Asking prices for residential property in the UK rose for the second month running in March as optimistic sellers pushed for near record high prices, despite the increased competition from the increasing number of unsold properties and tightening credit conditions, according to Rightmove.
Rightmove reported that the average asking price rose 0.8% between February and March, a slower rise compared with the 3.2% increase last month. The average price of a home now stands at £239,655, up 5% from last year, and is just 1% below the record high seen in October last year.
With borrowing conditions expected to worsen, Rightmove said the continued rise in house prices is unsustainable, if potential buyers cannot get a mortgage.
UK retail sales rose by 1% in February
According to National Statistics, UK retail sales rose by 1% between January and February, confounding City forecasts of a drop.
The City had predicted a 0.2% fall in sales, as households faced up to the prospect of a sharp UK economic slowdown and dealt with tighter credit conditions and a weakening housing market. Food sales drove February’s increase, but all categories other than household goods showed a rise in sales.
Vicky Redwood, UK economist at Capital Economics, said a flat month-on-month position in March would now leave retail sales up by 1.7% in the first quarter as a whole, compared with the preceding three months. The rise during the fourth quarter of last year was just 0.6%.
Homeowners plan to renovate and not relocate
Homeowners will spend more than £1.6bn on major alterations to their homes this summer, according to the Royal Town Planning Institute (RTPI).
Easter is the unofficial start of renovation season and more than 160,000 homeowners are expected to start the kinds of improvements over the next six months which require planning permission. On average, they’ll spend £10,320 each.
The RTPI is stressing the need to gain good advice before commencing home improvements, particularly as the number of first-time renovators is predicted to increase as a result of the credit crunch, with more people choosing to renovate rather than relocate this year.
Rynd Smith, RTPI policy director, said: “As a general rule if you think your renovations are going to have an impact on your neighbours or significantly alter the structure or size of your home then you’re going to need planning permission. But there are a number of circumstances where different rules apply. The bottom line is that it’s always better to be safe than sorry.
“Running your ideas past a professional planner before launching into home improvements can be quite economical and can save you a lot of grief and money down the line. Knocking a wall down is a hell of a lot cheaper and easier than putting it back up again, so it’s a good idea to know how the rules apply to you before you start swinging the sledge hammer.”
New office space planned for Glasgow’s business district
Glasgow ’s business district will benefit from much-needed additional office space after planning consent has been granted for a new £6m office development in Elliot Street in the Anderston area of the city.
The new 40,000 sq ft office scheme will occupy a prominent position close to the Clydeside Expressway and will be a key development in the regeneration of the Anderston and Finnieston area of the city, which has been undergoing extensive redevelopment to attract more businesses to the area.
Stephen Shear of Sovereign Properties, which has a number of land holdings in the Finnieston area, said: “I am thrilled that planning consent has finally been granted for this exciting scheme that will further enhance this area. Funding has been secured and I anticipate that construction will commence early in 2008.”
Future landlords plan a hands-on approach
Future landlords plan to take a hands-on approach to their investments, with the majority saying they would manage their properties themselves, according to Birmingham Midshires.
Around 54% of people who plan to get a buy-to-let property said they would manage it themselves, rather than pay an agent to do it. And 88% admitted that they would frequently drive past their property to check how well the tenants were keeping it. In addition, more than a third of landlords also said they would fix problems and carry out maintenance themselves, rather than pay a professional to do it.
Tim Hague, managing director of mortgages at Birmingham Midshires, said: “With landlords enjoying an average return of 16.3% in 2007, buy-to-let remains a sound long-term investment. We expect firm demand to continue throughout 2008 and beyond.”
BPF welcomes review of the planning system
The British Property Federation (BPF) has welcomed a new review of the planning system recently announced by communities’ secretary Hazel Blears.
The review entitled ‘Planning Applications: a faster and more responsive system’ will examine what can disrupt the process of an application from when it is submitted up to and beyond when a decision is made. It will be headed by Joanna Killian, chief executive of Essex County Council, and David Pretty, former chief executive of Barratt Developments. Ministers admitted that slow and cumbersome parts of the planning process need to be tackled and the BPF has long lobbied for a more efficient and nationally aligned system.
Liz Peace CBE, chief executive of the BPF, said: “The BPF warmly welcomes this review, and it is encouraging to see that the Government acknowledges there are elements of the application process which are cumbersome and bureaucratic. Hopefully, the review will make some sensible recommendations to help create a thorough but quick process for planning applications to be determined.”
