Reeds Rains Property Blog

Property News from Reeds Rains

Buy-to-let index April 2015

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Rents rise at fastest rate since 2010 to hit all-time record high

  • Residential rents have grown 4.6% year-on-year – the fastest rate of increase since November 2010
  • Average rent across England and Wales hits record high of £774 in April – or a record £1,204 for London
  • East of England sees rents up 12.5% in 12 months, faster than new peak of 7.8% annual rises in London
  • Levels of late rent improve once again after previous spike – proportion of rent in arrears falls to 7.0%
  • Landlords see total returns drop to 8.9% on back of slower capital growth, but yields steady at 5.1%

Rents across England and Wales jumped 4.6% compared to April last year, according to the latest Buy-to-Let Index from Reeds Rains.

This represents the fastest annual rise since November 2010.

Rents are also at a new all-time record in absolute terms.  As of April, the average rent across England and Wales stands at £774 – the most expensive rental prices on record.

On a monthly basis, rents grew by 0.8% between March to April, the fastest month-on-month growth since September.

Adrian Gill, director of estate agents Reeds Rains, comments: “Rents are going skywards and still accelerating.  That momentum is fueled by a fundamental shortage of housing and given oxygen by renewed wage growth.

“Economic progress has brought about a slow but steady stream of household earnings and employment: the most basic requirements for rent rises.  Placed in the context of the UK’s pressure-cooker housing shortage, these modest improvements have driven rents up at record speed. 

“This should be a loud and clear signal to the authorities that home building is more than just manifesto-fodder.  People have more money in their pockets, but we’re in danger of seeing that recovery squandered away on a housing shortage. With the surprise of a relatively strong majority government, there has never been a better time to take the bull by the horns and fix this housing crisis at the root.  When you hear a kettle whistle, you take it off the hob.”

Full details about the Buy-to-Let index can be found here 

House Price Index - April 2015

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House price growth in South East and East Anglia overtakes London

  • For the first time in four and a half years, London no longer leads the regions – beaten by South East and East Anglia, which are experiencing stronger year-on-year price rises than the capital
  • Across England and Wales, house price growth picks up on a monthly basis in April, climbing 0.2%
  • But the annual rate of property price growth has halved since last summer, down to 5.3% in April
  • Q1 sales down 10% before the General Election, but new certainty likely to reset the balance

Adrian Gill, director of Reeds Rains estate agents, comments: “House price growth has jolted awake again in April, climbing 0.2% (£600) in the past month, following what was a more lethargic period for property values. This has lifted the average house price across England and Wales to a new high this year, at £275,961. Annual price growth is still cooling, but mainly due to some recent negative monthly price rises. The direction of travel is clear and accelerating – and most importantly, momentum is picking up where it was lacking before.

“By contrast, annual price rises in London have fallen sharply. As a result, the capital has been knocked off its perch by the South East and East Anglia, who have now edged ahead of London with the strongest year-on-year increase in property values of all regions across the country, at 7.1% and 6.9% respectively. In contrast, annual growth in London has shrunk from 9.0% in February to just 6.8% in March 2015.

“This is the first time for nearly four and a half years that London has not been leading the pack in terms of regional house price growth, as higher stamp duty rates take some of the shine off high-end properties in prime central areas. In the City of Westminster, where the average property is now worth £1,382,965, prices dropped 5.2% during the month of March, as pre-election speculation of a Mansion Tax put a dampener on enthusiasm for the most exclusive London homes. London also saw the sharpest decline in completed home sales between Q1 2015 and the same period a year ago, falling 16.5%.

“Election uncertainty has now vanished, so arguably London’s unique property market could see a fresh boost. But this mansion tax effect is one for the very top of the market. Away from the prime hotspots, affordability is still the biggest factor holding back further price rises – owning a London home is still more of a dream than even an aspiration for millions.

“While property values in the capital have dipped 0.6% month-on-month, prices have still risen steadily in other areas – reaching new records in the South East, East Anglia, and East and West Midlands in March. The head start that the housing market in London has traditionally exercised over the rest of the UK is retreating, and more of an even playing field is emerging instead. Average property values also hit new highs in Greater Manchester and Birmingham, as demand in other large cities continues to thrive away from the south-eastern extremities of the UK.

“Across the wider market, home sale completions made healthy headway with a 5% uplift in the month to April – in face of what was thought to be a looming political impasse. However, there was a slowdown when we look at the first quarter of 2015 as a whole, with Q1 witnessing a 10% year-on-year drop in the number of homes sold. Activity was certainly more restrained in the months running up to the General Election.

