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.

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’s property market is in a coma

London’s housing market has ground to a halt.

After years of blockbuster growth, home prices have reversed course and are expected to drop further over the next year. The number of sales has dropped, and more homeowners are pulling properties off the market.

The dour outlook comes courtesy of the Royal Institution of Chartered Surveyors (RICS), which warned in a report on Thursday that weakness in London had caused its UK house price indicator to hit a five-year low.

A number of factors have hobbled London’s market.

The government has in recent years hiked taxes on property purchases, making it more expensive to buy luxury housing, second homes and investment properties. Doing so has scared off some wealthy investors and caused prices to slump in central London.

Britain’s decision to leave the European Union has also hurt the market, with potential buyers putting their plans on hold because of the economic uncertainty.

One property professional surveyed by RICS said that Brexit and the tax changes had “killed the liquidity of the London market.”

Related: Renting vs. Buying: What can you afford?

The Bank of England is also expected to keep slowly raising interest rates as the economy grinds forward, making mortgages even less affordable for Londoners.

The average house price in London is £486,000, according to the UK Land Registry.

That’s too high for many first-time buyers, whose finances have been hit by high inflation and small salary rises. But sellers would rather pull properties off the market than accept lower bids.

“Buyers and sellers are currently locked in a stand-off,” said Hansen Lu of Capital Economics.

RICS’ chief economist Simon Rubinsohn said that the slowdown in London “has the potential to impact the wider economy, contributing to a softer trend in household spending.”

He said the dynamic could ultimately impact the Bank of England’s thinking about future interest rate rises.

Still, analysts don’t expect house prices to collapse in London. Inflation has moderated in recent months, employment remains strong and the British economy is growing.

Lu said this should be considered “good news” for the stagnant market.

Rents in Greater London Continue to Fall

Recently released figures by HomeLet revealed a 0.7% rise in the average rent over the month across the UK – the 11th consecutive month in which rental growth has lagged behind the general rate of inflation of 3.1%.

Nevertheless, regional differences exist in the data, with rents in some parts of the country rising at a faster pace than others.

Tenants in the East Midlands, Northern Ireland, South West of England and the North East all saw their rental costs surge above 3% year-on-year in November.

Rents in Greater London, the East of England and the South-East fell into negative territory over the month, on the other hand, with annual decreases of 0.2%, 0.3% and 1.9%, respectively.

On a monthly basis, rents in November eased across 10 out of 12 regions in the UK, with only the South West and North East seeing rental increases.

Commenting on the research, HomeLet’s Chief Officer, Martin Totty, said:

“So far, this year we have seen very modest rental price inflation; rents are now higher than a year ago in most parts of the country, but there has been no return to the more rapid increases we last saw during the first half of 2016.

“HomeLet’s monthly data continues to support a picture of modest increases in rents over 2017 and, in most instances, a reduction in real terms against the backdrop of underlying higher inflation.”

New Draft London Plan Targets Small Sites

The London Mayor, Sadiq Khan, hopes removing existing planning laws will get more homes built

The Mayor of London has revealed details of how he will tackle the capital’s housing crisis in his new draft London Plan.

It lays out Sadiq Khan’s vision for London’s housing future, with strategies including removing the density limitations on housebuilders so that land can be utilised to its maximum efficiency.

The Mayor also sets out a target to build 65,000 every year, with half of these to be genuinely affordable through planning, investment, and building on public land.

The plan demonstrates his dedication to stimulating growth in the capital through small and medium sized builders, as Khan claims they hold capacity for 24,500 homes a year.

His draft London Plan follows on from the Autumn Budget, which the Mayor called “the most anti-London in a generation.”

Commenting on his London Plan, Khan says “I am using all of the powers at my disposal in my first draft…to tackle the housing crisis head on, removing ineffective constrains on homebuilders.

Brian Berry, chief executive of the Federation of Master Builders, welcomes the London Plan: “In order to reach the 66,000 new homes London needs to build each year, this renewed emphasis on small sites is vital.”

 

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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.

Manchester, Birmingham & Leicester Topping House Price Growth

Growth in property values in London is lagging behind that of regional cities

Analysing housing trends across 20 UK cities, the newest research by Hometrack shows an average of 6.1% increase in house price inflation in October– the greatest growth seen since September 2016.

According to the market experts, the value of homes in regional cities is rising faster than London, as affordability levels in these areas remain attractive and unemployment continues to fall.

