1Chestertons Residential Observer Monthly Edition – April 2015
Report highlights – Total property wealth of over 65s is now at its highest level since records began. – Average annual void period for residential landlords has dropped to its lowest level since 2002. – The proportion of mortgages granted at LTVs of 90% - 95% doubled in 2014. – 2014 housing completions up 11% on 2010 low point, but 25% below five year pre-global recession average.
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Chestertons NationalBarometer
Latest available Land Registry figures show that annual price growth at national level stabilised in February and in London accelerated slightly for the first time since last August. Whether this marks a turning point in the cycle is too soon to say, however it is encouraging news. Anecdotally, the General Election so far appears to be proving less of a distraction for buyers than has been reported. Nonetheless, there is concern about the possible introduction of a Mansion Tax which has impacted on price negotiations just above the £2m threshold. Fears of an early interest rate rise are dwindling and some very attractive mortgage deals are still available, although credit approval for some buyer categories, such as first time buyers, has become more difficult. The general market should remain active over the next three months subject to the availability of both
mortgages and properties for sale.
National barometer
Chestertons Residential Observer
No. 37April 2015Monthly Edition
House prices page 2
Rental values page 4
Mortgage market page 6
Tax & regulatory news page 7
The last word page 8Housing market activity page 5
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gton
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ley
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ark
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es
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ames
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isha
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on
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ich
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er
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agen
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alth
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rest
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et
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kney
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ul.
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ts
26%
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21%
-25%
16%
-20%
11%
-15%
6%-1
0%
0%-5
%
Islin
gton
– La
nd R
egist
ry’s
Hou
se P
rice
Inde
x re
veal
s
that
ave
rage
ann
ual p
rice
grow
th a
ccel
erat
ed
sligh
tly in
Feb
ruar
y (+
13.1
%),
the
first
tim
e
since
last
Aug
ust.
This
take
s the
ave
rage
hous
e pr
ice
in L
ondo
n to
£46
3,87
2.
– N
ewha
m re
mai
ns th
e bo
roug
h w
ith th
e
stro
nges
t ann
ual p
rice
grow
th (+
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%) b
ut
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beth
mov
es in
to se
cond
pla
ce (+
18.7
%).
Kens
ingt
on &
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lsea
cont
inue
s to
see
the
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est a
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l gro
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ong
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on
boro
ughs
alth
ough
the
Febr
uary
figu
re o
f
7.8%
is u
p on
the
7.2%
reco
rded
in Ja
nuar
y.
NB
com
men
t: w
hile
pric
e gr
owth
in th
e w
ider
m
arke
t pic
ked
up in
Febr
uary
, it r
emai
ns to
be
seen
whe
ther
this
repr
esen
ts a
turn
ing
poin
t in
the
cycle
. Whi
lst a
fford
abili
ty is
sues
are
pr
even
ting
man
y as
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g ho
useh
olds
from
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r ow
n ho
me,
the
shor
tage
of a
vaila
ble
prop
ertie
s is h
elpi
ng to
sust
ain
pric
e gr
owth
.
Figu
re 1
: Lon
don
boro
ugh
hous
e pr
ice
grow
th:
12 m
onth
s to
Febr
uary
201
5So
urce
: Lan
d Re
gist
ry
Top
5 bo
roug
hs
1. N
ewha
m 2
1.4%
2. L
ambe
th 1
8.7%
3. G
reen
wich
18.
5%4.
Lew
isham
18.
5%5.
