Wriglesworth Vlog: Paper Summary for 24th December 2014

The key macro-economic, personal finance and property stories from today’s papers, read by Wriglesworth Account Executive Victoria Heslop.

Advertisements

Average prices up £1,384 in January, setting a new record high

LSL Property / Acadata England & Wales HPI 

  • Monthly sales set to reach 73,000 – the highest in a January since 2007
  • Sales only 4% below January average in the decade before the credit crunch
  • 90% of Unitary Local Authorities now experiencing house price growth

House Price

Index

Monthly Change %

Annual Change %

£241,101

245.5

0.6

5.2

 David Newnes, director of Reeds Rains and Your Move estate agents, owned by LSL Property Services plc, comments: “The UK housing market is roaring further back to life in 2014 as the recovery weighs in across the board.  Prices are now up 5.2% annually, driving the price tag for the average home to a new high. Mostly this is due to much increased activity, with increased demand for property buoyed by low interest rates and Help to Buy, combined with hot competition for homes. This boost in sales has seen an air of optimism encapsulate the market. While 2013 was a turning point in the recovery, 2014 is set to be a watershed year if the next few months continue in the same vein.

“Last month saw the largest rise in sales over the past year, up 67% annually, with transaction levels crucially only 4% below the January average seen in the decade before the credit crunch. This astounding turnaround can largely be pinned down to the resurgence of the first-time buyer. The wide range of attractive mortgage deals on offer, cheaper rates and wider product choice has been pivotal. Such rises in new buyers has spurred on activity further up the ladder and inspired movement among second steppers, which will prove vital in sustaining a healthy rate of sales activity.

“The recovery has now been rolled out far and wide, with the good news coming in from more and more Your Move and Reeds Rains branches up and down the country. Price rises have now spread to 90% of unitary local authorities – the greatest number since August 2010. With mortgages still historically cheap and interest rates set to remain stable for the time being, we’ll continue to see new buyers will rush to the market nationwide. However, even so, price growth and sales levels are still behind their pre-crisis peaks so we’re still some way from the ill-fated ‘bubble zone’.

“Regionally, we’re seeing a ripple effect emerging from London. Heat from the capital is emanating out further with traditional hotspots being the first to reap the benefits of recovery; particularly southern England and East Anglia before moving north through the Midlands. Although we’re still seeing a North-South divide, this is gradually being eroded. The West Midlands has this month broken the mould as growth has surged past the rate seen in the South West region, with Reeds Rains branches across the region reporting a large jump in prices in January compared to the preceding month.

“With greater economic prosperity, confidence between banks and lenders has been cemented further which will no doubt fuel the engine of recovery in the months ahead. While similarly first-time buyers are set to swim further across the sea of adversity to secure a home. But it is crucial both aren’t scuppered and that the Government’s housing plans come to fore with a continued focus on supply. This will ensure the recovery reaches the finish line and a generation doesn’t get priced out of the market”. 

Marsh & Parsons:

Record January for the Prime London Property Market

 Image 

  • Almost half (48%) of Prime London property sold for, or in excess of, the asking price
  • Over a third (34%) of property in January sold within two weeks of being put on the market
  • Ratio of supply and demand rose to a four-year high with 23 registered buyers for each available property
  • Strong demand is pushing prices higher, with the average price of two-bedroom properties in Outer Prime London increasing by 17% in 2013, an increase of almost £100,000

 

The Prime London market experienced a bumper January in 2014, with properties selling in record time and for closer to the asking price than ever before, according to new data from estate agent Marsh & Parsons.

 

Over a third (34%) of property in January was sold within two weeks of being put on the market – twice as many properties in this timeframe compared to January 2013.

 

In addition, almost half (48%) of all property in January sold for, or in excess of, the asking price. This meant that, on average across all property sold, 99% of the asking price is currently being achieved – an increase from 98% during the past two years.

 

Peter Rollings, CEO at Marsh & Parsons, commented: “Now is the time to get a jackpot price on property thanks to a surge of potential buyers entering the market in the New Year. These extraordinary conditions have created a strong seller’s market and one of the best opportunities to sell property in recent years.

 

“But conditions like this won’t last. Many people believe that the best time to market property is during the busier months of the spring. But these sellers could be missing a trick – the increasing levels of property supply at that time of year will dissipate current levels of demand, and bring about a return to more normal market conditions in the spring.”

