One city's house price surge

This article by Kevin Peachey of BBC News Business on October 6th, 2013 reveals data from NBS that house prices has doubled in the past 10 years.

Two cities in the UK - one is a centre of commerce, has runaway house prices, and welcomes a constant stream of overseas property buyers. The other is London.

House prices in and around Aberdeen have more than doubled in the past 10 years, according to data from the Nationwide Building Society.

That increase is only matched by the trendy north London borough of Islington, and by Westminster in the heart of the capital of the UK.

Recent figures show that Scotland's third city is recording a fresh surge in property prices. One estate agent describes the area as a property force field.

"Everywhere outside is doom and gloom, but it is boom time here," says Brian Sutton, of James and George Collie solicitors and estate agents.

Silver city
 
Take a closer look at Aberdeen, and its picturesque, shimmering granite homes, and you can see the complexity of the UK property market.

The city has demand from first-time buyers willing to pay above valuation levels, interest from workers moving to the area, investors keen to get in on the act, and a lack of homes for sale.

All this pushes up prices. Yet, in Scotland as a whole, prices are only creeping up after years of stagnation.

It shows that averages can be misleading and that local areas can have very different trends to neighbouring regions, for reasons ranging from the quality of local schools to employment levels.

It also questions a widely held belief that the London property market is unique - that soaring prices in the south-east of England are unequalled in the rest of the country.

Oil money
 
At the mouth of Aberdeen Harbour, next to the fishermen's village of Footdee, is a landmark called the Roundhouse.

The Shoremaster's accounts for 1797-98 show that more than £225 was spent on the new house and telescope on the site.

Nowadays, first-time buyers in the city can expect to pay up to £140,000 for a one-bedroom flat, or up to £500,000 for a bigger property.

Competition for homes means many buyers are paying 5% to 10% over valuation at the moment, says Bill Barclay, partner at Raeburns solicitors and estate agents.
Often sales go to sealed bids, with first-timers stretching their savings to compete with buy-to-let investors.

Spend a few minutes standing by the harbour and the reason for this active property market is clear - North Sea oil.

"It drives the local economy," says Mr Barclay. "Big companies are making long-term financial plans for the area, so we are not going to see much changing."

Overheating market?

The area was not immune to the financial crisis. Banks were not lending at the levels they had been before 2008, but Mr Barclay says Glasgow and Edinburgh suffered much more.

Now, he says - using a phrase apt for an oil-producing region - the banks are "starting to open the taps" again to fund mortgages.

Figures published by the University of Aberdeen show a 25% increase in the volume of sales in the second quarter of the year compared with the same three months in 2011. Prices were up by 5.5% in the city and its suburbs over the same period.

Sales volumes of flats were up by 53% in that time, as buy-to-let investors find the finance and predict demand from tenants
.
All this is gloomy news for potential first-time buyers. One 32-year-old tells the BBC he has been renting on the south coast of England and then Aberdeen over the past 15 years and is unable to save anything close to what is needed as a deposit.

You hardly see a sale sign erected within the city's sought-after areas, with supply low and competition picking up. But the market is far from overheating, as it was in 2007, according to estate agent Brian Sutton.

"We had people in their early 20s buying property, with 10 to 20 bidding for one property. Competition has come back, but it is three to four people bidding," he says.

"First-time buyers are in their early 30s, not their 20s, often with their parents helping."

Bubble fears?

He predicts the housing market will continue to rise at a "sustainable rate", especially as the oil companies build headquarters in the area and continue to relocate staff to the region.  

Prices may grow by single figures year-on-year, he says, but nobody wants to return to the days of 20% a year increases.

Much the same point was made by Business Secretary Vince Cable when he raised concerns about a property bubble potentially being inflated by government schemes to kick-start the market.

"In London and the south east, in the north-east of Scotland, in other areas, there are serious housing inflationary pressures," he said.

Despite his warning, the second phase of the Help to Buy scheme has been brought forward by three months in England, and the Scottish government has announced the start of its own scheme.

The UK and Scottish governments both argue that Help to Buy, which includes allowing buyers to apply for a shared equity loan for part of the property, are vital to give people the chance to secure a mortgage from risk-averse lenders.

Buyers only qualify under the Scottish scheme if they are buying a newly built property.
Critics might argue that they should encourage the developers to follow the example of the fishermen's cottages at Footdee - where the front doors face inwards to protect occupants from incoming storms.

