Housing market confidence bounces back

 

According to a survey conducted by the HomeOwners Alliance, myhomemove and BLP Insurance, confidence in the housing market is rebounding as concerns about stamp duty and negative equity fade away.

The report revealed that people’s concerns about housing have receded ‘across the board’ over the last year. Most dramatically, the numbers saying that negative equity is a problem has slumped in the last 12 months by more than 10%. Concerns about stamp duty rates have seen a near identical drop.

The proportion of adults who say stamp duty is a serious problem has dropped from 64% in 2014 to 51% in 2015, In the wake of the government’s reforms of the system last year, one third say they feel the recent changes to stamp duty have made it more affordable for them to buy their first home or to move up the property ladder.  The HomeOwners Alliance campaigned strongly for reform of the stamp duty system, and welcomed the reduction in rates at the lower end of the housing market and abolition of the hated “slab” system.

Concerns about estate agent fees, conveyancers’ fees and being able to pay off the mortgage have all eased over the past year.  Yet the ability for aspiring first-time buyers to get on the property ladder continues to be a top housing concern with 83% of UK adults saying it is a serious problem.  Among those aspiring to get on the ladder, house prices, saving for a deposit, the ability to get a mortgage/remortgage[1] and quality of housing are rated as more significant issues than among UK adults generally.

Key findings from the survey include:

Ability for aspiring first-time buyers to get onto the property ladder (83% saying it is a serious problem) and saving for a deposit (83%) top the list of housing concerns nationally, followed by house prices (76%) and the ability to get a mortgage (72%).

The proportion of adults who say negative equity is a serious problem has dropped down to 49% from 64% last year; after a steady increase in house prices. Negative equity continues to be a key concern in Northern Ireland, with 68% saying it is a serious problem.  

Concern over stamp duty rates has also fallen sharply (64% in 2014 to 51% in 2015), with 1 in 3 saying that the recent changes to stamp duty have made it more affordable for them to buy their first home or move up the property ladder.   

Housing anxiety has subsided, with UK adults saying they are less concerned than last year across the board, including property/solicitor fees, and the quality of housing.

Regionally, concern about high house prices continues to be greater in London than in other regions. (60% of Londoners say house prices are a very serious problem compared with 40% in the UK generally).  The proportion saying house prices are a very serious problem in London has risen 5% in the past year.  Those living in Northern Ireland and the North East are more concerned with housing availability and negative equity than elsewhere in the UK.

Nearly half of adults (49%) say gazumping is a serious issue, while 43% say gazundering is a serious issue.  51% of adults believe that the homebuying/selling process in this country is a serious issue.

The leasehold and freehold system is causing widespread concern across the UK, with 42% of adults saying it is a serious problem. In London, East Midlands and East of England, around half of people say it is a serious problem.

Aspiration to own your own home has edged up slightly, with 69% wanting to own, compared to 68% last year and 65% in January 2013.

Aspiring homeowners are significantly more concerned than UK adults, with house prices (84% vs 76%) and the quality of housing (57% vs 49%).
 

 

Are we on the brink of a remortgage surge?

 

New research from the Nottingham Building Society has found that brokers are forecasting an increase in remortgaging over the next 12 months as their clients aim to cut costs following rate reductions.

Its study found 58% of brokers expect a rise in remortgaging inquiries with nearly one in 10 (9%) forecasting a dramatic increase.

The research from the society, which offers a mortgage service that searches the whole of the market to find the best deal for customers, found that brokers are forecasting a rise in the number of five and 10-year fixed deals available. Around 48% of brokers believe there will be more five-year deals while 40% are forecasting an increase in 10-year deals.

However brokers are reporting a rise in customers giving up on remortgage and mortgage deals because the process has become more time-consuming and difficult – more than two out of five (41%) say they’ve seen an increase in customers giving up.