 

Supply and Demand

 

In January, there were 23 registered buyers competing for each available property on Marsh & Parsons’ books. This was the highest level since 2010, and represents a dramatic increase from the ratio of 14 registered buyers per property in January 2013.  Compared to the same point last year, 19% more buyers entered the market in competition for 28% fewer properties – making this a strong seller’s market.

 

But for the last four years, an average of 10% more property has become available between the months of January and April.  This percentage jumped considerably between 2012 and 2013 as the property market recovered, and if this trend continues, 18% more property could hit the market by spring 2014.

 

Peter Rollings continued: “London’s rising population, together with a perfect combination of low interest rates and competitive mortgage finance has created a surge of potential buyers. But the supply of housing stock has remained more subdued. Our more astute sellers are putting their properties on the market now because they know that the imbalance of supply and demand will help them to get a great price.

 

“In a seller’s market, property regularly goes for over the asking price, so buyers need to be realistic when viewing property and placing bids. When they find their chosen property, they must not delay. Being decisive is key to successful negotiations.”

 

Impact on Prices

 

The average value of two-bedroom properties in Outer Prime London increased by nearly £100,000 during 2013 following a 17% annual growth, according to Marsh & Parsons’ latest London Property Monitor.

The average value of two-bedroom properties in Outer Prime London increased by nearly £100,000 during 2013 following a 17% annual growth, according to Marsh & Parsons’ latest London Property Monitor.

 

The average price of a two-bedroom property in Outer Prime London – comprising non-central areas such as Brook Green, Fulham and Barnes – now stands at £673,812. This is an increase of £98,214 since Q4 2012, when the average price of a two-bed in these areas was £575,597.

 

The average price of a two-bedroom property in Outer Prime London – comprising non-central areas such as Brook Green, Fulham and Barnes – now stands at £673,812. This is an increase of £98,214 since Q4 2012, when the average price of a two-bed in these areas was £575,597.

 

Property Type Breakdown

   

All Prime London

Prime Central London

Outer Prime London

1 Bed

 £     520,076

 £        599,131

 £        470,668

2 Bed

 £     939,839

 £     1,365,482

 £        673,812

3 Bed

 £  1,577,109

 £     2,362,956

 £     1,004,493

4 Bed

 £  2,024,000

 £     2,979,556

 £     1,426,778

 

 

Looking at average values across all property types, growth in Outer Prime London outpaced Prime Central London by 50% during 2013, with annual growth of 15%, compared to annual growth of 10% in the Prime Central areas of Chelsea, Kensington, Notting Hill, Holland Park and Pimlico.

 

The top five Outer Prime ‘hotspots’, where the highest levels of growth were recorded during 2013 were: Barnes (average annual price growth of 19%), Balham, Clapham, Fulham (all 18% annual growth), and Battersea (15% annual growth). 

 

Peter Rollings continued: “Last year the biggest price increases were to be found in the Outer Prime London ‘villages’. These areas are all popular with UK buyers and are favoured for their community feel and local atmospheres. Slightly lower property prices in these areas also attract those who may have been priced out of more central areas.

 

“But early indications in January point to a turnaround. While parts of Outer Prime London sped ahead in 2013, our data suggests that Prime Central areas are due for a growth spurt in 2014. This was beginning to happen in the third quarter of last year and looks set to surge forward later this year.”

 

Prime London Property Price Movements

 

Average value

Quarterly Change

Annual Change

Prime London

£ 1,477,699

3.0%

12.3%

Prime Central London

£ 2,108,717

2.3%

10.0%

Outer Prime London

£ 1,083,313

4.0%

15.1%

 

 

Headlines on Friday 7 February

Personal finance

Struggling Brits are weighed down with an estimated £139bn worth of unsecured debt. Research by Moneysupermarket shows the average debt – excluding mortgages – is £4,412. The typical 18 to 24 year old owes more than £1,000 extra. Rock bottom interest rates could be fuelling the problem by tempting people to borrow more. One in five of us have at least two forms of unsecured borrowing such as an overdraft, credit card, personal loan or store card. (Mirror p2)

Property

Almost 300,000 families are housing another family under their roof as stagnant wages and rising house prices take their toll. Official figures show the number of “concealed families” has risen by 70 per cent in the last decade to almost 300,000. Concealed families include young couples living with one set of parents, older people living with adult children and their families, lone parents living with their parents and totally unrelated families sharing a home (Times p4, Telegraph p8).

