house prices
Rising property prices one of many benefits stemming from Crossrail
Work on the multi-million pound Crossrail is underway, with completion currently scheduled for 2018. Crossrail is set to link Maidenhead and Heathrow with Shenfield and Abbey Wood, passing through Ealing and central London, and is expected to bring with it a huge range of benefits. This includes a boost for the property market in and around London as well as wider economic benefits.
Real estate agents are predicting a significant boost in the value of properties along the new Crossrail route, with some London estate agents expecting increases of around 10 percent as a result of the new service, whilst others predict increases of up to 25 percent. Once Crossrail has been completed and is fully functional, many homeowners with properties along the route will see their property values soar. This is due to rising demand from the likes of traders, financial workers, and others who want to benefit from convenient access to central London.
Another major benefit that is expected to stem from Crossrail is increased foreign investment. This could include more foreign businesses moving into the area as well as increased property investment, both commercial and residential. Officials believe that Crossrail will play a big part in the level of foreign investment in and around London in years to come, and the service has been described as being a key part of London’s plans when it comes to growth and expansion.
Some of the wider benefits that could affect property prices
It is thought that in central parts of London, the service could see up to two dozen trains an hour in operation at peak times, each of which boasts the capacity to hold 1500 passengers. This will relieve a huge amount of pressure on London’s roads, as it will help to ease congestion considerably, which could also have a knock on effect on the property market both in terms of demand and values.
Crossrail is also likely to bring many more jobs into the area, partly due to new businesses and investments, and this could boost property demand further. A report carried out late last year on behalf of Crossrail indicated that there were plans to build many new homes and commercial premises close to the new stations. Eight of which are set to be built in central London and Docklands.
The Thames Valley Chamber of Commerce said that the service would have far reaching positive effects for London and some of the surrounding areas, not only in terms of property values and increased business investment but also in terms of regeneration, employment, and improvements to the local economy.
The Housing Bubble explained
This weekend’s Independent on Sunday contained one of the clearest explanations of the 2000 – 2008 Housing bubble that I have read. Two simple graphs: one showing the spike in ‘House price to average earnings ratio’ between 2002 and 2008 and the other showing a corresponding spike in ‘UK Net mortgage lending’.
The relationship between a huge net lending increase (credit creation) and house prices seems undeniable.
I won’t add any value with additional commentary so head over the the Independent website to read the full article:
Hamish McRae: Glimmers of light on road to ‘normality’
In fact print it off and keep it in your purse/ wallet and hand it to any bubble deniers you encounter.
Nationwide Back Funding for Lending as House Prices Fall
The Nationwide Building Society, who have been at odds with house price figures from other sources in the past have backed up the overall view that the market is in decline. The Society showed that property prices across the UK fell by 0.4% in September to an average figure of £163,964 and that the annual rate of decline now stands at 1.4%.
These statistics represent a small drop from that reported in August although the overall pattern will be causing concern in some quarters. However, the Nationwide are another organisation who are hopeful that the new Funding for Lending Scheme (FLS) will shortly start to show a positive impact on the housing market.
Robert Gardner, Chief Economist at Nationwide said that the market had “been impacted by a number of one-off factors this year, such as the ending of the stamp duty holiday that cannot be controlled by the usual process of seasonal adjustment”.
“For this reason the annual rate of house price change is a better guide to the state of the market at present. On that basis, the housing market remains fairly stable, with prices 1.4% lower than September 2011.”
Nationwide were one of the first mortgage lenders to sign up for the FLS and while they remain firmly behind the scheme, Mr Gardner warned that other factors were of equal importance if the property figures were to experience a sustained rise.
“Labour market developments will remain of paramount importance in deciding the trajectory of house prices. There are grounds for caution on this front, as the unusual combination of rising employment and declining economic activity that was evident in the first half of 2012 is unlikely to be sustained,” he added.
Once again, regional variations in the market vary wildly. At the top of the list, the average price of a property in London is now £301,168 while in Northern Ireland that average drops right down to £107,719.
“London continues to defy economic logic. To be just 2% below its peak in a paralysed economy is preposterous,” said Russell Quirk, of estate agents eMoov.co.uk.
Mr Quirk was also sceptical over the FLS, suggesting that it would not filter through to first time buyers and make a significant difference.
“I’m less confident than the Nationwide that the Funding for Lending scheme will have a major impact. Yes, it may make credit more available and cheaper, but will it get through to the people who need it?
“Cheap and available is idle chatter if it’s not getting through to higher loan-to-value borrowers,” Mr Quirk concluded.
The Extras That Home Buyers Look For
When we’re looking to buy a property there are always going to be obvious factors that are more important than others. The number of bedrooms, the size of all rooms and the style and look of a house should be at the forefront of a property seeker’s mind but what about those added extras?
