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London bucks house listings trend in three-year high despite nationwide fall

The number of properties listed on London’s housing market rose to a three-year high in June, despite the UK suffering an overall decline in houses put up for sale, according to new figures from a property supply index.

Nearly 33,000 homes were put on the market in the capital last month, the highest level since the index began in June 2015.

New home sellers in London rose 2.8 per cent in June from May, while supply across the UK as a whole fell 3.8 per cent in its first fall since December of last year.

The figures come after a month in which London’s flagging property market has experienced falling house prices, in a trend that goes against the rest of the UK.

Camden Borough had a steeper increase in listings last month than any other London borough, rising 31 per cent.

Kensington and Chelsea along with Hammersmith and Fulham saw the biggest falls in property listings in June compared with May, falling 9.5 per cent and 8.6 per cent respectively.

London Boroughs with the biggest increases in properties put up for sale
1. Camden – 31.0 per cent

2. Merton – 11.4 per cent

3. Bexley – 9.2 per cent

4. Barking and Dagenham – 9.0 per cent

5. Greenwich – 8.4 per cent

The index, carried out by online estate agency HouseSimple.com, looks at the number of new properties listed by estate agents every month across more than 100 major UK towns and cities.

Sam Mitchell, chief executive of online estate agents HouseSimple.com, said: “Seller activity has picked up noticeably since mid-May, particularly in London, where prices have cooled. Buyers are viewing a lot more properties before they make an offer, and with more sellers listing in the past month, they have more choice.”

Mitchell added: “More than ever, the key for motivated sellers is to price correctly and competitively to attract buyers. It’s important to do your research, to check what properties are selling for on your street and in the nearby area. This is probably not the right market to price high, hoping to squeeze a little more money out of buyers.”

Source: City A.M.

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Sterling rallies as UK services growth builds case for rate rise

The pound rose on Wednesday after a survey showing Britain’s dominant services industry gained momentum last month fuelled expectations of a Bank of England interest rate rise this summer.

After a sluggish start to 2018, the British economy is showing tentative signs of a recovery with surveys this week for the manufacturing, construction and services sectors beating expectations.

That has brought some respite for sterling after weeks of losses caused by worries about whether Britain can secure a deal with the European Union before it leaves the bloc next March.

The IHS Markit/CIPS services Purchasing Managers’ Index (PMI) unexpectedly rose to an eight-month high of 55.1 in June, beating economists’ average forecast in a Reuters poll for it to remain unchanged at 54.0.

The pound rose to $1.3201, a five-day high, from $1.3176 before the data GBP=D3 and away from 2018 lows hit last week of $1.3050.

At 1510 GMT the pound was up 0.3 percent versus the euro at 88.18 pence and heading for its biggest daily gain against the common currency since the European Central Bank signalled on June 14 that any interest rate rise was still distant. EURGBP=D3

“The momentum continues for the British economy, the services PMI data has lifted hopes that the Bank of England will raise rates sooner rather than later,” said Naeem Aslam, chief markets strategist at Think Markets UK.

Markets are pricing in an 88 percent chance of a single 25-basis-point increase by the end of 2018 and a 53-percent chance of an August rate rise.

Last month BoE chief economist Andy Haldane joined two other members of the nine-strong Monetary Policy Committee in calling for a rate rise, and official data was revised to show the first quarter slowdown was less severe than first thought.

The pound has slumped recently because of weakness in the economy, a resurgent dollar and fears that Prime Minister Theresa May will run out of time to agree a deal with the EU on the post-Brexit relationship.

The currency weakened more than 6 percent between April and June, its worst quarter since the 2016 referendum vote to leave the EU.

On Monday it fell despite relatively robust manufacturing survey data as investors worried about a looming a Brexit cabinet meeting later this week.

“Although there is good reason for the BoE to want to further normalise interest rate policy, the chances that a Brexit deal will not be struck in the coming months leans against the risk of a policy tightening,” said analysts at Rabobank in a note to clients.

