House Price Growth Highest in North West

UK annual inflation in September up 0.6% compared with August, while London prices decline…

The ‘north-south divide’ seems to be diminishing, as London’s house price growth continues to lag behind the rest of the country.

 

The north west of England continues to dominate, with a 7.3% rise year-on-year according to the September house price index by the Office for National Statistics (ONS).

 

By comparison, the capital saw growth drop by 0.2% since August to just 2.5% year-on-year.

 

As a whole, the UK experienced an annual price increase of 5.4%, up from 4.8% in August.

 

This is a much faster rate than what has been reported in other recent house price indices; 2.5% according to Nationwide, and just 1.4% announced by Rightmove.

 

Buy-to-let investors are turning away from the capital and Jonathan Hopper, manging director of Garrington Property Finders, believes economic growth in the north and higher yields are a possible cause.

 

“In the 12 months to September, prices in the capital rose at barely a third of the pace of those in the fastest-growing region.

 

“This shift is being driven by a steady flight of equity from London – and other previously overheated regions – to areas with greater affordability.”

More Landlords than Ever are now Using Cash to Invest

Cash purchases made by landlords accounted for 65% of all buy-to-let investments in the last 12 months…

Landlords choosing to buy their rental properties with cash are now dominating the UK’s rental market, according to the latest lettings index from the UK’s largest estate agency group, Countrywide.

In the last 12 months, a total of billion was invested by landlords paying for properties in cash, marking a 32% increase over the last decade.

Indicating a shift in attitude in the market, 65% of all buy-to-let property purchases were made with cash in 2017, surpassing the previous peak of 60% in 2011, as well as the 40% share seen in 2007, when the agency started their records.

A driving factor behind the increase in cash purchases is, according to Countrywide, rising house prices, which are allowing investors to remortgage their current assets and invest the equity in new properties.

However, there are regional disparities. The North East contained the largest proportion of cash buyers, which accounted for 78% of all purchases made in the region in the last 12 months, while 58% of landlords in London were still using buy-to-let mortgages to purchase their investments.

In terms of rental growth, the agency reported a 1.2% increase over the last 12 months in Great Britain, when excluding London.

The growth was mainly driven by Wales and the Midlands, where rents saw an upswing of 2.6% and 2.2% year-on-year, while average rents in the capital fell once more.

Commenting on the report, the Research Director at Countrywide, Johnny Morris, said:

‘Landlords have increased their housing wealth considerably over the last 10 years. This means cash purchases are steadily becoming a bigger part of the market…. Rising prices have allowed landlords to take equity out of both their personal or other rental homes to expand their portfolios.’

Empire Property Holdings 3 – Empire Property launch a third loan note

Following on from the success of the first two Loan Notes.

Business Strategy

The Company intends to use the funds raised, to acquire suitable commercial properties, and strategically renovate and manage these assets to achieve the guaranteed returns.

Investment will provide a double digit return on investment, and allow investors to benefit from opportunities in the real estate market without management commitment or concentration of investment in any one property.

Once converted, the properties would become a commercial asset, whose underlying value whilst linked would not be reliant on the variable housing market price index.

The Company plans to take full advantage of current market conditions and acquire assets through the following methods:

  • Initially acquire three commercial properties in prominent towns or Cities
  • The funds will be used to acquire & develop the property into residential accommodation.
  • The properties will be renovated using permitted development rights where possible, or the equivalent full planning requirements.
  • The Company will then liaise with known private, and council letting contacts, to speedily let and manage rooms.

The cost of every project and every future project can be standardised to provide a business plan for each property. The details of each potential project will be input into a feasibility spreadsheet and the viability can be quickly assessed.

The main factors affecting the project are the purchase price of the property and the cost of renovation. Each room is given an average cost to complete, which takes into account all aspects of the renovation, project management, administration, licensing, and liaison with councils.

The only other factor is the purchase price of the room and therefore in each case, we can identify the purchase price of each room that should not be exceeded.

