LSL/ACADAMETRICS ENGLAND & WALES HOUSE PRICE INDEX

House prices hit another record high in July
• Beats previous peak in 2008
• House prices up £5,796 in the past twelve months, reaching a high of £232,969
• With first-time buyers accounting for 45% of all house purchases

David Newnes, director of LSL Property Services plc, owner of Your Move and Reeds Rains estate agents, comments: “House prices have never been higher. 2013 has marked the time when the property market recovered from the 2008 financial crisis. Prices are up £5,796 over the past year, thanks largely to a significant increase in mortgage lending to first-time buyers. House prices are growing steadily; signifying long term recovery is becoming a reality. Mortgage lending in May was up by over a fifth compared with April and 17% stronger than a year ago, while the number of first-time buyer mortgages are at the highest since 2007.

Typically the property market flourishes in the summer, and July sales are the highest so far this year. But the improvement is more than just a seasonal trend. The market is palpably stronger than a year ago and confidence is returning to lenders and buyers. The Funding for Lending scheme can take plenty of the credit, as can Help to Buy. Both schemes have helped banks boost first-time buyer lending by providing them with credit to offer more loans to new buyers and reduce rates on house purchase mortgages. Funding is more accessible for lenders, while banks are more confident than they were six months ago – which bodes well for the future.

But this improvement continues to be powered by the strong performance in the capital, where prices are rising far faster (7.1%) than other parts of the country. Domestic and foreign buyers’ interest for bricks and mortar in London appears to be undiminished. Supply is restrained, and without a sudden rush of properties hitting the market, prices will rise even more over coming months. The bottom line is that the divide between London and the rest of the UK housing market is deepening, with parts of London operating at an entirely different level from the rest of country, and even the rest of the capital.
Despite this overall improvement in the market, the level of first-time buyer activity is still around half a fraction of what might be considered normal levels. Both the lack of housing supply and rising competition in the property market are supporting prices, but at the same time making it more difficult for first-time buyers. The Government urgently needs to address housing supply if it is serious about boosting home ownership levels. One way would be to remove stamp duty which is a disincentive to buying for both home movers as well as first time buyers.”

Welsh house price sink £2,935 in the past year

LSL/ACADAMETRICS WALES HOUSE PRICE INDEX

• Prices fall a further £1,552 from April
• May’s monthly fall the biggest since January 2012

House Price	Index	Monthly Change %	Annual Change %
£150,376	233.3	-1.0	-1.9

Richard Sexton, director of e.surv, part of LSL Property Services, comments: “The Welsh housing market is still caught in the clutches of restricted mortgage availability. Prices have fallen by almost £3,000 over the past 12 months, and £1,552 in the last two months. It’s a sharp contrast with England and particularly London, which is starting to fire at all cylinders. Buyers in Wales are struggling to get mortgage finances, which is clogging the whole property chain.

“But things are looking up. The lending environment is slowly improving for first time buyers, who are able to access wider and cheaper a range of mortgage deals. Low interest rates are helping and more affordable options are surfacing that are helping boost activity from the bottom end of the market. But deposit requirements remain the sticking point with plenty of buyers unable to cobble together enough savings while inflation remains high and wages remain suppressed. Wealthier buyers and equity-rich retirees represent the largest slice of buying power: this is sustaining sales-levels, and propping up prices.

“On a regional level prices tend to vary prominently depending on the distribution of wealthier buyers. Prices have fallen in poorer ends of the spectrum in areas with more first time buyers. The sinking prices are bucking the normal summer trend of sales rising over the summer and sales figures are below average historically, by almost half what they were in 2006.

“But given how difficult it is to get a mortgage at the moment, the small rise in house sales is a cause for celebration. Sales have increased by 6.2% compared to May 2012, reflecting the improvement in first-time buyers flocking to the market, many of who have been supported by improved lending conditions.

“The property market could do with a spark to boost its rate of recovery. The good news is that the Welsh Government plans to up its game, having recently announced the drafting of a new Housing Bill which will focus on the quality and supply of housing, as well as homelessness and the private rented sector. This bodes well for the future, while the long-term effects of the Funding for Lending scheme and Help to Buy feed through into the market. Hopefully this combination will drive the Welsh property market into safe territory as the year progresses.”

