Commentary on the January / February Property Investor´s Factfile

The Property Investor Blog´s monthly factfile is principally aimed at UK property investors and traders and includes broad data on national / London house prices, the latest Limited Company (SPV) loan rates, LIBOR / SWAP rates, rental data, mortgage debt figures and information on the first time buyer sector. This month´s issue (accessible here) presented a range of noteworthy market observations, using data from latter part of 2016*:

Rightmove data pointed to an overall 1.1% asking price drop for English and Welsh properties coming on to the market in November and, in the same month, only 14% of RICS surveyors expected prices to increase over the subsequent 3 months (compared to 18% in October 2016);
After 4 consecutive month-on-month post-Brexit drops, as at November 2016, Land Registry sold prices in the City of Westminster had broadly recovered to May 2016 levels. However, prices in the City of London fell by 8.27% between June and November 2016. Whilst it should be mentioned that low sales volumes makes the significance of these statistics questionable, it will be interesting to see if buyers will be willing overlook the stamp duty and other purchasing restrictions over the coming months / years (or expect some form of price correction to factor in these extra costs);
Inner** and Outer London*** saw marginal price decreases 0.62% and 1.02% respectively. As widely predicted, low supply and an increasing desire for London buyers to get “more for their money” further away from the central Boroughs may well mean these areas remain resilient for the foreseeable future. Nonetheless, affordability issues, some concern over the direction of interest rates and other macro-related shocks could prompt a relatively rapid change in direction;
Council of Mortgage Lenders (CML) recent data estimated that gross mortgage lending reached £20.4 billion in December – 4% higher than December 2015 (£19.7 billion);
November CML statistics also reported an increase buy to let remortgaging and a negligible increase in financed buy to let purchases (following a pre-Stamp duty surcharge spike in March 2016). Investors are advised to be mindful of gearing levels moving into 2017 and beyond owing to Prudential Residential Authority (PRA) enhanced underwriting criteria and the tapered removal of interest relief on personally owned properties (initiating from the 2017 tax year);
As a result of these latter factors, Limited company (SPV) borrowing looks set to become increasingly mainstream with fixed rates on 2 year terms (at 75% loan to value) ranging from 3.34% to 3.65%. Whilst PRA rules do not apply to Limited Company borrowers, investors should be prepared for extra scrutiny moving forward and be aware of their responsibilities as Directors;
UK LIBOR and SWAP rates steadily continue at historically low levels;
Rents in England have continued to grow strongly; Welsh rental figures have been broadly flat since 2012, as has Scotland´s since late 2015 (after a relatively strong growth period in the preceding years);
The Office of National Statistics say that the average house price for first-time buyers was £183,385 in September 2016, representing an annual increase of 7.5%;
The Council of Mortgage Lenders reports that 92,500 (0.84%) of mortgages had arrears equivalent to at least 2.5% of the outstanding mortgage balance in Q2 2016 – the lowest since 2006. Since the end of Q2 2015, this figure has dropped by 39 a day;

* Most valid property data has a 3 month time lag (formal registration of sale at the Land Registry);

** The Land Registry classifies Inner London as constituting the following boroughs: Camden, City of London, Hackney, Hammersmith & Fulham, Haringey, Islington, Kensington and Chelsea, Lambeth, Lewisham, Newham, Southwark, Tower Hamlets, Wandsworth and Westminster;

*** Barking & Dagenham, Barnet, Bexley, Brent, Bromley, Croydon, Ealing, Enfield, Greenwich, Harrow, Havering, Hillingdon, Hounslow, Kingston upon Thames, Merton, Redbridge, Richmond on Thames, Sutton and Waltham Forest.

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