Residential Property Review – December 2019

Residential Property Review – December 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.

A Conservative majority – what next?

According to Knight Frank, some certainty has returned to the property market following the general election result. Their opinion is that there will be growth in both property demand and supply, as those who were holding off acting in the midst of political uncertainty decide to take the plunge.

Knight Frank also believe there could be a shortage in private rental properties, particularly in the prime London market, with landlords taking advantage of improved market conditions to put their properties up for sale instead.

There is also the impending Budget, expected in February 2020, to take into account. The threat of proposed tax changes could prompt prospective buyers to act before these pass into law.

First-time buyers will be a key policy focus for the new government, having said they will refocus efforts on home ownership, particularly for first-time buyers. Although the manifesto reiterated the Help to Buy Equity Loan Scheme would be scaled back in 2021, subsequently ending in 2023, it pledged a review of methods to support home ownership following its completion.

Cash purchases hit record low

Decreasing numbers of investors and downsizers have meant cash purchases of property have fallen to a record low, according to the latest Land Registry data. At just 28%, that’s the lowest proportion of sales since records began.

Purchases without a mortgage typically run above 30%, with a peak of 36% recorded in 2009. In March that year, prices hit their post-credit-crunch low, making them appear more affordable for those with the means to buy. One decade later, though, house prices are over 50% higher and new tax rules mean, for investors and overseas buyers, associated expenses have risen by even more.

Every region of the country saw a decline in cash buyers, with London reporting the lowest proportion of cash purchases in the survey. The attraction of the South West appears as strong as ever, where cash purchases were the highest in the UK, at 34%.

Northern cities lead the way on house prices

Houses in the northern cities of the country may cost less, on average, than those in the South East, but prices are rising at a faster rate.

According to the latest Zoopla Cities House Price Index (to end October 19), Edinburgh, Manchester, Glasgow, Liverpool, Leeds, Nottingham, Newcastle and Birmingham all saw average rises of at least double that of London. Leicester topped the list with 4.7% growth, while Bournemouth was the only southern city to muster anything above 2%.

One city to buck the rising trend was Aberdeen, where the fallout from lower oil prices continues to hit. Here, house prices fell 5.9% compared with the same time last year.

House Price Headline Statistics – December 2019
House Price Change by Region – December 2019
Average Monthly Price by Property Type
Mortgage Activity – Dec 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.

ARE YOUR FINANCES MORTGAGE-READY?

Preparing to buy my new home – Get Mortgage Ready

Time spent organising your finances before you apply for a mortgage will help lenders assess your suitability and may even result in them lending you more.

ASSESS CURRENT DEBTS

A prospective lender will want to know about any debts you already have. If you can afford to, pay down loans and credit card balances, but make sure you have enough saved for unexpected emergencies.

CHECK YOUR CREDIT RATING

The better your credit rating the better mortgage offer you can expect. You can improve your rating by making sure you’re on the electoral roll, paying utility bills on time and paying off your credit card balance in full each month.

CANCEL UNUSED SUBSCRIPTIONS

It’s too easy to continue to make monthly payments for services you no longer use or need. Check through your direct debits and standing orders and cancel those no longer in use.

FAMILY HELP

Your parents or grandparents may be able to help you by giving or lending you some money. If not, they may be prepared to act as a guarantor.

ASK AN EXPERT

A mortgage is a big commitment and it’s a good idea to take advice to find one that really suits your circumstances. We can help you navigate your way.

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.

BANK OF MUM AND DAD STILL PAVING THE WAY TO PROPERTY PURCHASES

Children are still relying on financial assistance from their parents to get their foot on the property ladder. For ‘Generation Rent’, becoming a homeowner is harder than ever, meaning that the Bank of Mum and Dad continues to play a significant role.

Parental support has become so vital, in fact, that the Bank of Mum and Dad became Britain’s 11th largest mortgage lender in the year to 2018, providing £6.3bn to aspiring homeowners, both young and even some middle-aged adults. Over the same period, 20% of property transactions were supported in this way.

Children have seen a significant increase in parental contributions since 2018, which have risen by over £6,000 to £24,1003 – double the average house price increase of £3,000. Interestingly, research suggests that it’s not just young adults or first-time buyers benefiting from parental assistance. In fact, 22% of those aged between 45 and 54 have enjoyed a welcome boost from BoMaD.

And, with 35% of prospective home buyers expecting to need financial assistance from their family in the next five years, it would appear that the Bank of Mum and Dad’s prominence in the mortgage market is far from diminishing.

3Legal and General, June 2019

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.

RETIREMENT INTEREST-ONLY MORTGAGES: SHOULD YOU GET ONE?

The demand for mortgage products for older borrowers is growing and with lenders now more willing to lend to this age group, now could be the time to explore new ways of funding your retirement years.

A retirement interest-only mortgage is specifically designed for those over the age of 55 and for pensioners. The loan is secured against your property and can help fund your retirement lifestyle by repaying debts, carrying out home improvements or making lifetime gifts of money to children. In contrast to a standard interest-only mortgage, the amount borrowed doesn’t have to be repaid until you die or move into long-term care. But you will need to prove that you can comfortably afford the monthly interest payments during your retirement years.

The amount you can borrow is based on an affordability assessment carried out by your lender to ensure you will be able to afford the monthly payments after retirement when your sources of income are likely to be from pensions, savings and investments.

NO FIXED TERM

This type of mortgage works well for retirees as the loan term isn’t fixed, and there is no need to demonstrate how the mortgage will be repaid, as repayment will come from the eventual sale of the property. Some products, however, do allow borrowers to repay some of the capital as well as paying the interest on their loan. There is no roll-up of interest, meaning that it’s more likely that there will be something left following the eventual sale to pass on as an inheritance.

GETTING THE BEST ADVICE

Retirement mortgages are a major financial commitment and it makes sense to talk to us about your specific circumstances and needs so we can find you the best available options.

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.

WHICH SEASON IS BEST FOR SELLING YOUR HOME?

The answer to this is that it depends on a range of factors, but there are some seasonal trends that can help you decide when to sell.

Estate agents report that typically once the warmer weather arrives and the evenings are lighter for longer, people are more likely to think about moving home, especially if they have school-age children and want to arrange their move around the summer holidays

BREXIT CASTING A SHADOW

However, economic and political events play their part too. The uncertainties surrounding Brexit have meant that in some parts of the country, especially London, markets have been subdued in the first few months of this year.

Many homeowners wasted little time listing their properties once the new Brexit date at the end of October was confirmed. Nearly half (49%) of major UK towns and cities analysed by online estate agent Housesimple1, saw an increase in listings in April. The biggest month on month rise was in Stevenage (69.4%), followed by Salford (43.8%), while Chichester saw a rise of 33.8%. In London, the biggest rise was in Kensington and Chelsea, with listings up by 17.3%.

AUTUMN AND WINTER ACTIVITY

Once the school holidays end, market activity tends to pick up. Buyers think ahead and often picture themselves celebrating Christmas in a new home. Although December sees house sales fall, by January those intent on fulfilling their housing dreams in the coming year start to be in the market.

PRICE IS AS IMPORTANT AS TIMING

Whatever time of the year you intend to sell, the price has to be right. Ideally you want to create plenty of interest and encourage a good number of viewings to help ensure you find a buyer. You can get an idea of what your property might fetch by looking at the various online sites that show the prices that properties in your area have sold for, as opposed to the figure that they might have been advertised for.

1Housesimple, May 2019