 

 

House prices rise to highest on record in May

LSL/ACADAMETRICS ENGLAND & WALES HOUSE PRICE INDEX

• Beats previous peak in February 2008
• House prices up £6,125 higher than May 2012; sales up 10,000 year-on-year
• But it is London driving most of the increase – northern regions are still struggling

House Price	Index	Monthly Change %	Annual Change %
£233,061	237.3	0.4	2.7

David Newnes, director of LSL Property Services plc, owner of Your Move and Reeds Rains estate agents, comments: “House prices rose in May to the highest on record. Even taking inflation into account, the record high price is symbolic of the significant improvement in the housing market over the past year. Prices are £6,125 higher than in May last year, sales are up 19%, and prices have only dropped one month out of the past eighteen. The catalyst for all this has been significant improvement in mortgage availability. Life for first time buyers is noticeably easier than it was six months ago. An abundance of great mortgage deals are on offer and lenders are more willing to lend to high LTV borrowers, which has led to a substantial rise in first-time buyer activity. Schemes like Help to Buy and Funding for Lending have acted like a steroid injection for the mortgage market and made it markedly stronger than last year.”

“But it is not quite as good as it looks. Take London out of the equation and the average price falls dramatically. The red hot London market is giving the whole property market a deceptively healthy glow. London still leads the way in terms of house price rises with growth in 31 out of 33 London boroughs annually and is the only region in England with average prices above previous record levels. The North/South divide is actually becoming more prominent as time goes on and as the London market is more exposed to a wider audience of potential foreign buyers, flocking to the capital. A strong economy is vital for the health of the property market and it is performing much better in London than other less resilient parts of the UK, which are suffering from public expenditure cuts. More needs to be achieved to help banks lend to new buyers, as a strong improvement in first-time buyer lending is the crucial catalyst for a full market recovery”.

“On top of that, the supply of mortgage finance is still constrained, despite improvements over the past year. Many buyers remain locked out of the market because they can’t afford to meet strict mortgage requirements and save enough for a deposit which is why cash buyers still account for a high proportion of the total number of sales. Lender’s caution will not disappear, as new regulations and controls continue to hamper their ability to lend. The only real solution is a sustained improvement in the wider economy which will help increase the supply of mortgage finance and improve demand for it.”

THE PRICE OF OUTDOOR SPACE IN LONDON = 20%

As 150,000 visitors are expected to flock to the world’s largest annual flower show at Hampton Court (July 9^th – 14^th) this summer, research by Marsh & Parsons shows that Londoners value a garden and will pay at least a 20% premium for outdoor space.

The latest Marsh & Parsons research reveals that two comparable properties in the same area could vary significantly in price due to the impact of a garden, outside terrace, or proximity to a park. An attractive garden, roof terrace or being near to green, open space can add around a 20% premium to the price of a London property.  Now that the summer is here, the importance of a garden or alfresco space such as roof terraces and balconies moves up to the top of the wish list for buyers.

In Bayswater, there are strong price differences between those properties which boast attractive outdoor space and those which do not.  A one-bedroom property with an outdoor patio garden (http://www.marshandparsons.co.uk/property-for-sale/1-bedroom-Flat-for-sale/Queensborough-Terrace-London-W2/NOT100218) is £75,000 more expensive than a comparable one bedroom property, also on the lower ground floor of a building only two minutes’ walk away (http://www.marshandparsons.co.uk/property-for-sale/1-bedroom-Flat-for-sale/Inverness-Terrace-London-W2/NOT120240) – a premium of around 16% for a property of relatively the same size, on the same floor, in the same building and mainly due to one having a private patio.

Proximity to London’s great parks can add an enormous premium to prime London property. In Kensington, a property featuring a magnificent garden, overlooking Kensington Gardens, is offered at £3,500,000. (http://www.marshandparsons.co.uk/property-for-sale/3-bedroom-Flat-for-sale/Palace-Gardens-Terrace-London-W8/KNS130060). A similar sized flat without a garden in the same area (http://www.marshandparsons.co.uk/property-for-sale/3-bedroom-Flat-for-sale/Makepeace-House-Kelso-Place-W8/KNS130065) shows that a 36% premium exists for the Palace Gardens Terrace property with an exceptional garden – compared to this similar sized property without a garden and only a stone’s throw away.

