The buy-to-let property market is still booming, despite higher interest rates, according to the Royal Institute of Chartered Surveyors (RICS).
Demand for rented property is rising as high property prices are forcing potential home buyers to remain in rented accommodation. The result is that rents are rising at their fastest rate on record. Meanwhile, buy-to-let mortgages have surged over the past three years as investors make the most of rent rises.
Jeremy Leaf, RICS spokesperson, said: “Current economic uncertainty has created an ideal platform for buy-to-let investors to cash in on rising rental levels. Many would-be buyers have decided to wait and see how the interest rate cycle will affect the market.”
Experts have blamed rising house prices and rents on the continuing shortfall in new homes being built and the rapid increase in the UK’s population, largely due to immigration. According to the Association of Rental Lettings Agents (ARLA), rents have now risen to an all-time high as demand outstrips supply in all parts of the market.
The average weekly rent for a flat in prime Central London is now £525pw, with £215pw being charged in the South East and £150pw in the rest of the UK.
Planning consent on six brownfield sites in outer London
The Chiltern division of Linden Homes has obtained planning consent for a record number of new, mixed residential schemes over the summer on brownfield sites throughout the region.
Planning has been granted on a total of six brownfield sites in outer London boroughs, Buckinghamshire and Berkshire.
Recent proposals from the Government have been unveiled to accelerate the building of homes for families and first-time buyers with a £500m boost to encourage local councils to identify necessary housing and the land for it to be built on - with particular focus on brownfield land. Site’s awarded planning for Linden’s Chiltern division are Isleworth, Bushey, Winnersh, Loudwater and Slough.
Rob Wyke, land director for Chiltern, said: “Demand for new homes is high. New developments in areas such as Slough which boasts one of the fastest growing populations in the UK and a thriving business centre are getting snapped up off-plan. With direct links to London and train journeys into Paddington under 20 minutes its popularity looks set to continue.
“Our planned developments in the Chiltern area represent an important step towards developing brownfield sites to meet the huge demand for both private and affordable housing in the South East.”
Improvement in number of days to sell property
LMS, a conveyancer, has published the LMS Market Efficiency Monitor Q3 2007. It shows that there has been some improvement in the number of days it takes to sell a property during the last quarter, down from 53 days to 49 days.
The longer the period of time between a property coming onto the market and the exchange of contracts, the greater the possibility of the sale falling through. The new data indicates there does seem to have been an improvement in overall market efficiency.
In the first half of 2007, the average number of days between notification of sale and exchange was 55, 17% higher than during 2005 and 2006. As Home Information Packs (HIPs) were introduced in August 2007, it is unlikely that much of this improvement is attributable to the packs, but full roll out across all properties should ensure that exchange efficiency is improved.
Dominic Toller, director of marketing and new business for LMS, said: “Any improvement in efficiency over the last three months is unlikely to be soley thanks to HIPs, rather due to a decrease in the number of properties on the market. With volumes down, the market tends to be more efficient.”
OFT told Tesco to suspend sales section of property website
Tesco has suspended the private sales section of its property website and offered a full refund to customers.
The decision came after the Office of Fair Trading (OFT) told the retailer it was acting as an estate agent, so would need to abide by the relevant laws. The site was launched in July.
Customers got a ‘for sale’ sign and a listing on the website, and saved money as there was no estate agent’s fee. Soon after it was launched, a representative of the board of the Ombudsman for Estate Agents wrote to the Office of Fair Trading to ask if Tesco was effectively acting as an estate agent.
Tesco is not the only private property sales website which may come under scrutiny. In recent years, many specialist websites have sprung up which also offer to help you sell your home without going through an estate agent.
Tesco is now reviewing its business with a view to launch an online estate agency service.
On course to meet Government’s housing targets
The first of eight major surplus public sector sites identified in the recent Housing Green paper, to be brought forward in support of housing growth targets was named today as the former Connaught Barracks in Dover. The site has been acquired by English Partnerships to deliver around 500 homes in the town.
At least 60% of the Government’s new homes targets of three million by 2020 will be built on brownfield sites and surplus public sector land such as Connaught. Located to the north of Dover town centre and adjacent to Dover Castle, Connaught Barracks covers an area of 56 hectares, of which 12.5 ha is suitable for the development of new homes. The remaining land includes large areas of open space and an English Heritage Scheduled Ancient Monument consisting of Fort Burgoyne and the Eastern and Western Caponiers.
