Meet first homebuyers to complete under Help to Buy scheme

A young couple relocating from Northern Ireland to a new Taylor Wimpey home near Liverpool have become the first new homebuyers to complete under the Help to Buy scheme, an initiative launched by the Government on 1^stApril.

Catherine McClean (26), a nurse, and Nikolai Ivanovic (25), a former Queens Guard, have taken their first step on the property ladder by using Help to Buy to purchase a three bedroom semi-detached home at Taylor Wimpey's Speakman Gardens development in Prescot.

Commenting on the success of the scheme, Housing Minister, Mark Prisk said: 

"I'm delighted that, just five weeks after the launch of Help to Buy in the Budget, the scheme's first buyers are moving into their new property. I'd like to congratulate first time buyers Nikolai and Catherine as they move in today, and wish them all the best for the future in their new Taylor Wimpey home."

Pete Redfern, chief executive of Taylor Wimpey, said:
“The measures announced by the Chancellor will help home builders get Britain building and add a welcome vibrancy to both the new and second hand market over the next three years. The country is desperately in need of more homes and we welcome the Government’s focus on addressing this.”

New home-owner Catherine McClean said of the scheme:
“Help to Buy has been a massive help to us. We certainly wouldn’t be in the position we are now without it. It has enabled us to own our own property. I am the first person in my family to own my own home and I am immensely proud. We have been so lucky to have been given a helping hand to allow us to achieve this.”

Scottish house sales up 8.1% on last year

The volume of houses sold in Scotland between April and June increased by 8.1% compared with a year ago, according to official figures.

However prices fell by an average of 0.3% during the same time.

Residential properties had an average price tag of £148,174 in the first three months of 2013.

The Registers of Scotland Quarterly House Price Statistical Report covers all residential sales including those that did not involve a mortgage.

Three local authority areas in Scotland had average values of above £200,000; Edinburgh City, East Dunbartonshire and East Renfrewshire, which had the costliest average price in Scotland at £212,129. Midlothian saw the largest year on year rise in prices, with homes there selling for 9% more than the same period in 2012.

Glasgow had the largest number of properties sold in the first three months of the year, with 1,666. Volumes also increased in Edinburgh as 1,639 properties changed hands in the capital, where the total sales topped £335 million making it the largest market in Scotland.

‘It is encouraging to see a rise in volumes and while the average price has fallen, it is not a substantial drop,’ said Registers of Scotland’s director of commercial services, Kenny Crawford.

‘We are seeing some interesting figures from areas like Midlothian, where the volumes and average price have both increased. There’ve been a number of new developments in areas like Dalkeith and Gorebridge, which are likely to be contributing to this upward trend. Work has also recently begun on the new Borders Railway Project, which may also be having an impact on the local housing market,’ he explained.

East Ayrshire has shown the largest percentage fall in terms of number of properties sold as 9.4% fewer homes changed hands compared to the same period last year. Prices there also dropped, as they did in Inverclyde and West Dunbartonshire.
‘As ever, the picture is variable from one local authority area to the next, as reflected in our detailed statistics,’ added Crawford.

Prime central London rents fell by 0.4% in July

• In Prime central London rents have fallen by 2.7% annually but they remain 21.3% above their financial crisis low

• The number of applicant viewings is up year-on-year, by 6.8%

• Rents for properties in Marylebone, Kensington and Belgravia have risen in 2013 by 1.7%, 1.6% and 0.1% respectively

• Rents in prime central London declined again in July, but despite recent falls, they remain 21.3% above the low point they reached in June 2009. 

Rental performance has been weaker for larger and more expensive properties, with greater resilience being displayed at the more “affordable” end of the market.

Over the past month rents have fallen more for houses than for flats, with a -0.6% and -0.3% decline respectively.

Rental falls have also been more notable in the £1,500+ per week bracket than in the £500 to £1,500 per week bracket this year.

Despite the ongoing decline in rents, activity levels across the prime central London rental market remain buoyant this year.

The volume of tenancies agreed over the year-to-date is 32% higher than in 2012.

Additionally, the number of applicant viewings is up this year, by 6.8%. This increase in activity reflects a broader shift in favour of the rental sector across the UK, due in part to the lack of mortgage market funding for new entrants in the owner-occupier market.

The main factor weighing on rents, especially at the top end of the market, continues to be the health of the London economy.

