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Mixed messages cloud the picture on housing market for year ahead

The housing market has been sending out some mixed messages recently. On the one hand there’s talk of consumers being reluctant to make big decisions amid wider economic uncertainty and a squeeze on living costs, but on the other hand, house prices have continued to climb in many areas, with reports of a lack of properties to choose from in popular locations.

So what will happen to house prices in 2018? In general, predictions have ranged from prices being flat across the UK to edging up by a few percentage points by this time next year. Economists believe the squeeze on incomes from inflation will limit what buyers are willing to pay.

Robert Gardner, chief economist at Nationwide Building Society, says: “How the housing market performs in 2018 will be determined in large part by developments in the wider economy. Brexit developments will remain important, but hard to foresee.”

This year has seen big differences between areas of the UK in how the housing market has performed. The Royal Institution of Chartered Surveyors has said pricing in Scotland, Wales, Northern Ireland and north-west England has been resilient compared with some other places.

While London has seen a cool-down, some other major cities, where housing affordability is less stretched, have been putting in a relatively strong performance.

Richard Donnell, insight director at property analysts Hometrack, says: “The likes of Manchester, Birmingham and Glasgow have seen market activity increase and this has delivered above-average price growth of 6 per cent to 8 per cent for the last 12 months.”

When it comes to sealing a deal, more house sales are going through at less than the original price sellers had wanted, according to estate agents. For some buyers, they may find there’s more room for negotiation, depending on what the local housing market is like at the time.

But the supply of properties on the market is still tight in many places, so sellers in these areas may feel more confident in holding firm on price.

Across the UK, 85 per cent of properties sold for less than the asking price in November, according to the National Association of Estate Agents – the highest proportion since its records started in 2013. One in eight (12 per cent) properties sold for the asking price and 3 per cent sold above the asking price.

As regards mortgages, despite the Bank of England hiking the base rate from 0.25 per cent to 0.5 per cent in November, the rates on offer are still “extremely low”, says David Hollingworth from broker London & Country Mortgages.

He says some mortgage borrowers will be receiving their annual statements in January, which can help them to take stock of whether they should make switching mortgage their New Year’s resolution or whether they are already on a good deal.

In some good news for first-time buyers, Hometrack predicts this sector will make up the largest group of buyers in 2018.

Donnell says: “We expect first-time buyers to be the largest group of buyers in 2018 accounting for over one in every three sales and overtaking existing home owners as new purchases by investors fall in the wake of tax changes.”

Source: Scotsman

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Tougher landlord stress tests split lending market

Tougher stress tests and underwriting standards polarised the buy-to-let market in 2017, according to Coventry Building Society.

Kevin Purvey, director of intermediaries at Coventry, said the more stringent regulatory standards from the Prudential Regulation Authority (PRA) had split the market into lenders that will lend to limited companies and those that will not.

The PRA brought in the tougher affordability guidelines on 1 January, which led most lenders to raise their interest coverage ratio – the amount of monthly income required to cover borrowers’ repayments – from 125 per cent to 145 per cent of the mortgage interest.

Then, on 30 September, the PRA told lenders to take into account the viability of borrowers’ entire portfolios when they apply for a new mortgage.

Landlords have also been hit by the government’s decision to phase out tax relief on mortgage interest by 2020.

Many amateur landlords have since stopped adding to their portfolios, while borrowing via a limited company has surged in popularity for those looking to avoid the scrapping of tax relief.

Mr Purvey predicted the tougher underwriting standards would have an impact on the market for years to come.

He said: “Lenders’ approaches to higher stress rates and new rules for lending to portfolio landlords have made the market more complicated for landlords and brokers.

“These changes have seen the market become increasingly polarised between those who will lend to landlords registered as a limited company and those who don’t.”

But while borrowing via a limited company allows landlords to claim tax relief, concerns have been raised that higher interest rates on some products could ultimately lead to them paying more than they would as an individual.

This could have implications for brokers if clients who have borrowed via a limited company complain about the advice they received.

Source: FT Adviser

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UK mortgage approvals hit 15-month low in November

LONDON (Reuters) – British banks approved the fewest mortgages in 15 months in November, when the Bank of England raised interest rates for the first time in more than a decade, industry figures showed on Thursday.

Banks approved 39,507 mortgages for house purchase last month, down from 40,417 in October and 5 percent fewer than in November 2016, trade association UK Finance said.

At the start of the month, the Bank of England raised interest rates from a record low 0.25 percent to 0.5 percent.

“Housing market activity remains under pressure from squeezed consumer finances and fragile confidence, and it may well have taken a further dent in November from the Bank of England lifting interest rates,” Howard Archer, chief economic adviser to the EY ITEM Club consultancy, said.

