Savills predicts 3% average growth in UK house prices for 2008
Savills residential research has forecasted 3% growth in average UK house prices in 2008, as the slowdown in the housing market continues over the first half of next year before picking up again as interest rate pressures ease.
The impact of the credit squeeze is likely to contribute to the slowdown in 2008 because tightened lending criteria will reduce accessibility to mortgage finance.
Lucian Cook, director of Savills research, said: “House price growth has been slowing since the beginning of the year in the mainstream markets as interest rate increases have heightened affordability issues. To date, the effect has been most notable in the Midlands and the North, with markets in London and the South proving to be more robust.”
Savills average forecast for the country shows some substantial variations; the mainstream London and South East markets have forecast growth levels of 5% and 4.5% respectively, whilst for the North East, the North West and Yorkshire and Humberside, Savills is predicting just 0.5%.
Scotland is still benefiting from relatively low historic house price growth and a recent reversal of the long term trend of out-migration. Prices are expected to rise at above the UK average, but the Scottish market will not be immune to those pressures affecting the rest of the UK, warns Cook.
Longer term trend for shorter commercial leases
Landlords have responded to tighter market conditions over the last year by negotiating shorter commercial leases with retailers and commercial tenants.
The 10 th Annual Lease Review, published by the British Property Federation (BPF) and the Investment Property Databank (IPD), reflects the downturn across property during 2006/07.
The review showed that shorter leases have become more frequent; 57% of leases granted in this year’s review were five years or less, and less than 3% of leases agreed were for more than 15 years. While leases have shortened, the average first period to break on all property (where the lease contained a break) was 6.3 years compared with 5.4 years in 2002, indicating that break clauses are becoming more effective.
Liz Peace, BPF chief executive, said: “Tighter market conditions experienced by the retail sector over the last year seem to be reinforcing the longer term trend across all sectors for shorter leases. Whatever the cause in these uncertain times, what is important is that the property market is offering a choice of duration of leases that reflects the needs of its customers. Of course, this downward trend cannot continue forever but I have no doubt that the practice of providing choice to potential tenants will continue and that is what is important.”
New housing scheme to help key workers and first time buyers
Councils could offer thousands of affordable housing deals to help key workers and first time buyers onto the property ladder under a Local Housing Companies (LHCs) scheme proposed by housing minister Yvette Cooper.
Councils will be able to offer their own deals for key workers and first time buyers through new homes built on their land. It is claimed that thousands of young families could get onto the housing ladder as a result if councils take up this option.
Cooper said: “We urgently need to build more homes for first time buyers and families. That’s why we are investing £10.2bn to increase affordable and social housing. But Government cannot deliver this alone. This is a new way to help councils to do their bit to support new homes for key workers and families in their areas.”
Each LHC could have the potential to deliver up to 1,000 new homes. They are a key part of the Government's Housing Green Paper to meet the Prime Minister's target to provide three million more homes by 2020. The Government is investing £10.2bn over the next three years on more affordable and social housing.
MoJ shows a stable picture on court actions and orders for possession
The Ministry of Justice (MoJ) has released its quarterly data on court actions and orders for possession which shows a very stable picture in Q3 2007 with a small fall in the number of court orders compared to a year ago.
The Council of Mortgage Lenders (CML) published its half-yearly data on arrears and possessions, and the next publication will be out on the 8 th February 2008. While MoJ figures report the number of actions entered and orders made, the CML figures are the only regular source of information that relate to actual possessions of properties in the UK.
CML’s half-yearly data reported the number of properties taken into possession in the first six months of 2007 was 14,000. The recent CML housing market forecasts for 2008 estimated the number of repossessions to total 30,000 (0.25% of all mortgages) in 2007, and 45,000 (0.38% of all mortgages) in 2008.
The MoJ figures are usually significantly higher than the CML figures as there are substantial differences in the sets of data. The MoJ figures relate to court activity which may not result in a possession. Lenders may use court proceedings to help ensure that households in arrears have a firm commitment to a payment plan designed to get them back on track. Also, the MoJ figures relate only to England and Wales whereas the CML figures are for the whole of the UK.
£45m to regenerate Kidbrooke
English Partnerships has given Greenwich council £45m towards the regeneration of Kidbrooke, which is the council's biggest-ever modernisation programme.
Deputy council leader Peter Brooks said: “The money from English Partnerships is good news for local residents who are now a step closer to benefiting from one of the biggest regeneration schemes London has ever seen.
