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UK RICS house price balance hits lowest since 2012

A closely-watched gauge of British house prices struck its lowest level since 2012 during April, another sign of soft consumer demand ahead of a Bank of England interest rate decision on Thursday. The Royal Institution of Chartered Surveyors’ (RICS) house price balance fell to -8 last month from zero in March, the weakest reading since November 2012 and dragged down again by London.

A Reuters poll of economists had pointed to a much smaller decline to -1.

New buyer enquiries and sales were broadly flat during the month, according to the survey of property valuers.

Overall, the report chimed with other signs of a muted housing market and it added to a run of downbeat data that means the BoE is likely to leave interest rates on hold when it announces its decision at 1100 GMT.

In London, nearly two-thirds of property surveyors said they saw prices fall rather than rise in April – the biggest proportion since February 2009, around the depths of Britain’s last recession.

Nearly a third of surveyors said they expected house prices nationally to be higher in a year’s time, RICS said.

Earlier this week mortgage lender Halifax reported a particularly sharp drop in house prices last month.

Respondents in the RICS survey had fairly flat expectations for sales over the next 12 months. Those in Scotland were the most upbeat.

Source: UK Reuters

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Despite slowing in property market, prices surge for prime London homes over £2m

Homes sold for £2m or more in prime areas of London over the last three months have seen prices rise 3.2 per cent from the same period a year ago, according to data from property group Lonres.

However, homes sold for under £2m saw prices fall by 5.8 per cent, compared to the first quarter of 2017.

This reflects a reversal in fortunes for these two segments of the market: two years ago homes sold at £2m or more recorded annual falls of 5.5 per cent ,compared with growth of 4.4 per cent for those priced under £2m.

Marcus Dixon, head of research at Lonres said:

“Homes sold below £2m, recorded the most significant prices falls, as the wider London housing market slowed and fewer investors entered the market.

“This contrasts with the market above £2m. Demand for these properties appears to be increasing, prices having fallen earlier and buyers, many of whom are owner-occupiers, have begun to see value, even with Brexit uncertainty still looming.”

According to Becky Fatemi, managing director of London real estate agency Rokstone, the increase in prime real estate prices comes down to continuing high demand in London’s luxury areas.

“Mayfair and Marylebone is where everyone wants to be, so prices are going to be stronger,” said Fatemi. “I had 16 properties in the W2 postcode last year, now I’ve got two.”

Peter Wetherell, who runs Mayfair-based agency Wetherell, has seen a similar increase in demand for high-end properties, and as a result, prices in the area have remained strong.

“Mayfair has bucked the trend,” says Wetherell. “Whereas everyone else has plateaued, we’ve kept growing. We’ve taken the crown back from Knightsbridge.”

Still, overall prices across prime London fell by an average of three per cent compared to the same period last year, even though the number of transactions increased by three per cent, with the market for homes over £2m continuing to see the most activity.

According to Wetherell, this overall slump in the prime London market is due to a large extent to the government’s stamp duty, which has dampened the market beyond even their own expectations.

“They’ve done what they wanted to do, they’ve taken the heat off,” said Wetherell. “The problem is they turned on the cold water tap too strong.”

Meanwhile, according to the Halifax House Price Index released today, prices across the UK have fallen by 3.2 per cent in the first three months of the year.

Source: City A.M.

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Buy-to-let rates fall

The cost of a typical 5-year fixed rate buy-to-let mortgage has fallen since the start of the year despite speculation that the Bank of England will soon increase base rates again.

This was found by a Mortgage Tracker launched today by Property Master, a digital start up that uses algorithms to match the requirements of individual private landlords against the entire buy-to-let mortgage market of some 2,000 plus products.

It revealed that average 2-year fixed rates based on 65% of the value of the property and 75% of the value of the property also declined from January to May 1st of this year. Only 2-year fixed rate mortgages for 50% of the value of a buy-to-let property increased over the five-month period and then by 0.42%.

