According to Paragon, the average rental yield for UK properties in August was 6% for an average-priced property of £178,566 with an average rental value of £10,626.
Paragaon data shows rents have increased by an average of 2.4% over the past 12 months. Regions achieving the highest rents per annum were London (£19,981), the South West (£11,978) and the South East (£10,964).
Over the past year, investment property values have also risen by 4.2% to £178,566 but have dropped from July’s figure of £181,533. London raced ahead with the highest property price in the UK (£360,465), followed by the South West (£197,700) and the South East (£187,932).
Yields in the UK continue to be stable at or above 6% as they have been for over a year. The North West achieved the highest yields at 6.5%, followed by the East and West Midlands and Yorkshire at 6.4%.
Total returns on a property purchased 12 months ago stood at 10.3%, with the South West achieving the best returns at 17.6%, London 17.2% and Yorkshire at 14.9%.
Conservatives want to raise stamp duty threshold
Conservative leader David Cameron has suggested that his party would look to abolish stamp duty on houses worth up to £250,000 for first-time buyers only.
Speaking on BBC One’s Andrew Marr Show, Cameron said that house prices are proving to be a barrier for many first-time buyers, with the country currently experiencing its lowest rate of new buyers for 27 years.
He said: “ Today people are looking at their salary cheque, then looking at house prices and they're thinking that they can’t get on that ladder.”
Removing the tax on properties below £250,000 would ease the financial burden for 200,000 people, he added. David Hass, spokesman for the Conservative Party, said: “The further stamp duty thresholds (3% currently at £250,000 and 4% at £500,000 respectively) have not been set out yet but will be at a later date.”
The party's shadow chancellor George Osborne also announced that the Conservative's aimed to reduce the inheritance tax burden for families by raising the threshold from £300,000 to £1m.
In addition, the controversial Home Information Packs (HIPs) which were intended to speed up house sales, plan to be scrapped if the Conservatives come into power. The party classes them as clumsy and ineffective, and not streamlining the house-buying process as the Government had hoped.
Economists predict interest rates will decrease in 2008
The next move in UK interest rates will be a cut, according to a Reuters poll of economists, but the Bank of England will probably wait until early next year before it follows the US Federal Reserve’s lead.
In a survey taken on 25-27 Sept, all 56 economists said the Bank of England would announce rates on hold at 5.75% when its next Monetary Policy Committee meeting ends on 4 October.
But 13 of 56 economists said rates would fall this year, most likely in November, and 36 said the MPC would cut rates to 5.5% or lower by the March 2008 meeting.
Asked separately to assess the probability of a Bank of England rate cut this year, analysts gave it a one in three chance. That was a huge shift from just a few weeks ago when they said there was still a one in three chance that rates would rise to 6% by the end of this year.
Planning permission for 700 homes in Chelmsford
Genesis Housing Group and Hill Residential has bought a 3.4 hectare (8.4 acre) Central Campus site in Chelmsford from Countryside Properties with planning permission to build almost 700 homes.
The site will contain a mix of affordable homes (rented and part-buy/part-rent) and outright sale properties as well as office, retail and arts space. The planning permission also includes a new land bridge over Parkway to Central Park South. Genesis will be working closely with Chelmsford Borough Council throughout the development of this site.
Steve Coleman, Genesis group development director said; “This development will contribute towards reducing housing shortage as well as having a positive economic impact on the area. The mixed use of a range of housing tenures and commercial units at this development will attract a range of people to the area, helping to create a strong sustainable community.”
Improved gearing should help sector remain healthy
Improved gearing should help the buy-to-let sector remain healthy in the long run, according to Paragon.
The low level of arrears on buy-to-let mortgages means the sector stands to gain from the current credit squeeze, Paragon suggested.
“Activity in the securitisation and whole loan markets has been muted over the summer and, when investors return in force, credit quality will be top of their agenda. Given the superior, indeed exemplary, credit profile of buy-to-let, we can expect them to favour paper backed by low risk mortgage assets”, said Neil Terrington of Paragon.
Savills has also suggested that the credit crunch could prove beneficial for the market, reducing the risk of the sector overheating.
No change in interest rates
The Bank of England has maintained interest rates at 5.75%.
David Bexon, managing director of SmartNewHomes.com, said: “Today’s decision to hold interest rates will not be well received by current home owners, some of whom are yet to be hit with higher payments as fixed rate deals end. This month, interest rates should have been reduced to restore confidence throughout the market as whole.
