/investment-europe/opinion/2299147/uk-property-market-comes-back-to-life-says-old-mutuals-watts

Tips for Buyers to Survive Estate Agent's Tricks

This article by Henry Pryor of theguardian on October 6th, 2013 reveals the guidelines that buyers should follow when dealing with estate agents.

Estate agents are not your friends. They work for the seller and are paid by the seller to get the best deal for the seller.

You wouldn't play poker with all your cards face up on the table, so don't be tempted to explain why you're moving, how much you have to spend (say "we hope that we won't have to spend more than X"), or that you need to be in by January. These will all be used against you when you fall in love with the right home. The agent will know how far he can push you, how little time you have to find something, or that you have already lost out on five other houses and you've threatened divorce if you don't get this one. Don't be panicked into buying and most of all, don't be afraid to make an offer.

Here are my tips for buyers:

■ Agents get paid when deals are done. They are therefore keen to find a buyer who is serious. To make sure you are the first to be called when a new property becomes available, make sure the agent knows you are ready to go. Cash in the bank is better than someone who needs a mortgage. Someone in rented accommodation can move faster than someone with a property to sell.

■ Ignore tempting discounts or incentives to buy a new-build property. If someone is paying your stamp duty or moving costs then it's in the price and you will pay for it over the next 25 years of your mortgage.
■ Confirm every conversation you have with an agent. Viewing appointments, offers made, bids rejected together with the terms of any offer. Agents like people who know what they're doing and you will look like you have bought and sold before.

■ Ignore invitations to rush to see a property or to be panicked into bidding. Fewer than 10% of homes for sale in any one month sell. Proceed in your own time – there are 24m other homes in the UK.

■ Don't get your finance from the selling agent's financial services company. Get a quote, but then discuss it with your own mortgage adviser.

■ Don't assume that the guide price is anything more than an indication of the owner's greed or the agent's enthusiasm to get the job. Be confident and make an offer. A house is worth what you and the seller agree, not what the agent thinks it's worth.

■ Double-check everything you are told. Is it quiet on a Friday or Saturday night? Are there neighbours from hell? Is the road a rat-run and does the roof leak?

■ Don't be fooled into thinking that a bank valuation is for your benefit. It's for the lender and you have no comeback on the surveyor.

■ Don't expect an agent to send you new properties when they are available. Keep in touch, go and see possible properties and look serious. You'll be amazed how much you will learn from frequent contact.

Article Source: http://www.theguardian.com/money/2013/oct/06/tips-buyers-estate-agent-tricks

Are We Becoming a Nation of Estate Agents?

This engaging article by 4 news on September 12th, 2013 shows the latest trend on profession chosen by a number of Brits and turned out that many of them joined the real estate industry.

Once voted as the second least trusted profession, a record number of Brits are now becoming estate agents. Channel 4 News asks what's behind the sudden trend - and if it's here to stay.

They may be among the most hated of all professions. But new figures from the Office for National Statistics (ONS) show that an additional 77,000 people joined the real-estate industry over the last year - one in every four jobs created last year.

This means that 562,000 people are now employed as estate agents or property developers - the largest number since records began in 1978 - and they show there has been "an upturn in market activity and confidence so far this year which has given estate agents the confidence to invest in people," said Miles Shipside, commercial director at Rightmove.

Joshua Rayner, managing director at Rayner Personnel, told Channel 4 News: "The last 12 months have been the busiest I've seen in more than ten years of property recruitment, reflecting the growing volume of property transactions.

"I've noticed estate agents are valuing their staff more than perhaps they did in the past. Keen to capitalise on the opportunities, today they're looking to offer long-term career paths and really reward their top performers."

On the up?

Chancellor George Osborne said austerity measures pursued by the government are leading to economic recovery. Treasury officials believe the economy has entered the "next phase" of recovery - only months after economists feared the UK was set to plunge into an unprecedented triple-dip recession.