Angus Stewart, chief executive of Property Master, said: “This is quite a significant increase and perhaps reflects that there are fewer lenders discriminating at the 50% LTV level.  Lenders are clearly taking margin here and giving back on other LTV levels.”

Savings on a 5-year fixed rate buy-to-let interest only mortgage on a typical property worth £180,000 ranged from £5 to £15 per month and on some 2-year fixed rates from £10 to £15 a month.

Stewart added: “Our findings show that there are some very good deals out there for landlords despite worries over any future increase in base rates.

“The Monetary Policy Committee meets again this coming Thursday (May 10th) so we will see what happens then but there may be other factors operating in the buy-to-let market which explains the decline in costs that we have seen.

“Our findings come on the back of recent research revealing that the number of buy-to-let products currently on the market has reached a record high, so it could be that we are seeing landlords benefiting from unprecedented competition amongst lenders for their business.  This is very good news indeed.”

Source: Mortgage Introducer

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Halifax: UK house prices tumbled 3.1 per cent in April as property market continues to slow

House prices fell over three per cent in April, following a 1.6 per cent rise in March, according to the latest research from UK bank Halifax.

In the last three months to April, house prices were up 2.2 per cent compared to the same three months last year, but were still down from the 2.7 per cent annual growth recorded in March.

House prices between February and April were also 0.1 per cent lower than in the last three months of 2017, the third consecutive drop in monthly prices, the data showed.

Russell Galley, managing director at Halifax said:

“Both the quarterly and annual rates have fallen since reaching a recent peak last autumn, with these measures providing a more stable indication of the underlying trend than the monthly change.”

Galley also said that housing demand had decreased in the first few months of 2018, with both mortgage approvals and completed home sales edging down. Housing supply also remains very low, Galley said.

Jeremy Leaf, north London estate agent and former residential chairman at the Royal Institution of Chartered Surveyors (RICS) called the figures “disappointing.”

“There is a market of sluggish growth and transactions, despite still showing modest price rises,” said Leaf. “And yet we are entering what is supposed to be the busy spring buying season, which tends to set the tone for the rest of the year.”

Howard Archer, chief economic adviser at EY ITEM Club was less optimistic, however, pointing out that the Halifax figures show “the sharpest monthly decline since September 2010 and was a much sharper-drop-than-expected”.

According to Archer, even allowing for poor March weather to have impacted house prices, “the underlying performance over the first quarter points to the housing market remaining muted as it pressurized by still limited consumer purchasing power, fragile confidence and likely further gradual Bank of England interest rate rises”.

The Bank of England is scheduled to reveal its latest monetary policy decision on Thursday, however, following poor economic indicators this month including sluggish GDP growth, an interest rate hike has begun to seem highly unlikely with investor bets only indicating a seven per cent chance of a rate rise.

Source: City A.M.

 

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£70m Merchant Square development ‘will transform ‘city centre’

WORK has commenced on a major development of a nine-storey grade A office building which it is claimed will transform the centre of Belfast’s business district.

The £70 million Merchant Square development on Wellington Place, due to complete by the autumn of next year, will create 227,000 sq ft of retail and office space and house up to 3,000 employees.

Funding for the Merchant Square project has been secured from the Northern Ireland Investment Fund and Fairfield Finance, with owner Oakland Group being advised by local firm Radius Corporate Finance.

Guy Hollis from Oakland insists development will have a “transformative impact” on Belfast city centre and will herald the beginning of a new era of commercial infrastructure in the city.

He said: “Our project will have a multiplier effect around Wellington Place, Queen Street and College Square, and we are confident the Merchant Square project will make a major contribution to the redevelopment of Belfast going forward.”

Among the unique features of Merchant Square (which replaces the existing Oyster House) is the sustainable nature of the development, with an emphasis on the provision of ‘green’ working space.

When completed the ground floor of the building will house retail units alongside space for 250 bicycles, complete with a bike repair shop and shower and laundry facilities.

Each of the nine floors will provide up to 24,000 sq ft of workspace and the entire building will incorporate smart building technology through wireless networks.

