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UK property market a global weak spot

The UK is one of just three countries likely to see no house price growth this year, according to a report by credit agency Fitch Ratings.

The report looked at 22 countries and said growth is likely to slow in most markets as the prospect of higher interest rates pushes up mortgage costs. However, only Norway, Greece and the UK are expected not to see price rises this year.

Fitch said the UK market would be flat in 2018 as high prices, low income growth and the weakness in the financial sector post-Brexit would lead to small falls in house prices in London and the southeast, while the regions would remain stable. It added that the impact of buy-to-let (BTL) changes including lower tax deductibility of rental income would also hit UK prices.

Suzanne Albers, senior director, structured finance at Fitch Ratings, said: “Arrears are at very low levels in most markets. They will only move in one direction as mortgage rates rise slowly due to higher policy rates and more expensive bank funding from the gradual unwinding of quantitative easing.”

Long-term fixed-rate loans are less exposed to increasing rates, but fewer re-financings mean lower lending volumes, so lenders may relax their borrowing criteria to boost volumes, subject to regulatory limits.

The report reflects the recent weakness in the UK housing market. The most recent Halifax report showed weakness in London, with growth slowing in the rest of the country.

Source: Your Money

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Renting by the room brings biggest yields

Houses of multiple occupation (HMOs) – properties which are rented by the room – produced the highest buy-to-let yields in 2017, according to the latest figures.

Data compiled by Mortgages for Business showed average yields of 8.9 per cent for houses were many people rent rooms individually.

However, this represents a fall, and the first time that yields for this type of property have dipped below nine per cent since the  Mortgages for Business index was launched in 2011.

Experts at the firm said that the fall was due to the increasing popularity of this type of property with landlords, which is pushing up prices.

“The attractiveness of HMOs as a buy-to-let investment has increased in recent years not only because of the higher yields on offer but because serious investors are keener to diversify their portfolios,” said Jeni Browne, sales director at Mortgages for Business.

“With more landlords vying for these properties, prices have been pushed up more quickly than the rents which, I would suggest, is one of the main reasons we are seeing their yields drop, although, I suspect that the granting of fewer new HMO licences is also having an impact.”

She added the figures showed landlords opting for cheaper ‘vanilla’ properties.

Defined as normal 2 to 3 bed houses and flats, usually fitting the general lending criteria of mainstream buy-to-let lenders, these properties produced average yields of 5.6 per cent in 2017.

The average value of a vanilla buy to let property in 2017 was £305,283, a 19 oper cent decrease on the average in 2016 (£375,409).

Ms Browne added there was anecdotal evidence landlords are looking further afield, where prices are cheaper.

Whilst there was no change in the number of lenders operating in the sector in Q4 2017, the number of mortgages available continued to rise, the figures showed.

There has been a 444 per cent increase in buy-to-let mortgage products since the index was launched in 2011.

Ms Browne said this rise resulted from lenders responding to the growing popularity of buy to let by offering a seemingly ever-expanding range of products to suit a variety of properties and borrowing requirements.

However, she said that this was likely to have reached its peak.

“Looking forward, it is widely anticipated that buy to let lending will contract this year in response to the tax and regulatory measures being imposed on the sector.

“As such, I would expect product numbers to peak in Q1 2018 and we have already seen some lenders trimming their ranges, leaving a core of great products which have been designed to reflect the changing needs of landlords,” she said.

Source: FT Adviser

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Local councils ‘continue to ignore’ building affordable homes on farmland

Local authorities are continuing to ignore ways to deliver much needed affordable homes for local people across the countryside, according to a rural organisation.

New government data shows that despite a 9% increase in affordable homes built in small rural communities across England, only 51 more than the previous year were built on rural exception sites, farmland not usually granted planning permission but used for affordable housing developments.

The CLA, which represents landowners and farmers, welcomed the overall increase but said local councils across England could use these sites more effectively to help solve the rural housing crisis.

CLA Housing Adviser Matthew O’Connell said housing need is “widespread” throughout rural England.

“The increase in the total number of affordable homes being built is encouraging, however, large discrepancies between local authorities mean that certain councils are doing more than others,” he explained.

