Halifax figures confirm UK house price slowdown

The latest Halifax house price figures show that growth is continuing to slow, according to Best Advice.

In the three months leading to February 2018, prices were 1.8% higher than the three months leading to February 2017. This is slower than the annual growth of 2.2% recorded in January 2018.

House prices in December – February were 0.7% lower than in the preceding three months and prices grew only 0.4% on a monthly basis in February, after two consecutive monthly declines.

Managing Director of Halifax Russell Galley said: “House prices continue to remain broadly flat, as they have since the end of last year. The annual rate of growth has slowed from 2.2% in January to 1.8% in February, the lowest rate of growth since March 2013.

“The labour market continues to perform strongly with the number of people in employment rising by 88,000 in the three months to December. Notably, this is almost entirely accounted for by full-time jobs. The strength of the jobs market may finally be benefitting wage growth, with the annual growth rate accelerating from 2.3% in November to 2.8% in December. However, earnings are rising at a slower rate than consumer prices.

“Despite the November rise in the Bank of England Base Rate, mortgage rates continue to stay low by historical standards. While we expect price growth to remain low, the low mortgage rate environment, combined with an ongoing shortage of properties for sale, should continue to support house prices over the coming months.”

Land Registry analysis quantifies offshore property ownership

One in four properties in England and Wales owned by overseas firms is held by an entity registered in the British Virgin Islands (BVI), according to BBC News.

The tiny archipelago located in the Caribbean is home to companies that own 23,000 properties between them, making it the offshore location with the greatest number of properties. The properties are owned by 11,700 firms registered in BVI, which has a population of just 30,600.

Analysts from the BBC looked at data from the Land Registry relating to overseas property ownership. Around 97,000 properties in England and Wales are held by overseas firms, as of January 2018. The finding will add to claims that offshore tax havens under British control are a means for wealthy individuals to avoid paying tax.

The next largest concentration of offshore ownership is Jersey, Guernsey and the Isle of Man. Other popular places to register property ownership companies are Hong Kong, Panama and Ireland.

The analysis was produced following a change in rules over the record for England and Wales last November, which saw the Land Registry become public and free to access.

The research found that almost half (44%) of all properties owned by overseas companies in England and Wales are in London, valued at a total of £33.9bn; more than one in ten properties (11,500) were located in the City of Westminster and 6,000 were in Kensington and Chelsea.

The government of BVI has denied that the country is a tax haven and claims there are many practical reasons why UK properties are owned by companies located on the islands, such as the opportunity to bring together multiple investors.

UK mortgage approvals drop to lowest rate in five years

Mortgage approvals in the UK have dropped to their lowest level for five years, according to BBC News.

Figures from UK Finance indicate that just 36,115 seasonally-adjusted mortgages were approved in December 2017, the lowest figure since April 2013. The reduction took place despite a cut in stamp duty for first-time buyers which came into effect in November 2017.

Experts have said the stamp duty is unlikely to have made an impact in the figures, but some borrowers may have been deterred by the rise in interest rates to 0.5% by the Bank of England in November. This in turn led to an increase in rates on standard variable mortgages from December.

Dr Howard Archer, chief economic adviser to the EY Item Club said: “December’s marked drop in mortgage approvals suggests that already pressurised housing market activity took a further hit from the BAnk of England raising interest rates in early November. Housing market activity has been under pressure from squeezed consumer finances and fragile confidence.”

In December 2017 the amount approved by UK banks in mortgage lending was £7.02bn – the lowest since September 2016.

UK government plans to build 300,000 homes a year

The UK government plans to build 300,000 homes a year in a bid to ease the housing crisis, according to BBC News. Chancellor Philip Hammond has said the pledge will be made in his budget next week.

Hammond said there was no “single magic bullet” that would improve housing supply and ruled out the government simply pouring money into possible solutions. Instead, developments with planning permission will be speeded up and smaller firms will be given more help.

The shortage of affordable housing in the UK is likely to be a core theme of the Chancellor’s budget, with younger people facing a particularly tough challenge to get on the housing ladder. Hammond  has said the situation for young people is “not acceptable” and that the government would “keep its pledge to the next generation.”

While the Chancellor agreed that 300,000 new homes should be built annually, there was no commitment to meet the Communities Secretary Sajid Javid’s call for £50bn to fund a house-building programme. Last year, 217,350 “additional dwellings” were built in England.