Mr Hollis said the development had been designed to showcase Belfast as a capital commercial city across the islands.

“We believe in the future of Belfast as a commercial hub and we have carefully designed every element of Merchant Square to ensure that we are providing the most up to date, attractive and competitive commercial space for which we know there is a demand.

“With our proximity to the new transport hub which is due to open in 2022, to the major motorways, the harbour and two airports we anticipate a high demand for this space and in fact we have already some enquiries before we start the building work. We are excited at the potential of Merchant Square and the contribution it will have on the ongoing regeneration of Belfast and Northern Ireland.”

Fairfield Real Estate Finance managing director Chris Wilson said: “The deal reaffirms our focus on helping experienced property teams to execute their business plans. We see Belfast as a very strong office market. Merchant Square is a great addition to our growing development finance portfolio.”

Lisa McAteer, director of CBRE, which is overseeing the letting of the building, added: “Merchant Square will deliver much needed grade A space to the Belfast market.

“Most of the existing space in Belfast is fragmented and cannot accommodate companies wishing to secure large floor plates for sizeable teams or to provide for future expansion. Merchant Square’s 24,000 sq ft floor plates make it ideal for companies with large requirements.”

Source: Irish News

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Holiday lets generate highest returns in UK property market

Holiday lets are among the highest returning assets within the UK real estate sector, according to research from holiday property fund Second Estates.

Yields from holiday properties were 1.1 percentage points higher than those for residential buy-to-let properties over the last 12 months, and higher than all other major categories, according to the property group’s study.

The average weekly income for a holiday letting was £563 last year, compared to just £191 for an average buy-to-let residential property. Even when taking into account the off-season weeks, holiday lets generate nearly three times more income than residential buy to let properties.

The lettings data shows holiday lets generated an average net yield of 6.1 per cent over the last year. The next highest property asset class was student accommodation with a net yield of 5.25 per cent.

Meanwhile, the data showed that holiday lets are forecast to outperform other asset classes with an average total return of 9.3 per cent over the next five years.

Commenting on the data, Alistair Malins, CEO of Second Estates, said: “This research demonstrates the strength of the UK holiday property market as an emerging alternative asset class.”

Second Estate pointed to the strong increase in UK tourism, which has seen an increase of seven per cent last year, which is having a positive impact on UK holiday accommodation.

There are close to two million buy-to-let landlords in the UK, of which and an estimated 165,000 homes listed as holiday lets.

Source: City A.M.

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UK buyers need more help to find cheaper mortgage deals, says FCA

Plans to make it easier for mortgage borrowers to shop around have been proposed by the City regulator, after it found nearly one in three people fail to find the cheapest deal.

The Financial Conduct Authority (FCA) said these people could have saved £550 per year with a lower-priced deal. It is also exploring ways to help “mortgage prisoners” – longstanding customers who are trapped in their existing deal – to switch.

Publishing its interim report into the mortgage market, the FCA said it had found that competition was working well for many people. But it also identified ways in which the market could work better.

Mortgage debt accounts for more than 80% of total UK household liabilities, so selecting a deal is one of the most important financial decisions consumers have to take, but it can be a difficult one to get right, the FCA said.

The regulator said that while there was little evidence that current arrangements between firms were leading to poor consumer outcomes, there was no easy way for people to be confident at an early stage of the mortgage products they qualify for.

This is a significant impediment to shopping around, and about 30% of customers fail to find the cheapest mortgage for them, it said. On average, these consumers were paying approximately £550 per year more over the introductory period of their mortgage compared with the cheaper product.

One approach could involve lenders making the necessary eligibility and other qualification criteria available to other market participants consistently at an earlier stage, the FCA suggested. This should help brokers and also create other opportunities for new online tools, it said.

The FCA also proposed making it easier for people to compare mortgage brokers, saying it intended to work with the broker sector to develop ways to compare deals.

The report said: “We found that on average a consumer’s choice of intermediary makes a difference to the eventual cost of their mortgage. In particular, we have observed links between more expensive mortgages and intermediaries that typically place business with fewer lenders. But there are few tools to help consumers choose an intermediary.”

