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

Residential Property Review – November 2019

Property Market Review November 2019

First-time buyer numbers hit a 12-year high

Numbers of people buying their first home reached a monthly high in August, achieving a level not seen since 2007, before the financial crisis.

The average first-time purchaser borrowed £175,361 or around 80% of the property value. The amount borrowed equates to a multiple of 3.52 of first-time buyers’ income, but with continuing low-interest rates, this only represents 17.1% of total household income.

These strong figures for first-time buyers are backed by research from Zoopla which shows that over a third (36%) of all property purchases in 2018 were by first-time buyers. Reasons given include Stamp Duty relief, the Help to Buy scheme and Help to Buy ISA.

Mortgage broker outlook is confident

According to the latest Mortgage Market Tracker survey from the Intermediary Mortgage Lenders Association (IMLA), 91% of brokers said they were either ‘very confident’ or ‘fairly confident’ about the outlook for the mortgage industry.

Executive Director of the IMLA, Kate Davis, said: “Continuing political uncertainty has failed to dent the confidence of mortgage brokers. Intermediaries remain confident that they are well-placed to weather the storm of political uncertainty. Brokers are upbeat about the prospects for Britain’s mortgage market.”

Postcode lottery in estate agents’ fees

New research from Get Agent, the online estate agent comparison site, has found that selling your home through a high street estate agent can vary by as much as 261%, depending on your postcode.

The research analysed data from over 40,000 branches, listing properties in more than 2,400 postcode areas and found that the average fee (including VAT) in England and Wales was 1.53% and was as high as 3.07% in the most expensive areas. Postcode CT11 in Ramsgate, Kent was the most expensive, equating to a fee of £7,425, based on the average listing price of £241,849 in that area. At the other end of the scale, sellers in Benthall, Northumberland, which is postcode NE67, are typically charged 0.85%, which equates to £2,771 for an average property worth £326,000 listed in that area.

Since October 2016, all estate agents’ quotes should include VAT. Before this date, fees were quoted ‘plus VAT’.

House Price Statistics
House Price Change by Region
House Price – Average Prices by Property Type
Mortgage Activity – November 2019

VALUING PROTECTION

A gesture of protection. Life insurance. Security for you and your family. A responsibility. Social protection

Having the confidence to know that everything you hold dear is protected is a good place to be.

Regard protection insurance as something that safeguards everything that is important in your world: your health, your life, your home and your job. If you have a partner or dependants, these are obviously a chief priority too.

CUT TO THE CHASE

Working out the difference between life insurance, critical illness, income protection and buildings and contents insurance can be tricky, especially when they are wrapped up in the blanket term ‘protection’, but don’t let the jargon put you off.

Understanding what is available and choosing the right amount of cover for you and your family is important. Working with us will help you find protection which is affordable and understand the value of each type of insurance, so you are reassured that you are selecting the correct policies to secure your financial future.

Income protection (with no investment link) has no cash in value at any time and will cease at the end of the term. If you stop paying premiums your cover may end.

HOMEOWNERS PUT OFF MOVING DUE TO STRESS

home comfort white dog

If you find yourself recoiling at the prospect of selling up and finding a new property, you’re not alone. Quite apart from Brexit uncertainty and the housing market slowdown, it seems that many homeowners are putting off moving because it’s simply too stressful. Concerns about moving to a new location, having noisy neighbours and high estate agency fees, among others, explain why 60% of homeowners in a recent study1 are reluctant to start looking.

Some respondents even said that moving home was more stressful than getting divorced (34%), having a baby (31%) or starting a new job (27%). It could be worth the pain, however; 62% of those surveyed said they believed that moving could make them happier. Taking action to minimise your stress, then, rather than avoiding it altogether, could make for a smoother transition and a brighter future.

FEAR OF THE UNKNOWN

Not knowing much about the location you are moving to is likely to increase your anxiety, so the best thing you can do is conduct some research. Find out about the schools, healthcare and amenities available in the area, talk to current residents, and see what noise and traffic levels are like at different points in the day/week. Arming yourself with more knowledge should help to alleviate your fears and improve your outlook.