Another property in the same neighbourhood that boasts a private patio and access to a roof terrace (http://www.marshandparsons.co.uk/property-for-sale/3-bedroom-Flat-for-sale/Palace-Gate-London-W8/CHS120094), shows the price gap is substantial compared to the Makepeace House property which is the same size but lacks outdoor space (http://www.marshandparsons.co.uk/property-for-sale/3-bedroom-Flat-for-sale/Makepeace-House-Kelso-Place-W8/KNS130065). Here we see a premium of around 6% for an almost identical property in size and style, simply owing to the fact the Palace Gate property has the additional appeal of a small patio and a roof terrace.

Peter Rollings, CEO of Marsh & Parsons, said:  “In the summer months, Londoners yearn for some outdoor space and the freedom to have an external room in which to entertain. But fulfilling the dream of a countryside idyll in London comes at a premium. In such an urban area, outdoor space is both scarce and expensive. Thankfully, Londoners can also retreat to one of the capital’s treasured parks and green spaces, where it is possible to find a piece of the great outdoors here in the city.

“Location and outdoor space can make the difference between a desirable property and an incredible property with a wow factor. Gardens, roof terraces and the proximity to green space can all add substantial value. Properties without gardens are not as appealing for many home buyers and it can be harder to sell them during the summer months.”

Wriglesworth Paper Summary: 9th July 2013

Personal Finance

Retirement becomes a distant dream as new research shows that one in five people believe they will never retire. According to the Association of British Insurers, whereby You Gov asked 2,506 employees questions relating to retirement and welfare, in a survey that was weighted to reflect the working adult population, sadly two thirds of those polled said they would struggle to meet the costs of paying for long-term care as they become frail. Even though there are numerous initiatives to encourage people to save, including the introduction of compulsory workplace pensions, the evidence shows that many will struggle to maintain their living standards into old age. The Government has phased out the statutory retirement age, which used to be 65, so technically there is no restriction on stopping work. (The Times)

Personal finance will become compulsory in schools across England for the first time under new reforms to the national curriculum put forward by Education Secretary Michael Gove. All pupils will be required to study financial education between the ages of 11 and 16 as part of a citizenship course to give kids the financial skills so that they can manage their money on a day-to-day basis, and plan for future financial needs. The proposed curriculum, to be taught from 2014, comes as welcome news for campaigners who have worked hard so that children can be educated on how to manage their money. Personal finance is already taught in schools in Wales, Scotland and Northern Ireland. (Guardian)

Economy

Last night the coalition was accused of failing to implement key recommendations of a high profile parliamentary report on cleaning up the City despite having announced that bankers would now face jail for reckless misconduct. Ministers opted to ignore some of the key recommendations of the Parliamentary Commission into Banking standards that it set up. In an 80 page response Mr Osborne and business secretary, Vince Cable offered only a partial endorsement of the commission’s exhaustive report, and were criticised as being weak by Labour.  Mr Osborne said the government is determined to raise standards across the banking industry to create a stronger and safer banking system and that the government will implement its main recommendations.  The Government also emphasised that cultural reform in the banking sector marks the next step in the government’s plan to move the whole sector from rescue to recovery and ensure that UK banks demonstrate the highest standards, and are able to support business and drive economic growth.

Property

The housing market seems to be gaining strength as shown by the latest RICS report that illustrated that June was the strongest month for house prices in over three years. Out of the surveyors questioned by RICS, 21% more reported rising than falling prices, that’s the highest proportion since January 2010. Apparently the number of people involved in the industry who expect prices to keep rising is at its highest point since the survey started in 1999. The reason prices are rising is especially due to the impact of rising demand, with 38% more surveyors reporting new buyer enquiries than reporting fewer. Demand is being driven up at the fastest rate since the survey began in 1999. The lack of newly built housing coupled with the new government policies and initiatives may be injecting life into the property market. (City AM, Guardian)

Recruitment / Employment

The controversial scheme School Direct that was introduced by Michael Gove, the education secretary, as part of his plan to train more teachers in schools has come under attack due to criticisms that it cannot train enough teachers and there may be a teacher shortage on the horizon. Concerns have also been brought to light about whether this sort of training lacks some of the important grounding offered by a university-based PGCE. Ideally the government would like 10,000 new teachers to be trained through School Direct from September. The idea is to give heads greater power over training and guarantee more “on the job” experience for recruits. However fewer than half this number have been accepted onto the scheme, and there have been concerns from schools about the quality of applicants.