 Article Source: http://www.bbc.co.uk/news/business-24348196

Help to Buy: Let the Property Scramble Begin

This article by Rupert Jones of theguardian on October 5th, 2013 tells us the criticism from experts regarding the second part of the government's help to buy scheme.

A range of government-backed 95% mortgages are set to go on sale next week after ministers fired the starting gun on a new property scramble.

Two partially state-owned banks, Royal Bank of Scotland and the Lloyds Banking Group, will offer the loans initially, and millions of people will potentially be eligible to sign up.

Under the controversial Help to Buy scheme, homebuyers will only need to put down a 5% deposit – and it is open to existing owners as well as first-time buyers. What is more, there are no limits on how much you can earn and it applies to both old and new-build properties costing up to a generous £600,000.

RBS and its NatWest arm seem to think this second part of the Help to Buy scheme, which is being launched three months earlier than planned, has the potential to be the financial equivalent of the Harrods sale. They say customers will be able to visit any of their 2,000 branches or ring up, and add that opening hours will be extended at peak times "to help with customer demand".

Homebuyers were this week awaiting details of the deals – in particular, how attractive the pricing will be – amid speculation that the scheme could push down rates on 95% mortgages from their current levels of between 5% and 6% to perhaps as low as 4.5%, as well as increasing the choice of products available. That could lop almost £100 a month off the typical payments of someone taking out a £160,000 mortgage.

RBS and NatWest say they will offer "a range of competitive 95% mortgages" to first- and next-time buyers. These will initially be available in branches and over the telephone, and later via mortgage brokers. Halifax, part of the Lloyds group, will also be offering deals from launch; these will be available via branches and brokers. Lloyds Bank will participate from January, while other lenders such as Santander and Nationwide have yet to confirm whether they will take part.

While the scheme won't become fully operational until January, people will be able to start applying from next week, and once their mortgage is approved the funds will be available straightaway – they won't have to wait until the new year to complete on their home purchase.

There has been fierce debate about whether the scheme will hand a vital lifeline to homebuyers or simply drive house prices even higher, but what is undeniable is that this is a huge and potentially risky venture for the government. It is partially guaranteeing £130bn of low-deposit mortgages, which ministers have claimed could translate into assistance for well in excess of 500,000 homebuyers over three years.

That is a lot of people potentially being helped but, even so, there are fears demand could massively exceed supply. Santander issued research yesterday claiming 10% of Britons – equivalent to 5.1 million people – believe they are likely to buy a property in the next 12 months. A third of these, 1.7 million, said they planned to use Help to Buy.

In reality, some of these people would be locked out of the scheme because, for example, they are buying a property to rent out, or a second home, both of which are excluded from Help to Buy, or they don't meet the requirements on income and past credit history – but this still suggests that fears of a stampede of applicants may not be misplaced.

Phase two of Help to Buy is about encouraging banks and building societies to offer more mortgages that only require a small deposit (at least 5%) by giving them the opportunity to buy a guarantee on the "top slice" of the home loan – the bit between 80% and 95%. If a borrower gets into financial difficulty and their property is repossessed, the government will cover a chunk of the lender's losses.

Ministers are making available £12bn of guarantees to lenders, but the latter will have to pay a fee for each mortgage underwritten.

The scheme has come in for harsh criticism from some commentators. On Thursday, Howard Archer, chief UK economist at IHS Global Insight, warned: "There is a mounting danger that house prices could really take off over the coming months." He was speaking after figures from Halifax revealed that house prices are rising at their fastest annual pace for more than three years.

• A free Help to Buy show is taking place today (5 October) at the Glow events venue at the Bluewater shopping centre, Kent, between 10am and 4pm. The event is aimed at people in Essex, Kent, Sussex and south London. Go to glowbluewater.co.uk for more.

Article Source: http://www.theguardian.com/money/2013/oct/05/help-to-buy-property-scramble

The Cost of Renting in the UK is Nearly at a Record High

This article by the Landlord Expert on October 4th, 2013 tells us that private rents are just £1 short of record highs as an effect of rising house prices on rental market.

The lettings network LSL Property Services said rents had reached their second highest level since 2008 - largely because of a shortage of property to buy as Government schemes help people onto the ladder.

LSL, which owns the Your Move and Reeds Rains chains, reported that at £743 on average, monthly rents in August were just £1 less than the all-time high recorded in October 2012.