‘Missing a trick’

According to the data, Cornwall Council leads the way in number of homes built, whilst other councils lag behind.

Mr O’Connell believes local authorities are “missing a trick” by not using rural exception sites to their full potential.

“Rural exception sites are a key means of providing affordable homes in rural areas where a landowner provides land at below market value to build affordable homes for local people.

“We know that 27% of CLA members want to build affordable housing and many are keen to manage their own affordable properties. To harness this ambition, local councils and housing associations must engage with rural landowners to help bring more sites forward increasing the range of housing options for people in rural areas.

‘Hold the key’

Mr O’Connell added that rural landowners “hold the key” to easing the shortage of rural housing.

“Without challenging a few orthodoxies we are not going to solve the rural housing crisis. New build rented housing, affordable home ownership and affordable rented homes are all crucial to maintaining a living, working countryside,” he said.

To help increase the supply of affordable homes across the countryside the CLA is calling on the Government to formalise the process for landowners to manage affordable homes and implement the Housing White Paper proposals on rural exception sites.

The Housing White Paper proposed to give stronger support for rural exception sites and the role they can play in providing affordable housing for the community, even if this relies on an element of general market housing.

The CLA is also urging the government to exempt properties provided as affordable homes from liability for Inheritance Tax, and exempt the value of land sold for affordable homes from Capital Gains Tax.

Source: Farming UK

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The UK is leading the way in crowdfunding and P2P lending as the rest of Europe plays catch-up, says University of Cambridge data

The UK has helped to prompt a boom in European crowdfunding and peer-to-peer (P2P) lending, according to new research from the University of Cambridge’s Judge Business School.

While the UK remained the largest alternative finance market in Europe by far, at €5.6bn (£4.9bn), the rest of Europe began to play catch-up as it grew its own market by 101 per cent, the data from the university’s Centre for Alternative Finance showed.

Though this meant the UK lost market share, senior research manager Tania Ziegler said it was a positive story for the country which was showing signs of consolidation in a maturing market.

“Europe is growing from a much lower base so you are going to see much more rapid growth,” Ziegler said.

“It’s slower growth in the UK but that’s because we have seen consolidation, and the platforms that are active are very strong incumbents. It isn’t much of a worry because it’s a case of Europe catching up.”

Ziegler added that the UK “has been ahead because of innovation and a regulatory regime that has allowed innovation to grow”, which other countries are beginning to learn from.

France came second after the EU in the size of its online alternative finance market at €444m, followed by Germany and the Netherlands. Some of the more surprising rankings included Finland at number four and Georgia at number seven.

Excluding the UK, Estonia ranked first for alternative finance volume per capita for the second year in a row, at €63, followed by Monaco and Georgia.

P2P consumer lending accounted for the largest portion of alternative finance in Europe at 34 per cent, followed by P2P business lending, invoice trading, equity-based crowdfunding and reward-based crowdfunding.

Source: City A.M.

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One in five buy-to-let landlords plan to sell up

The ongoing changes to the tax treatment of buy-to-let investments and ongoing economic uncertainty mean 20 per cent of UK landlords are considering exiting the market, according to the National Landlords Association.

The trade body said one in five of its members plan to reduce the number of properties they own within the next 12 months.

The organisation said the additional 3 per cent surcharge for purchasing second homes, the banning of upfront letting fees and the changes to the tax treatment of buy-to-let investments prompted landlords to consider reducing their exposure to the market.

Mike Heynes, head of private client at accountancy firm RSM, said of those three, the changes to the tax regime were having the greatest impact.

He said: “Even a half a per cent movement in interest rates could mean that the investor is losing money.

“Many buy-to-let investors are in the market for the capital gains, rather than the income, but house prices are falling in most parts of the country.

“If they invest with income in mind, then the tax changes impact on that, so there could be a crash in the property market if people decide property is not worth owning.”

Changes announced in July 2015 mean that buy-to-let landlords can only claim mortgage tax relief at the basic income tax rate of 20 per cent, rather than, as was previously the case, at the higher rate.

This is being phased in gradually with the relief tapering off until 2021.