However, despite the upturn and feel good factor, Mr Shipside told Channel 4 News that "the market is still recovering from the heavy blows of the last five years.

"Estate agents, like many other businesses, cut staffing heavily in a bid to become more streamlined when the credit-crunch hit.

"We have not yet seen a marked increase in the number of new branches opening - just the number of people employed by existing branches, and, even then, both branch and staff numbers are down on historic levels."

House prices rise

In June house prices rose by 3.1 per cent year-on-year to £242,000 on average, marking the strongest annual upturn in the last six months.

On a monthly basis, values rose by 0.4 per cent, equalling the increase recorded in May. House prices in London have soared by 8.1 per cent year-on-year, but growth remained patchy, and in Scotland and Northern Ireland prices edged down by 0.9 per cent and 0.4 per cent respectively.

Wales recorded the strongest annual house price growth in the UK, at 4.3 per cent, while England saw a 3.3 per cent rise.

The Royal Institution of Chartered Surveyors (Rics) report said house prices are rising at their fastest pace since their 2006 peak last month.

The number of would-be buyers looking to enter the market in July also saw the strongest growth in four years, in further signs that a recovery is "round the corner", the survey said.

'Vigilant'

But Bank of England Governor Mark Carney has also urged caution. He told the treasury select committee the bank remains "vigilant" over a house price bubble, as prices and demand are pumped up by government stimulus schemes.

It could recommend banks set limits on how much households can borrow, he said.

"Overall, my view is that the announcement has reinforced recovery," he said. "There has been a change in the pace of activity without a question. This is welcome but we should not be satisfied with it."


Article Source: http://www.channel4.com/news/estate-agents-homes-housing-bubble-mortgage

Housing: Foreign Players in the Property Game

This interesting article by Hannah Kuchler of FT on September 9th, 2013 reveals foreign property buyers interest in purchasing new homes in London would cause problems to the domestic would be homeowners.

Foreign property buyers may be looking beyond London’s most pristine streets to purchase in less desirable parts of the capital but some estate agents argue they are not distorting the housing market for one simple reason: most live and work in London. As mansions on the streets of Kensington have been bought up by Russians and Italians, and even new-build developments in less prestigious areas are being advertised in Singapore and Hong Kong, some have feared a new housing bubble fuelled by foreign money.

Tales abound of whole blocks of flats left empty by arm’s-length investors awaiting capital return, but estate agents insist that changes in the market simply reflect the international metropolis that London has become. Yolande Barnes, director of residential research at the estate agent Savills, argues that blaming foreign investors for fuelling a boom in London house prices is “verging on the xenophobic”.

“There’s a lot of money in London, whether it is from UK nationals or foreign nationals, and simply not enough housing,” she says. “It’s true that the middle class has never been able to live in Mayfair. But ‘Mayfair’ has now become a lot bigger – and includes Bermondsey.”
She says the number of foreign buyers – about 38 per cent of purchasers of prime London property overall – is close to the 35 per cent of Londoners who are born overseas. As few are predicting the mass departure of migrants, analysts do not think the bottom is likely to drop out of this market any time soon.

The housing charity Shelter says the UK is building half of the 250,000 homes required each year to meet rising need. A shortage of housing has meant the proportion of homes in the capital owned with a mortgage dropped by 18 per cent in the decade to 2011, while private renting rose by 63 per cent, according to census data.

Some in the property market do worry that the surge in overseas buyers causes problems for domestic would-be homeowners.

“It is fantastic that London has this magnetism, but the reality is that prices have skyrocketed and are, for many locals, simply out of reach,” says Charles McDowell, an estate agent specialising in prime London property. “It has existed at the top end of the market for a long time, but the overseas interest in the mid and low market housing is relatively new.”