Brokers’ confidence on remortgaging is supported by consumer research which shows that 16% of homeowners are considering switching between March and August this year. The biggest group of homeowners contemplating this are those aged 25-34, many of whom may be in their first home and want to move on to better deals.

However, 19% of homeowners aged 45-54 and 9% of those in the 55-64 category, are also thinking of doing this, but The Nottingham’s research suggests that many people aged 40 and over have struggled to secure new deals.

Ian Gibbons, Nottingham Mortgage Services Senior Mortgage Broking Manager, said: “Brokers believe remortgaging could be a major growth area in the coming year and that is reflected in the new deals being launched by lenders.

However there remains an issue about customers giving up on applications because the process has changed since they last took out a home loan which underlines the need for the expert support provided by brokers and the whole of market service.”
 

 

House price optimism wobbles in June

Halifax has reported through its Housing Market Confidence Tracker, that following the General Election in May house price confidence hit its highest level in four years before slipping back in June.

House price optimism slipped from +68 in May to +64 in June, yet remains substantially higher than at the beginning of the year (+52 in January).

The dip in confidence in June comes despite continued rise in real wage growth, together with record low numbers of homes available for sale pushing average house prices over £200,000 for the first time ever.

Nevertheless, while the May high was short-lived, the percentage of Britons predicting an increase in the average property price of more than 5% over the next 12 months has still risen from 34% to 38% in the last quarter.

This increased optimism also corresponds with a fall in the net figure for buying sentiment, from +35 in February 2015 to +25 in June 2015. More than half (56%) of Britons said in June they think it will be a good time to buy property over the next 12 months, compared to 61% who said this in February 2015. At the same time there’s been an increase in the net figure for selling sentiment from +27 in February 2015 to +32 in June 2015).

With the Governor of the Bank of England saying improving economic figures means an interest rate rise has moved closer, nearly half of Britons (48%) expect mortgage interest rates to be higher in 12 months’ time (compared to 45% in Q1, March 2015).

Raising a deposit is still seen as one of the main barriers to homeownership (55% mention this), ahead of job security (47%) and rising property prices (35%).

While concerns over raising a deposit have fallen in the last quarter (61% of Britons cited this as a barrier to buying in Q1, March 2015), this is still higher than the proportion who said this in Q1, April 2011 (50%). At the same time concerns about rising prices have continued to increase, with more than a third citing this as a barrier to buying (35%) compared to just 15% who said this in Q1, April 2011.

Londoners are less likely than those in any other region to say it is a ‘good time to buy’ (38% of Londoners say this compared with 56% of Britons overall), making it the only region where the proportion who think the next 12 months will be a bad time to buy exceeds the proportion who think it will be a good time.

Those in the South East are more confident than in any other region that house prices will be higher in 12 months’ time (90% say this compared to 69% of Britons overall) with those in the North East and the West Midlands the least likely to say this (both 59%).

Martin Ellis, housing economist at Halifax, said: "Economic growth, together with increasing real earnings growth and historic low mortgage rates are all supporting the continued rise in house price optimism. It’s not been a smooth increase though as while there was a noticeable spike in optimism straight after the General Election result, this has now fallen off slightly.

A key factor in maintaining optimism over house price growth has been the fact that the stock of homes available for sale is currently at record low levels. If this growth is to be sustainable then we need to see a comprehensive house building plan rolled out across the UK, and soon.”

10 things landlords should really know but don't

 

 

According to the Residential Landlords Association, there are more than 100 rules and regulations that landlords need to abide by to let out a property, but how much do landlords really know?

Steve Coyle, operations director, at Cullen Property outlines his top 10 things landlords should really know but often don’t:

1.    Tenant Fees are illegal in Scotland.

Any ‘Tenant Fees’ are illegal in Scotland.  This includes, referencing fees, agency fees, holding fees, sign up or inventory fees etc.  Basically the only two things tenants should pay for in the process of letting a property are a) rent, and b) deposit.

