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Completed remortgages up 7.1% year-on-year

The mortgage market has seen a pre-summer boost as there were 36,000 new homeowner remortgages completed in the month, some 7.1% more year-on-year, UK Finance’s Mortgage Trends Update has found.

The £6.3bn of remortgaging in the month was 6.8% more year-on-year. There were 32,200 new first-time buyer mortgages completed in the month, some 8.1% more than in the same month a year earlier.

The £5.4bn of new lending in the month was 12.5% more year-on-year and the average first-time buyer is 30 and has a gross household income of £42,000.

Steve Seal, director of sales and marketing, Bluestone Mortgages, said: “Whilst it’s good to see continued first-time buyer activity, these results do not reflect the growing pool of borrowers who struggle to access funding.

“Contractors, entrepreneurs or self-employed workers with complex financial backgrounds usually struggle to meet the vanilla criteria of high-street lenders – even if they have a reliable history of repayments.

“The specialist lending market has a significant role to play in closing this funding gap; providing a service that understands an individual’s circumstances and supporting borrowers in their homeownership aspirations.”

There were 31,100 new homemover mortgages completed in the month, some 4.4% more than in the same month a year earlier.

The £6.6bn of new lending in the month was 4.8% more year-on-year and the average homemover is 39 and has a gross household income of £55,000.

There were 5,500 new buy-to-let home purchase mortgages completed in the month, some 9.8% fewer than in the same month a year earlier. By value this was £0.7bn of lending in the month, 22.2% down year-on-year.

There were 14,600 new buy-to-let remortgages completed in the month, some 15% more than in the same month a year earlier. By value this was £2.3bn of lending in the month, 21.1% more year-on-year.

Matt Andrews, managing director of mortgages at Masthaven, said: “Growing first-time buyer figures represent a huge bright spot in mortgage lending, with figures even outstripping homemovers.

“Likely to be attracted by good rates, the various government backed schemes and the emergence of challenger banks and specialist lenders who provide alterative options to the big high street names, the choice for first-time buyers has never been so good.

“As expected, remortgaging continues to rise, largely due to the anticipated Bank of England rate rise.

“While uncertainty remains around timescales, brokers need to see this as an opportunity to reengage with their back-books.

“The same opportunity can be seen in the buy-to-let space – much work needs to be done here to attract new and veteran landlords, with specialist lenders leading the way in providing flexible and innovative products.”

Jackie Bennett, director of mortgages at UK Finance, said: “The mortgage market is seeing a pre-summer boost, driven by a rise in the number of first-time buyers and strong remortgaging activity.

“It is also particularly encouraging to see an increase in homemovers, after a period of relative sluggishness in this important segment of the market.

“However, affordability remains a challenge for some prospective buyers and this is reflected by a gradual increase in loan to income multiples.

“Meanwhile purchases in the buy-to-let market continue to be constrained by recent regulatory and tax changes, the full impact of which have yet to be fully felt.”

Source: Mortgage Introducer

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Bank of England urged to freeze house prices for five years

The Bank of England should freeze house prices for five years and set a separate new target for house price inflation, the Institute for Public Policy Research (IPPR) has suggested.

The zero target could mean house prices falling by around 10% in real terms as other prices and wages continue to rise, and would make homes more affordable.

Only after expectations of constantly rising house prices have been “reset” would they be allowed to increase again – but no faster than the general consumer price inflation target of 2%. This means no further growth in the real value of people’s homes.

Mark Hayward, NAEA Propertymark, chief executive, said: “Excessive house price growth is certainly not something we want to see, but homebuyers make purchases on the basis of capital appreciation and the belief that their investment will be protected and enhanced.

“We encourage all measures to help first-time buyers get onto the housing ladder, but with property transactions at an already low level, this sort of tampering could have unintended consequences.”

IPPR’s call came as part of a wider plan to rebalance the UK economy away from finance, and reduce the risk of another financial crisis, published as a discussion paper.

It envisages that the Treasury would task the Financial Policy Committee of the Bank of England with meeting a target for annual house price inflation.

The Bank would restrict mortgage lending by insisting on higher initial deposits, stricter ceilings on the ratio of loans to income, and other steps to control credit in the property markets. It would also be entitled to ask the Treasury to step up investment in house building.

