The mix-adjusted average house price in the UK in April 2007 stood at £209,454, up from £206,890 in March 2007, according to the Communities and Local Government department.
Average house prices in April were £216,707 in England, £162,170 in Wales, £155,516 in Scotland and £228,208 in Northern Ireland. The English region with the highest average house price in March remains London at £320,191. The lowest average price was in the North East at £145,875.
The rise in UK prices between March and April can be attributed to increases in average prices for bungalows (1.9%), terraced houses (1.7%), semi-detached dwellings (1.4%), detached properties (0.8%) and flats (0.7%).
Wales saw a decrease in inflation in April 2007, from 9.7% in March to 9%. However, England, Scotland and Northern Ireland all saw house price inflation increase. In England, annual house price inflation rose from 9.8% in March to 10% in April. In Scotland, the rate rose from 14.8% in March to 17.8% in April. In Northern Ireland, annual house price inflation in April was 54.1% compared with 50.1% in March.
Demand for residential properties outstrip supply
Demand for residential rented properties has outstripped supply causing rising rent levels during the three months to the end of May, according to the latest quarterly survey from the Association of Residential Letting Agents (ARLA).
These results show the shortage of properties and the continuing need for investment in the private rented sector at all levels. Rents rose for the fourth quarter running for each type of property. As a result of increased demand, void periods have fallen to an average of 24 days.
Over two thirds of ARLA agents in Prime Central London report rising rent levels. Half of the agents in the South East say the same and in the remainder of the country the proportion of agents reporting has risen from 33% to 35%.
Seven out of ten Prime Central London agents says there are more tenants than properties. This is the highest figure seen since the ARLA surveys started six years ago. In the South East, 10% more agents report demand is outstripping supply.
Adrian Turner, chief executive of ARLA, said: “There is a shortage of all forms of housing in this country and these results show that the shortage of good, quality property is also apparent in the rented sector.”
The gap diminishes between new build prices in London and the South East
According to Knight Frank’s South East residential development review, a combination of wealth generation, severely restricted land supply and sustained market confidence are diminishing the gap between new build prices in London and the rest of the South East.
In the past three years, new build prices have risen substantially with property in an increasing number of the South East’s towns achieving over £350 sq ft.
The report highlights towns that have witnessed the highest growth in London commuter residents such as Guildford, Sevenoaks and Tunbridge Wells. Historically, commuter towns were those within an hour’s journey of the capital, but increasingly London workers are willing to trade proximity to work for rural, and particularly coastal, residences further afield.
A severe lack of land supply, exacerbated by Special Protection Areas in the Thames Basin Heath area, has led to rising land values and lower margins for house builders. As a result mergers and acquisitions have risen and even the larger house builders are becoming involved on smaller schemes.
NAEA brands DCLG’s handling of HIPs as chaotic
The National Association of Estate Agents (NAEA) has renewed its dismay over the government’s plans for Home Information Packs (HIPs), following the release of revised regulations by the Department of Communities and Local Government (DCLG).
The government has confirmed that there will be three stages for the implementation of HIPs. The first commences on 1 August and applies to properties with four or more bedrooms, followed by a second and third phase covering three bedroom properties and then all other properties as soon as there are enough domestic energy assessors (DEAs) to cope with demand.
Peter Bolton King, chief executive of NAEA, said: “The already chaotic situation surrounding HIPs appears to be getting even worse. The idea of three separate phases will cause complete confusion and delay the introduction of the important energy performance certificate (EPC).
“The NAEA continues to be dismayed that despite criticism of the proposals from parliament, the industry, the media and the public, the DCLG is continuing to push forward with these ill-thought out proposals.”
Removing rate relief will not achieve government aim, says RICS
The Royal Institute of Chartered Surveyors (RICS) believes that removing rate relief on empty property will not achieve the government’s intended aim of increasing the supply of commercial property.
This follows the second reading of the Ratings (Empty Properties) Bill.
