rental property
Marketing No Comments

Rental supply fails to keep up with demand as landlords ‘are pushed out of the market’

Demand for rental property has hit its highest level so far this year, but supply has failed to keep up, letting agents report.

ARLA Propertymark’s July Private Rented Sector Report – based on responses from 191 members – shows that the number of new prospective tenants registered per branch increased from 71 in June to 79 in July, the highest level so far this year.

It matches the previous high reached last September.

However, the supply of available properties moved in the opposite direction to demand, falling from 191 in June to 184 last month.

There are also reports of fewer tenants experiencing rent increases, with the proportion of tenants seeing hikes falling from 35% to 31% between June and July.

David Cox, chief executive of ARLA Propertymark, said: “Buy-to-let investors are being pushed out of the market by increasing costs and continued regulatory change, and new landlords are being deterred from entering.

“Last month, an average of four landlords took their properties off the market per branch, up from three this time last year – and as supply falls, competition among tenants increases, which pushes up rent costs.

“Almost a third saw their rents rise last month, and although this figure was down from June, it’s still far too high. To put tenants back in the driving seat, we need more homes available to rent, and the only way this will be achieved is if the Government makes the market more attractive for buy-to-let investors.”

Source: Property Industry Eye

House prices
Marketing No Comments

London house prices to fall this year and next, 1-in-3 chance of a crash

House prices in London’s overvalued market will fall this year and next, a Reuters poll of analysts and experts predicted, and will tumble if Britain fails to reach a deal ahead of its departure from the European Union.

The quarterly poll of around 30 housing market specialists, taken in the past week, said house prices in the capital – where foreign investors have previously fuelled skyrocketing prices – will fall 1.6 percent this year and 0.1 percent next.

“Central London is tanking because the traditional international buyers are staying away – and the quantum of buyers is falling. A disorderly Brexit will exacerbate this trend,” said Tony Williams at property consultancy Building Value.

Uncertainty over how Brexit negations pan out has already spooked foreign investors. When asked what effect a disorderly departure would have on London prices, responses ranged from “short-term fall” to “damaging” to “disaster”.

“In the short term the additional uncertainty will disproportionately affect London, causing the value of some properties, particularly high value properties, to fall further,” said Ray Boulger at mortgage broker John Charcol.

Britain is due to leave the EU in March and sterling fell to a near one-year low against the euro on Tuesday amid no-deal angst. A weaker currency should make UK houses more attractive to foreign buyers but Brexit uncertainty is keeping them away.

When asked about the likelihood of a significant correction in London’s housing market before the end of 2019 the specialists gave a relatively high median of 29 percent. The highest was 75 percent.

But that might not be a bad thing – certainly for first-time buyers.

When asked to rate the level of London house prices on a scale of one to ten, where one is extremely cheap and ten extremely expensive, the median response was nine. Nationally they were rated seven.

“The weight of evidence suggests that housing is overvalued once more,” said Hansen Lu at Capital Economics.

In August the average asking price for a home nationally was 301,973 pounds and in London a whopping 609,205 pounds, according to property website Rightmove, putting home ownership out of the reach of many – despite historically low borrowing costs.

The Bank of England pushed interest rates above their financial crisis lows this month but signalled it was in no hurry to raise them further. It will add another 25 basis points in the second quarter of next year, taking Bank Rate to 1.0 percent, another Reuters poll predicted.

So with mortgage rates staying low house prices are expected to increase nationally by 2.0 percent this year and next – slower than inflation – and then 2.3 percent in 2020.

“We see little upward or downward pressure on house prices at current near-zero interest rates. However, risks lie substantially to the downside,” said Andrew Brigden at Fathom Consulting.

“Were interest rates to return to pre-crisis levels or higher, which may prove necessary if there were a sharp fall in sterling after a General Election, for example, then house prices could fall by around 40 percent.”

Source: UK Reuters

Marketing No Comments

Carney ‘asked to stay’ as BoE governor amid Brexit concerns

Bank of England (BoE) governor Mark Carney has been asked by the government to stay for another year in a move to settle the City’s Brexit concerns, according to a report.

This means Carney would remain BoE governor until June 2020, staying for an extra year on top of his original departure date of June 2019.

The report, in the London Evening Standard’s Diary section, claimed the chief reason would be so Carney could provide continuity following the UK’s exit from the European Union, which takes place on 29 March 2019.

However, a Treasury spokesperson denied the story.