FRETTING OVER THE FINANCES

For many, the prospect of finding a new mortgage is their biggest worry when considering a move. Seeking our advice as early as possible will give you more time to explore the available options and decide what’s best for you, whether this be transferring your existing mortgage, increasing the size of your loan or finding a new provider.

Remember, change can be positive – so if you’re thinking about moving, now could be the time.

1Yopa, 2019

As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments.

RESIDENTIAL PROPERTY REVIEW – October 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.

Continuing uncertainty in residential property market

The latest Royal Institution of Chartered Surveyors (RICS) UK Residential Market Survey, has reported a decline in home listings coming onto the housing market, with the net balance for new instructions slipping to its weakest point for more than three years at -37%.

This follows the more stable trend seen over the last three months, as ongoing political and economic uncertainty continues to dissuade vendors. As a result, estate agents’ books remain at near record low levels.

The near-term outlook suggests that sales will remain subdued over the next three months and price expectations will see a modest decline UK-wide over this period. However, sales volumes are expected to stabilise over 12 months and more respondents to the survey expect prices to rise, rather than fall over the coming year.

A mixed picture continues to be seen across the UK, with price gains in Scotland, the North West and Northern Ireland, whereas London and the South East retains negative momentum.

UK’s best new building

In the centenary year of the introduction of mass council housing, the RIBA Stirling prize for the best new building in the UK has been awarded to Goldsmith Street in Norwich. This is the first time in the 23-year history of the prize that the award has been won by social housing.

The project has been built by Norwich City Council and comprises 100 terraced homes which are rented out on secured tenancies at fixed social rents. Goldsmith Street offers highly energy-efficient homes using a passive solar scheme where annual energy costs are expected to be 70% cheaper than that of the average household.

Chair of the 2019 RIBA Stirling Prize judges, Julia Barfield said: “This is proper social housing, over ten years in the making, delivered by an ambitious and thoughtful council. These desirable, spacious, low-energy properties should be the norm for all council housing.

Shock interest rate hike on Treasury loans

Councils have reacted with frustration after an unexpected rise in interest rates from 1.81% to 2.82% on new borrowing from the Treasury’s Public Works Loan Board (PWLB). There are fears the rate hike, announced on 9 October, could delay or put a halt to regeneration plans and housebuilding schemes.

PWLB loans totalled nearly £8bn in 2018-19, which represents a 77% year-on-year rise in new borrowing. Many councils used the low-interest loans to invest in regeneration and housing projects and there are fears that housebuilding schemes will cease to be affordable and may have to be cancelled as a result.

Sharon Taylor, District Councils Network spokesperson and leader of Stevenage Borough Council commented: “It is extremely disappointing that the government is to increase Public Works Loan Board rates, at a time when councils’ finances are already under huge pressures. It’s another big blow for local government finance. The need nationally is for good quality, affordable housing. My view is only councils can deliver that. Why would you want to slow that down in the middle of a housing crisis?

House Price Headline Stats – October 2019
House Price Change by Region – October 2019
Average Monthly Price by Property Type – Ocober 2019
Mortgage Activity – October 2019

ARE YOU A LEASEHOLDER LOOKING TO BUY YOUR FREEHOLD? HELP IS ON THE HORIZON

The Law Commission has proposed a raft of new proposals which could make it easier for leaseholders to buy their freeholds. These will be welcomed by homeowners who have been told they must pay exorbitant amounts of money to buy their freehold.

There are an estimated 4.2m leasehold residential properties (one-third houses and two-third flats) in England, and around half of these are on leases with less than 80 years remaining. Ground rents average £370 per year.

One of the proposals that the Commission has put forward is to introduce a simple formula that would mean that eligible leaseholders would pay just ten times their current ground rent, or 10% of the value of the property, to convert their property from leasehold to freehold. It also recommends replacing the current right to purchase a one-off 50-year lease extension with the right to purchase an unlimited longer lease extension without a ground rent.

It also proposes removing the current requirement that leaseholders must own the lease on their property for a minimum of two years before they can buy their freehold.

The final recommendations will be published next year.