According to the National Housing Federation (NHF), UK residential house prices will increase 40% over the next five years due to a shortage of properties.
It said the average value of a home will rise to £302,400 by 2012, and prices in London will jump 48% to £478,300.
Prime Minister Gordon Brown has promised to build more homes to make property more affordable for Britons after prices tripled in the past decade.
David Orr, chief executive of the National Housing Federation, said: “Continuing house-price rises and the resulting housing crisis are set to stay with us for a long time. Home owners may see this as good news, but it carries a sting in the tail. More and more people are going to find themselves priced out.”
The average price of a home is currently 11 times the average workers’ annual earnings. In London, where the average house value is 13 times earnings, prices will continue to be driven higher by wealthy foreign investors and financial-services workers, the report said.
Residential market slow down says Savills
Savills residential research department is predicting that the slowdown in the mainstream UK housing market will last well into 2008 leading to a period of low turnover and house price growth.
The effects of higher interest rates already vary significantly between the regions, and looking ahead, a strong north-south divide is expected with more robust southern and prime markets being supported by a lack of supply and wealth both generated in and attracted to London. By contrast, affordability is particularly constrained in northern areas which are currently bearing the brunt of the slow down.
However the one clear exception to the north-south divide is Scotland where house prices have continued to grow regardless of interest rates.
Lucian Cook, director of Savills, said: “Current interest levels are impacting on affordability, however as long as there remains a reasonable prospect for rates to drop below their current levels by the end of next year, we do not predict falls in average UK house prices.
“We believe that we are currently witnessing the beginning of a slowdown similar in nature to that of 2004/05, when the number of transactions reduced significantly and house price growth stalled. Unless there is a conspiracy of factors which significantly erode market confidence, we expect the market to respond by slowing for a period, allowing households to rebuild their monthly finances.”
The only way is up for repossessions
The number of mortgages in arrears in Q2 2007 has risen to an estimated 125,100, which is 3% lower than in the same period last year, but up 4% when compared to Q4 2006, according to the Council of Mortgage Lenders (CML).
Of the latest figures, the majority (71,800) were in arrears of 3-6 months, while 38,300 were in arrears of 6-12 months, and 15,000 more than 12 months. Around 1% of all mortgages were in arrears
At 14,000, the number of properties taken into possession in the first half of this year rose by nearly 18% compared with the previous half-year (July-December 2006) , and nearly 30% compared with the first half of 2006. Although significantly higher than in the recent past, when possessions reached extremely low levels, the number remains low by historical standards. It equates to around one in 840 mortgages ending in possession in the first half of this year.
Michael Coogan, CML director general, said: “Interest rates are clearly higher than many were expecting, and are set to remain so. And the greater risks inherent in sub-prime lending are resulting in significantly higher levels of repossession in that part of the market compared to mainstream experience. This impact has been underestimated in our past market data, which we have now revised. While the revisions are naturally unwelcome, more accurate market information is important. We will work to further improve data on both mainstream and specialist sectors.
Affordable new homes are out of reach
There are currently at least eight people searching for each new home that is under the lower stamp duty threshold, says SmartNewHomes.com.
According to the company, 5,000 properties on its website fall under the £125,000 stamp duty bracket, yet over 40,000 people have been searching for a home that falls below this threshold, indicating a need for more affordable homes.
David Bexon, managing director of SmartNewHomes.com, said: “These recent findings highlight the severe lack of affordable new homes currently on the market, with first time buyers increasingly getting priced out. The average price for a new home is currently £260,073, with average prices in London and the south east exceeding £300,000.
“A first time buyer, purchasing an averagely priced home in the south east would currently have to pay out £9,000 in stamp duty, in addition to paying legal fees and saving up a deposit – pushing the reality of owning a home for many, out of reach.”
Ten years ago when Blair came into power, the lower stamp duty threshold was £60,000. In the same year, the average price paid by a first time buyer for their first home was recorded as £54,133 by the Department for Communities and Local Government (DCLG), with the majority of these buyers able to escape the stamp duty trap.
However, by 2006, while the lower stamp duty threshold had been moved up to £125,000, the average price paid for a property by a first time buyer had nearly trebled to £151,803, according to DCLG statistics, resulting in more first time buyers having to pay stamp duty and making the reality of buying a home increasingly difficult for those buyers looking to step onto the property ladder.
NAEA International incorporating FOPDAC
The National Association of Estate Agents (NAEA) and the Federation of Overseas Property Developers, Agents and Consultants (FODPAC) have signed a formal agreement to merge FOPDAC with the international section of the NAEA. The new name for this part of the company is NAEA International incorporating FOPDAC.
The two organisations are both members of the European Confederation of Estate Agents (CEI) and worked together in 2005 to bring about the introduction of a new International Code of Practice, which has since been accepted by the 40,000 estate agent members of the CEI.