The ongoing Eurozone crisis has put downward pressure on growth, confidence and recruitment in the city.

Data from financial sector recruitment specialist Morgan McKinley indicated that in the three months to July 2013 there was a gradual rise in job availability month-on-month. But, while this is positive news, it is worth noting that job opportunities remain at a lower level than the same period of 2012.

While the headline figures confirm that rents continue to fall, we are seeing differing price performance across areas. Rents in Mayfair have declined by 4.2% since January. In St John’s Wood and Notting Hill average rents have also slipped in 2013 by 3% and 2.1% respectively.

In contrast, rents for properties in Marylebone, Kensington and Belgravia have risen so far in 2013 by 1.7%, 1.6% and 0.1% respectively.

Our view remains that it will be 2014 before we see more robust rental growth, however this will require a sustained improvement in central London job creation.

Record levels of Brits interested in buying abroad

Interest among future pensioners in buying a holiday home in an overseas idyll for their retirement has reached higher levels than before the financial crisis, HSBC has said.

The economic slump has not deterred millions of upcoming retirees in considering purchasing abroad to either live in during their twilight years, or have as a base for holiday visits.

Spain is still the most desired location, accounting for more than a quarter of 45 to 64-year-olds surveyed by HSBC who are planning a property purchase, followed by France and Italy.

And while many have struggled to put aside decent sums of money during the slump of the last five years, HSBC thinks that asset-rich baby boomers on better pension plans are in an ideal position to take advantage of property prices lower than pre-2007.

On average, 45 to 64-year-olds would spend on average just under £117,000 on a property abroad, with the majority saying they would buy the property outright rather than take out a mortgage.

HSBC's James Yerkess said: 'The economic downturn has had an impact on the income and savings of many but it has also helped lower the price of property in numerous overseas locations.

'Many of the baby-boom generation, who are now approaching retirement, are fortunate enough to remain relatively asset-rich despite recent economic frailties and this has opened up opportunities to take advantage of lower property prices abroad.

 'That said, the weakness in many overseas property markets has created some caution among those considering purchasing a property abroad with many saying they would now look to buy smaller properties or homes in less expensive locations.'

In spite of the tempting prospect of spending retirement in warmer climes - the last few weeks of blazing British sunshine notwithstanding - four out of five don't see themselves moving abroad permanently even if they do buy a property.

Two-thirds said they would spend between three and six months there, while a fifth would use it for no more than three months.

Spain is still the destination of choice for Britons, in spite of recent anti-tax evasion law that affects British expats being brought in recently.

UK house prices grew 0.3% in July

Hometrack house market report

Key Points:

• While overall housing market conditions continue to improve the rate of house price growth slowed in July on softening demand.
• A scarcity of housing for sale has been a key feature of the market in recent months. While supply has been growing it has failed to keep pace with demand. This trend reversed in July with a 2.4% increase in supply on the back of improving market sentiment.  
• House prices grew 0.3% in July, down on the 0.4% growth in each of the previous two months.
• New buyer registrations are slowing as seasonal factors kick in – demand for housing grew 1% in July, down from 1.6% in June and 2.5% in May.
• The coverage of price rises fell marginally over July with 29% of markets registering price increases – down from 31% in June.
• Other market indicators are still improving on the back of continued price rises and rising sales volumes. 
• The average time on the market has fallen to 8.2 weeks - the lowest for 6 years as a result of rapidly shortening sales periods in London (3.8 weeks) and the South East (6.4 weeks). 
• Vendors across the country are benefiting from a lower discount on asking price which currently averages 5.6% - another measure that is back to 2007 levels. Firmer pricing is drawing vendors into the market. 
• Looking ahead we expect demand to continue to slow over the rest of the summer as seasonal factors play their part.  The supply of homes for sale is likely to expand further as vendors look to benefit from improving market conditions and expectations of a renewed pick-up in demand in the autumn. 
• Whether 2013 turns out to be the year with the highest increase in house prices since the start of the downturn will depend on the level to which new buyers enter the market in the autumn. 

Richard Donnell Director of Research at Hometrack - the residential property analysts - said:

“The latest survey shows overall housing market conditions continuing to improve with shortening sales periods and vendors achieving lower discounts on asking price. However, the rate of house price growth slowed slightly in July as a result of weakening demand as we enter the holiday season.

