More On The ‘Double-Dip’ and New Mortage Deals
Predictions of a double-dip continue with data from Acadametrics – the only index which bases its findings on actual property price transactions in England and Wales rather than asking prices or valuations – showing that house prices fell for the third month in a row in May. The number of homes sold in May also fell, down by 18% from April, the lowest in 15 years. Acadametrics chairman Dr Peter Williams asks “The question now is will that decline continue through to the end of the year and beyond?” and says “There is much to suggest that it will, although in reality there is a spectrum of views from analysts ranging from a price fall of 7% to a 3% rise over the next six months. Clearly, the emergency budget on 22 June will offer some clarity, not least on CGT but also on other tax rises and expenditure cuts.”
On the mortgage front there is a bit of movement. Woolwich and builder Bovis Homes have together launched a new mortgage offering up to 90% on a new-build Bovis flat or house. Aimed at first-time buyers the mortgage has a two-year fixed rate of 4.99% with a £999 fee. And Yorkshire building society has today launched a 10-year fixed rate mortgage at 4.99%. The mortgage has a £995 fee and can be use for purchasing a property or remortgaging. Long-term fixed rate mortgages aren’t as popular as they used to be – in June 2007, at the market height, there were more than 80 long-term fixed rate mortgages available, now there are less than ten. Short-term fixed rate mortgages have proved more popular (the cheapest you can get is a two year rate at 2.95% from the Co-op) but the idea is that with the possibility of interests rates going up people may find more comfort in a long-term fixed rate.
And another Labour initiative to hit the dust at the feet of Cameron’s government is proposals for landlord regulation, which included a national register of landlords and compulsory written tenancy agreements. Housing minister Grant Shapps rejected the proposal saying: “…I am satisfied that the current system strikes the right balance between the rights and responsibilities of tenants and landlords,” and “So today I make a promise to good landlords across the country: the government has no plans to create any burdensome red tape and bureaucracy, so you are able to continue providing a service to your tenants.”
Nationwide & Halifax House Price Confusion
So the market is not awash with a tonne of properties as predicted, that is according to Nationwide which yesterday published figures showing that that house prices are currently only 10% off their 2007 peak after a 0.5% rise in May, putting the averages UK house at £169,162. But wait, what’s that? Today, Halifax announced that house prices actually fell 0.4% in May – the third month in a row prices have dropped according to them – putting the average house prise at £167,570. Well, you’d be forgiven for feeling a bit confused.
A quote from Halifax’s housing economist Martin Ellis attempts to shed a little light: “The mixed pattern of monthly price rises and falls so far this year is consistent with a slowing market and is in line with our view that house prices will be flat during 2010 as a whole.” Or how about this from Boris Kofman, a director of London property consultancy Virtus Real Estate, to clear things up: “The inconsistency around prices – up in May according to the Nationwide, down in May according to the Halifax – reflects a market that still lacks a sense of direction.”
The prevailing view still seems to be that the mini-boom we have seen is not indicative of things to come. Boris Kofman also said: “Few people believe that the mini property market revival we have seen over the past 12 months or so is underpinned by strong fundamentals.” And Vicki Redwood, an economist at analysts Capital Economics, described the recent rise in house prices as ‘unsustainable’.
Other news is that the government’s recent suspension of the pesky £300 HIP is having a positive effect with a rise in sellers putting their homes on the market. Rightmove and estate agents Countrywide have reported a 35% increase in listings since the HIP was axed on May 21. Sellers now only need to fork out £50 for a energy performance certificate to put a property up for sale. And the view from estate agents still holds that the increase in capital gains tax is encouraging buy-to-let landlords to think about selling. Let’s see what the next few months brings shall we?
Heading For A Slump?
This week the resounding assertions are that the ‘mini-boom’ is over, even in London. Financial forecaster IHS Global has said that a surge in the number of properties being put on the market combined with the difficulty of getting mortgages (lending is currently at a nine year low) will put an end to the rises in house prices we’ve seen over the last year. IHS Global’s chief UK economist, Howard Archer, is reported as saying that the data “reinforce our suspicion that house prices will struggle to make significant gains over the coming months.”
