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Seasonal price fall of 1.7% ahead of Christmas traffic surge

-Price of property coming to market falls by 1.7% (-£4,542) as sellers compete on price in bid to stand out during quieter winter months.

-Mini-boom hits a pause, as affordability and sentiment are dented by prices 8.5% higher than a year ago and tougher mortgage lending criteria.

-Stock for sale per estate agency branch falls to lowest ever level recorded at this time of year, which will help to underpin prices in the New Year.

There is further evidence of a slowing rate of growth in the property market, with the price of newly-marketed property falling by 1.7% (-£4,542) this month. This is typical at this time of year as those choosing to come to market seek to undercut the prices of other properties to boost their chances of finding a buyer. November has recorded a drop in new seller asking prices in eight out of the last ten years, although the more positive tone of this year continues, with the monthly fall being the smallest for five years and the annual rate of increase climbing to +8.5% (+£20,890).

Following the most active year for transaction volumes since 2007, average stock levels per estate agency branch are at historically low levels, with an average of 60 properties for sale. This is the lowest number ever recorded at this time of year, with lack of property choice having helped fuel this year’s upwards price pressure. The volume of property coming to market is also slowing down, further limiting supply, and this month sees new listings down 1% on the same period last year and 15% on last month. While prices are falling in the run-up to Christmas, there are still signs of supply shortages in some parts of the country compared to buyer demand which could push prices up again in 2015.

Home ownership to fall as renting increases – prediction

Soaring rents will force nearly 6 million private tenants into poverty by the year 2040, while home ownership and social renting will continue to decline.

The private rented sector will grow to accommodate one in five people in England.

The claims are in a new report from the Joseph Rowntree Foundation, ‘What will the housing market look like in 2040?’

It predicts that today’s five-year-old will be paying private rents 90% higher than at the start of the recession in 2008, with rents rising twice as fast as incomes.

People who rent will be more than twice as likely to be living in poverty than home owners.

Julia Unwin, chief executive at the Joseph Rowntree Foundation, said: “These stark findings are a wake-up call for political leaders.

Our country is in the depths of a housing crisis so severe that unless we do something about it we won’t be able to house the next generation. This isn’t just about house prices. The cost of renting is getting out of control, leaving many people in poverty. If this continues we will see people priced out of both buying and renting and struggling to put a roof over their head.

With 8m babies born between 2001 and 2012, we really need to ask ourselves, where will our children live when they reach adulthood?

Second-time house buyers need £60,000: Growing numbers of owners trapped in small first properties because they cannot afford to step up

• Report by Lloyds Bank found climbing the ladder is becoming harder
• Couples now desire an extra £58,400 - double the average first-time deposit
• They get stuck, making it even harder for first-time buyers to get on ladder

Growing numbers of homeowners are ‘trapped’ in small first homes as they struggle to take the second step up the property ladder.

Thousands who bought their first home at the peak of the market can’t afford to up-size, say experts.

A study by Lloyds Bank found homeowners must now raise almost £60,000 to take their next step.

The report showed the average household looking to move estimated their current home was worth £223,600 – but the price for the next house they wanted was £282,000.

It means these ‘second steppers’ must find an extra £58,400 to move house – double the amount of the average first-time buyer deposit of £25,848 – showing it is more expensive to move up the ladder than to get on it.

A third said stamp duty was a key challenge in moving house.

The Government has faced fierce criticism for failing to raise stamp duty tax thresholds in line with soaring house prices.

Buyers must now pay more than £8,000 in stamp duty on an average UK property worth £274,000, or more than £20,000 on an average London home at £514,000.

The report warns: ‘Second Steppers are living in the homes that the first time buyers need to buy to keep the market moving.

‘Without movement from Second Steppers, movement on the ladder comes to a standstill on the second rung.’

The gap is £15,000 more than last year as house prices, especially sought-after detached homes, soar out of reach.

Many first-time buyers who bought their first home during the 2007-08 property surge have only recently come out of negative equity and now face a desperate struggle to raise the extra capital to move into a larger home.

Almost half of those questioned by Lloyds said costs and fees associated with moving house was the biggest barrier to moving up the ladder.

Property price crash – is it coming?

As the Guardian reported recently, “some boroughs have witnessed a 30% price growth over the last 12 months, taking the average home price to within a whisker of half a million quid”. In fact, some London properties are almost priceless, with London recently overtaking Hong Kong as the most expensive city in the world to relocate employees to. With so many eager buyers waiting on the side-lines, experts expect a slow steady decline of the annual growth rate, rather than a property crash.

“The regional figures for London indicate that the number of new sellers already hugely outnumbers new buyers”,reports the Daily Mail, and basic economics dictates that when supply is high and demand is low, your prices will fall.

Rate rise will leave one in four struggling to pay their mortgage

One in four home-owners say they will be in financial trouble when interest rates rise, according to research.
A study found seven per cent believed they would be in ‘serious difficulties’ if their mortgage repayments increased, while 20 per cent would be in ‘slight’ financial trouble.

