Rate of house price growth in UK starts to plateau

Latest index data suggests that the rate of house price growth in key cities in the UK is starting to plateau after a strong first half of the year. London in particular is likely to see slower growth ahead.

Month on month the Hometrack Cities Index recorded growth of 6.9% in June and year on year growth is running at 10.2%, the same level as the previous month.

Market attractions

The index report suggests that double digit year on year growth has been sustained by the surge of investor demand ahead of the stamp duty change in April. Low mortgage rates and improving economic conditions have continued to attract households into the market against a backdrop of dwindling supply with the net result being continued upward pressure on prices.

In June, Bristol remained the fastest growing city with year on year price growth of 14.7% taking the average price to £253,400. London followed close behind with annual growth of 13.7% to £476,800 and then Cambridge up 11.5% to £411,800.

The report points out that any impact from the decision by the UK to leave the European Union will not be reflected in the index for two to three months.

“That said, we have reported signs of slowing growth in some cities, particularly in southern England where affordability levels are close to record highs. The slowdown might have been more apparent by now had the stamp duty change not been introduced,” it says.

Supply and demand

A new analysis looking at listings also shows that for selected cities new supply has grown faster in the last three months than the average increase in supply seen over the last 12 months. For all cities in England and Wales excluding London new supply has grown 10% faster than the 12 month average, this rises to over 15% in London.

“This analysis shows how recent sales momentum in regional cities, and higher house price growth, appears to have held up over the referendum period. In contrast, the headwinds facing the London market ahead of the vote have resulted in more supply and relatively fewer sales pointing to slower house price growth in the months ahead,” the report says.

Hometrack explains that this is something that is clearly evident at a more granular level across London’s localised markets where the highest value markets in central London are registering low single digit growth. In lower value, outer areas of London growth is still 15% to 20% per annum although showing clear signs of losing momentum.

“While this listings analysis provides a snapshot of the last quarter, the reality is that it is still very early days to assess the true impact of the EU referendum vote on activity and house prices. Our view remains that sales volumes are likely to slow and price growth will moderate over the second half of the year,” the report adds.

“The severity of a slowdown will depend upon the response of consumers and businesses to the uncertainty created by the decision to leave the EU and the impact this has on the economy. The early market activity data confirms our view that London will bear the brunt of any slowdown,” it concludes.

Source: Property Wire

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Extended mortgage age limits show changing property culture

Changes in policies announced by leading lenders including Halifax and Nationwide to increase the maximum age limits on mortgage lending mean that borrowers could find it easier to get on the property ladder.

Many older borrowers have struggled to secure a mortgage into their pension years, even with guaranteed final-salary pension income.

Despite the default retirement age being phased out in 2011, and the rise in people living and working for longer, most lenders have stuck to the state pension age.

The announcements in May that Halifax and Nationwide were raising upper age limit to 80 and 85 respectively has been broadly welcomed by the property industry.

Mortgage lending in general surged just before March as second home buyers rushed to beat the stamp duty increases. The British Bankers Association said lending rose to £17.1 billion in March 2016. But overall mortgage lending remains with historically low levels.

The move to raise the threshold of the age limit offers property buyers extra flexibility and is believed it will help homeowners who have not cleared interest-only mortgages, and older ‘silver splitter’ couples divorcing and looking for new homes.

Number of Buy-to-let Mortgages Plunges By 40%

Number of Buy-to-let Mortgages Plunges By 40%

The latest data published by Landmark Quest, the UK-based financial consultancy specialising in property, shows a dramatic 40 percent drop in the number of buy-to-let mortgage valuations in April, compared to February.

The latest figures claim a substantial drop of 30.6percent between March and April alone.

Peter Stimson, managing director of Landmark Quest, said: “Overall market instructions were down slightly by 6.6% compared to March, however we saw a sharp decrease in the number of buy-to-let instructions – over 30%, in the same period.”

The sharp decline in instructions reflects the fact that many buy-to-let landlords brought forward their buying decisions in order to avoid the tax hike, as reflected by a substantial jump in mortgage lending in March, when a total of £25.7bn in mortgages were handed out, up 59% year-on-year, according to the Council of Mortgage Lenders (CML).

“It’s clear that the race was on for transactions to go through before the new rules came into force on 1 April.  It will be interesting to see what happens in May but I am anticipating that volumes will remain low,” said Stimson.

Sneaky loopholes try to circumvent new rules

As part of its process, Landmark examined the market for fraud. Following the changes to the stamp duty rules, it reported a sharp rise in the number of investment properties appearing on ‘sale under value’ and ‘property club’ websites.

It also pointed out that a significant number of new build developments are now popping up online, offering buyer incentives.

“With any significant changes like we have seen with the stamp duty rules, we do typically see a change in behaviours. Currently, we are seeing a sharp rise in the number of new-build developments either offering ‘stamp duty paid’ deals or appearing in Property Clubs offered at ‘discounted rates’, ”he said.

“Particularly worrying is that rather than just one or two properties at the end of development phase in some instances we are now seeing entire developments appearing for sale ‘under value’. Lenders and surveyors really need to do their due diligence and be fully aware of such incentives and schemes to manage and control the risks associated with these.”