For further information about our track record please see our Done Deals.

London Held Back the UK’s Rental Growth in October

Rents in the East Midlands rose at the fastest rate year-on-year

 

Data from tenant referencing firm HomeLet revealed a modest increase in rental costs in October, as rents reached an average of – a 0.9% annual uptick.

Whilst rents continued in upward trajectory, HomeLet said growth is decelerating, as the pace of annual increase witnessed last month represented a decline from the 2.0% and 2.4% year-on-year rise found in September and August respectively.

However, this stagnation was, according to the firm, largely driven by London.

With the average tenancy agreed in the capital standing at in October, rental inflation in London reduced to 0.6% over the month. When excluding the city from the analysis, figures pointed to a more substantial annual rental uptick of 1.5% and an average rent of across the UK.

​Conversely, the greatest increase compared to October 2016 was recorded in the East of Midlands, where rents surged by 3.6%, and Northern Ireland, where tenants paid on average 3.4% more in rents than a year earlier.

On a monthly basis, rental values decreased by 1.9%, said Homelet.

Regionally, the South East was the only area to have experienced both an annual and monthly decline, as rents in the region dropped by 2.4% from September and 0.8% year-on-year.

Significant Increase in Buy-to-Let Activity in the North

Rental rates across the country also set for 5-year growth as Bank of England raises base interest rate

Applications for buy-to-let mortgages in the Northern regions of England have surged in the first three quarters of 2017.

 

Both the North East and Yorkshire and the Humber regions have seen significant rises of 77.6% and 73.2% respectively, whilst applications in the North West increased by 24.8%.

 

The research comes from Commercial Trust Limited. The mortgage broker’s chief executive, Andrew Turner, said of the rise;

 

“With property prices typically cheaper and a strong demand for private rental homes…and from thriving student populations, there is plenty of incentive for those looking to invest in property, to look North.”

 

Rental prices, meanwhile, are forecast to see growth over the next five years according to real estate firm Savills, with a 2.5% rise in 2018 and 2019, a further 3% in 2020, before peaking to 3.5% over 2021 and 2022; a cumulative growth of 15.5%.

 

Although London saw a slight dip of 3% in rental prices this year, Savills projects over the next five years prices in the capital will rise by as much as 17%.

 

Savills believe landlords are being prompted to raise rents given the extra costs they are facing, including the 3% Stamp Duty surcharge, the gradual removal of mortgage interest tax relief, and the recent Bank of England interest rate increase.

Structural Shifts to Make the UK’s Housing Market Healthier

A 2.5% house price growth per annum over the next 5 years is the new headline figure

In their latest residential report, global services firm JLL explores the factors triggering structural changes in the UK’s property market, indicating that political legislations and the advent of new technologies in the construction industry (i.e. Build Information Modelling), will leave a positive mark on the sector.

Whilst house price growth is expected to remain moderate in the short term, the market will achieve greater stability in the medium term, says JLL – benefitting the government, buyers, sellers and industry participants.

The UK’s exit from the European Union is not expected to interfere with the transition towards a healthier housing market; JLL believes that while scenarios for a post- Britain vary, forecasts lean towards an upside in the risk balance scale, both in terms of the economy and the property market.

In the short-term, growth in property prices is expected to average 1% in 2018 and 2% in 2019, with transaction levels remaining just below 1.2 million pa. Around 2020-2022, property prices are due to improve steadily, with increases of 3.5% pa.

The lettings market is to remain more robust, according to the company, with rental growth averaging 2% pa in 2018 and 2019, and continue to expand – achieving rises of around 2.5% pa during the 2020-2022 period – supported by the continued unaffordability in the housing market and the rise in popularity of renting.

In terms of supply, housing starts are forecast to stay at circa 200,000 pa during 2018-2019, and increase to 215,000 homes a year by 2022.

