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Real estate reviewed

Right at the beginning of this year, we predicted that the UK housing market would be shackled by political and economic uncertainty.

Looking back, the uncertainty we have been dealing with has been greater than we ever expected.

Amid all the Brexit brokering and backstabbing, we have seen the number of buyer enquiries with estate agents fall in 20 months out of the past 22, according to the Royal Institute of Chartered Surveyors survey. Many buyers have simply been sitting on their hands, choosing to hold back on buying a home until the outlook is clearer.

Potential sellers have bunkered down too, with many choosing to extend or renovate in favour of taking on the potential risk of moving to a different property.

It is no wonder then that transaction levels are 8 per cent lower now than in the year before the referendum vote.

Buyer numbers hit hard

First-time buyers buck this trend: their numbers have grown 11 per cent since June 2016, boosted by support from Help to Buy and the bank of mum and dad. But cash transactions have fallen 12 per cent, as these more discretionary buyers sit and wait for greater certainty.

Mortgaged home mover activity has also fallen; mortgage lending regulation has made trading up the ladder much harder.

Buy-to-let investors have been worst hit – their numbers have halved since before the referendum, reflecting a tougher tax regime and stricter lending rules.

With transaction activity slowing, it is perhaps surprising that house prices have continued to grow: 1.9 per cent in the year to November, according to Nationwide. However, if one compares that growth with inflation – 2.2 per cent over the same period – the picture becomes clearer. House prices at a national level look to be marking time.

Regional variations

But the story varies across the country. In Yorkshire and Humberside, for instance, values grew by 5.8 per cent in the year to September. There, mortgage loan to income ratios sit at 3.2 and the average deposit is relatively modest, at £27,000.

Contrast this with London, where affordability is stretched to its absolute limit after registering price growth in excess of 70 per cent over the past 10 years. With an average deposit of £118,000 and loan to income ratios already at 4.0, it is no wonder prices were stagnant in the capital this year.

It is a similar story in the south of England, with price growth rippling out further to the Midlands and North.

The next few months will likely see some of the lowest housing transaction levels since the credit crunch as Brexit angst reaches a crescendo.

The market will have to rely on its three constant friends: death, debt, and divorce.

Looking further ahead, the outlook is mixed. On the one hand, the outcome of Brexit negotiations will provide some much needed certainty to an apprehensive market, whatever that outcome is.

On the other hand, interest rates are likely to rise from today’s historic lows, putting more pressure on affordability.

On balance between these two drivers, we expect to see a bounce in value growth in 2020, but only a limited one.

That bounce will be most pronounced in those areas retaining some affordability wriggle room.

The north-west and Yorkshire & Humber look particularly well placed to benefit. London, on the other hand, will remain constrained regardless of any Brexit outcome, simply because affordability there is so stretched, meaning five-year house price growth in the capital and its commuter belt will be in single digit territory.

The balance of improving sentiment and tightening affordability means we are unlikely to see any sharp resurgence in transaction activity.

We predict that transaction levels in five years’ time will be roughly the same as they are now, albeit with even less activity from buy-to-let investors as tax relief on their mortgage interest payments recedes further.

This will put upwards pressure on rents, particularly in supply-constrained London, where average rents are expected to rise faster than incomes.

In a market where home ownership looks set to remain out of reach for many aspiring owners, we need policies that secure institutional investment in the build-to-rent sector, to provide quality rental homes, greater security of tenure and to help rebalance supply and demand.

Source: FT Adviser

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Northern Ireland set to enjoy strongest UK house prices growth

NORTHERN Ireland is set to enjoy the strongest growth in house prices in the UK over the next four years, with residential property prices predicted to lift from their current average value of around £128,000 to reach £154,000, according to PwC’s latest UK Economic Outlook (UKEO).

The report points to the local market being more resilient than the rest of the UK, where there will be some softening of national property price growth between now and 2022.

Data on annual property price growth reveals thatNorthern Ireland is currently the seventh highest among the UK regions, with PwC forecasting the region will rise to third in 2019 and will top the list by 2022.

