News & Views Blog

• Long term outlook optimistic as prices are supported by supply constraints

• Proportion of people confident that house prices will rise has fallen

• Interest rates impact on short term confidence

• Brown’s house building policy wins first time buyers’ vote

Forecast house price growth subdued
The proportion of people confident that house prices will continue to rise has fallen marginally from 77% in June to 74% - its lowest level since February 2006 - according to the latest research from propertyfinder.com.  Forecast average house price growth over the next twelve months stands at 5% for the second consecutive month.

Affordability issues impact on confidence
The succession of rate rises since last August has impacted upon the confidence of consumers - 81% of respondents blame rising interest rates for their more subdued view.  The effects on the housing market of five rate rises in ten months are becoming more pronounced.    

However, interest rates are not the only factor affecting affordability.  71% of all respondents and 87% of first time buyers stated that house prices are too high relative to income.  

Warren Bright, chief executive of propertyfinder.com, suggests the market is experiencing a natural slow down, caused by rising interest rates:

The price growth we have experienced recently has been exceptional and a period of more subdued growth is to be expected.  Home owners have become accustomed to double digit capital growth but these levels are unsustainable. It is only natural that after a period of such rapid growth, we should see a slowdown to bring house price inflation more in line with that of earnings.

Interest rates remain at the forefront of people’s minds.  People are being increasingly squeezed by the rising cost of borrowing – it is time for the MPC to stop turning the screw.

Prices buoyed by lack of supply over medium term

Consumers remain confident that a lack of supply will continue to buoy house price growth over the medium term – although at a more subdued level.  

The research indicates that Gordon Brown’s increased house building targets will be a very popular move with first time buyers – 40% of who stated that house prices are rising because too few new homes are being built.  

Warren Bright concluded:

Our new prime minister has clearly set out his legislative plans with a vote winning agenda.  His well publicised intention to build more affordable houses will appeal to the growing number of young people who are being priced out of the housing market.

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420,000 dwellings stand empty in a state of disrepair – equivalent to more than the number of households in Birmingham – according to the most recent research by propertyfinder.com. Meanwhile, the recent Barker report states that there is a shortfall of 600,000 homes for England’s current needs, let alone predicted demand.

At very little cost, these homes could be utilised to help restore some balance between housing supply and demand in the UK market.  Current government targets for new builds of 200,000 per year are insufficient to rectify the current shortfall, and are well below UK household formation – predicted to rise at a rate of 223,000 until 2026.  Predicted annual immigration of 185,000 - 190,000 (Treasury’s December 2007 pre-budget report) is adding to the pressure on housing supply and the number of single person dwellings continues to climb.

According to the DCLG, it would cost just £11,580 each on average to make these dwellings fit for habitation – about a tenth of the cost of building a home from scratch.  

Warren Bright, chief executive of propertyfinder.com commented:

An enormous resource of housing stands empty and unused, equivalent to almost two years’ housing supply - it is a huge waste.  We are letting a valuable source of extra housing crumble, instead building at extra financial and environmental cost. It’s also popular with local residents who may be hostile to new build but whose house prices and quality of environment would benefit from renovations of derelict homes.

Admittedly, not all of this housing can be used as some is in parts of the country in need of larger scale regeneration, but even in areas of extremely high housing demand, property stands unrenovated and empty.112,000 of these empty homes are social housing – in fact, social housing is proportionately much more likely to be empty and unfit for habitation than private housing.  The cost of renovating social housing is a mere £6,753 per property.

Warren Bright continued:

Gordon Brown has announced a new programme of council house construction yet a lot of social housing could be provided at a fraction of the cost of construction.

There are a further 404,000 properties standing empty, despite being fit for habitation, placing additional pressure on the housing market.  This housing is disproportionately in the social sector. 5.2% of all social housing stands vacant, just half of which is classified as unfit.  This is opposed to just 2.4% of owner occupied housing standing vacant.  

Warren Bright concluded:

Despite promises of more affordable housing from our new prime minister, local authorities are failing to target housing supply issues.  One small step towards helping the housing supply problem would be to actually make use of the empty social housing available.

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The demand for second homes in the UK is growing and with the height of summer approaching, housing markets in coastal towns are booming.  A growing number of Britons are choosing to holiday within the UK, rather than venture abroad – and many of these are purchasing a second home.