Some economists are predicting a proper crash with prices coming down by as much as 20%, knocking £34,000 off the average house prices of £167, 802. They are also taking into consideration the prospect of higher interest rates and the fact that the mini-boom was underpinned by the government – lenders were able to offer good mortgage deals requiring smaller deposits because they were being propped up by the Bank of England and the Treasury with guarantee schemes. This support is due to be removed from 2011 and the coalition government has not announced any plans to extend the schemes.
This really would bode well for first-time buyers out there, the gap between wages and properties being so large that in recent months 8 out 10 first-timers have been helped out financially by their mum and dad – this according to estate agent Douglas & Gordon who released figures on their first-time buyers back in January. How long will this last?
Inflation Up to 3.7% and Buy-To-Let Landlords Selling Up
So this week’s big news is the surprise jump in inflation last month with the consumer price index (CPI) rising from 3.4% (in March) to 3.7% (in April) and the retail price index (RPI) – used by banks and building societies – rising from 4.4% to 5.3%, the biggest monthly increase since 1991. For those with mortgages, the worry is that the Bank of England will respond by raising interest rates – millions of variable rate mortgages are linked to the Bank of England base rate, currently at 0.5%, its lowest level ever. If this happens, then people faced with unmanageable mortgage repayments may have to put their properties back on the market.
Another factor which may see more properties up for sale is George Osborne’s proposed hike in capital gains tax, from 18% to 40% or even 50%, a tax which would hit buy-to-let landlords selling any property other than their own home. Announced as something to expect in the forthcoming budget on 22 June, this week estate agents reported a large number of inquiries from buy-to-let landlords about selling their properties with some already putting their properties on the market and even dropping prices to make sure they get a sale in the next two weeks.
For example, under the new tax, a £200,000 property originally bought for £100,000, with a 40% tax bill, would net its owner £160,000. If the owner were to sell now, the net value would be £182,000. (Thanks to the Guardian for this handy calculation.)
Of course for those with lower value properties, the hike won’t be such a big issue and it is possible that Mr Osborne may introduce other measures to take away the sting. And then there are always the options of making a property a primary residence or transferring it into someone else’s name. But with annual returns on rental properties up by 12.8% over the past year, bringing rents almost back to their 2007 peak, that buy-to-let property might be worth hanging onto.
New Government On Inheritance Tax, HIPs and Capital Gains
So the love-in has begun. Exciting times as we watch what many consider to be an unholy alliance teeter forwards on its brand-new legs. Whoever you voted for, whoever you now support, we bet you’re dying to know what’s ahead policy wise. Let’s see what we can glean in relation to property.
The big one of course is inheritance tax with David Cameron now indefinitely postponing his promise to cut the threshold to £1million. Not entirely clear from the official statement, which went: “We agree that [changes to the NI personal allowance and axing of the increase to employers' contributions] should take priority over other tax cuts, including cuts to inheritance tax.”
Next up is Home Information Packs, those pesky things you spent so much time/money compiling. Apparently the plan is to bin ‘em. The official statement went: “The parties agree to the retention of energy performance certificates (EPCs) while scrapping HIPs.” Not much fun for the hundreds of people trained as home inspectors.
And then there’s capital gains tax. George Osborne has 50 days to present an emergency budget in which he plans to raise capital gains tax from 18% to 40% on non-business assets – in line with key Lib-Dem policy it should be noted. This will have a huge impact on some people’s tax bills, in particular, buy-to-let investors who will probably want to get their properties back on the market sharpish. In which case we may be looking at a market flooded with properties pushing prices back down – music to most people’s ears. But if Osborne is not so keen causing a market downturn, it may that some transitional measures are introduced to soften the blow.
And to keep another type of blow soft, charities and lenders are asking George Osborne and Vince Cable not to change the Labour policy that allows homeowners to stay in their homes even if they have defaulted on payments. This plea comes as new data shows that repossessions were down in the first three months of this year after reaching a 15-year high in 2009, with 46,000 households losing their homes.
