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

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

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

England and Wales House Prices Up 1% in July

According to the latest data from the Office of National Statistics, house prices in England and Wales increased by 1% in July, taking the average house price to £164,098 as shown in this August 29th, 2013 article by the Property Wire.


The region in England and Wales which experienced the greatest increase in its average property value over the last 12 months is London with a movement of 6.3%. The average price of property in the capital is £385,799 in comparison with the average for England and Wales of £164,098.

In London the borough with the highest annual price rise is Lambeth, with an increase of 11.4% while Islington experienced the highest monthly increase, up 2.3%. Newham saw the least significant annual growth at 0.7% and Barking and Dagenham saw the greatest monthly price fall, down 1.5%.

Both London and the Midlands experienced the greatest monthly rise with an increase of 2.1%, while the North East also saw the most significant monthly price fall with a decrease of 0.5%.

The metropolitan district with the largest annual price increase is Birmingham, rising by 2.6% and Rochdale experienced the highest monthly price rise, with an increase of 2.2%.
Sandwell saw the most significant annual price fall, down 6.1% and Sandwell also saw the greatest monthly price fall with a decline in prices of 2.1%.

But on a monthly basis the Isle of Anglesey experienced the strongest monthly growth with an increase of 2.9% while Blaenau Gwent saw the most significant monthly price fall with a drop of 5.9%.

The most up to date figures available show that during May 2013, the number of completed house sales in England and Wales increased by 19% to 62,651 compared with 52,516 in May 2012.

The figures also show that number of properties sold in England and Wales for over £1 million in May 2013 increased by 28% to 740 from 576 in May 2012.

The region with the greatest fall in the number of repossession sales was Yorkshire and the Humber where repossessions dropped by 32% in May 2013 compared to the previous year.
Overall repossession volumes decreased by 23% in May 2013 to 1,365 compared with 1,765 in May 2012.

Paul Smith, chief executive officver of haart estate agent, said that the figures shows that the pace of the property market is up and now is a good time to sell.

'Mark Carney, Governor of the Bank of England, has quelled fears that we are sitting on a volatile property bubble, by indicating that the Bank is ready with a plethora of tools to guard against such a scenario. His additional signal that interest rates are likely to remain the same until late 2016 injects further confidence into the rapidly recovering property market, with lenders able to offer highly advantageous deals for those seeking to step onto the property ladder,' he explained.

'Today’s Land Registry House Price Index shows that property prices are continuing to rise across the UK due in part to the increase in sales transactions which are up 19% annually in May 2013. While demand is very high, our market monitor this month indicated that new buyers across the UK are up 28%, and the majority of people have not cottoned on to the fact that the economy, and the property market, are looking incredibly rosy now is the time to sell now before everyone else does,' he added.

David Newnes, director of LSL Property Services, owners of Your Move and Reeds Rains, said that a splurge of sales, married to a painful lack of supply of homes, is driving up house prices at a rate of knots.

‘It has been a staggeringly quick improvement over the last 12 months, and is underpinning the wider economic recovery. Getting a mortgage is significantly easier than it was in 2012, and this has opened the door to thousands more first time buyers. Rates are cheaper, choice is wider, and criteria are less stringent, which has triggered a mortgage boom,’ he explained.

‘It has allowed more new buyers to realise their dreams of home ownership, which were a very distant prospect several years ago. In the long term, the government needs to do more to ensure the improvements in the housing market are sustainable,’ he added.

He also pointed out that if prices continue to rocket, it will freeze the next wave of first time buyers out the market and dash dreams of home ownership for buyers who can’t wield a big deposit. ‘More homes need to be built if supply is to keep pace with demand. An equilibrium between supply and demand should be the basis of a responsible and sustainable housing market.

There is currently a pitiful shortfall in housing starts. Planning restrictions need to be eased and the government needs to do more to help developers,’ he concluded.

According to Paul Hunt, managing director of Phoebus Software the housing market is proving to be resilient with underlying demand supporting house prices in London and the East Midlands in particular.

‘The catalyst for all this has been significant improvement in mortgage availability, and this is making life much easier for first time buyers. Mortgage lenders have thrown a lifeline to high LTV buyers by bringing in a range of cheap and more accessible deals onto the market, and this has sent a flurry of first time buyers flowing into the market,’ he said.

‘Lenders have been vital in their innovative approach, supporting potential buyers, while schemes like Funding for Lending have acted as a major helping hand for the mortgage market and made it markedly stronger. The months ahead look set to be slightly easier for mortgage lenders, thanks to the government’s support which should help improve the availability of finance for house purchases and help boost sales figures,’ he added.

Article Source: http://www.propertywire.com/news/europe/england-wales-property-prices-201308298174.html

Property Asking Price Discounts in the UK are Falling Sharply

This interesting article by the Property Wire on August 20, 2013 shows how property market accumulate new figures displaying a part of discounted properties for sale has greatly fallen.

As the UK property market picks up new figures show that the proportion of discounted properties for sale has fallen from 37% to 32% over past 12 months.
 
Average asking price discount on the original asking prices has come down to 6.3% from 7.6% a year ago but there are regional differences.

The North/South property divide remains clearly evident in the Zoopla research, showing all of the top 10 areas with the highest proportion of discounted properties being in the North and nine of the top 10 areas with the biggest discounts on offer also being in the North.

For example, some 42.7% of properties currently for sale in Barnsley have had their asking price reduced at least once since being put on the market, with Rotherham at 42.3% and Wakefield at 42.1% not far behind.

London continues to have the lowest proportion of discounted properties on the market with less than a quarter, 22.8%, of properties for sale in the capital today having seen their asking price reduced since being listed for sale.

Edinburgh at 27.7% has the second lowest proportion of price reduced properties on the market currently, followed by Wolverhampton at 29%. Poole has the biggest average discount in the UK today, currently standing at 9.9%.

‘A fall in the proportion and level of asking price discounts suggests sellers are feeling more confident and happy to wait it out to achieve their target asking price. First time buyers are finally getting a look in due to improved mortgage availability which in turn is lifting the whole market,’ said Lawrence Hall of Zoopla.

‘Banks, sellers and buyers are all more bullish about the state of the economy, which bodes well for the months ahead. And the Bank of England’s forward guidance on interest rates has generated a greater sense of certainty about the future, which should lead to even more activity,’ he added.

Article Source: http://www.propertywire.com/news/europe/uk-asking-price-discounts-201308208136.html