As well as speeding up the process of building where planning permission has been granted, the government plans to pay to clean up brownfield sites for housebuilding, encourage local authorities to give small parcels of land to smaller developers and guarantee bank loans to small builders.

 

Can online estate agencies disrupt an entrenched property industry?

Offline agents have for a long time dominated the real estate industry and led many people to believe that they are unshakable. The revolution on how people buy and sell property began like one and a half decades ago in the UK with the arrival of portals such as Right move. The big debate currently is on the effects of the entry of online estate agencies on entrenched property industry.

Availing of information

In a traditional setting, homeowners had limited information on the value of their property. The realtor can take advantage of the customer’s ignorance and charge high commissions for a home sale. The today’s buyer has access to information online which one can use to make vital decisions. Such a customer does not see the need to pay an agent to give information that is available on various websites for free.

Speed

Some properties take days while others take months to sell at the hands of realtors. There have been a lot of bureaucracies in the property when it comes to payment. The clients need agents who can link them to financiers with a loan calculator readily available to speed up the process. They can also use virtual home staging apps which illustrate the sale process. Some online agencies can take 48 hours to close a deal.

Fees

The commissions that traditional brokers charge are sometimes unrealistic and can take large amounts of one’s property. The market now has people with competitive and new pricing models which make the market leaders rethink their strategies. It is common to find free property valuation portals which potential customers use and thus save some money.

Control

Traditional Realtors have isolated buyers and sellers for a long time in the selling process. With current innovations, the seller has control of the process which makes it fulfilling. The customer can take virtual tours to the dream home so as to make informed decisions. The seller can also schedule for home viewing without inconveniencing any of the parties.

Outdated marketing techniques

Use of brochures and sign posts have little exposure and can take ages before you land a client. The modern customers use online platforms due to the convenience and this is also a trend in property markets.

The largest share of the property market is still in the hands of traditional real estate agents. There are daily innovations and digital disruptions that come with direct and indirect impacts on this sector. High street agents are now using a combination of direct customers and online classifieds to sell properties.

How Might the Chancellor’s Autumn Statement Affect Landlords?

The year 2016 has definitely been a turbulent one for Britons, especially landlords. The property market is still reeling from the result of the EU referendum in addition to some of the new changes made by former Chancellor, George Osborne.

In November’s Autumn Statement, Osborne proclaimed that from April 2016, people in England and Wales will be expected to pay a 3% surcharge on their stamp duty band. The extra charges will be used to raise an excess of £1 billion for the treasury by 2021. This wasn’t received happily by landlords. The other changes revealed by the Chancellor included a prolonged Help to Buy scheme in London, and more funds for the Starter Homes initiative.

Landlords in the UK expressed disappointment at the perceived indifference to their plight from the Chancellor’s office regarding the 3% surcharge. Many believe it would quash investment in buy-to-let property. According to a survey conducted by Towergate, 59.6% of UK adults agreed that the new increase in stamp duty will stop them from buying a second property to let.

How it affects landlords

The stamp duty surcharge raised each band by 3 per cent. This means that if a property has a value between £125,000 and £250,000, and the stamp duty is 2 per cent, landlords of buy-to-let properties will pay 5%. Hence, for the standard buy-to-let purchase of £184,000, prospective landlords will have to pay an extra £5,520. This charge is exempt for commercial property investors with more than 15 properties.

Owners of buy-to-let properties were also hit by changes in the rules of Capital Gains Tax (CGT). According to the new law, starting April 2019, landlords will be expected to pay any CGT that is due within 30 days of selling a property, instead of waiting until the end of the tax year.

In addition to this, landlords will get a reduced rate of tax relief. The chancellor announced that from 2017, they will only be able to claim the basic 20 per cent tax relief – a reduction from the previous 40 per cent – on their mortgage fees.

Already, the fallout of the announcement led banks and other mortgage lenders to increase their lending criteria for buy-to-let homes. In subsequent events following the Brexit result, the property market is currently experiencing a decline in growth of house prices. In reaction to this, some banks have decided to limit buy-to-let lending completely.

According to Richard Sharp, an authority in the Bank of England’s committee on financial policy, the decision by banks is to enable them study the property market carefully before resuming ‘aggressive lending’.