"The momentum generated over the last six months looks set to moderate in the short term with less upward pressure on prices. The year has got off to a strong start. The level to which new buyers enter the market in the autumn will dictate whether 2013 turns out to be the year with the highest increase in house prices since the start of the downturn.

House prices grew by 0.3% in July, down on the 0.4% growth recorded in each of the previous two months. 

"A continued slowdown in the rate at which new buyers are entering the market (up 1% in July) is starting to reduce the upward pressure on house prices. The geographic coverage of price rises also slowed in July with 29% of the country registering price rises and just 1.8% recording price falls.

"London continues to be the engine for overall house price growth with prices in the capital up 0.7% in July, down from a 0.9% increase in June. Across the rest of the country, three regions saw prices remain unchanged in July (East Midlands, Yorkshire & Humberside, North East) while the remainder all registered price increases of up to 0.4% in the South East.

"Despite the modest slowdown in prices in July all the key market indicators continue to improve. The average time on the market has fallen to 8.2 weeks which is the lowest for 6 years thanks to rapidly shortening sales periods in London and the South East. Vendors across the country are benefiting from a lower discount on asking price which currently averages just 5.6% - another measure that is back to 2007 levels."

How home insurance premiums can give insight when buying a house

Home insurance premiums can give you a good insight into an area before you start looking for houses.

Since these prices take into account the risk of events like burglary and flooding, it stands to reason that areas with a higher insurance premium would be a riskier place to live.

Here are the postcode areas in Great Britain that had the highest (and the lowest) home insurance premiums in 2012.

It comes as little surprise that the top ten highest home insurance premiums came from London. The London area has one of the highest burglary rates in the country, with 13 burglaries per 1,000 population.**

The capital is the most densely populated area in Great Britain, and with more people comes a higher crime rate. Add to that the fact that almost everything is more expensive and to an insurer, London becomes a high risk area with a high price tag to match.

For example, Barnes is an affluent and desirable area populated by celebrities like Brian May and Robert Pattinson, and its expensive housing ultimately results in a higher premium since the houses are going to be more expensive to repair or rebuild.

Top 10 highest home insurance premiums (excluding London) in 2012

Excluding the capital, the more expensive house insurance prices tend to be clustered around cities like Birmingham, Manchester and Hull. The East Yorkshire area, including Hull, was hit hard by the 2007 floods and has been affected by smaller scale flooding in 2012.

Similar problems were seen in Boston, which was hit by flooding in June 2012. Lincolnshire council has since spent £90,000 bolstering the flood defences of the town, but these areas in the east of England might always have problems since the majority of the areas sit on a floodplain [Source: Environment Agency].

Top 10 lowest home insurance premiums for 2012

Although 9 of these 10 areas are on the coast, they’re also in areas that have a significantly lower risk of flooding than some areas with the higher premiums – proof that living on the coast doesn’t automatically mean that you’re at risk from flooding.

These areas are also in more remote areas with a much lower population (Aberdyfi, for example, only has 800 residents). As befits the small, sleepy, seaside towns, these areas have less crime than the larger cities, meaning less risk in the eyes of insurers.

What factors influence these prices?
Looking at these hotspots, there are some factors that seem to influence the prices, so it’s worth watching out for these when house-hunting:

House prices – the more affluent the area, the more you’ll have to pay for your house, and the higher the cost to repair or rebuild it should you have to make a claim.

Flood risk – Houses that are built on a flood plain can be left with a high rebuild cost if flooding affects the area. Use the Environment Agency’s Flood Map to get an idea of how well-defended an area is from flooding: maps.environment-agency.gov.uk.

Crime rate – The more instances of burglary, arson, vandalism and theft there are, the higher risk an area becomes. Inner cities and densely populated areas will naturally have a higher crime rate compared to smaller, rural towns.

Vince Cable warns about Help to Buy housing bubble

A flagship government scheme to revive the housing market could inflate it, Business Secretary Vince Cable warns.

The Help to Buy scheme provides equity loans of up to 20% for buyers of new-build homes in England and will start part-guaranteeing mortgages for buyers across the UK from next year.

"I am worried of the danger of getting into another housing bubble," Mr Cable told the BBC's Andrew Marr Show.

But another minister said the scheme would be designed not to raise prices.

The Treasury's infrastructure minister Lord Deighton told BBC Radio 5 live that it was an "ingenious scheme", adding that it "would be properly designed to avoid any risk of stimulus being converted into price rises".