Adrian Coles, director general of the Building Societies Association, said in the Guardian: “With a new government in place, there is a risk that the schemes could be pulled early, resulting in many homeowners being left with no safety net.”
Land Registry Figures Contradict Building Societies; Mortgage Lending Slowing
Now this is interesting. Figures from the Land Registry published last week contradict recent figures from Nationwide and Halifax and show that house prices actually fell in March. While the mortgage lenders claim that the average house price went up slightly in March, the Land Registry is saying it dropped by 0.6%. However, the Land Registry figures are only based on completed sales so the figures may not be that accurate after all. So maybe not so interesting after all. But if you enjoy the finer details read more here.
Now this might be of more import. Figures from the Bank of England released this week showed that mortgage lending slowed down significantly in March. The Guardian reports that net lending rose by just £300m in March, compared to the £1.8bn rise in February. Howard Archer, chief UK and European economist for Global Insight, puts the decline down to the December rush to get in on the stamp duty holiday and said: “The muted mortgage approvals data for March reinforce our suspicion that house prices will be erratic over the coming months and may well be no better than flat over the rest of the year – particularly if more properties come on to the market thereby pushing the supply/demand balance more towards buyers from sellers.” The Financial Times reports that Richard McGuire, fixed interest strategist at RBC Capital Markets, noted that the rate of growth in total mortgage lending was well below expectations and at an eight-month low: “This underscores the continued fragility of the housing sector following the stamp duty-related bounce at the end of last year.”
However, who knows what the future will hold, what with the election and all. Will you be pulling an all-nighter to watch the results come in?!
House Prices Rise 1% And Inflation Up To 3.4%
Roll up, roll up. The rollercoaster that is the UK property market tosses us up high again. The latest figures from Nationwide show prices rose in April by 1% for the second month running, taking the average house price up to £167, 802 and bringing it within 10% of its October 2007 peak. Yikes. However, Nationwide puts the rise down to low levels of supply and high demand rather than high sales.
This view is backed up by David Smith, a senior partner at property consultancy Carter Jones, as reported in The Times: “The property market may have edged into double-digit territory but it’s important to put this symbolic price point into context. The price rises of the past year have been driven primarily by a shortage of stock rather than strong demand.” Presumably to quell all this ‘It’s like 2007 all over again’ chat among estate agents. Jones also said: “They are also being supported by low interest rates, which will only remain at the current level for so long, and possibly not as long as some think given rising inflation,” and that “Many buyers are currently sitting on their hands, waiting to see how the general election and a second potential Budget pan out before they commit to transact.”
The Guardian is also of the opinion that the election is skewing the real picture reporting that figures from a recent Rics members survey show a surge of homes coming on to the market as homeowners try to strike a deal before next week’s election. Seven days to go…
And now a quick look at inflation which rose last month from 3% to 3.4%, according to the National Office of Statistics (due to higher fuels costs and air fares). With the prospect of this pushing up interest rates mortgage brokers are encouraging homeowners on standard variable rate mortgages to move onto fixed rates deals, as these are the cheapest they’ve been in 10 months. If this sounds like you, read more here. And finally some good advice if you are wondering about circumventing inheritance tax by making a property gift: The Guardian’s property expert explains all.
First-Time Buyers In 20-Year Low; London’s Hot Spots
The focus on the plight of first-time buyers continues this week with news that the number of first-time buyers in the UK has been at a 20-year low for the last 12 months. The Guardian reports that the latest figures from market research company GfK’s Financial Research Survey (which polls 60,000 people a year) shows 347,000 buyers took out first-time mortgages in the last year. Though slightly up from 2008’s 331,374 figure, this is quite a drop from 2004/5’s more than 700,000. It seems last year’s stamp duty holiday didn’t provide enough incentive for first-time buyers who now have to cough up much higher deposits for mortgages than ever before. The survey also found that the number of first-time mortgages awarded to the over-50s had increased. Ben Steer, financial director at GfK, is quoted in The Telegraph: “The survey tells a story that is keenly understood by millions of young people across the country. Increased prudence on the part of lenders has priced many out of the housing market – the challenge for these financial providers is to create products which will assist young people, without creating the conditions that sparked the crisis in the first place.” Are the over-50s locking out younger buyers as they make retirement investments? Or are they buying the properties for their youngsters? Either way, it’s not making things any easier for the first-timers.