The pace of rent increases stepped up to 0.7% month-on-month in August.

It said rents were 1.3% higher across England and Wales than a year ago - less than half the rate of inflation - but London's rental market was soaring.

At £1,126 typically, rents in the capital have risen at a much faster rate than inflation and are up by 4.8% year-on-year.

Earlier this week, official figures showed that house prices in London were up by nearly 10% year-on-year , indicating the strength of demand.

Wales saw the second biggest annual increase in rents, with a 2.3% uplift taking average rents to £561.

The South East recorded the strongest month-on-month growth, with a 2% rise pushing monthly rents to £762.

By contrast, rents in Yorkshire and the Humber are 1.6% lower than last year, at £536 typically, followed closely by a 1.5% annual fall in the North West, taking average rents to £582.

The North East saw the biggest month-on-month drop in rents, with a 0.8% fall taking average rents to £523.

Across the country, rental inflation had been cooling off for much of this year following the launch of Government schemes to give people with low deposits a chance to buy.

First-time buyer numbers have reached their highest levels in more than five years following the initiatives such as Funding for Lending and Help to Buy, which have widened access to mortgages and allowed some people who were previously trapped in renting to break free.

But David Newnes, director of LSL Property Services, said that weak income growth, which has an impact on households' ability to borrow, and a lack of housing supply meant that the private rental sector was continuing to see strong demand from new tenants.

Mr Newnes said: "Better availability of finance has allowed some households to leave the rental market. And rents certainly felt the short-term impact of that.

"But releasing a blast of pent-up pressure to buy a home is unlikely to change the long-term trend in renting.

"Although Government schemes are helping, buying a first home is still extremely hard on the back of low salary growth."

 Article Source: http://www.landlordexpert.co.uk/index.php/news-centre/6222.html

House Prices Up 6.2% in a Year as Demand Strengthens

This article by Michelle McGagh of citywire money on October 3rd, 2013 reveals the continued and steady rise upwards of house prices according to the figures from Halifax.

More sellers might be putting their houses on the market but the continued disparity between supply and demand means that house prices have increased another 2% in the past three months.

Halifax's house price index shows a 6.2% increase in UK property prices in the past year, pushing the average price of a home to £170,733.

Prices in September were up 0.3% on the previous month, the eight successive monthly price rise, although prices are still 14% off their 2007 peak.

The demand for property has been fuelled by the government’s Funding for Lending scheme and the successful implementation of the first part of the Help to Buy scheme.

Supply has lagged behind, meaning prices have ticked upwards, but it now looks like more homes are coming on to the market. According to the Royal Institution of Chartered Surveyors the number of people putting their property up for sale increased successively in the seven months to August.

The number of new homes being built has also increased and in the first six months of 2013 new building starts were 22% higher than the same period last year.

Martin Ellis, Halifax housing economist, said: ‘House demand has risen more quickly than supply in recent months, putting upward pressure on prices. Demand has increased against a background of low interest rates and higher consumer confidence underpinned by signs that the economy has begun a sustainable recovery.’

He added that ‘supply is beginning to respond to the pick up in demand’ which should help to ‘constrain prices’.

‘The recent strengthening in house prices is increasing the amount of equity that many homeowners have in their home, enabling more to put their property on the market for sale.’

The figures come days after the prime minister announced the government was fast-tracking the second part of its Help to Buy scheme. The first part sees the government offer a five-year interest–free loan up to 20% of a new build property’s price if a buyer has a 5% deposit.

In the second part the government will guarantee 15% of the mortgage taken out on any property up to a total property price of £600,000. Again the buyer must have a 5% deposit.

The second part was not supposed to come into force until January but will now be up and running next week. Critics, including business secretary Vince Cable, have said the mortgage guarantees are not needed and will further fuel house price rises.

Article Source: http://www.citywire.co.uk/money/house-prices-up-6-2-in-a-year-as-demand-strengthens/a707015?ref=citywire-money-latest-news-list

All You Need To Know About The Autumn Price Surge In UK Properties

This article by Les Calvert of property-abroad.com on October 2nd, 2013 reveals that UK industry is about to see a price surge in autumn according to the latest report by the real estate market.

The latest reports on the real estate market in the UK suggest that the industry is about to see a price surge around autumn. Contrary to popular belief that UK real estate prices were in general gradual incline, studies have shown that there was actually a slowdown throughout the most part of the year - with the trend changing around the autumn.