But even if prices do increase at this rate, they will still be around 28 per cent lower than the 2007 pre-recession average.

The UKEO says the the Northern Ireland economy is set to growth by a mere 0.8 per cent in 2018 and around 1.2 per cent next year – still well below the forecast UK average of 1.3 per cent and 1.6 per cent, making it the slowest-growing of the UK’s 12 regions.

PwC NI chairman and UK head of regions Paul Terrington said: “The Northern Ireland property market continues to perform better than expected, with a positive balance between earnings and house prices. But prices remain well below their peak level in 2007, and this gap is unlikely to close in the near future.

“We have also considered the effect of future interest rate rises, and believe that only around 11 per cent of UK households would be immediately affected if rates increased.”

The PwC report also highlights the impact that artificial intelligence (AI) may have on UK employment in the two decades to 2037 and, while estimates suggest the overall net effect will be broadly neutral, this is not true for individual sectors.

The most positive effect is seen in the health and social work sector, where PwC expects the number of jobs to increase by nearly one million, equivalent to around 20 per cent of existing jobs in this sector.

On the other hand, the report estimates that the number of jobs in the manufacturing sector could be reduced by around 25 per cent due to AI and related technologies, representing a net loss of nearly 700,000 jobs.

Applying this formula across the UK regions suggests that the impact on Northern Ireland will be broadly neutral, amounting to a net loss of around 4,000 jobs by 2037, considerably less than other industrialised regions.

Mr Terrington said the overall outlook for 2019 was mixed, adding: “The UK economy held up well in the six months after the EU referendum, but growth slowed from early 2017 and continued into early 2018, while higher inflation has squeezed real household incomes, which has taken the edge off consumer-led growth.

“The stronger global economy should continue to have some offsetting benefits for net exports this year, although there are downside risks in 2019 and beyond if recent US tariff policy changes were to escalate into a wider international trade war.

“Brexit-related uncertainty and the absence of any UK-EU agreement may also continue to hold back business investment across the UK while the absence of an Executive and the continued uncertainty around post-Brexit border controls impacting inward and indigenous investment and general business confidence.”

He went on: “The next 12 months will be crucial for Northern Ireland’s medium-term growth, but as at today, the signs are not especially hopeful.”

Source: Irish News

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UK house prices edge up in May after April slump – Halifax

The UK housing market remains subdued, however, house prices in the three months to May were 1.9 per cent higher than the same period a year earlier, according to survey by UK bank Halifax.

On a monthly basis, prices rose by 1.5 per cent in May, partially reversing the 3.1 per cent decline in April.

Halifax’ April housing Index showed that house prices fell over three per cent, following a 1.6 per cent rise in March.

However, the May figures represent something of a slow down from the 2.2 per cent annual growth seen in April, while still being 0.2 per cent higher than in the preceding three months.

The average house price in the UK is now £224,439, Halifax said.

Russell Galley, managing director at Halifax, said: “These latest price changes reflect a relatively subdued UK housing market.

“After a sharp rise in January, mortgage approvals have softened in the past three months, whilst both newly agreed sales and new buyer enquiries are showing signs of stabilisation having fallen in recent months.

“The continuing strength of the labour market is supporting house prices. With interest rates still very low we see mortgage affordability at very manageable levels providing a further underpinning to prices.”

Howard Archer, chief economic adviser at the EY ITEM Club said: “The ongoing softness in house prices comes amid still lacklustre housing market activity.

“The further dip in mortgage approvals in April – albeit slight – looks particularly disappointing given housing market activity that they had likely been adversely affected in March by the severe weather.

“April’s mortgage performance indicates that housing market activity remains muted as it pressurized by still limited consumer purchasing power, fragile confidence and likely further gradual Bank of England interest rate rises following November’s first hike since 2007.”

However, Jeremy Leaf, north London estate agent and a former RICS residential chairman, was somewhat more positive on the Halifax numbers: “At first glance, these figures look disappointing with Halifax reporting annual house price growth softening in May.

