London Housing Crisis: How Would Labour Fix It?

This article by Dave Hill of theguardian on September 29th, 2013 reveals the ongoing debate that is taking place about the capital's particular housing problems behind the scenes since Ed Miliband's conference speech offered big policy ideas, but was short on detail.

The housing element of Ed Miliband's Labour conference speech was greeted by the wiser commentators with a mixture of disappointment, puzzlement and hope. Colin Wiles pointed out that despite that heavily-trailed pledge to be building 200,000 new homes a year by 2020 if Labour wins in 2015, only a few words of the Labour leader's oration were devoted to housing. He quoted all 212 of them in full, and so will I:

So we'll say to private developers, you can't just sit on land and refuse to build. We will give them a very clear message - either use the land or lose the land, that is what the next Labour government will do. We'll say to local authorities that they have a right to grow, and neighbouring authorities can't just stop them. We'll identify new towns and garden cities and we'll have a clear aim that by the end of the parliament Britain will be building 200,000 homes a year, more than at any time in a generation.

What do these words really amount to and how much encouragement should London, with its distinctive and growing clamour of housing troubles, draw from them?

As I wrote just before Miliband got to his feet in Brighton, the capital could be needing about half of those 200,000 when and if the Labour leader becomes prime minister, suggesting that the target isn't nearly big enough for either London or the UK as a whole. Or Britain. Or England. Jules Birch joined Wiles in wondering precisely which bits of the British Isles Miliband was applying the 200,000 figure to. For Lynsey Hanley the speech was a mere step forward when what's required is a giant leap.

However, both Birch and Wiles found some encouragement in those few dozen words. And their poverty of detail belies the scope of debate in Labour circles about housing policy, not least as it would apply in London should Miliband enter Number 10 and a Labour mayor - Jowell? Khan? Lammy? Adonis? - take command of City Hall in 2016.

There is a strong desire to clamp down on the scandal of land banking for massive profit in London at a time when the housing shortage is critical and overcrowding rife. Shelter's Roger Harding says here that the GLA reckons about half the hoarded sites in the capital aren't even owned by property developers, but by hedge funds and banks with no intention of building so much as a garden shed on them.

We already knew shadow London minister Sadiq Khan is giving some thought to if it's time for a land value tax, which could put a big break on speculation, and I'm told he has found the Smith Institute's case for a property speculation tax "very interesting".

Miliband's "use it or lose it" line on this had right-wing pundits howling about totalitarian state "theft" but even prominent London Tories are calling for radical remedies. In June, Conservative London Assembly member Tony Arbour asked for "the problem of land banking" to be dealt with by boroughs demanding that planning consents set a date for the plan's completion. Boris Johnson himself re-affirmed during the same debate that he is prepared to make greater use of compulsory purchase orders to deal with the "pernicious" phenomenon.

Labour policy thinkers are also putting their minds to devising a concept of "affordable" housing that isn't outright laughable, as is the case with the government's malfunctioning "affordable rent" ploy. How should "affordable" be defined? Who should decide?

There is, it seems, broad agreement that a "fairly high" percentage of the new homes Labour would want built in London would be for social rent as conventionally understood.

On the private rented sector it isn't only Khan who likes Newham council's accreditation scheme for private landlords. Shelter's proposal for inflation-linked, five-year stable rental contracts appears much admired as a better way of limiting rent increases and improving tenant insecurity than old-style rent controls, though the party hasn't yet worked out whether or not it thinks these should be statutory.

Miliband has asked the former BBC Trust chair Sir Michael Lyons to look into ways to to prevent precious land being left unused while its owners idly watch its value mount. Sir Michael will also consider the development of those "new towns and garden cities", a good percentage of which would very likely be within easy commuting reach of the capital. How times have changed. The New Towns built in London's orbit after the last war - Stevenage, Crawley, Basildon and so on - spoke to a readiness among Londoners to leave a smogged, bomb-ravaged London behind. The new New Towns would be in part a response to more and more people wanting to be here.

I'm told that firmer Labour proposals for housing in London will emerge in the coming months. Dare we hope they will be bold?

Article Source: http://www.theguardian.com/uk-news/davehillblog/2013/sep/29/how-would-labour-solve-london-housing-crisis

House Prices Rises in South-West London Beat Capital's Centre for First Time

This article by Anna White of The Telegraph on September 26th, 2013 shows that for the first time escalating house prices in south-west London have outpaced property values in the capital's centre.

“Prime” property (the top five to 10pc of the housing market by price) in the affluent south-west London belt, which stretches from Fulham to Wimbledon, increased by a record 11.8pc over the past year.

Prices in central London continued to show steady year-on-year growth of 5.6pc but were overshadowed by a burgeoning "domestic market" with the city's south west, north (7.4pc) and east (6.5pc) all experiencing an uptick, according to new research from Savills.

The real estate adviser’s report quashes criticism of the Conservative’s Help to Buy scheme, the second stage of which starts in January.

At this week’s Labour Party Conference, shadow chancellor Ed Balls warned the programme, in which the Government guarantees 95pc mortgages on all properties worth up to £600,000, could push up prices forcing young buyers out of the market.

However, the residential property recovery is being driven by equity rich Londoners and foreign investors, as opposed to Help to Buy expectations.

Lucian Cook, head of research at Savills, said: “In the south-west belt there is still a store of wealth from bonuses earned before the credit crunch and money made recently by hedge fund managers. Europeans are also moving into the areas like Fulham, in which prices have jumped 114pc over the past eight years.”

The analysis shows that £22 out of every £100 of equity in the UK housing market over the past year was spent in London. Therefore the total £146bn of equity applied to buying in the UK, £33bn was spent in London.

Mr Cook said: “This is a cash-driven phenomenon and completely unrelated to Help to Buy. It provides no evidence of a credit-fuelled boom in the wider market.”

The hike in house prices in south-west London is also due to a reluctance to move further out into commuter zones such as Guildford.

“This is a psychologically big move and often ties in with finding a new school. Following the recession people are not exploiting the pay gap between south-west London and the Surrey corridor. Mindful of job security, they’re staying put and therefore allocating more wealth towards housing,” he said.

There is a new build development pipeline around Canary Wharf, and continued appetite for warehouse conversions in Wapping. Gentrification of fashionable areas such as Shoreditch and Dulston is also driving up London prices.

“But talk of a housing boom is premature. Transaction levels are still very low at around 60pc - it is still not a fully functioning market,” Mr Cook concluded.

Despite this, at the top end, the cost of mansions in the capital's centre in the £10m plus bracket has increased by 38pc since 2007. The most expensive properties purchased in London over the past year include a Regent’s Park house for £80m and a luxury pad on Avenue Road, St John’s Wood, sold for close to £25m. While a house in Richmond went for £12m.

Article Source:  http://www.telegraph.co.uk/finance/newsbysector/constructionandproperty/10334345/House-prices-rises-in-south-west-London-beat-capitals-centre-for-first-time.html

UK Taxman Launches New Crackdown on Residential Landlord Payments

This article by the Property Wire on September 25th, 2013 reveals how private residential landlords are being advised to put their house in order as the UK's taxman has announced a crackdown on unpaid taxes.

It is estimated that around £500 million is owed by landlords in unpaid tax and HMRC has launched a campaign to target buy to let, student and holiday let landlords who it believes are underpaying or deliberately not declaring rental income.

