Reeds Rains Property Blog

Property News from Reeds Rains

LSL New Build Index

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Following the announcement of Government plans to shake up the housing market, the house building industry has once again come under the spotlight. In its latest New Build Index, LSL considers what the plans are and highlights again the changing regional picture in terms of new build prices.

James McAuley, Director of LSL Land & New Homes commented: “Although it was hoped that the Government may introduce further measures, such as a three year ‘holiday’ for affordable homes, the new plans recently announced should go some way in helping boost activity and, we believe, should to be welcomed.

“At the moment one of the main obstacles to house builders is the sheer lack of buyers who are in a position to buy due to their ongoing difficulties in raising deposits and mortgage finance. Hopefully the reported success of NewBuy and the extension of FirstBuy will help but, in the meantime, it’s clear that some developers have had to respond with price reductions - with some regions now better placed than others.

“Comparing average prices in the period September 2010 to August 2011 with September 2011 to August 2012 we see that only three regions are seeing price rises across all property types namely East Anglia, the West Midlands and the South East. In contrast Greater London, the North East, North West and Yorkshire and Humberside have generally seen price falls. An indication, possibly, of the steps developers are having to take to attract new customers.

“In terms of popularity terrace properties look, in some regions, to be particularly sought after as prices in the West Midland, Wales and Scotland suggest –increasing by 5%, 9.1% and a staggering 16% respectively.

“Only time will tell what impact new Government plans will have to future prices but hopefully with the relaxation of planning rules, the extension of FirstBuy and, of course, the fact that developers will have access to capital more easily – we’ll see a more positive picture in the future. Until then, however, we hope that mortgage lenders will play their part in kick starting the market and make credit available, not only to first time buyers, but also the wider market.”

Keith Osborne, editor of new homes portal whathouse.co.uk, says: “Comparing these figures to last month’s, there seems to be a settling down of regional markets – there haven’t been many dramatic changes from positive to negative, or vice versa. This would suggest some sort of stability, something which is worth monitoring over the coming couple of months. It will be interesting too, to see whether the dramatic 16% increase in terrace home prices in Scotland is an anomaly or whether that heralds a longer-term trend north of the border.

“The launch of MI New Home in Scotland as a counterpart to England’s NewBuy scheme has been widely welcomed. Though recent figures suggest that first-time buyers have it a little easier in Scotland, it is a common theme with the house builders I see and talk to that without some sort of significant financial assistance from family, government or developers, meeting the lending criteria to buy a first home is incredibly difficult for anyone on an average salary. Let’s hope the Funding for Lending initiative leads to many more affordable mortgage options at the bottom of the market."


Graph shows average new homes prices in the period September 2011 to August 2012 and % variation over same period 2012/2011.

Fleur Welcomed To Lettings Team At Reeds Rains Hillsborough

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Reeds Rains Hillsborough welcomes Fleur Woodall to the team as a result of record lettings in the already buoyant and successful office. Fleur will compliment the team as Lettings Manager, joining Branch Manager John Morfitt and their experienced lettings team.

Fleur has enjoyed a successful estate agency career, spanning 20 years, within the sales and lettings market. With extensive knowledge of the Sheffield property market, Fleur is looking forward to getting started in her new role.

Fleur commented “I am delighted to have been appointed as the dedicated Lettings Manager at Reeds Rains Hillsborough. We have an exciting team on board, who are all experienced in the rental market and can offer you excellent customer service”

Fleur added “The lettings market is currently experiencing a boom in the number of tenants looking for a property, so why not hang on to your home and potentially capitalise on its future value?”

Reeds Rains Hillsborough offers a comprehensive service to landlords. With services ranging from let only, rent collection and fully managed, we take on the day-to-day responsibilities, allowing you to live your life whilst holding on to a worthwhile asset.

Whether you are a first time landlord or a current investor looking to expand your portfolio, our branch lettings consultants are here to help. Equipped with the best resources and technology we are well placed to let your property quickly, whether that’s finding a good quality tenant or securing safety certificates, our service has it all. We can also provide competitive quotes for all your property insurance requirements.