The IPPR paper argued that the financial sector’s dominance since the 1980s has contributed to a strong pound, which has hurt exporters, particularly the manufacturing sector.

It said the UK financial sector has attracted surplus capital from other countries and channelled it into loans to British consumers and to speculative investors – including as mortgage lending.

It also concluded that speculation over house prices and related securities contributed to their 10-fold increase between 1980 and 2008, and has increased the economy’s vulnerability to financial crises.

Grace Blakeley, IPPR research fellow and author of the discussion paper, said: “Since the 1980s, the UK’s business model has rested on attracting capital from the rest of the world, which it has channelled into debt for UK consumers.

“The 2008 crisis proved that this is unsustainable. We need to move towards a more sustainable growth model, one built on production and investment rather than debt and speculation.

“To do this, we must break the cycle of ever-rising house prices driving property speculation, crowding out investment in the real economy.

“Over the longer term, we should build up our manufacturing and knowledge-based industries and reduce the significance of our finance sector to the economy, including by curbing its worst speculative excesses.

“We argue for sweeping reforms to taxation of the financial sector, including the introduction of a financial transactions tax on currency trading, combined with an industrial strategy focused on boosting the UK’s exporting sectors.”

Source: Mortgage Introducer

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Britain must stop flipping housing ministers

Before Brexit took centre stage, the most urgent long-term problem facing the government was the housing crisis.

Whether we were to go down the socialist route of government building programmes or the free-market route of minimum intervention and letting prices fall in line with earnings, it badly needed addressing. Bold decisions needed to be made and firm action taken.

Theresa May’s solution? Four different housing ministers in two years.

Today we consider the housing market, some of the largest companies in the sector – and we talk philosophy.

We can’t blame the EU for the ridiculous state of our housing market

Having a philosophy is important. Your philosophy guides you. When you are confronted with a decision, the ramifications of which are beyond your knowledge or experience, your philosophy is what will help you make the right choice.

You’ll often hear investors talk about “having a system”. Whether that system is fundamental analysis and balance-sheet study or momentum trading and trend-following doesn’t really matter.

The important thing is to have a system. Then, when you’re confronted with a decision – and all investing is decision-making – then you have your system to be your guide.

When you look at other politicians, whether of the left or right – it might be Jeremy Corbyn at one extreme or it might be Jacob Rees-Mogg at another – for the most part there is a clear political philosophy which guides them. It might be a philosophy with which you disagree, but you can’t deny there is a philosophy. And thus their attitudes and decisions are, for the most part, predictable.

Which brings me to Theresa May. I’m not sure she has a philosophy. In fact, I’ll go as far as to say that she has got to where she has by not having a philosophy. She’s too “clever” to commit to any particular point of view, because that way it can’t be held against her at a later stage. Her decisions seem to be born out of political expediency more than anything else. She might be smart tactically, but she lacks an overall strategy.

And so we have this wishy-washy leader, who promised strength and stability and has delivered neither. “Brexit means Brexit”, she said to get elected, but, judging by the amount of resignations this week, Brexit means different things to different people.

Before Brexit took over, perhaps the greatest long-term issue facing the government was the housing crisis: an entire generation has been priced out of the housing market. The cure is lower prices, but house prices cannot be allowed to fall because another generation is dependent on their staying high.

All sorts of cheap fixes have been attempted – from help-to-buy, to fiddling with planning laws, to attacking buy-to-let through tax changes, through to extortionate stamp duty at the higher end of the market – but none of these deals with the fundamental problems.

Lots of easy money entered the market via loose lending. This pushed up prices. House prices were not included in inflation measures, and so their rise went unchecked by higher interest rates. As a result, owning property was the only means by which normal people could keep up with the rampant money supply growth which took place in the 1990s and 2000s, and so it turned into a speculative asset.

Newly created money was pouring into a market that couldn’t then expand, because planning laws restricted the amount of new supply. A house that might cost less than £50,000 to build cost over half a million, simply because the land had planning permission.

When 2008 came and there was the opportunity to let the market correct, both the Labour government and the coalition which followed decided to intervene and protect.