Residential landlords can expect a knock on the door during the Let Property Campaign which builds on previous initiatives aimed at plumbers and electricians, building contractors, takeaway restaurants, motor traders and many other sectors that have collectively seen HMRC collect over £800 million in unpaid tax.

The so called ‘amnesty’ will last 18 months and failure to come forward could result in criminal proceedings. ‘All rent from letting out a residential property or holiday home has to be declared for income tax purposes,’ said Marian Wilson, head of HMRC Campaigns.

‘We appreciate some people will have made honest mistakes, and some may not be fully aware that the rent from a property is taxable, and that is why it always makes sense to talk to us so we can help,’ she explained.

‘It is always cheaper to come forward voluntarily and pay the tax you owe, rather than wait for HMRC to come calling. Telling HMRC about your tax liabilities is simple and straightforward, and help, advice and support are available. The message for all landlords owing tax is simple; it is better to come to us before we come to you,’ she added.

Stephen Barratt, private client tax director at accountants James Cowper said landlords should not be wary and take it as an opportunity to put their tax affairs in order.

‘This campaign is designed to give residential landlords the opportunity to come forward and disclose any unpaid or under paid tax.  This is a window of opportunity to get tax affairs in order before HMRC comes knocking,’ he explained.

He pointed out that in targeting residential landlords, HMRC recognises that there will be instances where individuals have either deliberately not declared rental income on let properties or made an honest mistake. This distinction is important when looking at what penalty might be imposed.

‘HMRC is using increasingly sophisticated software to identify those who are not paying sufficient tax and the chances of going undetected are therefore diminishing. This campaign offers landlords the opportunity to come forward voluntarily and pay any unpaid tax, interest and penalties at a preferential rate,’ said Barratt.

‘Landlords who continue to close the curtains and hide behind the sofa can expect HMRC to find them and enforce much stiffer penalties or even criminal prosecution,’ he added.

The advice from the firm for residential landlords who believe that they may have an outstanding tax liability is not to approach HMRC directly without first speaking with an accountant or tax adviser as HMRC is an increasingly tough negotiator and without detailed knowledge of the tax system larger tax bills and penalties than necessary might be charged.

It also says landlords should not ignore this clampdown as it is possible that HMRC is already aware of landlords’ financial details.  Also, if HMRC make the first move because no voluntary disclosure has been made, penalties can be expected to be more severe.

Article Source: http://www.propertywire.com/news/europe/uk-landlords-tax-crackdown-201309258276.html

Planning Permissions for Housing Rise 49%

This article by Alex Johnson of The Independent on September 24th, 2013 shows that 49% year-on-year increase in the number of planning approvals for new homes between April and June in 2013.

Figures from the Home Builder’s Federation show a 49% year-on-year increase in the number of planning approvals for new homes between April and June in 2013. Although this is a slight drop from the previous three months, there were 77,686 permissions granted in the first six months of the year, a 26% year-on-year increase.

Stewart Baseley, Executive Chairman of the HBF, said: “The overall trend in residential permissions is very positive. It reflects house builders’ increasing confidence in the market and also the positive principles of the new planning system. With Help to Buy forging ahead strongly and developers looking to increase output, we need to see the increase sustained.

“However, at a time when developers are looking to build more much needed homes, we are increasingly concerned by the conditions attached to many of these permissions that prevent actual work starting on site. Local Authorities must ensure planning conditions are not overly onerous or unrealistic otherwise despite the success of Help to Buy, the much needed increase in housing supply will be held back. Despite the increase in permissions granted, we are still well short of the 220,000 permissions required annually to meet housing need.”


House haggling

A study of 2,000 UK adults by Gocompare.com suggests that 89% of those who ask for a discount are successful in their negotiations. Cars and motorbikes (34%) top the list of goods and services people successfully haggled over, followed by electrical products (30%) and furniture (28%). Around a quarter said they had haggled over the price of a house.

New buy-to-let ranges

Virgin Money has launched a new range of buy-to-let mortgages with rates starting from 3.38% for a 2 year fixed rate with a £1,995 fee. Following the fixed or tracker period, all mortgages from the new range will revert to the Virgin Money Buy-To-Let Variable Rate, currently set at 4.99%.

Meanwhile, Accord Buy to Let has launched three new mortgages with zero completion fees, all available at a maximum of 75% loan to value with rates starting from 3.79%. They also offer £500 cashback on completion. The full details are:

* Two year fixed rate at 3.79% with £195 product fee and £500 cashback

* Three year fixed rate at 4.09% with £195 product fee and £500 cashback

* Five year fixed rates at 4.69% with £195 product fee and £500 cashback

Article Source: http://blogs.independent.co.uk/2013/09/24/planning-permissions-for-housing-rise-49/

West Bromwich Raises Interest Rates for Buy-to-let Mortgage Borrowers

This article by Rupert Jones of theguardian on September 23th, 2013 states that borrowers with tracker mortgages will see their rate rise by two percentage points.

Thousands of customers holding buy-to-let mortgages with West Bromwich building society will see their monthly costs rise sharply after the terms of their deals were changed.

Angry borrowers are already pledging to fight the move after it emerged that about 6,700 customers will be hit by the society's decision to increase their interest rates by two percentage points on 1 December. This is despite the fact that the Bank of England base rate, which these mortgage deals track, has been at 0.5% since March 2009 and seems unlikely to rise for at least two years.

Some of those affected – for example, those currently paying a rate of 1.49% – will see their mortgage rate more than double at a stroke.

The change follows a similar move earlier this year involving 13,500 Bank of Ireland UK customers, which prompted an outcry and later led to the bank cutting the numbers of people affected.

The West Bromwich said the 6,700 borrowers were all BTL landlords with mortgages that track the base rate. The affected customers took out their deals from early 2006 onwards and are on a variety of different interest rates. They all signed up with the West Bromwich Mortgage Company, a division of the building society.

A spokesman for the society said: "The West Bromwich has advised a number of BTL borrowers who have tracker mortgage accounts with the West Bromwich Mortgage Company that their rates of interest will be increasing by 2% from 1 December 2013. All borrowers affected are landlords of multiple property portfolios.

"These changes, which are permitted under the terms and conditions of the accounts, are a reflection of market conditions and the need for us to carry out our business prudently, efficiently and competitively."

Customers have already started to post comments on websites. On the Property118 website Gavin Ewan said: "I will be phoning them on Monday to complain, as there is nothing in my acceptance of offer suggesting that they can increase it. Basically it is a tracker BOE [Bank of England] base rate +0.99%, ie 1.49% until the term end (25 years from November 2006)."
He added: "I expect there are going to be a lot of very unhappy people."

Another, Shaun McAllister, said: "I shall be fighting them all the way."

In February 2013, Bank of Ireland prompted fury after revealing it was triggering a "special condition" clause in loan agreements that allowed it to increase the "interest rate differential" on some of its UK base rate tracker mortgages.

The changes would have affected about 13,500 residential and BTL customers. However, in May the bank wrote to 1,200 of the borrowers to advise them they would not face the rise in payments after all, following a review of customer complaints.

