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”. 

Property market confidence soars to highest level for 4 years

  • UK homeowners predict 7.2% increase in property prices over first half of year
  • 92% of homeowners expecting property prices to rise between now & summer
  • Londoners most confident with 98% of owners in capital saying prices will rise
  • Biggest increases in confidence seen in North signalling a broadening recovery

UK homeowners predict house prices will rise 7.2% between now and summer, up from 5.7% just three months ago and from 3.2% this time last year, making it the most upbeat forecast in four years, according to the latest Zoopla Housing Market Sentiment Survey.

The survey of 7,796 UK homeowners by Zoopla found that 92% of homeowners expect house prices in their area to rise over the next six months, up from 65% last year and the highest proportion on record. Only 3% of homeowners predict house prices will fall over the first half of this year, down from 19% at this time one year ago.

The survey further revealed that as homeowner confidence is buoyed, there has also been an increase in those considering buying a property over the next six months in the first half of 2014 – up to 22% from 19% back in September.

Londoners remain the most optimistic about the state of the property market, with 98% expecting a further rise in property values in the capital during the first half of the year and predicting average price growth of 9.6% over this period, above the national average of 7.2%.

In a positive sign for the broadening out of the market recovery, the most significant jump in confidence can be found in the North with Yorkshire and The Humber and the North West where the proportion of owners who believe property prices will increase over the next six months has risen from 84% to 88% in just 3 months. At the other end of the spectrum, homeowners in Wales are the least bullish on house prices currently, with only 85% of homeowners predicting a rise in property prices by June.

Lawrence Hall of Zoopla.co.uk commented: “Across the country, homeowners are starting the New Year far more positive about the health of the property market. Early indicators suggest that we can look forward to a busy first few months to 2014, as current levels of confidence are likely to fuel more transactions. With 2013 characterised by the wave of government initiatives to lure first-time buyers onto the property ladder, 2014 could well be the year we see activity levels increase significantly.

 

PROPORTION OF HOMEOWNERS EXPECTING PRICES TO RISE BY JUNE

Region

Rise   (%)

Flat   (%)

Fall   (%)

London

98%

2%

1%

South East England

96%

3%

1%

East of England

95%

3%

1%

South West England

94%

4%

2%

West Midlands

93%

5%

2%

East Midlands

89%

7%

2%

Yorkshire and The Humber

88%

8%

4%

Scotland

88%

7%

4%

North West England

88%

8%

4%

North East England

87%

8%

5%

Wales

85%

7%

9%

Source: Zoopla.co.uk (January 2014)

 

% HOMEOWNERS EXPECT PROPERTY VALUES TO INCREASE BY JUNE

Region

Now

1   year ago

London

9.6%

5.8%

East of England

7.5%

3.4%

South East England

7.5%

2.5%

North West England

7.3%

2.4%

South West England

7.3%

3.6%

West Midlands

6.9%

3.5%

Scotland

6.3%

4.2%

East Midlands

6.1%

3.1%

Yorkshire and The Humber

5.8%

4.6%

North East England

5.7%

3.3%

Wales

5.5%

1.8%

Source: Zoopla.co.uk (January 2014)

 

LSL PROPERTY SERVICES: SIX IN TEN LANDLORDS PREDICT GROWTH IN TENANT DEMAND NEXT YEAR

  •  58% of landlords predict tenant demand will grow in the next twelve months
  • Four in ten landlords reported growth in tenant demand in last six months
  • Nearly a fifth expect to expand their portfolios in 2014
  • Three quarters of landlords believe now is a good time to buy or sell rental properties

Prospects are bright for the rental sector in 2014, with growing tenant demand boosting confidence among landlords, and rising prices making properties attractive investment opportunities, 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.

In the past six months, 41% of the 2,195 landlords polled reported a rise in tenant demand, with just one in sixteen seeing a fall.  Such growth in demand has been the driving force behind the series of rent rises seen during 2013. The majority of landlords (58%) predict demand will increase further in 2014, with just 10% expecting demand to shrink.

Nearly a fifth (18%) of landlords therefore anticipates growing their portfolio of properties over the coming twelve months, while 16% already expanded in 2013.

David Newnes, director of LSL Property Services, comments: “The rise in house prices is evidence of the underlying buoyancy in the property market and the stabilising of rent rises is an indication of the current healthy state of the rental sector. Landlords are therefore in a prime position to benefit from the strong yields on properties and aspiring buy-to-let investors can be encouraged by the climbing tenant demand, as not only does it signify the excellent long-term investment opportunity, but also demonstrates the continued appetite for rental homes.”

