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Property Optimism Falls To Lowest Level For 18 Months

Property Optimism Falls To Lowest Level For 18 Months

Property Optimism Falls To Lowest Level For 18 Months

UK property price optimism among private rental sector landlords and residential property owners has dropped to the lowest recorded level for 18 months after buy to let mortgage lending in January was reported to be decidedly sluggish.

Traditionally, the UK property market generally experiences a slow start that incrementally builds to a summer buying frenzy before reaching another plateau and then a further period of increase followed by a gradual easing at the end of the year.

The latest Halifax House Price Index (HPI) found that UK property prices increased by just 2% in January 2015, reaching a new UK average property price of £193,130 (GBP).

Combined with figures released by the Department of Communities and Local Government, showing a slowdown in the number of new homes being built, and it is clear why landlord and residential property owners optimism has fallen.

60% of landlords and property owners, surveyed for the lender’s latest housing market confidence tracker report, expected the average property price to be significantly higher in 12 month’s time.

This means that house price optimism has fallen by 10 points from 62 to +52, the lowest level of consumer confidence since June 2013, when 52% of private rental sector landlords and residential property owners expected a large rise in property prices.

So what’s different?

  • In June 2013 UK inflation was at 2.9% compared to the current 0.3%
  • Employment was just over 30 Million compared to today’s figure of 30.9 Million
  • Mortgage lending levels were at £15 Billion (GBP) compared to the current £17 Billion (GBP).

Despite the fact that the UK’s Gross Domestic Product (GDP) for 2014 increased by 2.6% and all members of the Bank of England’s (BoE) Monetary Policy Committee (MPC) voted to hold interest rates at 0.5%, the dip in confidence levels over UK property prices reflects public concern over the UK economy in general.

Craig McKinlay, mortgages director at the Halifax said that “More than half of consumers still believe UK property prices will be higher than they are now in a year’s time; however optimism has continued to weaken. Despite this we’re now seeing a return to the seasonal trend for house price activity”.

But he pointed out that of more concern are the figures from the Department of Communities and Local Government showing a slowdown in the number of new homes being built. ‘It’s widely acknowledged that the UK needs an increase in the amount of new housing being built,’ said McKinlay.

‘The Lloyds Banking Group Commission on Housing targeted 2 to 2.5 million new homes built by 2025 new homes to be built before 2025. If we are to address demand the increase in new homes coming onto the market needs to be sustainable,’ he explained.

Is The Mortgage Market Review Slowing The UK Property Market?

Is The Mortgage Market Review Slowing The UK Property Market?

Is The Mortgage Market Review Slowing The UK Property Market?

The number of new mortgages being approved by lenders dropped to an 11 month low in May 2014 as the new affordability rules brought in by the Mortgage Market Review (MMR) caused borrowers to be put off and delayed hundreds of existing mortgage applications.

The Mortgage Market Review brought in on the 26th April 2014 requires all UK based mortgage lenders to carry out rigorous affordability checks on the financial status of borrowers.

These stringent affordability checks include stress tests designed to determine if a borrower could continue to repay their loan if interest rates rise significantly.

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UK Property Rental Prices Reach New Record High

UK Property Rental Prices Reach New Record High

UK Property Rental Prices Reach New Record High

Latest figures show that the new national average property rental price being advertised has reached a whopping £1,006 (GBP) per calendar month (pcm).

This is the first time ever that the national average property rental price has broken the 4 figure ceiling barrier in the UK.

The increase in the national average property rental price has been attributed to continued growth of the London and South East property markets.

Property rental prices being advertised in central London have reached £2,300 (GBP) per month, the highest recorded rental average apart from during the Olympic’s in the summer of 2012.

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UK Residential Property Prices Only Increased By 0.5% Last Month

UK Residential Property Prices Only Increased By 0.5% Last Month

Residential Property Prices Only Increased By 0.5% Last Month 

New data released by Hometrack shows that residential property prices only increased by 0.5% during May 2014, less than previous price rises recorded in the three previous months, suggesting a slowdown in property sales and price growth.

The data shows that the proportion of UK regions recording property price increases during May had fallen to just 42%, down from the 50% recorded in March and April 2014.

While property prices may have continued to rise in London, there has been an overall slowing in the rate of growth, with property prices only increasing by 0.6% in May, compared to the 0.8% average increase over each of the previous six months.

The main growth in London is in lower priced areas of the capital that are perceived as offering better value for money, however, central London prices only increased by 0.2% in May. 

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UK Property Market Bubble Warning

UK Property Market Bubble Warning

OECD Warn About Sustainability Of UK Property Market

The Organisation for Economic Cooperation and Development (OECD) has warned about the sustainability of the UK property market as residential property prices gain more upward momentum across the UK, and continue surging phenomenally in London, prompting growing fear of another property market bubble, as the UK economy continues to recover from the financial crisis in 2008.