Nadia Nath-Varma, RICS’ public policy officer, said: “Properties are not left deliberately vacant so an additional charge will not act as an effective incentive. It may in fact have the opposite effect as developers could be discouraged from speculative development, reducing supply and increasing rents.
“Empty property rates will only act as a roadblock to much needed regeneration schemes as developers will be reluctant to risk having to pay rates on empty properties where demand is weak. The government should pay attention to the recommendations of the Lyons Inquiry and allow for proper consultation on all rate reliefs and exemptions, rather than rushing into reform without considering the adverse effects.”
Lack of property for first-time buyers
Hometrack’s latest research highlights that more than two thirds (67%) of residential housing is made up of family homes comprising of three or more bedrooms, and three bed properties alone account for the bulk of supply (47%).
This means that properties for first time buyers make up 3.1% of housing supply in England and Wales; less than 800,000 dwellings.
“The lack of smaller sized homes combined with strong demand from investors and first time buyers has led to a constant upward pressure on prices at the bottom end of the ladder”, said Richard Donnell, Hometrack’s director of research. “This in turn has led to the value of one and two bed homes being compressed up towards the price of three bed properties, where values are set. The net result is relatively high entry prices for one bed homes, compounding the affordability pressures faced by first time buyers.”
The imbalance in supply not only affects first-time buyers but also sellers looking to trade down. For downsizers, the amount of equity released from their property is often limited and for many, it is not enough to compensate for the loss of space. This means lower turnover of family houses which in turn leads to a lack of supply of larger homes coming onto the market.
Donnell said: “Policy makers are clearly faced with some major challenges. The debate over increasing housing supply tends to be focused on the headline numbers with little emphasis on the types of housing that are needed.”
One solution to the problem could be to increase the development of smaller sized housing as a means of boosting the first rung of the ladder.
Highest mortgage interest payments since 1992, says CML
According to the Council of Mortgage Lenders (CML), interest rate rises have pushed up mortgage interest payments for first-time buyers to their highest levels since 1992.
First time buyers in April were paying 18.7% of their income on mortgage interest, up from 18.3% in March 2007 and 16.3% in April 2006.
Despite the recent decision by the Bank of England to hold interest rates at 5.5%, borrowers will see further increases in the proportion of income they spend on mortgage interest payments once May’s interest rate rise starts to be reflected in CML’s data.
In addition, increasing numbers of first-time buyers are paying stamp duty, which is up to 58% from 51% in April 2006.
Michael Coogan, CML director general, said: “Month-on-month we see affordability constraints for first-time buyers worsening. And with the impact of May’s interest rate rise still to be felt, many borrowers face higher costs in the coming months. The vast majority of borrowers will be able to absorb higher mortgage payments. But with two million fixed-rate loans coming to an end over the next year and a half, many borrowers should anticipate that their mortgage costs are likely to rise and should be planning ahead.”
Olivier Gilmartin, Royal Institute of Chartered Surveyors’ senior economist, added: “ The price of fixed rate mortgages has risen consistently in 2007 and is set to rise further as interest rate rises and lingering inflation concerns raise longer dated borrowing costs. With affordability the worst in over a decade and some homeowners fearing the end of current fixed rate arrangements, holidays at home may be all the rage this summer.”
House prices are dropping in parts of NI
According to a Royal Institute of Chartered Surveyor (RICS) and Ulster Bank survey, house prices are dropping in parts of Northern Ireland.
Out of all the chartered surveyors who responded, nearly one in ten (7%) reported falling property prices of up to 2% in May. However, experts stressed there is no sign of an imminent crash, with 66% of surveyors still reporting rises, and 27% declaring prices remained the same.
Tom McClelland, RICS’ Northern Ireland residential property spokesman, said prices are falling back from the massive highs early this year. “We are seeing a clear trend of slowing house price inflation in Northern Ireland as the current interest rate tightening cycle bites. However, in historical terms and in comparison with other parts of the UK and the world, Northern Ireland’s current rate of house price growth is still very strong”, he said.