"Given the current situation with the economy I think we're a long, long way from having any bubble."

Help to Buy has been credited with boosting first-time buyers this year.

But some have warned the government is interfering too much.

The first phase of the scheme was launched this year. From January, Help to Buy will be extended to help buyers of existing homes throughout the UK.

Mr Cable said: "The Help to Buy scheme is actually quite complex. We have one part that's already operating, which is providing mortgages against new homes, nobody has questioned that.

"The proposal which hasn't yet been implemented, which is providing a guarantee for a limited range of mortgages, could be a problem. It could inflate the market.

"But, if it's properly designed it could be a useful addition."

The second part of the scheme will allow people to buy with just a 5% deposit, with the government undertaking to act as guarantor for a mortgage for a further 20% of the value in the hope of giving banks greater confidence to lend.

Buyers of properties costing up to £600,000 will be eligible for the assistance.

But foreign buyers with no history of property ownership in the UK, buyers of second homes and buy-to-let landlords will be excluded, Chancellor George Osborne has said.

Further growth forecast for Prime Central London property in 2013

Property prices in prime central London continued to rise in July and now stand almost 60% above their financial crisis low in March 2009, say Knight Frank.

This nn ow points to total growth in 2013 of 6%.  

Key points:

#  Prime central London residential prices increased by 0.5% in June and by 4.2% so far in 2013

#  Over the past 12 months, price growth in prime central London has totalled 7%

# The strongest price growth has been seen in the sub-£1m price bracket

#  The biggest price rises during June were seen in Islington (1.1%), Marylebone (1.1%) and the South Bank (1.5%)

# Prices are expected to increase further as viewings are up 15%

Christian Lock-Necrews, the Head of Knight Frank’s Marylebone office: “For a central location in the greatest city in the world, Marylebone still offers good value in the £1m+ category to British buyers and those from abroad.  

"An eclectic community with a hugely popular destination high street and a recent offering of the highest quality product at 25% less than other PCL boroughs has altered the buyer perception of Marylebone and Fitzrovia. 

"They are attracted to an area that retains its community feel but has world class shopping, access to London’s great parks and is in the heart of the West End.”

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First-time buyer numbers have soared to their highest levels in six years, a report shows.

There were 120,000 in the first six months of this year, a 20 per cent increase year-on-year, the Halifax has found.

Improvements to the housing market have made it easier for buyers in their 20s and 30s to get on the property ladder.

Mortgage rates have been slashed to some of their lowest levels, driven by the government’s Funding for Lending scheme, giving lenders access to cheap finance to help borrowers.

Halifax said that the average house price paid by a first-time buyer was 4.26 times their annual earnings, well above an average of 3.23 over the last 30 years. Buyers in this sector are 30 years old on average, up from 29 in 2011.

Once first-time buyers have managed to make the jump on to the property ladder, mortgage repayments have become more affordable as a proportion of income.

Halifax said that the proportion of disposable earnings they typically need to put towards mortgage payments has dropped to 27 per cent, which is way below a peak of 50 per cent in autumn 2007 and sits comfortably under the long-term average of 36 per cent.

‘We’re determined that anyone who works hard and wants to get on the property ladder should have the chance to do so,’ said housing minister Mark Prisk.

‘Today’s figures show how government action is helping more first-time buyers take that step into home ownership.’

A new scheme called Help to Buy will be fully operational next year.

The government will underwrite £130billion of low-deposit mortgage lending with state guarantees.

Some analysts and even Business Secretary Vince Cable warn it could create a ‘property bubble’ with people overstretching themselves.

Want to invest abroad - look at Australian mining town

IP Global's second quarter Global Property Barometer takes a close look at Asia as real estate curbs in the region's long regarded safe havens, such as Singapore and Hong Kong, look set to remain firmly in place. 

Given the increase in the cooling measures can these cities remain Asia's top property investment hotspots? Which Asian markets are investors looking to as investment alternatives and which of these provide the best opportunities? Below you can find the cities that IP Global and investors are taking an interest in, their market performance analysis and forecasts and how they rank in this quarters barometer.

This has seen the Australian mining town of Mackay, Kuala Lumpur and Jakarta move into the property fast lane..