A property market bubble occurs when property prices become so over inflated that they become unsustainable and the market collapses

The Confederation of British Industry (CBI) also aired concern saying that they are on high alert about the property market in London and the South East of England as house prices surge.

The Bank of England are said to be monitoring the situation, however BOE policy maker, Ben Broadbent reckons there’s no need for alarm over the UK property market as they have already curtailed incentives for home loans through the Funding for Lending Scheme.

Rising property prices are a good thing, they are a good indicator of the overall health of a nation’s economy, and the current government are confident that prices will continue to rise, hence the introduction of financial incentives such as the Help To Buy scheme, encouraging property buyers with loans or guaranteed underwritten mortgages, allowing them to gain a stake in the UK property market.

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Help-To-Buy Scheme Could Threaten UK Housing Market

Help-To-Buy Scheme Could Threaten UK Housing Market

The Help To Buy Scheme Could Be Scaled Back Amid Concerns That The UK Property Market Could Be Heading
For Another Property Bubble

George Osborne, the Chancellor of the Exchequer has said that the Bank of England are being vigilant on UK house price rises and they would intervene if the situation becomes necessary.

The Chancellor’s comments come after the Organisation for Economic Co-operation and Development (OECD) warned that the booming UK property market could threaten the economic recovery of the country.

Possible action could include reigning back the Government’s Help-To-Buy scheme, which enables people with only a small deposit to take out a mortgage.

In a report the OECD said that “The UK should introduce measures to address the risks of excessive house price inflation, as property values now significantly exceed long-term averages relative to rents and household incomes. Access to the Help to Buy scheme should be tightened, and buyers should be required to put down bigger deposits for mortgages”.

In response to the report, Mr Osborne said: “I’ve said we should be vigilant about the housing market and this Government has given the Bank of England the power and the tools to do what they felt needed to be done to help to contribute to building a resilient economy in an independent way”.

The Help to Buy scheme enables the Government to place a second charge on properties purchased under the scheme, allowing them to have some degree of profitability and allow them a small degree of control over the UK property market.

People buying property worth up to £600,000 (GBP) using a deposit of just 5% may be grateful of the Government’s help but many fail to realise the full implications of the scheme, or spot the Government tactic of controlling properties.

The Government either top up the purchasers 5% deposit with 20% of the property’s value or it will underwrite a portion of the debt allowing lenders to advance purchasers with high loan-to-value mortgages that the Government guarantee.

The £600,000 (GBP) upper limit of the Help-To-Buy scheme has been widely criticised for being too high, however, recent figures show that the average cost of a property bought using the scheme was just £148,000 (GBP).

Concerns are rife that another property bubble may be formed in the UK property market following a continuing run of positive house price trends.

Mortgage lender, Nationwide recently reported that property values had risen by 10.9% during the last 12 months, the first time annual house price inflation has reached double figures since April 2010.

Data from the Land Registry also shows that average property prices in London have already surpassed the previous 2007 peak.

Recent property price increases have caused the typical average cost of residential property in the UK to rise to £262,770 (GBP), according to Zoopla.

New regulations to control borrowing were introduced at the end of April 2014 to ensure prospective property owners are not risking taking on too much debt.

Under the Mortgage Market Review, lenders are required to carry out stringent affordability checks, including making sure borrowers can continue to meet the mortgage repayments if and when interest rates rise.

However, data on the number of mortgage approvals for residential property purchases appear to suggest that the market may be moderating, with the Bank of England reporting a dip in loan approvals for the second consecutive month during March 2014.

Treasury Watchdog Sounds Alarm Over Runaway Property Market

Treasury Watchdog Sounds Alarm Over Runaway Property Market

Treasury Watchdog Sounds Alarm Over Runaway Property Market

  • Office for Budget Responsibility (OBR) says speculators are inflating property prices
  • Average price of a London home is expected to jump from £458,000 (GBP) to £650,000 (GBP) by the year 2020
  • Average price of a UK residential property reached £254,000 (GBP) in January

Following on from last Friday’s post about the Government’s independent watchdog the Office for Budget Responsibility (OBR), the Treasury’s chief watchdog, Robert Chote has spoken out.

Soaring UK property prices are being inflated by speculators banking on further gains, causing Robert Chote, head of the Office for Budget Responsibility (OBR), to issue a warning that the UK is on the verge of a dangerous housing bubble.

Mr Chote told Treasury Select Committee MP’s: “With very rapid house price increases in some parts of the country you might see bubbly activity where people are willing to buy stuff off plan or not intend to live in it. The surge in prices is partly down to soaring demand, driven by rising confidence, increased lending, and government schemes such as Help-To-Buy combined with a general lack of supply. You can explain the increase in house prices by fundamentals without having to resort to saying there is a bubble going on. That doesn’t mean to say there may not be some bubbly components to what is going on in the housing market in particular parts of the country.