Real estate in the UK 

The increase in search activity with regards to the UK real estate market shows that sellers have yet to respond to the sudden increase in interest. Market experts believe that this is the result of people still being very unsure about investing in real estate in what is a very volatile market even right now. However, sellers that really want to get rid of their properties are being seen to aggressively market their property even now as they are not willing to wait till the autumn.

Timing, as always is an essential part of ensuring that you get top dollar for your property. However, various other personal circumstances will usually play a pivotal role in the entire deal. Heavy marketing is essential to get people interested in your property. At the end of the day, there are buyers that have the money to push a deal through, your job is to ensure that the property appeals to them enough for them to sign on the dotted line.

Summer slow down and what it means 

While there is usually a downturn in property sales during the summer, 2013 has proved to be a bit different with market surveys showing a surprising 1.1% increase on the back of a surprisingly improving market sentiment. The same reports show that house prices grew up by around 0.4% last year while prices in London as well as the South Eastern parts of the country grew by 0.9% and 0.5%, respectively.

Last years (2012) summer downturn was experienced heavily on the outskirts of London, with the property in the heart of the city not registering as many numbers as it does through the rest of the year. However, sale prices had not fallen too much, as sellers would usually hold onto their houses until the trends changed rather than sell at a lower cost.

Future trends 

Trends in the near future point towards a much improving long-term health of the property industry. Some of the biggest property brokers in the land have noticed that there seems to be a lot more property coming off the market than there is coming on as people are becoming increasingly open to spending the large amounts of money on investing in property than they were previously. The biggest increases in property values happen to be in, unsurprisingly, the heart of London. The last six years have seen a consistent downturn in people looking to purchase property, but that has taken a sharp and credible turn this year with experts saying that the new model of the way things work now appears to be sustainable.

Also, the speed at which sales are taking place appear to have also been cut down with sales completing in a stunning 8.1 weeks - which is the lowest turnaround time recorded since November 2007.

Article Source: http://www.property-abroad.com/england/news-story/all-you-need-to-know-about-the-autumn-price-surge-in-uk-properties-19317788/

UK Landlords Advised to Be More Accurate Over Property Decoration

This article by the Property Wire on October 1st, 2013 the failure of UK landlords to protect themselves from redecoration disputes.

Landlords in the UK are failing to protect themselves from redecoration disputes because they are not accurately recording the condition of their property at the start of a new tenancy, it is claimed.
 
They are also not being clear with tenants on issues such as what constitutes a ‘neutral’ colour, according to the Association of Independent Inventory Clerks (AIIC).

In any dispute involving redecoration costs where the check out evidence shows it is definitely needed, one of the first things an adjudicator will do is look at the check in inventory to see what state the décor was in when the tenant took up residence. The next investigation is how long the tenant has lived at the property.

Industry guidance indicates landlords should expect to decorate every three to five years. It is also suggested that if a tenant has lived in a property five years or more, and they are not required by a contract to carry out redecoration themselves, there is little prospect of success in a claim for costs, where the tenant hasn’t caused the need for redecoration.

‘As a general rule, responsibility for redecorating lies with the landlord. However, lots of disputes are presented where parties agreed to the tenant redecorating, but the precise details were not clearly defined. Landlords can be very shocked to find the walls have been painted jet black or bright red, rather than the desired neutral magnolia or white,’ said Pat Barber, chair of the AIIC.

She explained that the AIIC gets involved with numerous disputes over décor. Recent cases feature a bedroom, which the tenant had been given permission to redecorate. However, he created Lion King murals on all walls. At the end of the 12 month tenancy, the landlord needed to re-let the property, but this room was now firmly designated as a small child’s room due to the décor. As a result, although the walls were in a really good condition, the tenant had to pay for a complete redecoration.

Another case involved four mature and professional sharers. One of them decided to repaint the lounge with the landlord’s permission and a stipulation that it had to be in a neutral colour. At the end of the tenancy, the lounge had been repainted in a dark purple, instead of the required magnolia as agreed.

Fortunately for the landlord the inventory clearly stated the original colour and condition and even though the original décor had been fairly marked, the tenants were made to pay for complete redecoration to return the room to the original neutral colour. The adjudicators agreed with the landlord that purple walls would impair the search for new tenants.