 

“Demand for rented accommodation is strong, exemplified by the fact that the number of lettings, new viewings and applicants are all rising. There are strong foundations for prosperity in the rental sector, fuelled by increased economic optimism and future job creation. Against the backdrop of growing economic stability, more confidence is driving people forward in search of the attractive deals on offer across the buy-to-let mortgage market, which will allow them to benefit from the attractive returns.”

 

Over three quarters of landlords (77%) believe now is a good time to buy or sell rental properties. Of those who think now is a good time to buy, 71% cited attractive property prices and half highlighted the better capital returns on offer compared to other forms of investment, while 47% pointed to strong tenant demand as a key investment driver.

 

MORTGAGE FINANCE REMAINS A STUMBLING BLOCK

Despite the stark improvements in the mortgage market recently, just one in six landlords believes the availability of cheap finance is a key reason for why now is a good time to invest – although this is up from one landlord in eleven in December 2012.  In fact 35% of landlords say that it is more difficult to raise mortgage finance compared to a year ago, highlighting that for some mortgage challenges remain a deeply embedded issue.

David Newnes concludes: “While the level of buy-to-let lending has been rejuvenated and is now climbing out of the doldrums, this is still short of historic levels. Securing mortgage finance is therefore not just a concern exclusive to first-time buyers, but remains a real and serious challenge for many landlords. Lending to first-time buyers and those without large deposits has itself seen a pick up but still has a long way to go, and the proportion of UK households is only increasing. It is the rental sector that will be continually needed to pick up the slack.

 

“Filling the chasm between supply and demand is also reliant on the rising number of buy-to-let investors accessing the affordable mortgages required, thus allowing them to further widen the pool of rental accommodation on offer.”

LSL BUY-TO-LET INDEX: RENTS RISE TWICE AS FAST AS WAGES OVER PAST YEAR

  • Rents rise 1.6% in twelve months – compared to 0.8% annual growth in weekly earnings
  • Average rent in England and Wales now stands at £753 per month, despite seasonal dip
  • Landlords see record 8.9% total return over last twelve months, or £14,592
  • Tenant finances improve in time for Christmas, as proportion of late rent drops to 6.6%

Rents have risen at twice the annual rate of weekly earnings, according to the latest Buy-to-Let Index from LSL Property Services plc, which owns the UK’s largest lettings agent network, including national chains Your Move and Reeds Rains.

Average rents across England and Wales now stand at £753 per month as of November, up 1.6% compared to November 2012.

By comparison wages have risen by just 0.8% on an annual basis.  Average regular pay before tax stands at £1941 per month, according to the latest official figures.[1]

Rents across England and Wales remain significantly higher than a year ago, despite a recent seasonal drop of 0.7% (or approximately £5) in the month since October 2013.

November also witnessed annual growth in lettings activity. The number of new tenancies agreed across England and Wales increased by 1.5% compared to November 2012. This was despite a slowdown on a monthly basis, with 6.3% fewer new lettings than in October.

David Newnes, director of LSL Property Services, owners of estate agents Reeds Rains and Your Move, comments:Economic reality now resembles the most optimistic dreams of last year.  But for so many households, the dream of homeownership is still relegated to the imagination.

“It’s not just wages.  Savings rates have been swamped by inflation for half a decade – so building up even a 5% deposit is a real struggle.  Help to Buy is having a perceptible impact, with thousands of first time buyers benefiting already.  Yet millions of new households have joined the queue at the bottom of the housing ladder – and private renting is the only tenure to have taken up much slack.”

Rents by region

Eight out of ten regions saw rents fall on a monthly basis between October and November, in line with a monthly fall across England and Wales as a whole.

The sharpest monthly drop was in the West Midlands, with rents down 2.6% since October. This was followed by a fall of 1.8% in the South East and a 1.3% monthly decrease in the East of England.

However, the South West experienced rent increases of 1.1% between October and November, while rents in Wales also rose slightly on a monthly basis, up by 0.2%.

On an annual basis, London saw the steepest rent rises – 4.4% higher than in November 2012. This was followed by a 3.4% annual increase in the South West, while rents in the South East are 3.2% higher than twelve months ago.

Meanwhile, rents in the East of England have fallen by 5.5% (or £42) over the last year. This was followed by a 2.8% annual drop in the West Midlands, while rents in both the North East and Yorkshire and the Humber are 2.0% lower than November 2012.

David Newnes, director of LSL Property Services, owners of estate agents Reeds Rains and Your Move, comments: “Economic recovery is spreading throughout the UK.  And the property market is the leading edge of that wave.  As the home purchase situation heats up, the effect on the rental market is even less uniform – with rises accelerating in some areas and slowing in others.  Across the UK, every town and city is its own market, and requires local knowledge.”

