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

Brexit Bulletin

Brexit Bulletin

304 Days to Go

Today in Brexit: While the Irish border and customs arrangements are the most pressing concerns, work on everything else needs to accelerate. And there’s a lot left.

The U.K. Parliament is in recess, but London has its homework to do. Brussels expects British negotiators to return next week with a clear plan about how the government proposes to solve the Irish border problem. The European Commission insists a backstop – the solution that will have to do until something better comes along – can’t be the government’s U.K.-wide customs arrangement with the European Union.

But amid all the talk about the Irish border and the endless customs union debate, it’s easy to forget there’s still a lot else that needs to be hashed out by October. The EU’s chief Brexit negotiator, Michel Barnier, used a speech in Portugal over the weekend to spell out the differences. The system for settling disputes – which the EU maintains must include a strong European Court of Justice role but which the U.K. wants to be run by joint political committee – also needs to be included in the final text of the Brexit treaty.

The details about the foundations of the future relationship – which includes trade, ddefenceagreements, financial-services arrangements and regulations for industries such as fishing – are supposed to be completed by October, too.

A senior EU official raised British hackles last week, accusing the U.K. of chasing “fantasy” ideas and failing to accept responsibility for the consequences of walking away. In a background briefing for reporters, given on the condition of anonymity, the official laid out areas of dispute. From the EU’s perspective, here’s where these stand:

  • Mutual recognition of standards and regulations in areas such as food safety and financial services
  • Security: The U.K. can’t stay in Europol or take part in the European Arrest Warrant system, the EU believes
  • Foreign policy: The EU is unlikely to comply with a U.K. request for a significant say in decision making
  • Galileo satellite navigation system: The U.K. can’t turn the program into a U.K.-EU joint project and have privileged access which could give it the right to turn the system off unilaterally, the EU says
  • Data protection: The EU is unlikely to allow the U.K. to have a bespoke agreement that would lead to the EU losing its autonomy over privacy rules

There’s much work to do over the summer to lay the plans for the full-scale negotiation on the two sides’ post-Brexit ties. “Time is running out,” Barnier warned on Saturday. “If we want to lay the foundation for our future relationship before the withdrawal of the U.K., we must accelerate.”

Ian Wishart

Today’s Must-Reads

  • The Financial Times’s Tony Barber argues there’s a fierce battle emerging over the future of the EU that’s been ignited by the crisis in Italy
  • Bloomberg Opinion’s Mohamed A. El-Erian says markets fear a populist backlash in the country

Brexit in Brief

Air Agreement | The U.K. is ready to agree to an “open skies” agreement with the U.S. this summer that will keep planes between both countries flying after Brexit, the Daily Telegraph reports, citing four unidentified sources. The newspaper also says the EU has moved to shut the door on British and other non-EU companies participating in the European Defense Industrial Development Program.

Carry On Spending | Britain will help to determine the EU’s 1 trillion-pound budget up to 2027 after European countries defied Brussels and invited British officials to take part in negotiations, the Times reports. The European Commission was opposed to the plan devised by individual member states, the newspaper says.

Scotland in Brussels | Scottish First Minister Nicola Sturgeon reiterated her goal for the U.K. to remain in the customs union and single market in a meeting with Michel Barnier in Brussels.

Dynamic Deals | Foreign Secretary Boris Johnson repeated his call for the U.K. to make a clean break from the EU when it leaves the bloc, warning Prime Minister Theresa May that Britain won’t be able to take full advantage of the split unless it does.

No Plan B
| The government’s preparations for a “no deal” Brexit have largely ground to a halt, the Financial Times reported. This will make it almost impossible for Theresa May to walk out of negotiations with the EU in the next 10 months, the paper said.

Hunky Dory | A Bank of England spokesman ,refuted suggestions of a rift between the central bank and the U.K. Treasury after a report in the Financial Times said the institutions are at “loggerheads” over the future of City of London regulations after Brexit.