Article Source: http://www.theguardian.com/money/2013/sep/23/west-bromwich-interest-rates-buy-to-let-mortgage

Soaring Rents at 11-year High

This article of The Independent on September 23th, 2013 show that rents are at the highest levels for more than a decade according to new research.
Rents are at the highest level for more than a decade as house prices stretch beyond the means of would-be buyers, according to new research.

The findings from nationwide estate agency and lettings group Sequence show average rents hitting an 11-year high of £779 – a 4 per cent rise during August alone and an 11 per cent year on year increase.

The price hikes have been exacerbated by a shortage of supply and, in London, the problem is even more acute with rents up nearly double the national average to £1,465 and the average length of tenancy increased from 12 to 18 months as renters are priced out of the sales market, the report said. Head of lettings Stephen Nation warned: “If supply continues to be outstripped by demand, we will see further significant rent rises.”

The pressure on the rental market has also triggered a fresh surge in buy-to-let investing. The latest Council of Mortgage Lenders figures showed 15,200 buy-to-let loans worth £2bn advanced in July – up 11 per cent in a single month.

Article Source: http://www.independent.co.uk/property/house-and-home/property/soaring-rents-at-11year-high-8833192.html

London Fuels Record Growth in UK House Prices

English property prices pushed roaring demand for London housing more than their peak at the height of the country's economic boom according to this article by Ed Hammond, Kate Allen and Claire Jones of FT Adviser on September 17th, 2013.

Roaring demand for London housing has pushed English property prices beyond their peak at the height of the country’s economic boom, official figures showed on Tuesday, underscoring concerns of an impending housing bubble. 

House prices in the capital outpaced those in the rest of the country by a factor of 10 times during the past year, according to figures from the Office for National Statistics. The jump helped lift the English average house price 3.7 per cent during the 12 months to July to £255,000, surpassing the 2008 zenith.

 

The Bank of England’s Financial Policy Committee, which is responsible for safeguarding financial stability, is on Wednesday expected to discuss the housing market against the backdrop of warnings from policy makers that the government’s mortgage guarantee schemes are fuelling nationwide price growt.

Last week, the Royal Institution of Chartered Surveyors urged the BoE to curb the risk of another housing boom by taking the unprecedented measure of capping national house price growth to 5 per cent a year.

After stripping out the impact of London, however, average UK house prices rose just 0.8 per cent during the year, underlining the diverging economic fortunes between the capital and the wider UK housing market.

This divergence complicates the BoE’s new policy of “forward guidance” under which the FPC must confirm that ultra-low interest rates are not serving to undermine financial stability.

While it would be unlikely for the FPC to signal the end of forward guidance a little over a month after its introduction, the new policy heaps pressure on the FPC to explain why housing is not compromising financial stability.

To date policy makers have focused on a one-size fits all solution for the country.

“The difficulty is you have significant variations between London and the rest of the UK, so it is impossible to control pricing by manipulating the entire mortgage market,” said Lucian Cook, head of UK residential research at Savills, the property group. “All it will achieve is to create further polarisation between the equity-rich buyers and the debt-reliant market”.

The cost of an average London home hit £318,000 in the 12 months to July, according to the Nationwide, compared with £167,200 for the rest of the UK. The difference means the average London house is worth 1.9 times property elsewhere, eclipsing the 1987 peak of 1.75 times.

Analysts do not expect the FPC to announce measures to restrict activity in the mortgage market in its post-meeting statement next Wednesday. Mark Carney, governor of the BoE, last week played down concerns a housing bubble is inflating, while saying policy makers needed to remain “vigilant”.

“When looked at in the broadest terms, it is obvious that no agent of the government would wish to act at the current time to cool the housing recovery,” said Brian Hillard, economist at Société Générale. “What the Bank can do, however, is monitor the state of the housing recovery.”

Prices also rose in Northern Ireland, where the property market has been devastated in recent years. Average house prices fell in both Scotland and Wales, however.

The ONS index only includes transactions involving a mortgage – it does not include cash-only purchases. A substantial proportion of sales are now to cash buyers.

The LSL/Acadametrics index, which includes sales to cash buyers, showed a 3.2 per cent annual rate of growth in its most recent figures. But other indices run by mortgage lenders, such as Nationwide and Halifax, show prices are still substantially below their 2008 peak. House price indices have diverged in recent years, as methodological differences produce increasingly divergent results.

Article Source: http://www.ft.com/intl/cms/s/0/0d15ebae-1f8f-11e3-8861-00144feab7de.html#axzz2fPX03wcg

Chelsea Beats HSBC to be Top for First-Time Buyers

Chelsea is now top on the list when in comes to two-year mortgage rates catering first-time buyers as revealed on this article by lovelymoney.com on September 18th, 2013.

Chelsea Building Society has launched a market-leading two-year fixed rate mortgage for first-time buyers.

Borrowers with a 10% deposit can apply for the deal, which comes with a fixed rate of 3.54% for two years and a one-off fee of £1,545.

The new offer from Chelsea shoves HSBC from the top spot for two-year fixed rates on 90% loan-to-value deals – making a mockery of a price promise the bank pledged just a couple of weeks ago.

Flawed price promise

The HSBC price promise is a guarantee to be 'first for first-time buyers' on three of its 90% LTV deals.

The deals include a two-year fixed rate at 3.59%, a five-year fixed rate at 4.39% and a lifetime tracker rate of 3.99% (base rate plus 3.49%). Each of the offers come with a £999 fee if you have a HSBC current account, otherwise you will have to fork out £1,499.

HSBC said it would automatically beat or match providers that offered a better rate elsewhere between 2nd September and 3rd November 2013.
But this bold claim comes with an important catch.

The HSBC price promise will only beat or match rates on offer from Barclays, Woolwich, Halifax, Lloyds TSB, Nationwide, NatWest, Royal Bank of Scotland and Santander.

HSBC says these providers represent 81% of the UK mortgage market.

This means that HSBC will be able to match or beat four out of five providers on the price of 90% LTV mortgages, but not all of them, as the latest move from Chelsea Building Society has highlighted.

HSBC vs. the 19%

The eight providers HSBC challenged have so far failed to set the mortgage world alight with counter offers that might put the price promise on HSBC's leading deals to the test.
 
Only Chelsea Building Society, part of the 19% of providers HSBC's guarantee doesn't cover, has brought out a challenger rate that is just 0.05% lower.

Elsewhere Nottingham Building Society has launched a rate of 4.39%, fixed for five years with a low fee of £299, which matches the rate on offer from HSBC's five-year fixed rate.

The HSBC deals have only been challenged by lenders it discounted, a flaw in an otherwise bold offer.

HSBC said it had no immediate plans to extend the promise to the many building societies excluded from the guarantee, which is a shame as things could really get interesting if they were.

Punching above their weight

Last year building societies increased gross lending by 30% to £31 billion. This gave the sector a 22% share of the mortgage market, compared to 17% the year before. This year building societies are on track to go even further, with the latest figures pointing towards a 24% market share.

It's clear to see that building societies are punching above their weight and giving the big banks a run for their money.

Apart from Chelsea and Nottingham Building Society presenting a challenge to HSBC's claim, Norwich and Peterborough has recently launched a market-leading rate of 1.99% to borrowers with a 35% deposit, while Leeds Building Society has come out with innovative 0%-interest mortgages.

Supporters of building societies always point out that they are run in the interest of their members rather than shareholders, so this is where the flexibility comes from. But the lower rates have almost certainly been spurred on by the Government's Funding for Lending Scheme.