The demand of buy-to-let borrowing has fallen sharply since, no doubt as a result of the additional surcharge.

How landlords will react

Many landlords will likely increase their property rents in a bid to pass on the cost to their tenants. The result of a survey released earlier in the year showed that 40 per cent of landlords intend to increase their rents in the coming months. Three-quarters of that figure admitted that they would do so to offset the reduced tax relief.

Government Help Scheme

In a bid to encourage home ownership and reduce housing benefits bill, the Chancellor announced that funds will be injected into the starter homes scheme. Home builders will receive a 20 per cent discount on prices £450,000 and above in London, and £250,000 in other locations.

UK building rained off in August 2015

Output in the UK construction industry during August this year was estimated to have declined by 4.3% compared with July 2015 and was also down by 1.3% compared with August 2014, according to the Office for National Statistics (ONS) Output in the Construction Industry report for August 2015 released on Friday.

This first year-on-year fall in construction industry figures since May 2013 is said to be partly due to the inclement weather in Britain during August this year, as bricklayers are unable to work in very wet conditions.

The ONS Construction: Output & Employment survey also revealed that all work types reported decreases, with repair and maintenance (R&M) decreasing by 5.6% in August 2015 compared with July 2015 and new work falling by 3.6% over the same period.

UK construction output fell by 0.8% over the 3 months of June 2015 to August 2015 when compared with the previous 3 months of March 2015 to May 2015,  Repair and maintenance declined by 3.6%, however all new work increased by 0.7%. 

When comparing the June 2015 to August 2015 quarter with the same quarter of 2014, construction output was estimated to have increased by 1.8% and all new work increased by 5.6%, while repair and maintenance decreased by 4.6%.

The UK government reportedly plans to relax planning rules and has promises to build 200,000 affordable homes by 2020, with a Starter Homes scheme planned for England.

Under the Starter Homes scheme, properties must be offered for sale to first-time buyers under 40 years of age only. The homes must be priced at a discount of 20% below market rates, with a GBP450,000 maximum in London and GBP250,000 outside the capital. These buyers would be unable to sell the house for five years.

According to Sky News, critics of the Starter Homes project have suggested that the scheme risks stoking demand rather than desperately-needed supply which has been cited as a core reason for UK house prices continuing to creep up. Charities have argued that the Prime Minister’s demand to create a revolution from “generation rent to generation buy” is irresponsible and firms will look to reach the price limits, leaving the worse off without access to homes.

The construction industry has reportedly welcomed the relaxation of planning laws, but the sector admits that a lack of skilled labour is hampering output growth.

Barratt Developments’ final results indicate demand for new homes outstrips supply

UK residential property development company Barratt Developments plc released its full year financial results on Wednesday, which reveal continued growth in demand for new homes in Britain.

The company reported profit before tax of GBP565.5m for the full year ended 30 June 2015; an increase of 44.8% compared to GBP390.6m for the full year ended 30 June 2014. Basic earnings per share were GBP0.455 for the full year, up by 45.8% over basic earnings per share of GBP0.312 reported in 2014.

Barratt Developments revenue for FY15 increased by 19% to GBP3,759.5m, compared to GBP3,157.0m in the previous year.

Average private selling prices for Barratt homes, increased by 8.7% to GBP262,500 in the company’s FY15, in comparison to GBP241,600 in the previous fiscal year. This increase was reportedly driven by further changes in mix and house price inflation.

In addition, Barratt said it continued to secure good land opportunities and approved 16,956 plots for purchase, as well as maintaining a controlled land supply of 4.5 years.

David Thomas, Chief Executive of Barratt Developments PLC commented:

“The strong operational and financial performance in FY15 reinforces the progress we have made over the past few years. Alongside our industry leading management team, I will continue to execute on our current strategy and focus on driving further efficiencies across the business. The new financial year has started very well; we have a strong forward sales position and are making very good progress towards our FY17 targets of at least a 20% gross margin and at least a 25% return on capital employed.”

Richard Hunter, head of equities at Hargreaves Lansdown, was quoted by the BBC as saying: “Housebuilders find themselves in an extremely sweet spot at present and Barratt is no exception. A combination of low interest rates, a general lack of new housing supply, rising house prices and increased mortgage availability all play into its hands.”