The report, published by the Building Societies Association and the Money Advice Trust, also found that a fifth will be forced to cut back on essentials like clothing and food, while two-fifths will spend less on holidays and eating out.
The study found 12 per cent will have to work longer hours to keep up with repayments and six per cent will have to move to a cheaper property.

Mark Carney, the governor of the Bank of England, has signalled that the base rate, frozen at a historic low of 0.5 per cent since 2009, could be ‘beginning to increase by the spring and thereafter rising very gradually’.
While the Bank says any rise would be ‘gradual and limited’, research shows that many who took out their loans when interest rates were low may struggle to meet higher monthly repayments.

Joanna Elson, chief executive of the Money Advice Trust, said: ‘After all these years, mortgage-payers are in for a big financial shock when interest rates begin to rise.

‘For many, that shock will be too much to absorb – and there is a real risk that we will see a surge in unmanageable debt problems as a result.

‘Our message to borrowers is clear – interest rates will rise and that day is coming soon, so now is the time to prepare.

North/South Divide in Property Rents for Students

Students in the UK are likely to face a North/South divide when it comes to renting property new research has shown. Rents for students are also likely to be higher this year than they were last year.

Higher education courses begin next month for those who recently received exam results therefore many will likely be looking for accommodation as the new term begins. However, average weekly student rents have increased from £77.04 last year to £79.42 this year according to online business Accommodation for Students. However, there are some regional differences in rents for students meaning that many students will feel the crunch whereas others will have cash to spare.

Northern cities with major institutions are the best places to stay for students with rents staying the same or falling. However, rents in the South are continuously rising, reflecting the cost of housing in general in this region. In addition, housing in the North for students is more likely to include the cost of bills in their rents making it easier for students to budget.

Overall, the average rental costs in private halls of residence has increased by 1.5% and their rental costs are higher by 63% than student housing. There is a notable North/South divide in terms of rental prices as well as bills for student accommodation. Accommodation for Students has shown that 70% of students prefer the option of inclusive bills as it allows them to budget their finances. This option has increased in availability by almost double since 2008. The addition of bill costs to rental costs averages £5.51 per week in the North whereas it averages £8.08 in the South.

The greatest increases in student rents have been seen in the South with Luton increasing by 20% since 2012 and Chatham increasing by 19%. There have been significant increases in London with the average rental value standing at £129 per week. Northern university locations such as Manchester have an average weekly rent cost of £74 in comparison and Sheffield has an average cost of £69. The cheapest locations are Walsall with an average rent of £48, Stockton at £49 and Wolverhampton at £52.

Demand for places at prestigious universities has likely been the cause in the rent rises however; many universities are now offering incentives to desired students in order to fill spaces. This may, in turn, have an impact on the demand for student accommodation in the near future.

Mortgage Choices Boosted by Funding for Lending Scheme

The Funding for Lending scheme has boosted mortgage choice to record levels in the UK with many more products now on offer when compared to previous years. There were more than 10,000 mortgage products available on the market last month; more than there has been on the market in five years according to the National Mortgage Index from the Mortgage Advice Bureau.

The new data suggests that Funding for Lending has increased the number of mortgage products available as well as the variety of products on the market. The average number of products available in July reached 10,262 therefore product choice has improved by 33% over the last year alone. Consumer choice has improved by 97% over the last three years and 198% since July 2009. The data, taken from upwards of 500 brokers and 800 estate agents, shows that the average purchase mortgage rose for the fifth month in a row in July.

Overall, the average home buyer borrowed £159,391 in July of this year, an increase of 6% since January. However, salaries are not increasing at the same rate with the typical home owner’s salary rising by only half this rate since January. This means that the average loan to income ratio has risen slightly but this ratio remains similar to that found in 2012.

According to the MAB, the Funding for Lending scheme has decreased fixed rate mortgages significantly, with two, three and five year product rates down by 1%. The average two year fixed rate has seen the most significant drop and five year rates have fallen slightly further than three year rates. There have been a substantial number of borrowers taking advantage of the lower rates with 92% applying for fixed rate deals over variable rates. This is compared with the 79% seen in July 2012. In addition, 91% of home owners went for fixed rate deals when remortgaging when compared to the 77% in July 2012. Average borrowing for remortgaging has risen by 7% over the last year showing that many are seeing the benefits of the lower fixed rate deals.

Greater numbers of borrowers are turning to brokers for advice on mortgage lending indicating that there are a number of low priced products on the market to choose from. Increased competition between lenders means that there are more options on the market for consumers and many will benefit from the lower rates offered as a result of the Funding for Lending scheme.

Help to Buy Scheme Hailed a Success in Last Four Months

The UK’s Help to Buy scheme has seen success over the last four months as 10,000 reservations for new build homes have already been made. The scheme, designed to boost the UK property market, has already increased consumer confidence and encouraged many new buyers to jump on the property ladder.