2.    Deposits must be placed in a Tenancy Deposit Scheme.

Any deposit funds must be placed in one of the three designated government backed Tenancy Deposit Schemes (TDS) within 30 working days of a lease starting/the deposit being received.  Failure to do so is a criminal act and may make the landlord liable for a fine at court of three times the deposit amount being payable from him/her to the tenants. Putting the money into a separate bank account doesn’t qualify.

3.    Tenants can report bad housing.

Tenants can report poor housing (e.g. no running water, excessive mould etc) to the Private Rented Housing Panel (PRHP) who have the power to stop the rent being paid to the landlord until the property is in a satisfactory condition again.

4.    Lease paperwork is very important.

Allowing a tenant to move into a property without a proper AT5 or Short Assured Tenancy contract could mean that the landlord has inadvertently created an Assured Tenancy, meaning that the tenant has the right to live there indefinitely as long as they continue to pay the rent.  The Landlord has few powers to gain re-possession under an Assured Tenancy.

5.    Check your insurance policy.

Insurance policies, like most things in life, mean that you generally get what you pay for.  Cheapest usually means least amount of cover.  Some policies won’t cover even basic items like fire and flood depending on what caused them so make sure you read the small print.  It’s too late to start reading it after an incident has occurred.

6.    Smoke alarms – what the law says.

All letting properties must now legally have hard-wired smoke alarms in the living room, hallway and other ‘living areas’ and a hard-wired heat detector in the kitchen.  This applies to one bedroom and two bedroom flats as much as larger properties too.  HMO flats and properties over two levels have further requirements.  

7.    Know about the Factor Act.

Arranging communal repairs could now be classed as being in contradiction of the Factors Act.  Collecting and using other peoples’ money to pay for any repair in a communal area could technically leave the arranger in breach of the law.  Ideally, each owner should pay the main contractor their share of the costs rather than the ‘stair secretary’.

8.    Tax evasion is illegal.

Landlords who earn an income from their rental property must generally complete a Tax return.  Letting property is, in effect, running a small business and should be treated as such.  HM Revenue & Customs can impose hefty fines on anyone discovered to be evading tax.  Generally, the interest part of any mortgage can be off-set against the tax bill for the property along with various other concessions.  Check the HMRC website for full details.

9.    Check-ins and check-outs.

Conducting a proper check-in and check-out is essential.  These should include a full inventory check, condition report check, and a full set of dated digital photographs.  If the Landlord and the tenant can’t agree on what the tenant may be liable for at the end of the lease then the check-in and check-out evidence is the only way the Landlord can prove his case.  In contested cases, TDS adjudicators start from a position of ‘the money belongs to the tenant’, and it’s up to the Landlord to prove otherwise.

And finally, for all those reading this and saying to themselves, ‘Well, I never knew that!’…

10.    Ignorance is no excuse

It’s important for landlords to keep up-to-date with letting rules and regulations.‘Ignorantia juris non excusat’ or ‘ignorantia legis neminem excusat’ is Latin and is a legal principle holding that a person who is unaware of a law may not escape liability for violating that law merely because he or she was unaware of its content. The translation being: “Ignorance of the law does not excuse" or "Ignorance of the law excuses no one" so be sure to do your homework and keep abreast of new rules and regulations.

 

 

Is BTL better than stocks and shares for retirement?

According to new research from Nationwide Building Society, the average cost of a typical home in the UK in April 1991 was £53,677.

Prices have increased by almost 260% over the past 24 years, bringing the average UK house price in 2015 to £193,048.
It’s no surprise that the buy-to-let market is booming in the UK, as more and more investors opt for property, rather than stocks and shares to fund their retirement.  More than two million people are now private landlords, up by 600,000 since the financial crash.

In 2000, less than 2% of mortgages in Britain were buy-to-let. Now there are 900 BTL mortgages available accounting for 15% of all home loans and new buy-to-let mortgages account for 18% of new mortgages.