This has given lenders access to cheap funding, which they have passed on to mortgages borrowers in the form of record-breaking low rates.
Now building societies like Chelsea are coming to represent a real threat to the big banks.

First time buyer mortgages

Don't discount the other 19% of lenders out there like HSBC has. Make sure you shop around for the best deal on a mortgage. You can visit our mortgage centre.

There are also deals like Help to Buy and New Buy which have been designed to assist first time buyers onto the property ladder.
 
Article Source: http://money.aol.co.uk/2013/09/18/chelsea-beats-hsbc-to-be-top-for-first-time-buyers/

London House Prices Rise by 9.7% Another Fears of New Property Bubble

This article by Vicky Shaw of The Independent on September 17th, 2013 reveals of another increase in London house prices by 9.7% that may led to fears of another property bubble.

House prices in London have risen by nearly 10% in the last year, adding to signs of a sharp north-south divide in the market.

A 9.7% increase in prices in London over the year to July helped to push the value of homes across England to a new high of £255,000 on average, the Office for National Statistics (ONS) said.

House prices in London and the South East both raced past their 2008 peaks and stood at an average of £438,000 and £303,000 respectively, while prices in the East of England and the South West also edged close to their previous highs.

But the UK market was still patchy and while house prices were up by 3.7% year-on-year in England they dropped by 2% in Scotland and 0.7% in Wales.

Prices in Northern Ireland were up by 1.8% year-on-year as the market showed signs of starting a slow recovery after some sharp falls following the economic downturn.

The annual pace of house price inflation picked up across the UK in July to its fastest rate recorded in 2013 so far at 3.3%, taking values to £245,000 on average. Prices rose by 0.3% month-on-month.

Concerns have mounted in recent weeks that Government initiatives to kick-start the housing market such as Funding for lending and Help to Buy are in danger of creating a property bubble, with borrowers over-stretching themselves as access to low-deposit deals returns.

Last week, the Royal Institution of Chartered Surveyors (Rics) suggested that a 5% cap should be placed on annual house price growth to stop any future house price bubble and borrowers taking on too much debt for fear of missing out on a boom.

Matthew Pointon, property economist at consultancy Capital Economics, described London as a "special case", with prime central London in particular seen as a safe haven for overseas buyers to place their cash. He said some areas of London are seeing "bold behaviour" from buyers.

In the short term, a shortage of homes on the market in London is likely to spell further price gains in the capital, he predicted.

Peter Rollings, chief executive at London-based estate agents Marsh & Parsons, described the London market as telling "a different story" to the rest of the UK.

He said: "The huge demand for property in the most desirable parts of the capital, from both UK and overseas buyers, is helping to push prices higher.

"In the three months to June, we recorded 11% more buyers entering the market in competition for 14% fewer properties. Property is changing hands in record time and for close to the asking price."

At £132,000 on average, house prices in Northern Ireland are still 49% below a previous peak recorded in 2007. Prices in Scotland are around £182,000 and are sitting 6% below their previous high, which was recorded in 2008.

House prices in Wales are 7% below their 2008 peak, and currently stand at £160,000 on average.

Richard Sexton, director of e.surv chartered surveyors, warned that rising house prices in some areas threaten to price some people trying to get on the property ladder out of the market at a time when households are still under pressure from high inflation and stagnant wages.

He said: "If the Government wants to make housing more affordable - and avoid inflating another property bubble - then it needs to encourage more house building."

Housing Minister Mark Prisk said: "New housing supply is at its highest level since 2008, with 334,000 new homes built in England over the past three years, including 150,000 affordable homes.

"Over the coming months we will unlock construction for thousands of new homes at stalled sites, and our £1 billion Build to Rent fund will help build a bigger, better private rented sector with more choice and quality for people in the housing market."

Article Source: http://www.independent.co.uk/news/uk/home-news/london-house-prices-rise-by-97-sparking-fears-of-new-property-bubble-8822383.html

House Prices Rise Again Fuelling Fears of a 'Bubble'

Another house prices increase in addition to low mortgage interest rates could be mean economic crisis for the country according to this article by Eileen Kersey of Digital Journal on September 16th, 2013.

London - When the economic crisis hit in 2008 it had direct links to the housing market. The UK has experienced inflated house prices in the past and the "bubble" subsequently bursting. Could the introduction of a Government scheme to help buy homes be bad news? 

 

People buy homes for many reasons -- to get a step on the housing ladder, investment, to get a family home or as there is little alternative available. 

 

News that house prices in parts of the UK are rapidly increasing, added to low mortgage interest rates, may be a winner for householders but it could be bad economic news for the country. 

 

The UK is suffering a housing shortage. The ill-thought out "bedroom tax" was allegedly created to ease this shortage, but to date has failed. Householders faced with a reduction in benefit or moving to a smaller property faced "Catch 22" -- there were no properties available. 

 

The coalition government's Help To Buy Scheme offers a lifeline to would be homeowners. On the surface it sounds a good scheme but there are some possible pitfalls. One for the British economy is that it could create a "housing bubble" which sooner or later will burst. If that happens any short term monetary gains you may have made will soon be wiped out. 

 

Deputy Prime Minister, and leader of the Liberal Democrat party, Nick Clegg insits that the UK is not facing another "housing bubble". The Lib Dems are holding their annual conference and Monday the Irish Examiner reports: 

 

 Nick Clegg, Britain’s deputy prime minister, has said that the UK is nowhere near a house-price bubble and the Bank of England has tools to prevent it, amid growing concerns that government support for home-buying is stoking another boom. If there’s another bubble, the Bank of England and the government “have means by which we can anticipate that and make sure it doesn’t happen again,” Mr Clegg told the BBC. 

 

 An increase in the value of your home is good news if you are a home-owner. House prices in the UK have stagnated, with some decreasing in value, since 2008. 

 

A false house price increase, stoked by a boom in the housing industry though, is bad news. In the past it meant that banks had expensive mortgages on properties that had reduced in value. 

 

This shortfall hit the banking industry in Spain and that economy has yet to recover.

 

The UK and US can pinpoint there financial woes to the banking sector, and housing industry. 

 

Getting a mortgage in the UK has been difficult since 2008 but this weekend Santander announced that it was offering a raft of new deals to open up the mortgage market. 

 

More good news but what about a possible housing bubble? Monday the Guardian reports: 

 

A leading estate agent has tripled its forecast for house price rises in 2013, stoking fears of a destabilising house price bubble. 

Online estate agent Rightmove has raised its 2013 house price forecast for the third time this year to more than double the rate of inflation. The chain expects the average property price to increase by 6% this year, up from the 4% it predicted just two months ago. At the start of the year it predicted prices would rise by 2%

On Wednesday the Bank of England's financial policy committee will meet to discuss the possibility of a property bubble, and what remedial measures can be taken. 

 

Calls for that committee to cap annual house price growth in the UK at 5% a year illustrate concerns about a housing bubble which could quickly form and rapidly burst. According to the Independent: 

 

 Britain’s leading chartered surveyors have made an unprecedented call for the Bank of England to put a cap on annual house price inflation in order to avoid a “dangerous” debt bubble. 

 

Surely, however, this will hit confidence in the UK housing market and deter those who buy property as an investment? 

