Residential Property Review – August 2017

 

Our monthly property market review is intended to provide background to recent developments in property markets as well as to give an indication of how some key issues could impact in the future.

 

RICS survey paints a mixed picture

Research published in August by the Royal Institution of Chartered Surveyors (RICS) showed significant regional variations in housing market conditions in the UK. RICS Chief Economist, Simon Rubinsohn, explained that whilst a small majority of surveyors across the country reported that prices were rising, there were signs that in some regions they were weakening. There were also variations in market activity, with London and the South East slowing down, relative to other parts of the UK. The UK Residential Market Survey also suggests that price expectations over the next three months are likely to remain flat. Longer-term, 28% of respondents anticipate an increase in prices over the next year.

The survey also indicates that new buyer enquiries were down, extending a run in which buyer demand has failed to see any significant growth back to November last year. Newly agreed sales also declined, an indicator which has now been negative for five months, although regional variations are evident, with reasonable transactions growth in the South West.

Average stock levels on estate agents’ books remain close to record lows, with the flow of new listings dwindling for the 17th month in a row. This lack of stock is a dominant theme mentioned by respondents to the survey, who generally believe this, combined with political uncertainty, is holding back the market.

Gross mortgage lending reached £22.1bn in June

Latest estimates from UK Finance indicate that in June gross mortgage lending reached £22.1 billion in the UK; this represents a 3% increase on the year. The gross mortgage lending figure for June 2016 was £21.5 billion. June’s figure concludes the second quarter of 2017, with initial estimates indicating that gross mortgage lending increased 3% on the first quarter of the year.

UK Finance’s Senior Economist, Mohammad Jamei, commented on the current market conditions: “A period of belt-tightening now seems to be underway as inflation begins to erode consumer spending power, and consumer confidence weakens. Given that the economy and housing market are closely linked, this has contributed to the activity plateau since the start of the year.

Looking ahead, housing market activity is likely to reflect economic conditions – a deterioration would likely dampen first-time buyer numbers and homeowners remortgaging – the factors that have supported lending recently.

A more diverse array of land buyers evident

Savills’ recent Market in Minutes summary, which focused on residential development land in the UK, identified a more diverse range of land buyers in the market. In the last year, housing associations and small/medium-sized house builders have been purchasing more land, with 89% more plots sold to small house builders and 22% more to medium-sized house builders, who are able to build more homes through support from government funds and accessible finance. In particular, medium sized house builders are growing in their ambition and buying larger sites, with Fairview and Gleeson building 76% and 20% more homes in the last year alone.

 

HOUSE PRICES HEADLINE STATISTICS

HOUSE PRICE INDEX (JUNE 2017)*                              117.1*
                                                                                                                                                                AVERAGE HOUSE PRICE                                                                   £223,257
                                                                                                                                                                        MONTHLY CHANGE                                                                           0.8%
ANNUAL CHANGE              4.9%

*(Jan 2015= 100)

  • Average house price stands at £223,257
  • UK house prices grew by 4.9% in the year to June 2017
  • While the annual growth rate has slowed since mid-2016 it has remained broadly around 5% during 2017

 

HOUSE PRICES PRICE CHANGE BY REGION

Region   Monthly Change (%) Annual Change (%) Average Price (£)
England   0.8 5.2 £240,325
Northern Ireland
(Quarter 2 – 2017)
  3.1 4.4 £128,650
Scotland   0.1 2.9 £144,253
Wales   2.9 3.6 £151,672
East Midlands   1.0 7.1 £182,166
East of England   0.3 7.2 £286,623
London   -0.7 2.9 £481,556
North East   1.9 2.5 £130,065
North West   1.9 5.5 £156,392
South East   0.6 4.9 £320,168
South West   0.7 5.3 £246,159
West Midlands Region   0.5 4.7 £185,082
Yorkshire & The Humber   2.2 4.9 £157,762
Source: The Land Registry
Release date: 15/08/2017 Next date release: 12/09/2017

 

UK UNEMPLOYMENT FIGURES

  • 32.07 million people in work, 125,000 more than for the period January to March 2017
  • 883,000 people (not seasonally adjusted) in employment on “zero-hours contracts” in their main job, 20,000 fewer economically inactive than for a year earlier
Jobless total
1.48m
Unemployment rate
4.4%
Source: Office for National Statistics
Release Date: 16/08/2017

 

MORTGAGE ACTIVITY

  • UK Finance estimates that gross mortgage lending reached £22.1 billion in June
  • Gross mortgage lending for Q2 increased 3% on Q1


Source: UK Finance (formerly Council of Mortgage Lenders)
Release date:
 20/07/2017

 

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission.