Yields and Returns

Gross yields on a typical rental property remained steady at 5.3% in November, consistent with the past three months.  However, taking into account capital accumulation and void periods between tenants, total annual returns on an average rental property rose to 8.9% in November. This is up from 8.1% in October – with the increase due to accelerating house price rises. In absolute terms this represents an average return of £14,592, with rental income of £8,243 and capital gain of £6,349.

If rental property prices continue to rise at the same pace as over the last three months, the average buy-to-let investor in England and Wales could expect to make a total annual return of 10.5% over the next 12 months, equivalent to £17,294 per property.[2]

David Newnes comments: “Over twelve months the availability and affordability of buy to let finance has achieved a quiet revolution – with a very real effect on the private rented sector.  Demand for homes to rent is still soaring, yet heavy investment by landlords in 2013 has brought rent rises in most areas below inflation.  In 2014, one thing will remain certain – demand from new tenants will continue to grow.  Supply of new homes to rent will be critical in maintaining relatively affordable annual rent rises, compared to rampant house prices.”

Tenant Finances

Tenant finances improved in November, with the total amount of late rent across England and Wales reaching a new record low of £228 million.  Since November 2012 the total amount of late rent has fallen by £20 million. As a proportion, such tenant arrears now represent 6.6% of all rent, down from 7.1% in October, and significantly lower than 7.4% of all rent in arrears in November 2012.

David Newnes concludes: “Homes of all tenures have become more expensive for most people.  That’s partly because the UK is poorer than it was five years ago, with wages only gradually struggling to recover.  But more fundamentally, housing is also becoming more expensive because there aren’t enough homes to keep up with an expanding population.

“Building more homes at a serious pace is the only way to avoid the risk of stagnation in the housing market – the property industry cannot grow by competing ever more fiercely over fixed resources.  But to make new homes affordable they will also need to be purpose built for all tenures.  Private renting has been growing for decades, and new supply will need to cater for the sector for decades to come.”


[1] Office for National Statistics data, updated 18/12/13: http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/december-2013/index.html

 

[2] Assuming house prices change at the average rate of the last three months and they achieve the average yield of 5.3%.

 

LSL / Acadata Scotland HPI News Release

Scottish house prices up £1,368 since October 2012

  • On a monthly basis prices fall marginally by £206
  • House prices in Aberdeen set another record high
  • Sales over the last three months are 23% higher than last year

 

House Price

Index

Monthly Change %

Annual Change %

£144,084

195.4

-0.1

1.0

Richard Sexton, director of e.surv chartered surveyors, part of LSL Property Services, comments: “It’s clear the Scottish housing market is being restored to health. Sales are substantially better and prices are entering a period of prosperity, fuelled by rising consumer confidence and demand. October is the second consecutive month in which the annual change in prices has been positive, a trend that has not been visible since early 2011. Average prices have risen £1,368 over the past year in Scotland, while lending levels are improving rapidly as economic conditions perk up as is being seen across the UK.

“With the easing of mortgage lending conditions, first-time buyers are having a much easier ride. There is now a better range of competitively priced products with lower deposit requirements, thanks in part to the backing from the government’s schemes. So far 2013 is seeing the greatest amount of sales recorded over the last five years. Record low interest rates have sent the market into another realm. Sales have shot up by 23% for the three months of August, September and October 2013 compared to the same period last year. At the bottom end, shoots of first-time buyer activity mean the market is blossoming, a factor that’s giving the whole market a lift.

“After a period of slow movement, it is reassuring to see home mover and remortgage lending is also showing a boost in levels. People are now more confident in their plans to sell their current homes and buy somewhere else as signs show the path ahead in 2014 looks stable. The Help to Buy scheme will take on more prominence early next year and will be the main driving force pushing up house price growth and buyer activity.

“The recent news that the Funding for Lending scheme will be axed has created an element of uncertainty. But the underlying fact is that the recovery has only just begun. Lending is still only slightly above half the levels seen at the peak of the market, so there is much space for growth. The referendum next year on independence from the UK could have an impact on Scotland’s housing market. But if investors hold on to see what the effect will be, it may unsettle the market and hamper its ability to create the much needed new housing supply in the meantime.”

Property Valuations up by a Third

Valuations activity has grown by one third over the last year, according to chartered surveyors Connells Survey & Valuation.

The total number of valuations conducted in November saw annual growth of 33%, despite a 5% monthly seasonal slowdown when compared to October.