Liam Bailey, global head of residential research at Knight Frank, the estate agents, says foreign buyers might be looking beyond traditional areas such as Kensington and Chelsea precisely because they live and work in the city. The eurozone crisis has drawn more European professionals to London to develop their careers or businesses, he adds. “This is especially noticeable in areas like the City fringe and the Southbank – areas which were not on the radar of wealthy foreign buyers a decade ago.”

Foreign buyers are more dominant in the new-build market, purchasing nearly three-quarters of new homes in central London. Most of these are advertised at overseas events in places such as Singapore and Hong Kong before being offered to UK buyers, according to research from Knight Frank.

But the new-build market is a small section of the whole, about 20 per cent of all transactions in 2012, and buyers do rent out the flats they purchase, says Savills’ Ms Barnes. “It seems to be a popular notion but if the lights are out at 8pm it is because the residents are out in London enjoying themselves or working long hours – not because they are empty properties.”

Mark Prisk, the housing minister, warns not to “throw the baby out with the bathwater” when talking about foreign buyers. He says money from foreign buyers willing to buy off-plan helps developers get new schemes built – which leads to a greater supply of housing for everyone. “It is a mistake to think if we bar people from abroad from investing in housing, this will help. All it will do is it will never get off the ground.”

For Henry Overman, a professor of economic geography at the London School of Economics, there is a simple explanation for London’s house prices: you just need to “do the maths”. “In the [2011] census the population went up by 4m but we built 1.4m homes in a decade,” he says, adding that the trend was seen outside London where there were far fewer foreign buyers. “In southern Manchester, property prices are pretty high relative to incomes, which is put down to a supply constraint and domestic demand ... prices are high in most successful places in Britain.”

While few dispute that there is a shortage of housing in London, some argue there are areas of the market that appear overheated. Analysts at Fathom Consulting, the research and consultancy company, say valuations of prime central London property are more vulnerable. The price of a typical property in the most expensive parts of London is 6.5 times the national average – up more than 20 per cent in the year from mid-2012.

Danny Gabay, director of Fathom Consulting, says prices of high-end central London property are more driven by global equity prices and currency flows than house prices in the rest of the UK. He believes that the withdrawal of quantitative easing by the US Federal Reserve is the biggest threat to house prices in the most expensive central London areas, which he thinks are about 10 per cent overvalued. 

“The gradual withdrawal of monetary stimulus by the world’s central banks risks removing one of the key supports to global asset prices, including prime central London,” he says.

But owners of some of London’s most prestigious properties could put their faith in the new governor of the Bank of England, according to Mr Gabay. If Mark Carney can convince markets that policy tightening in the UK remains a “very distant prospect”, prices could just about stay steady, he says. 

Article Source: http://www.ft.com/intl/cms/s/0/a222aba8-18f8-11e3-bdb6-00144feab7de.html#axzz2eMmdwLqY

Noisy Neighbours are a Turn Off for UK Home Buyers

According to research home buyers in the UK are most turned off or pissed to noisy neighbors rather than hearing noises coming from train and traffic as revealed in this August 26, 2013 article by the Property Wire.

Noisy neighbours rather than trains and traffic noise put off people from buying a home in the UK the most even if the price was reduced, according to research.
 
Over half, some 54% of home buyers wouldn’t buy a home next door to party animal neighbours while 32% would be put off by a train line, 31% by traffic noise from a motorway and 29% by frequent DIY.

Other noise also puts people off, including 33% who wouldn’t buy because of dogs barking or cockerels crowing and 26% put off motorbikes or diesel vans starting up immediately outside the front of the house every morning.

The research by estate agents haart also found that women are more concerned by troublesome neighbours than men, with nearly two thirds, 58%, of female respondents opposed to living next to a party house compared to 46% of men.

The older generation are also particularly apprehensive, with 74% of those aged 65 and over unwilling to put up with party animals next door. Young adults aged 16 to 25 proved to be the least cautious.

Other noises that affect the desirability of a property include close proximity to an airport which would put 39% of people off buying.