This is a huge and on-going problem that has badly needed addressing for many, many years. How can you hope to address it – to identify the cures and work towards the solutions – when you have eight different housing ministers in eight years?

This week brought us May’s fourth housing minister in two years! If ever there was an illustration of her lack of long-term strategy, it is the circus that this post has become. How can anything meaningful happen, if the man in charge keeps changing? We badly need some continuity.

Kit Malthouse looks like a very nice man and seems to be genuinely delighted at the opportunity. I wish him all the best. And many of the problems in the housing market – especially those relating to the money system  – are beyond his control.

But, even so, I hope he has been appointed because he understands some of the problems and has an idea of how to fix them. If this is just another wheeze to put an ally in a key position, Lord help us.

The UK housing market looks ugly, but not catastrophic

Anyway, I set out to write this article about the state of the housing market. I got side-tracked. Here’s my tuppence worth.

Whereas once upon a time all boats floated with the tide – all you had to be was long housing – I would say now, this is a stock-pickers’ market.

The housing market is not dead; there are opportunities to be had if you pick the right property in the right place, for example (and I’m not advocating speculating in property by the way). London looks terrible, particularly with new-builds above £1.5m where higher stamp duty rates are taking their toll. But I’m more bullish about other British cities where there is genuine value: Manchester and Birmingham, for example.

Turning to the companies, estate agent Foxtons (LSE: FOXT) – effectively, a leveraged play on London – keeps on falling. It’s now at all-time lows of 50p. It won’t recover until transaction levels in London pick up, which won’t happen because of stamp duty and still excessively high prices.

Countrywide (LSE:CWD), which owns estate agency brands such as Hamptons, John D Wood and Gascoigne-Pees, is also close to all-time lows at 50p. It fell by 25% a week or so ago, after it announced a rights issue to raise £100m to cover some of its £190m debt pile. It soon had an offer from Emoov, I understand, to merge, so it’s had a minor rally since.

Even Purplebricks (LSE: PURP) is down by more than 20% this year, so the failure of Foxtons and Countrywide is not just a failure of the traditional estate agent model. New tech is suffering too.

The builders also look weak. While Persimmon (LSE: PSN), the best performer, is flat on the year, the likes of Barratt (LSE: BDEV), Taylor Wimpey (LSE: TW) and Berkeley Group (LSE: BKG) are all in bear markets, which are starting to look pretty entrenched.

It’s all symptomatic of a market that is not functioning properly. The builders benefitted from help-to-buy, but the agents didn’t – that’s why they’ve done worse. But now the whole market looks wobbly.

This is not a Brexit problem. We set our own housing policy, not the EU. We can’t blame Brussels. Investors are walking away. Who can blame them? With no coherent policy or direction, would you risk capital in such a strongly valued market?

Of course, these companies – the builders and the agents – are not the same as buying a house itself. House prices on the whole are holding up (London aside – although even there they are not in free fall). But the builders and the agents are proxies for the greater health of the market.

It’s worth noting that one other proxy – Rightmove (LSE: RMV) – is having a storming 2018, up by more than 10%. Apparently more people start looking at properties after England score. Bizarre, I know.

Anyway, let’s hope there’s plenty of that this evening. Good luck to England – and good luck to Kit Malthouse. Let’s hope both he and Gareth Southgate are in the job for many years to come. And let’s hope Malthouse does as good a job.

Source: Money Week

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Asian buyers dominate City of London property market

More than half of all commercial property purchases in the City of London come from Asian investment, new figures reveal.

While 57 per cent of commercial properties in the Square Mile are bought by Asians, the second-highest investors by continent are the Europeans, buying 14 per cent over the same period of the most recent six quarters, according to data compiled by Datscha UK, a provider of property research intelligence.

Lesley Males, head of research at Datscha UK, told City A.M.: “London is the financial capital of the world. I don’t think that will change with Brexit. The initial fear was there but demand has gone through the roof again.”

Males added: “Asians see the potential in London, with commercial property prices holding values.”

The latest statistics are fresh evidence of a surge in interest from the east for London’s high-end property market, both in terms of residential and commercial buildings.