Treasury Watchdog Sounds Alarm Over Runaway Property Market as average price of a typical residential property climbed to £254,000 (GBP) in January 2014 – an increase of 6.8% in a year

Treasury Watchdog Sounds Alarm Over Runaway Property Market as average price of a typical residential property climbed to £254,000 (GBP) in January 2014 – an increase of 6.8% in a year

Official figures show the average price of a typical residential property climbed to £254,000 (GBP) in January 2014 – an increase of 6.8% in a year.

Residential property prices were up:

  • 13.2% in London
  • 7.1% in the South East
  • 6.9% in Wales.

As already reported on Spotlight, the OBR expects house prices to rise by more than 30% in the next five years, meaning that the average price of a typical residential property in London is expected to jump from £458,000 (GBP) to £650,000 (GBP) over the next six years.

Mr Chote insisted that the OBR was not “taking a view that house prices are over or undervalued, house price inflation should cool from 8.5% this year to 3.7% in 2017 and 2018.

Steve Nickell, an economist who sits on the OBR with Mr Chote, said: “A bubble arises when demand is being driven by people wanting to get in because of expectations of price growth rather than for somewhere to live. The house price to income ratio has been growing for the last 40 years but that cannot go on forever because everything you consume would become housing and there would be nothing else left.’

But David Ruffley, a Tory MP on the Treasury committee, said forecasters always expect a ‘benign return to equilibrium’ and fail to predict the cycle of boom and bust.

Mortgage Lending Up £1.7 Billion (GBP)

Mortgage Lending Up £1.7 Billion (GBP)

UK Mortgage Lending Up £1.7 Billion (GBP)

The latest mortgage lending figures released by the Bank of England show that lending secured on residential property increased by £1.7 Billion (GBP) in December 2013, compared to the average monthly increase of £1.1Billion (GBP) observed during the previous six months of the year.

The increase is generally being credited to the success of the Government’s Help-To-Buy scheme, with London leading the way on residential property price rises, but what is the real situation affecting the UK?

Director of e.surv chartered surveyors, Richard Sexton, explained: “Mortgage lending in the UK is improving at lightning-speed. Lending has hit a six year high, as banks continue to offer cheap loans and interest rates, and repayments remain low. Mortgage lenders have dramatically increased lending to borrowers with smaller deposits, which has encouraged more first-time buyers to the market. And the government’s Help-To-Buy scheme has given consumers a huge confidence boost, which has increased lending volumes further. But the heart of the market remains in London and the South East. In other areas of the country the recovery is far slower. House prices may be increasing quickly, particularly in the capital, but it’s important not to withdraw Help-To-Buy too soon. In London, buyers need the scheme to get on the ladder. In many other areas, wage growth has been comatose since the economic crash, would-be property buyers simply don’t have enough income to save for a deposit. Building more houses would be a far more prudent approach to capping price rises than trimming down the Help-To-Buy scheme prematurely.”

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Published UK Property Data For 2014 Suggests A Record Start To The Year

Published UK Property Data For 2014 Suggests A Record Start To The Year

Published UK Property Data For 2014 Suggests
A Record Start To The Year 

Confirmation that the UK’s residential property market has returned to health is the first data from Rightmove covering 2014 which suggests that the year ahead looks good for property!

The Rightmove House Price Index (HPI) of 2014 shows that property asking prices increased by 1% in January.

Property prices are traditionally subdued in the first month of the year, prices increased just 0.2% in January 2013 and have usually fallen by an average of 0.2% in the month of January over the last decade.

The number of properties coming to market and activity is also up as both estate agents and property vendors look to cash in on the increased confidence in the UK property market.

Year on year property asking prices are up 6.3%, the highest annual rate of increase since November 2007, before the onset of the UK’s credit crunch. 

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Rightmove Think London Property Prices Are Unsustainable

Rightmove Think London Property Prices Are Unsustainable

London Property Prices Increase
More Than 10% In October

Average UK property prices increased by 2.8% across the country in October, however property price rises in London are going through the roof and are unsustainable, according to property portal Rightmove

London property prices increased by £50,484 (GBP) equivalent to a 10.2% increase in October, after two consecutive monthly falls in the price of properties marketed.

Property prices in the Capital had fallen by -2.8% and -1.5% in August and September respectively, and the double digit price increases reported in October has analysts worried about the volatility and sustainability of the London property market.

The huge rise in London property prices has been attributed to corresponding factors;

  • Lack of supply of residential properties coming to market
  • Overseas investment in new build properties by foreign property investors

October’s strong recovery means London property prices are now 5.6% or £28,852(GBP) up on July’s all-time high of £515,379 (GBP), pushing the year-on-year increase in London to +13.8% or £66,161(GBP).

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