Property Prices Back Down With a Bump

As the first week of July comes to an end, the usual sets of conflicting property price figures for the previous month are coming in. Among the falls currently being reported, the Nationwide claim that figures across the UK fell by 0.6% in June and this continues the sharpest decline for three years.

Among the likely causes as far as Nationwide are concerned are the end of the Stamp Duty holiday and the weakness of the economy as a whole. It says that there is little indication of an upturn in economic fortunes in the near future and as such, the housing market faces an extended period of uncertainty.

“Economic conditions are expected to remain challenging over the next twelve months,” said Robert Gardner, Nationwide’s Chief Economist.

“However, policymakers’ efforts to bolster the supply of credit to the economy and to help lower the cost should provide support to demand.”

The figures confirm that the average price of a property in the UK now stands at £165,738. The society also state that the quarterly price figures fell by 0.9% in June compared to the findings from March of this year.

We were promised a challenging summer with Jubilee celebrations followed by the Olympics and some property experts are claiming that the effects are already being realised.

“The Olympics and traditional summer lull mean the next few months look set to be even more challenging,” said Mark Harris of SPF Private Clients.

“It is still too early to see what effect the emergency funding from the Bank of England will have, and whether it will mean cheaper mortgages for those with small deposits, as well as those with sizeable down payments.”

Meanwhile, figures from the Land Registry have been produced this week and while they are a month behind those of the Nationwide, it claims a 0.5% rise in UK house prices between April and May 2012.

Figures such as these always seem to vary, depending on their source, although those from the land Registry are generally viewed as being the most comprehensive. It is, however widely accepted that an uncertain few months lies ahead.

“What is consistent across the country is that the volume of transactions is well below what we were seeing at the height of the market,” said independent house buying agent Gabby Adler.

“Many vendors are waiting to see what happens with the economy, while many would-be buyers believe they will not be able to get mortgage finance so there is no point in trying.”

The Vital Role of Parents in Property Buying

In recent weeks we’ve looked at many surveys in different parts of the property sector and one of the common themes is the difficulty young people face in buying a property. Organisations such as Shelter have called on more efforts by the government to address issues within the rental market while it’s also being suggested that young people are being forced to stay home for much longer than they would prefer.

Figures released by the Bank of Scotland this week are now stating that the majority of parents are now fully aware that they will need to provide assistance if their children are to stand any chance of getting onto the property ladder.

The findings show that 55% of those surveyed believe it to be essential that they offer a financial hand in this type of situation but the numbers of prospective property purchasers seeking that help has risen dramatically.

The survey concentrated on those between the ages of 18 and 34 and it found that while around 61% were looking for home buying aid from their parents in the 1980’s, that figure had shot up to 84% in the present day. Additionally, it was also found that 30% of young people were receiving aid from their parents to pay rent as opposed to 8% some thirty years ago.

“Much has been said about the bank of mum and dad in relation to the cost of getting on the housing ladder, but it is clear Scottish young adults rely on financial support from their parents for a lot more than this,” said Greg Coughlan, head of savings at Bank of Scotland.

While that quote may mention Scotland specifically, the survey took in 1500 young adults from across the UK so it’s clear that this is a nationwide issue. Aside from buying a first property, those surveyed said that they were also looking for parental aid to pay for other essentials such as a car and university fees.

A separate poll carried out by Post Office Mortgages looked to underline how keen young people were to get onto the property ladder. The survey said that 36% of males and 32% of females aged between 18 and 34 were hopeful of buying a property in the near future.

“All first-time buyers need to make sure they don’t compromise on getting the right mortgage to help them get on the property ladder,” said Mike Cook head of mortgages at the post office.

Mr Cook also went on to suggest that FTB’s should also look at saving a 10% deposit but that is precisely the problem that is seeing those prospective purchasers look to their parents for financial aid in the first place.