Christopher Woolard, the FCA’s executive director of strategy and competition, said: “For many the market is working well with high levels of consumer engagement. However, we believe that things could work better with more innovative tools to help consumers.

“There are also a number of longstanding borrowers that have kept up to date with their mortgage repayments but are unable to get a new mortgage deal; we want to explore ways that we, and the industry, can help them.”

The FCA also outlined how “mortgage prisoners” could be better helped, many of whom took out interest-only deals before the financial crisis. Stricter lending practices since the crisis have made it harder for these customers to find a cheaper mortgage.

The regulator suggested there could be an industry-wide agreement for lenders to approve applications for a new mortgage deal from existing customers whose most recent mortgage was taken out before the financial crisis and who are up to date with their payments.

The FCA will consult on the findings and proposed remedies, with a final report due around the end of the year.

Source: The Guardian

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Trying times for buy-to-let landlords

Buy-to-let investors must keep on top of new government regulations as well as tax changes.

The past few years have seen the introduction of a number of new rules affecting landlords, covering both the treatment of tenants and the financial side of renting out property. Here’s a rundown of what you need to know.

First, landlords found to be renting out substandard properties now face tougher consequences, with the introduction of a national database of rogue landlords and letting agents. The database includes landlords and letting agents who have been convicted of a range of housing and immigration offences, such as unlawful eviction, and breaching gas and fire safety measures.

Local authorities can share information with one another, but the register is not accessible to the public. Under the new rules the worst offenders can be banned from letting property for anything from 12 months to life. If a landlord ignores a banning order, he or she will face criminal sanctions, from six months in prison to an unlimited fine.

Landlords should also be aware of a bill going through parliament – the Homes (Fitness for Human Habitation and Liability for Housing Standards) Bill. Currently, tenants need to complain to the council if their house isn’t safe or fit to live in, and rely on the local authority to take action. But under the bill tenants will have the right to bypass the council and sue landlords who rent out properties in a poor state of repair.

The bill will apply to all areas of a building in which the landlord has an interest. This includes communal areas, such as stairwells, and covers other vital aspects such as fire alarms, sprinklers and gas pipes. You should also be aware that since 1 April newly let properties are required to have a minimum energy performance certificate (EPC) rating of E. This will apply to all rental properties from 1 April 2020. Landlords can be fined up to £4,000 if their property doesn’t meet the standard.

Talk tough with your letting agent

Landlords should also get ready for some tough conversations with their letting agents, if they use one. As it stands, agents can charge tenants for services such as contract renewal. But the Tenant Fees Bill now working its way through parliament will ban agents from charging tenants fees. Once this is law, it’s expected that agents will try to pass the fee on to landlords, who can swallow it, try to add it to the rent they charge, negotiate harder – or if that fails, find a cheaper agent. The bill will also cap tenancy deposits at six weeks’ rent.

The new tax year has also seen landlords’ profits hit by taxation changes. Section 24 of the Finance Act introduced a tapering down in the tax relief that allows landlords to offset the cost of mortgage interest against their rental income. The start of the 2018-2019 tax year saw this cut further to 50% (eventually this will fall to 0%, to be replaced by a tax credit worth 20% of mortgage interest).

Finally, if you plan to take back a property, make sure you keep up to date with rules on how “section 21” notices can be used. (You can issue a section 21 notice if you want your property back after a fixed term ends.) The Deregulation Act 2015 changes when and how section 21 notices can be issued and comes into force for all tenancies on 1 October 2018 (it’s been in effect for new tenancies since 2015). The Act introduced new conditions that must be met before the service of such a notice can be valid, and deadlines for issuing proceedings, among other changes.

Source: Money Week

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Million-pound UK house sales hit a new high in 2017 – but London was not the region with the fastest growth

The number of properties which sold for more than a million pounds hit a record high last year, according to Lloyds Bank Private Banking – but London was not the region with the highest growth.