LSL / Acadametrics Scotland HPI

 House prices climb £1,082 in March 

• Prices rise for the third month in succession
• Prices rise by £3,776 over 2013
• Sales volumes increase by 8% over previous year

House Price	Index	Monthly Change %	Annual Change %
£144,615	196.1	0.8	-0.9

 

Gordon Fowlis, regional managing director of Your Move, an estate agency chain that is part of LSL, comments: 

“Although the Scottish housing market has had to battle with a lack of cheap mortgages and poor funding conditions over the last year, it looks as if the market is now sailing into calmer waters. This is thanks to the help of the Funding for Lending scheme. The positive increases in house prices for three consecutive months of 2013 are encouraging.

Green shoots are beginning to show in the Scottish housing market. Sales are climbing, up 8% compared to March 2012. 25 out of 32 authority areas are seeing more sales, with Midlothian, which had the greatest rise in sales, up 70% compared to a year ago. In Edinburgh, which is obviously a crucial market, the number of flats being sold is up by 60% compared to 2012. The rising number of buyers in the first quarter has helped build market confidence in March. But the supply of properties coming onto the market has been constrained. That’s ramped up competition between buyers, and pushed up house prices.

Although it is not yet clear quite how high the Scottish Government will put supporting the property market up their priority list, the UK Government has taken a number of steps to boost the housing market. The Funding for Lending scheme has been the most important one and has encouraged lenders to lower mortgage rates and reduce interest rates. George Osborne and the UK government are giving the property market a further helping hand with the Help to Buy scheme. That will impact the UK overall, and should help Scotland move forward into broad, sunlit uplands.

“The last year was tough with strict mortgage lending rules which pushed back masses of beleaguered first-time buyers. House prices are still £1,257 lower than a year ago. Sadly poor inflation rates made matters worse and the prospect of public spending cuts in Scotland put the property ladder further out of reach for those struggling to save up for a deposit. But it looks as though we are now turning a corner.”

LSL/ACADAMETRICS ENGLAND & WALES HOUSE PRICE INDEX

Prices rise £6,726 over the past twelve months

• Sales up 18% compared to last year
• House prices up £707 in April and have only fallen once in the past 17 months
• Of the 10 regions in England & Wales only two regions have negative house price growth

House Price	Index	Monthly Change %	Annual Change %
£231,170	235.4	0.3	3.0

David Newnes, director of LSL Property Services plc, owner of Your Move and Reeds Rains estate agents, comments: “House prices in England and Wales climbed £707 in April, have risen £6,726 in the past 12 months and have dropped only once in the past seventeen months. The catalyst has been a significantly improved mortgage market.

“Sales are 18% higher than they were last year, reflecting the improved conditions for buyers. A plethora of excellent mortgage deals are surfacing, cheaper mortgages have trickled into the market and low interest rates too have led to a boost in buyer activity. The impact of the Funding for Lending Scheme (FLS) has been significant, allowing banks and building societies to accelerate lending levels to a wider pool of borrowers. Gradually, competitive rates have emerged which should mean we will see a solid improvement to lending levels in 2013.

“A word of warning though: the strong performance of the London market is dragging up the average UK house price and glossing over weaknesses elsewhere in the country, particularly the north of England and most of Wales. This is due to the lightning fast speed of growth in the capital. Take London out of the picture and the national rise in prices falls to 1.1%. Here the widening gap is also conspicuous between housing types and income groups. London is seeing a rise of 5% (2010-11) and 5.7% (2011-12) in properties sold for £1 million plus, while the rest of the country sees a drop of -5.3% and -8.5%. London’s share of the whole £1m market and £2m property market has grown rapidly, outdoing its counterparts, suggesting wealthy buyers still form a disproportionately large share of the market.

“Despite difficult funding challenges, the Government’s attempts to steer the housing market have been vital to the progress it has made so far. The property market has been recognised as key to a healthy economy. Numerous measures, such as the FLS, the Help to Buy, New Buy and First Buy, designed to stimulate lending for development and mortgages, are being taken to stimulate the market against strong economic headwinds. At the moment, the FLS needs to be improved in scale before we are to see a more substantial effect. In order to unlock increased LTV lending in a controlled way, lenders need the constraints that require them to hold 8 times more capital in reserve for advances over 60% LTV to be loosened. Unless these constraints change, alongside the increased cheaper funding availability, lenders will find it hard to extend lending to many hard pressed first time buyers.”