How to Add Real Value to Your Home

In recent weeks we’ve looked at many easy and inexpensive ways in which you can encourage buyers for your home and increase its value. Tidying your garden, painting your front door and de-cluttering are all good ideas but what about those major jobs such as extensions, loft conversions and conservatories? A recent survey by estate agents Savills told us exactly what to do if you want to make a major difference to the market value of your home. Here are the top five findings.

1. Loft extension

The key to most of these methods is in creating extra space. A loft which is otherwise left empty or used for storage can be perfect for an extra bedroom or a home office.

It is claimed that converting your loft space can add between 10% and 20% to the value of your home depending on the total size of your property and on the area. In London, for example, where extra space is highly desirable you could expect to receive the full 20% increase on a future sale price.

1. Side Return

The first question to ask here might be ‘what is a side return’? In Victorian times, this was the area outside the home that led from the door at the side of a house and out into the back garden.

Some viewed it as wasted space and had the kitchen extended to make a larger kitchen area or even to add a dining room if feasible. Many older properties in the UK still have a side return and by converting it, Savills estimate that you can add around 10 to 20% to your property in financial terms.

1. A new kitchen

In the case of a new kitchen, you aren’t actually adding any square footage to your home but you are making better use of the space inside. A transformed kitchen can be stunning and comes in at third place in the list.

However, while it may add 5 – 7% to your property value, it is claimed that the initial cost of your new kitchen is rarely, if ever, claimed back on a future sale.

1. A new bathroom

A bathroom is arguably the one place in the house that will be redecorated in accordance with the new owner’s tastes. It is also widely claimed that the thought of upgrading such a room is likely to deter prospective buyers.

Restyling your bathroom can therefore encourage a sale and it’s also claimed that it can add up to 5% to the final figure.

1. An en suite bathroom

This represents the ultimate in luxury and convenience and more and more buyers are adding an en suite bathroom to their list of requirements.

If you have enough space in your main bedroom then you could consider adding the extra room for your own use and when the time comes to sell, you may find that you’ve boosted your property value by up to 4%.

Property Asking Prices On the Rise

A survey from property website Rightmove has shown that asking prices for homes across the UK rose for the third month in a row as buyers sought to choose from a fairly restricted availability. Additionally, Rightmove claim that the average asking price for UK homes has risen by 2.4% in the past twelve months and currently stands at £246,235.

It’s questionable however as to what this statistic really means because, according to the Land Registry, the housing market at the moment is static at best. In simple terms, vendors can ask what they want for their homes but the market dictates that there is no guarantee they will achieve the figure they really desire.

Additionally, with a set of new builds about to enter the market, a dip is now predicted as supply starts the catch up with demand.

But the overall message for vendors is to not get excited about the new figures and to not become complacent about realising a fair asking price that suits both parties. Property experts advise that cutting prices and promoting any unique features in your home will both be vital factors for anyone looking to sell in today’s climate.

“While the national average price of property coming to market has set new records in each of the last three months, sellers should not break out the bunting in celebration until they have done their homework,” said Miles Shipside of Rightmove.

“It remains a very local market ruled by property style and location. Cutting your asking price to be cheaper than your competition and promoting your selling points better will be the key to avoid being an also-ran in the race to sell.”

In addition, Rightmove claim that there is a confused, two tier market at present: On the one hand there are sellers who price at a realistic figure while others have so little equity in their home that the numbers are increased in a desperate hope to sell.

“‘Agents report a two-tier market where those who can afford to price realistically are selling, while those who are equity-poor are struggling to sell as they often have to price up to make any prospect of a move viable,” Mr Shipside added.

Any summer of optimism is also expected to tail off as the London Olympics approach. Major events such as these have traditionally led to a slower market which causes sales to stagnate at best and it is felt that further estimates in 2012 will reflect this.

Surrey Tops the Tables in the Property Price League

In recent weeks we’ve seen just how regional variations differ in property statistics and how significant the respective rises and falls can be in some cases. As an example, London has generally stood out as a region where house prices are increasingly steadily whereas areas such as the West Midlands and Northern Ireland are experiencing some alarming drops in sales figures.