Jakarta With the fourth-largest population in the world, attractive demographics and a strong investment climate, Indonesia off ers great prospects for real estate investors looking for a growth market in Asia.  Mackay Underpinned by continuing expansion of the mining and export sectors, Mackay is one of the hottest property markets in Australia right now.  Kuala Lumpur Kuala Lumpur remains one of Asia's prime markets for investment, with the outlook upbeat for the property market following the recent elections.	Hong Kong Having shown only a slight fall in prices, the Hong Kong real estate market has remained stable in the face of newly introduced cooling measures(8).  Tokyo Interest in investing in Tokyo is on the rise, which is seeing land prices increase for the fi rst time in years(10). Melbourne The Australian economy is likely to become increasingly bipolar over the next year, with areas in Queensland and Western Australia propelled by the mining boom while federal and state budget cuts and the high dollar hurt the south east.	Singapore Though the Singapore market currently seems stable, there are reasons to be concerned about the prospects for real estate investment in the city. Hanoi Hanoi is undergoing a major market correction after the speculation of previous years has driven an abundance of supply and overinfl ated prices. Seoul The Korean economy is still experiencing a slowdown, with its very modest 0.9% GDP growth for the first quarter of 2013(20) still the fastest gains seen since the beginning of 2011.

Tiny Dorset beach hut sells for £180,000

A tiny wooden beach hut with no water, electricity or even a toilet has sold for a staggering £180,000 within days of going on the market.

But while it may not have many mod cons or amenities, and cost as much as a three bedroom house in Liverpool, the 12ft x 18ft hut boasts priceless views over the The Solent towards the Isle of Wight.

The one-bedroom cabin, which sleeps four people at a squeeze, opens directly onto the beach at Mudeford near Christchurch, Dorset - one of the most sought after pieces of real estate in the world.

But with no mains sewerage, there is no toilet and the buyer will have to walk a nearby amenity block to spend a penny.

The hut went on the market a few weeks ago and sold within days for a rumoured £180,000, it emerged today.
Will Wright, of Waterside Properties, said: 'There was definitely a lot of interest - that’s for sure. It was talk of the town when it went up for sale. The beach huts down there are so popular, I am not surprised it sold so quickly.' 
The one-bedroom hut is not accessible by car and owners will have to walk to the short distance to enjoy their new purchase. There are solar panels on the roof which power the spot lights and one 12v socket, similar to those seen in cars. Water is obtained from a communal standpipe and the sink drains via a soak-away under the property, with toilets in a nearby amenity block. The new owner - who does not want to be named - now owns the leasehold on the property until 2029 and will have to pay a yearly service charge of £1,986.00 to Christchurch Borough Council. It qualifies for a reduced council tax bill of £499.56 but can only be lived in for a maximum of ten months of the year. Former owner Sarah Litchfield, 48, who owned the property for the last 10 years, said she agonised over the decision to sell. She said: 'I had a mad moment 10-years-ago and bought it, I’m a local girl and everyone dreams of having one. 'I have spent many happy years down there and it has been a tough decision to sell.'

Source: Daily Mail

Footballer Phil Neville renting out Manchester apartment

Phil Neville is renting out his three-storey apartment that can be found in Manchester’s tallest building.
The three bedroom property is thought to be one of the most expensive of its kind in Manchester and is on the market for £15,000.

That big chunk of change buys you 4950ft² of plush real estate on the 44^th-46^thfloor of the Beetham Tower and includes a gym, study, dressing room and studio.  The footballer’s apartment boasts 180 degree views across the city and has private lift access and five allocated car spaces (well you’ll need space for the Ferraris!).

The WAG friendly property is perfect for open plan living and the interior was designed by British designer to the stars, Kelly Hoppen. If all that’s not enough, the pricey pad is above the Hilton Hotel which grants residents access to all of its luxury amenities.

The former Manchester United and Everton midfielder bought the flat back in 2006 for £1 million with his wife Julie and their two children. The property was originally up for sale for £4 million but having failed to sell the property is now available to let - something tells us that at that price, the apartment won’t be without a footballer for long! 