WHY IT’S A SHAME THAT MANY UK ADULTS DON’T HAVE LIFE COVER

Life insurance may not be at the top of many people’s ‘to do’ list, but arguably it’s one of the most important financial products anyone can take out, and one of the best ways of leaving loved ones provided for financially.

Life insurance doesn’t just pay a lump sum on death or (with a combined policy) the diagnosis of a critical illness, it can (with other add-ons or in ‘whole of life’ form) help provide an income for families hit by an accident, sickness and unemployment, help parents pass their wealth on to future generations and play a major role in inheritance tax planning too.

A recent study1 has shown that only around 26% of UK adults have any form of life insurance. What this figure means is that too many UK families are risking the consequences of life’s unexpected or unwelcome events. In the event of a death, diagnosis of a serious illness, accident or unemployment there would be no lump sum pay out or income payment from an insurance policy to fall back on.

WHY THIS IS SO

One reason given was a belief that insurance companies don’t pay up in the event of a claim. However, the most recent industry figures show that insurers pay out 97.2%2 of all claims. UK companies pay out over £10m every day on protection policies, including income protection, critical illness and life insurance. When they don’t pay out, it’s usually because of incorrect information having been provided by the policyholder when the policy was taken out.

Cost is often cited as a reason for not taking a policy. However, an analysis of premiums paid by respondents in the research shows an average life insurance policy premium of £21.28 per month for over £120,000 of cover. The average critical illness cover premium reported was £30.58 per month for over £71,500 of cover. This represents a relatively small outlay that could mean real peace of mind.

1Royal London, 2017 
2Association of British Insurers, 2016

Some of the most competitive deals on the market can be found through a mortgage adviser.

If you are looking to move house, remortgage or buy an additional property as a landlord, some of the most competitive deals on the market can be found through a mortgage adviser.

Advisers may be able to access mortgages that you would not find when searching independently.  Brokers have regular contact with a wide variety of lenders, some of whom you may not even know about. The alternative to working with a broker is to call up dozens of lenders and compare their mortgage terms and rates on your own, taking up your valuable time.

Clear Fees

There are several different types of fees involved when taking on a new mortgage or working with a new lender, including arrangement, booking fees, and valuation fees.  A mortgage broker can explain all of these to you and take them into account when finding the right product for you.

Knowledge

The knowledge of different lenders’ criteria can be invaluable, especially in the current environment where the mortgage application process is more complicated than ever due to recent regulatory changes. For example, by working with a mortgage adviser they can go through your expenditure. This will be beneficial to you when completing the affordability test as part of your mortgage application.

Duty of Care

Brokers have a duty of care to the borrower.  They must take their individual circumstances into account and ensure they find the right mortgage for them. One size does not fit all and it is vital the borrower and adviser have honest and thorough conversations in the run up to finding and applying for a mortgage.

Experience

Getting a mortgage can seem like one of the most daunting tasks that you can face in your life, but it doesn’t need to be.  The important thing to remember is that every lender is different in what they view as the ‘perfect candidate’ to lend to. Just because you don’t fit one’s criteria, doesn’t mean you won’t fit another lender’s criteria.  There is no better time to be seeking suitable mortgage advice from a mortgage adviser.

 

Is it Time to Remortgage?

Recent figures from Moneyfacts show that the motivation to remortgage has hit its highest level since 2008, and many market watchers think that this trend looks likely to increase over the coming year.

WHY REMORTGAGING CAN MAKE SENSE

When your mortgage deal ends, your lender may automatically move your mortgage to their Standard Variable Rate (SVR), which normally rises and falls in line with the Bank of England base rate.

The average SVR in February of this year stood at 4.56%. Back in February 2015, the average two-year fixed deal was 3.14%. So, this means that borrowers who have reached the end of their deal would see a rise of 1.42% if they reverted to the typical SVR. This is the highest increase recorded since November 2008. By contrast, the average two-year fixed mortgage rate is now around 2.33%, so by remortgaging, the same borrowers could enjoy a reduction of 0.81%, which could represent a welcome drop in outgoings.