 

Source https://www.bloomberg.com/brexit

East Midlands is Most Confident Region for House Price Growth

Consumer confidence in the housing market has increased by its largest rate since 2016, according to the latest Housing Market Sentiment Survey by Zoopla.

Over eight in ten homeowners (84%) predict house prices in their area will grow by 6.9% over the next six months.

This is a marked increase on the previous survey held in November 2017, when a price increase of 4.9% was forecast by 70% of consumers.

The East Midlands remains the most confident region, with 93% expecting prices to rise compared to 79% in November’s survey, closely followed by the East of England (90%).

Although North Eastern homeowners have the least optimism, market confidence has nearly trebled in the region from 22% in November to 63%. In London, 76% of consumers are anticipating prices in the capital to grow.

However, in terms of the rate at which prices are predicted to rise, homeowners in the West Midlands are the most optimistic, predicting property prices in the region will grow by 10.6% in the next six months.

Zoopla believes that the rise in confidence is a result of wider activity in the housing market, due to a seasonal increase in momentum.

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.

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

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.

 

Manchester – the UK’s property hotspot

Strong demand for city-centre living, a huge student population and urban regeneration make Manchester one of the best-performing property markets in Britain

Manchester, benefitting from the recent £1bn investment as part of the Government’s Northern Powerhouse initiative, is showing itself to be a vibrant, forward-thinking metropolis with the most attractive city centre investment market in Britain, according to JLL.

The property specialist company rates Manchester as its No 1 prospect for residential price growth over the next five years, with the annual average growth of 4.2pc compared with 2.4pc across the UK. Rents are expected to increase by around 3.5pc per annum between now and 2020.

Pivotal to the recent success of Manchester is a revival in demand for city-centre living

House prices grew by 10pc in 2017, with the average two-bedroom flat now costing £250,000 (an increase of 8.7pc over 2017), and rental prices rose by 3pc, according to JLL’s latest research.

Pivotal to Manchester’s success is a revival in demand for city-centre living – a trend that was at its height before the 2008 recession, which collapsed along with house prices due to sheer oversupply.

In 2000 there were 10,000 people living in the heart of the city. Now there are nearly 70,000, many of them students or young professionals with a desire to live close to where they work and play.

“City living has gained strong momentum in Manchester over the past three years and, together with an active student market, has pushed demand in both the sales and lettings markets noticeably higher,” says Neil Chegwidden, of JLL residential research.

Huge potential: canalside apartments in the Castlefields area of Manchester Credit: Getty

“And with housing supply in the city centre severely constrained, prices and rents have soared.”

For investors with an eye on Manchester, its student population of more than 85,000, spread among four universities, plays a crucial role.

The city has the highest retention rate of students after London, with 50pc choosing to stay after they graduate. Six in 10 Manchester-born students who go to university elsewhere also return to their home town after graduation.

Nick Whitten, JLL’s director of UK research, says: “You can see the reasons. They already know they enjoy living there and there are plentiful employment opportunities and affordable housing.

“More new businesses are coming to the city than anywhere else in the UK, outside London. Many of them are first-time investors in the city, which is a reflection of Manchester’s growing profile.”

Manchester: a market snapshot

4.2%

Average house price growth in Manchester over next five years

£250,000

Average cost of a two-bedroom flat in Manchester

£1bn

How much the government has invested in the Northern Powerhouse initiative

70,000

Number of people now living in Manchester city centre

The young demographic is also a driving force in the number of rental properties in Manchester – which constitute two-thirds of the city centre’s housing stock. A fast-emerging trend is a build-to-rent market, which accounts for a large proportion of the 30 new residential developments currently being built.

“Professionally managed blocks of rental apartments with leisure facilities and concierge services are forcing private landlords to up their game, which is a positive thing.

“Shortly, we could see landlords offering similar white-label services such as local discounts and access to a network of handymen to stay competitive,” says Mr Whitten.