 

With a north south divide in the UK house prices are already a hotch-potch across the country.

Read more: http://www.digitaljournal.com/article/358436#ixzz2f7dQ2Rsn

How A House Price Cap Could Work

This article by Hilary Osborne of TheGuardian on September 13th, 2013 basically explores how a cap would work. The Royal Institution of Chartered Surveyors has called for the Bank of England to cap house-price rises at 5% a year.

Why does Rics want a cap?

The organisation says limiting house prices would prevent a dangerous new property bubble, reckless lending and a build-up in consumer debt. By letting people know that they can only expect prices to rise by up to 5%, the Bank of England would stop homebuyers and lenders gambling on rising prices. During the last property boom lenders such as Northern Rock offered 125% mortgages, based on an expectation that prices would rise and borrowers would not end up in negative equity for long – but when prices crashed some people were left stuck with huge loans. Rics argues that everyone would be more cautious if there was a price cap.

Why set it at 5%?

Rics says it is "not wedded" to the figure, which it based on the average annual growth in UK earnings, plus an allowance for price pressure caused by a lack of supply of homes for sale. Growth is currently exceeding that level, according to Halifax's latest house price index.

Is that the index that would be used?

Not necessarily. Rics has said it is "agnostic" about which measure of prices is used. The Bank has previously considered all of the major house price reports when making interest rate decisions, but there is now an "official" ONS index published monthly. Its last report showed prices rose by 3.1% in the 12 months to June.

If prices were capped, would that mean I would have to reduce the price of my house?

No. The cap wouldn't restrict individual buyers' and sellers' transactions, so if you were selling a property at a profit equivalent to more than 5% a year that would be fine. What the cap would do is force the Bank of England's new Financial Policy Committee to use powers it has to restrict mortgage lending.

What are those powers?

If it believes the housing market is overheating, it can direct the banking regulator, the new Prudential Regulatory Authority (PRA – also, confusingly, an arm of the Bank), to tighten the screw on mortgage lenders.

The PRA would use so-called sectoral capital requirements to give banks pause for thought before they make risky loans. They could force lenders to set aside more capital against all residential property lending, for example, if they thought the entire market was frothy – or pick on particular areas, such as high loan-to-value ratio mortgages. In practice, whichever types of loan the PRA singled out would become scarcer and more expensive.
  
What are the problems with a cap?

The main problem is that the headline rate of growth disguises massive regional variations. In the London market (itself a multiple of the entire New Zealand market) house price rises are already up 10.2% over the past year, according to the latest figures from the property portal Rightmove.co.uk. Yet in the north, north-west, Yorkshire and Humberside and south-west regions, house prices are up less than 1% over the past year.

Also, it does not address the real problem with the UK housing market – the lack of supply of properties.
  
So price rises in London could trigger a cap and stop me getting a mortgage in Newcastle?

Spot on. Houses in Newcastle could represent good value and be affordable to first-time buyers, but lenders would be constrained from granting loans if a London boom pushed up UK prices.

Article Source: http://www.theguardian.com/money/2013/sep/13/how-house-price-cap-work

Bank of England Should Cap House Price Inflation

On this article by Reuters on September 13th, 2013 surveyors suggest that to prevent another property bubble the bank should cap annual house prices to 5%.


(Reuters) - The Royal Institution of Chartered Surveyors has called on the Bank to limit annual house price inflation to 5 percent to prevent another property bubble.

Such a policy, it says, could be implemented by imposing caps on loan-to-value ratios, loan-to-income ratios, or ceilings on the amount banks are permitted to lend.

The request - an unusual one from an industry group that typically benefits from rising prices - comes months before the government begins to offer mortgage guarantees to riskier homebuyers under its controversial "Help to Buy" scheme.


Property prices are already rising at more than 5 percent a year according to mortgage lender Halifax, and the RICS has joined a chorus of voices warning that price rises could become unsustainable.

Figures from LSL/Acadametrics on Friday showed a 30 percent rise in the number of first-time buyers.

"Sending a clear and simple statement to the public that the Bank will not tolerate house price rises above five percent would help restrict excessive price expectations across the country," the RICS report said.

"This policy would discourage households from taking on excessive debt out of fear of missing out on a price boom, and discourage lenders from rushing to relax their lending standards as they compete for market share."

The industry group notes that limits on property price inflation have been used by a variety of countries, including Canada between 2008 and 2012, when Bank Governor Mark Carney headed the country's central bank.

Under Carney's watch, Canada's national regulator the amount buyers could borrow in relation to their deposit and imposed more stringent credit checks - measures that appeared successful in bringing price inflation back down.

At a hearing before lawmakers on Thursday, Carney said that although Britain's central bank lacked formal powers to force banks to do the same, it could issue strong advice that they rein back lending.

However so far the Bank has not identified a bubble in house prices. Its Financial Policy Committee is charged with spotting risks building up the financial sector and acting to head them off.

(Reporting by Christina Fincher; editing by Ron Askew)

Article Source: http://uk.reuters.com/article/2013/09/13/uk-britain-housing-idUKBRE98B1BC20130913

Prime Property Prices in Central London Up 116% in Last 8 Years

Research shows that in the past 8 years prime Central London house prices have more than doubled and it is up by 116% outpacing the RPI by 86%, according to this recent article on September 11th, 2013 of the Property Wire.

Prime central London house prices have more than doubled in the past eight years, up by 116 and outpacing the Retail Price Index by 86%, new research shows.


By contrast the average UK property price is 19.3% down on the same period, according to the research from Savills which tracks the expansion of the market since its indices were launched in 1979 and analyses in detail the performance of different locations in the latest market cycle.

It shows that prime central London property prices have grown on average 4.9% per annum since 1979.  This compares to just 3.6% above inflation across greater London and a UK average of 2.9%, opening the gap between prime London and the rest to its widest ever.

Mayfair tops the growth chart with growth of 139% since the middle of 2005, followed by Knightsbridge, Belgravia and Chelsea with growth of at least 128%.  All are now at least 30% above peak.

The analysis points out that supply has failed to keep pace with demand, resulting in an expansion of prime London from its Belgravia core in the 1950s to a swathe that runs from Richmond in the south west to Islington in the north, from Chiswick in the west to Canary Wharf in the east.

‘London is seen as one of the premier world cities in which to both live and invest. London’s economy has been put at nearly a third the size of that of the whole of the UK. Like other global cities, London attracts capital from around the world,’ said Yolande Barnes, head of world residential research.

She pointed out that the demand catchment for London housing is therefore global and the appetite for investment remains strong. Also London is physically limited in size and by very low levels of new supply so real house prices have risen much faster  than elsewhere.

‘London is a honey pot for wealthy real estate buyers but many of these buyers also live and work in London. It would seem that London’s housing market is inextricably tied with its economic success but it has been failing for some time to increase supply at a sufficient rate to curb price growth,’ explained Barnes.

This means that the lack of housing supply is playing out most visibly in London’s prime housing markets where the wealthiest home owners can compete most effectively for space.

Looking forward, the analysis suggests that the strength of outer London prime markets will be dictated by the creation of new wealth from the London economy and the flows of wealth between prime markets.

The report says that generally, over the next five years, London and the south east are expected to lead the economic recovery in the UK. In London, the economic growth from the all important financial and insurance sector is likely to be on a par with the average for the capital. The highest economic growth is forecast from the professional scientific and technical and information and communication sectors.