Mr Haynes added the potential for a future Labour government to introduce rent controls is another factor worrying buy-to-let landlords.

Ray Boulger, senior technical manager at mortgage broker John Charcoal, said: “The chancellor (at the time) was quite clever in the way they brought it in over several years so people didn’t feel a hit immediately.

“Investors need to do their calculations very carefully, especially as there is likely to be very little rent inflation in the coming years as immigration is falling.

“Generally the new rules don’t affect those landlords who haven’t borrowed, but there could be a nasty shock for those that have a lot of gearing.”

David Hollingworth, associate director of communications at London & Country Mortgages, said the major trend he has noticed among his clients is a rush to remortgage to lock-in the present low interest rates.

He said the changes mean landlords have to more aggressively manage their properties in order to achieve a return.

Source: FT Adviser

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Demand for UK property fell more than seven per cent last year

The UK’s housing market continues to look shaky, after new figures showed the number of new buyers registering with estate agents dropped last year – as the number of properties on the market plunged.

Figures from estate agent Haart showed demand for homes fell 7.4 per cent in the year to December, falling 3.4 per cent between November and December.

Meanwhile, the number of homes coming onto the market fell 16.8 per cent in the year, falling by the same percentage month-on-month. That means nine buyers are now chasing every property on the market.

However, the number of transactions rose 4.6 per cent year on year, and 8.5 per cent month on month, it said.

The figures also showed house prices fell 3.3 per cent in the year to December, the figures showed, with the average house price now standing at £229,562.

There was some good news for first-time buyers: the average deposit dropped 12.5 per cent between November and December, to £37,268, although it rose 2.3 per cent on the year before.

Loan-to-value ratios for first-time buyers rose to 79 per cent, from 77 per cent the year before, while the average purchase price fell to £191,981, from £213,515 the year before.

The average age of a first-time buyer edged higher, from 31.3 in December 2016 to 31.9 in 2017.

“In December the market began to pick up and we have started to see transactions rise towards levels last seen in the months before the stamp duty surcharge change and the vote to leave the EU,” said Paul Smith, Haart’s chief executive.

“However, there remains a severe lack of homes on the market, and as a result of this I expect we see UK price growth of between three and five per cent, and a more modest one to three per cent in London.”

Source: City A.M.

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Hammond won’t solve housing crisis without further reforms, Treasury select committee warns

Philip Hammond’s attempt to relieve the housing crisis requires further reforms, according to the Treasury select committee.

Last year’s cut in stamp duty to help first-time buyers get on the housing ladder is likely to increase prices by at least the amount the reduction is intended to save, MPs said.

The influential committee urged borrowing caps on councils to be lifted if the target to build 300,000 new homes a year is to be met.

The chancellor’s move to fix the housing crisis in his autumn budget but the Government will “find it very difficult to meet this ambition” without further action, the committee said.

“Greater measures are needed to increase housing supply,” the report states.

“300,000 homes a year will not be achieved with the current measures. The Government will need to show greater commitment to housing supply to achieve its aspiration and will need to bring forward additional policy measures.”

The committee’s analysis of the Chancellor’s budget called for “unfair” RPI measures used to calculate interest rates on student loans, rail fares and air passenger duty (APD) to be ditched.

MPs also called for the Office for Budget Responsibility to issue a special forecast on the economic impact of Brexit before Parliament votes on crucial exit laws.

Nicky Morgan, who chairs the Treasury committee, said: “The OBR expects a fall in private sector investment due to Brexit-related uncertainty. An agreement between the UK and the EU27 on a ‘standstill’ transitional arrangement is therefore urgent.”

The committee said there “needs to be a step change” in help for first-time buyers.

Councils are limited in how much they can build by a cap on borrowing.

The Chancellor raised the limit for councils in areas of high affordability by £1 billion but it should be abolished, the committee said.

Private housebuilders create around 150,000 homes a year so without significant local authority building, the target will not be reached, it warned. Stamp duty reforms announced in the autumn Budget mean a cut for 95% of all first-time buyers who pay it and no stamp duty at all for 80% of first-time buyers, with savings of up to £5,000.

