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The Property Investor' Blog

Commentary on the August 2017 Property Investor´s Factfile

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August 2017 Property Investor´s Factfile

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

  • Both the Halifax and LSL / Acadata house price indices reported drops between May and June of 1.05% and 0.69% respectively. During the same period, however, Nationwide reported 1.24% growth in prices. Land Registry slightly lagged, although arguably more accurate, data pointed to average prices across England and Wales growing by just 0.28% (from £220,094 in April to £220,713 in May);
  • Rightmove asking prices slightly recovered from a 0.37% drop in June, yet only marginally rose to 0.1% in July.  According to Rightmove director Miles Shipside: “prices are in the summer doldrums. Sellers coming to market at this time of year have to price more keenly as the traditionally bubblier spring selling season is over and prospective buyers are distracted by their own summer holiday plans. A year on from the shock referendum result and subsequent dent in activity levels, the fundamentals remain strong. Low unemployment, low interest rates, strong demand and historic undersupply of homes are mitigating any wobbles in confidence and as a result nearly half the properties on the market, over 45 per cent, have sold signs slapped across them.”  According to the same index, Greater London asking prices grew by 1.1% during the same period;
  • Land Registry data between April and May pointed to growth in the City of Westminster, Inner [1] and Outer [2] London at at 2.26%, 0.06% and 0.40% respectively. Over the same period however, City of London prices fell by a lesser rate of 2.43% (compared to a notable 7.05% drop between March and April);
  • The latest Hometrack Cities Index house price growth in London has slowed to 2.6%, the lowest rate in over 5 years and the same as the annual rate of consumer price inflation (CPI). Birmingham, Edinburgh, Manchester, Nottingham and Leicester all continued to show strong year-on-year growth (at 7.8%, 6.5%, 6.4%, 6.0% and 5.8% respectively);
  • The August 2017 Bank of England Inflation Report acknowledged the importance of buy-to-let transactions in buoying the property market as a whole.  However, the report stated that more recently the “widespread slowdown [in house prices] is likely to have been driven by some of the same factors driving the weakness in spending, in particular the weakness in income growth” and “activity may also have been affected by uncertainty surrounding the EU referendum”;
  • An interesting Economist article reported on the issue of lower home moving levels which was attributed to a number of factors including: a long-term decline in housing construction; restrictive planning policy; an ageing population less incentivised to downsize; more Britons living alone; the rising burden of stamp duty (the average amount of which has risen by 30% in real terms over the last decade); higher deposit requirements and an overall emerging trend of squeezed living standards despite cheaper mortgage borrowing;
  • Conversely, according to Countrywide (analysing Land Registry data) the number of speculators “flipping” properties (i.e. buying and selling over a short period) has reached its highest level in 10 years. Approximately £5.5 billion worth of homes (30,822 houses and flats) across England and Wales were bought and sold more than once in the year to April 2017. Such activity has become particularly prominent in cheaper regional markets as higher stamp duty obligations has made quick turnarounds less feasible in Greater London and the South East. In 2007 (pre-recession) £9.6 billion worth of housing stock was “flipped”;
  • The Council of Mortgage Lenders (now integrated into a new trade association UK Finance) recently estimated that approximately 1.9 million borrowers (about 21% of all homeowner mortgages) are just paying off the interest on their debts without any form of capital amortisation. With many of these mortgages granted on 10 or 20-year terms in the 2000s, the Financial Conduct Authority (FCA) previously stated that around 600,000 interest-only loans are due for expiration by 2020.  It is believed that one in 10 households do not have “an appropriate strategy” to repay the debt once the loan expires;
  • Buy-to-let mortgage brokers and investors are being warned to prepare themselves for delays and “log jams” in lender services when new Prudential Regulation Authority (PRA) underwriting rules for portfolio landlords come into play from 30th September. Lenders are likely to demand detailed information on income (bank statements, payslips and other necessary documentation) as well as cashflow forecasts and business plans.  Where possible, borrowers are therefore being encouraged to secure financing during the summer months. It should be observed that such PRA underwriting criteria does not apply to buy-to-let borrowing through Special Purpose Vehicles (limited companies);
  • Some relatively interesting Special Purpose Vehicle (SPV) buy-to-let borrowing products include a 2.99% 5-year tracker rate with relatively reasonable loan arrangement fees of £937 (note the final rate increases to 4.49%) and a LIBOR-linked 10-year 3.64% initial payrate from Landbay (with a £1,125 loan arrangement fee and a final rate of 3.64%).  Please note that specific rules and conditions will apply.  For more information and to discuss your specific borrowing circumstances please get in touch with or direct on 01133 203240;
  • The number of first time buyers in the UK reached an estimated 162,704 in the first six months of 2017, only 15% below the peak of the last boom in 2006, according to the latest Halifax First Time Buyer Review. The average prices paid by a first time buyer was £207,693 but this rose to £410,000 in London, the highest on record;
  • Despite a sharp drop in homebuilders’ share values at the start of August after a report suggested that Help to Buy could be wound down sooner than expected, the Department for Communities and Local Government (DCLG) affirmed a commitment of £8.6 billion for the equity loan scheme to 2021, assuring it will “continue to support homebuyers and stimulate housing supply.”


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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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