A Reuters poll of economists last week suggested British house prices will rise little more than 1 percent next year, with those in London set to fall for the first in eight years.

Last month, finance minister Philip Hammond sought to offer voters some relief with spending plans that focused on housing, including scrapping a property purchase tax for most first-time home-buyers.

“Even if successful, (Hammond‘s) measures to boost house building in November’s budget will take time to have a significant effect so are unlikely to markedly influence house prices in the near term at least,” Archer said.

More comprehensive lending figures from the Bank of England are due next Thursday.

Source: UK Reuters

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New £2.9m bridge will create link between Notts town and village

Funding for a multi-million pound bridge that will support the development of hundreds of new homes has been approved.

The new pedestrian and cycle access overpass will be installed over the A46, connecting the former RAF Newton site – where 550 new homes are proposed – with a plot of land also proposed for new housing in Bingham.

A total of 317 homes could be built on the plot of land, just west of Chapel Lane, by developer Barratt Homes.

The planning application was submitted to Rushcliffe Borough Council in September, and is due to be discussed by its planning committee at a meeting in the new year.

The council has been awarded £2,910,000 by Highways England – the government-owned company with responsibility for the operation, maintenance and improvement of the motorways and trunk roads in England – to build the bridge.

The bid to secure the funds began two years ago, and it was confirmed on December 28 that it had been awarded from Highways England’s Growth and Housing fund.

Bingham Town Councillor Sue Hull welcomed the news of the bridge being built, and said it would “connect” both Newton and Bingham together.

She said: “The borough council applied for the funding of the bridge over two years ago now.

“It is needed for the area. The residents on the RAF Newton site feel isolated, as the nearest shops for them are in East Bridgford.

“This new bridge will connect the two sides together. People will be within walking distant of supermarkets, and the post office.

“It will be a quick and direct link to Bingham’s town centre, and will have a huge positive impact on the people from the Newton side.”

It is not known when work on the bridge will start.

The developments are part of the first phase of Rushcliffe Borough Council’s plan to build up to 1,050 new homes as well as shops, a community centre, primary school and allotments and parks in Bingham

Leader of Rushcliffe Borough Council Councillor Simon Robinson said: “Rushcliffe is delighted to be awarded this funding from Highways England Growth and Housing Fund.

“The link bridge directly supports the development of 550 new dwellings proposed at RAF Newton.

“It will provide direct pedestrian and cycle access across the recently dualled A46 between the RAF Newton and Bingham development sites.

“This will mean the current and future residents of the RAF Newton settlement will have sustainable access to a wide range of retail and commercial amenities on offer in Bingham, and better access to employment opportunities in both the town itself and the greater Nottingham area through improved access to public transport links.

“RAF Newton is a key site on the A46 and the funding for the bridge brings us a step closer to realising our targets and ambitions for this key growth corridor.”

Source: Nottingham Post

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Mortgage sales showed growth in UK in November, particularly buy to let sector

Mortgage sales in the UK rose by 4.1% or £637.4 million and up by 3% or £470 million year on year, the latest intermediary marketplace data shows.

Buy to let mortgage sales in November increased by 10.8% or £334.1 million compared to October while residential figures were also up, increasing 2.5% or £303.3 million on the previous month.

The data from Equifax Touchstone shows that the majority of regions across the UK witnessed positive mortgage sales growth in November. Wales led the way with a rise of 9.9%, followed by the South East at 8% and the Midlands at 7.5%. The North West and London were the only regions to see a drop in sales, down by 2.3% and 2.6% respectively.

‘Mortgage sales in the UK have once again remained strong. Buy to let figures in particular have continued to gain momentum, enjoying positive growth for a fourth consecutive month,’ said John Driscoll, director at Equifax Touchstone.

He pointed out that the outlook for the market remains unclear but the firm is expecting that mortgage sales will continue given the current increasing difficulty in getting on the housing ladder and the subsequent increase in demand for rental properties.

‘The full impact of the recent rate hike on sales is yet to be fully felt and even the abolition of stamp duty for first time buyers announced in November’s budget was not received as wholly positive; some within the industry believe house prices may actually rise as a result, which could negatively affect mortgage sales,’ he pointed out.

The data, which covers the majority of the intermediated lending market, also shows that the average value of a residential mortgage in November was £191,425 compared to £190,627 in 2016 and in the buy to let sector it was £144,537 compared to £163,115 in 2016.

Source: Property Wire

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Government to tell rogue landlords: ‘shape up or ship out’

A package of measures to crack down on rogue landlords, including a tougher licensing regime for house shares and a minimum size for bedrooms, has been announced by the government.