Forecasts by the OBR found a reduction in stamp duty in isolation will increase the affected first-time buyer house prices by double the reduction.

The committee said the only sustainable way to address housing market affordability is to significantly housing supply, adding: “The autumn budget alone is unlikely to achieve this”.

Morgan said: “The Chancellor pledged to ‘fix the broken housing market’, but the Government is going to find it very difficult to meet this ambition.

“The increase in the cap on borrowing for local authorities to build homes is a step in the right direction, but it doesn’t go far enough.

“The borrowing cap restricts the number of homes that local authorities could deliver. To achieve the Government target of 300,000 new homes per year, the cap should be abolished. The potential of local authorities to build should be unleashed.”

Local Government Association Chairman Lord Porter said: “This is significant recognition of our central argument about the vital role councils must play in solving our housing shortage.

“Our national housing shortage is one of the most pressing issues we face and, as a nation, we have no chance of housing supply meeting demand unless councils can build again.”

Source: iTV

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Gloom shrouds UK households as inflation expectations spike

British households turned gloomier about their finances in January as their expectations about future inflation hit a near four-year high and they relied more on borrowing, according to a survey which underscored the strain on many consumers.

Data company IHS Markit said its Household Finance Index fell to a four-month low of 43.0 from 43.7 in December.

Britain’s economy slowed in 2017 as higher inflation – caused by the post-Brexit referendum fall in the pound – hurt the spending power of consumers.

Official data on Friday showed that 2017 was the weakest year for retail sales in Britain since 2013.

While the Bank of England expects the squeeze will ease in 2018 as inflation cools and weak wage growth ticks higher, Monday’s survey showed consumers – at least for now – lack this optimism.

“Pressures on UK household finances intensified at the fastest pace in four months, as rising living costs and subdued pay growth have led to a renewed squeeze on cash available to spend,” Sam Teague, economist at IHS Markit.

The survey showed inflation expectations hit a 47-month high in January, a possible concern for the BoE.

Official data published last week showed that inflation eased off a nearly six-year high in December when it edged down to 3.0 percent in December. But the BoE does not expect it to return to its 2 percent target before 2021.

Furthermore, the IHS Markit survey showed households’ need for unsecured borrowing grew at the fastest pace in 11 months.

Official data has shown consumer lending growth cooled in the second half of last year.

“There was little evidence to suggest that households reined in day-to-day spending, as households increased their expenditure at a modest rate whilst utilising additional unsecured debt to balance budgets,” said Teague.

Forty-five percent of households expected the BoE to raise interest rates within six months, down slightly from 48 percent in December’s survey.

A Reuters poll of economists published last week showed the BoE is likely to keep rates at 0.5 percent until the fourth quarter of this year, having increased borrowing costs for the first time in over a decade in November. [ECILT/GB]

Households reported a strong rise in workplace activity but job insecurity hit a six-month high, IHS Markit said. Official data have shown two consecutive monthly declines in employment, suggesting employers are turning more cautious as Brexit nears.

The IHS Markit survey, conducted by Ipsos MORI, polled 1,500 Britons between Jan. 10 and 14.

Source: UK Reuters

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600 homes plan for Shrewsbury deferred a second time over access concerns

A decision on plans to build 600 homes in Shrewsbury has been put off for a second time over issues with access.

Members of Shropshire Council’s central planning committee deferred the plans from Taylor Wimpey and Persimmon Homes to build the development at Weir Hill, at a meeting yesterday.

Objectors to the proposed housing development are concerned over access for construction traffic off Preston Street and are demanding that a new access road be built before work begins.

The developers had suggested that a new access off London Road would be constructed once 365 homes were built. The figure was then reduced to 250, and now 225.

Mike Carter from Shrewsbury Civic Society said: “The developers have done little or nothing to meet the concerns of the public or this committee.

“A single access route, even for 225 homes is unacceptable. Most estates have one built first. This development needs better access and better connectivity.”

Members also raised concerns about a lack of infrastructure and links to the town.

Jason Tait, agent for the application, said construction traffic would not be allowed to use London Road in peak times to alleviate congestion.

