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MME Residential Property Review – July 2018

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.

 

Three-year tenancies for renters causes concern to landlords

As reported by The Guardian, the Secretary of State for Housing, Communities and Local Government, James Brokenshire, has proposed stopping landlords of rental properties from evicting tenants at short notice and implementing a minimum three-year tenancy agreement.

Currently, approximately 80% of residential tenancies in England and Wales are agreed for either a six or twelve-month period. The assured shorthold tenancy agreement is the most widely used tenancy agreement by buy-to-let landlords. This type of tenancy entitles the landlord to a possession order immediately after the initial agreed period, meaning the landlord is therefore able to evict the tenant after the initial fixed term without a legal reason.

Referring to his recent consultation paper, Mr. Brokenshire stated: “It is deeply unfair when renters are forced to uproot their lives or find new schools for their children at short notice due to the terms of their rental contract.

 

London house price growth at nine-year low

The UK Cities House Price Index, published by Hometrack, a property research organisation, has shown that London is amongst five cities where home prices are declining in real terms, when adjusted for inflation. Their definition of a decline is where house price annual growth rates fall below the Government’s Office for National Statistics’ (ONS) Consumer Prices Index (CPI), which currently sits at 2.4%.

The Hometrack report states that London house price growth has slowed to a nine-year low, while prices in Edinburgh and Manchester are rising faster than in any other major UK city, with price gains of 7.1% and 7% respectively.

Richard Donnell, the insight director at Hometrack, commented: “We expect house prices to keep rising across regional cities such as Birmingham, Manchester and Edinburgh over the next two to three years. During this time house price growth in London will remain flat, with annual price rises of approximately 0-2%.

Faster redress for defective new-build properties?

In a report entitled ‘Better Redress for Homebuyers’, the All-Party Parliamentary Group for Excellence in the Built Environment, states that the landscape for buyers of new-build homes who are trying to resolve complaints about building defects is a confusing one. This problem is compounded by the complexity of the current number of housebuilding codes, building guarantees, and individual developer’s complaints procedures.

The All-Party Group have proposed setting up an independent ombudsman with powers to reimburse buyers by up to £50,000, or even give the buyer recourse to reverse the original sale contract. It is proposed that the scheme would be funded by a levy on housebuilders.

Land shortage challenges new homes supply

According to the most recent capacity survey from estate agent Savills, the policy environment for delivering affordable new homes is improving. However, the availability of suitable land was cited by 86% of respondents as being the number one barrier to achieving this, with the lack of subsidy or grant being claimed by 54% as the number two barrier. Meanwhile, Government policy was only cited by 24% of their participants as being a barrier.

The Government’s target of 300,000 new homes per year continues to put pressure on housing associations to ramp up their housebuilding to bridge the gap from the present supply of 220,000 houses.

 

House Prices Headline statistics

HOUSE PRICE INDEX (MAY 2018)* 118.7*

 

Average House Price £226,351

 

Monthly Change 0.1%

 

Annual Change 3.0%

 

*(Jan 2015= 100)

·         UK house prices rose by 3.0% in the year to May 2018

·         This is the lowest UK annual rate since August 2013 when it was also 3.0%

·         The East Midlands was the fastest growing region with an annual house price growth rate of 6.3%

 

House Prices Price change by region

Region   Monthly Change (%) Annual Change (%) Average Price (£)
England 0.3 2.9 £243,583
Northern Ireland
(Quarter 1 – 2018)
  0.3 4.2 £130,026
Scotland   0.1 4.9 £149,004
Wales -3.0 1.0 £148,894
East Midlands   1.7 6.3 £190,216
East of England   0.2 2.4 £288,808
London   0.1 -0.4 £478,853
North East   -0.5 1.3 £128,680
North West   0.1 2.9 £157,531
South East   0.0 2.2 £322,096
South West   0.1 3.9 £251,877
West Midlands Region   0.2 5.0 £192,322
Yorkshire & The Humber   1.0 2.9 £158,966

 

Source: The Land Registry
Release date: 18/07/2018 Next date release: 15/08/2018

 

AVERAGE MONTHLY PRICE BY PROPERTY TYPE – MAY 2018

PROPERTY TYPE ANNUAL INCREASE
DETACHED
£343,823
(4.6%)
SEMI-DETACHED
£213,606
(3.7%)
TERRACED
£182,373
(3.1%)
FLAT / MAISONETTE
£202,696
(0.0%)

Source: The Land Registry
Release date: 18/07/2018

Contains HM Land Registry data © Crown copyright and database right 2017. This data is licensed under the Open Government Licence v3.0.

 

Mortgage Activity

·         “The mortgage market is seeing a pre-summer boost, driven by a rise in the number of first-time buyers and strong remortgaging activity. It is also particularly encouraging to see an increase in homemovers, after a period of relative sluggishness in this important segment of the market.

Jackie Bennett,
Director of Mortgages at UK Finance

Source: UK Finance (formerly Council of Mortgage Lenders)
Release date: 12/07/2018

 

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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.

 

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