‘These sectors will, like financial services before them, also attract international investment and human capital which is expected to be reflected in overseas demand for housing. This is likely to widen the profile of buyers and support underlying housing demand for prime property beyond central London,’ it points out.

It also suggests that an increased proportion of prime demand is likely to be focused on the commuter zone given the gap between pricing in these markets and prime domestic London.

‘We expect to see a continued displacement of wealth from the prime central London markets into other parts of prime London and beyond. The markets in closest proximity to prime central London will see continued overseas buying activity, mainly from full time residents in the capital. This means the prime central London and other prime markets will remain linked,’ adds the report.

Article Source: http://www.propertywire.com/news/europe/london-prime-property-analysis-201309118224.html

UK House Rrices Recorded Their Fastest Rise

This recent news article by Reuters on September 10th, 2013 reveals the fastest rise of house prices ever recorded in almost seven years and sales volumes also jumped to a multi-year high.

(Reuters) - British house prices recorded their fastest rise in almost seven years last month and a measure of sales volumes also jumped to a multi-year high, a survey showed on Tuesday.

The Royal Institution of Chartered Surveyors' seasonally adjusted house price balance climbed to +40 from a slightly upwardly revised +37 in July, staying at its highest since November 2006.

The balance reflects the percentage of property professionals saying that prices rose minus those reporting falls.

Britain's housing market has shown signs of a revival this year, spurred by a healing economy and help from the government and the Bank of England to ease access to finance. But the scale of the recovery has raised concerns about a new property bubble.

The RICS survey found that a net balance of +45 of surveyors expect further price growth over the next three months. Over the coming year, house prices are forecast to rise by 2.2 percent.

"Momentum is increasingly broad-based across the country; this isn't just a London story," RICS said.

The average number of sold properties per surveyor rose to 17.9 over the last three months, the highest since January 2010.

The number of properties going on sale also increased markedly in August, with the relevant balance jumping to +26 from 16 in July.

"With positivity starting to return to areas right across the UK, it seems those who may have been waiting for the right time to sell are choosing now to do so," RICS said.

(Reporting by Olesya Dmitracova; editing by Ron Askew)

Article Source: http://uk.reuters.com/article/2013/09/09/uk-house-prices-rise-further-sales-jump-idUKBRE98817R20130909

Best Mortgages Set to Disappear, Borrowers Warned

According to this recent article by Dan Hyde of The Telegraph on September 9th, 2013 the record low rates on new fixed mortgages are in danger due to rising costs faced by banks.

Home owners have just a short window of opportunity to lock into the lowest-ever fixed mortgage deals before rates rise, experts have warned.

Lenders are preparing to push up the rates on new fixed deals because the cost of funding these loans has risen considerably.

Mortgage rates have been slashed to record lows in the wake of government schemes to stimulate the property market.

Two-year fixed rates are now available at less than 1.5pc. In July, The Telegraph reported that analysis of the home loan market showed it was the best time to remortgage in six years, with half of borrowers able to save money by taking out a new deals.

Since then, the money market rates underpinning these attractive offers have started to climb, reflecting the improving strength of the UK economy.

Banks typically price their fixed mortgages according to the rates on the money markets “swaps”. Over the past week, the rate on five-year swaps has risen from 1.77pc to 2.01pc.

Already, some lenders are removing their best buy mortgages or pushing up rates. Yorkshire Building Society today increased the rate on its five-year fixed rate for the second consecutive week. The rate was 2.44pc two weeks ago. Today it is 2.59pc.

Tomorrow, First Direct will increase the rate on its five-year deals for customers with a 10pc deposit. Its 4.19pc deal will then cost 4.39pc. Norwich & Peterborough and Nationwide have also made moves to increase rates.

Andrew Hagger, an independent personal finance researcher at Moneycomms, said: “Money market swap rates increased significantly last week, with a massive spike on Thursday. We must now wait to see whether these higher rates hold, but already lenders are starting to increase mortgage rates.”

David Hollingworth, a broker at London & Country, said: “Mortgage rates are not as directly linked to swap rates as they once were.

“But lenders cannot ignore the cost of funding going up, so if you are thinking of taking a fixed rate, there is very little to suggest rates are going to get better.

Mr Hollingworth added that lenders are still competing fiercely for business, as Britain’s property market rejuvenation continues. This should keep rates from rising rapidly. Further downward pressure could arrive when the second stage of the Government’s Funding for Lending Scheme is launched in January. This will provide a government-backed mortgage guarantee to customers who put down a 5pc deposit when moving home.

Article Source: http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/10295935/Best-mortgages-set-to-disappear-borrowers-warned.html

UK is Urged to Invest £50bn in a Greener Economic Recovery

For the sake of UK greener economic recovery, Green New Deal campaign group says £50bn should be spent on technology, cheap housing and insulating homes as revealed on this article by Heather Stewart of TheGurdian on September 8th, 2013.

Campaigners have warned that Britain is hurtling towards a new economic crisis, and call for a £50bn "Green New Deal" to create more sustainable growth and better-paid jobs and equip the country for a low-carbon future.

After two quarters of better-than-expected GDP growth and a batch of positive economic indicators – including rising house prices and upbeat business surveys – the coalition is hoping the summer economic bounce will turn into a longer-term recovery. But five years on from their first demands for a radical reworking of Britain's business model, the Green New Deal group, which includes Green party MP Caroline Lucas, economist Ann Pettifor and tax expert Richard Murphy, says the need for an alternative approach is greater than ever. In a report published on Monday, and seen by the Observer, it argues that recent growth has been based on unsustainable rises in consumer spending and house prices and could end in "the mother of all credit busts".

"Recovery is an interesting word to apply to an economy that is marked by rapidly rising personal debt, highly insecure and often low-paid work, and rising underlying carbon emissions. What we're calling a recovery is poor, divided, indebted and polluting," said Andrew Simms, chief analyst at thinktank Global Witness and an author of the report.

Central banks have poured cheap money into financial markets to drive down interest rates and prevent deflation and depression. But Green New Deal says this is a dangerous gamble: "Given the choice, they prefer to have the problem of asset prices going through the roof than the problem of deflation. If they are wrong and the bubble bursts before the recovery arrives, it will be the mother of all credit busts," it says.

Under an alternative plan in the Green New Deal report, the government would invest £50bn into expanding green technologies over five years, building low-cost housing, and employing a "carbon army" to insulate hundreds of thousands of homes and reduce energy use.

The authors say these measures would create more, and better-paid, jobs than the current debt-fuelled bounce, which Pettifor described as an "Alice in Wongaland" recovery. Lucas, who is the MP for Brighton Pavilion, said a grassroots workforce could be trained to lag Britain's chilly lofts "within weeks". "Ministers want to cut a nice big ribbon on a new nuclear power station – but this would be far more effective in getting our emissions down quickly," she said.

Real incomes have continued to fall over the past year, as above-target inflation has outpaced pay growth, in what the TUC has described as the greatest wage squeeze since the 1870s. Green New Deal argues that if more workers were paid a living wage it would help to create more sustainable consumer demand. Frances O'Grady, the general secretary of the TUC, which begins its annual congress in Bournemouth on Sunday, supported the Green New Deal initiative, saying: "The green economy already employs nearly a million people, in areas from electric-car manufacturing to wind-turbine installation. Implementing some of the ideas in this report could help these industries create more of the skilled and well-paid jobs we need if we are to build a sustainable recovery."