In addition, the Help to Buy scheme has also encouraged many new house builders to begin developments which has increased the supply of new housing to its highest level since 2008. Approximately one third of a million additional homes have been built over the last two years alone. There has also been a surge in interest from first time buyers. The number of first time buyers is at its highest levels since 2007 and is still on the rise indicating that many have been encouraged by the government schemes available. In addition, £19.5 billion of public and private funding is being spent on affordable housing. Mortgages are now more affordable with wide ranges of new products coming onto the market regularly.

Overall, the government aid appears to be having a positive effect on the UK housing market with more affordable mortgages available, house building on the rise and a fundamental increase in interest among first time buyers. As a result, over 10,000 reservations have already been made over the last four months for new builds indicating that the Help to Buy scheme is already helping deliver a sustainable increase in housing. A number of families and young buyers may now be able to set foot on the first rung of the housing ladder as a result, which, for many, was unachievable in the recent past.

The Help to Buy Equity Loan for new build properties will allow buyers to receive a 20% loan which will be interest free for five years. Buyers must already have good credit and, those who do, will be able to use the loan to purchase a new build property with a value up to £600,000. Already, 3,000 sales have been completed and the scheme looks set to help over 74,000 home buyers over the next three years. The Help to Buy mortgage guarantee scheme will launch in January 2014 and will enable lenders to offer £130 billion worth of mortgages with deposits as low as 5%. The funding also looks set to create more opportunities for employment which will further stabilise the economy.

UK House Prices Increased by 3.1% Show Latest Government Figures

The latest figures from the Office of National Statistics have shown a surge in UK house prices in the twelve months leading to the end of June. There has been an increase of 3.1% in the year leading to June 2013, a step up on the 2.9% increase in the twelve months leading to May of this year.

The house price growth is relatively stable across the UK, but prices in London are growing more rapidly and are fast succeeding the UK average for asking prices. Annually, England house prices increased by 3.3% whilst prices rose by 4.3% in Wales. Prices rose by 0.9% in Scotland and by 0.4% in Northern Ireland. The house price rise in England has been driven mainly by London’s figures, which have reached record highs over the last year. Overall, prices in London increased by 8.1% whereas they rose by 3.1% in the West Midlands. House prices in the South East increased by 2.9%. Not including London and the South East, house prices rose by 1% in the twelve months leading to June.

For existing home owners, prices rose by 2.7% in June 2013 when compared to June 2012. There was a rise of 3.9% in the prices paid by first time buyers over the same time period. The increase is prominent all over the UK, even when London and the South East is excluded showing positive improvement in the housing market as a whole. In addition, borrowers can expect to take advantage of the low Bank of England base rate until at least 2016, meaning that mortgage deals will continue to be more attractive.

The Royal Institute of Chartered Surveyors recently published a report showing that housing market activity has increased throughout the UK. While the primary focus of the housing market was London and the South East, the North East and the West Midlands have shown the biggest increases in buyer activity this July. As a result of the new demand in these areas, the rise in house prices has been more prominent. However, London has still shown the highest increase at 8.1% annually due to the interest of international as well as domestic markets.

In order to continue the recent success in the housing market, economists have warned that supply has to meet demand. The interest of new buyers due to the Funding for Lending scheme and the Help to Buy scheme has caused a surge in demand meaning that house builders may need to come into action in order to restore the housing market balance.

Greater London House Prices set to grow by 7%

Greater London house prices are set to rise by 6.9% this year, according to real estate firm Cluttons. The Help to Buy scheme looks set to play a role as it will extend to all home buyers as of next year encouraging more buyers onto the market. As there is unlikely to be an equivalent increase in housing stock, sellers are likely to increase their asking prices due to the amount of competition and the high demand.

The Residential Property Forecasts report from Cluttons indicates that the increase in house prices could outprice many buyers who want to purchase property in and around London. Despite the fact that wage growth in London is slightly higher than the national average, earnings may not be able to keep up with the high rises in house prices in the area over the next two years.

Cluttons has forecast an 8.4% increase in house prices in prime central London, an increase on the previous figure of 5% reported by the firm. The annualised average was reported at approximately 4% for the next five years. It has also been stated by credit ratings agency Fitch that Help to Buy could artificially increase house prices without increasing the number of new homes being built. This could result in many properties becoming unaffordable despite the fact that mortgage lending has improved.

First time buyers are still struggling to enter the property market in London due to the return of bidding wars. There has also been a reduction in the availability of housing stock due to the number of buy-to-let mortgages being accepted in the area and the number of people renting their property and buying in other areas.

The rise in confidence in the housing sector, the recent government intervention and the lower mortgage rates look set to increase capital growth which has led Cluttons to revise their London house price forecast for this year. Cluttons has also reported that rental demand in central London has remained strong but there is little rental growth. Their forecast indicates that there will be rental growth of 3% in London this year, which is an annualised average growth of 4% until the end of 2018. As there are few signs that supply is set to meet demand, policy makers may make the rental market a priority in order to restore balance.

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