Wal
tham
For
est 1
8.5%
2Ch
este
rtons
Res
iden
tial O
bser
ver M
onth
ly E
ditio
n –
April
201
5
Hou
se p
rices
– L
ondo
n
3Chestertons Residential Observer Monthly Edition – April 2015
North East0.1%
£97,974
North East3.7%
£102,061
East Midlands4.4%
£134,032
East10.5%
£202,394
London13.1%
£463,872
South East9.0%
£242,469South West
5.1%£186,124
Wales5.4%
£123,941
North West0.7%
£111,259Yorks and Humber
2.8%£121,454
West Midlands5.0%
£138,982
Source Price (£) 12 month change
3 month change
Monthly change
Data as at Definition
Land Registry £180,252 6.5% 1.9% 0.5% Feb-15 England & Wales: sold price
Rightmove £281,752 5.4% 9.0% 1.0% Mar-15 England & Wales: asking price
Home.co.uk £271,089 6.8% 2.1% 1.1% Mar-15 England & Wales: asking price
LSL Acadametrics £273,528 6.8% 0.7% 0.5% Feb-15 England & Wales: based on Land Registry data
ONS (not seasonally adjusted) £273,000 8.4% 0.7% 0.4% Jan-15 UK: price at mortgage completion
Nationwide £189,454 5.1% 0.5% 0.1% Mar-15 UK: price at mortgage approval
Halifax (not season-ally adjusted) £192,270 8.1% 1.9% 0.4% Mar-15 UK: price at mortgage approval
Key national housing market indicators
Figure 2: Average national house prices & price growth Source: Various
Figure 3: Regional average house prices & 12 month price growth (February 2015)Source: Land Registry
House prices – national & regional – Land Registry data show that average house
prices in England & Wales rose by 6.5% in the year to February, the same growth rate as the revised January figure.
– Outside London, the East remains the region with the fastest rising house prices with 12 month growth slightly accelerating to 10.5% in February. In the South East price growth slowed to 9.0% from 9.4% in January. However, the average house price of £202,394 in the East is 16.5% lower than that of the South East.
NB comment: house price growth appears to be stabilising, however as with London we need more than one month’s data to confirm this. Meanwhile, the north-south divide is no closer to narrowing. Hopefully the recently announced plans to boost regional economic growth will be implemented and bear fruit, which can only benefit regional housing markets in the north.
4Chestertons Residential Observer Monthly Edition – April 2015
Westminster
Wandsworth
Waltham Forest
Tower Hamlets
Sutton
Southwark
Richmond upon Thames
Redbridge
Newham
Merton
Lewisham
Lambeth
Kingston upon Thames
Kensington & Chelsea
Islington
Hounslow
Hillingdon
Havering
Harrow
Harringey
Hammersmith & Fulham
Hackney
Greenwich
Enfield
Ealing
Croydon
Camden
Bromley
Brent
Bexley
Barnet
Barking & Dagenham £1,140 £1,570
£1,041 £1,811
£1,302 £2,890
£1,225 £1,809
£1,340£1,638 £2,059
£2,289 £1,577
£1,416 £1,065
£1,480 £1,940
£2,432 £3,947
£1,758 £1,924
£1,474 £1,827
£1,513 £1,239
£2,143 £2,233
£1,251 £2,381
£1,317 £2,172
£3,928
– According to the Homelet Rental Index, average UK rental values for new tenancies in the three months to February were 9.2% higher than in the same period in 2014. Average UK rents for new tenancies over the three month period to February 2014 were £899 per calendar month.
– Average rents for new tenancies in London were 5.1% higher in February compared to the corresponding month in 2014 and now stand at £1,390 per calendar month.
NB comment: rental growth at national level accelerated over the past three months whereas in London, despite the demand pressure for rented accommodation, rental growth slowed.
Rental values
Figure 4: London borough monthly asking rents for 2-bed flats (as at 2 April 2015) Source: Zoopla
5-bed4-bed 3-bed 2-bed1-bedAll Properties
£1,869 £2,699£4,392
£5,620
£7,621
Ave. Rent:£2,985
Figure 5: London average monthly asking rents by property type (as at 2 April 2015) Source: home.co.uk
5Chestertons Residential Observer Monthly Edition – April 2015
– HMRC data reveal that national residential house sales in February were marginally higher (+0.6%) than in January but were 7.6% lower than in February 2014.
– New research from financial specialist Key Retirement Solutions says that the total property wealth of over 65s is now at its highest level since the firm started monitoring it five years ago. Retired homeowners in the UK now collectively own property worth £861 billion, with their total property wealth increasing by more than £33 billion in the past six months. The figures show almost a fifth of all pensioner property equity is owned by over-65s in London with total wealth of £167.7 billion.