Carney has already extended his term once at the Bank in a move to ensure continuity through the Brexit negotiations.

He had originally only intended to remain for five years after joining in 2013, but announced plans to stay an extra year four months after the Brexit Referendum in June 2016.

BoE deputy governors Ben Broadbent, Dave Ramsden and Jon Cunliffe are among the favourites to replace Carney, along with Financial Conduct Authority CEO Andrew Bailey.

In May, the governor warned economists about the dangers of a “disorderly Brexit”, adding monetary policy could be placed on a different path if the transition is not “smooth”.

In August, the Bank’s Monetary Policy Committee unanimously voted to hike interest rates by 25 basis points to 0.75%, the highest level in almost a decade and its first rise since November 2017.

Silvia Dall’Angelo, senior economist at Hermes Investment Management, commented: “It would be ideal if Carney decided to remain at the helm of the BoE for longer.

“It would provide continuity in the approach to monetary policy, shoring up business and consumer sentiment during the Brexit process and potentially allowing for a smoother transition.

“Reports he was asked to stay on until 2020 suggest there is broad-based awareness that continuity is needed at such a crucial juncture for the country.

“That said it is unclear whether the rock star governor is willing to accept what looks like an unpalatable offer.

“As the chances of a hard Brexit are “uncomfortably high”, risks that his otherwise stellar reputation gets smeared in a potentially disruptive process, are also elevated.”

Source: Professional Adviser

home ownership Bank of Mum and Dad
Marketing No Comments

Home ownership doesn’t have to be a distant dream for young people

WE heard headlines recently about house prices in Northern Ireland having fallen in the second quarter of this year. Good news for affordability and first time buyers? In short, unfortunately not.

When we look beneath the headlines, official figures show house prices here continued to rise by more than four percent on an annualised basis. In Q2, we also see that the kind of property first time buyers and those on lower incomes are likely to buy actually continued to see an increase in prices, or were broadly flat. It was only detached properties that recorded a significant fall in prices in the quarter.

The media reaction to rising prices is usually positive. For a house builder and for 66 percent of people lucky enough to own their homes, I guess it is.

But what I think is telling from much of this commentary is a world view that sees property as an investment vehicle rather than a basic need. House prices rising at well above the rate of inflation, with weak economic growth, stagnant wages and increasing interest rates isn’t good news if you are a young person looking for your first home. For you, it feels like that home ownership is getting further away or is simply unattainable.

Many people aspire to home ownership because of the advantages it brings, but more fundamentally people want a home. Somewhere that is affordable, secure, provides modern standards of accommodation and is convenient.

Other recent data which is less publicised, points to the lack of options for young people on low and moderate incomes. Average private rents in Northern Ireland have now risen to £650 per month and over the last 12 months have risen by 4.3 percent – the highest increase in the UK.

A mortgage will cost around £100 a month less on a typical first time buyer property than the current average rent. The longer-term outlook in the private rented sector looks challenging with UK rents expected to climb by 15 percent over the next five years. The cause of the increase in rents is a lack of supply, caused at least in part by small private landlords leaving the market due to tax changes.

This was the intention of the tax changes as the Conservative government saw private landlords competing with first-time buyers. It was intended to support home ownership, but instead has made private renting unaffordable for an increasing number of people. The private rented sector is also increasingly carrying the burden of the lack of social housing. Recent Housing Executive research shows that over 50 percent of people in private rented properties are in receipt of Housing Benefit and 81 percent of those people say that Housing Benefit did not cover the full cost of the rent.

So why do people rent privately if home ownership or indeed social housing is so much more affordable and secure?

The average annual pay of a first time buyer applying to Co-Ownership is just over £20,000, which equates to take home pay of about £1,400 a month. Paying an average rent on that level of income is clearly not affordable even if it is what many are forced to do. But there are few other options available. Social housing is not an option because you are regarded as being adequately housed. Home ownership is probably not an option because you do not have a deposit and because debt and insecure employment mean you cannot get a mortgage. Banks are also rightfully very careful these days that the mortgage payments will not place undue stress on people’s finances. So the private rented sector or staying with friends or family are often the only options.

Clearly part of the solution is building more social housing for a wider range of people. We need to support people into affordable home ownership through building more homes and providing a helping hand. But we also need to focus on increasing the supply of affordable, high-quality rented properties through the private sector. This is something successfully done in many European countries, but which has been given little priority by government here.