If you’re London-based and trying to negotiate the housing market, getting a grip on the capital’s hot spots – areas that despite the crash are still selling for as much as, even more in some cases, they were at the market peak in 2007 – is no bad idea. Last week a mews house behind Harrods in Knightsbridge sold for £950,000 – the second highest a property of that type has ever sold for in that area. Though apparently it’s not all down to area and street, sometimes it can be the actual number of the street. Anyway, read more about the ins and outs here.
Equity Release and the Bank of Mum and Dad; More Properties on the Market and Affordable Islands
Last week’s post flagged up Priced Out, a campaign for and run by people outraged at the high cost of property in the UK. There may have been the odd bit of backlash from the older generation berating youngsters for spending all their money on iPhones, but most of us will probably agree – unless you’re a superstar footballer, DJ etc – that the house of our dreams in the area of our choice near to decent transport and various shopping outlets, but still green and leafy, really is a pie in the sky. And, according to the Financial Times, market research figures published this week by Key Retirement Solutions show that the number of retired homeowners using equity release to help out family members has risen to 35%, up from 19% in 2009. Ah, the Bank of Mum and Dad, going stronger than ever it seems.
As ever, it’s hard to get a handle on what’s really happening with property prices, up a smidgen one month, down a jot the next. The latest wave to be sending ripples through the housing market is the forth-coming general election on May 6. The Guardian reports that Rics’ monthly snapshot shows a surge in properties on the market, a 6% increase of properties on their books to be precise. Rics reckons it could be partly down to sellers with pre-election jitters keen to seal a deal before the election. Rics spokesperson Ian Perry said: “With the general election approaching and uncertainty growing over the political direction of the country, many vendors who were previously inclined to sit on the sidelines now appear eager to put their properties on the market.”
On a political note Labour has pledged to broaden home ownership if they are elected for a fourth consecutive term. Not that we’re a truly cynical bunch but while stepping into the land of make-believe why not take things a step further and daydream about owning your very own island. Wait, an 8-acre crescent-shaped island in the Gulf Stream off Nova Scotia, Canada priced at £51,200? Maybe dreams can come true. Check out these affordable islands.
First-Time Buyers Feel The Squeeze; Are They Priced Out?
Despite the arrival of some lovely spring weather (finally), housing market news is not in such a buoyant state. And, perhaps rightly so. House prices rose slightly in March, after February’s dip (no good for anyone looking for a bargain, let’s face it) and this week we hear that many first-time buyers, granted purse-easing stamp duty cuts in the budget, are having a tough time getting mortgage lenders to approve loans. (In case you’re wondering who exactly qualifies as a first-time buyer, read this article – for instance if you are buying with a partner who is not a first-time buyer then you will have to buy in your name only.)
Apparently Halifax and Northern Rock are being the toughest; although straight after the budget Northern Rock announced cuts in rates for buyers with a 15% deposit, they had previously changed their policy on interest-only mortgages, preventing buyers (mostly first-timers) from borrowing more than 75% of the house price. This move could add about £3,204 to the cost of a loan for those unable to raise a 25% deposit. Halifax also recently introduced changes, charging an extra 0.2 percentage points on interest-only mortgages. And HSBC rushed out two ‘first-time buyer’ mortgages after the stamp duty news – however, according to The Times, the rate for those with a 10% mortgage is 4.49 points over Bank rate, which means, dear readers, that the cost of a mortgage could go up to 8.49% when rates get back to 4%. Not such a great deal after all.
But if you thought first-time buyers were going to take this all lying down, think again. A new organisation called Priced Out is campaigning to make the woes of first-time buyers unable to get on the property ladder heard. Calling for lower house prices, controls on property speculation, improved housing supply and an end to six-month tenancy agreements used by landlords, Priced Out – volunteer-run and web-based – provides template letters to send to housing minister John Healey and a forum for members to discuss relevant issues. So if you’ve been looking for somewhere to voice your concerns, then this is the place.