“Yet any past gloom only improves the prospects of a rebound in momentum. Now a clear majority government has been established, confidence has returned to the market with abandon, and buyers across the country can seize the golden opportunities on offer. With the election done and dusted, and demand certainly bolstered by extensions to schemes like Right to Buy, the only major snag in the fabric of the housing market remains the fundamental flaw of a lack of new homes.”

Full details can be found here

 

Mortgage Monitor - May 2015

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Higher LTV lending supporting the wider mortgage market in April

  • April sees over 10,000 house purchase approvals to higher LTV borrowers, up 7.3% year-on-year
  • Lending to borrowers with small deposits represents 16.3% of house purchase approvals in April, up 1.4 percentage points from 14.9% a year ago
  • Small deposit borrowing concentrated in Yorkshire and North West – a quarter of all loans in Yorkshire were higher LTV

Loans to borrowers with small deposits saw a year-on-year increase in April, according to the latest Mortgage Monitor from e.surv, the UK’s largest chartered surveyor.

In April there were 10,112 house purchase loan approvals for borrowers with deposits worth 15% or less of their property’s total value – typically first-time buyers.

This is 7.3% more than April last year, when there were 9,422 approvals, and 6.4% more than the 9,508 borrowers seen in March. 

However, the number of house purchase approvals fell year-on-year, suggesting that higher LTV lending is helping to support total mortgage approval figures.

In the total market, there were 1.9% fewer approvals for house purchase loans in April than there were last year: 62,035 loans, down from 63,236 in April 2014.

As a proportion of total approvals, higher LTV lending now stands at 16.3%, compared to 15.5% in March and 14.9% in April last year. These gains come despite a poor start to the year. 

The most recent First Time Buyer Tracker from Reeds Rains found that Q1 2015 was the worst opening quarter for first-time buyers in two years, with just 60,900 transactions recorded. 

Richard Sexton, director of e.surv chartered surveyors, comments: “Borrowers with smaller deposits are making a welcome comeback, thanks to increased accessibility in lending, improving wages and highly attractive mortgage rates.

This revival of the bottom of the market is becoming ever more crucial – and this showed in the recent election struggle, with all the main parties placing helping first-time-buyers as one of the crucial components of their campaigns.

“However, before concerns are raised regarding the increase in higher LTV lending, it’s worth putting these numbers in context. The number of higher LTV house purchase approvals is still only a quarter of what it was in 2007. This is a healthy upturn in higher LTV lending, not a symptom of any malady in the mortgage market.

“David Cameron has outlined a plan to provide 200,000 cut-price starter homes, alongside a commitment to unlocking brownfield land for building new homes. This is the kind of clear planning the property market needs – it is to be hoped that the proposals crystallise into real policies.”

Rental Regional Review...

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England 

The housing market as a whole has recovered well since the credit crunch, with the average house price now standing at just over £34,000 higher than the previous peak in February 2008, according to our own Reeds Rains property price indices. Although the average price growth in London has dropped, due to revised Stamp Duty Land Tax and the pre-election threat of ‘mansion tax’ affecting the top end of the market, the lower rungs of the property ladder are thriving, particularly in the east of the capital. Newham, Dagenham, Bexley and Waltham Forest have all seen rises of well in excess of 15% in the past 12 months, a stark contract to Kensington & Chelsea, where values have dropped by an average 7.4%.

Still in London, the Greater London Authority’s Rental Standard scheme has been a tremendous success, with over 14,000 private landlords and more than 300 letting and managing agent firms having signed up, as of mid-March. As early adopters of the scheme, our branches all display the LRS badge that reassures tenants they’re renting from a responsible agent. Find out more here.

Liverpool

Measures to improve standards in the PRS in the north of England have recently been implemented in two of its major cities. Firstly, Liverpool Council has introduced a mandatory Landlord Licensing Scheme, requiring all private landlords to apply for a five-year licence for each of their rented properties from 1st April. Landlords must satisfy the council that they are a ‘fit and proper’ person to manage their properties, as well as meet certain conditions relating to health and safety and handling complaints about anti-social behaviour by their tenants. The licence costs £400 for the first property and £350 for each additional property, with landlords who are already members of a council-approved accreditation or regulation scheme receiving a discount and paying just £200. Visit Liverpool City Council’s website for more information. 

Manchester

And in Manchester, the council has recently introduced a Renting Pledge as an alternative to licensing. It is a simple set of standards that landlords can sign up to, to demonstrate that they are responsible and provide a good standard of home for tenants. Tenants of these landlords will also be required to make a pledge to pay their rent on time, look after the property and be a good neighbour. All the key professional associations, including ARLA, RLA and NALS have already signed up and the scheme has been generally well received in a city where 27% of residents live within the PRS. Visit Manchester’s local authority website for more information.