Source: Irish News

rental demand
Marketing No Comments

Rental demand rises as supply falls

July rental demand reached its highest level this year – as there were 79 prospective tenants per branch, ARLA Propertymark research shows.

However the supply of available properties moved in the opposite direction, falling from 191 in June to 184 last month.

David Cox, chief executive of ARLA Propertymark, said: “Buy-to-let investors are being pushed out of the market by increasing costs and continued regulatory change, and new landlords are being deterred from entering.

“Last month, an average of four landlords took their properties off the market per branch, up from three this time last year – and as supply falls, competition among tenants increases, which pushes up rent costs.

“Almost a third saw their rents rise last month, and although this figure was down from June, it’s still far too high.

“To put tenants back in the driving seat, we need more homes available to rent, and the only way this will be achieved is if the government makes the market more attractive for buy-to-let investors.”

In July 31% of tenants saw a rental increase, down from 35% in June.

The last time there were this many tenants per branch was in September 2017.

Source: Mortgage Introducer

approvals
Marketing No Comments

House purchase approvals slide from five-month high

The value of mortgage lending rose in July but fewer home purchase loans were approved, data suggests. It comes after mortgage approvals for house purchase hit a five-month high in June.

Lending data from banking trade body UK Finance shows that the number of mortgage approvals for house purchase fell 0.6% annually to 43,976 during the month, although the number of remortgages rose 2.8% to 28,294.

Actual mortgage lending values were up 7.6% annually to £24.6 bn.

Commenting on the figures, Paul Smith, chief executive of haart estate agents, said branch activity is being driven by first-time buyers and called for more support for landlords.

He said: “Conditions are still ripe for further growth in the lending market this year.

“The UK is currently experiencing the highest level of employment in decades, mortgages remain readily available, and rates are still historically low, despite the recent base rate rise.

“On the ground, activity is looking positive – our branches have seen a 10% increase in transactions on the year. This surge of activity is largely being driven by first-time buyers who are continuing to take advantage of their Stamp Duty cut.

“However, landlords are still feeling the pinch with 12% fewer landlords buying property than the same time last year.

“The buy-to-let sector is a fundamental part of the UK property market, and with fewer landlords, we are seeing rents rise. The Government must stop penalising those who are willing to invest in the rental market and stop its needless crackdown on the sector.”

Source: Property Industry Eye

‘normal’
Marketing No Comments

Most Landlords Surprisingly ‘Normal’ According To Research

Two-thirds of private landlords have what is classed as ‘normal’ jobs, renting out property to supplement their main income.

New research from online letting agent MakeUrMove found that the most common occupations for landlords are jobs in IT, teaching and accountancy. Surprisingly, just 5 per cent of buy to let investors are full time landlords who own five properties or more, which suggests that very few landlords profit from large portfolios.

Although many landlords are in the business through choice, the number of accidental landlords has risen significantly in recent years. The research found that a mere 18 per cent of landlords became landlords through intending to create a property investment business. 16 per cent of landlords let a property that they inherited and 22 per cent became landlords through a range of circumstances, such as being unable to sell a home.

The fact that more than half of landlords own just one property refutes the conception that all landlords are wealthy.

Managing director of MakeUrMove, Alexandra Morris, said: ‘These figures shed some light on what British landlords really look like. The reality is that wealthy, multi-property owning landlords are quite rare. Most landlords are ordinary people working in normal jobs who are renting out a property to try and save for their retirement or to supplement their main income. With 53 per cent of landlords owning one single property, it’s clear that most landlords are not living off a portfolio of properties. They work as electricians, taxi drivers, hairdressers or social workers – they are just normal people who want to maintain healthy, stress-free relationships with their tenants.’

She continued: ‘We’ve found that a good number of landlords fell into renting their property through unforeseen circumstances such as inheriting a property or struggling to sell their own house. Many of these landlords start on a consent to let mortgages and later become buy to let mortgage holders, having a mortgage on the property means they are forced to pass on the costs to their tenants.’

Source: Residential Landlord

rental property
Marketing No Comments

Supply of rental property continues to fall

Despite rising demand, housing levels in Britain’s private rented sector are dwindling, highlighting the need for more investment in purpose-built rental property for the country’s growing number of tenants.

Summary:

  • Up to 4,000 traditional buy-to-let rental properties are being sold each month by private landlords
  • New taxes introduced to curb buy-to-let investment are forcing more second property owners to sell due to rising costs
  • At a time when more people are renting their homes, it is imperative that greater levels of investment is put into the purpose-built rental sector

The gap between supply and demand levels of UK rental property continues to widen.