He added: “Its unreasonable to say the site would be unsustainable especially when it is earmarked for development in Shropshire Council’s own plan.

“It will bring many benefits to the area including a multi-million pound contribution to schools.”

Councillor Kevin Pardy suggested deferring the application for a second time, despite the recommendation from planning officers to grant permission.

“The public are not saying don’t build on this site – what they are saying to us is please help us get this right,” he said.

“It would be so much easier for the developer to go away and look at this again because I don’t think they have looked at it properly.

“They should go away and come back with plans that we can accept. I think we have been completely ignored.”

The developers will be asked to clarify the highways data provided as part of the proposal and the application will return to the planning committee for a decision at a later date.

Source: Shropshire Star

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Housing activity stagnates despite stamp duty cut

The UK housing market saw activity fall in December despite the first-time buyer stamp duty cut, the December 2017 RICS UK Residential Market Survey found.

Some 86% across the UK said they hadn’t seen an increase in first-time buyer enquiries following a cut in stamp duty.

After new buyer enquiries came close to stabilising in November, 15% more respondents noted a decline in demand (as opposed to an increase) in December.

Simon Rubinsohn, RICS chief economist, said: “The initial feedback from the market doesn’t suggest that the change in the stamp duty regime announced in the budget is going to have a material impact on activity.

“Indeed, the risk was always that a good portion of the benefit would be capitalised in the price, therefore limiting the benefit for the first-time buyer.

“Meanwhile, the latest RICS data continues to highlight the importance of disaggregating the headline numbers when talking about the market.

“Challenges over affordability may have grown across the UK but they are clearly having a bigger impact in some parts of the country than others.

“This is clearly evident in the sales expectations figures which still remain in positive territory in more than half of the areas surveyed in the report.”

Nationally, the majority of respondents (66%) anticipated the change having little consequence, whilst 12% felt it would result in higher overall activity.

Some 28% expect the changes to increase overall market activity. The results for the wider South East are closer to the national picture.

Agreed transactions also fell at the national level, with 13% more respondents reporting a decline in volumes over the month.

Scotland, Northern Ireland and the North East region were the only areas to suggest stronger transactions, whereas sales trends were either flat or negative across the rest of the UK.

Thomas van Straubenzee, managing director at prime London real estate agency VanHan, said: “There has been a steady level of activity in the PCL market recently, with several large deals completing over the last few months.

“There are a number of big buyers in London, which is a good indication of the strength of the market.

“These include Indian, Chinese, Russian and American families, who are looking to take advantage of the favourable exchange rate.”

“We believe there are some excellent investment opportunities in prime central London at the moment. When there have been dips in the market previously, buyers have been, for the most part, rewarded in the long term and so we expect to see a renewed focus on long-term investment.”

Sales expectations nationally remain flat over the coming three months, but respondents are more optimistic over the year to come with activity anticipated to pick-up across all regions/countries over the next 12 months. London recorded its first positive reading since last June.

New instructions continued to decline nationally, extending a run of 23 months.

Looking at prices, 8% more saw them rise in December.

In the lettings market, tenant demand continued to fall during December, albeit the pace of decline eased somewhat from the month before.

Meanwhile new landlord instructions declined at a slightly faster rate. As a result, rental growth expectations were modestly positive for the three months ahead (9% more were positive).

Van Straubenzee added: “We have always maintained that London has long been attractive to both domestic and foreign investors and we strongly believe this will continue to be the case.”

“The PCL market hasn’t had the smoothest ride over the last few years, predominantly due to tax increases, the EU referendum, changes to non-dom property rules (Inheritance Tax, for example), and more stringent regulations in the owner-occupier and buy-to-let mortgage markets.

“We expect that the market will continue at similar levels for the next couple of years, although, that said, we are optimistic that the very best stock will continue to attract strong interest, particularly from foreign buyers.”

“We noticed an upswing in the number of clients wishing to sell their properties off-market last year and this looks set to continue in 2018. Sellers of prime residential property don’t want to enter a crowded market, nor do they want a pricing record in the public domain.”

Source: Mortgage Introducer