Is a garage more important than regular public transport links or would you favour high speed broadband access over the nature of your power supply?
A recent survey of 2,000 homebuyers revealed that broadband is now a number one priority and 19% of movers make sure that their service is the first thing they activate when they move in. In fact, one in ten potential buyers have rejected a prospective property simply because it had a slow connection.
“When it comes to buying a home it seems it’s more a case of broadband, broadband, broadband than location, location, location,” said Dominic Baliszewski, of the website broadbandchoices.co.uk.
“Broadband has become something people are not prepared to live without, so it’s little wonder it’s now such a major factor for homebuyers.”
Estate agents have also shown that a faster broadband speed will secure more viewers as buyers consider this to be of higher importance than factors such as a garage, off street parking or easy walking access to nearby shops.
The increase of teleworking is undoubtedly at the heart of this growing need. With more people working from home, either on a full or part time basis, a fast broadband connection suddenly becomes essential.
“In this digital age, a fast broadband connection is becoming much more important for home-hunters,” said Miles Shipside of RightMove.
“People don’t just rely on a good internet connection for web browsing, but also streaming television and working from home.
“As the consumer technologies which rely on the internet expand, the need for a strong connection will be added to more home mover wish-lists.”
Once you move beyond the desire for broadband, the more traditional requirements start to emerge. Electricity and gas fired central heating may be more attractive than isolated properties that still rely on oil for their fuel source while garages, off street parking and local amenities are still taken into consideration.
However, it’s Broadband that has emerged as the main requirement in terms of those property ‘add-ons’.
“It is very easy to check broadband speeds in a specific area so we’d urge potential home buyers to do this rather than be left disappointed,” Dominic Baliszewski added.
While it may be easy to check, estate agents are finding that the inclusion of a positive broadband speed on their sales specifications will save time and is also becoming a powerful selling tool.
Could Downsizing Push the Housing Market Forward?
A recent survey has revealed that downsizing has become the prime reason for moving house within the UK with one if five people moving to a smaller home sooner than they expected. The findings come from Lloyds TSB who claim that more and more homeowners are moving to cheaper houses, either for relocation purposes or simply to save money.
Within the survey, Lloyds TSB found that around one third of those taking part said that they were downsizing to save money on household expenses while 59 per cent stated that they were looking for dwellings that better suited their needs.
Traditionally, those property owners reaching retirement age have been the main demographic in any downsizing statistics but Steven Noakes of Lloyds TSB said that the findings were continuing to include people from all life stages.
“Downsizers are now playing a key role in the housing market and as the study shows we are starting to see homeowners on different stages of the property ladder considering it as a sensible option as more and more families are looking at ways to save money,” Mr Noakes said.
Many are still option to downsize in order to claim a cash windfall and this is another area where market factors have led to more homeowners selling up and moving to smaller properties. Those planning to trade down have seen the average amount of their cash windfall rise by forty per cent over the course of the last ten years. It’s claimed that trading from a detached home down to a small bungalow in 2012 will earn an average of £97,298 – an increase of £28,484 from 2002.
“While we have seen a significant rise in the potential cash windfall, downsizing can make a lot of sense for a wide range of people, it is important to consider carefully whether trading down is the best solution,” Added Steven Noakes.
“Whether you are looking to lower utility bills, pay for an offspring’s tuition fees, or free up extra cash for retirement we recommend you seek professional advice before taking action.”
For anyone thinking of downsizing, they are urged to weigh up all the advantages and disadvantages and there are more than just financial issues to consider. On the plus side there are factors such as less work and maintenance but some homeowners regret their decision purely because they miss the comfort factor that a larger property can bring.
For whatever reason, downsizing is on the up but will it make any significant boost to the property market over the next few months and years?
Are House Prices Finally Being Slashed?
Throughout 2012, we’ve seen property prices fluctuate but the overall trend seems to be one of minor falls, depending on which set of figures you read. One point that many industry experts keep raising is the reluctance by sellers to bring down their asking prices but statistics released this week suggest that this situation may have changed.
Property website Zoopla has found that the number of houses that have sold for less than their original asking price is now at its highest level for nine months. However, the figures in financial terms may be very significant.
Of those properties sold, Zoopla reveal that 37% have had their asking price cut at least once while the average reduction is 7.6%, which in turn equates to an average drop of £19,000.
Traditionally, the summer is a quiet period for the market as a whole but those one-off events have also had an effect. It’s therefore thought that sellers have accepted the need to drop their prices in order to combat the further slowdown caused by the Olympics and the Queen’s Diamond Jubilee.
