New HIPs regulations may only affect 25% of residential property market
Property website Rightmove believes that one in four homes currently advertised for sale would be liable for a Home Information Pack if they were being freshly marketed after 1 August.
This follows the news that HIPs would only affect sellers of houses with four or more-bedrooms. At present, according to Rightmove, around 25% of houses it lists falls into that category although there is speculation that four bedroom houses could be marketed as ‘three bedroom plus study’ homes.
Miles Shipside, commercial director at Rightmove, said: “This is a larger proportion than has been speculated. It remains to be seen whether this percentage will be representative of what comes onto the market after 1 August, especially if there is a rush of instructions prior to that date to avoid the costs of a HIP.”
UK housing market is 65% overvalued
The Organisation for Economic Co-operation and Development (OECD) has warned that the UK residential housing market is 65% overvalued.
Financial experts believe this will lead to a further rise of interest rates to 6% before the end of this year. The Paris-based OECD argued that the UK property economy was world-leading in being overvalued, with the possible exception of Canada.
In its Economic Outlook report, it made a comparison between average house prices and annual rental incomes to establish that the UK market was overvalued by more than 60%. Figures released by the Council of Mortgage Lenders (CML) last month showed that mortgages were up by over £1,000 from the same time last year, a sum that would continue to rise if the interest rates push higher.
Rises in interest rates could lead to a much expected slowdown and a possible crash in property prices, according to the OECD, and that stiff rate rises were the corrective measure to avoid this. The report said: “Some slackening of pace of housing investment is likely in many OECD countries, and that may contribute to a cooling down of some fast-growing economies.”
Scots claim HIPs not necessary
Estate agency, Edinburgh Residential, believes that Home Information Packs (HIPs) are better suited to the English residential market than the Scottish market.
Ken Mitchell, chairman of Edinburgh Residential, said that single survey schemes would not be necessary in a Scottish property market that is “totally different to that in England”. Mitchell believes that solicitors in Scotland act as both estate agents and legal advisors. This creates an environment that is not sales driven as they are heavily regulated by the law societies of Scotland, according to Mitchell.
“The process is driven by lawyers and surveyors, so Scots are quite comfortable that the property is in good order and that it’s not in breach of any regulations”, said Mitchell.
HIPs informs prospective buyers about their new homes and is supplied by the seller. It is an independent report composed of legal documents and surveys, as well as an energy efficiency study.
Sharp slowdown in investor purchases
According to mortgage broker Landlord Mortgages, there has been a sharp slowdown in the number of residential purchases being made by investors in recent weeks, while some estate agents have seen a rise in the number of amateur landlords selling up and banking profits.
Lee Grandin, director of Landlord Mortgages, says: “Many landlords are facing a dilemma as the rising cost of borrowing means that rents may be less than their mortgage interest. The figures haven’t stacked up well in the last two to three weeks. Landlords are having to find bigger deposits to make their mortgage work, and this in turn limits the number of properties they can buy.”
Tim Hyatt, head of UK letting at Knight Frank, has recently seen a rise in the number of letting properties coming up for sale. “It seems that landlords are reassessing their position and deciding either to stay in for the long term or to sell up. We have seen 10-15% of our lettings being put up for sale in the last six months or so, whereas normally this figure is minimal”, he said.
High demand for rental property fuelling buy-to-let market
High demand for rental residential property is fuelling the buy-to-let property market in the first quarter, according to the National Association of Estate Agents (NAEA).
Despite many buy-to-let mortgage holders opting to increase the amount they charge for rent in response to recent interest rate hikes, few appear to have much difficulty in finding tenants for their property. The average time-period between tenancies fell from 14 days in 2006 to 13 for the first part of 2007, said the NAEA.
Jan Bartlett of the NAEA said that tenants appeared more willing than ever to pay high rents for their accommodation.
“Increases in rents is a reflection of interest rate rises, but it has not affected the market”, she said. “Properties are being let at their full asking price, unlike 18 months ago when we often had to negotiate rents down.
“Economic and immigration factors continue to fuel demand, and we have also seen an increase in the number of young professionals relocating for employment, which fuels the rental market as people often rent before they buy when relocating.”
Surge to slowdown in Scottish house prices
Lloyds TSB Scotland has warned that the surge in Scottish house prices in the last quarter could be followed by a slowdown.
The Lloyds TSB Scotland House Price Monitor study claims Scottish house prices have risen by an average of 11.9% in the last year.
Aberdeen recorded the largest average annual rise at 25%, and the figures for the North of Scotland suggest that Aberdeen's boom may be having an effect on house prices in the surrounding area. The cities of Edinburgh, Dundee and Glasgow also showed annual increases of 12%, 9% and 7% respectively.
Professor Donald MacRae, chief economist at Lloyds TSB Scotland, said: “Recent rises in interest rates will have a slowing effect on these house price increases. This latest surge is expected to moderate and may be followed by a decrease in the next quarter. This latest increase in Scottish prices may well be the last surge before the much forecasted slowdown.”
The Lloyds TSB Scotland House Price Monitor claims to be the only house price comparison index to focus exclusively on Scotland.