John Bagshaw, Corporate Services Director of Connells Survey & Valuation, comments: “Despite a slight monthly dip, progress since the start of the year has truly transformed the housing market, and cautious optimism for 2014 seems more appropriate than most would have hoped for even a few months ago.

“Activity is pumping through the arteries of the property market once again. Both phases of Help to Buy are now having some impact, and economic life is seeping back – even to the outer corners of the UK.”

The fastest annual growth was in remortgaging activity, up by 65% since November 2012. Remortgaging has also increased on a monthly basis, up by 1% since October, in defiance of the seasonal trend.

John Bagshaw continues: “Lower mortgage payments are helping millions with their monthly finances. Remortgaging has boomed for the last year – partly as better deals with lower rates have entered the market, and partly as many households look for ways to cut monthly costs and make ends meet.

“As we approach the New Year, the question on everybody’s lips is how long mortgage rates can stay so low. But all indications from lenders are that it will be some time before monthly payments start to rise. In the meantime, remortgaging is helping many households achieve the relative security of fixed-rate packages.”

First time buyer activity was the section with the second fastest annual growth. Valuations on behalf of first time buyers outnumbered November 2012 by 40%, despite a 7% slowdown compared to October. Meanwhile, valuations for existing homeowners looking to move have seen annual growth of 16% after a monthly drop of 8% from October.

John Bagshaw comments: “The property ladder is no longer broken. It’s still a difficult climb – but finding a first home and moving up the ladder is finally getting easier. There are still stumbling blocks, such as the lag between activity in estate agents’ offices and activity on building sites. But the market for new buyers and second-steppers alike is now alive and kicking.”

Buy-to-let activity saw the sharpest seasonal slowdown, with 11% fewer valuations than in October. However, buy-to-let valuations are still up 10% on last year and 94% ahead of levels seen in 2007.

John Bagshaw concludes: “Buy-to-let stands out from the crowd only because of the rip-roaring success of other sectors. Yet – while remortgaging has benefitted from Funding for Lending, and a raft of special measures for homebuyers are taking the property market by storm – buy-to-let has shown substantial growth primarily on its own steam.

“While buying a home is more achievable than it has been for years, many still face significant challenges. In the last year, landlords have capitalised on current market conditions by providing homes for those who are still struggling to get onto the property ladder.”

LSL / Acadata: Wales House Price Index News Release

Welsh house prices rise for first time in seven months

  • Prices increased £1,563 in September
  • Average price now £1,219 higher than start of 2013

House Price

Index

Monthly Change %

Annual Change %

£152,779

237.0

1.0

0.5

Richard Sexton, director of e.surv chartered surveyors, part of LSL Property Services, comments: “The economy is racing along and the rise in confidence, underpinned by better access to mortgages, is fuelling the property market in Wales. A shift in gear towards growth has become much more obvious: prices have moved into positive territory for the first time in seven months, with a rise of £1,563 in September compared to August.

“Hordes of first-time buyers are coming out of the wood work, providing renewed strength which will help the Welsh market gather momentum. Record low interest rates have meant mortgage payments for new borrowers are their most affordable for over a decade. As a result the mortgage market is bustling with potential buyers. Since the summer the increase in first-time buyers has helped unlock property chains higher up, allowing sales to soar. The slight drop in September is a reaction to the record high peak in August, reflecting a return to a more sustainable level on the barometer.

“The Government’s Help to Buy Cymru scheme has provided much needed support to people in search of affordable new build housing. It’s incredible to see that demand has leapt up and activity in Wales has become more even across all tiers of the property market. Prices have risen now that the distribution of sales is no longer primarily from the lower end of the market. However, there are concerns that interest rates may rise and a slowdown in wage growth could put pressure on aspiring buyers, eager to step on the ladder.

“On a smaller scale, the north and south divide is fading as the average price changes in north, south and central regions are almost identical in September reflecting the uniform recovery across the country. Cardiff is a hotspot having the largest total number of sales, and represents a substantial proportion of the Welsh property market. Often prosperous areas benefit from the upswing in buyer interest, as stronger local economies attract new buyers looking to settle down and find employment. Cardiff, boasts more green space per person than any other UK city, which is a key factor enticing more and more buyers into the region.

“With an influx of people into Wales, the market will hit a roadblock if the lack of housing supply in Wales is not addressed. The spotlight will be shone on the new Housing Bill to boost the supply of affordable homes. While the possibility of the Government’s New Buy mortgage guarantee scheme with builders and lenders will also provide a further foundation for growth.  These schemes will be crucial for the Welsh economy to stay on track and for the recovery to reach the finish line.”