David Edwards, English Partnerships’ director for Southern England, said, “Our acquisition of Connaught Barracks presents a golden opportunity to develop a sustainable community and demonstrate to the rest of the country just how much can be achieved with surplus public sector land.
“Our approach at Connaught is evidence of the expertise English Partnerships will bring to the Homes and Communities Agency. This is the first step along a road leading to three million new homes across England by 2020.”
Buy-to-let landlords are generating higher total returns than at any time since June 2006, according to Paragon’s October Buy-to-Let Index. The average total return (capital gains plus rental income) generated by landlords is 14.2%, up from 12.9% six months ago and 10.5% a year ago.
Despite the increase in property values over the period, rental yields have remained steady at around 6%. Rents have followed an upward trend, rising by almost 7% or £700 in one year. The average property has increased in value by £13,640 over the same period.
John Heron, managing director of Paragon Mortgages, says: “The market environment for buy-to-let is very positive. The UK’s population and the number of households continue to grow more rapidly than the housing supply, so the underlying shortage of homes is becoming gradually more acute. On top of that, a large proportion of the new households being formed comprise of people who are more likely to rent than buy – inward migrants, students and people setting up home after relationship breakdown. This creates upward pressure on rents and additional demand for rented homes, and investors are responding by adding to their portfolios.”
Number of mortgage products slashed by over 40% in last three months
According to Moneyfacts, the number of home loans available on the UK market has been slashed by around two-fifths (41%) in just three months. In total, over 6,400 different mortgage products have been withdrawn.
The company found that the biggest cutbacks were in the sub-prime market, both in home-buying (72% cancelled) and buy-to-let (54%). In the prime mortgage markets, 20% of residential mortgages were pulled and 16% of buy-to-let mortgages.
Lancashire property price growth slows
House prices in parts of Lancashire have been amongst the highest climbers in the North West region over the past 12 months. The average cost of a home in Preston has increased by £12,804 to £188,670 in the past year, (up 7.2%) with homes in Leyland rising by £11,887 in the same period.
But the latest statistics from rightmove.co.uk show that prices have recently slowed down to a monthly increase of 0.5% in Preston, and no change in Leyland. West Lancashire remains the most expensive place in the county to buy a property, with prices increasing by £20,000 last year (up 7.9%) to £273,929.
However, local estate agents have reported a ‘levelling off’ of prices due to the demands of rising interest rates and the credit squeeze. The study shows average prices in England and Wales rose 2.7% in the last month, reversing the previous month’s 2.6% drop. The dash to beat the introduction of Home Information Packs may have been responsible for August’s fall.
12% fall in gross mortgage lending in September says CML
Gross mortgage lending fell by nearly 12% in September compared with August to an estimated £30bn according to new data from the Council of Mortgage Lenders (CML).
Although lending was up 2.5% on the £29.2bn figure for September 2006, the annual increase is the lowest in two years.
While lending typically falls between August and September, a 12% decline is larger than the norm of around 5%. This easing in the market is another sign of the expected consumer response to the five interest rate rises experienced since August 2006.
Commenting on the data, CML general director Michael Coogan said: “We have been expecting a slowdown in monthly lending levels in line with interest rate rises. In the coming months, we expect to see monthly lending levels dip below their 2006 levels for the first time this year as rate effects are exacerbated by the recent liquidity problems in the mortgage market.”
Majority of Brits expect continued house price growth
Almost two-thirds of Britons think house prices will continue to rise, according to a survey by the Association of Investment Companies (AIC). Despite the recent warning by the International Monetary Fund (IMF) that the UK market was heavily overvalued and heading for a fall, 62% of the public thought the housing market was still on the way up.
Among investors, confidence in the market was lower, with 44% predicting a continued rise and 48% predicting a stagnant market or a fall, compared with 21% of people generally.
The research found that the five interest rate rises since August 2006 had taken a toll on second-home owners and landlords - some 30% said the value or profitability of their property investments had been hit and 6% said they were already losing money on their second property.
Asked to consider the housing market in the context of other investments, 54% of people said they believed residential property would be the UK’s best performing sector next year, while just 15% said they thought the stock market would perform best.
However, the opposite was true among people with investment portfolios - one-third of them thought the stock market would be the top performer, and just 15% favoured the UK property market.