A recent survey by primelocation.com has shown the property divide even more clearly with a survey that indicates just how much the south of the UK dominates housing wealth. Overall, homes in the UK are worth a total of £5.6 trillion pounds and heading the county tables is Surrey, which accounts for around 5% of that combined figure.

Total property values within the county amount to £287.6 billion pounds which equates to £255,125 per head of the population. Below Surrey in second place comes Dorset but the top ten UK counties show just how the much the south prevails throughout the country.

The top of the table reads as follows:

1. Surrey (£255,125 per head; £287.6 billion total)

2. Dorset (£207,220; £83.8 billion total)

3. Buckinghamshire (198,490; £98.8 billion total)

4. East Sussex (£196,300; £101.2 billion total)

5. Essex (£178,705; £252.4 billion total)

6. Hertfordshire (£175,492; £194.3 billion total)

7. Devon (£161,817; £121.3 billion total)

8. Hampshire (£159,171; £206.4 billion total)

9. Kent (£157,288; £224.5 billion total)

10. Warwickshire (£145,431; £77.9 billion total)

The survey went on to indicate just how the country is divided on a regional basis and once again, the final table shows a clear pattern when it comes to overall regional property wealth.

1. South East (£1.6 trillion total property values)

2. London (£1.0 trillion)

3. South West (£488.3 billion)

4. East (£482.5 billion)

5. West Midlands (£367 billion)

6. East Midlands (£336.1 billion)

7. Scotland (£322.1 billion)

8. Yorkshire & Humberside (£300 billion)

9. North West (£253.9 billion)

10. Wales (£223.3 billion)

11. North East (£162.9 billion)

Of course, that table only gives you the overall total and it may be fair to assume that the North East for example, is less densely populated with housing that London. However, those figures are a good indication of an overall picture.

”Property wealth per head is driven by one key factor – demand,” said primleocation.com’s Nigel Lewis.

”Homes in and around the capital will always be sought-after because of the increased population density in the South and its better employment opportunities.”

Action Required to Make Home Ownership More Than Just a Dream

Earlier in the week we saw the reaction of Shelter, the housing and homelessness charity to a survey claiming that property rental could soon become a permanent way of life for many. The organisation suggested that the government had to wake up to the reality that only a quarter of the UK population may be owning their own home by the year 2025 and to ensure that improvements were made in all areas.

“It’s time government woke up to the fact that ‘rental Britain’ is here to stay,” said Shelter’s Chief Executive Campbell Robb.

While these are apt comments, some observers were surprised that the organisation didn’t take the opportunity to suggest that home ownership needs to be more affordable. To be fair however, Shelter have been vocal on this subject in the past but for the time being, this particular challenge has been taken up by another charity – the Joseph Rowntree Foundation.

The organisation focuses on potential buyers between the ages of 18 and 24: At present it claims that 2.4 million of them live in private rented accommodation but as they attempt to save for home ownership, ‘inflated’ house prices mean that they face an uncertain future.

The foundation then calls for major reforms in order to avoid a permanent rental trap by the start of the next decade. By 2020 it claims that young people will be staying with their parents for longer and they will subsequently need to call on those parents to help them purchase their own home.

Those that decide that staying at home has run its course face the prospect of a long period of private rental.

“The challenges facing young people by 2020 will require fundamental changes to the UK housing system. Young people are particularly vulnerable in a badly functioning housing system due to their lack of resources and opportunities,” the report states.

It goes on to echo the comments made by Shelter in suggesting that huge reforms are needed in the private rental sector.

“There is a particular need to reform the private rental sector, balancing the interests of both landlords and tenants. The growing number of families living in the private rental sector will create a need for more stability in the sector,” the report concludes.

While Shelter and the Joseph Rowntree Foundation may be approaching things from slightly different angles, they both agree that home ownership may become just a distant dream unless more positive steps are taken to address the issue.

Rental Trap or New Way of Life?

In previous weeks, studies and surveys have told us that many families are currently caught up in a rental trap. With the lack of available mortgages and the struggles for first time buyers to raise a deposit for a new property, a significant proportion of potential buyers are having to be patient in the current climate.