The authors suggest their pro-growth policies could be paid for by scrapping the controversial HS2 rail project; cracking down on tax evasion; and launching a fresh round of quantitative easing.

Instead of using electronically created money to buy government bonds from City investors, as the Bank of England has done with almost all of the £375bn-worth of QE it has undertaken since 2009, the proceeds this time would be used to invest in green projects, and pay off private finance initiative debts, freeing up public money to be spent elsewhere.

The report argues that investing in affordable housing, in particular, would benefit those on lower incomes more than the better off. "It can mean that people have more disposable income after housing costs, which in turn boosts spending in the local and national economy," the report says.

The authors argue that a rapid boost in the supply of housing would also help to "dampen the housing bubble beginning to appear in response to government measures such as Help to Buy, which facilitates prospective homebuyers to find a deposit". The controversial Help to Buy scheme was the centrepiece of George Osborne's March budget, and has been questioned by a number of critics, from the former governor of the Bank of England, Lord King, to the International Monetary Fund, amid fears that it could create a new property boom.

Mark Carney, the Bank's new governor, has said he is "very alert personally" to the risk that a housing boom is emerging – and said he was ready to burst any bubble, by targeting mortgage lending.

Reforming the bailed-out banking system is another central proposal of the report, suggesting that Royal Bank of Scotland, which is majority-owned by the taxpayer, could be broken up into a series of regional lenders that would build relationships with local industries. "All the mechanisms which have been brought into play to encourage lending to the productive part of the economy don't seem to be working," says Simms.

Labour has promised to introduce a British Investment Bank, to boost lending to businesses; but it has eschewed much of the Green New Deal agenda over the past five years, focusing on an emergency VAT cut as the centrepiece of its policies to create a recovery.

Other members of Green New Deal include Charles Secrett, former director of Friends of the Earth; Jeremy Leggett, chairman of green energy firm Solarcentury; and Larry Elliott, economics editor of the Guardian.

Article Source: http://www.theguardian.com/environment/2013/sep/08/invest-greener-recovery

Got a UK Property for Rent? How to Be an Overseas Landlord

This interesting article by Ruth Margolis of BBC America on September 5th, 2013 gives out simple and helpful advice on how to rent out your house if you have to up and leave the UK.

You’ve just had the call to say the dream job is yours. Congratulations. One thing, though: your new office is in America, so you’ll need to move there. OK! But hang on: you’ve just bought that nice new flat, and there’s no way you can afford the hefty mortgage and finance your new life in the U.S. What’s a soon-to-be-expat to do?

With the U.K. property market still flat, you might decide that selling up isn’t an option. Possibly your best choice is to rent out your place, so you do the thing people always do in these situations: put a “Great flat for rent!” shout-out on Facebook. But you get nothing — not even a solitary “like.” What now?

Contact local estate agents. Explain your situation, then pick the least obnoxious and most sensible-sounding half-dozen to come to your house and give a valuation. Put together a long list of annoying questions and remember to include the following ones about money: if you find me the ideal tenant (someone I like who has good references and a sublime credit score), what’s your fee? Will you charge me if the agreement falls through? What will I have to pay you to find me a replacement renter if my current one moves out? If I choose to have you manage the property, what will that cost? And what, exactly, do I get for the money?

Once you’ve given a cross section of agents a grilling, choose a couple to market your place. But be warned: even the good guys will give you the hard sell on the property management side of their business. Carefully consider whether it’s worth the money. If you take the time to fix any problems with the property before you leave and pick a great tenant, you may find you can come cope with arranging minor household repairs from afar.

However, don’t let your agents know you’re planning to DIY. They’ll work harder on your behalf if they think you might also pay them to manage your property.

Don’t make the mistake of thinking you can handle everything from abroad, especially if you’re not planning to make regular trips back to the U,K. You will need a trusted proxy to pop by a couple of times a year to make sure your tenants haven’t thrown the bath out of the window or painted the walls with sewage. For your part, make an effort to build a good e-relationship with your renter and be quick to sort out any issues they may have. Neglect to do this and you run the risk that they’ll stop paying rent or give notice.

If you do decide to manage the place yourself, find a trustworthy odd jobs person who can attend to any small problems in the property. Also, take out renters and utilities insurance to cover you if your tenant stops paying the rent or the boiler breaks down.

Talk to your mortgage provider about swapping to a buy-to-let agreement. In reality, plenty of people who let a property they once lived in don’t bother to do this because it’s fiddly and expensive. And, in all likelihood, you won’t be found out should you decide to stay on the same deal. But you are supposed to swap, legally speaking.

You’ll also need to pay U.S. and U.K. income tax on any profits accumulated from your rental. So find an account who can help you with your tax returns in both countries.

Finally, find the time to check the property yourself whenever you’re in the U.K., giving your renter at least 24 hours notice. Nothing inspires a tenant go to town with a Swiffer and scrape the sewage off the walls like a visit from the owner.

Article Source: http://www.bbcamerica.com/mind-the-gap/2013/09/05/got-a-uk-property-for-rent-how-to-be-an-overseas-landlord/

Student Flatshare Rents 'up 8.5%'

According to a study, rents are higher in a third of university towns than students are willing to pay as revealed in this recent article by Express & Star on September 5th, 2013.

Research reveals that the cost of a room in a student flatshare has soared by 8.5% in the past year, to an average of £357 per month.

The research based an analysis of rents in 25 university towns and cities, and a survey of students, found that unsurprisingly, London is the most expensive place, with average monthly rents of £567, followed by Cambridge (£450) and Oxford (£398).

At the other end of the scale, Cardiff and Swansea are the cheapest, with landlords in these places asking for £255 and £260 a month respectively.

The research, conducted by flatsharing website easyroommate.co.uk, found that in eight of the areas examined, rents were higher than the maximum amount students were willing to pay.

The biggest discrepancy was in Exeter, where the average monthly student flatshare rent was £385, but students said they were only willing to pay out a maximum of £300.

Other places where rent exceeded expectations were Bournemouth, Hull, Leeds, Leicester, London, Manchester and Plymouth.

More than half (54%) of the 1,100 students surveyed said they had seen their rent rise in the last 12 months, the research found.

It claimed that the rate of growth in the cost of rents had been fuelled by higher numbers of people going to university.

Increasing rents had also forced students to change their lifestyle and accommodation, the study found.

Over a fifth of those questioned said they now shared a property with more people than last year to reduce their costs, while more than a quarter (28%) said they had less money to spend on their social life.

Around one in eight (12%) said they were able to save less money for after they graduate, while 7% had had to cut back spending on books and study materials.

Rishi Patel, manager of easyroommate.co.uk, said: "Student rents are once again on the march as student numbers begin to recover following the increase in tuition fees.

"Rents for student flatshares are now at their highest level in five years which is increasing the financial pressure being felt by many students across the country who also have to deal with higher fees and more expensive day-to-day living costs."

The survey questioned 1,122 students between August 16 and 27.

