J Greenwood Blog

National hotspots and coldspots revealed

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A new report that recorded the change in supply and demand for the most populated locations across the UK, has found that demand for property in the UK fell by -5% during Q1 of 2016 despite the pre stamp duty rise rush.

eMoov found that despite the rush to complete before the new tax changes kicked in, property demand across the UK dipped by 5% and now stands at 39% overall. However demand is up +9% when compared to the same period in 2015.

Top 10 Hottest Spots

London’s outer boroughs and commuter belt continue to outperform the rest of the country where property demand is concerned. With demand at 72%, the London Borough of Bexley remains the hottest spot in the UK once again. Bristol (68%) climbs from third to second hottest spot in the country, still the most in demand locations outside of the capital and surrounding commuter belt. Bedford (66%) jumps four places to take the third hottest spot in the UK.

Cambridge and Watford (62%) both retain their top 10 status, although both have dropped down the rankings and now sit outside the top five hottest spots. Sutton (61%) also drops one place to claim the 10th hottest spot in the UK.

However, with the London commuter belt continuing to increase in demand, Medway (63%) and Milton Keynes (61%) make a first appearance in the top 10 at fifth and ninth. Aylesbury (63%) also returns to the top 10 (sixth) for the first time since the start of 2015. However, with demand currently at 65%, Ipswich explodes into the top 10 for the first time, now the fourth hottest location for UK property demand. With a direct commute into Liverpool Street of just over an hour, Ipswich’s new found demand shows the ever increasing boundaries of the London commuter zone, as buyers search further afield for affordable property.

Top 10 Biggest Climbers (Q2Q)

The first quarter of 2016 has seen both Aberdeen and Durham resurrected from the depths of the UK property market. Although demand in both Aberdeen (15%) and Durham (27%) is still considerably lower than the UK average (39%), the previous dire state of the property market in both locations means that even the smallest green shoots of a property demand increase, have been enough to make them the first and second highest climbers in Q1 respectively.

The declining Scottish oil industry has hit Aberdeen hard, with it consistently ranking as the coldest spot for property demand in the UK. But there is hope for Aberdeen homeowners and, although demand is only at 15% currently, this +50% increase over the last quarter has seen property demand return to the same level as this time last year and move Aberdeen off the bottom spot.

Durham also seems to be flourishing under its title of one of the UK’s most affordable cities. Not only this but the region has seen some of the biggest drops in house prices in the North East, down -5% over the last year alone. This mixture of affordable housing and even more affordable living is clearly popular with buyers in the area at present, as Durham is not only the second-biggest climber in the last three months (+42%) but has also enjoyed the biggest increase in demand over the last year across the whole UK (+90%).

Stoke-on-Trent (+37%) is the third highest climber, flying the Midlands flag with Walsall (+28%) as the eighth highest climber.

It would seem the Northern Powerhouse is starting to make an impact, particularly in Yorkshire, with Wakefield (+33%) the fourth highest climber over the last quarter and fifth over the course of the last year (+53%). Wakefield is joined by Leeds (+31%) in fifth, Sunderland (+29%) sixth and Bradford (+29%) seventh in terms of growth over the last quarter, with Bradford having also made the list of most affordable cities in the UK.

Rhondda Cynon Taf (+26%) is the only Welsh entry in the top 10 highest climbers in the last quarter, with South Lanarkshire (+23%) joining Aberdeen as the second Scottish entry, completing the highest climbers over the last quarter.
Top 10 Biggest Climbers (YoY)

As well as those enjoying the largest demand increase both over the last quarter and year on year, the following locations have also enjoyed large demand increases since Q1 2015.

Second North Lanarkshire (+67%), third Barnet (+57%), fourth Sandwell (+56%), sixth Bolton (+45%), seventh Gloucester (+42%) and 10th Manchester (+40%).

Top 10 Coldest Spots

Aberdeen’s shift up the table means it is now only the fifth coldest spot in the UK (15%). It has been replaced by the boroughs of Westminster (12%) and Kensington and Chelsea (12%) as the coldest spots in the nation, as prime central London property demand remains almost non-existent.

Despite the slight resurgence in the North East by Durham and Sunderland, the area continues to perform poorly overall. With demand at 13%, North Tyneside is the third coldest spot, with Stockton-On-Tees (15%) in fourth and Northumberland (17%) in sixth remaining in the top 10 coldest spots for the second consecutive index. Sunderland (18%) in ninth is the final North East entry, although as for mentioned the area has enjoyed a big increase in the last quarter and so looks to be joining Durham as part of the North East revival.