Alok Sharma, the housing minister, said “far too many” tenants were being exploited by unscrupulous landlords, who would now have to “shape up or ship out”.

The measures come after the government was accused of undermining efforts to protect private sector tenants by curtailing the powers of local authorities to introduce landlord licensing schemes. Figures published two months ago under the Freedom of Information Act revealed that most councils had failed to secure a single landlord prosecution.

Meanwhile, in an interview with the Independent, the Labour leader, Jeremy Corbyn, said at the next election his party would scrap laws that allowed landlords to evict tenants under so-called no-fault evictions.

Ministers are to seek approval from parliament to widen the criteria for landlords in England, who need to secure a licence when renting out a “house in multiple occupation” (HMO). There are about 500,000 HMOs in England, and national mandatory licensing applies only to properties that are three or more storeys high.

This is to be changed so that many flats and one- and two-storey properties would be subject to licensing, provided they are occupied by at least five people from two or more households. The move will affect about 160,000 houses.

Rules have also been proposed that would set minimum size requirements for bedrooms in HMOs to prevent overcrowding. Rooms used for sleeping by one adult would have to be no smaller than 6.51 sq metres (70 sq ft), and those slept in by two adults would have to be no smaller than 10.22 sq metres. Rooms slept in by children aged 10 or younger would have to be at least 4.64 sq metres in size.

As part of the licensing requirements, councils will be able to make sure only rooms meeting the standard are used for sleeping.

The Department for Communities and Local Government said there would also be new rules to help people “fed up” with living near shoddily maintained properties without proper bins and rubbish dumped everywhere. Ministers intend to introduce a mandatory condition in HMO licences requiring landlords to comply with local council rules on refuse and recycling.

The government has set out details of criminal offences, which would automatically ban someone from being a landlord. From April, an individual convicted of offences including burglary and stalking can be added to the database of rogue landlords and barred from renting out properties.

Sharma said: “Through a raft of new powers, we are giving councils the further tools they need to crack down on these rogue landlords and kick them out of the business for good.”

This month, however, Newham council in London – which has arguably led the way in tackling bad landlords, with 331 prosecuted as of last October – accused the government of standing in the way of councils that were trying to protect their tenants.

In 2013, Newham became the first council in the country to introduce borough-wide licensing, requiring all landlords to licence all properties offered for private rent. However, in 2015 the government introduced legislation requiring ministerial permission to introduce such schemes, while the Newham scheme renewal a few weeks ago had conditions placed upon it – one part of the borough was excluded – and was also delayed unnecessarily, resulting in a gap of two to three months between the end of the old scheme and the start of the new one, according to the council.

Sir Robin Wales, mayor of Newham, has called on the government to “remove this bureaucratic and anti-democratic piece of legislation, and let councils get on and introduce the right schemes to protect their private sector tenants from rogue landlords”.

Source: The Guardian

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Why British residential property remains a good bet in 2018

British residential property has long been viewed as a very strong asset class for investment. While there have been ups and downs along the way, such as the price crash in the early 90s, it has generally offered excellent long-term returns.

The market’s reputation has taken something of a knock recently, however, which has been driven by Brexit-related uncertainty and a slight cooling in price growth. This is a temporary blip and is unlikely to dampen the market in the long-run. Rather than be deterred, I firmly believe that investors should embrace some of the excellent opportunities this market presents.

The Brexit vote in June 2016 is the starting point for this slight faltering of faith in the residential market. In the run up to the referendum vote, both house prices and foreign investment in the UK were at record highs. However, a somewhat surprise result  signified a break with the status quo and ushered in economic uncertainty, and this soon led to concerns about whether price growth could be sustained.

–UK inflation: where’s it heading in the long term?

However, these anticipated shockwaves failed to materialize. House prices have continued to rise ever since the referendum, illustrating that demand for residential property remains high and providing investors with strong capital returns. Rental yields across much of the country have also continued to perform well, with ever greater numbers of tenants looking to the private rented sector to meet their needs.

For some investors, the vote has actually opened up new opportunities. The devaluation of Sterling against currencies like the Euro, Dollar, and Renminbi has meant that UK assets offer better value than they did before the vote. This provides overseas investors with excellent value for money, and has also kept important capital flowing into the country’s property market – ensuring that developers can successfully finance the projects that increase the UK’s housing stock.  Similarly, a sustained low Bank Rate has also kept investors’ mortgage costs down.