However, there are increasing suggestions that this pattern is set to become a permanent way of life for this and possibly future generations. A study by Cambridge University which has been published by The Observer suggests that much of the UK buying public face being locked out of the market for the long term.

In the present day, the survey claims that 35% of the population are homeowners although that figure has dropped from 43% in 1993. It goes on to claim that further decline is set to follow and that as few as 27% of us will own our own homes by the year 2025.

The report indicates that those with families are in the greatest danger of renting for life as they continue to spend over half their income on monthly rental charges. As a result, there is simply no money left to save for a deposit and they remain locked in to the prospect of renting on a permanent basis.

“The worse the economy, the more the likelihood of this group’s housing being in the private rented sector,” the report continues. “In London, if current trends continue, tenants will soon outnumber owners, with important political, social and economic implications.”

The news has been met with resignation in some areas and the housing organisation Shelter says that the government has to recognise that renting has now become a ‘way of life’ for many families. It has gone on to call for major investment in the private rental sector in order to improve standards in all areas.

“This report shows what is fast becoming the new reality of our housing market in the current economic climate: home ownership continuing to fall while renting becomes a way of life for British families,” said Shelter’s Chief Executive Campbell Robb.

“Yet despite the growing pressure on the rental market, the government’s recent housing strategy virtually ignored the sector and did little to address the issues of affordability, stability and quality that so many renters face. It’s time government woke up to the fact that ‘rental Britain’ is here to stay.”

Many of those families would naturally want to retain a hope that they can still move into home ownership and as such, will be hoping that the future isn’t as bleak as the report suggests. As far as Shelter are concerned however, maybe a proportion should really be considering that rental has now become permanent.

3% Property Price Fall Predicted For 2012

As we’ve seen with previous months, conflicting sets of figures with regards to the property market are often released by various bodies but some of the more trusted statistics originate from the Land Registry.

Overall, the figures show that while there are big variations in property prices across the UK, the average price of a home in Great Britain is now around one per cent lower than a year ago at £160,417. In addition, the Land Registry confirm that their figures show a fall of 0.3% in prices from March to April and this tends to be consistent with those numbers released by other organisations.

Once again, there is widespread variation across the UK with prices in London climbing by 5.1% in April according to the survey; a rise that also means a 5.1% increase on the same period in 2011. Meanwhile, the biggest monthly fall of 2.7% was experienced in the West Midlands while Yorkshire and Humberside suffered the largest annual drop of 5.6% on statistics released a year ago.

“The divergence between house prices in London and those of the rest of the country has increased sharply this month,” the Land Registry announced.

“The average price of property in the capital is £360,721 in comparison with the average for England and Wales of £160,417.”

The prices across the UK are fluctuating so wildly that some industry experts are finding it hard to see a pattern emerging.

“Very low transaction levels are causing prices to shift unpredictably from month to month,” said Russell Quirk of emoov.co.uk.

“For prices in the capital to have shot up 5.1% during April, after a decline of 1.8% in March, drives home just how volatile and unpredictable the market is.

“Take prices in the North East. These shot up by 5.6% in March but fell 2.1% in April. Where’s the logic?”

Meanwhile, Howard Archer of IHS Global Insight believes that the figures released by the Land Registry are consistent with predictions that the market will start to settle into a steady fall over the next few months.

“We expect house prices to fall by around three per cent by the end of 2012,” he said.

Figures released by various bodies and organisations such as the Land Registry, Office of National Statistics, the Halifax and Nationwide can often give us a confusing set of figures. In addition, the property market picture was masked by the closing of the stamp duty holiday but maybe, as Howard Archer suggests, we are now set for a more stable period even if that reveals a steady drop in house prices for the remainder of 2012.

UK Mortgage Lenders Not Immune to Eurozone Crisis

UK financial analysts are warning that the crisis hitting many parts of Europe at present may filter through to Britain to the extent that mortgages may become even scarcer to track down than they are at the moment.