Last month trophy buildings in the Square Mile were bought up for huge sums, with Ropemaker Place and the UBS headquarters both being purchased for £650m and £1bn respectively.

Talking to City A.M. several weeks ago about the growth in south east Asian investment, commercial property expert Nick Braybrook said: “The market for trophies has been increasing for a few years now, and we have reached a point where the market is dominated by private investors, principally from Hong Kong. People are not quite aware of the dominance of south east Asian buyers, who make up about 70 per cent of the market.”

Source: City A.M.

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Sharp fall in value of retail property as high street woes worsen

The UK’s retail property sector has suffered one of its biggest monthly falls in value for over six years amid disappearing footfall on the high street.

The value of commercial property in the retail sector tumbled 0.8 per cent during June, a drop that is equal to the five months before it combined. It was the biggest fall since May 2012, excluding July 2016 (which was seen as an exceptional month after the EU referendum.)

Rents among retail commercial property also fell 0.2 per cent, although as a whole the value of commercial property in the UK rose in the second quarter of the year after a strong performance within the industrial sector, according to the CBRE UK monthly index.

Threats to the value of commercial property have grown as potential insolvencies of major high street giants loom, with House of Fraser, Poundworld and Carluccio’s already announcing widespread store closures.

Miles Gibson, head of research at CBRE, told City A.M.: “These figures are noticeable, and possibly even striking because it is quite unusual. The sentiment in the market is that values are falling in the retail sector.”

Gibson added: “We have seen a Brexit inflation effect – price inflation has been higher than wage increases which means consumers have less in their pocket, leading to a slowdown in retail spending which affects rents paid by retailers on property.”

The value of commercial property outside of London outpaced growth in the capital, with London enjoying a 0.2 per cent rise compared with a 0.6 per cent boost outside of the M25.

Source: City A.M.

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Peer-to-peer property loans platform Lendy gains authorisation from City watchdog

Property funding platform Lendy has gained authorisation from the Financial Conduct Authority, in a move which will pave the way for regulated products.

The authorisation could open the way for products such as an innovative finance individual savings account (Isa), which allows savers Britons to earn tax-free income from peer-to-peer lending.

Lendy, which launched in 2012, provides bridging and development finance to property firms, with loans sourced from a peer-to-peer platform.

The firm says is has so far facilitated more than £400m in lending, with 21,500 registered investors. The firm will continue its new investments alongside new investment products, its said.

Liam Brooke, Lendy chief executive, said the “long and sometimes challenging journey” to authorisation has “helped us mature into a stronger and more robust business”.

“This is a validation of our efforts to move from a young start-up to an established mainstream lender, with the ability to disrupt the banking model for the benefit of clients, and design new investment products and services.”

Peer-to-peer lending has boomed in recent years as online platforms have reduced the cost of accessing finance from multiple retail investors, while investors have also been attracted by the relatively high yields on offer particularly in the property space.

Brooke added that he believes Lendy has helped fund property developments which “wouldn’t have been delivered otherwise”.

He said: “This kind of finance is critical to tackling the UK’s housing shortfall, with house building now at its lowest rate since the second world war.”

Source: City A.M.

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Help for housebuilders but a kicking for buy-to-letters

Housebuilders got a fairly clean bill of health from the latest government-sponsored review of their industry and more good news on state support is coming, from what I hear. But spare a thought for thousands of ‘mom and pop’ buy-to-letters, who look set for another kicking from ministers.

Conservative grandee Sir Oliver Letwin’s review into what he refers to as the ‘stately’ build-out rates of major housebuilders dismisses the industry’s bête noir – the widespread and long-held allegation that they ‘sit on their land banks’.

They don’t, he concludes, in the thinnish 30-page draft of his ongoing review: once they get full planning permission the diggers move in. The charge that their profitability depends on the appreciation of undeveloped land has always been a red herring, as I’ve previously argued.

But he does twig that their earnings are underpinned by “the sale of housing… by building only at the ‘market absorption rate’ for their products”.This revelation puts him in contention for my second annual ‘No S*** Sherlock Research Award’.

Since the year dot, most volume developers have built as fast as they can to maximise sales volumes, but no faster than would undermine local pricing – the absorption rate. About 0.7 homes per site per week has been the rule of thumb for most firms across most cycles.