JLL identifies nine Manchester “sub-markets” that offer potential to investors, including the centrally located Northern Quarter, Piccadilly and Castlefields, with its urban canalside living. St John’s Deansgate has become a prime market, with sales there last year regularly exceeding £500 per square foot.

Across the River Irwell, suburban Salford is prominent on the radar of the millennial market seeking a lower-priced, higher-quality alternative to city-centre living.

Focus area: Salford Quays is the UK’s second-biggest media hub Credit: Getty

Salford is also a key focus for buy-to-let investors, with Salford Quays now the UK’s second-biggest media hub, home to 80 media organisations.

“It has the benefits of being well connected to the city centre but better value in property terms. There are 7,500 homes in some phase of development in the Salford City Fringe, and Salford Quays attracts a professional audience, which makes it a good place to invest,” says Mr Whitten.

He thinks that another area to watch is Ancoats and New Islington, whose regeneration is largely funded by the owners of Manchester City Football Club.

As the momentum and investment continue in creating the Northern Powerhouse, Manchester is arguably the poster city and the greatest beneficiary so far, with a new arts centre, two new research institutes and improved transport infrastructure.

It has also seen the highest rate of job creation in the country, with the number of new jobs growing by 84pc between 1999 and 2015.

Midlands Cities Among Top 10 Buy-To-Let Property Postcodes

London commuter belt towns fall down the rankings as Northampton, Leicester and Birmingham surge

Three of the top five locations for buy-to-let property investments are in the Midlands, according to new research.

Northampton, Birmingham and Leicester were all cited as top postcodes for buy-to-let, with strong rental growth of 2.38%, 3.91% and 4.35% respectively, according to independent mortgage lender LendInvest.

Whilst the Midlands regions have been steadily rising up the rankings, the report highlights the South West region as an up-and-coming market, as strong rental growth and healthy market activity has boosted the profile of cities like Bristol, Swindow, Truro and Gloucester.

Conversely, London and the South East continue to underperform, as declining rents deters further investment in these regional markets.

Historically strong performing commuter towns like Dartford, Romford and St Albans have recent begun to slide down the LendInvest buy-to-let rankings, in some cases by as many as 58 places.

However, the report notes that demand for housing will continue to support future growth: “Political changes are increasingly underpinning this uncertainty in the market, however the need for housing around the UK prevails.

“As such, we can expect the rental market to grow, with investors prioritising yields and rental price growth as valuable metrics to consider when purchasing a property.”

Over the last 10 years, rents have grown by 16% nationally, according to figures from Rightmove.

 

Government Announces £400m Housebuilding Investment Fund

The Housing Secretary Sajid Javid has revealed a new government investment fund to help boost housing construction in Greater Manchester, Oxfordshire and the West of England.

Almost million is being put towards building more homes, as well as delivering local infrastructure projects like schools, roads and hospitals.

The fund is similar to the £ 120m grant to build 215,000 new homes in the West Midlands, announced by the Chancellor in the Spring Statement.

Of this, Greater Manchester is set to receive m to accelerate economic growth in the Northern Powerhouse and support the construction target of 227,200 new homes in the region by 2035.

An interim package of 120m will be given to the West of England, which covers Bristol, Bath, and parts of Gloucestershire and Somerset, to nearly double the number of new homes built each year from 4,000 to 7,500.

Oxfordshire will receive the rest of the funding, some m, which will support the construction of an additional 100,000 new homes by 2031, as well as the building of vital bridges, roundabouts and roads.

Meanwhile, the government announced that shortlisting has finished on bids for the bn Housing Infrastructure Fund, with 44 bids for high-impact infrastructure projects successfully progressing to the next assessment stage.

“This government is determined to build the homes this country needs,” Sajid Javid said of the fund. “That’s why we’re working with ambitious areas across England and backing them with investment and support.

“We’re also investing in local infrastructures like schools, roads and hospitals so that we can help unlock even more new homes in the areas where they’re needed most.