Help to Buy scheme – Is it driving up prices? – March 2014

 

Help to Buy scheme – Is it driving up prices? – March 2014

Large numbers of mortgage lenders and brokers are predicting part of the government's Help to Buy scheme will be withdrawn early because it is artificially inflating house prices, according to an industry survey.


Research by the Intermediary Mortgage Lenders Association (IMLA), a group made up of banks and building societies that offer loans through brokers, found growing concerns that rising house prices could cause the chancellor to pull the plug on the part of the scheme that guarantees 95% home loans before the end of its planned 3 year term.


A key criticism of the scheme has been that it drives up demand for properties without increasing supply.
Source: The Guardian

 

Stamp Duty Land Tax when you buy property

HOW STAMP DUTY IS CHARGED AND HOW IT HAS SOARED

 

Before 4 December 2014 stamp duty was charged on the entire purchase price of a property.

Prior to Gordon Brown being in charge of the nation's finances stamp duty was a flat rate of 1% above £60,000.

Additional levels were added of 1.5% above £250,000 in 1997 and 2% above £500,000.

As house price inflation took off, Mr Brown decided to cash in further by raising the tax again to 3% above £250,000 and 4% above £500,000 in 2000.

The 1% initial level was raised to its current threshold at £125,000 in March 2006.

George Osborne raised stamp duty to 5% above £1million in 2011, and 7% above £2million in 2012.

Despite the punitive nature of the higher bands, they have never risen in line with the huge house price inflation that has been seen since their introduction.

From 4 December 2014 stamp duty will be charged on the purchase price at a sliding scale as follows:

 

£0 - £125,000 - 0%

£125,001 to £250,000 - 2%

£250,001 to £925,000 - 5%

£925,001 to £1,500,000 - 10%

Above £1,500,000 - 12%

To calculate what stamp duty you will pay please use the calculator tool below:



Changing tenant demographic – February 2014

Changing tenant demographic – February 2014


There has been a significant change in the age and type of tenants living in the private rented sector in England, Scotland and Wales, according to analysis from Countrywide Residential Lettings, the UK’s largest lettings agency.


The number of people aged over 30 living in rented accommodation in January 2014 increased 5.8% compared to January 2013. This age group now equates to 59.3% of all tenants. 


The number of families living in the private rented accommodation has also increased in most regions, with London seeing the greatest year-on-year increase of tenants living with children.


According to the ONS, 22% of 20-34 year olds in London are living at the family home, up from 18% ten years ago. However, London has the lowest percentage of young adults living with their parents than anywhere else in the country.


Source: Countrywide Residential Lettings

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Annual house price growth rises to 6.5%

House prices in the three months to December 2016 were 6.5% higher than in the same three months of 2015.

Prices in the last three months (October-December 2016) were 2.5% higher than in the preceding quarter.

 

UK House prices

December 2016 (seasonally adjusted)

Annual change

+6.5%

Quarterly change

+2.5%

Monthly change

+1.7%

Average Price

£222,484

 

Martin Ellis, housing economist said:

 

House prices finished 2016 strongly. Prices in the final quarter of the year were 2.5% higher than in the previous quarter. The annual rate of growth increased, rising for the second consecutive month, from 6.0% in November to 6.5%.

Slower economic growth, pressure on employment and a squeeze on spending power, together with affordability constraints, are expected to reduce housing demand during 2017. UK house prices should, however, continue to be supported by an ongoing shortage of property for sale, low levels of house building, and exceptionally low interest rates. Overall, annual house price growth nationally is most likely expected to slow to 1-4% by the end of 2017. The relatively wide range for the forecast reflects the higher than normal degree of uncertainty regarding the prospects for the UK economy this year.
 

Key Facts
 

House Prices Housing Activity

House prices in the final three months of 2016 were 2.5% higher than in the previous three months. This compared to the 0.9% quarterly rate of change in November. The quarterly rate of change in December was the highest since March 2016 (+2.9%).

 

Prices in the three months to December were 6.5% higher than in the same three months a year earlier. This was the second consecutive increase in the annual rate from a 2016 low of 5.2% in October and compared to 6.0% in November. Despite the increases in November and December, the annual rate remains significantly below the 10.0% peak reached in March 2016.

 

House prices increased by 1.7% between November and December. This was the fourth successive monthly rise and the biggest since March 2016 (2.2%).