Instead, Yorkshire and the Humber saw the sale of million-pound homes rocket by 60 per cent compared to the year before, while the capital experienced a mere one per cent climb.

Across the whole country, the number climbed by five per cent as 14,474 homes worth more than a million pounds were sold.

“As always, the highest number of transactions took place in the capital last year. However growth in London has started to slow for million pound properties,” said Louise Santaana, head of UK wealth lending at Lloyds Banking Group.

“Overseas investors represent a good share of this end of the London market and some may be holding off buying, pending further clarity over Brexit.”

She added that 2018 would be an “interesting year” for the million-pound property market, as government consultation on ways to improve the house-buying process could make “high-end homeowners more empowered to engage in property transactions”.

But counteracting this could be the high cost of stamp duty, especially for people looking to invest in property rather than buying somewhere to live.

The East Midlands was the only place to see lower numbers of million-pound homes sold last year, with a 23 per cent drop to just 72 transactions.

Source: City A.M.

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Will UK interest rates rise in May?

Rate rises are important to many in the UK, particularly those whose wealth is tied to the value of their homes and the mortgage debt they pay on them.

A rate rise could have a substantial impact on both, potentially driving down the value of the home while increasing mortgage costs.

It can also have an impact on markets and certain types of assets, which is explored here.

The next UK interest rate announcement will be made on 10 May 2018.

The Bank of England (BoE) is trying to raise interest rates, but with the economy slowing and Brexit on the horizon the chances of rates rising sooner rather than later have fallen significantly.

The market is now pricing in a 17 per cent chance of a rate rise in May, having been at 100 per cent on 29 March 2018, after recent data pointed to a more buoyant economic outlook.

More recently, data from the Office for National Statistics has shown that the UK economy almost stalled in the first quarter of 2018 growing by just 0.1 per cent, the weakest quarterly growth since 2012. Furthermore, inflation fell to 2.5% in March, from 2.7% in February. It was the lowest rate in a year.

If growth had remained solid and inflation high then the decision to raise rates would not have been so complicated.

However, the data surprised many, including the Bank of England’s rate-setting monetary policy committee (MPC). It prompted the Bank’s governor, Mark Carney, to reiterate that he didn’t want to get too focused on the precise timing of a rate increase, more the general path.

The BoE raised interest rates for the first time in a decade in November 2017, taking the headline borrowing rate to 0.5% from 0.25%. Through this period of volatile forecasts, the Schroders Economics Team has maintained its view that November will mark the next rise in rates. It expects only one rise in 2018 and two in 2019, with rates reaching 1.25%.

Given the uncertainty Azad Zangana, senior European economist and strategist at Schroders, answers some of the most pressing questions.

Why wouldn’t the BoE raise rates in May?

Recent data suggests that the UK economy may not have been as strong as previously thought. Bad weather in February and March probably played a role, but the data suggested that there was something else behind the weakness. Rather than take a risk and hike anyway, the BoE is likely to wait to see whether the data improves in coming months.

What effect would not raising rates in May have?

Very little. A hike would have meant a rise in borrowing costs for mortgage holders, and potentially slightly higher interest rates for savers. However, without the hike, borrowers and savers are unlikely to see any change.

When will UK interest rates rise?

We think the next interest rate rise is likely to happen in November 2018, by 0.25% to 0.75%. By then, economic data should have recovered, and uncertainty over Brexit should be lower.

How quickly do you think rates will rise thereafter?

We think we could see two more (0.25%) rate rises in 2019. The economy is likely to gather momentum, and the UK will have departed from the European Union, albeit into a transition phase. While two more hikes is an acceleration compared to this year and last, it is still a very slow pace of hikes compared to history.

What would be the harm in leaving interest rates as they are?

At the moment, there is little harm. However, as the economy continues to recover, the risk of higher inflation grows. Raising interest rates to more normal levels would help slow the economy to a more stable pace of growth, which should reduce the risk that inflation overshoots the BoE’s target. High inflation not only hurts the purchasing power of households, but it also erodes the value of savings.

Source: City A.M.