The note said the pound would drop to $1.28 by the end of the year.

Source: UK Reuters

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London house prices are falling, so here’s what to do if your home is worth less than your mortgage

Less than a year ago, it was all talk of bubbles in the UK housing market. But we all know that what goes up must come down, and the first signs that the market was losing steam came at the start of this year.

The market continues to look skittish, with the most recent figures from Nationwide indicating that annual growth in house prices slumped to a five-year low last month. The building society reported subdued levels of buyer enquiries, and said the supply of properties remains “more of a trickle than a torrent”.

But it’s London that has really felt the squeeze. In fact, rather than a slowdown, the capital saw house prices actually fall, down 1.9 per cent in the second quarter of this year – meaning the average cost of a London property is now £468,845.

This decline is perhaps unsurprising given the euphoria in London property prices over recent years. But it’s also symptomatic of people feeling the pinch, with many would-be homebuyers sitting tight as Brexit-linked uncertainty looms large.

Many first-time buyers will welcome price falls with open arms, helping them move closer to that distant dream of owning a home. But for existing home-owners, it can become a nightmare.

When house prices crash, it can lurch homeowners into something known as negative equity, when your home is worth less than the outstanding amount on your mortgage.

Let’s say you purchased a property for £350,000 with a mortgage of £320,000. If a crash in prices meant your property was only worth £300,000, you would be in negative equity, with a property value that is less than your £320,000 mortgage.

According to property expert Elliot Castle, negative equity is not a phrase many homebuyers will be aware of. And yet, it could soon become a common problem.

Castle, who is the founder of WeBuyAnyHome, warns that fear of a negative equity climate is increasing, particularly with the Brexit storm brewing over the UK.

Problems usually arise when people with negative equity try to move house. Selling a house in negative equity can be impossible for some, as few people have enough savings to pay the difference in price between the value of their home and the mortgage.

But it can also be a struggle for those wishing to remortgage, because a lender is unlikely to let a borrower who is in negative equity switch to a different mortgage deal.

If you find out you’re in negative equity, your options will vary depending on various factors, such as how much negative equity you have and the value of the property you want to buy.

Here are some tips on what do to.

Lending a hand

If you want to sell your home in negative equity, the first thing you should do is speak to your lender.

Hannah Maundrell, editor in chief at Money.co.uk, says your mortgage provider might let you transfer the shortfall to a new property, get alternative finance to cover the difference, or even rent out your home after you’ve moved.

It’s pretty unusual, but a small number of providers even offer special negative equity deals, which allow you to move house without paying off the shortfall on your mortgage (although these often come with extra charges).

“If you need to remortgage, get your lender to explain your options,” says Maundrell. “You may be offered a new mortgage deal, or rolled onto their standard variable rate. Either way, your repayments may rise, so you’ll need to adjust your budget accordingly.”

While there will be a limited number of deals, the personal finance expert says it’s worth speaking to your broker.

Early bird

If you can afford it, the best option is to pay off your mortgage more quickly by tapping into capital. If you make extra repayments, you can chip away at the shortfall over a period of time.

“Mortgage rates are usually higher than savings (for which you also pay tax on interest), so reducing your mortgage with any money you have is a valid option,” says Castle.

However, bear in mind that most lenders have a limit on the amount you can pay off before incurring an early repayment charge.

Credit crutch

While it’s not ideal and will be costly, Castle says one option is to buy yourself out of the property.

“If you are desperate to move, and the difference in value between your home and the outstanding mortgage isn’t sky high, you could consider clearing the shortfall with borrowed money,” he says.

If you don’t have the funds, you could consider taking out an unsecured loan – which obviously comes with its own risks, and would increase your total debt.

Castle also warns that an unsecured loan is likely to be more expensive than borrowing against your home.

Sit on it

Of course, these options only really apply if you want to move house or borrow against it. In fact, most people in negative equity will continue to live in their homes and pay off the mortgage, or wait for property prices to rise.