Homes near top English state schools cost 13% more on average

New research from Lloyds Bank released on Friday indicates that average property prices in the postal districts of the top 30 state schools in England have now reached GBP344,446, an average GBP40,728, or 13%, higher than county averages of GBP303,738.

Lloyds Bank figures reveal that properties near the best performing state schools were valued at 9.2 times average gross annual earnings, which is reportedly significantly higher than the average across England of 7.7 times average gross annual earnings. Top schools are defined as those secondary schools that achieved the best GCSE results in 2014.

The banking company’s research found that the postal districts of a fifth of top state schools command a housing premium of over GBP125,000, when compared to surrounding areas. Parents of pupils who attend Beaconsfield High School in Beaconsfield pay the the largest premium for their homes, with properties selling at an average GBP636,132, which is 186% above the average house price of GBP342,166 in neighbouring locations.

House prices in the postal district of The Henrietta Barnett School in Barnet were the second highest, trading at a premium of GBP418,860, followed by St. Olave’s and St. Saviour’s Grammar School in Orpington with an average premium of GBP180,447, then the Tiffin schools in Kingston upon Thames at GBP137,665.

However, the research showed that not all top rated schools are located in expensive areas. Of England’s top 30 state schools, 16 are in locations with an average property price below the average in neighbouring areas. Homes in the postal district of Aylesbury High School trade at a discount of GBP122,506, compared to the county average of GBP342,166. The next largest house price discounts in cash terms, are in Reading, Berkshire, where Reading School and Kendrick School are located, at GBP119,485. The Reading schools are followed by Queen Elizabeth’s School in Barnet, at GBP95,681 and Westcliff High School for Boys Academy in Essex at GBP58,970. 

Andrew Mason, mortgages director at Lloyds Bank mortgages director, commented:”In general, homes close to the nation’s top performing state schools command a significant premium over neighbouring areas. The presence of a top performing state school appears to help support property values in many of these locations as parents compete with other buyers to land the property that gives their child the best possible chance to attend their chosen school.”

Buyer demand outstrips number of UK homes for sale during November

House prices in the UK are predicted to continue to rise in 2014, according to the Royal Institution of Chartered Surveyors (RICS), which released its UK Residential Market Survey on Monday.

The independent, representative professional body said that the amount of homes coming onto the UK market in November this year did not meet increasing buyer demand. A further 59% of chartered surveyors predicted that prices will continue an upward trend, rather than drop back over the coming three months. This is said to be the highest reading since September 1999, which indicates that the higher demand and lower supply is having an impact on the housing market.

According to the RICS, house prices picked up sharply in November 2013, with a net balance of 58% more respondents reporting price growth, up from 57% in October. Each region in the UK reportedly saw property prices rise for the second successive month. Some areas of the UK that are struggling, however the results of the RICS survey show that regional markets are now responding to government incentives and positive economic news.

Despite the lack of housing stock for sale, the number of property transactions is increasing and during the three months to November, the average number of homes sold per chartered surveyor amounted to 20.6, compared to the same period in 2012 when the survey respondents were selling just 15.9. The RICS added that a net balance of 76% of surveyors expect sales levels to increase in 2014.

Simon Rubinsohn, RICS Chief Economist, stated: “It’s no secret that the housing market is on the way up and prices are surging ahead in many parts of the country. The Bank of England’s recent decision to withdraw the Funding for Lending scheme – which allows banks to borrow more cheaply and pass the benefits on to mortgage applicants – could well have some impact on the number of people able to purchase a home. Although the improvement in wholesale and retail funding markets may mean the impact on mortgages is relatively limited.

“One thing we are very concerned about, however, is the lack of both new and existing homes coming on to the market. As the Chancellor pointed out last week, housebuilding is on the up, but it is rising nowhere near quickly enough to make up the shortfall that has built up in recent years. If there is not meaningful increase in new homes, the likelihood is that prices, and for that matter rents, will continue to push upwards making the cost of shelter ever more unaffordable.”

The RICS regulates property professionals and surveyors in the UK and other sovereign nations. Its members are Chartered Surveyors and are entitled to use MRICS after their names. The organisation also provides education and training standards, protects consumers with strict codes of practice and advises governments and business, as well as providing expertise in matters involving fixed assets, including but not limited to land and real property.