LSL Acadametrics October Index: Housing market returns to growth in October as prices and transactions climb

• Housing market returns to growth in October as prices and transactions climb
• Transactions increase by 24% in October compared to previous month
• House prices see first monthly increase since May, rising by 0.1%

David Newnes, Director of LSL Property Services plc, owner of Your Move and Reeds Rains estate agents, comments: “There were welcome signs of life in October’s housing market as house prices rose on a monthly basis for the first time since May and transactions jumped up to their second highest level in over two years. Following the post-Olympic slump in September, the housing market has been playing catch-up, benefitting from the pent up sales activity of those who delayed moving decisions in early summer. But we’ve also seen tentative indications of a slight thaw in the mortgage market in the last month. Although the number of borrowers able to secure a mortgage remains far from healthy by historic standards, lenders are starting to pass along cheaper finance provided by the Funding for Lending scheme.

While we are likely to see the scheme play an increasingly prominent role in coming months, the capital banks are required to set aside for each higher risk loan is likely to act as a drag on high LTV lending, a factor which may prevent a return to anything like the number of first-time buyers in the market before the initial credit crunch in the foreseeable future.

Nevertheless, any future easing of borrowing conditions will be welcomed with open arms by prospective buyers who are looking to leave increasingly expensive rented accommodation. It is crucial that lenders redouble their efforts to boost the amount of cheaper funds reaching the lower end of the housing market, and loosening cautious criteria would go some way towards preventing October’s improvement in buyer activity from being a flash in the pan.

Despite the positive developments in the mortgage market, equity rich and wealthier buyers remain key to monthly sales activity and are underpinning the local and regional variation in the housing market. As a rule of thumb, areas with the most expensive homes are seeing the largest increases, with the average house price in London increasing by 8.3% annually, compared to falls in regions such as the North West, Wales and the West Midlands. Even in London, this remains the case, with the five boroughs with the most expensive average house prices featuring in the seven boroughs with the fastest house price inflation. We won’t see this pattern change until the mortgage market recovers sufficiently for the lower tier to spring into action, and competition to be hot enough among first-time buyers to buoy prices at the opposite end of the market.”

Scottish house sales 9% higher than 2011 as market takes first steps towards recovery

• 2,674 more house sales in first half of 2012 compared to equivalent period last year
• Prices in Midlothian rise £20,000 in last year
• Prices in Edinburgh up almost £13,000 over last 12 months

House Price	Index	Monthly Change %	Annual Change %
£146,093	198.1	0.0	-0.1

Richard Sexton, director of e.surv chartered surveyors, part of LSL, comments: “The Scottish housing market is climbing the ladder to recovery rung by rung. Despite the impact of the Jubilee bank holidays, house sales so far this year are 9% higher than in the equivalent period last year. The fact activity has increased during a year when the economy has been weak bodes well for the future, and is testament to the underlying strength of the housing market and pent up demand.

Although bank lending is still in the doldrums, evidently more buyers have been able to access mortgages than in 2011. More buyers have rolled up their sleeves and built the big deposits banks require to access affordable loans, which has eased the gridlock in the market and jump-started activity. An air of cautious optimism surrounds the Scottish housing market at the moment. Slowly but surely the building blocks of recovery are being put in place.

But there is still a long way to before the market drags itself out the hole dug for it by the financial crisis. Sales are still at half they level they were before 2008. Recoveries from recessions caused by debt are always fragile, and a severe downturn in the eurozone or a sharp squeeze on the credit available to banks could still shatter much of the progress the market has made. Despite the deposits being saved, the lack of loans to first time buyers is a huge roadblock to a complete recovery.

Prices are erratic on a regional basis. Areas like Edinburgh and other parts of Midlothian, which have pockets of wealthier buyers, have seen prices rise considerably over the past year. These areas are full of buyers with more equity, so more people are finding it easier to get a mortgage. This is pushing demand above supply and causing prices to rise. On the flip side, less affluent areas with high unemployment have seen activity drop away, which has dragged down prices.”