Financial trading continues to operate with fewer borders and as such, UK banks with a Europe-wide presence are going to feel the effects of the current problems and their mortgage arms may be set to tighten their criteria and maybe even remove some products altogether.

According to the Council of Mortgage Lenders, short term prospects for the UK mortgage market were going to be directly affected as a result of the on-going problems in Greece and elsewhere. Recent figures released by the CML have shown an easing of mortgage lending following a spike at the start of 2012 as many borrowers sought to take advantage of the stamp duty holiday.

Gross mortgage lending for April stood at £10.2 billion and while that represented a fall of 19% from March, it was still 2% higher than for the same period in 2011. The stamp duty window was always going to give a false picture and the fact that lending is higher than a year ago might give cause for optimism but the CML have warned against complacency.

“The underlying picture appears to be one of easing momentum in the housing market, but with potential for a sharper downwards correction on bad eurozone news,” said Bob Pannell, chief economist at the CML.

Meanwhile, mortgage brokers are urging borrowers to be alert to the danger that the crisis may bring as lenders consider their options.

“The cross-border nature of banking means that UK banks cannot remain immune to what happens in the eurozone,” said Mark Harris of SPF private clients.

“While interest rates are unlikely to rise for three to five years, supporting the market to an extent, borrowers must keep an eye on lenders raising mortgage rates regardless and take action if required and if they are able to.”

On many occasions in the past, prospective buyers may have been put off by dramatic headlines in the media and it is also felt that this factor may apply in the current climate.

“Few could argue that the demand for property, already weak, has been dealt a further blow by the deterioration of the Eurozone,” said Martin Stewart of London Money.

“With apocalyptic headlines every day, who wants to commit to a transaction as big as moving house?”

The volatile situation looks set to continue for the coming months but how much effect will the news from Greece and elsewhere start to have on the UK mortgage market?

Could mortgage market ‘seize up altogether’?

Advice coming from a proportion of mortgage experts suggests that potential buyers should be looking to arrange a mortgage before the market seizes up. The claims come in the wake of moves by Santander to drastically reduce its lending for the near future.

The bank has allegedly dropped its share of the lending market through brokers from 25% to 14% in recent months and the concern from everyone’s point of view is that nobody is stepping in to fill that void. The end result could be that lending grinds to a halt bringing the property market to a complete standstill.

In contrast with these claims, figures from the Council of Mortgage Lenders (CML) showed that mortgage lending surged in March but brokers have recently been suggesting that there has been a slowing of this market for some considerable time now.

“Both confidence and funding could be affected by the renewed eurozone uncertainties, so the underlying picture of a relatively quiet mortgage market seems likely to persist for some time,” said Bob Pannell, Chief Economist at the CML.

There are, of course, many lenders who are currently increasing rates and adjusting their selection criteria so why are Santander being singled out? It seems that the bank have been such a major home loan provider since the Credit Crunch back in 2008 that their absence from the market today is being keenly felt.

Ray Boulger of John Charcoal Mortgage Brokers revealed that 10% of his company’s business was placed with Santander in 2011 and that figure stood at 11.5% at the beginning of 2012. However, at the present time only 5.5% of its present mortgages are funded by the Spanish based bank.

“Those who want a good mortgage deal should act sooner rather than later, in case the market seizes up altogether,” Mr Boulger said.

In the meantime, Ben Thompson of the Legal and General Mortgage club said that alternative lenders were hoping to fill the gap in the market left by Santander but funding conditions were making it extremely difficult.

In addition, there is a range of potential new lenders looking to enter the mortgage market but have yet to be regulated by the FSA. Those names include Tesco Bank and Castle Trust and as they wait for clearance, the blame for the delay has been levelled firmly at the FSA.

You could certainly name the FSA as a culprit in the lack of capacity,” Ray Boulger added. “It would be helpful if it stood by its own deadlines.”

With Santander pulling back, there is a clear need for someone to fill that gap but is anyone going to be in a position to step in during 2012?