“If you don’t need to move, just keep making repayments on time and your bank won’t be too concerned,” says Maundrell. However, she also recommends that borrowers consider taking steps to minimise issues later down the line, such as making overpayments, or using savings to reduce the amount you owe.

“Sorting out a budget that accounts for increases in mortgage repayments is a good idea. Also look at cost-effective ways to add value to your property.”

High demand and short supply make it unlikely London will suffer a steep fall. So if you don’t have to move house yet, wait it out until prices rise again.

Source: City A.M.

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Number of Homes Sold RISES in May as Interest Rates Remain on Hold

The UK property market looked encouraging when the Bank of England held interest rates at their present level of 0.5%.

The Monetary Policy Committee (MPC) voted to hold rates, putting it in the position to gradually increase them if necessary to return inflation to target levels later on.

This is good news for those who are thinking about buying or remortgaging a property, as the static base rates keep mortgages at their presently competitive levels. Recent HMRC figures also suggest that there was an increase in the number of homes sold in May.

The numbers

Last month 99,950 properties were sold, up from 98,820 in April. The number of properties sold since the beginning of 2018 is currently 492,350. However, this is lower than the same period in 2017, when total property sales reached 611,980.

Brian Murphy, Mortgage Advice Bureau’s  Head of Lending said that so far this year, the overall transactions level appears to be steady. However, he warned that the report results appear to mask the fragmented market and two-tier activity levels currently being seen across the UK. Some areas are seeing house price growth and increased buyer activity while others are dealing with fewer buyers and lower prices.

Mr Murphy added that given the current economic and political uncertainties, the absence of volatility is a positive indicator even though numbers may be down compared to 2017.

Mike Scott, chief property analyst at Yopa, an online estate agency, said that HMRC has confirmed that the property market has recovered from its brief downturn earlier this year. The number of homes sold in May was only 0.5% down on the year before.

Mr. Scott added that all evidence points to the housing market is steady, with the number of homes sold remaining level and prices going up only slightly faster than average earnings. He said there was no reason why the trend can’t continue for the rest of the year unless some disruption in the economy changes things.

Many agents throughout the country believe that Brexit concerns are causing buyers and sellers to stay put until everything is finalised. A similar ‘wait and see’ attitude is often seen in property transactions prior to a general election. However, once the Brexit terms are defined, it’s possible that those who are currently holding back will decide to act, especially since the interest rate decision includes a large hint that rates are likely to go up in the coming months, thanks to the vote from the Bank’s chief economist, Andy Haldane, to raise rates.

This suggests that there may be a small but effective window of opportunity for buyers to use the current market state to their advantage in order to negotiate a more favourable deal, together with getting one of the low fixed-rate deals that are still being offered by lenders looking for more customers. How long that window will stay open remains to be seen.

Source: CRL

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A third of London investors think property is no longer a good investment

More than a third of London investors now believe property is no longer a good investment, according to new research.

In the latest indication of a slump in London’s property market, the figures also showed that only 17 per cent of high net worth investors who own buy-to-let properties planned to increase their portfolio in the future.

However, among those with over £100,000 of investible assets, only one in 10 did not see property as a good investment.

Tax changes in buy-to-let investments and recent regulations affecting portfolio landlords were cited by investment management firm Rathbone, which carried out the survey, as the main reasons behind investors turning away from property.

Robert Hughes-Penney, investment director at Rathbones, said: “Whilst it’s understandable that property, and in particular residential property, has been a popular investment in the past, it’s now making less and less sense.”

Hughes-Penney added: “Not only are the returns now being impacted by an increased rate of tax, but they can also prove high risk investments due to a lack of diversification. Property investments require a large amount of capital to be held in one single asset and landlords will often hold a number of properties within one region.”

Source: City A.M.

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Record number of first-time landlord products

Given the recent upheaval in the Buy-to-Let market, many would assume that the number of products to first-timers would dwindle along with demand. However, the latest research from Moneyfacts.co.uk shows the number of deals to first-time landlords has risen to record levels, increasing by a massive 13% since the start of this year.