Over the last 15 years, property has given investors excellent returns. The chart below shows how much money would have grown if it had been invested in property since 1991, the year Nationwide started publishing monthly house price figures, and in the FTSE All-Share index over the same period. Returns from the FTSE All-Share only narrowly beat those from property, at 264% compared with 259%.

Jane Morris, Managing Director of Property Let By Us comments: “Our own research shows that for 20% of landlords, their property portfolio forms part of their pension provision and for 70% of younger landlords, it is their only pension fund.  

Many people still prefer property as a sensible way of saving for the future because, unlike pensions, with bricks and mortar your money isn't locked away until you reach the age of 55.  Excellent rental yields and capital growth from buy-to-let is appealing to any investor who is concerned about the volatility of the stock market.  

 

Despite the additional costs in property such as buying fees, maintenance and void periods, the asset growth and rental income is still very attractive for investors concerned about the volatility of stock markets. However, as with any investment, there are no guarantees, so investors should be aware of the potential pitfalls.”

43% of landlords say demand is booming

 New research by Paragon Mortgages has found that continued growth in the BTL market is rife in the second quarter, with 43% of landlords experiencing a rise in tenant demand.

The most recent findings show that the trend for strong tenant demand is well-established, with ongoing steady growth for the past three consecutive quarters.

The level of growth is expected to continue over the next 12 months with more than half of landlords (51%) believing they will continue to see a rise in demand.

The research also identified the tenant groups that landlords are most frequently letting to with almost half of landlords (47%) renting to young couples, young singles (43%) and families with children (42%).

John Heron, Managing Director of Paragon Mortgages, said: “It is no surprise that rental demand is steadily increasing. With continued stress on the housing stock driving prices up, tough affordability hurdles for would-be buyers and a social rented sector under pressure as a result of renewed interest in right-to-buy, a steady increase in rental demand was practically inevitable. It is important that landlords continue to expand the supply of rented property in order to maintain balance and so avoid unsustainable increases in rents. A healthy, competitive and innovative buy-to-let market is critical to this.”

New 95% LTV range launched at TSB

    

TSB Intermediary has announced that it has launched a 95% LTV range with rates from 4.49%.
Two year fixed rates start at 4.49%, five year fixes from 4.89%, and the ten year Fix and Flex from 5.34%.
TSB’s Fix and Flex mortgage is new to the intermediary market at 95% LTV. According to the bank, it is the only lender to offer a ten year fix rate mortgage for buyers with a 5% deposit.
TSB are also offering a three year stepped mortgage from 3.59% (year 1), rising to 4.69 in years 2 and 3.
TSB’s new stepped mortgage is also new to the range of mortgages available to brokers. These give homebuyers some financial flexibility during the first year in their new home, and the assurance of a fixed rate for three years.
Roland McCormack, TSB Intermediary Director, said: “The mix of TSB’s mortgages allied to our reliable expert to expert service is proving to be a hit with brokers. The introduction of 95% mortgages through TSB Intermediary is the latest milestone in the launch of our intermediary offering.”