Some would buy if there was a generous discount offered with the highest reduction required to put up with neighbours having regular parties, where people would want an average of 22% off the cost of the property.

Being near an airport would merit a discount of 21%, next to a very busy main road or motorway a 19% discount and being next to commuter trains running regularly an 18% discount. While dogs barking daily would need a price drop of 16%, loud DIY also 16% and noisy vehicle start up 15%.

‘Brits are renowned for our prudent behaviour, and this survey highlights just how significant this mind set is when it comes to buying a home. It is usually quite simple to scope out whether a property is affected by noise from nearby traffic, train lines or motorways, however, it’s not so easy to spot the livelier neighbours in just a handful of visits,’ said Paul Smith, chief executive officer of haart estate agents.

‘Home buyers should make sure they check out a property at different times of day and week if possible and speak to the neighbours and get their view of the street and area before you decide to buy,’ he added.

Article Source: http://www.propertywire.com/news/europe/uk-buyers-homes-neighbours-201308268158.html

Financial Reasons to Invest in London Property

If you are a property investor you might want to consider investing in London property. Here Gulli Arnason of financialnews.co.uk on August 22, 2013 discusses the financial reasons to invest in London property.

Residential property in London has attained a reputation as a safe asset class and as far as any investment is a safe bet, London property appears to be the place to invest with values outpacing all other investment types, and it’s not just the case in the more affluent areas of London like Kensington and Chelsea or Mayfair – up and coming boroughs like Lewisham and Tower Hamlets are seeing prices continue to increase too.  According to a report by estate agent, Savills, Lewisham is set to see its property prices rise by 20% over the next five years. 

But it’s not just Savills that are recommending investing in London property as a sound financial decision. The world’s biggest property agent, CBRE, has produced a report that ranks the UK’s capital city right at the top spot for the most attractive places to invest in property. And, in fact, London was in pole position on the same report last year too. So, with property prices continuing to rise in the capital despite the rest of the UK’s continued economic turmoil, could London make it three years in a row?

Despite property prices hardly being buoyant in other areas of the UK (Craigavon in Northern Ireland has been the hardest hit with property prices having fallen by 18.4% down to an average of £91,530), London prices have remained safe within their own economic environment. property investment opportunities in London are plentiful and can be found all over the capital. The top five places to invest, according to a report by Savills, are the boroughs of Westminster, Kensington and Chelsea, Hammersmith and Fulham, Camden, and Islington. For some of the best property investment options, visit Galliard Homes.

New research by estate agents, Cluttons, has revealed that the average price of a flat in central London has soared above £1 million for the first time ever. Elsewhere in London, however, it is possible to stay well under this price bracket – and the Land Registry of England and Wales shows that the average price of a flat in London (information sourced between January – March 2013) was £391,496. 

A popular place to buy property outside the central London belt – but within easy reach of it – is Greenwich. Here, property owners have the benefit of all the amenities of London on the doorstep but live in an area with more of a village feel. Greenwich park, the Observatory, and the Cutty Sark – along with the Thames, a great selection of pubs, independent shops and the ever-popular market, continue to make Greenwich a popular prospect with buyers. What’s more, with the newly improved tube network, commuting time from Greenwich has been eased considerably. 

There are more financial benefits of investing in property in London if you are to consider the property renovation market. Although somewhat saturated with people turning their hands to property makeovers, there are still opportunities in the property market for those prepared to look. First time buyers can climb the property ladder quickly if they’re prepared to turn their hand to property development. London boroughs on the outskirts of the capital are more likely to hold investment opportunities within an affordable price range. 

Developers, and those with a portfolio of properties, meanwhile, will be able to invest in houses with more attractive postcodes. However, even if it’s just a case of a quick lick of paint, a new kitchen and a new bathroom, thousands of pounds can easily be added to the value of your home in a matter of a few months.

Article Source: http://www.financial-news.co.uk/16900/2013/08/financial-reasons-to-invest-in-london-property/