Value of UK property market falls £26.9bn as house prices stagnate

he value of Britain’s housing market has fallen by £26.9bn, or 0.33pc, since the start of the year, as growth in the North East and Wales has failed to counteract falling prices in many other regions across the country.

The nation’s homes decreased in value by an average of £927 each between Jan 1 and June 30 this year, and are now worth a collective £8.2 trillion, according to figures from property site Zoopla.

While the value of the housing market in the North East has risen by 3.31pc, and Wales’ by 1.4pc, poor-performing regions such as the South West, which endured a decline in value of 2.51pc, and Yorkshire and The Humber (-2.12pc), has dragged the overall market value down.

It marks a reversal of fortunes for the UK housing market, which registered an increase in value of 3.5pc in 2017, despite a slowdown in London and the South East.

Zoopla’s most recent data found that on a local level, the English town of Barrow-in-Furness in Cumbria was the top-performer in terms of house price growth, with prices rising 6.7pc in the past six months. Holt in Norfolk experienced second-best growth of 6.27pc, followed by Pontypool in Torfaen (6.06pc).

By comparison, Reigate in Surrey saw price growth in the first half of 2018 decline in value by 6.7pc. The second and third largest reductions were seen in Lydney in Gloucestershire, and Sturminster Newton in Dorset, which reduced in value by 6.69pc and 6.64pc, respectively.

Despite property prices in London falling at their fastest rate since February 2009, the capital’s homes collectively rose in value by an average of 0.75pc in the six months to June 30.

Zoopla’s Laurence Hall said it was “not surprising” to see a small drop in values since the start of the year.

“Uncertainty around Brexit is a very real factor in the market, however on the positive side, the drop is creating a potential opportunity for first time buyers to get a foot on the ladder in some regions across Britain,” he said.

Analysts have blamed Brexit for the slowdown in the UK’s property market since 2016. House prices have risen more slowly than before the EU referendum, which hit consumer confidence and spending as the pound’s fall pushed up inflation.

According to figures from Nationwide in April, house prices were growing by about 5pc a year around the time of the Brexit vote, but in 2018 growth has consistently hovered around 1pc.

A buoyant property market depends on the UK’s economic health, so if the pound weakens further, inflation surges, and interest rates are raised, the capacity for house price growth would be reduced.

Equally, if Brexit negotiations are successful, economic growth continues to remain positive, and confidence is boosted, house prices could increase faster than initially thought.

Source The Telegraph

https://www.telegraph.co.uk/property/house-prices/value-uk-property-market-falls-269bn-house-prices-stagnate/

How a a £15,000 loan led to a 1,500 residential property portfolio

Empire Property Concepts founder Paul Rothwell tells the Telegraph Business Club about his company’s focus on converting disused commercial property into residential accommodation

Paul Rothwell’s career in property development began while he was a student. He used a £15,000 loan from his dad to buy a house and convert it into flats for himself and fellow students.

When he graduated, he didn’t sell the house but let it out and took out a second mortgage to help fund another.

That was how Empire Property Concepts (EPC) started out, and now, just 13 years later, it has a portfolio of more than 1,500 residential units across various portfolios.

Empire’s response to Permitted Development Rights (PDR) legislation was to set up a new company, Empire Property Holdings (EPH).

EPH issues Loan Notes across several Special Purpose Vehicles (SPVs) to finance EPC’s developments, focusing on converting disused commercial property into residential accommodation.

With interest rates low or negative, these Loan Notes offer sophisticated investors an innovative way to engage in the UK property market.

Statistics

Company website: empirepropertyconcepts.co.uk

Business sector: Consumer & Retail

Location: Doncaster, UK

Annual turnover: £4.5 million

Number of Employees: 16

Year Founded: 2009

Build-To-Rent Development Pipeline Exceeds 100,000

New research by Hamptons International proposes that the private rented sector will continue to grow despite recent policy changes.

Demand for rented property will be a key driver of the sector’s performance, due to long-term demographic changes and a consistent decline in homeownership levels as house price increases outpace income growth.

As a result, the estate agency forecasts that 20.5% of households will be renting in Great Britain by 2022, up from 19.4% in 2018, and that there will be six million households renting privately by 2025.

The research goes on to explore the different ways in which properties can appear on the market. For example, it estimates that around 80,000 homeowners decided to let their home out as they struggled to sell.

However, Hamptons predicts that the build-to-rent sector will become a larger part of the market, as it found the development pipeline will deliver more than 100,000 units, with more expected to come in the future.

Cash owners outnumber those buying with a mortgage, the research also highlights, noting that cash buyers have increased for 23 out of the last 25 years.

In 2017 alone, 65% of investors purchased using cash, equating to billion in property.