House prices cool amid heatwave

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The latest Nationwide house price index has confirmed that despite the recent heatwave, house price growth has continued to cool off, moderating to 3.3% from 4.6% in May.
Robert Gardner, Nationwide's Chief Economist, said: "This maintains the gradual downward trend that has been in evidence since mid-2014, though this is the smallest annual rate of increase for two years. House price growth continues to outpace earnings, but the gap is closing, helped by a pickup in annual wage growth, which moved up to 2.7% in the three months to April from 1.9% at the start of the year.
The slowdown in house price growth is not confined to, nor does it appear to be driven primarily by, developments in London. In quarter on quarter terms, London has continued to see price growth at or above the rate in the UK overall over the past three quarters, while the annual rate of price growth in the capital remains the second highest in the country.
Eleven of the thirteen UK regions saw a slowdown in the annual rate of growth in Q2. Most parts of the country continued to see annual house price gains - the exceptions were Wales and Scotland, which recorded small declines.
Robert Gardner suggested that housing stock is likely to be used more intensively unless supply picks up: “Given the gap between population growth and rates of housebuilding (which has been evident for some time) the housing stock is likely to be used increasingly intensively until building activity catches up. There are signs that this has been occurring, with the number of vacant properties trending down since 2008, though council tax changes in 2013 impacted reporting and probably overstate the decline in the last two years.
The strong relationship between supply constraints and vacancy rates is clearly visible at the regional level. As you might expect, regions where affordability is more stretched see far fewer vacancies. For example, in London, the UK region where affordability is most stretched, only 1.7% of the housing stock was vacant in 2014, around half the 3.5% rate prevailing in the North of England.
Given the apparent supply pressures, it is interesting that instances of under-occupancy are relatively high. For example, in 2014 almost half of owner occupiers in England lived in a property with two or more spare bedrooms.
While this may represent peoples’ preferences, it may indicate that the housing stock is not be being used as efficiently as it might be, perhaps because of a mismatch between the types of property people want and what is available. For example, it may be that older people are unable to find suitable properties to downsize, frustrating the ability of families to move into larger homes.”

 

Paul Smith, CEO of haart estate agents had this to say: “Today’s report of national house price growth slowing is a step in the right direction for affordability but we are still finding that demand for homes is outpacing supply. Our data shows there are now 11 prospective buyers chasing each new property instruction across the UK, compared to eight at the same time three years ago. The formation of property chains is still proving difficult – while many are keen to move, and would do so if the opportunity presented itself, the difficulty is in securing an onward purchase.
This is having a stagnating effect and there is a desperate need for a more liquid market, through an injection of supply. We are in desperate need of government driven supply side initiatives which should include attractive incentives for housebuilders to get building. We are also hearing reports from branches that downsizing has become a dirty word and is seen as carrying negative connotations – that the seller has somehow lost their zest for life. Changing this attitude to release more family homes for second-steppers, would ensure our limited housing stock is used in the most efficient way. Without this healthy churn in the market, first-time buyers will continue to be priced out.”
Alex Gosling, CEO, online estate agents HouseSimple.com, quipped: "Only the second monthly fall in house prices this year suggests any momentum gathered following the General Election in April, has started to ease.

However, there's no immediate cause for concern that the housing market is starting to stutter. Typically, the summer months are often slower months for property purchases as buyers head to the beaches rather than view properties. And April and May did see an unusually high level of buyer activity.

What we're seeing overall is a return to normality, although a black cloud does loom overhead in the form of a shortage of stock. The lack of properties coming onto the market remains an issue, and come September when buying activity typically starts to pick up again, the picture could be an entirely different one."

Although most regions have seen annual price growth fall, the most noticeable drop is London with annual price growth down to 7.3%. London's buoyant housing market propped up the UK market as a whole during the hard times - now it seems the Capital could do with a little propping up itself."
Jonathan Samuels, CEO of Dragonfly Property Finance, added: "The property market is a veritable conundrum right now. The June dip and ongoing slowdown in the rate of annual growth have come despite the fact that demand is picking up and supply is still constrained.
While the gap between earnings and house price growth may be narrowing, you suspect there will always be a degree of repulsion between the two, like two positive magnets. Wages may be improving but it's hard to see them ever getting consistently close to house prices.
London prices may have softened quite considerably but they are still comfortably above the UK regional average. Even when London falls, the landing is relatively soft. The fact that Northern Ireland outperformed all other regions in the second quarter highlights the way in which different regions can wax and wane.
It's hard to predict where the property market is headed. With a low cost of living, very competitive mortgage rates, renewed political certainty and a strong jobs market, there are many positives. However, should events in Greece spiral out of control, the UK property market will not be immune