– New research from the National Landlords Association (NLA) indicates that tenants are securing a larger proportion of private rented homes in the UK at below advertised rents. The data shows that 16% of private rented homes are let to tenants at below advertised rents, with 8% of homes being let to tenants at above the asking price. 76% of private rented homes are let to tenants at the advertised rent.
– The average annual void period for residential landlords in the UK has dropped to its lowest level since 2002, according to new research from Paragon Mortgages. The average void period in Q1 2015 was just 2.4 weeks. The survey also found that in the first quarter of 2015 some 42% of landlords said that in their view tenant demand was either growing or booming, while 54% felt demand was stable.
– Residential Land has secured one of the largest refinancing deals ever seen in the UK prs sector. HSBC has backed Residential Land with a five year £320m facility at a loan-to-value of 55%. Residential Land has also entered into a new £650m joint venture fund with Ivanhoe Cambridge. The fund will invest in a wider area of prime London, including locations such as the South Bank, parts of north & east London and the Isle of Dogs.
– Housing supply continues to lag behind demand. Last year around 214,000 new homes were built in England. This is 11% higher than the low point in 2010 but 25% lower than the five year average before the global recession, which in turn was already insufficient to match demand.
NB comment: a number of positive surveys regarding the buy-to-let market have emerged recently. Low void periods, strengthening tenant demand, low mortgage interest rates and low returns on fixed income assets are all combining to make residential property an attractive investment proposition. It will be interesting to see whether the new pension freedom triggers an increase in investment purchases.
Figure 6: UK residential transactions, non-seasonally adjusted (Feb 2014 – Feb 2015)
Housing market activity: sales, rentals, development & investment
Feb-15Jan-15Dec-14Nov-14Oct-14Sep-14Aug-14Jul-14Jun-14May-14Apr-14Mar-14Feb-14
91,5
70
94,3
10
85,9
40 103,
090
108,
440
110,
260
114,
670
105,
110
114,
920
98,9
30
103,
720
78,9
30
79,4
00
Source: HMRC
6Chestertons Residential Observer Monthly Edition – April 2015
– The Council of Mortgage Lenders estimates that gross mortgage lending reached £13.4 billion in February. This is 9% down on both January and on last February and is the lowest monthly estimate for gross mortgage lending since April 2013.
– Recent research from Barclays highlights that mortgage market competition among lenders remains intense. For those able to transact with 60% loan to values, two year deals are available (at the time of writing) at a fixed rate of around 1.2% and 10 year deals are available at rates below 3%.
– The Times reported that proposals from the Basel Committee on Banking Supervision could lead to banks having to increase the cost of mortgages for higher risk customers such as first-time buyers and others who need high loan-to-value products. The article suggested that the new rules could more than double the amount of capital that banks have to hold against lending.
– Under the EU Mortgage Credit Directive (which will introduce EU-wide conduct standards for firms selling mortgages), anyone wishing to remortgage with a new lender will need to satisfy affordability tests – although these will not apply if they remortgage with their existing lender. The requirements of the Directive must be implemented by 21st March 2016 although the intention is to implement the requirements into legislation this year.
– The latest monthly survey by the National Association of Estate Agents (NAEA) has shown that some first time buyers may be reaping the benefits of low interest rates and very competitive lending products as 30% of those who purchased a house in February were first time buyers. That is the highest number since September 2014 and may also reflect that new stamp duty rules have prompted some people into buying.
– Data from the Financial Conduct Authority show that the proportion of regulated mortgage loans granted at loan-to-values of more than 90% and up to 95% has more than doubled from 2.0% in Q4 2013 to 4.2% in Q4 2014.
NB comment: with consumer price inflation falling to zero in February, a rise in Bank Rate appears further away than last month. Meanwhile, the ongoing competition between lenders means that mortgage interest rates remain very attractive, although the qualifying criteria have been tightened.
