RESIDENTIAL PROPERTY REVIEW April 2019

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

‘Last-time buyer’ numbers increase in home purchases

Whilst first-time buyers make up just over 50% of residential home purchases currently, a further 30% of purchases, accounting for approximately 200,000 homes, are being made by buyers aged 55 or older.

This research, conducted by the Intermediary Mortgage Lenders Association (IMLA), states that of this group, many are cash buyers, using the large equity reserve in previously owned properties to downsize to their ideal last home and retain the excess cash; 63% of these older homeowners own their properties outright.

The IMLA went on to add the caveat, that whilst only 2.5% of those eight million older homeowners actually move each year, it predicts that this small cohort will grow exponentially faster than any previous generations over the next 10-20 years.

The International Monetary Fund offers a warning

The world’s financial watchdog, the International Monetary Fund (IMF), based in Washington and headed by the previous Finance Minister of France, and now Managing Director and Chairwoman, Christine Largarde, has fired a warning over the danger of overseas buyers disrupting domestic property markets.

The IMF has stated that house price booms are a consistent cause of recessions and countries, including the UK, should take note and make pre-emptive steps to ensure that this process does not repeat itself. In an effort to prevent a housing bubble destabilising the economy, the IMF suggest that Britain should contemplate imposing stricter mortgage limits and deterrents against overseas buyers of UK property.

They warned the UK is a market: “where foreign buyers have played a role.” The IMF also stated that: “The most recent data seem to point to an increase in downside risks to house prices over the next one to three years in some countries.

Lifestyle aspirations drive new home development design

In addition to adapting to trends in the property world, new housing developments are increasingly having to adapt to changes in wider society. These changes are having an impact on the communal amenities provided and outdoor space.

New home developments are now frequently design-driven by the demands of buyers looking for a ‘lifestyle’ that includes innovative amenities such as gyms and fitness centres, communal landscaped green spaces and community facilities, such as meeting rooms.

Given that many more people have flexible working patterns and may work from home, much more time is now spent by working families in the residential home and their desires are now being reflected in the initial overall design of mid and high end new-build developments.

Some new developments are offering innovative ‘extras’ such as individual indoor secure bicycle storage facilities, allowing homeowners to easily jump on their bike to commute to the station or office, or just to spend their leisure time cycling around the area.

FIRST-TIME BUYERS KEEPING THE MARKET BUOYANT

The recent slowdown in the market has been good news for those who want to get into the housing market and make that all-important first purchase.

Whilst the number of current owners moving home has come to a virtual standstill, due in part to the uncertainties surrounding Brexit, the number of first-timers has increased. Analysis by Lloyds Bank2 shows that 372,100 first-time buyers entered the market in 2018, up by 3% on the figure for 2017.

STAMP DUTY STIMULUS

Changes in Stamp Duty provided much-needed help. First-time buyers in England and Northern Ireland now pay no Stamp Duty on properties worth up to £300,000. This means that they save up to £5,000. For properties costing up to £500,000 they pay no Stamp Duty on the first £300,000 but will pay duty on the remaining £200,000. (If they buy a property worth over £500,000, then they pay the standard rate and won’t qualify for first-time buyer’s relief). In Scotland, first-time buyers enjoy Land and Buildings Transaction Tax relief that saves them up to £600, whilst in Wales they get no special Land Transaction Tax concessions.

As of October 2018, first-time buyers under Shared Ownership schemes can now claim First-Time Buyer’s Stamp Duty relief on homes worth up to £500,000. This change applies to homes purchased on or after 22 November 2017. Those purchasers who chose to pay Stamp Duty in stages and were previously not eligible for the relief can now claim this tax back.

TIME TO MAKE YOUR MOVE?

As well as being able to take advantage of what has become a buyer’s market, first-time buyers can also benefit from historically-low interest rates on mortgages. The mortgage market remains very competitive and lenders are currently offering a range of attractive deals specifically designed to help young people get on the housing ladder.

In the current market conditions, it’s worth checking out recent sold prices in the area in which you’re looking to buy, as you may be able to secure a property with an offer lower than the asking price, especially if the owners are keen to move as soon as possible.

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.

2Lloyds, 2019

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.

Information is based on our understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from taxation are subject to change.

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.

Tax treatment is based on individual circumstances and may be subject to change in the future.

RESIDENTIAL PROPERTY REVIEW – March 2019

Our monthly residential 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.

Average residential sales times longer

Recent research from property portal, Rightmove, indicates that across the UK, the average time taken from when a property is first listed, until it is marked as under offer, has increased from 72 days in January 2018 to 77 days currently.

The data also shows that Runcorn, in Cheshire, has the fastest moving housing market outside of London. Runcorn has an average asking price of £132,653 and has seen a reduction in selling time from 69 days in 2018 to just 48 days currently, 29 days quicker than the national average. This appears to have largely been driven by the opening of the Mersey Gateway Bridge, alleviating major traffic problems, to allow a journey time of 20 minutes by car, from Runcorn to Liverpool City Centre.

In Scotland, homes are selling quickest in Livingston, where on average it takes just 35 days for properties to get snapped up. Redditch in the West Midlands takes top spot as the fastest selling market in England, with properties in the Worcestershire town selling in 45 days, on average.

Targets may not be met despite more homes being built

A recent survey of more than 400 housebuilding companies in England, by property and construction consultancy McBains, reveals that 57% of respondents reported increasing the rate at which they built new homes during 2018 and are also predicting a further rise over the next 12 months.

However, less than half of those surveyed (48%) think that the Government target of building 300,000 homes a year, on average, by the mid-2020s is achievable, with worries over land availability, slow planning permission and skills shortages being cited as barriers to prevent them building more homes.

Of the homes to be built over the next 12 months, house builders expect 22% of these new homes to be classed as affordable homes for rent or sale. Clive Docwra, Managing Director of McBains, commented: “For those people struggling to get a foot on the property ladder, the finding that only arou nd one in five of new homes to be built over the next year will fal l into the affordable category will be disappointing.”

Uncertainty continues

The Royal Institute of Chartered Surveyors (RICS) February 2019 UK Residential Survey, indicated that the residential property market continues to struggle for momentum. The survey posed an additional question this time, aimed at identifying the most significant factor holding back activity, and in response to this, 77% of respondents cited Brexit uncertainty as the biggest challenge facing the housing market at present. The survey also indicated that 71% felt it was impacting both buyers and sellers, while only 8% were of the view that Brexit was not having an effect on either.

The Chancellor delivered his Spring Statement on 13 March and although little was expected in terms of new policy measures affecting the built environment, many policies remain dependent on the outcome of the Brexit debate, which a RICS press release expressed as ‘frustrating given how much parliamentary time has been diverted to it at the expense of pressing domestic issues such as the housing crisis, construction skills shortage and infrastructure deficit.’

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.