“Activity levels tend to fall over the summer months as holidays delay the buying process,” said Zoopla’s Nigel Lewis.
“With the recent bad weather and the extended jubilee bank holiday, the rise in proportion of price reductions is a signal that sellers have been doing everything they can to try and tempt those buyers still in the market.
“Once the distractions of summer holidays and the Olympics are gone buyers will once again be able to focus attention on their property search, and this should bolster confidence among sellers.”
Meanwhile, regional variations differ greatly but in regards to the overall market, it’s being claimed that the summer’s events are having little effect in some parts of the country. London based Estate Agent Marsh and Parsons claim that their own sales for the period of the Olympics – 27th July to 12th of August were up by 23 per cent compared to the same period in 2011.
“While many potential buyers were glued to their TVs and seats at venues rather than out viewing homes, London’s housing market didn’t grind to a halt by any means,” said Marsh and Parsons’ Peter Rollings.
“The traffic chaos and logistical problems feared in the run up to the Games thankfully failed to materialise, and a corps of committed buyers moving with urgency actually took advantage of quieter streets to secure homes.”
These figures are among the most interesting to have been released so far this year but were the boost in sales at this particular Estate Agents really down to quieter streets or are reduced asking prices about to have a marked effect on the property market as a whole?
FTB Borrowing Recovering After ‘See-Saw’ Year
Figures relating to mortgage lending and the property market as a whole have been affected by a number of unusual factors this year. Firstly, there was a late rush to beat the stamp duty ‘holiday’ on properties priced up to £250,000 and the subsequent summer lull was exaggerated by major public events – namely the Queen’s Jubilee and the Olympics.
However, figures released today by the Council of Mortgage Lenders (CML) suggest that lending in June 2012 was boosted by the return of many first time buyers to the market but does this mean we can expect a settled period for the remainder of 2012?
The CML confirmed that lending to First Time Buyers (FTB’s) stood at its highest point since July 2010 – excluding the solitary month of March 2010 when the property market saw a late rush to beat the stamp duty reintroduction.
Paul Smee, Director General of the CML welcomed the news but said that he expected further fluctuations in the market. Concern over the Eurozone crisis continues and the statistics have yet to see any impact from this year’s Olympics.
“Lending figures have see-sawed in the first half of the year and we may see more fluctuations in the coming months,” Mr Smee said.
Many property professionals are pleased to see FTB’s return to the market in such numbers but insist that more has to be done to make first time property purchases more accessible.
“It’s good news that ending the stamp duty concession appears not to have held first-time buyers back permanently, but they still need as much support as possible,” said Charles Haresnape, managing director at Aldermore Residential Mortgages.
“It will be good to see more lenders participating in NewBuy and offering schemes to help borrowers who are struggling to find a deposit.”
The Mortgage Advice Bureau confirmed that their own figures were largely in line with those released by the CML but they also predicted an uncertain period ahead.
“MAB’s own figures for May reflect those released by the CML,” said Brian Murphy, head of lending at the Mortgage Advice Bureau.
“However, we expect external factors to play a major part in activity levels in the next few months, with activity levels to continue to fluctuate.”
Overall, it’s impossible to identify any pattern in the figures released by the CML but it has to be a positive aspect to see FTB’s returning to this level. The future may be uncertain in the short term but longer term benefits should be attained by making it easier to make that first step onto the property ladder.
Nationwide Reports Biggest Property Plunge in 3 Years
The start of any new month brings a fresh batch of property statistics and first out of the blocks are the Nationwide with claims of significant falls in house prices. In fact, the Society reports that property figures are falling at their fastest rate since 2009 and the trend looks set to continue for the remainder of 2012 at least.
Nationwide’s survey reveals that the average price of a home in Great Britain now stands at £164,389, a fall of over £1,000 from the June figure of £165,738. That represents a drop in percentage terms of 0.7% and this is the fourth month out of the last five that overall property prices have decreased.
It was also reported that mortgage approvals were at their lowest point since 2010 and Nationwide claim that the gloomy picture is firmly down to the current recession.
“The weaker price trend observed in recent quarters is unsurprising, given the disappointing performance of the wider economy,” said Robert Gardner, Nationwide’s Chief Economist.
“The UK recession intensified in the three months to July, with the economy contracting by 0.7% quarter on quarter.”
The Society also went on to point the finger at contributory factors such as the wet summer and the Queen’s Diamond Jubilee, but suggested that these were only minor issues and shouldn’t be blamed in isolation.
“This disappointing outturn can be only partly explained by unusually wet weather and the impact of an extra bank holiday during the quarter,” Mr Gardner added.
Elsewhere, property experts have met the news with resigned acceptance while it is forecast that property prices could ultimately end up falling by as much as 3%.