Business/economy

The European Central Bank has rejected calls for radical action to head off deflation and relieve pressure on emerging markets. Despite stating it is ready to act if inflation falls even further below target or if the recovery falters, it has offered no clear guidance on future policy. Deutsche Bank, BNP Paribas, Barclays and RBS had all been expecting a cut in the main interest rate, currently 0.25%, while widespread reports suggested the ECB would open the door to quantitative easing (Telegraph b1).

Recruitment

Canadian manufacturer Bombardier has won a £1bn contract to supply the trains for Crossrail, Lnodon’s new east-west rail line. The move will create 340 jobs at its plant in Derby as well as 260 positions at a maintenance depot in northwest London, preserving the future of Britain’s sole surviving train factory (FT p2, Telegraph b1, Express p30).

FOUR IN TEN LANDLORDS EXPECT TO RAISE RENTS OVER NEXT 12 MONTHS

LSL logos colour redefine

  • 42% of landlords expect to increase rents in the next twelve months
  •              One third expect to increase rents by over 1% in 2014
  •              Average estimate of 3.7%, down by 0.9% compared to December 2012

Four in ten landlords anticipate they will raise rents in the next year, according to a landlord sentiment survey conducted by LSL Property Services plc, which owns the UK’s largest lettings agent network, including national chains Your Move and Reeds Rains.

Overall one third of landlords expect they will raise rents above 1% in the next twelve months, with an average estimate of 3.7%, down by 0.9% compared to December 2012. Currently, average rents are rising at an annual rate of 1.5%, according to LSL’s latest Buy-to-Let Index.

Out of those that expect to increase rents, 56% indicated they will do so to cover the cost of inflation. While conversely over half (57%) expect to leave rents unchanged in 2014.

David Newnes, director of LSL Property Services, owners of Your Move and Reeds Rains, comments: “Even with an increase in rental properties available, demand in the private rental sector continues to outstrip supply in many areas, especially in London. In the months ahead, this will enable landlords to push up their rental prices when letting their properties, putting a stop to inflation from eating into their rental income. This is underlined by the fact that covering the cost of inflation is the main reason cited by landlords expecting to increase rents.

“With demand rising, greater emphasis must be on the supply of homes. While the government plans outlined are a welcome move, this is only the start of the long-term solution.”

With current yields at 5.3%, property investment is proving to be a worthwhile alternative to historically low annuity yields and a volatile stock market. Taking into account both capital accumulation and void periods between tenants, total annual returns on an average rental property increased to 8.8% in December, compared to 8.3% in November, reflecting the growth in house prices.

David Newnes, director of LSL Property Services, owners of Reeds Rains and Your Move, comments: “Rising rents are delivering strong yields to investors, making a powerful case for the rental market for those in search of a beneficial, long-term investment.

“However buy-to-let investment is not a license to print money, and it requires the same level of research and planning as any other business investment. The success of the investment depends on the property remaining occupied to deliver ongoing rental income. Before taking the plunge it is important to be aware of factors such as the location of the property, which can determine the level of tenant demand. For instance, those nearest to transport hubs will usually be of the highest demand, especially in larger cities like London.”

FALLING VOID PERIODS

December experienced annual growth in lettings activity, with new tenancies agreed across England and Wales up by 7.7% compared to December 2012. As a result, void periods in private residential property in the UK have fallen, helped by this solid tenant demand. As the UK lettings market powers ahead in 2014, landlords shall continue to benefit from falling void periods, while tenants will face intense competition for the best properties.

David Newnes, concludes: “While void periods are falling, the private rented sector gives tenants flexibility, so as tenants’ circumstances change; there are still occasions when a property might be empty.  Of course, it is in every landlord’s business interest to maintain good, long lasting tenancies and avoid voids. At a time when demand far outstrips supply, it is imperative that empty properties are filled quickly, following any necessary maintenance and improvements. Landlords can minimise void periods by talking openly with their tenants about their future plans – in order to prepare for when the property might be empty. Overall there’s an air of optimism surrounding the rental market now that inflation is firmly back on track as wage expectations start to improve. A rise in affluent tenants will help further boost the success of the private rental sector this year.”lsl-property-services-logo