Mortgage market
Figure 7: National gross mortgage lending (Feb 2014 – Feb 2015) Source: Council of Mortgage Lenders
Feb-15Jan-15Dec-14Nov-14Oct-14Sep-14Aug-14Jul-14Jun-14May-14Apr-14Mar-14Feb-14
15,4
33
16,7
11
14,7
55 16,9
80
17,9
88
19,5
56
17,9
28
17,8
49
18,3
70
16,1
17
16,5
88
14,7
74
13,4
00
£M
7Chestertons Residential Observer Monthly Edition – April 2015
– Buy-to-let landlords face a possible raft of new regulations which will impact upon their businesses. The key measures are as follows:
– Landlord registration and licensing: After 1 April 2015 local councils will no longer be able to licence landlords across a whole borough or city without prior permission. Councils will now require government approval before implementing a licensing scheme if they plan to license a large proportion of the market.
– Energy efficiency standards: from April 2016, tenants will be able to request consent for energy efficiency measures that may not unreasonably be refused by the landlord. From April 2018, all privately rented properties where new leases are granted will be required to attain a minimum EPC (Energy Performance Certificate) rating of E. From April 2020, all privately rented residential properties will need to attain a minimum EPC rating of E.
– The Landlord’s Energy Saving Allowance will no longer be available after 31 March 2015 for corporate landlords and after April 2015 for unincorporated landlords of let residential properties.
– Revenge evictions: new legislation designed to prevent retaliatory eviction by landlords against tenants where they have a legitimate complaint is expected to be implemented by October 2015.
– Subletting: the Budget 2015 Red Book announced proposals to “make it easier for individuals to sub-let a room through its intention to legislate to prevent the use of clauses in private fixed-term residential tenancy agreements that expressly rule out sub-letting or otherwise sharing space on a short-term basis, and consider extending this prohibition to statutory periodic tenancies.” Depending on the Election outcome, this may or may not be progressed.
– T enant deposit protection: the Government has clarified tenant deposit protection legislation in response to recent court cases involving landlords withholding tenant deposits. As a result, where landlords took a deposit prior to the introduction of the tenancy deposit protection legislation on 6 April 2007 in respect of a tenancy which rolled over into a statutory periodic tenancy on or after that date they will have a period of 90 days from the date of Royal Assent (26th March 2015) to protect their tenant’s deposit or potentially face a fine.
NB comment: the regulatory environment for the private rented sector is being tightened. Moreover, if Labour comes to power following the Election there is the prospect of further regulation, including rent control.
Tax, planning & regulatory news
8Chestertons Residential Observer Monthly Edition – April 2015
– The Independent recently published a list of the country’s top 10 most unusual street names. Letsby Avenue in Sheffield comes in at number one thanks to the fact that it is the address of the South Yorkshire police operations’ centre. A worthy second place is Whip-Ma-Whop-Ma-Gate in York. Among the names that just missed out are Labour in Vain Yard in Norwich and several No Name Streets.
The last word
ContactsNicholas BarnesHead of ResearchT: +44 (0)20 3040 8406E: [email protected]
Robert BartlettChief ExecutiveT: +44 (0)20 3040 8241E: [email protected]
John WoolleyHead of Valuation T: +44 (0)20 3040 8513E: [email protected]
Henry KnightSpringtide CapitalT: +44 (0)20 3040 4400 E: [email protected]
Richard DaviesHead of Residential T: +44 (0)20 3040 8244E: [email protected]
Sam Warren Head of New HomesT: +44 (0)20 3040 8267E: [email protected]
The contents of this report are intended for the purpose of general information and should not be relied upon as the basis for decision taking on the part of the reader. Although every
effort has been made to ensure the accuracy of the information contained within this report at the time of writing, no liability is accepted by Chesterton Global for any loss or damage
resulting from its use. Reproduction of this report in whole or in part is not permitted without the prior written approval of Chesterton Global.
Source: The Independent
Top 10 most unusual street names in the UK1. Letsby Avenue, Sheffield2. Whip-Ma-Whop-Ma-Gate, York3. Cavalier Approach, Leeds4. Crutched Friars, City of London5. Needless Alley, Birmingham6. Fort Lebanon, Cupar, Fife7. Ha-Ha Road, Greenwich8. Bow Wow, South Cerney, Gloucestershire9. Riddle Dumble Park, Galashiels10. Swing Swang Lane, Basingstoke