Wales

The average rent across England and Wales is 3.1% higher than February last year, the biggest year on year increase seen in the last two years according to our latest Buy to Let Index from Reeds Rains. Average rents in Wales were £566 per month, which was one of the highest increases of 1.8% year on year. Average yields remained at 4.3%, which is just below the average of 5% yield for England and Wales.

Oliver Blake, Managing Director  of  Reeds Rains, comments: “The  rental  sector  is  carrying  the weight  of  the  housing  crisis. More homes are  needed  to house  an  ever growing population. The supply simply isn’t there. The result is that landlords are catering to those who can’t afford to buy as well as those who choose renting for the flexibility it offers them workers moving into new jobs, or people wanting to get a feel for an area before committing to property ownership and setting down roots.”

Northern Ireland

According to the ‘Northern Ireland Quarterly House Price Index’ 2014 was a “journey back to a more normal housing market” with steady growth returning in both sales and prices – with the latter increasing by over 8%, suggesting 2013 was the year property prices bottomed out. 

Price wise, the average price ended up at £143,675 at the end of the year, much higher than the £133,000 it was the previous year and showing a pick-up in prices versus the last quarter too. Semi-detached bungalows and apartments grew at highest levels, breaking double digit growth, while terraces and townhouses rose by less than 3%. 

Belfast and areas such as Derry/Strabane saw the highest market rise at 14% year on year, while most other areas saw prices rise between 5 and 10%, with the exception of Antrim/Ballymena where prices actually fell just under 5%. 

Rental income wise, we are seeing rents stable to rising over the last 12 months. 

Ryan Andrews, Director of Reeds Rains Northern Ireland explains “We have noticed in recent months the return of chains to the marketplace which is due to more and more houses being sold at a higher level than previous years.” Ryan believes “this is a really positive sign which has been helped by the recent changes in stamp duty, with some excellent savings to be made especially in the £250,000-£300,000 bracket.” 

From the Buy to Let investors perspective, “the market is strong and lots of investors want to purchase before house prices rise any further.” 

For more information about the property market in Northern Ireland, please do visit one of our offices, call 0845 450 0865* or email Landlords@ReedsRains.co.uk. For the full property price update from Ulster University, read their Housing Index.

First Time Buyer Tracker - April 2015

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Worst quarter for first-time buyers in two years

  • First-time buyer (FTB) transactions drop to 60,900 in the first quarter – lowest since Q1 2013 (51,000)
  • March 2015 sees 23,300 first-time buyers, up since winter drop-off, but still 3.7% lower than March 2014
  • Comes despite FTBs paying the lowest mortgage rates in over four years – averaging 3.64% in March
  • Average first-time deposit now under £25,000, as LTVs reach 83.5% – the second-highest in four years

The first quarter of 2015 has seen the lowest number of first-time buyers complete property transactions for two years, according to the latest First Time Buyer Tracker from Reeds Rains.

The total number of first-time buyer (FTB) transactions for the first quarter of 2015 stood at 60,900, a sharp fall from 79,900 in 2014 Q4 and the lowest quarterly total since Q1 2013 – when 51,000 new buyers joined the property ladder.

In the latest figures for March 2015, the monthly total for UK first-time buyer transactions now stands at 23,300. While higher than the often quiet months of January and February (up 24.6% on February’s total) this still represents fewer new buyers than the same month a year ago – down 3.7% since March 2014.

The news comes despite a 3.64% average mortgage rate for first-time buyers in March – the lowest in over five years – and an average loan to value ratio (LTV) for March’s first-time buyers of 83.5%, the highest in a year (since April 2014).

Cheaper mortgage rates have also supported lower monthly mortgage repayments as a proportion of first-time buyers’ income. In March the average FTB dispensed 19.9% of their gross income on repayments against their new mortgage, compared to 20.1% in February and 21.9% of income in March 2014.

Adrian Gill, director of estate agent Reeds Rains, comments: “Cheaper mortgages and a steadier property market should be boosting first-time buyers. Enthusiasm for the idea of homeownership is as strong as ever and it’s a great time to get on the ladder according to these headline fundamentals.  Yet for many thousands of would-be new buyers there is still a very real difficulty in matching their personal finances to a home they can afford.

“Some might also point to election uncertainty and that could be a partial brake.  However, the real bottle-neck is a much more serious and longer-term problem.  First-time buyer numbers have flat-lined for two years because a lack of new homes is catching up with the property market.  It’s not the election itself that matters most – it’s the next five years and the decades after that which will count. Even now, with the extra support of record low mortgage rates and Help to Buy, the property ladder seems to be missing several rungs. Politicians need to get serious about building more homes.”

Full details of the First Time Buyers Tracker can be found here

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