“Once again we are seeing the rather topsy turvy pattern to the housing market – up one month, down the next. It is the same on the ground – no real pattern, with buyers and sellers negotiating hard but not always successfully.

“Looking forward, we expect more of the same and possibly slightly better as we await figures reflecting the crucial spring market period.’

Source: City A.M.

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Homeowners will be able to add two storeys to their property

Homeowners, buy-to-let landlords and property developers could be given the go-ahead to build upwards by two storeys to extend their property.

Secretary of State for Housing, Communities and Local Government, Sajid Javid, said the government will make planning guidance more flexible in order to help fix the broken housing market and boost supply of housing stock.

The move could also ease pressure on the green belt if it becomes easier to build upwards in towns and cities.

Homeowners would still need planning permission to build two extra storeys under the proposals, but guidance to local authorities is likely to be changed, so they are encouraged to approve such applications.

Mark Hayward, chief executive of NAEA Propertymark, said he welcomed any move to create housing stock. “The market is in crisis with a severe lack of available properties, which is pushing prices up and pricing first-time-buyers (FTBs) out of the market.

“The fact that this will enable existing residential areas throughout the UK to expand is especially welcome, as it should increase stock in the areas which most need it, rather than being confined to more expensive urban areas.”

Paresh Raja, CEO of Market Financial Solutions (MFS), added that landlords and property developers could also take advantage of the more relaxed guidance, creating more rented accommodation, and benefitting tenants.

“In this sense, recent reforms to housing planning rules are a definite step in the right direction, and I believe this will have positive ramifications,” he said.

“Buy-to-let landlords can now consider adding additional storeys to their property, increasing the number of rental spaces on offer. At the same time, property developers can also look to build a further two storeys on existing developments, increasing the number of houses available on the market.

“Ultimately, this type of reform will only contribute to housing supply and will help alleviate current market demand.”

Source: Your Money

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Value of British property market has fallen by £62.7 billion since July, report finds

The average home across Britain has lost nearly £24 a day in value over the past three months, according to analysis by a property website.

Zoopla said a house price dip between the start of July and the end of September means the average property has decreased in value by £2,188 over the quarter, which equates to a fall of £23.78 per day.

Spokesman Lawrence Hall said: “We’ve seen a decline in house prices during the last quarter, which is potentially good news for first-time buyers.”

Zoopla calculates that the total value of the British housing market fell by £62.7 billion during the third quarter of 2017, making it now worth around £8.1 trillion.

But while values have fallen across England in the past three months, Scotland and Wales have bucked the downward trend, according to the website.

In Wales, the average home is worth £393 more than three months earlier, while in Scotland values have seen a £54 increase on average.

Caernarfon in North Wales was identified as the top-performing area in the third quarter, with price growth of 1.57% or £2,563 on average.

Within England, the North West has been the most resilient in terms of price falls, with values there edging down by 0.59% or £1,120 since July.

London, where housing affordability has become particularly stretched, has seen the biggest price falls over the period, with an average decline of 0.99% or £6,633.

Alton in Hampshire was identified as having the weakest house price growth in Britain in the third quarter, with property values falling by 2.17% or £10,900 on average.

Here are average property values across Britain in September, followed by the increase in cash and percentage terms over the previous three months, according to Zoopla:

  • Wales, £182,773, £393, 0.22%
  • Scotland, £187,084, £54, 0.04%
  • North West England, £189,552, minus £1,120, minus 0.59%
  • North East England, £186,765, minus £1,341, minus 0.71%
  • South West England, £295,011, minus £2,358, minus 0.79%
  • East of England, £355,941, minus £2,988, minus 0.83%
  • South East England, £406,271, minus £3,575, minus 0.87%
  • East Midlands, £209,416, minus £1,867, minus 0.88%
  • Yorkshire and the Humber, £172,199, minus £1,572, minus 0.9%
  • West Midlands, £218,398, minus £2,130, minus 0.97%
  • London, £665,605, minus £6,633, minus 0.99%

Source: iTV