Article Source: http://www.expressandstar.com/business/uk-money/2013/09/04/student-flatshare-rents-up-8-5/

Lenders in the UK Confident That Stress Tests Will Not Bar Most Mortgage Applicants

According to the research by the Intermediary Mortgage Lenders Association intermediary mortgage lenders in the UK are ensured that new affordability checks resulting from the MMR will not significantly reduce the number of people who successfully apply for a mortgage as shown in this recent article by the Property Wire on September 3rd, 2013.

Research by the Intermediary Mortgage Lenders Association found just 7% of intermediary lenders expect significantly more people will be turned down for a mortgage because of new stress tests, which will examine whether borrowers could afford their repayments in the event of interest rates rising.

IMLA’s Intermediary Lending Outlook shows that almost three quarters of lenders are confident that affordability checks will not impact borrowers in large numbers while the remaining 20% are unsure.

Overall responsibility for affordability checks will officially pass from brokers to lenders when the MMR takes effect in April 2014.  While many of its provisions are already standard practice for lenders, mortgage brokers are less convinced that aspiring borrowers will be unaffected.

Although 34% of brokers do not expect stress tests will significantly reduce the number of successful mortgage applicants, some 44% predict that considerably more consumers will find they are turned down.

However, brokers are significantly more confident about the impact of the MMR than they were at the start of the year. Some 66% are not at all worried in August 2013, compared with 42% in January 2013, and the percentage with significant worries has dropped from 12% to 4%.

In contrast, 67% of lenders are currently worried about the impact of MMR but despite their extra responsibilities under the new rules, no lender has serious concerns.

‘The MMR rules on affordability are built on common sense and are not too far removed from how many lenders already approach the issue. Recent experience has shown how important it is to ensure that mortgage borrowers can reasonably manage their commitments, not just now but in the future,’ said Peter Williams, executive director of the IMLA.

‘We are in unfamiliar territory when it comes to current interest rates, so we have to be pragmatic and anticipate the likelihood of change. Falling numbers of arrears and repossessions in recent years show a responsible approach to mortgage approvals, and lenders are working hard to ensure their existing tests meet the full MMR requirements without unfairly disadvantaging consumers,’ he explained.

‘Although the regulatory buck will rest with lenders from April 2014 there is still a collective responsibility to put affordability at the heart of the industry. This involves brokers working closely with lenders to help finalise the rules of engagement, while also ensuring that customer expectations are managed and applications suitably vetted,’ he added. 

Article Source: http://www.propertywire.com/news/europe/lenders-uk-mortgage-review-201309038187.html

New Loan Scheme Aims to Bring Empty Homes Back Into Use

This engaging article by The Independent on September 2nd, 2013 reveals a new loan scheme that intends to assist the country's housing shortage by giving affordable loans to owners of empty properties.

A new scheme hopes to help solve the country’s housing shortage by handing cheap loans to owners of Britain’s 710,000 empty properties.

The cash – up to £15,000 per property – will be offered to help with renovations through a new Government-backed £3m National Homes Empty Loan Fund, which has been set up following last year’s Great British Property Scandal campaign by architect George Clarke.

It will be administered by green lender the Ecology building society in conjunction with the Empty Homes charity and 39 local authorities.

David Ireland, chief executive of Empty Homes, said: “Many homes are empty because it is difficult for owners to raise the money needed to bring them back up to a habitable standard. The scheme will kick-start efforts to tackle this.”

The loans will be charged at a fixed 5 per cent and are available to those who own a property that has been empty for six months or more.

Ecology chief Paul Ellis said: “At a time when there is increasing demand for homes but an acute lack of supply, it makes sense to bring new life to existing but neglected properties.”

Article Source: http://www.independent.co.uk/property/house-and-home/property/new-loan-scheme-aims-to-bring-empty-homes-back-into-use-8794322.html

Is Shared Ownership a Real Housing Solution?

With the ongoing nation's housing crisis it has been carried out that shared ownership plan is the solution according to this article on August 31st, 2013 by Patrick Collinson of TheGuardian.

A Shelter report has concluded that a robust and organised shared ownership scheme is a key part of solving the nation's housing crisis.

The shared ownership flat in London's Docklands seemed like salvation for Mark and his partner, who had spent years trying to find a home in striking distance of where they work in the capital. It was pricey, at £437,000, so they could only afford a 25% share, but with the rent set at a reasonable level it was just about affordable.

Yet just a few months later it turned into a nightmare for the first-time buyers, with the service charge hiked up by 73% to an unmanageable £380 a month, or £4,560 a year.

The service charge, plus the mortgage payment and rent, make the property no longer viable for Mark who feels conned by the housing association that sold the flat. At the time of the purchase, the association provided him with an "estimate" of the service charge, even though, he claims, it later admitted it knew this was not an accurate reflection of the costs, and that it would be raised in a matter of weeks.

If the true charge had been disclosed Mark would not have proceeded with the purchase, and in any case would have failed the affordability test.

Mark's tale is just one among many about this hybrid form of property buying for the desperate. One former head of the National Association of Estate Agents likened shared ownership to "sending lambs to the slaughter".

The concept of "staircasing", where a young buyer takes on a 25% share then buys further portions on the way to full ownership, is largely illusory.

A Cambridge University report found that of the estimated 145,000 shared ownership properties already sold in England, only 27,908 have been staircased up to 100% ownership since 2001.

Many shared ownership apartments are overpriced new-builds flogged by housing associations using dubious techniques whereby the buyer is almost guaranteed instant negative equity. So-called "affordable" homes sell for as much as £640,000 (a two-bed in Tower Hamlets, east London) with combined monthly costs adding up to as much as £2,000. To qualify buyers need incomes of up to £80,000 a year.

Legal fees to staircase can be high, service charges are steep and selling up is difficult when you are restricted to just a small pool of potential buyers. Much of the public subsidy that goes into shared ownership ends up in the pockets of developers and landowners, which are able to charge an inflated price.

Yet housing charity Shelter, after a long investigation into the property market focusing on the 1.8 million low-to middle-income "forgotten families" trapped in renting this week concluded that the solution to the UK's housing problem is … shared ownership.

To be fair to Shelter, its inquiry makes no bones about the current shoddy state of the shared ownership market. It has developed in a piecemeal way, with multiple schemes launched by successive governments, none having a material impact on the market.

Shelter's vision is for a major, mainstream shared ownership market supported by the government to the tune of £12bn in order to provide 600,000 decent homes for priced-out families throughout their lives.

Shelter reckons the minimum share of ownership should be as low as 12%. That effectively turns the purchase into a controlled rent home from a social landlord with a bit chipped in by the "buyer". But maybe that is no bad thing. The main attraction of shared ownership is that unlike the private rented sector it gives full security to the occupiers, as they can't be evicted with just a couple of months' notice.

Shelter acknowledges that shared ownership is not the entire answer – we need to address the chronic undersupply of new homes in other ways as well. The government's Help to Buy scheme won't help, either. Shelter estimates that when the second part of the scheme goes live in 2014, three in four families will still be unable to raise enough money to buy an average three-bedroom home in their area.

It is good that Shelter has put shared ownership under the spotlight, as it is a sector that urgently needs reform. But it's sad that the best we can offer today's younger generations is a quarter share of what the baby boomers saw as their birthright.

Article Source: http://www.theguardian.com/money/blog/2013/aug/31/shared-ownership-housing-solution