While Brexit might not have been the doomsday event for the property that some expected, there are also concerns in several quarters that the market has run out of steam. There has been some evidence that the London market has cooled off slightly in recent months – particularly at the upper-end, which has been heavily affected by the changes to stamp duty on second homes. However, other parts of the country also offer world class property investment opportunities. Manchester, Liverpool and Leeds continue to provide strong returns, and our recent Global Real Estate Outlook found that Birmingham is set to become a global property investment hotspot. This is due to a combination of low prices, high yields, and a rapidly growing local economy. The UK residential property market therefore continues to offer investors with a variety of different portfolio sizes, risk appetites and capital availabilities a diverse range of different propositions.

–Which way will property prices go in 2018?

While the additional stamp duty levy on second properties and recent changes to landlords’ tax relief remain in place, the political environment towards property investment is less highly-charged than it was pre-Brexit. The recent Autumn Statement, for example, was notable for the absence of significant policies directed at landlords. While punitive pre-Brexit policies remain in place, policymakers’ attentions now appear to be more focused on improving first-time buyers’ prospects and increasing housebuilding than cracking down on investment portfolios.

Looking forward, there are a few risks facing the UK’s residential sector, but many of these look increasingly unlikely to come to fruition. While economic turbulence resulting from the UK and EU failing to agree upon a divorce bill could have derailed the economy, it now appears that a reasonable deal that works for both parties in in sight. This will encourage stability in the market. Furthermore, the imbalance between supply and demand in the property market will support both a baseline of rental yields and house prices. With the UK’s population continuing to grow, this trend is unlikely to be reversed anytime soon.

Although the economic outlook often changes in the short-term, the reality is that the UK will continue to be a great long-term destination for residential property investment for some time.

Source: Money Observer

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British Pound Advances On Dollar, Slips Against the Euro in Thin Holiday Trade

Pound Sterling on front foot in final week of 2017. Economic and political news flow is thin but there’s scope for low volumes to exaggerate moves in FX.

Sterling overcame resistance from a weak US Dollar Wednesday, although a more robust performance against the greenback by the Euro helped push the Pound-to-Euro rate down by a fraction – reversing an earlier gain for the pair.

Price action comes amid a light flow of economic data and low volumes in foreign exchange markets as London, the main centre for currency trading, operates with a skeleton crew throughout much of the current week.

“The UK has returned from the long holiday weekend, though with another one coming up and the Pound in the middle of a bigger range, there doesn’t appear to be much incentive for the market to be wanting to make any big pushes,” says Joel Kruger, an FX strategist at LMAX Exchange.

The Pound was quoted 0.16% higher at 1.3394 against the US Dollar by the London close while the Pound-to-Euro rate was marked 0.20% lower at 1.1255. The Euro-to-Dollar rate was quoted 0.35% higher at 1.1899.

“The market has been consolidating but ultimately looks poised for a continuation of the 2017 uptrend, with a higher low waiting to be confirmed at 1.3027 on a break of the 2017 high at 1.3658, Kruger adds, referring to the Pound-to-Dollar rate.

“This will then open the door for a measured move upside extension back above 1.4000 and towards 1.4200 into 2018,” Kruger adds, referring to the Pound-to-Dollar rate.”

British Pound Advances On Dollar, Slips Against the Euro in Thin Holiday Trade Commercial Finance Network

Above: Pound-to-Euro rate shown at hourly intervals.

2018 Agenda: UK Economy and Brexit

The ebb and flow of economic growth and the stop-start march of Brexit negotiations have been front and centre for the Pound in much of 2017.

Similar will be true for the currency in 2018, with traders looking to see talks on future trade and transition opened once into the New Year, while hoping for another interest rate rise from the Bank of England.

“For the next week and possibly two, we do not expect new Brexit developments as the U.K. Parliament isn’t expected to debate on the issue until mid January,” says Kathy Lien, a managing director of foreign exchange strategy at BK Asset Management.

“There are no major U.K. economic reports scheduled for release until next week at which point the pace of growth and more specifically the PMI reports will be in focus.”

Next week sees January and the New Year get underway with the monthly surveys of purchasing managers across the manufacturing, construction and services industries, which will be among the final inputs to expectations for economic growth in the final quarter and 2017 as a whole.

Talks around a possible “transition deal” will begin in January, with markets hoping to see a quick agreement struck in the first quarter, before discussions move onto future trade ties after the next European Council meeting.

Simultaneously, markets will be positioning for the next round of Bank of England growth and inflation forecasts, due for release in February. These will be key for the market’s evolving expectation of future interest rate decisions.

The Sterling Overnight Index Average (SONIA) rate most recently implied an expectation by the market that the Bank of England will wait until February 2019 before raising UK interest rates again.