Charlotte Nelson, Finance Expert at Moneyfacts.co.uk, said: “It is great news that first-time landlords have more choice than ever before, increasing by a whopping 339 BTL products in just two years. Not only do first-time landlords have more choice, but they have also seen rates fall by 0.36% over the same period.

Record number of first-time landlord products Commercial Finance Network“Despite market uncertainty, providers are certainly not shying away from offering this risky group deals. Providers know all too well that many borrowers on their mortgage books will be coming to the end of their term and reassessing their deal, so they need to attract new business. As such, they’re enhancing their ranges and offering these extra deals to entice those customers who are new to the market, thereby breathing new life into their mortgage book.

“While multiple regulations and tax changes may have put some borrowers off becoming a landlord, it seems many are undeterred. In fact, it has been reported that Accord has seen the number of applications from aspiring landlords double over the past 12 months.

“This is little surprise when many consider bricks and mortar as a safe bet. With savings rates low, many are looking to get better returns elsewhere. Also, while rents are high and mortgage rates for first-time landlords are still falling, the potential for a decent return is high.

“Potential investors should not get ahead of themselves however. Since September 2017, they face checks and questions about their finances and will need to do their homework to ensure they get the best deal.

“Of course, BTL is not without its risks, and anyone seeking to enter this sector would be wise to seek the advice of a financial adviser to see if this is the best route for them.”

 

Source: Property118

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Manchester Property Hits The Jackpot For Capital Growth

The latest statistics released by Hometrack who analyse house price trends across 20 of the UK’s largest cities put Manchester on top for capital appreciation on property investments. Dubbed the largest power-base next to London, the northern location overtakes southern destinations with recorded price inflation over the last 12 months as high as 7.7 per cent. Compared to rival property hotspot, London, where house price growth was only 0.8 per cent in the same period, it’s clear that Manchester is leading the way for the most lucrative property investments in 2018.

The data from April this year shows how Manchester’s positive growth has been consistent over the last three months as well as the past month respectively, with incremental bursts beating fellow northern hotspots in Sheffield and Newcastle. Cambridge and Oxford are somewhat add-ons of the London market that used to contribute considerably to its price growth, but these areas are now seeing bigger slumps than ever and are struggling to rank highly for price inflation. Across the two locations, growth only reached a high of 2.1 per cent over the past 12 months as a reflection of the dwindling property market towards the south shores of the country.

 According to Hometrack, the average growth rate for cities is 4.9 per cent and 4.5 per cent across the UK. Manchester’s colossal surge in house prices outstrips both of these figures to highlight that it’s a major contender for property investment, not only surpassing London but most other parts of the UK too. But how do investors know that the trend is going to last? Property company JLL have in fact predicted that Manchester’s capital growth will reach 28.2 per cent between June 2017 and June 2021 in an immense market revolution.

Rising house prices tend to have negative connotations, but for buy-to-let investors, price inflation equals property gold. The average Manchester house price is £153,600, which is still relatively low when compared to the average of £490,100 in London. Investors can acquire lower-cost properties and receive better prospects for capital growth in the future to allow buy-to-let players to cash in on their Manchester investments.

Manchester’s record levels of house price growth haven’t been witnessed in the market since 2005, awarding it with the UK’s strongest regional property rating. In fact, experienced companies like RWinvestare urging investors to get involved as soon as possible in order to reap the benefits of capital appreciation. The underlying market conditions indicate healthy market strength in Manchester which also assures investors with affordable properties and strong rental yields. Now establishing itself as a go-to location for investment in buy-to-let property, Manchester has become a lucrative alternative to London and it’s notoriously trying market.

Source: Shout Out UK

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UK corporate debt soars to all-time high after years of low interest rates

The debt of the UK’s public listed companies (PLCs) has hit an all-time high after years of low interest rates and continued pressure to return money to shareholders.