The top 10 is completed by the London Borough of Southwark (17%) in seventh, Bradford (18%) eighth and Hammersmith and Fulham (19%) 10th, as the coldest spots for property demand across the UK.

Founder and CEO of eMoov.co.uk, Russell Quirk, commented: “Interesting to see that despite the rush ahead of April’s stamp duty deadline, the UK market as a whole has cooled during the first half of the year. Although it’s undoubtedly a seasonal influence due to the festive period, it would seem that those looking to push through a second home or buy to let purchase, didn’t have the overall demand impact that many thought they would.

Ipswich, Milton Keynes and Medway making the top 10 hottest locations for the first time highlight the expanding parameter of London’s commuter belt, as the hunt for affordable commuter friendly property continues.

The Northern Powerhouse seems to be rearing its head particularly with the likes of Wakefield, Bradford and Leeds seeing some of the biggest increases in property demand in the last quarter. Our local property directors in both Leeds and Bradford have been rushed off their feet of late with the number of valuation requests they’ve received, so it would seem a good time to sell if you’re a homeowner in Yorkshire.

There’s also reassuring news for homeowners in Aberdeen and Durham. Both have had a hard time of late and so the news that demand for property in each is on the up should come as welcome news to many. Neither are out of the woods just yet, but the reverse in previous downward trends is better than a slap in the face, that’s for sure.

It’s fascinating how Bristol has remained hot for a long time now. It isn’t necessarily the first place you think of in terms of property demand outside London and the South East, but as this research proves, it clearly has the right mix of ingredients to attract strong demand from UK buyers on a consistent basis.”

Growing FTB confidence sees transactions up 6.6%

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New data from Your Move & Reeds Rains has highlighted that during February, transactions for first-time-buyers hit 21,000 - a rise of 6.6% annually.

Adrian Gill, director of estate agents Your Move and Reeds Rains, had this to say: “February is a traditionally quiet period for the first-time buyer market. The month sits awkwardly between the New Year property market rush and the spring-summer activity high. However, beyond that seasonality, these figures demonstrate the strong, steady underlying growth that comes with growing first-time buyer confidence.

This optimism may begin to reveal itself more clearly in March, when an Easter uplift may sweep away any residual doubts among some first-timers. While the more general mismatch between buyers and sellers will continue to exert upwards pressure on prices, a combination of pluck and poise from first-time buyers will ensure that this does little to impact the overall trend of growing demand at this end of the market.”

The costs of buying and owning a first home have remained broadly stable in February, with lower borrowing costs balancing larger prices and deposits.

February’s average mortgage rate represents the lowest mortgage rate for first-time buyers in over five years.

High LTV lending also remains strong, with February’s average ratio reaching 82.5% – a figure that is high relative to the average LTVs recorded in 2014/15.

 

e.surv's Mortgage Monitor recorded a 5.7% month-on-month increase in the number of higher LTV loans in February.

In February the average deposit put down by a first-time buyer stood at £29,451 – an increase of 14.7%, or £3,766, on an annual basis. This uptick has been a factor in the growing proportion of FTB income which is consumed by deposit costs. In November 2015, a deposit ate up just over two-thirds (67.4%) of an average first-time buyer’s annual income, whereas in February of this year the average deposit consumed, on average, almost three-quarters (74.9%) of their income.

However, the amount of first-time buyer income that is consumed by monthly mortgage repayments has hardly changed between February 2015 and February 2016. Over the last twelve months this has risen 0.8 percentage points, from consuming 19.6% of an average first-time buyer’s income to consuming just over a fifth (20.4%) of such income.

Adrian Gill continued: “First-time buyers have had the benefit of some favourable February conditions. While those setting a first foot on the ladder this month have had to shell out more in terms of headline prices – as they seek to compete with buy-to-let investors for small, affordable homes – mortgage lending has easily kept pace. Equally, although many first-time buyers will baulk at the rising deposit costs, there is a silver cloud to this grey lining. Larger deposits tend to indicate growing incomes and larger mortgages, meaning an impressive number of first-time buyers are accessing the capital to purchase a first home, even in a sellers’ market."

78% of landlords refuse to be stopped by stamp duty changes

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According to new research from Nottingham Building Society, only one in seven landlords and potential landlords have scrapped plans to add to their portfolio or make their first BTL purchase despite new tax and stamp duty rules taking effect from this Friday.