“The massive regeneration of Kidbrooke is one of the most ambitious plans we have ever had. The package of improvements will better the lives for thousands of residents and businesses by providing new homes, improved transport links, new community facilities and access to new training and job opportunities.”
Interest rates hold steady at 5.75%
The Bank of England’s Monetary Policy Committee (MPC) maintained the base rate at 5.75%.
Several institutions were disappointed at the Bank of England’s decision to keep rates level, as a slight reduction would have been a welcome breather to consumers.
Peter Bolton King, National Association of Estate Agents’s (NAEA) chief executive, said: “I would have hoped that the Bank of England would have considered this month’s rate movement carefully as confidence in the market needs to be restored and a relaxation of interest rates would do just this.
“The last 12 months has been an extremely busy period for the housing market and consumers are crying out for reassurance. Many housing market reports including the NAEA survey, clearly indicate that the housing market is slowing down on a monthly basis and agents have expressed concern on the reduced activity.
“The market needs a period of stability and the Bank of England should feel confident enough to loosen up the rates. This would serve as an ultimate enhancer to restore confidence in what is currently a fragile market.”
Credit crunch benefiting buy-to-let market
According to Moneygate, the credit crunch is likely to benefit rather than hinder buy-to-let investors as first-time buyers find it harder to get onto the property ladder.
Citing figures from MoneyExpert.com showing that the number of mortgage application rejections has increased by 60% over the past six months, the broker has said that buy-to-let landlords represent a lower risk for brokers.
Moneygate believes that as a result, the sector is set for a prosperous 2008 even if the wider property market will see reduced growth levels.
Dennis Reed from Moneygate said: “In general, the rate of arrears and repossessions for buy-to-let investors is much lower than for residential on account of the income they can generate.
“Also, experienced landlords tend to be older and have greater income as well as an asset –base, which the average residential buyer does not. Despite predictions of doom and gloom in the property market, the buy-to-let market looks set to continue bucking the trend with predictions of up to 15% growth over the next year.”
Buy-to-let market is a rich man’s world
The buy-to-let market is now so inaccessible to the average investor that only the wealthy can afford to become landlords, says the Royal Institute of Chartered Surveyors (RICS).
Interest rates and levels of rental cover ratios for mortgages have made investment an unattractive proposition for vast swathes of the population. In the current climate, would-be investors need to lay down a deposit of £65,600 (30% of a property’s value) for the average UK house in order to get a foothold on the buy-to-let ladder. This compares dramatically with the £10,100 (only 8% of a property’s value) required in Q1 2002.
David Stubbs, RICS senior economist, said: “It takes more capital than ever to set up a buy-to-let investment. Would-be investors who have missed out on the impressive returns of previous years are now finding the hurdles to property investment are higher than they imagined. However, existing landlords should be able to use the equity in their past investment properties to fund the deposit needed for new ones, and this should ensure that demand from the buy-to-let sector does not dry up entirely.”
25% of landlords will expand portfolio amidst credit crunch
Almost a quarter of landlords plan to expand their property portfolios over the next five years, according to the National Landlords Association (NLA).
Nearly 60% of landlords believe the size of their property portfolios will remain unchanged over the same period. Fewer than 18% of landlords suggested the size of their portfolios would reduce over the same time frame and 2.4% said they planned to exit the private rented sector completely.
David Salusbury, chairman of the NLA, said: “The fall-out from the so-called credit crunch has dominated public attention in recent weeks, but in times of financial uncertainty people continue to need a roof over their heads. That landlords are committed to invest further in the private rented sector over the next five years demonstrates that they remain confident about their businesses over the medium term.”
IPC has the power to fast-track infrastructure schemes
The Independent Planning Commission (IPC) will now be able to fast-track infrastructure schemes of national importance such as airports and power stations.
The IPC will be politically independent and accountable to Parliament, and will be strongly guided by national policy statements (NPS), which are clear statements (agreed in Parliament) setting out what developments (such as roads, energy, waste) should go where.
Liz Peace, chief executive of the British Property Federation (BPF), said: “These proposals strike a reasonable balance between the need to allow adequate opportunity for debate and the need to expedite nationally important schemes. We hope that the desire for quicker and more transparent decision-making can be matched by a democratic system balancing the needs of local communities fairly against those of the wider economy.
“National policy statements will the most important factor upon which the new planning commission will base its decisions. It is vital that this new element of spatial planning works in harmony with the current planning system. There will need to be effective co-ordination between national and regional government, and differences of opinion must be resolved fairly and promptly.”