“The mass of cash in the market alongside increasing institutional interest is acting as an insulation to changes in policy. Creating a firm foundation on which the sector can continue to grow, particularly as the demand for rented homes will continue to rise,” the research concludes.

Inflation and poor growth see Bank of England ditch rate rise plans

Interest rates could stay low for as long as another two years, as falling inflation and weak economic growth force the Bank of England to scrap plans to push up rates in the coming months.

Mark Carney is expected to hold rates at 0.5pc at Thursday’s Monetary Policy Committee meeting, postponing a highly-anticipated rate rise for at least three months. The freeze will disappoint savers who have laboured under historically low rates for almost a decade – and a boon to borrowers who get extra time with cheap money.

But economists now suspect that inflation will keep falling quickly towards the Bank’s 2pc target, making it harder for policymakers to raise the rate.

Poor GDP growth at the start of this year and signs of a slowing global economy could also dent the Bank’s longer-term inflation estimates.

If that forces it to cut back its inflation forecast then the case for higher rates could evaporate altogether.

“They are stuck. The Bank can’t raise rates now, the economic numbers have been too weak recently,” said Martin Beck at Oxford Economics. “They should not have raised rates in November, closed the term funding scheme or worried that credit growth was too strong – those three things have contributed to the economy slowing.”

Markets are currently pricing in only two rate rises by August 2019, but George Buckley, an economist at Nomura, thinks even this may be too many if inflation is slowing sharply.

“Should the Bank publish a forecast with inflation below target based on market rates that would be quite a statement, as it would imply that even limited market pricing for rate hikes might prove too much,” he said.

UniCredit’s Daniel Vernazza believes it will be at least another year before rates rise to 0.75pc.

Kallum Pickering at Berenberg Bank fears the Bank has missed its chance. “They should have hiked by this stage of the economic    cycle, but they cannot do it now because of the soft data,” he said.

Banks push back BoE rate forecasts after growth data shock

LONDON (Reuters) – Banks scrambled to push back their forecasts for the next Bank of England interest rate raise after data on Friday showed a sharp and unexpected slowdown in Britain’s economic growth.

The new forecasts anticipate the next BoE hike to take place in August this year or as late as 2019.

Before Friday’s GDP data most economists had expected the central bank to tighten monetary policy in May.

The change in banks’ forecasts signals a much weaker outlook for the pound, which has been among the best performing major currencies in 2018.

Last week expectations of higher rates lifted sterling to its highest since the Brexit referendum in June 2016.

The likelihood that the BoE will not hike next month also means bond prices could rally further and presents a more volatile backdrop for the UK stock market.

UBS scrapped its estimate of a single rate hike in 2018 after the weaker-than-expected growth figures while Nomura, which has long been hawkish on UK interest rates, now sees a first hike in August.

Bank of America Merrill Lynch and Natwest Markets strategists pushed back their May rate hike calls to November.

“We view the (economic) slowdown as more serious, and see no prospect of hikes in 2018,” said UBS, the world’s largest wealth manager, in a note.

John Wraith, a UBS economist, said inflation could fall back to the central bank’s target of two percent later this year and that concerns about talks between Britain and the European Union over the terms of their divorce could resurface.

Market expectations of a rate hike in May tumbled to less than 20 percent from around 50 percent, after GDP data showed Britain’s economy slowed to 0.1 percent growth between January and March, the weakest quarter since 2012.

Earlier this month the market was pricing in a 90 percent chance of a rate rise.

The market is now also forecasting no more than one 25 basis point rate hike over the remainder of 2018, from a near-certain two rate rises expected a fortnight ago.

Sterling GBP=D3 tanked more than one percent to $1.3748 and government bond prices surged in the aftermath of the data.

Reporting by Tom Finn and Saikat Chatterjee, Editing by Tommy Wilkes and William Maclean

One Third of Millennials Will Continue to Rent in Their Retirement

The number of families with children living in rented property tripled between 2003-2016…

The Resolution Foundation has proposed a series of reforms aimed at protecting tenants and landlords in the private rented sector.

According to the think-tank’s research, half of all millennials – people born between 1980 and 1996 – will be living in rented property up to their 40s, whilst a third are likely to be renting beyond retirement.

Furthermore, four out of ten millennials aged 30 are already renting, double the rate of the previous generation and four times that of baby boomers, whilst the number of families with children lived in the private rented sector has grown substantially, from 0.6m in 2003 to 1.8m in 2016.

Although they acknowledge the policies the government has introduced to make housing more accessible for first time buyers, the Resolution Foundation argues that more needs to be done to provide greater security for those that rely on renting.

This includes short-term measures such as proposals for indeterminate tenancies, which are essentially open-ended leases. Such tenancies are already in use in parts of Europe, including Scotland.

A new tribunal system could also be created, in order to resolve disputes in a timely and cost-effective manner.