A CHANGE OF ATTITUDE IS NEEDED

Interestingly, a study conducted by YouGov, shows that just 28% of those with a mortgage have switched provider to secure a more favourable deal at the end of their fixed-rate deal. By comparison, 50% of people have switched their energy provider to save money. Whilst the saving to be made by switching to a different gas and electricity supplier can be hundreds of pounds, the savings to be made from switching mortgage lenders could amount to thousands of pounds over the term of a typical loan.

There are currently estimated to be around three million people paying their lender’s SVR on their mortgages. So, if you’re one of them, this could be a good time to get some professional help and advice from a mortgage adviser to see if you could switch to a more suitable mortgage deal.

For further information on remortgaging click – Here

You may have to pay an early repayment charge to your existing lender if you remortgage. Think carefully before securing other debts against your home.

A mortgage is a loan secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

Sluggish house prices ‘will deliver a buyers’ market’ as Nationwide tips growth of just 2% this year

 Average UK house price reaches £211,671 in July, according to Nationwide

2017 house price growth expected to be just 2% down from 5.2% last year

‘Balance in the market is shifting a little further towards buyers’, says Nationwide

House prices will rise by just 2 per cent this year to fall behind inflation and deliver a buyers’ market, building society Nationwide forecast today.

In a further sign of the sluggish property market, Nationwide said that while house prices had continued to grow throughout 2017, it had been at a slower pace than in previous years, with prices up just 2.9 per cent on a year ago in July. 

Robert Gardner, chief economist at Nationwide suggested that a buyers’ market could be around the corner though a lack of homes for sale is helping prop up current house price growth.+4

Enough for sale? Relatively few properties are coming onto the market, bolstering prices

The 2 per cent forecast for 2017 revises down earlier expectations and compares to 5.2 per cent property inflation in 2017. 

Gardner said: ‘Survey data point to relatively sluggish levels of new buyer inquiries, but at the same time surveyors report that relatively few properties are coming on to the market.’

He added: ‘While employment growth has remained relatively robust, household budgets are coming under pressure as wage growth is failing to keep up with the rising cost of living.’ 

‘This suggests that housing market activity is likely to remain subdued, with the balance in the market shifting a little further towards buyers in the quarters ahead.’

Nationwide’s index showed house prices rose by 0.3 per cent in July, up just £370 to £211,671 on average.

House price rises continue to outstrip wages, however, with the struggle for buyers to afford increasingly expensive homes weighing on the market.

The buyer of the average home needs to find some some £5,956 more than a year ago, according to Nationwide. Its data shows that homes have only been more expensive compared to wages at the peak of the 2000’s boom.

Higher and higher: Despite a slowdown, UK house prices continue to hit record levels, according to Nationwide’s index

Nationwide’s chart shows that homes have only been more expensive compared to wages at the peak of the 2000’s boom

Jeremy Leaf, a north London estate agent and a former Royal Institution of Chartered Surveyors chairman, said: ‘Although these figures on the face of it look quite encouraging, when one considers the fall in transactions, it is clear that prices are being supported by a lack of property on the market.‘

Despite high prices, first-time buyer numbers have been on the rise over the past 18 months, as they take advantage of lower mortgage rates and a decline in buy-to-let purchases after the 3 per cent stamp duty surcharge was added for anyone buying a second or additional property, in April 2016.

Shifting demographics of buyers and sellers could present an opportunity for first-time buyers to get on the property ladder, with landlords making fewer transactions.

Record lows: Fewer properties for sale is keeping prices ticking upwards, says Nationwide

The very best and cheapest mortgage deals on offer remain for those with big deposits or substantial equity in their homes, but there are competitive rates across the board even for those with just 10 or 5 per cent deposit.

Brian Murphy, head of lending at Mortgage Advice Bureau said: ‘The mix appears to be changing with landlords transacting less frequently – or indeed divesting their portfolios in some cases – due to the tax changes.’

This has left an opportunity for first time buyers who would normally be competing for the same type of property with an investor. 

He added: ‘Now we’re seeing more first time buyers getting on the ladder, which is of course great news as they underpin the rest of the market, so it’s possible to suggest that this particular trend, which has been emerging since the beginning of this year, could ripple through to the rest of the market in months to come.’