However, the UK economy is recovering its lost momentum, wage growth is picking up and inflation of 3.1% is still more than 100 basis points above its target, which could mean there may be scope for the BoE to signal an earlier move is possible once into the New Year.

This would be positive for the Pound, particularly when considering that markets are already braced for three Federal Reserve hikes in 2018 and that the European Central Bank is yet to announce a full exit from its quantitative easing program.

Source: Pound Sterling Live

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House prices soar in West Bromwich, with the average home now costing £150k

House prices rose by almost 10 per cent in West Bromwich during 2017 – putting the town in the top 10 areas in the UK for property price growth.

Homes cost almost £150,000 on average – 9.5 per cent higher than a year ago.

The latest analysis of the property market, from Rightmove, sees the town ranked alongside Suffolk and Hampshire in terms of places that have seen the biggest price rises.

Councillor Bawa Dhallu, who represents West Bromwich Central, said he hoped the news would encourage people to move to the town.

He said: “This is very good news and something that I would welcome. In recent years we have had a drive on getting more people to come here and more housing available. Therefore, the property area is something we are looking to work on all the time.

“We want to encourage West Bromwich as being a great place to work, live and invest. With house prices soaring then this obviously helps with the investment of the town too.”

West Bromwich was ranked ninth below leafy market town March, in Cambridgeshire, with an average house price of around £210,000 and a 9.4 per cent price growth.

At the top of the chart was Sudbury, in Suffolk, with a 13.1 per cent growth, alongside Sowerby Bridge, in West Yorkshire, at 12.5 per cent and Kendal, in Cumbria, at 10 per cent. Bristol was the most searched-for place outside London this year for both buyers and renters.

Miles Shipside, director of Rightmove, said: “Although prices have grown at a muted rate of 1.2 per cent nationally this year, there are a number of local markets where strong demand and short supply has led to pretty heady price rises, especially in areas where homes are relatively more affordable than some of their nearby cities.”

The West Midlands was projected to be one of the UK’s house price hot spots earlier this year, according to a report by accountancy firm PwC.

It meant the average home was set to be around £183,000, £8,000 higher than in 2016, and could rise to more than £208,000 by 2025.

Source: Express and Star

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Six factors influencing the UK property market in 2018

1. Interest rates will stay low

Another 0.25% hike is expected in late spring, taking the Bank of England base rate to 0.75%. That will add £22 to the typical £175,000 tracker mortgage, but with more than half of all borrowers on fixed rates, it will probably go unnoticed by most homeowners. With the economy weak, the market does not expect any further hikes across the year. Mortgages will remain cheap although, with inflation outpacing wage rises, will still very much feel like a burden.

2. Housebuilding will rise

New home building has picked up with 217,000 homes coming on to the market in 2016-17, up 20% on the year before. But that only brings the total back to levels seen before the financial crash, and a long way short of the 300,000 target set by the government. If “Brexodus” migration numbers continue to fall and construction activity picks up further, the supply side of the housing equation will be less pressing than in previous years.

3. Landlords will lose out to first-time buyers

First-time buyers should be in the ascendant in 2018, with lending for buy-to-let in retreat. As recently as 2015 landlords snapped up 120,000 houses using buy-to-let finance, but the Council of Mortgage Lenders expects this to fall below 80,000 in 2018. Rising taxes and tougher lending criteria are slowly tipping the balance in favour of homebuyers rather than property speculators.

4. Stamp duty cut and help to buy will continue propping up developers

Philip Hammond abolished stamp duty for all properties up to £300,000 bought by first-time buyers with immediate effect in the budget. The move will save four out of five first-time buyers up to £5,000. But the Office for Budget Responsibility predicts that it will raise prices by 0.3%, with the increase coming in 2018. Meanwhile, the help-to-buy scheme has been given another £10bn boost, providing financing until 2021, although critics say it has been squandered in chasing up the price of new-builds.

5. Tenants may find some relief, at last

After years of galloping rent increases, landlords are finding they can’t squeeze tenants any further. Average UK rents rose by less than 1% in 2017, and fell in London. With salaries under pressure from inflation, few expect real rent increases in 2018. Tenants will applaud the new ban on letting agency fees – when it eventually arrives. There is still no date fixed for the ban to come in, but the government insists it will happen some time in 2018.

6. The rich will go higher and higher 

The 56 storeys of One Nine Elms will race up London’s skyline during 2018, with the first buyers (prices started at £800,000 at launch) moving in in 2019. But its crown as the city’s highest residential tower will be swiftly grabbed by the Spire in Docklands. It will have 67 storeys housing 861 suites (many at £2m-plus) and will be completed in 2020.

Source: The Guardian