 

Luton recorded the biggest percentage rise in house prices among major UK towns and cities over the past year, according to recent separate research by Halifax. The average house price in the Bedfordshire town was 19.4% higher than in the previous year, increasing from £214,934 to £256,636 in 2016. Luton is within easy commuting distance of London and has relatively low property prices. The outer London borough of Barking and Dagenham experienced the second biggest rise in average house prices with an increase of 18.6%. Dunstable – Luton’s near neighbour – completed the top three with a 17.9% rise.

 

 

Total UK home sales in 2016 set to be broadly unchanged from 2015 and 2014 at 1.2 million. Sales have largely stabilised since the middle of 2016 with a 1% increase between October and November. Sales in the three months from September to November were, however, 9% lower than in the same period last year. (Source: HMRC, seasonally-adjusted figures)

 

Mortgage approvals were 6% higher in the three months to November compared with the preceding three months. The volume of mortgage approvals for house purchases – a leading indicator of completed house sales – slightly increased (+0.2%) on a monthly basis from October to November, following a 6% rise between September and October; indicating homes sales could increase over the coming months. (Source: Bank of England, seasonally-adjusted figures)

 

Supply remains very low. There are no signs that the acute shortage of stock of homes available for sale is easing. The number of new instructions for November was flat, with the figure for unsold stock at a record low. (Sources: Royal Institution of Chartered Surveyors’ RICS monthly report).

 

 


 

Number of first-time buyers reaches 10-year high

 

*Average deposit doubles to £32,321 with a four-fold increase to £100,000 in London.

 

* Average first-time buyer house price breaks new ground – passing £200,000 (UK) and £400,000 (London).

 

* 60% of first-time buyers choosing mortgage terms of 25+ years to improve affordability.

 

The number of first-time buyers is estimated to have reached 335,750in 2016, according to the latest Halifax First-Time Buyer Review.

First-time buyers numbers have totalled over 300,000 for the third successive year, growing from 312,900 in 2015 to an estimated 335,750 in 2016 (up 7.3%) – the highest level since the start of the financial crisis in 2007 (359,900).

Having reached an all-time low of 192,300in 2008, the number of homebuyers getting on to the first rung of the property ladder has grown by 75% to its current level. However, first-time buyer numbers still remain 17% below the immediate pre-crisis peak of 402,800 in 2006. 

Importance of first-time buyers to the housing market continues to grow

In 2006 just over a third (36%) of all house purchases financed by a mortgage were made by first-time buyers. In 2016, this proportion is estimated to have reached almost half (49%), the highest level since 1996. In the past year, this share has risen from 46%.

Average price and average deposit paid by first-time buyers reach new highs in 2016

The average first-time buyer deposit has more than doubled over the past decade from £15,168 in 2006 to £32,321 in 2016 – an increase of 113%.

Four regions (all in southern England) have seen at least a doubling in the average deposit put down. In London the average deposit by new entrants to the housing market has grown four-fold in the past decade, from £26,701 to £100,445 – an increase of 276%.

 

Other regions to see a sharp rise in the average deposit include the South East where it has grown to £47,472 (an increase of 173%), the South West – up to £34,306 (or 130%) and the East – up to £31,864 (+122%).

By comparison, first-time buyers in Northern Ireland have fared the best with average deposits falling by a fifth (20%) from £20,834 in 2006 to £16,695 – the lowest in the UK.

The average national deposit of £32,321 is equivalent to 16% of the average price of a typical first-time buyer home, having fallen from 25% in 2009. Meanwhile, a decade ago, the average deposit had been as low as 10%.

 

In 2016 the average house price paid by first-time buyers was £205,170 – the highest on record. Since falling to £135,254 at the height of the housing downturn in 2009, the average price paid by first-time buyers has grown by 52%. In the past year, this average has grown from £191,929, an increase of 7%. In London, first-time buyers have seen the average price rise by 81% (or £180,273) since 2009 to £402,692 – the highest on record. Not only is the average price in London three and a half times higher than in Northern Ireland (£115,269) – it is also £130,000 higher than the second most expensive region, the South East (£272,777).

 

First-time buyers head for longer mortgage terms

As house prices for a typical first-time buyer home have risen, there has been a growing trend towards mortgage terms longer than the more traditional 25-year term. In 2006, two-thirds (64%) of first-time buyers had a mortgage term of between five and 25 years, whilst the remaining 36% were over 25 years. In 2016, this mix has markedly reversed, with 60% of mortgages at a term of 25 years or more, while the five and 25-year mortgage terms have fallen to 40%.