“With a fall in the number of new mortgages taken out last month it is clear that new buyers are being put off by the current uncertainty. I urge the MPC to bring better news next month and vote for a cut.”
Warren Bright, chief executive of propertyfinder.com, said: “It is high time that base rate cuts came onto the Monetary Policy Committee’s agenda. Turmoil in international credit markets has effectively been a rate hike by another name. House price growth has been moderating for some time and confidence in the housing market has been dented. The MPC should now be cutting rates to prevent the housing market’s orderly slowdown becoming a disorderly rout.”
7-8% returns for landlords in student sector
According to Paragon, landlords who rent properties to students are making greater returns than those who focus on other tenants.
Its research showed that landlords who had rented more than half of their properties to students were making rental returns averaging 8.6%, compared with yields of 5.6% for people who did not have any student properties. Investors who had some student properties generally made average returns of around 7%.
Paragon said that, based on the average value of a buy-to-let property of £178,566, those who rented to students collected rent worth around £15,356 per property each year compared with rent of £9,999 for non-student lets. Rental income tends to be higher for student lets as landlords typically let to students on a per room rather than a per property basis.
Neil Terrington, chief executive of Paragon Group, said: “Strong tenant demand in the student market is driving yields in that sector. If landlords select the right type of property in the right location, the returns from the student market can be extremely healthy.”
Proportion of younger home-owners has fallen, says DCLG
The Department for Communities and Local Government (DCLG) has published Housing in England 2005-06, which provides key housing data on owner occupation and on the social and private rented sectors.
The survey shows that in 2005-06, there were 14.6m (70%) owner-occupied households, 3.7m (18%) social renters and 2.5m (12%) private renters. It also shows that the proportion of people aged 25-34 who are owner-occupiers has fallen, with private renting becoming more common amongst this age group.
Housing minister Yvette Cooper said: “These figures show that young families will feel the strain if we don’t build more homes. We have the highest level of housebuilding now since 1990 but the supply of housing has still not kept pace with demand, which is why the Prime Minister has announced plans for three million new homes by 2020. People who are opposing new housing development need to consider the unfair consequences for young people.
“In the last few weeks and months, we have seen councils in the South East and Yorkshire oppose proposals for increased housing. Today’s figures show that every region needs more homes and every council needs to do its bit to help future first-time buyers.”
The annual survey of nearly 20,000 households was carried out for the department by the National Centre for Social Research.
AHIPP says the Conservative Party ‘doesn’t make sense’
Earlier this week, the Conservative Party pledged to scrap Home Information Packs (HIPs) and raise both the stamp duty and inheritance tax thresholds if they were brought into power.
Mike Ockenden, director general of the Association of Home Information Packs (AHIPP), said: “Abolishing HIPs to make it easier and cheaper to buy homes, as cited by the party, is the very reason why the packs have been introduced in the first place. Currently one in four transactions fail when purchasing a house, costing consumers £1m per day and it seems strange that the Conservatives wish to continue this sorry state of affairs for buyers and sellers. HIPs have been introduced to make the house buying process more transparent and quicker and this will benefit all buyers.
“HIPs will particularly help first-time buyers - a group of homebuyers that the Conservatives are supposed to be trying to help. HIPs mean these cash strapped buyers have all the information they need up front, paid for by the vendor. On the one hand, Cameron is trying to help first-time buyers by removing the stamp duty burden, on the other he has stated his intention to disadvantage them by scrapping HIPs. It doesn’t seem to make sense.”
Crossrail gets the go-ahead
The Government has given the go-ahead to the £16bn Crossrail project in London, which should be completed by 2017.
The route goes from Maidenhead and Heathrow in the west right across the Capital into Essex and Kent in the East. It will travel underground through the city centre between Paddington and East London. It will operate with main line size trains, carrying more than 1,500 passengers in each train.
The funding is now in place for the long-delayed scheme. Prime Minister Gordon Brown said it was a project of ‘enormous importance, not just for London but for the whole country’. He said the scheme will generate an additional 30,000 jobs.
Crossrail was first given the go-ahead by the Conservative government as far back as 1990 but mounting costs caused the project to be put on ice in the mid-1990s before it was revived in recent years.
Baroness Valentine, London First chief executive, told BBC Radio 4’s Today programme: “It’s great news for London, it's great news for business in London and in particular the poor commuter. We are delighted.
“London's transport system has been creaking for the last 20 years and governments of all hues have failed to invest. I guess they had to choose between investing in London and more hospitals elsewhere. If we want London to compete on a world stage, we have absolutely got to keep investing in its transport system.”