Ian Tonge, chairman of the NAEA International working group, says: “This is a significant step for both organisations and I am delighted that we are now joining forces in this way. Members and consumers will be able to benefit from the combined knowledge and experience of both the NAEA and FOPDAC. Through this partnership we hope to make a further, positive difference in the international property arena.”
HIPs face yet more criticism
The Government has received more criticism of its Home Information Packs (HIPs), this time from the National Audit Office (NAO), regarding the way the Department for Communities and Local Government (DCLG) handled the certification scheme.
Peter Bolton King, chief executive at the National Association of Estate Agents (NAEA), said: “This latest criticism, which has come from the Government’s own audit office, is yet another confirmation of the inadequacy of HIPs.
“We have voiced our unhappiness over a number of aspects of the HIPs implementation right from the start and have not been alone in our concerns. A House of Lords Select Committee mirrored our worries earlier in the year when it met to discuss the legislation. Unfortunately, the Government chose not to heed the warning of the Committee, and indeed refused to take the advice being offered by industry stakeholders. The fact that a full investigation into the HIPs implementation is due to be launched next year by the National Audit Office speaks volumes.”
NOA will report to Parliament in 2008-9 on the overall effectiveness of the arrangements put in place by the department to introduce HIPs and to ensure qualified inspectors were available to implement the scheme.
Borrowers believe interest rates have peaked
The Spicerhaart Financial Services monthly mortgage survey shows that a higher percentage of borrowers believe interest rates have peaked and house price growth will level off in the second half of the year.
According to the survey, 86% of its customers are taking out fixed rate mortgages in July, but the amount of borrowers opting for variable mortgages has increased from 9% to 14%. This is the highest proportion since October 2006, and 11% of borrowers chose mortgages that tracked the base rate, 1.7% choosing a discount deal and 1.3% opting for other variable rates.
Steve Cox, operations director of Spicerhaart Financial Services, said: “The increasing proportion of variable mortgages indicates that borrowers are starting to believe that interest rates have peaked, as inflation stabilises, and are likely to come back down again before the end of the year. With interest rates still historically low, homeowners and first-time buyers are still confident in their financial security and are as keen as ever to move up the property ladder, even if this means borrowing slightly more.”
Development in Elephant and Castle goes ahead
The Printworks development in London’s Elephant and Castle, developed by First Base and owned by English Partnerships, has got the go-ahead.
The mixed-use development has been granted planning permission for 164 homes, 42% of which will be available for key workers or social housing. First Base and the council have worked with residents to launch a competition to design the area around Printworks. A significant proportion of the £275,000 of Section 106 Funds (money from private negotiations between the developer and the planning authority) available in the area has been allocated to the competition to improve the look of the surrounding streets.
The scheme is supported by English Partnerships, the Housing Corporation, the Greater London Authority and the Department of Communities and Local Government.
Beware of cowboy builders in flood-hit areas
Communities’ secretary Hazel Blears has warned households in flood-hit areas to guard against cowboy builders as she outlined Government commitment to support communities in the long-term task of reconstruction.
According to the Association of British Insurers, 45,000 households have made insurance claims in relation to the June and July floods and 14,500 claims have been received from commercial properties which include damage to hundreds of schools, roads and other infrastructure.
Reconstruction is therefore a key priority in the next phase of recovery efforts. However, there have been reports of both bogus traders and cowboy builders operating in flood-affected areas. Fraudsters are offering various services from re-construction, tree chopping, garden clearance to roof cleaning. The Government has held discussions with the construction and insurance industry as well as local agencies.
Blears said: “While the vast majority of people, including the building industry, are responding positively to the challenge it is extremely saddening that some people are trying to cash-in and exploit the hardship of others. This behaviour is completely deplorable and I would urge residents to be vigilant if they are approached. There are a number of places where people can go for free advice including the National Federation of Builders, the Federation of Master Builders or Consumer Direct.”
A convenient commute is what buyers want
According to Alliance and Leicester, a convenient commute to the office is a key consideration for new buyers.
Its survey said more than half of all first time buyers would prefer to live near to their workplace and a third (34%) highlighted good transport links as a key factor when deciding where to live.
Many of these buyers would have previously been renting, suggesting that buy-to-let landlords should focus on properties near good transport infrastructure for maximum appeal.
Stephen Leonard, director of mortgages at Alliance and Leicester, states that many young professionals are looking to reduce transport costs when moving into their first home.
He said: “Clearly choosing the right location is key to long term happiness in a home, but buyers should also be careful not to overstretch their budgets and may opt for a short commute to work to help keep costs down.”
Average property prices in the UK are set to reach £300,000 in five years, according to the National Housing Federation.
