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Commentary on the May 2017 Property Investor´s Factfile

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May 2017 Property Investor´s Factfile

The Property Investor Blog´s monthly factfile presents relevant data including national / London house prices, the latest buy to let Limited Company (SPV) loan rates, LIBOR / SWAP rates, rentals, mortgage debt figures and information on the first-time buyer sector.  Some noteworthy observations from the last month are outlined below:

  • According to Rightmove, asking prices were up 1.14% over the previous month (the equivalent to £3,547, raising the average price of new properties to the market to £313,655). The property portal also reported that the first-time buyer sector, typically of two bedrooms or fewer, gained strength (a 6.5% annual rate of increase). At the same time however, the same data showed that higher priced property saw an overall annual rise of 2.2% – the lowest recorded since April 2013. Also, whilst the market observed the highest number of sales agreed at this time of the year since prior to 2007 credit crisis, overall market growth is slower than the average 1.6% “spring-boosted surge” over the last seven years;
  • Land Registry data for the City of Westminster and the City of London reported average price increases of 3.58% and 5.58% respectively – although readers should note that there are generally lower sales volumes within these high value micro-markets.  More recent data from Savills indicated that prime residential prices fell by 0.3% in the first quarter of this year compared with 2.2% in the final quarter of 2017 (values remain 13% down since 2014). The organisation believes this sector of the market is “bottoming out” and a recovery in transaction volumes should give developers more selling confidence, albeit at lower prices. Interestingly however, the FT reported on the Grosvenor Group´s sale of £557 million of property assets in 2016 with a view to invest the proceeds in developments in the next cycle.  As the owner of 300 acres of Mayfair and Belgravia, whilst still investing in “mid-market” and build to rent projects, the group believes that high-end London homes will decline further and are expecting to see significantly weaker returns in 2018;
  • Savills predicted that buyers are likely to be more cautious in London, given that buying a home in the Capital is a bigger financial commitment compared to much of the rest of the country.  Recent Land Registry data somewhat supported such comments: between January and February 2017 Inner London[1] prices marginally fell by 0.12% whereas Outer London[2] grew by 0.53%;
  • Hometrack also recently reported that Brexit uncertainty has been “driving down house price growth in the Capital”, now at its lowest level since May 2013.  The UK Cities House Price Index, published at the end of April, pointed to a narrowing gap between the north and the south. Especially strong growth over the last three months has been witnessed in Edinburgh (4.5%), Newcastle (4.2%), Glasgow (3.7%), Birmingham (3.5%) and Manchester (3.4%). Average house prices in Aberdeen, however, have seen a noticeable drop of 6.2% over the last three months and 8.7% year-on-year to March 2017.  On the topic of house prices and the economy, readers may be interested in reading our brief write-up of a presentation by Simon Rubinsohn, chief economist at the Royal Institute of Chartered Surveyors (RICS) at the end of April;
  • Whilst describing the market as being in “neutral” gear, supporting the Rightmove data referred to above, the Council of Mortgage Lenders (CML) reported a “shift towards first-time buyer and remortgage customers, away from home movers and buy-to-let landlords”. The top-down controls on subduing the speculative growth of the market may be working earlier than expected;
  • Research by Legal & General and the Centre for Economics and Business Research consultancy reported that the “Bank of Mum and Dad” has become the equivalent of the ninth-biggest mortgage lender in the UK (expected to “lend” over £6.5 billion this year);
  • According to the CML, gross mortgage lending totalled £21.4 billion in March, in line with the monthly average over the past year but less than the £25.7 billion lent in March 2016 (a period which saw landlords rushing to buy homes ahead of a rise in the stamp duty surcharge);
  • According to Ludlow Thompson, stamp duty tax receipts have risen by 70% over the last five years and in the last year alone the government has received £1.1 billion.  Despite the ongoing campaigining (such as the #CalloffDuty), there seems little likelihood of any policy reversal for the foreseeable future;
  • This month, the factfile highlights a handful of the longer term Limited Company (SPV) buy-to-let mortgages (at the bottom of page 1). The Bank of India continue to offer some of the lowest rates in the marketplace (2.99% tracker payrate based on a 75% loan to value). Note that specific rules and conditions will apply – for more information and to discuss you specific borrowing circumstances please get in touch with or direct on 01133 203240;
  • UK LIBOR and SWAP rates steadily remain at historically low levels, reflected more recently in an unprecedentedly low variable rate of 0.89% being offered by the Yorkshire Building Society (for a residential owner-occupied property).  However, the relatively high arrangement fee of £1,495 and a minimum 35% downpayment requirement for this product highlights the importance of looking at the small print;
  • Index of Private Housing Rental Prices figures (via the Office of National Statistics) grew the strongest South East England followed by the East of England, the South West and the East Midlands (the latter two regions are at relatively similar levels);
  • 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).  RICS research indicated that headline rents in England will rise by 2% over the next year with a little more “pushback” expected in London due to ongoing affordability constraints;
  • Government figures released in April reported that over 868,000 Help to Buy ISAs have been opened and 259,000 people have now bought a property using a Help to Buy scheme.  The highest number of Help to Buy ISA assisted property completions was seen in North West, Yorkshire and The Humber and the South West. The ISA bonus (introduced in December 2014) has facilitated 45,098 completions across the UK.  London’s Help to Buy scheme has assisted 2,381 buyers in 31 boroughs between February and December 2016.  Over 112,000 completions have also taken place through Help to Buy’s Equity Loan scheme. Note that whilst the Help to Buy mortgage guarantee scheme was withdrawn at the end of 2016, the equity loan scheme and the ISA bank account will continue to operate.


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[1] 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.

[2] Informally referred to as the “donut” areas of London: 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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