Its study found 14% of existing landlords and potential landlords have decided against adding to their portfolio or starting investing in buy-to-let in response to increases in stamp duty on buy-to-let due on 1 April and tax changes due next year.

The national research shows interest in investing in property for retirement and demand for buy-to-let mortgages remains strong despite fears the new rules which remove tax breaks on income and increase the costs of buying would hit demand and undermine the attraction of property as part of retirement planning.

In fact the research shows around 78% of those questioned say they would still consider investing in property as part of their retirement planning following the new rules.

Mortgage brokers report strong interest from would-be landlords ahead of the stamp duty changes – The Nottingham’s research found 35% of brokers have seen an increase in inquiries from new buy-to-let customers over the past three months.

Ian Gibbons, Senior Mortgage Broking Manager at Nottingham Mortgage Services, said: “The buy-to-let market remains strong despite a period of uncertainty as lenders and customers assess their options ahead of stamp duty and tax changes.

People should only invest in buy-to-let if they can afford to and it makes financial sense for them. But that said it is clear that demand for property investment is not going away any time soon with the research showing people still very much value property as part of retirement planning.

The tax and stamp duty changes are complicating the calculations on buy-to-let but given the risks of stock market investment and the low interest rates there is a strong case.”

The Nottingham’s research shows just 10% of over-55s who were considering buying more properties, or buying their first buy-to-let property, have cancelled their plans as a result of the changes. That rises to 13% among those aged 45 to 54.

17% of BTL products are now fee free

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The number of arrangement fee free buy to let mortgage products rose in Q3 as lenders tried to find ways to compete without reducing rates which are already at an all-time low.

The findings from the latest Buy to Let Mortgage Costs Index reveal that 17% of products in Q3 were offered without lender arrangement fees, up from 13% in the previous quarter. Flat fees fell slightly to 46% from 47% in Q2. Products with percentage-based fees were the biggest losers, dropping back to 37% of all BTL products compared to 40% in the previous quarter.

Charges (lender arrangement fees, valuation fees and legal costs) have continued to have a declining impact on total costs. On average they now add an additional 0.48% to the headline rate, down from 0.52% in the previous quarter, and down from 0.67% in Q1 2013 when the index was first launched. This downward trend can now be seen even in high loan to value products which had previously seen rises up to 0.90% of the headline rate in 2014. In Q3 2015 the average impact of costs on these high LTV rates was down to 0.67% after three successive falling quarters.

The index also revealed that although absolute products numbers by initial term (1-5 year rates and loan term products) have risen across all categories, the market share of two year products has declined year on year from 54% in Q3 2014 to 43% today. Longer term products, particularly three and five year rates have increased their market share, gaining between them 9% of the market.

Simon Whittaker, finance director at Mortgages for Business said: “The recent falls in swap rates, almost back to levels similar to the start of the year, have helped lenders trim prices but whilst they continue to be attracted to the BTL space, they are having to be ever more creative to find the balance between maintaining their margins and offering competitive products. When looking at the market and the wider economy, the balance seems to have tilted towards there being no increase in Bank Rate for quite a few months yet.”

February mortgage lending at its highest for 8 years

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New analysis from Equifax Touchstone has revealed that mortgage sales exceeded all expectations in February as residential and buy-to-let sales totaled £16.6bn, an increase of 39.0% on January (+ £4.7bn).

Buy-to-let sales rocketed by 40.3% (+£1.2bn) on January while residential sales were up 38.6% (+£3.5bn). The year-on-year increase for buy-to-let and residential sales stood at 52.9% and 30.4% respectively.

Sales figures jumped in every regional area, with London taking the lead, rising by 50.6% on January. The rest of the country closely followed with the North West, Scotland and Northern Ireland all increasing by over 40% and all other regions growing in excess of 30%.

 

The data from Equifax Touchstone, which covers 92% of the intermediated lending market, shows that the average value of a residential mortgage in February was £192,568 (2015: £177,067), and £157,491 for buy-to-let (2015: £151,014).

Iain Hill, Relationship Manager, Equifax Touchstone, says: “With the impending changes in stamp duty on buy-to-let property, we expected buy-to-let sales to jump in February. However, the residential figures have taken many market participants by surprise, also rising sharply and resulting in the highest month for mortgage sales since the 2008 market crash. We expect sales volumes to remain strong in March, and it will be interesting to see if the market can cope with the inevitable pressures that come with the increased demand.”