Reeds Rains have over 150 years of experience in the estate agency sector and by listening carefully we have created the perfect offering, a local high street presence backed by the infrastructure and expertise of a large national organisation. We receive thousands of tenant inquires each week and let an average of 8,000 properties every year through our expansive network.

At Reeds Rains we pride ourselves on ensuring that we act in the best interests of our clients and provide a comprehensive service backed by all of the required insurances, as well as changes in legislation. We also monitor our safety contractors to make sure they have all of the required professional qualifications and valid memberships at all times.

So if you are a landlord and would like to know more about letting a property in the Hillsborough area, please contact Fleur Woodall and the team at Reeds Rains Hillsborough on 0114 2330250 or email fleur.woodall@reedsrains.co.uk. You can also follow us on Twitter @reedsrains for the latest in property news.

Growth In Severe Tenant Arrears Slows To 1.6%

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The Tenant Arrears Tracker for the third quarter of 2012 from LSL Property Services and Templeton LPA has been released today, providing a measure of tenants who are in arrears.

  • Quarterly growth in severe tenant arrears slows to 1.6%
  • 99,000 tenants in severe arrears
  • Number of court orders to evict tenants down 6% on last quarter
  • Fall in buy-to-let mortgage arrears accelerates, down 7%

The rapid growth in the number of tenants in severe arrears is slowing, according to the latest Tenant Arrears Tracker by Templeton LPA, the specialist practice of LPA Receivers and part of the LSL Property Services plc Group.

In Q3 2012, the number of tenants in arrears of more than two months grew by 1.6% on a quarterly basis. This represents a slower rate of increase than the 4.6% quarterly rise seen in Q2 2012 .

Despite slower growth, the number of tenants in severe arrears is now 99,000, the highest number on Templeton LPA’s records, which extend back to 2008.  Following the steady quarterly rise, the level of severe arrears is 15% higher than the average for the previous 12 months.

Tenants in Severe Arrears

A particularly strong performance from tenants’ finances in Q3 2011 has contributed to an annual growth of 45% in the number of tenants in severe arrears, rather than a sudden deterioration in Q3 2012. In fact, tenants in severe arrears represent 2.5% of tenancies in England and Wales, the same proportion as in the previous quarter.

Although severe arrears cases (tenants with arrears of more than two months) steadily climbed last quarter, overall tenant arrears fell slightly in August, with 9% of all rent late or unpaid, the first improvement in this measure in three months.

Paul Jardine, director and receiver at Templeton LPA, comments: “Rising rents have kept the pressure on tenants’ finances, but it is tenants with the lowest incomes that are feeling the pinch the hardest. While the majority of tenants have shown a slight improvement in their ability to cope with the bigger rent cheques, the minority of renters who are months behind with rental payments is still expanding.

“Nevertheless, it’s encouraging news for landlords that the rate of growth is slowing. The labour market has held up well recently, and if it strengthens further, it may well keep a lid on the number of tenants unable to pay the rent in the short-term.”

Despite the steady growth in severe tenant arrears so far this year, there was a slight reduction in the number of tenants who faced eviction through court order on a quarterly basis. In the second quarter of 2012, 25,422 tenants faced eviction notices, a quarterly fall of 6% compared to the previous quarter, reversing the previous 6% quarterly increase. However, evictions remain 8% higher on an annual basis.

The number of buy-to-let mortgages over three months in arrears fell by 7% to 22,000 by the end of the second quarter of 2012, compared with a previous quarterly fall of 4%. On an annual basis, cases of buy-to-let mortgages more than three months in arrears fell by 21%.

Paul Jardine continues: “With significant capital gains unlikely in most regions, the onus is currently on rental income to provide the lion’s share of an investor’s annual return, not to mention pay the mortgage each month. In this context, many landlords have been acting earlier to resolve payment problems before severe arrears cases result in eviction processes or mortgage arrears. Record low interest rates have also been pivotal for keeping a lid on mortgage arrears. Rock bottom mortgage payments are giving investors the financial breathing room to absorb short-term financial shocks, and allow tenants to get finances in order before an eviction becomes the only option. However, there are still further austerity measures to come. If these result in job losses, we are likely to see an increased level of tenant arrears spill over into a greater number of evictions and mortgage arrears cases.”