This is the second time this year that chartered surveyors reported a dip. The last being in February but that was looked at as a seasonal factor, but now a pattern seems to be emerging.
Affordability conditions set to worsen
The Royal Institute of Chartered Surveyors’ (RICS) UK housing market survey showed that house price inflation slowed in May, but buyer enquiries stabilised in spite of the latest interest rate rise.
House prices rose for the 19 th consecutive month in May but the rate of growth has slowed down by almost 5%. Almost 24% of chartered surveyors reported a rise rather than a fall in house prices, which is down from 28.5% in April 2007.
However, new buyer enquiries have stabilised in spite of the May interest rate hike, indicating that underlying demand conditions are still good. The effect that the current rate tightening cycle has had on new buyer enquiries has so far been quite limited with the absolute level of demand still high in light of buoyant economic conditions.
Jeremy Leaf, RICS spokesperson, said: “The stabilisation in buyer enquiries sends a clear signal that home buyers are undeterred by recent interest rate rises. However, the full impact of rising rates is yet to be felt and buyers tempted by the recent strength of house price rises may need to exercise caution. With interest rates expected to rise even higher and some home owners fearing the end of fixed rate deals, affordability conditions are set to worsen across the board and will herald a cooling market.
“Conditions in the market have loosened as sellers sought to avoid the upfront costs of the recently delayed Home Information Packs (HIPs). However, the surge in supply will be short lived, although owners of four bedroom properties may decide to enter the market before the next deadline on 1 August.”
Almost half residential sales have no environmental survey
According to GroundSure, an environmental reporting company, 44% of residential property transactions that took place in 2006 were carried out without an environmental survey.
Paul Livett, managing director of GroundSure, said: “I find it amazing that so many residential property transactions take place without an environmental survey. When you consider the potential risks involved, and the fact that contaminated land, subsidence and flooding are some of the most significant issues in any property transaction; it surely makes sense to carry out environmental checks before making what is likely to be the single largest purchase an individual makes in their lifetime.”
The survey will reveal whether a site has ever been used for commercial or industrial operations, such as a mining site, brickfield, gas works or a quarry. Household insurance policies often do not provide appropriate cover for environmental risks. As a result, homeowners could be liable for clean up costs incurred by contaminated land or may be unable to sell their property for its correct market value.
Living in a home that is situated on contaminated land can also cause health problems for residents due to significantly elevated concentrations of certain toxic metals.
Student sector best for buy-to-let landlords
According to Mortgages for Business, the student buy-to-let market is a predictable sector that offers landlords a clearly defined tenant agreement.
The Residential Landlords Association (RLA) has said that the fact that students will require several years’ worth of accommodation in a single area makes them attractive prospective tenants for landlords with buy-to-let mortgages. The association has also advised that the set end dates for each tenant make it easy for landlords to schedule maintenance or home improvement works, though cautioned that there were also disadvantages.
“Damage is always a problem; that’s why you take deposits off students”, said Chris Town, spokesman for RLA. “As far as arrears are concerned, because students are young and don’t normally have a credit record, you generally take a guarantee from the parent.”
London’s largest single regeneration project
A £5bn residential regeneration project in Greenwich is set to go ahead, creating a new riverside community for London.
Around 229 homes are due to be built at Greenwich Peninsula, which represents the first residential phase in the development of 80 hectares of the region over the next 15 years.
Bellway Homes is the developer, and it is due to start on-site late 2007 with residents moving in towards the end of 2009. It will be made up of one to four bedroom flats, maisonettes and townhouses. Sixty of these homes will be affordable housing, designed to meet Housing Corporation Scheme Development Standards.
Ted Ayres, Southern regional chairman of Bellway Homes, said: “ Greenwich Peninsula is London’s largest single regeneration project. This development will make full use of the location, providing residents with views of the Thames barrier, Canary Wharf and beyond.”