Close to 4,000 traditional buy-to-let rental properties are being sold in the UK each month, according to the latest report from the Ministry of Housing. In total, supply fell by 46,000 properties in 2017, the first recorded decline in rental homes in the country for 18 years.

The reduction in the availability of buy-to-let homes, often older properties on the outskirts of city centres originally intended for owner-occupiers, comes at a time when private landlords are being faced with increasing costs. Two years ago, a series of new tax measures, including a 3% rise in stamp duty on buy-to-let purchases, came into effect, decreasing profit levels.

As a result, it’s prompted many landlords to leave the market. Recent figures from UK Finance highlight a 19% fall in new mortgages approved for buy-to-let homes in the UK.

These findings back up those published earlier in August 2018 from the Royal Institute of Chartered Surveyors, who believe that this falling supply at a time when the demand for rental accommodation continues to rise will drive rental prices up 15% by 2023.

Increased taxation aims to shift the focus away from the outdated buy-to-let sector and grow investment in the purpose-built rental sector. These homes, located in prime city centre locations with the best facilities, are the properties that modern tenants will pay premiums to access.

Source: Select Property

Brexit
Marketing No Comments

Bill Jamieson: Continent counts the cost of ‘no-deal’ Brexit

Business pressure is growing on the UK to reach a deal with the EU on Brexit. From farmers to manufacturers, healthcare companies to banks and financial companies and SMEs to the behemoths of the CBI, the clamour is growing for the UK government to avoid a “no deal” outcome. All this is unfolding against the background of a sluggish performance by the UK economy and concerns over the lack of economic momentum –much of this blamed on the uncertainty caused by the relentless, debilitating lack of progress in securing a withdrawal deal.

Now Chancellor Philip Hammond has further racked up the pressure by repeating the findings of the Treasury’s provisional Brexit analysis earlier this year that a no-deal Brexit could mean a 7.7 per cent hit to GDP over the next 15 years, compared with the “status quo baseline”. He said that under a no-deal scenario chemicals, food and drink, clothing, manufacturing, cars and retail would be the sectors “most affected negatively in the long run”.

Let’s set aside the row over whether this is just a Remain-supporting chancellor regurgitating the earlier warnings of “Project Fear” which failed to materialise. We have much to be concerned about. And it adds to the sense that Michel Barnier and the European Commission negotiating team have nothing to lose by holding out and pushing the UK to the brink – and beyond. But we should also look more closely at what is at stake within the EU itself. For Brussels is under equal and equivalent pressure to agree a withdrawal deal.

The Eurozone economies, too, need to secure an agreement that minimises disruption to continental trade with the UK and wider negative effects. It’s generally assumed that the UK is the economic laggard, and that the EU, underpinned by the Single Market and the customs union, is enjoying a superior rate of economic growth and rising exports. But the latest figures suggest otherwise.

Eurozone economic growth slowed further in the second quarter of this year. Eurostat estimates that gross domestic product in the 19 countries sharing the euro, far from growing faster than the UK, is trailing our performance. It is grew by 0.3 per cent quarter-on-quarter in the April-June period, not only below analysts’ expectations but also slightly behind the 0.4 per cent growth recorded for the UK over this period.

The UK’s improvement on the first three months of the year has been attributed to the spell of warmer weather – though the Eurozone countries also enjoyed more clement conditions after the freeze of the opening months. Bert Colijn, a senior economist at ING Bank, said: “Trade uncertainty seems to have already had a significant effect on the Eurozone economy in Q2…

With lower confidence among businesses and consumers, concerns have likely translated into somewhat weaker domestic demand growth. In an economy in which capacity constraints abound and credit conditions remain favourable, confidence is the likely factor keeping investment down.” The Eurozone’s second quarter slowdown follows a sharp deceleration in the first three months of the year.

The combination of a slower global recovery and strong euro caused exports to plunge in the three months to March, with GDP growth falling from 0.7 per cent in the fourth quarter of 2107 to 0.4 per cent. Industrial production shrank in April and economic sentiment fell throughout the quarter. A stronger euro has taken a bite out of export growth, while rising inflation has been weighing on household spending – all too familiar here.

The euro area is also having to contend with political uncertainties – a fragile populist coalition in Italy, continuing turbulence in Spain, evidence of growing disenchantment with President Emmanuel Macron in France, while in Germany, Chancellor Angela Merkel has been under pressure from her coalition partners. Meanwhile, tensions with the United States, the Eurozone’s largest trading partner, are high following tit-for-tat tariffs implemented in June.