 

Interest Rate Rises for First Time in More Than a Decade

Monetary Policy Committee voted to increase base rate to 0.5%

The Bank of England has voted to increase the base interest rate in the UK, ending more than a decade of interest rate cuts.

 

The decision, made by the Bank of England’s Monetary Policy Committee (MPC), increased the interest rate from 0.25% to 0.5%, reversing the emergency rate cut made in August 2016 in the aftermath of the Brexit referendum last year.

 

Citing the continuing weak performance of sterling and rising costs for households as core reasons for the decision, Bank of England Governor, Mark Carney, said that today’s increase marks the first of three rate increases over the next three years, but that these would be limited and gradual.

 

Rising interest rates would help to support the value of the pound in the markets, whilst providing savers with greater incentive. However, Mr Carney warned that the change would make the cost of borrowing more expensive.

 

The rise follows the publication of September’s Consumer Price Index (CPI) which showed that inflation in the UK had reached a level of 3%. The Bank – and the MPC – are targeted to maintain a CPI of 2% to prevent the economy from overheating.

 

In addition to sluggish productivity levels in the UK, Mr Carney said that ‘the decision to leave the European Union is already having a noticeable impact’ on the UK’s economy.

 

In the report accompanying the MPC’s decision, the group highlighted that ‘Brexit-related constraints on investment and labour supply appear to be reinforcing the marked slowdown that has been increasingly evident in recent years in the rate at which the economy can grow without generating inflationary pressures.’

London Housing Crisis Driven By Poor Planning & Stockpiling Land

London’s housing crisis could be down to poor planning and a reluctance to release surplus land, according to a new report.

Sir Mark Boleat, a former policy chairman of the City of London Corporation, points to factors such as policies on land use, public sector bodies holding onto land, and weak infrastructures as restricting the supply of new housing.

He goes on to dismiss the notion that foreign property investors are to blame for the housing shortage, regarding it as nothing more than a myth.

The report, written for the Housing and Finance Institute, highlights a number of tests that must be passed in order for housing to be developed, which “can be problematic” and that “each carries with it a degree of uncertainty and therefore risk.”

For example, the land must be either owned or capable of being bought by a developer, rather than being owned privately. Another is that there must be the necessary infrastructure in place for the housing to be built.

He believes there are five requirements in order to solve the problem, the first of which pointing to “people influential in the debate” making false assertions:

“The first requirement is for there to be an honest debate, based on evidence not assertation,” the report says.

The remaining factors highlighted by Sir Boleat are for more land to be made available, simplifying the “expensive and time consuming” viability assessment processes, changing the bias towards locally elected members of developments, and reassessing current planning conditions.

More People Leaving London to Rent Rather than Buy

48% of tenants fleeing London head to the Midlands or the North to rent….

The latest report by Countrywide shows that a large proportion, or 78%, of tenants have moved out of the capital in the last 12-months to rent elsewhere, with just 22% leaving to buy a home – representing a significant shift from 2007 when 51% of tenants left to climb the property ladder.

Figures show a total exodus of 64,672 renters in the last 12 months, the highest number in the last decade, claims the letting agency.

With more and more people opting to rent outside of the capital, rents across its surrounding regions rose at the fastest pace, as the South West, South East and East of England saw their annual rental inflation increase by 3.3%, 1.9% and 1.7% respectively.

Those abandoning London have also been relocating to the northern regions, with data showing 48% of the capital’s leavers heading towards the Midlands and the North over the last year – a 17% increase from 2007.

Across the UK, rents were found to have increased 1.1% in the last 12-months, with the average now standing at

According to Countrywide, rental inflation over the year has been more prominent in southern regions, where a greater undersupply of properties supported growth in the sector.

Commenting on the research, research director at Countrywide, Johnny Morris said:

“For people in their 30s leaving London is something of a rite of passage. But as the number of those renting has grown the move out of London is increasingly likely to be in the rental market.

“A decade ago most tenants moving out of the capital did so to buy. But since 2007 leaving London to carry on renting somewhere else has become more typical”.