 

In 2016, 28% of all first-time buyers with a mortgage opted for a 30 to 35-year term, a share that has grown sharply from 11% in 2006. On the other hand, the share of 20 to 25-year mortgage term has fallen from 53% to 28% during the same period. The proportion accounted for by 25 to 30-year terms has also grown from 22% to 28%.

 

Low rates continue to keep mortgage affordability under control

 

The proportion of disposable earnings devoted to mortgage payments by a first-time buyer stood at 32%3 in 2016 Quarter 3; this is in line with the long-term average (since 1983) of 33%. This is a substantial improvement since summer 2007 when this figure reached a peak of 50%. Record low mortgage rates have been a major contributing factor driving this improvement.

Martin Ellis, Housing Economist at Halifax, said: “First-time buyers play a crucial role in the housing market, and each transaction has an impact further up the chain, as well as helping to drive levels of house building. “The number of buyers getting on the housing ladder exceeded 300,000 for the third year in succession – a welcome boost for current homeowners, house builders and the government. Continuing low mortgage rates, high levels of employment have supported the market and Government schemes such as Help to Buy4 have improved affordability, enabling more first-time buyers to buy their own property.

“Across the regions there is a contrasting picture. In London – which has one of the youngest populations in the UK – the average house price for a typical first-time buyer is now more than an eye-watering £400,000 with an average deposit of over £100,000 – more than twice that in the South East, the next most expensive region.”

 

ADDITIONAL FINDINGS

 

First-time buyer affordability

 

*Stirling in Scotland is the most affordable local authority district (LAD) in the UK with an average property price of £137,222; 3.0 times local average gross annual earnings. Inverclyde (3.1) and West Dunbartonshire (3.2) are the next most affordable. Eight of the 10 most affordable LADs for first-time buyers are in Scotland.

*Unsurprisingly, nine of the 10 least affordable LADs are in London. The least affordable is Brent where the average first-time buyer’s property price of £459,291 is 12.6 times gross average annual earnings in the area.

 

Stamp Duty

 

*Under a third (29%) of all first-time buyer purchases in 2016 were below the £125,000 Stamp Duty threshold. This share was 45% as recently as 2013.

 

*Close to a half (45%) of properties bought by first-time buyers were priced between £125,000 and £250,000. All such transactions in London were above the £125,000 threshold, whilst the overwhelming majority in the South East (97%) and South West (90%) were above this level.

 

Age

 

*The average age of a first-time buyer is 30 years old; up from 29 in 2011. Regionally, the average age of a first-time buyer is highest in London, at 32 years old.

 

*The youngest first-time buyers are 27 in Carlisle in Cumbria and Torfaen in south Wales. Meanwhile, the oldest average first time buyer is aged 34 in areas including Slough in Berkshire and the London boroughs of Barnet and Ealing.

 

EDITORS' NOTES:

 

DATA SOURCES:

This research is based on data from the Halifax's own extensive housing statistics database and ONS data on average earnings.

1. House Prices

The prices used in this research are simple arithmetic ('crude') averages for 12 months to December each year and 12 months to November for 2016. These prices are not standardised and therefore can be affected by changes in the sample from period to period.

2. Average Earnings

Average earnings figures are from the ONS's "Annual Survey of Hours and Earnings" (ASHE) and refer to the means for full-time employees.

At local authority district level, figures for the relevant local authority (residence based) are used in the majority of cases and inflated by the change in Weekly Average Earnings to Q3 2016. Where this has not been possible due to data unavailability, average earnings have been estimated using the change in weekly average earnings.


 

Changing tenant demographic – February 2014


There has been a significant change in the age and type of tenants living in the private rented sector in England, Scotland and Wales, according to analysis from Countrywide Residential Lettings, the UK’s largest lettings agency.


The number of people aged over 30 living in rented accommodation in January 2014 increased 5.8% compared to January 2013. This age group now equates to 59.3% of all tenants. The number of tenants in the ‘41-50’ age group grew more than any other over the same period of time, up 2.2% year-on-year and this group now forms 16.2% of all tenants.