Topping price inflation over the month was Manchester, in the North West, with prices in the area increasing by 7.9% year-on-year to an average of

In the ranking table, Manchester was closely followed by Birmingham and Leicester, both in the Midlands, recording a property price inflation of 6.2% and 6.1% respectively compared to a year earlier.

Conversely, decreases in house price growth were seen only in Oxford and Aberdeen, with values dropping by 0.6% and 3.1% respectively in these cities.

Whilst not at the bottom, London registered an annual house price increase of just 3.0% with the average home in the capital now priced at nearly half a million, or

Earlier this week, the latest analysis by Your Move showed robust rental growth in the East of England in the year to October, and yields remaining the strongest in the North.

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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.

Property Transactions Continue to Decline in September

Residential property transactions saw a year-on-year, seasonally adjusted increase of 4.6% in September, according to the latest statistics by Her Majesty’s Revenue and Customs (HMRC), indicating a slowdown from the 6.6% annual rise reported the month before.

As the lack of supply continued to weigh heavily on the market, transactions dropped by 1.8% from August’s total, to just 100,850.

Non-residential transactions saw a more negative picture in September, as the number of sales fell by 7.8% over the month of September.

Furthermore, an annual decline of 10.5% was also reported last month, as the total number of non-residential transactions reached 9,440.

Commenting on the report, the director of the Legal & General Mortgage Club, Jeremy Duncombe, said:

‘With no real incentive or boost for house building, supply remains subdued and buyer activity remains sluggish. The only way we will see transaction numbers grow is with an injection of activity into the house building sector that has to be led by No 10.’

In the light of recent announcements by the government, he continued:

‘Only time will tell if they can deliver on their promises. Otherwise, intergenerational inequality in the housing market will continue to rise, with Generation Rent struggling to become Generation Buy.’

Leasehold Property Watchdog to be Launched by Government

An independent property watchdog has been proposed by the Government to tackle unfair practices in leasehold property sales.

Announced by Sajid Javid, communities minister, the suggested organisation will address rising service charges and ground rents in residential property purchases, following pressure from homeowners to confront the rising cost of owning a leasehold property.

In a document published earlier this week, Mr Javid invited the views of the public and the property industry, to find out how the Government can best protect the UK’s four million leasehold homeowners.

‘This is supposed to be the age of the empowered consumer,’ said Mr Javid. ‘Yet in property management, we’re living in the past.

‘Our proposed changes to regulate the industry will give landlords, renters and leaseholders the confidence they need to know that their agents must comply with the rules,’ he continued.

Research from independent consumer research group Which? revealed that the UK’s leaseholders were being held liable for an additional bn in costs per year, with the estimated value of service charges alone now reaching bn a year in the UK.

The Government’s consultation period is due to finish in November, marking the first stage in a wider plan to tackle the issues surrounding the leasehold market.

International Buyers Still Capitalising on Diminished Sterling Value

Property investors from the G20’s wealthiest nations are continuing to flock to the UK in search of new assets, according to a new report.

Analysis of investor patterns for purchasers from countries within the G20, conducted by home construction investment platform Homegrown, revealed that favourable currency exchanges have provided 18 out of the 20 nations with significant discounts.

Investors from South Africa and Russia have seen the greatest benefit since the value of the pound declined after the UK’s decision to leave the European Union, with purchasers receiving an effective discount of 21%.

Property investors from Brazil enjoyed the third largest saving of any G20 country, an effective reduction in costs of 17%, despite exiting the nation’s longest recession less than 12 months ago.

Purchasers from the European Union have seen the cost of investing in the UK fall by 16% since last June, whilst buyers in India have saved 15% on their purchases.

According to Homegrown, property prices have continued to grow since the referendum, increasing by 6.23%. However, the depreciating value of sterling has allowed many nations to continue to see discounts despite increasing property prices.

Out of all of the G20 nations, only Turkey and Argentina have seen the cost of investing in the UK increase, with domestic political unrest and ongoing economic challenges cited as potential reasons by the report.

‘This just goes to show the incredible value that the UK property market still represents to armies of investors around the globe,’ said Anthony Rushworth, founder of Homegrown.

‘Demand for housing has shown no sign of abating in Britain while many still struggle to get on the housing ladder, so it’s vital the country addresses its chronic shortage of housing stock,’ Rushworth continued.

The demand for UK property from overseas investors is expected to continue in the months ahead, according to independent think tank, the Official Monetary and Financial Institutions Forum (OMFIF).