‘Even when a tenant repaints in the correct or authorised colour scheme, there are still problems. We see instances of bad paint application, very patchy walls, paint spills on fixtures and fittings, carpets and curtains, all of which the tenants will be responsible for at the end of the tenancy,’ said Barber.the AIIC has put together to help agents and landlords prevent a dispute over décor. This includes ensuring that there is a detailed account of the décor with description and photographs at check in and making sure the tenancy agreement stipulates clearly that any changes to the property must only be made with the landlord’s permission.

If tenants request to redecorate any areas it should be made clear, in writing , with any authorised colour schemes and any permission given to tenants to redecorate should also include a clause stating the landlord’s right to return the room to its original colour if unauthorised paint colours are used by the tenants.

 Article Source: http://www.propertywire.com/news/europe/uk-landlords-decor-disputes-201310028300.html

U.K. Mortgage Approvals Rise to Highest Since 2008

This article by Eshe Nelson by Bloomberg on September 30th, 2013 reveals the highest increase of mortgage approvals in the UK as the Help to Buy scheme prepares to accelerate.

U.K. mortgage approvals rose to the highest in more than five years in August as the government prepares to accelerate a home-buying program that’s been criticized for potentially over-stimulating the market.

Lenders granted 62,226 mortgages, the most since February 2008, compared with a revised 60,914 the previous month, the Bank of England said in a monthly report in London today.

The improvement in home-loan growth contrasts with business lending, which fell the most in eight months in August.

Hometrack said today house prices rose the most in more than six years this month and Prime Minister David Cameron yesterday brought forward by three months the second phase of his “Help to Buy” mortgage plan, saying it will start within days. The program has drawn criticism it may help fuel a property bubble, prompting the government last week to give the Bank of England the power to perform annual checks on it.

There is a “continued divergence across the household and the corporate sectors,” said Jens Larsen, chief European economist at RBC Capital Markets in London. “This picture will remain a worrying one for the Bank of England. While most commentators are focused on the risk of an overextended household sector, the bank is likely to concentrate its effort on improving credit to the corporate sector.”

The number of mortgage approvals exceeded the 61,500 figure that was the median estimate of 20 economists in a Bloomberg News survey. Net mortgage lending rose 974 million pounds ($1.57 billion) in August, the central bank said. Consumer credit increased 577 million pounds.

Company Lending

Business lending fell 3.8 billion pounds in August from July, the most since December and more than three times the average decline over the past six months. Lending is down 3.6 percent compared with a year earlier. For small- and medium-sized companies, lending has fallen 3.2 percent over the past year, according to the BOE.

“These figures are extremely disappointing, and show that Britain’s business finance system remains broken,” said Adam Marshall, director of policy at the British Chambers of Commerce. “While bigger and older companies can get finance when they need it, many young, dynamic, and fast-growing businesses are still frozen out.”

The pound rose 0.1 percent against the dollar today and was trading at $1.6161 as of 11:32 a.m. London time. The benchmark 10-year government bond yield was down 2 basis points at 2.69 percent.

Help to Buy

The BOE also said foreign investors sold a net 6 billion pounds of gilts in August, the most since June 2012. That followed a net purchase of 1.3 billion pounds in July. It said M4, a broad measure of money supply, rose 0.7 percent in August from July and increased 2.1 percent from a year earlier.

According to the Hometrack report, house prices in England and Wales rose 0.5 percent in September after a 0.4 percent gain in August. Annual price inflation accelerated to 2.4 percent. Prices rose in nine of 10 regions tracked by Hometrack. London led gains, with a 0.8 percent increase.

The first phase of Help to Buy -- interest-free loans for buyers of newly built homes -- began in April and has already contributed to the strongest housing market since the financial crisis. The second will provide government-guaranteed mortgages for buyers with a deposit of as little as 5 percent of the value of a home costing as much as 600,000 pounds.

With the plan facing criticism, Chancellor of the Exchequer George Osborne has downplayed risks of a property bubble, saying the housing market outside London remains weak. While the BOE has said property activity remains below its historic average, it will be “vigilant” to any risks.

“There is a mounting danger that house prices could really take off,” said Howard Archer, an economist at IHS Global Insight in London. “It is therefore of vital importance that policy makers closely monitor the situation and are prepared to act quickly and decisively if signs of the housing market overheating become increasingly widespread and pronounced.”

 Article Source: http://www.bloomberg.com/news/2013-09-30/u-k-mortgage-approvals-rise-to-highest-since-2008.html