David Brown, commercial director of LSL Property Services, commented: “Arrears management and prevention is a crucial consideration for any sensible property investment strategy. Landlords need to have a plan in place for identifying and tackling tenant payment problems early, or face the prospect of a property that is neither providing an income, nor able to be quickly filled. With this in mind, landlords should balance getting the best possible rental income from their property with making sure rental payments are affordable for prospective tenants in the long-term.”

First Time Buyer Transactions Slip But Deposit Requirements Show Signs Of Improvement

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The August 2012 First Time Buyer Monitor from LSL Property Services has been released today, providing a measure of First Time Buyer Transactions.

  • First time buyer transactions fall by 3.7% in August to same level as a year ago
  • LTVs for first time buyers rise to 81.5% in August, highest since July 2011
  • 94% of tenants want to become homeowners

First time buyer transactions fell by 3.7% to 18,300 in August after a stronger June and July, returning to their August 2011 level, according to the latest First Time Buyer Monitor from LSL Property Services.

Despite the dip in transactions, the average LTV rose from 78.9% to 81.5%, its highest since July 2011. As a result, the average deposit size fell to £26,285, 8% lower than in July as lenders showed signs of relaxing deposit requirements for select borrowers.  

While first-time buyer house prices rose by 4.7% to £141,918 in August, the affordability of both deposits and mortgage repayments improved on a monthly basis as the average income of a first time buyer rose. Deposits in August represented 73% of the average first-time buyer’s annual income, down from 81.7% in the previous month, while mortgage repayments account for 22.2%, down from 23.4% in July.

On an annual basis, the affordability of the average house purchase deposit improved slightly, with deposits representing 0.6% less of a buyer’s annual income. Mortgage payments are slightly less affordable than a year ago, climbing from 21.6% of a first-time buyer’s income as a result of larger mortgage advances. The average mortgage repayment rate for first-time buyers rose to 4.8% August from 4.6% a year ago.

David Newnes, director of LSL Property Services, owners of Your Move and Reeds Rains said: “There are encouraging signs that lenders are relaxing deposit requirements, but it’s not translating into increasing first time buyer purchases. In fact, following a seasonal drop-off in August, first time buyer numbers are back to their level of a year ago. Lending criteria remains incredibly stringent, and lenders are cherry-picking those new buyers with the very cleanest credit histories and largest incomes, limiting the number of buyers able to take advantage of deals with the very highest LTVs.

“We may be seeing lenders begin to react to the Funding for Lending Scheme - but it’s crucial that cheaper finance reaches a much broader selection of new buyers to boost buyer activity and alleviate the pressure on the private rented sector.”

The Aspiration Gap

94% of registered tenants stated they wanted to become a homebuyer, but only 7% stated they expected to buy this year. More than half (54%) believed they would make a purchase within five years.

Despite higher average LTVs in August, prospective first time buyers still see saving for a deposit as the biggest obstacle to buying. 47% of buyers are not able to buy because they cannot put together a big enough deposit, up from 41% three months ago. 14% of buyers blamed high transaction costs, down from 15% in May. One in twenty (5.1%) stated the prospect of falling house prices concerned them.

David Newnes continues: “There’s clearly underlying demand for home ownership, but the size of the gap between those who’d like to buy and those who actually can reflects the frustration that thousands of potential buyers.

“The size of the average deposit may have dipped in August, but tenants are still baulking at the prospect of saving over £26,000 at a time when rents and the cost of living are rising at a greater rate than salaries. With higher transaction costs on the back of the re-instated stamp-duty tax earlier in the year, the initial cost of purchasing a home is still a bridge too far for the vast majority of would-be buyers.”    

The profile of a first time buyer

The average first time buyer in August was aged 29 and had an income of £36,000, 2.9% higher than the average of £35,000 in July.