The Link Asset Services UK PLC debt monitor shows UK listed company debt of £390.7bn, up 69 per cent from the debt low point of 2010-11, an increase in debt of £159.6bn.

Most of that debt increase has been in the last three years, with companies piling up an additional £122.6bn of debt in that period.

Over the same period UK PLCs paid their shareholders £263bn in dividends, despite pressures on profitability.

Justin Cooper, chief executive of Link Market Services, said: “The economic recovery since the credit crunch has been slow, but very long, and some commentators suggest the cycle may be drawing to a close.

“Total borrowing may continue to rise as it’s a vital part of the investment financing-mix, but gearing, or the burden of debt is on the wane. Investors may prefer to see UK PLC focus on reducing gearing further to provide itself more breathing space in the next global downturn.”

At the credit crunch UK PLC debt-to-equity ratio, the ratio of borrowings versus the value of shareholder capital, hit 89 per cent.

Post-crunch that high level of gearing reduced sharply to just 64 per cent, but began rising again after 2011-12 when market conditions improved.

It peaked in 2015-16 at 83 per cent, but has since begun to wane, even though absolute debt has risen, and now stands at 73 per cent.

Tobacco company British American Tobacco has the most debt of any UK listed company following its acquisition of US giant Reynolds. Its £45.4bn of net loans account for £1 in every £11 of UK PLC borrowings.

Housebuilder Persimmon is sitting on the most cash, currently with a net cash position of £1.3bn.

Source: City A.M.

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Mini-revival for mortgage market as home purchase approvals increase for first time in two months

The mortgage market staged a slight comeback in May with approvals for both home purchase and remortgages increasing, Bank of England data shows.

Both types of lending had experienced falls in April.

Approvals for new home loans increased by 2.5% to 64,526, above the previous six-month average of 63,803. It is the first time approvals for home purchase have increased in two months.

However, remortgages continue to drive the market. Approvals were up 7.7% to 50,979, taking them above the previous six-month average of 48,494.

Commenting on the figures, Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “People who need to move or sell are getting on and doing it, whether that be because of death, divorce or a job move.

“The slowdown in the market is down to the lack of discretionary movers – they are more likely to sit on their hands and delay making a decision hoping for better value in the future.

“Of course, it is all relative. If you are selling and buying, any price movements will affect you both ways, but if you have sold, are renting and waiting, then the wait continues.

“Interest rates are not likely to move in the short term at least, and the mortgage market remains ultra-competitive with lenders vying for market share.”

Source: Property Industry Eye

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Modular homes are the future of UK housing

The column inches written about the dysfunctional British housing market are legion. Too few homes, at too high a price, built for too few people. Two years ago, the Farmer Report commissioned by the Government concluded that the British construction industry, using a medical analogy, was a dying patient.

Fast forward to today, it still lies on its sick bed, failing to change at a scale necessary to answer the UK housing crisis, boost productivity or innovate quick enough. The collapse of Carillion proves how fragile major contractors can be. Mark Farmer said at one event late last year that the industry: “is standing on a burning platform and all other options have gone. It simply has to change.”

Modular homes set to revive ailing construction industry

There’s one option, which could be a reviving shot in the arm for this ailing industry, and that’s modular construction. Rather than lay bricks and pour concrete on-site, sections can be manufactured in a factory, shipped to their destination and then bolted together for final assembly. The finished product can look very similar to existing buildings, yet 80 per cent of the work is done off-site.

This offers a new way of delivering more buildings, faster and of better quality, including homes, schools, hospitals or prisons. In his Autumn Budget, the Chancellor Philip Hammond said the state will use its purchasing power to drive the adoption of this technology come 2019, whether it be through the Ministry of Transport, Justice, Health, Education or Defence.

This offers a new way of delivering more buildings, faster and of better quality

“We cannot deliver the infrastructure we need with the model we have today, there just isn’t enough capacity,” explains Kenny Ingram, global industry director for IFS. “It’s the reason why the government mentions modular homes in every second sentence at the moment, it doesn’t help that there are labour and skills shortages as well.”