A robust Scottish economy
The three months to the end of February revealed that the global credit crunch has not drastically affected the Scottish economy, according to Lloyds TSB Scotland.
The report said that business expectations for the next six months have improved and there is no evidence of restriction in credit or rising levels of concern about credit costs in the coming half-year in Scotland.
According to Lloyds, the slowdown is affecting both manufacturing and services businesses, with the former reporting a net balance of 5% and the latter 9%. In contrast, expectations of increasing turnover in the next six months have improved, rising to 23%, up on the 17% of the previous quarter. With a net balance of 26% for production businesses compared with 21% of services, there is a higher level of optimism in the manufacturing sector.
Professor Donald MacRae, chief economist of Lloyds TSB Scotland, said consumer confidence in Scotland had remained robust, backed up by recent figures showing strong retail sales. He said: “Scottish economic growth is slowing from the latest annual underlying growth rate of 2.1%. Claimant unemployment at 2.5% is the lowest for 33 years. House prices in Scotland continue to increase year-on-year but at a reduced rate.
“Although this business monitor has recorded a slowing in the Scottish economy at the end of last year and the beginning of 2008, business expectations for the next six months have improved. There is no evidence of restriction in credit or rising levels of concern about credit costs. Costs overall are, however, a concern for most Scottish businesses.”
London yields stronger than the South East
Hamptons International’s latest data tracking the best residential investment yields across London and Southern regions of the UK for Q1 2008 found that investors generate the strongest income return from well-located flats.
Across all property types ranging from 1-bed flats to 5-bed detached homes, the strongest average yields in London were found in Islington (5.43%), Kensington (5.19%) and the City (5.08%). In addition, 1-bed flats through to 3-bed flats provided the strongest return, as on average, these types of properties generated as much as 73% more than returns for terraced, semi-detached or detached property.
In Q1 2008, figures revealed that the average yield was 4.85% for a standardised freehold/long-lease flat of approximately 500 sq ft and in good order. Comparatively, a 5-bed detached house with a garden, in good order and offering 3,000 sq ft of accommodation provides an average yield of 4.12%.
For buy-to-let investors or landlords looking to top up their portfolio outside London, the strongest yields generally come from smaller units like 1-bed and 2-bed units. Some of the best yields are found in Brighton (4.32%), Hove (4.22%) and St Albans (4.02%).
Rob Bruce, research manager, said: “Despite the well-publicised increase in the cost of capital, rental levels continue to escalate above house price inflation, pushing yields higher. For those looking to acquire new assets and happy to accept a longer-term view on capital appreciation, it is worth also noting that the average initial income returns are higher than recent years.”
Place your bets on house prices
According to Cantor Spreadfair (a spread betting exchange), there has been a shift in house price sentiment over the last few weeks.
Despite a meltdown in the majority of world markets, a higher level of activity on the spread betting exchange has seen prices for the housing market rise. The market witnessed an all-time low in December 2007, but seemed to be bouncing back with clients believing the housing crash was unlikely to occur.
In early January 2008, Halifax said the cost for an average UK house was £197,163 and Spreadfair clients predicted this to decrease to £181,000 by the end of 2008. In the last month, clients have been less bearish and see the average house price in the UK to be valued at £187,000 in December 2008 which is £6,000 higher than their estimate two months ago.
Nick Sproule, head of key accounts at Spreadfair, said: “We have seen significant interest from clients who would like to bet on where house prices are going to be in a year, two and even three years time. Interestingly, we are seeing a number of clients who made money during the property boom over the last few years, re-entering the market. Their view is it is oversold. Others are more bearish and are waiting for the credit crunch to feed its way into prices.”
“Buy-to-let is a solid investment”
Investors with buy-to-let mortgages are still involved in an industry which represents a solid investment, according to Birmingham Midshires.
The lender made the statement while revealing the results of a landlord survey which showed that most landlords prefer to be hands-on in the management of their property rather than carrying out the task via a third-party agent.
Tim Hague, director of mortgages at Birmingham Midshires, said: “With landlords enjoying an average return of 16.3% in 2007, buy-to-let remains a sound long-term investment. We expect firm demand to continue throughout 2008 and beyond.”
He also advised landlords that with so much rented accommodation around landlords could be choosier about their tenants and avoid problem ones more easily, a process he said organisations such as the National Landlords Association could help with.