Prospective property buyers who are unable to get on the housing ladder by the age of 35 are increasingly living in the private rented sector for longer. There are varying reasons why people rent for longer but many choose to do so because they enjoy the flexibility it offers their life style, especially in terms of job mobility.


The number of families living in the private rented accommodation has also increased in most regions, with London seeing the greatest year-on-year increase of tenants in the capital living with children, followed by the South West up 5% to 31% and the North West up 3% to 28%.


Whilst a growing number of over 30s and families are renting for longer, the opposite can be said for the younger generation, a group that has declined 5.8% year-on-year. This is partly due to the launch of the Help to Buy scheme, which has helped thousands of people to get on or move up the housing ladder. The decline can also be attributed to rising living costs, job instability and other macro-economic factors which are leading to an increase in younger people living in the family home for longer or returning to the family home in order to save money rather than pay rent.


According to the ONS, 22% of 20-34 year olds in London are living at the family home, up from 18% ten years ago. However, London has the lowest percentage of young adults living with their parents than anywhere else in the country.


A regional perspective


The UK average monthly rent in January 2014 was £859, up 0.6% month-on-month and 2.9% year-on-year. Over the past 12 months, average monthly rents have increased in 8 out of 10 regions, with Scotland seeing the most significant increase up 11.7% year-on-year.  The average monthly rent in Scotland was £639, an increase of £67 since January 2013. The East Midlands and the North East also saw significant year-on-year increases in average monthly rents, up 5.7% and 5.5% respectively.


Source: Countrywide Residential Lettings

 


 

 

Help to Buy scheme – Is it driving up prices? – March 2014



Large numbers of mortgage lenders and brokers are predicting part of the government's Help to Buy scheme will be withdrawn early because it is artificially inflating house prices, according to an industry survey.

Research by the Intermediary Mortgage Lenders Association (IMLA), a group made up of banks and building societies that offer loans through brokers, found growing concerns that rising house prices could cause the chancellor to pull the plug on the part of the scheme that guarantees 95% home loans before the end of its planned three-year term.
Half of the brokers questioned and 46% of the lenders said they expected the scheme, which offers lenders a taxpayer-backed guarantee on loans for borrowers with small deposits, to finish early. In addition, three-quarters of lenders said they expected it to be closed early for remortgages.

In July, 60% of lenders said they thought the scheme could be derailed by rising prices. That figure has now increased to 69%.

A key criticism of the scheme, which is available on properties priced up to £600,000, has been that it drives up demand for properties without increasing supply.


Source: The Guardian


High Speed trains come to Kent

A lot of the work that we are carrying out at present in Kent and East Sussex is as a result of people moving into these areas in order to take advantage of the high speed rail service between London - St Pancras, Ashford and the Kent coast. This service is due to be up and running in December 2009.

High Speed 1 (the re-named Channel Tunnel Rail Link) is the first major new railway to be built in the UK in over 100 years. It will provide a 68 mile high-speed link between St Pancras in London and the Channel Tunnel in Kent.

A new fleet of trains will be able to accelerate rapidly to 140mph and they will considerably shorten the current journey times from Kent into London.

For example, London to Ashford will be reduced from 83 minutes to 36.5 minutes.  

Two new stations have been built at Ebbsfleet and Stratford and millions of pounds have been invested in new depot facilities at Ramsgate and Ashford to facilitate the maintenance of the new trains.

 

 

20/05/10 HIPs SCRAPPED

Homeowners selling their properties will no longer be required to produce a Home Information Pack (HIP) after the new coalition government announced they would be scrapped today.

HIPs, which were launched in 2007 and have since become mandatory for anyone selling a home, have been dogged by criticism. Estate agents have long complained they add red tape to the selling process, while sellers have grumbled about the £200-£400 price tag attached to the packs.

Communities secretary, Eric Pickles, laid an order before parliament today suspending HIPs, pending primary legislation for a permanent abolition.

"The expensive and unnecessary Home Information Pack has increased the cost and hassle of selling homes and is stifling a fragile housing market," he said. "This action will encourage sellers back into the market, and help the market as a whole and the economy recover."

Sellers will still be required to get an Energy Performance Certificate (EPC), showing how energy efficient a property is, within 28 days of putting their home on the market, as this is a requirement under EU law. The cost of these is typically about £60.

The National Association of Estate Agents welcomed the news, saying that HIPs had "failed to benefit homebuyers and actively discouraged sellers."