Major construction firms getting on-board with modular

Many industry players including Mace, Laing O’Rourke and Mott MacDonald support offsite manufacturing, so do others such as Kier, NG Bailey, Sverfield and Arup, all extolling the benefits of so-called construction integrated manufacturing, or design for manufacture.

“We are looking at the biggest change in 100 years,” states Mr Ingram, whose company develops and delivers enterprise software for customers, globally. “It’s been talked about for a long-time, but now there’s real momentum and we’ve seen a greater number of companies come and talk to us about this.”

The UK construction industry is slow at moving into the 21st Century, adopting new technologies and changing its business processes, including the use of digital design tools, such as building information modelling  (BIM). Productivity has barely budged in 25 years, in manufacturing it’s doubled in this time.

The government wants 300,000 homes a year built by 2025, at the moment the sector can only deliver 190,000. The UK now lags behind Sweden, Germany and the Netherlands when it comes to the merger of manufacturing and construction, while in Japan more than 15 per cent of a million or so new homes constructed each year are, to some extent, prefabricated.

Modular homes are the future of UK housing Commercial Finance Network

The many benefits of modular homes 

There’s also a perfect storm brewing in this sector with an ageing workforce, a lack of new entrants and growing restrictions on free movement of labour, think Brexit, as well as a structural decline. There were 12,000 small housebuilders in 1988 accounting for one in four homes, by 2017 this had dropped to 2,500 responsible for just 12 per cent of new builds .

“There are lots of cultural barriers to change. The big driver is the housing market and the current crisis. This will force the issue. We are going to have to build more and companies are going to have to release land and land banks to relieve the pressure or build houses on them affordably. There is a sheer weight of demand,” states Mr Ingram.

There are benefits to building modular homes, 50 per cent reduction in time, lower labour costs, less materials, which means lower overall costs

“The market is now catching up. There are benefits to building modular homes, 50 per cent reduction in time, lower labour costs, less materials, which means lower overall costs. There are now quite a few factories where these modular homes can be built.”

However, investing in offsite manufacturing from the construction industry is still in a very early stage. Capital costs are high. Many top tier companies don’t know what their strategy is or should be. The government is pushing modular construction, and digital solutions like BIM, but is yet to mandate on it.

“The issue is getting people to realise there is an issue at all. Many construction firms are entrepreneurial and privately run. They started as one-man bands. Getting them to change is challenging. However, the fact that they are entrepreneurial means they can turn on a knife-edge quickly and invest if they have to,” decries Mr Ingram.

Construction needs government buy-in to drive modular forward

Amongst industry players there’s widespread agreement that if the government legislated on modular manufacture creating a solid pipeline of work there would be a drive to invest in factories that could churn out the buildings and infrastructure of the future.

“The government will force the issue in time. The issue is that the construction industry is still working on the same platforms as it ever has. Many companies don’t know how to manufacture. Shipping and logistics will also be part of this new picture. Many traditional firms just don’t have business systems that support these capabilities,” says Mr Ingram.

“We have solutions that works with construction, manufacturing and logistics. That’s why people are listening to us. The fact is the disruption will come, maybe not from construction, but from other sectors. Insurance companies, manufacturers, even Amazon are looking into this.”

The fact is the disruption will come, maybe not from construction, but from other sectors. Insurance companies, manufacturers, even Amazon are looking into this

Other sectors of the economy have been disrupted by tech-driven solutions from transport (Tesla), to accommodation (Airbnb), construction could be next. It doesn’t have to be from a domestic player either, with modular manufacturing, competition is global, since flat-pack housing can be produced in Sheffield or Shanghai.

“We began investing in construction 20 years ago and in parallel have a strong capability in manufacturing. It is a no brainer to bring the two together and offer the best of both worlds,” states Mr Ingram. “Now expect to see huge change around the corner.”

Source: Raconteur