Activity in residential housing market drops
According to property website Hometrack, activity in the residential housing market has dropped and price rises have slowed as potential buyers are put off by increasing interest rates.
Hometrack found that the number of sales of houses rose by 4.3% in May, which was down from a 9.6% increase in April, while the number of new buyers registering with agents did not change.
House prices rose by 0.6% in May, taking the annual pace of inflation among properties surveyed by Hometrack to 6.7%, slightly down from 6.8% in April. A housing slowdown has been widely forecast after the Bank of England raised rates four times since August 2006. A fifth rate rise is also expected soon, with some analysts forecasting that base rates could climb as high as 6% this year.
Richard Donnell, Hometrack’s director of research, said: “The steady ratcheting up of interest rates was bound to take its toll eventually. We expect the headline rate of growth to slow relatively quickly throughout the year to 4% as affordability pressures put a continued squeeze on purchasing power and more supply comes to the market.”
Hometrack reported that an increasing number of homes were coming onto the market as vendors in London and the South East sought to cash in on strong market conditions. The number of new properties was up by 6% this month, from 5.7% in April. House price growth was led by London, the South East and East Anglia, with other regions experiencing only subdued house-price rises.
Demand for rental properties continues
Demand for rental property continues according to lettings members of the National Association of Estate Agents (NAEA).
The increase in Eastern Europe immigration, buoyant employment conditions and the demand from those who cannot afford to buy has contributed to a thriving rental market throughout most of the UK in the first quarter of 2007.
This has meant that landlords in many areas are able to achieve their desired rental yields despite the increase in the number of buy-to-let investors and property available to rent.
Number of mortgages has decreased, says BBA
According to the British Bankers Association (BBA), the number of people taking out a mortgage fell in April.
Around 169,784 people took out a home loan or remortgaged during April, which is a 200,000 decrease from March, and a rise of just 1% from the previous year.
Around 65,000 people took out a loan for a house purchase in April, representing a fall of around 10,000 from the previous month, statistics showed.
The figures indicated that homebuyer demand could be moderating in the face of rising interest rates, the BBA said. Gross mortgage lending for the month was recorded at £17.3bn, which is a hike of 12% on April 2006.
This largely reflects a 10% annual growth in house prices and strong remortgaging activity, the BBA said.
Howard Archer, chief UK and European economist at Global Insight, said: “The BBA mortgage data add to the recent evidence that housing market activity is coming off the boil as higher interest rates, elevated house prices and modest real disposable income growth increasingly squeeze new buyers out of the market and make it more difficult for existing house owners to trade up.
Landlords need education on TDP
The Tenancy Deposit Scheme has announced the results of its first survey looking into the take-up and attitudes of the mandatory Tenancy Deposit Protection (TDP).
Letting agents and landlords were surveyed, which showed that 60% of landlords had joined one of three authorised schemes. A further quarter did not take any deposits at all and, as a result, fall outside legal requirements to be joined to a scheme.
Lawrence Greenberg, chief executive of the Tenancy Deposit Scheme, said: “It is surprising and gratifying that such a high proportion of tenants are aware and positive about the benefits of tenancy deposit protection so quickly after implementation. Yet, with only a third of landlords being aware, these figures show that we still have a long way to go to get the message across.”
Greenberg believes landlords need to be educated on the schemes: “There are still large numbers who we must presume are breaking the law because they still have to grasp the fact that tenancy deposit protection is mandatory.”
SNP backs out of Edinburgh’s transport projects
The Scottish National Party (SNP) has pledged to halt Edinburgh’s transportation plans including tram and airport rail link projects by cutting off £1.1bn of funding.
However, according to TIE, the company promoting the schemes, compensation for breaking contracts and redundancy payments have been estimated at between £27m and £35m. This would come on top of an estimated £79m which has been spent on the project to date. It is estimated that spending on the project will hit £119m by the time the final business case is due to be presented to the Scottish Parliament in the autumn, if planned roadworks go ahead in the coming weeks.
First Minister Alex Salmond refused to completely rule out the trams scheme, but he dampened hopes of a softening in the SNP’s stance by questioning why so much money has been spent so far without a single track being laid.
Graham Bell, spokesman for the Edinburgh Chamber of Commerce, believes this project must go ahead. He said: “It will make us the laughing stock of Europe if we don’t see this project through. There will be knock-on effects not just for businesses already in Edinburgh but also those looking to invest here.
51% rate energy efficiency in new properties
According to Hyder Consulting, the majority of UK adults are in favour of the introduction of Home Information Packs (HIPs), with 51% claiming that a property’s energy efficiency rating is a key consideration when purchasing a new home.
Around 14% would not take the energy efficiency rating into consideration when looking at a house or flat. Support is most popular in the East Midlands (60%), while those in Scotland are the least supportive with 45% embracing green living.
Chris Evans, head of environmental solutions at Hyder Consulting, said: “Once they have been fully introduced, HIPs may prove to be a key turning point in the push to make homes more sustainable. However we must be aware that a sustainable home and lifestyle does not stop with HIPs. It is important that we all continue to do everything we can from minimising our carbon footprint to recycling in order to help save our planet.”