According to FocusEconomics, five Euro economies, including major players France and Germany, have had their growth prospects cut. Cyprus, Estonia, Greece and Luxembourg were the only economies to see higher GDP growth forecasts, while Belgium, France and Italy will be the slowest growing – all expanding below two per cent. Germany is forecast to grow by 2.1 per cent this year.

Latest data from France suggests the economy expanded modestly in the second quarter, while industrial production contracted for the third consecutive month in May – the fourth monthly decline so far this year. In addition, consumer confidence dropped to a near two-year low in June amid mounting unemployment fears. Consumers are growing more fearful that the economic recovery is running out of steam.

In Italy recent industrial output figures in April and May, and the average of PMI readings throughout the quarter point to a slowdown. Consumer spending also seems to have cooled, as retail sales contracted heavily in April and rebounded timidly the following month. If, as seems likely, world trade continues to slow as US tariffs continue to bite and President Donald Trump threatens more, the Eurozone’s leading companies will be anxious not to have their prospects further damaged by a “no deal” UK exit with all that this means for companies exporting to the UK.

Exports from the EU to the UK totalled £341 billion last year, with a surplus vis-à-vis the UK of £67bn. While the UK enjoyed a £28bn surplus on trade in services, this was outweighed by a deficit of £95bn in goods. Two EU export sectors look particularly exposed: cars and food products. German car makers have long warned that Brexit would hit their exports to Britain and disrupt international supply chains.

About a fifth of all cars produced in Germany are exported to the UK, making it the single biggest destination by volume. As for food and non-alcoholic drink imports from the EU, these are running at £24bn a year – trade which EU suppliers will be acutely anxious to protect. As the clock ticks on, I see intensifying pressure from business on both sides for a deal to be reached – and preferably with the minimum of delay.

Source: Scotsman

Marketing No Comments

Are Londoners really ditching London property market?

The London property market is the crown on top of the UK market and has been for many years. London itself has one of the most diversified cultural spreads and while Brexit has caused concerns, are things as bad as some people are suggesting? A report by Hamptons International highlighted the number of people selling their London properties and reinvesting in the Midlands and the North. While these figures may have increased significantly in recent years, are Londoners really ditching the London property market?

BASIC STATISTICS

The report by Hamptons International confirms that the number of people relocating to the Midlands or North of England has trebled since 2008. In 2008, one in 17 selling their London properties reinvested in the North or Midlands while the figure now stands at one in five. We also know that the first six months of 2018 saw 30,280 Londoners selling their property to locate outside of the capital – an increase of 16% on the previous year. However, when you consider the population of London is around 8.8 million this is only a tiny percentage of London property owners.

VALUE FOR MONEY

The price differential between London and the Midlands/North of England has been well documented over the years. Indeed figures suggest that those quitting London have spending power of over £420,000 when looking for a new home. Average spending for London leavers in the North and Midlands is as follows:

• North West (7% of London leavers) average spend £149,530
• East Midlands (6% of London leavers) average spend of £167,790
• West Midlands (5% of London leavers) average spend of £181,220

To give some balance, the North East of England only attracted 1% of London leavers with an average spend of £132,730. It is also worth noting that the South and East of England still attract the highest percentage of London leavers:

• South East (38% of London leavers) average spend of £575,010
• East of England (30% of London leavers) average spend of £394,480
• South West (9% of London leavers) average spend of £544,580

While there are various issues to take into consideration, such as employment prospects, these figures reflect the fact that London property owners would appear to be seeking better value for money. Evidence suggests that some of those moving to the South and East of England are commuting into London and even securing additional accommodation through the week.

NEVER UNDERESTIMATE LONDON

It is fair to say that Brexit is being used as a reason to “rebalance” London property market prices compared to the rest of the UK. The difference in property values between London and the rest of the UK is well documented as is the perceived value for money. However, this does not take into account the unique characteristics of London.

So far, the expected evacuation of London by some of the leading business lights has failed to materialise to forecast nightmare levels. Yes, Brexit does create a number of challenges but the London business market, and the financial markets in particular, have a history of adapting to change. It would be unfortunate if the previously tight Brexit deadlines are extended, causing further confusion, but those who write-off the London property market do so at their own risk. The number of people leaving the capital is increasing but considered against the overall population of London there is nothing to worry about, yet.

Source: Property Forum