The Price of Land Rising Fastest Across the North

Growth in UK house prices is gaining momentum, driven by flourishing northern regions,

In their latest residential development land report, Savills predicts that property values in Scotland and the North of England will increase by 17-18% over the next five years – surpassing the UK average house price growth of 14%.

As a result of such strong performance, land costs across these northern areas are also due to rise exponentially, says Savills.

In particular, the value of greenfield land is expected to outstrip the national average of 1.7%, rising by 4.2% in Scotland and 2.7% in the North of England.

According to the estate agency, unlike many cities in the south, such as London, northern regions have yet to face affordability constraints – leading to greater opportunities for growth in these areas.

Furthermore, Manchester is seen as the leading driver of this trend, as house prices in the city rose by 8.6% in the year to October 2017 – more than double the national average of 4.2%.

Consequently, Manchester’s urban land prices have also seen significant increases, surging by 24% in 2017, compared to just 4% in the UK as a whole.

Also contributing to rising land values across the country is an increase in competition for land between large builders, medium-sized builders and housing associations, suggests the report

5% City House Price Inflation Predicted for 2018

Latest index reveals previously struggling cities reporting highest house price inflation

 

Since 2009, the cities which reported the weakest house price growth are bouncing back, recording the fastest rate of price inflation.

According to the latest UK Cities house price index from Hometrack, city house price inflation increased to 6.3% in November 2017, compared to 4.9% in the previous year.

Cities in Scotland are showing the strongest price growth, with Glasgow (7.9%) and Edinburgh (7.6%) taking the top spot. Also above the 7% mark are Leicester (7.5%) and Birmingham (7.3%).

For 2018, Hometrack predicts city house prices will increase by 5%, spearheaded by regional cities as London continues to struggle.

“A year ago, we predicted that UK city house price growth would be 4%,” the report notes, “as a continued recovery in regional city house prices would offset very low nominal growth in London.

“We expect 2018 to follow a similar pattern.”

London continues to weigh down on property prices, with LSL Property Services/Acadata’s house price index reporting annual house price growth in the UK was 0.9%. Excluding the capital and the South East this figure rises to 3.3%.

Borrowing Hits Highest Levels in Almost a Decade

Remortgage lending exceeded all of other types….

According to figures release by the Bank of England, households in the UK are borrowing at the greatest rate since 2008.

Analysis show new mortgage lending in the three months to September stood at 81 billion – an increase of 14% year-on-year.

The growth was driven by a race to beat November’s interest rate rise, when the cost of borrowing surged for the first time in a decade, from a rate of 0.25% to 0.5%, particularly among people remortgaging their homes in order to lock in cheap deals.

Despite the government introducing incentives to first-time buyers (FTB), such as the Help-to-Buy scheme, demand for financial products from this group fell in the three months to September.

The number of mortgages extended to FTB dropped over this period, in fact, with their share of lending of the overall market slipping one percentage point to 21%.

Figures also revealed a fall in buy-to-let mortgages, currently at the lowest level seen since 2013, following measures to curb this type of lending launched by the government in recent years, including rises to stamp duty.

UK Private Property Value Rises Nearly 50% in Last Decade

Whilst decade of growth is highest in London and the south, occupancy rates in the capital remain low

Over the last decade, the value of the UK’s private residential stock has grown by trillion, with over half of it concentrated in London and the South East.

This brings the total value to over tn for the first time, an increase of 48%, according to recent research by Halifax.

2017 alone saw an increase of billion, putting the average value per household at compared to the 2007 average of 290k

Unsurprisingly, the southern regions owned the majority of the private property wealth; 68% ( 5tn) in 2017, up from 62% in 2007.

Of the 3tn raised in the last decade, 55% was concentrated in London and the South East.

However, homeownership is becoming increasingly difficult in the capital; with average house prices soaring 71% since 2007 to owner-occupancy rates are as low as 48% in London.

The UK owner-occupancy average, by comparison, is 63%.

Russell Galley, managing director at Halifax, said: “While more than a fifth of total property wealth is in London, lower levels of owner occupation reflect a major barrier to the property ladder with a far great number of people renting where house prices are at their highest.”

With high prices impacting occupancy and affordability, Savills reported last week that the southern regions are likely to see modest house price growth compared to areas like the North West.

House Prices Forecast to Rise in 2018

Independent advisory body expects increase is a result of Stamp Duty Land Tax changes

House prices in the UK could rise by as much as 0.3% over the course of 2018, according to recent figures following the Autumn Budget announcement.

The Office for Budget Responsibility (OBR), which exists to prove independent analysis and forecasts ahead of the Budget, believes the move to abolish the tax on properties valued up to 300k will only benefit existing homeowners and not the first-time buyers it was designed to assist.

Removing the tax is expected to create a surge in demand, which would give sellers the advantage as they could raise their prices as their property becomes more desirable, cancelling out any money buyers may be saving from the tax change.

Miles Shipside, the director for Rightmove, believes this will be the case, saying ‘First-time buyers should think twice about acting quickly to take advantage of this stamp duty ban.

‘The extra demand it creates pushes up prices and starts eating away at the extra cash this stamp duty exemption will free up.’

Elsewhere in the Budget, the Chancellor promised 3bn to small and medium sized house builders in order to meet the government’s new target of 300,000 homes a year.

North West set to Lead House Price Growth in the UK

House prices set to surge in the north, while the south falls behind

The North West of England is set to see the strongest house price growth over the next 5 years, according to a report by leading estate agent Savills, with prices projected to rise by 18.1% between 2018 and 2022.

The region is followed by the North East and Yorkshire & Humberside, where prices are expected to increase by 17.6% in both areas – surpassing the UK average of 14.2%.

On the other end of the spectrum, southern regions are likely to see a more modest growth, as affordability continues to be squeezed in these areas.

The East of England and the South East are both projected to see a rise of 11.5%, while London will only see a small increase of 7.1% by 2022.

According to the company, the next five years is expected to follow the typical market cycle, where a more modest growth in London often leads to a surge in momentum for the North West and the North East.

With these areas being more affordable than the capital, they are more likely to attract first time buyers looking to put down a smaller deposit and avoid a large stamp duty bill.

Rents are generally also more affordable in these areas, compared to the south, which increases the possibility of retaining more graduates in the regions and, in turn, the demand for rental properties.

Commenting on the report, Lawrence Bowles, Associate at Savills, said:

‘Affordability in the capital is already more stretched than the rest of the UK, putting a brake on growth. But areas beyond the Home Counties have potential for growth: incomes have grown more in line with house prices, aiding affordability.’

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.”

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.

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.