44% of first-time purchases were entirely self-funded in August, compared to 39% in May. However, the bulk of first-time buyers require family help to buy. Over half (53%) received familial help with deposits or mortgage payments, or through inheritance.   

Four in ten first-time buyers (39%) stated they are buying now because they have only recently been in the financial position to do so, up from 36% in May.

First-timers were most commonly looking for houses with two or more bedrooms. 28% were looking for a two bed house and 51% were seeking houses with three or more bedrooms. The next most popular type of property was two-bed flats, for which 14% of first-time buyers were looking in August.

David Newnes said: “The Liberal Democrats may be pushing for a change to allow parents to access pension pots to fund their children’s deposits, but the reality is that the Bank of Mum and Dad is already playing a key role in the current market. Four in ten borrowers receive direct help from family members to help fund downpayments on their first homes. It’s crucial those who do not have family wealth to fall back on are overlooked. The NewBuy scheme may offer limited relief in autumn’s home buying season, but it has yet to have anywhere near the level of impact necessary to revive historically low first-time buyer numbers.”   

Price expectations

On average, first time buyers expect house prices to rise by 3.2% in the next year, compared to 2.1% in May. In August house prices in England and Wales rose annually by 2.6% according to the LSL/Acadametrics house price index.

David Newnes concludes: “The picture is by no means the same across all parts of the country, but house prices have been steadily strengthening in recent months, a fact that has fed through into improved confidence from new buyers. Historically affordable interest rates, combined with optimism in the future direction of house prices is underpinning a desire for homeownership, especially when set in a context of the rising cost of rental accommodation.”    

First-time investors expect to remain in their properties for an average of 7.6 years. Only 3% of first time buyers expect to stay in a property for less than two years.

First-Time Buyer Activity Increases 11% As Market Shows Signs Of Recovery

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The July 2012 Welsh House Price Index from LSL Property Services/Academetrics has been released today, providing a measure of the average house price in Wales for July 2012.

  • First time buyer numbers up 11% between Q1 and Q2
  • House prices are up £1,513 on last year

Data from the Welsh House Price Index for July 2012.

Nigel Favas, Managing Director of Reeds Rains, who has branches in Wales commented as follows in the latest Welsh House Price Index Report from LSL Property Services and Acadametrics published 26th September 2012.

“Life has become markedly easier for Welsh first time buyers in 2012, but particularly so over the last couple of months. More new buyers have been able to access mortgage finance, which has jumpstarted the lower end of the market. It’s in stark contrast to England, where first-timer numbers have actually fallen since the end of March. Welsh buyers do have an advantage because first time buyer property in Wales is cheaper than elsewhere in the UK, meaning the deposits required aren’t quite as large. Two thirds of all first time buyer purchases in July were for properties worth under £125,000.

“First time buyers are the lifeblood of any housing market. The long term recovery of house prices is tied inextricably to how well new buyers fare. The fact that life is becoming marginally easier for them certainly bodes well for the future. But we shouldn’t get carried away just yet. Until the coalition cooks up a successful recipe for growth, house prices will remain broadly flat. It’s a similar story to the English and Scottish markets: all are hamstrung by a weak economy.

“Welsh house sales are still only 48% of what they were in the first half of 2007. And when the economy flounders, lenders toughen criteria on high loan-to-value mortgages and focus on protecting their balance sheets. That’s why equity-rich home buyers continue to represent a larger share of sales than they would in a healthy market. Areas such as Vale of Glamorgan, where there are more affluent buyers, have seen the biggest rise in house prices because of the higher demand for property. But on the flip side, less affluent areas have seen prices fall because it is harder for lower income buyers to access mortgage finance, which has reduced demand and dragged down prices.

“The fortunes of the market over the rest of 2012 will depend heavily on the government’s Funding for Lending scheme, which aims to provide banks with cheaper funds and, therefore, with more high loan-to-value mortgages. Banks and mutuals are already reporting that the scheme has encouraged them to up their lending targets for the next six months.”

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