“The soft news on the housing market is coming pretty thick and fast at the moment,” said Howard Archer of IHS Global Insight.
“The Nationwide data reinforce our belief that house prices are headed lower over the rest of 2012 and very possibly beyond in the face of limited activity, low and fragile consumer confidence, muted earnings growth and relatively high unemployment.
“We expect house prices to end up losing at least 3% from current levels.”
Nationwide have also been in the news recently for releasing what some are heralding as the ‘cheapest ever mortgage deal’. After HSBC introduced a fixed rate product of 2.99% in July, Nationwide went on to trump this with a 2.95% deal.
However, the qualify criteria for both products is very strict and as such, neither are likely to kick start the mortgage approval market on their own. In turn, property prices could be set to maintain their downward spiral for some time to come.
UK Rank Third in Europe for Costly Housing
A recent survey has shown that families in Great Britain spend, on average, 40% of their annual income on housing costs and this means that those outgoings are the third highest in the whole of Europe.
In fact, only Denmark and Greece spend more on those expenses which would typically include the cost of renting or paying a mortgage together with other living costs. The report, delivered by Shelter also suggests that as many as one in six of those households are becoming increasingly overwhelmed with their payments which subsequently lead to higher levels of rent or mortgage arrears.
As a result, it’s claimed that the families who are worst affected are having to cut down on other household essentials such as food, petrol and clothing.
“These figures are the evidence that the UK housing market is deeply dysfunctional,” said Campbell Robb, Shelter’s Chief Executive.
“With so many families spending huge amounts of their income on their rent or mortgage, people will be making daily trade-offs between food bills, filling the car tank with petrol, and paying their housing costs.”
The survey took in 29 countries from across the continent and it found that Cyprus headed the right end of the table with just 2.5% of its families faced with unaffordable housing costs. Meanwhile, our nearest neighbours France revealed that around 5% of its population were struggling with housing bills – a figure that is three times better than in the UK.
One of the main contributors to high housing costs is the price of fuel which continues to rise. The 2010-11 UK housing survey showed that each household pays an average of £1152 a year in energy bills and the figures look set to climb. However, the suggestion that those families struggling to pay rent and mortgages maybe going without heat is even more worrying.
Many cheap energy tariffs have also been scrapped in recent months leaving the cost of fuel to rise further and place an increasing strain on overburdened families.
“This is not set to get better any time soon,” Campbell Robb added. “While the situation is bleak at the moment, a succession of governments failing to provide much-needed affordable homes means that the future facing our children and our children’s children is only set to get worse.”
Overall, it’s a gloomy picture being painted by the survey but can the coalition government rise to Shelter’s challenge and provide the affordable housing that is being widely called for?
Affordable Homes Scheme Set to Fall Short
The Governments Affordable Homes campaign, launched in 2011, was designed to get Britain’s home builders moving to provide the supply to meet a considerable demand. However, reports released by the National Audit Office (NAO), suggest that the scheme may fall some 50% below its intended target.
The plan had looked to deliver 80,000 new properties by the end of 2015 but the NAO are not only suggesting that the numbers may be nearer 40,000, they also suggest that due to financial issues, providers may not be able to keep to their agreement and charge 80% of market rent.
The plans, announced in 2010, left little room for negotiation and manoeuvre at the time,
“There are key risks including the fact that more than half of the homes are planned for the final year, with no room for slippage,” said Amyas Morse, Comptroller and Auditor General.
“The final judgment on the success of the programme will depend on how well these risks can be managed between now and 2015.”
Under the programme, different organisations had set themselves up as housing providers and these included local housing associations, local authorities and private companies. The main problem, as identified by the NAO seems to lie with those providers struggling to raise adequate finance to fund the project.
“Some have had to offer additional collateral, generally in the form of assets rather than cash, to lenders because of using financial derivatives to reduce their interest rate risk,” the report claims.
“A survey by Baker Tilly in 2012 found that 63% of registered providers who responded are now considering alternative funding other than traditional banking sources, the most popular being corporate bonds.”
Margaret Hodge will chair the public accounts committee that will examine the report and she indicates that the government will not explain at this stage as to just how many tenants are likely to be affected.
“The department has scrapped the target rent guidelines for this programme, leaving vulnerable tenants increasingly dependent on housing benefits and increasing the welfare bill by £1.4bn,” she said.
“The department has refused to be transparent about just how many tenants will be affected and by how much.”
Margaret Hodge went on to suggest that the scheme would have to be more transparent if there was any hope of it being completed on time.
“My committee will want officials to regularly and transparently update their assessment of the costs and benefits of the programme so that we can hold them to account for the social and financial consequences of their decisions, particularly in light of changes to the welfare system,” she concluded.