Kicking in the long grass

The next stage of Letwin’s ruminations – to be published ahead of November’s Budget – will be to recommend how to increase the build-out rate. As a taster, he suggests builders provide a much greater variety of size, design, tenure and end market: “If housebuilders were to offer more variety of homes and in more distinct settings, then overall build-out rates could be substantially accelerated.”

I’m not so sure about that: the last time government got prescriptive about what builders built on their sites, insisting during the ‘noughties’ on providing three-storey ‘town houses’, most struggled to sell the things. Expect much kicking into the long grass…

Of much more consequence to housebuilders is the future of the government’s Help to Buy scheme. There has been much speculation, not least in this column, about whether the scheme, which offers interest-free government ‘equity loans’ to buy newly built homes, will be extended beyond its current 2021 cut-off. It now supports upwards of half of all private homes sold by some housebuilders and arguably a greater proportion of their profits.

Industry sources with the government’s ear tell me they are convinced it will be extended, albeit with some cosmetic tweaks (perhaps restricting it to first-time buyers or reducing the limit on maximum household salaries to below, say, £100,000). Expect an announcement in the Budget, I’m told. The scheme’s not without its critics, but there has been a mounting view in Whitehall that it is ‘too big to fail’.

In contrast, the government views the legion of buy-to-let entrepreneurs as ‘too small to save’. They’ve been battered by stamp duty hikes, even more damaging changes to mortgage interest relief and more red tape.

Now new housing secretary James Brokenshire is proposing that landlords should offer minimum three-year contracts, as opposed to the six- to 12-month norm. But tenants would be free to leave earlier. Not surprisingly, the National Landlords Association greeted this with apoplexy – but to no avail, I suspect.

A Conservative councillor and despairing buy-to-letter last year confided that a former housing minister told him: “We don’t want ‘mom and pops’ running the housing market.”

Source: Property Week

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UK economy brightens as Bank of England nears rate decision

Britain’s economy picked up a bit of speed in May after slowing in early 2018, according to official figures that will give the Bank of England more confidence about raising interest rates next month for only the second time in over a decade.

A new monthly reading of gross domestic product showed the world’s fifth-biggest economy grew by 0.3 percent in May from April, the strongest performance since November and up from growth of 0.2 percent a month earlier.

The figure was in line with the forecast in a Reuters poll of economists, but sterling fell. Growth came mostly from the dominant services sector while factory output disappointed, the Office for National Statistics said.

“There is good news and bad news in this release, but on balance the Bank of England will likely focus on the good,” HSBC economist Elizabeth Martins said.

The good weather that helped spending in May continued into June and July, promising a pickup in growth. A British Retail Consortium survey earlier on Tuesday also showed a boost to sales from the soccer World Cup.

“Whether this pace of growth is sustainable, once the good weather and World Cup end, is another question,” Martins said.

Governor Mark Carney and other BoE officials opted not to raise rates in May because of the winter slowdown and decided to wait to be sure cold weather was to blame, not broader problems ahead of Britain’s exit from the European Union next year.

 However, Prime Minister Theresa May’s attempts to keep a grip on the ruling Conservative Party, which is deeply split over Brexit, could yet affect confidence among employers, a potential new hurdle for the BoE.

In the three months to May, Britain’s economy grew by 0.2 percent after stagnating in the three months to April and was 1.5 percent bigger than in May last year, the ONS said.

Bolstering hopes of momentum returning to the economy, GDP looks set to grow by 0.4 percent and 0.5 percent in the second and third quarters, the National Institute of Economic and Social Research, a think tank, said.

The BoE is expected to raise rates by 25 basis points to 0.75 percent on Aug. 2, according to a Reuters poll of economists. It raised rates in November for the first time since before the financial crisis and has signaled it will raise them gradually over the next three years.

SERVICES-LED GROWTH

The ONS said the warm weather and spending around the royal wedding of Prince Harry and Meghan Markle helped the economy.

Britain’s services industry grew 0.3 percent month-on-month in May, slowing from an upwardly revised 0.4 percent in April.

Over the three months to May, growth in services — which makes up 80 percent of economic output — picked up speed to 0.4 percent from 0.2 percent.