Almost 500,000 UK households own a second home, and 60% of Britons’ holiday homes are located in the UK.  25% of all UK holiday homes are located in the South West, and a further 23% in the South East of England, where house prices are already much higher than the UK average.  House prices in popular coastal holiday towns, such as Rock, are soaring. These resorts are becoming micro markets - ruled by demand factors independent of those influencing the general market.

A key factor driving demand for second homes is a growing sense of ‘green’ responsibility in the UK.  22% of people would cut back on flights to help the environment.  This is causing more and more people to holiday within the UK and consequently purchase holiday homes. Warren Bright, chief executive of propertyfinder.com, commented:

Warmer weather - ironically caused by the global warming many UK holiday makers are trying to offset - is also causing a growing number of people to avoid venturing abroad for their holidays.

Underpinning demand is the insatiable Great British appetite for bricks and mortar – people want to own property and view it as a good investment.  People are confident in the UK housing market and rising house prices - they are keen to capitalise by investing in property.

Many coastal towns are already property hotspots, but we can expect prices in popular UK holiday destinations to rocket compared to the market in general.  People looking to buy second homes may do well to broaden their search from the prime locations - by moving just a few miles inland from the coast, properties are often much more affordable and a good investment.

In certain places, second home ownership has become a problem, and propertyfinder.com welcomes proposed government legislation to more tightly control the use of properties as second homes.  But second home owners are not monsters. According to research by VisitBritain, 76% of people believe their holidays should benefit local people where they are staying and in the majority of coastal resorts, the purchasing of holiday homes positively contributes to local economies.  Too often second home owners are made a scapegoat for local councils’ shortfalls in providing affordable housing.

Posted by Bronwyn at 10:01 AM | Permalink | Comments (0)

The Blairs will be shifting their belongings from Downing Street into the Connaught Square mansion that they bought three years ago for £3.65 million. This home is to be linked to the adjoining mews house – which was acquired by the Blairs earlier this year for £800,000 – to form an eco-conscious and ultra-secure complex fit for a former world leader.

Connaught Square is the latest and probably the last stop on the Blairs’ scramble up the London property ladder from the scruffier side of town to an elite central quarter. This journey to Connaught Village – which was once known as Tyburnia after the nearby infamous place of execution – has not always produced for the family the profits that have been enjoyed by other middle-class households who have played the market with more skill.

Read more of Anne Ashworth's Times Online column, as she charts the highs and lows of the Blair's property decisions...

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Which improvements best add value to a property? 

This week, Garry Collins from Hamptons International in Weybridge answers this very important question:

As modern family life has developed it has become increasingly important that the home provides light, spacious and adaptable living space, particularly on the ground floor.

Most new houses build reflect the trend very well and cater to the needs of the family, providing a large open-plan kitchen/breakfast/family room where day-to-day family dining, living and informal entertaining can take place. With this in mind the additional installation of a high-quality kitchen will always prove exceptionally popular and desirable with purchasers.

If you have the space to extend on the ground floor beyond a smaller kitchen, to create an additional open-plan reception area this is definitely well worth considering. Another noticeable and highly-desirable feature of a modern home is the need for high-quality en-suite bathrooms to service as many bedrooms as possible. Superior quality white suites and stainless steel fittings are very popular along with hard flooring such as marble, slate, ceramic tiling or vinyl.

Posted by Bronwyn at 01:19 PM | Permalink | Comments (0)

How sale and leaseback works

• A buyer purchases the freehold of the property without paying VAT and leases it back to the developer for a period, often at least nine years.

• The developer gives an annual rent guarantee, typically 3% to 7%, and at the end of thelease period the property is returned in perfect condition.

• Each property usually has options for the purchaser to make personal use of his or her investment for a few off-peak weeks of the year at no cost.

• Utility bills and general maintenance costs are paid by the developer but you would still have to pay local taxes.

How rent guarantees work

•  A rent guarantee is paid in monthly installments, usually from the last day of the month after a new build property is completed.

• It is calculated return on the net purchaser price of a property.

• Sometimes the rental guarantee som is deducted from service charges of ground rent, rather than forming a separate and specific payment.

• Usually the owner can rent out a property and keep the income even if this overlaps with the period for which the rent guarantee applies.

Posted by Bronwyn at 01:06 PM | Permalink | Comments (0)