Lindsay Judge, a senior analyst at the Resolution Foundation, notes that support needs to be available across all areas of the housing market: “While there have been some steps recently to support housebuilding and first-time buyers, up to a third of millennial still face the prospect of renting from cradle to grave.

“If we want to tackle Britain’s ‘here and now’ housing crisis we have to improve conditions for the millions of families living in private rented accommodation.”

Number of Build-to-Rent Homes Under Construction Up 47%

The number of build-to-rent properties either completed, under construction or planned has risen significantly across the UK in the past year.

Analysis by Savills, commissioned by the British Property Federation (BPF), reveals there were 117,893 build-to-rent homes recorded across all the stages of development in Q1 2018; a 30% increase on Q1 2017.

Completions, as well as build-to-rent homes under construction, have grown substantially by 45% and 47% respectively, whilst properties in the planning stage have increased by 19%.

Of all the new build-to-rent homes either completed, under construction or planned, 60,530 (51%) are in London, followed by 29,600 in the North West (25%), and 13,009 across the Midlands and Yorkshire & the Humber (11%).

Ian Fletcher, the director of real estate policy at BPF, commented: “The build-to-rent sector is evolving quickly, with significant delivery in the regions and more houses, rather than just apartments, coming forward.

“Policy is also adapting, as to date the sector has grown without a planning blueprint. This is now changing. With the draft revised National Planning Policy Framework, local authorities will now have to specifically identify how many new rental homes their respective areas need.”

Meanwhile, Housing Minister Dominc Raab said: “The 45% increase in completed build-to-rent homes is good news, but we’re restless to do more.

“Our revised National Planning Policy Framework is a crucial next step in supporting the build-to-rent sector, reforming planning rules, and helping to deliver 300,000 homes a year by the mid-2020s.”

Recent analysis from Landbay revealed that rental payments across the UK amount on average to 52% of a household’s disposable income.

Extent of North-South Renting Affordability Gap Revealed

Households outside London spend an average of just over half their income on renting…

Households renting in London are putting a significant percentage of their income towards rent compared to the rest of the country, according to new data from Landbay.

Annual rental growth in the UK, excluding London, rose to 1.21% in March, bringing the average monthly rent to outside the capital.

In London, the average monthly cost of renting is more than double the national average, at 2100

However, the average disposable income for a worker in the capital is per 2455 month. As a result, 89% of their take-home pay is used on renting.

Outside the capital, rental payments amount to just over half (52%) of the average disposable income, which is per 1760 month.

In England, renters in the North East have the lowest percentage (41%) of their incomes going towards rent, followed by Yorkshire & the Humber (43%), the North West (44%) and the East Midlands (44%).

“Rents have continued to rise over the last five years, increasing by 9% across the UK since March 2013 and by 7% in London,” notes John Goodall, CEO and founder of Landbay.

“Not a day goes by when there isn’t more news about the supply-demand mismatch in the UK housing sector and until this is resolved, tenants will continue to rely on the private rented sector to support them.

“With the right property and the right location, there are attractive yields to be had, and consistent rental demand will drive returns in the long-term,” Goodall concludes.

 

London property market moves out of boom phase, says Rightmove

The capital’s housing market lagged the rest of the UK in 2017, and there’s little to suggest any upturn is in store

London’s property market has moved out of its boom phase, and home sellers need to be more realistic about their price demands, according to Rightmove.

The February report from the home-listing website shows that asking prices were down 1 per cent from a year earlier, a sixth consecutive fall. They rose 4.4 per cent on the month, reflecting the usual jump at the start of the spring season.

The capital’s housing market lagged the rest of the UK in 2017, and there’s little to suggest any upturn is in store. Still, while multiple reports point to a cooling in London housing, the damage is being limited by cautious sellers, who aren’t flooding the market in a panic to dump property.

That means the long-running supply-demand imbalance in the city is providing some support to prices.

“End-of-the-boom prices normally readjust more quickly if there is an oversupply,” Miles Shipside, Rightmove director, said in the report. However, “some would-be sellers are holding back, preventing a glut of competition from forcing prices downward,” he said.

The capital’s housing market lagged the rest of the UK in 2017, and there’s little to suggest any upturn is in store. Brexit uncertainty has damped demand, while years of rampant inflation has pushed ownership out of reach for many.

The mean asking price in London this month was almost £630,000, more than 20 times average UK earnings.

For those who need a fast sale, Shipside’s advice is to “sacrifice some of the substantial price gains of the last few years.” The average time to sell a property in London is now 83 days, up from 73 days a year ago.

Nationally, asking prices increased 0.8 per cent in February from January, though that was below the 10-year average for the time of year. The average price of £300,000 is up 1.5 per cent year-on-year. That compares with gains of about 6 per cent seen less than two years ago.