But industrial output fell unexpectedly in May by 0.4 percent on the month, hit by the shutdown of the Sullom Voe oil and gas terminal.

Manufacturing growth also disappointed, rising only 0.4 percent on the month — less than half the growth rate expected in the Reuters poll.

May capped the weakest three months for British factories since December 2012.

There was better news from construction, which had struggled in the bad weather of early 2018. Output jumped 2.9 percent in May, far exceeding expectations and marking the first growth in the sector since December.

Separate data showed Britain’s deficit in goods trade during May was broadly unchanged from April at 12.362 billion pounds ($16.37 billion).

Source: UK Reuters

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Manchester And Liverpool Top Cities For Property Investments

Manchester and Liverpool have been marked out as key northern cities to invest in when building up a property portfolio.

Manchester topped the list of best UK cities within which to be a landlord.

GoCompare recently launched an interactive tool which tells you the best areas to invest in. It includes data on average property prices, average yields and rental price growth. It also assesses the number of people in the city below the age of 35 as this group are considered prime tenants for landlords to focus on.

Following closely behind Manchester was London. Although rents are higher in the capital, yields may be slightly lower because of the initial purchase cost of properties in the capital, which is a factor to consider. Nottingham and Liverpool came in third and fourth place respectively in the list of cities in which to invest.

Manchester offered the highest average yield in the UK of 5.55 per cent with an annual rental growth of 5.76 per cent and a total of 5,545 properties available to rent.

London boasts 50,728 properties to rent, but has a somewhat smaller average yield of 3.05 per cent and annual rental price ‘growth’ is actually in decline at -1.12 per cent.

Stoke-on-Trent was discovered to be the least expensive area to buy with an average property purchase price of just £106,000. In contrast, Oxford offered much higher average property prices of £411,000. In the capital, the average price is £484,000.

In terms of annual rental growth, Manchester also came top at 5.76 per cent, followed by Leicester at 5.3 per cent and Cardiff at 5 per cent. Manchester also offered yields of 5.55 per cent, whilst Sunderland came in second place offering 5.37 per cent in yields. Liverpool also boasted sizable yields of 5.05 per cent per annum.

Source: Residential Landlord

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Wakefield Buy To Let Property Investors Criticised For Vacant Properties

Buy to let property investors in the private rental sector have been criticised for leaving thousands of vacant properties across Wakefield.

Over 3,300 houses in Wakefield have been vacant for at least one month, according to figures which date back to March. However, the number of derelict properties has fallen. The district no longer has any ‘empty property hotspots’ or single streets with lots of abandoned homes.

Councillor Glenn Burton led a task group on the issue and was ‘pleasantly surprised’ by his findings. Speaking at a scrutiny committee meeting on Monday, he said: ‘There’s been a change over time from having very concentrated areas of Victorian terraced housing, which was in very low demand, particularly in the south-east and Hemsworth. “Having been a problem in the past, it isn’t anymore.’

A mere 0.8 per cent of the city’s overall housing stock is empty. This is in comparison to the national average of 1.8 per cent. Councillor Burton said that this demonstrated the way in which Wakefield was ‘punching above its weight on the issue.’

However, there have been problems reported where due to emotional attachments to properties or a desire to wait until property prices rise, many homes have been left vacant by landlords. A lack of funds to renovate a property is another reason why a landlord might leave it uninhabited.

Councillor David Jones said that rogue property owners who did not adhere to legal guidelines were a contributing factor as they were difficult to trace. He said: ‘A number of these private landlords aren’t registered landlords and so they go off the radar. As a consequence, more pressure needs to be put on this particular type of landlords.’

Councillor Betty Rhodes added that some owners were letting individual rooms out to large groups, causing issues with overcrowding. She said: ‘There was one case in my ward (Wakefield North) where every room in the house had a family put in it. There was just one kitchen and one bathroom and all the families had to share them. For some people, it’s just all about the income. The landlord has thought, ‘I can get another family up there, regardless of the consequences.’ It is an issue.’

The report also commended the council’s action on empty homes in recent years but said the ways landlords with empty homes can be helped should be ‘better promoted.’

Source: Residential Landlord