The 10 UK areas where house prices rose the most in 2017

UK house prices:Cambridge and Orkney see the biggest average price growth across the UK

New figures reveal the districts where house price growth outperformed the rest of the UK last year.

Property prices in Cambridge have risen by £63,000 in a year, according to the first detailed report on how much homes sold for in 2017.

Annual house price growth of 15 per cent takes the average price of a home in the university town and surrounding areas to £462,000.

Meanwhile, with prices across the UK rising by five per cent to average £227,000, the pace of growth in Cambridge is three times higher than the national average, according to the Office for National Statistics (ONS) report.

Last year, the government committed to a £7 billion investment programme in the city which is set to bring new roads, rail links and homes between Cambridge and Oxford.

“There is lots of talk about the Oxford-Cambridge corridor becoming England’s own Silicon Valley. Faster rail links for London workers is music to many home owner’s ears as the exodus from London continues,” says Michael Houlden, head of national estate agency at Strutt & Parker in Cambridge.

He reports that the proportion of buyers from London in the area rose by 60 per cent last year.

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£475,000: this three-bedroom detached house is between Cambridge North and Cambridge stations with easy access to the A14

THE UK’S TOP 10 FASTEST RISING LOCAL AUTHORITIES IN TERMS OF HOUSE PRICE GROWTH:

Local authorities Av. house price Dec 2017 Av. house price Dec 2016 Av. growth
Orkney Islands £146,842 £124,256 18.20%
Cambridge £462,033 £399,330 15.70%
Eden £206,713 £179,676 15.00%
West Dunbartonshire £109,293 £95,081 14.90%
Kettering £203,237 £178,200 14.00%
Cotswold £394,405 £346,150 13.90%
North Norfolk £258,580 £227,473 13.70%
Oadby and Wigston £215,417 £189,806 13.50%
Forest Heath £223,407 £199,385 12.00%
Dover £246,887 £220,776 11.80%

ENGLAND

Other areas with double-digit growth were Eden, just outside of the Lake District National Park, where an average house now costs £206,000; Kettering in Northamptonshire with average prices of £203,000; and the Cotswolds in south-central England.

An average of £48,000 was added to Cotswolds residences over the course of 12 months, taking the average price to £394,000 in December last year.

For this price, buyers seeking their own slice of Cotswolds charm can stretch their budget to a three-bedroom house with exposed beams and an Inglenook fireplace.

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£400,000: this Grade II-listed, three-bedroom house is in the historic hamlet of Churchend.

“The Cotswolds remained a firm hotspot last year as it continued to attract strong levels of demand from buyers looking for a change of pace and lifestyle,” says William Leschallas, director of Jackson-Stops’ Burford branch.

Widely regarded for its beautiful countryside and picturesque villages, the area is proving popular with young professionals commuting to Cheltenham, Bristol and Bath, Birmingham and Oxford, as well as families and downsizers.

“We expect demand to continue over the coming years, but whether or not supply can keep pace is yet to be seen. There are a number of larger property schemes in the planning system on the edge of major Cotswold towns, which may appeal more to local buyers who wish to remain in the area as their needs change,” says Mark Johnson, residential development partner at Knight Frank.

SCOTLAND

Homeowners in The Orkney Islands, off the north-east coast of Scotland, saw the biggest growth in percentage terms, with average prices rising by £23,000 (18.2 per cent) to reach £147,000.

For this, home owners can buy a dreamy two-bedroom house with sea and farmland views.

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£155,000: a two-bedroom house in Orkney

“The romanticism of a secluded island life, coupled with an affordable price tag, has no doubt made the islands impervious to the negative market influences of the mainland. Although it is also likely that the Orkney Islands’ explosive growth is no doubt a tad skewed to a smaller sample size than most other areas of the UK,” says founder of Emoov Russell Quirk.

There are also generous grants available to businesses setting up in the area, which will be attractive to qualifying entrepreneurs.

Scotland’s West Dunbartonshire also made it in to the top five performing areas in terms of house price growth. With an average house price of just £109,000, it is nearly £20,000 cheaper than nearby Glasgow and nearly £70,000 cheaper than Stirling, boosting its appeal.

WALES

Newport was the standout area in Wales for price growth, with homes selling for an average of £168,000. However, growth of 9.6 per cent puts the region outside of the UK’s top 20 performing areas.

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£169,950: a semi-detached three-bedroom home for sale in Newport

“Over the last few years, Scotland and Wales have seen property prices fall due to influences other than the wider uncertainty surrounding our departure from the EU.

“Both countries are home to pockets that have seen a drastic decline in the local property market, as the result of diminishing industries which have previously been pivotal to the local populace and economy,” says Quirk.

“However, with a much lower cost of getting on the ladder than the majority of regions in England, both have benefited from a greater degree of buyer and seller confidence, which has returned at a much quicker rate than other more inflated markets.”