Check out the apartment on Rightmove here

UK House prices increase to an average of £162,621

The June data from Land Registry's House Price Index shows an annual price increase of 0.8 per cent which takes the average property value in England and Wales to £162,621.
 The monthly change from May to June shows an increase of 0.6 per cent. Repossession volumes decreased by 26 per cent in April 2013 to 1,185 compared with 1,599 in April 2012. 
• The region in England and Wales which experienced the greatest increase in its average property value over the last 12 months is London with a movement of 6.9 per cent. 
• London also experienced the greatest monthly rise with a movement of 3.1 per cent. 
• The region with the greatest annual price fall is the North East with a decrease of 3.8 per cent.
• The North East also saw the most significant monthly price fall with a decrease of 2.2 per cent.
• The most up-to-date figures available show that during April 2013, the number of completed house sales in England and Wales increased by 12 per cent to 48,367 compared with 43,252 in April 2012. 
• The number of properties sold in England and Wales for over £1 million in April 2013 increased by 45 per cent to 703 from 484 in April 2012. 
• The West Midlands was the only region to see an increase (8 per cent) in repossession sales between April 2012 and April 2013. The region with the greatest fall in the number of repossession sales was London where repossessions dropped by 37 per cent (April 2013 compared with April 2012).
The most expensive sale in June 2013 was of a property located in central London which sold for £12,250,000. The cheapest sale in June 2013 is located in Accrington, Lancashire and sold for £13,000. 

David Newnes, Director of LSL Property Services and Owners of Your Move and Reeds Rains said: “Momentum is growing in the housing market. The first time buyer market is showing it is ready to bounce back after a tough past couple of years, and the market is no longer dominated by equity rich buyers. Improved confidence – both among lenders and buyers – and a limited supply of properties is driving up values, plus the new government schemes have given the whole market a boost. The availability of cheaper mortgages has improved significantly in the last few months allowing banks to access cheaper credit and enabling them to loosen the purse strings on higher LTV mortgages. Even though first time buyer activity is lagging far behind its pre-2008 levels, there are good signs that progress is being made. The first-time buyer market is thawing, and that will energise the whole property chain, which will keep house prices moving steadily up as long as house building remains low.  We expect more lower income buyers to flock to the market and this will help stimulate growth across the board.”

Bank of mum and dad forks out £2bn a year to help children get on housing ladder

Parents are paying out £2 billion every year to help their children get on the housing ladder, as more and more young people are priced out of a home of their own.

New analysis by NatGen Social Research for Shelter shows that the pressure on parents to help their children out with the money for a deposit is rising.

Since 2009, more than a quarter (27%) of UK first-time buyers relied on help from their parents to raise a deposit – up from a fifth (17%) in the previous four years.

The average contribution from parents who helped their children was £17,000 – more than half of the average deposit of £28,000. That means that parents are contributing around £2 billion to the housing market each year. This is almost double the amount that the Government spends on building affordable homes.

Shelter is warning that unless the Government takes action to address this country’s affordable homes shortage, the Bank of Mum and Dad is going to reach breaking point. 1 in 5 parents are eating into their retirement pot to help fund children’s deposits, and a quarter are cutting back on their own spending.

For young families who can’t rely on financial help from their parents, the average time to save for a deposit is a decade. Unless something changes, then even those who could have relied on their parents in the past will begin to find that high house prices mean this parental assistance might not be enough.

Shelter argues that building affordable homes is the way to tackle this crisis. This wouldn’t just help young people hoping to get on the housing ladder; it would also ease pressure on the overheated rental market and reduce housing costs.

Campbell Robb, Shelter’s Chief Executive, said: ‘The fact that the Bank of Mum and Dad has to play such a central role in our housing market shows just how desperate the situation has become for a generation that’s priced out of a home of their own.

‘Something is seriously wrong when people who work hard and save each month still have no hope of buying a home without significant financial support from their parents. And while parents want to help their children to get a start in life, with the growing squeeze on family budgets the reality is that the majority can’t afford to.

‘Unless the Government starts building the affordable homes we so urgently need, having a home to call their own will be a distant dream for the next generation.'

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UK house price infographic from Rightmove

Add caption

Economist warns of potentially "disastrous" house price crash

ONE of Britain’s leading economists today warned of a potentially “disastrous” house price crash due to a new Government home-buying scheme that many fear is causing an unsustainable bubble.

Reacting to the announcement of an extension to the Help to Buy scheme, under which the Government will guarantee part of a home-buyer’s mortgage on properties worth up to £600,000, Graeme Leach, Chief Economist at the Institute of Directors, said:

“The housing market needs help to supply, not help to buy and the extension of this scheme is very dangerous. Government guarantees will not increase the supply of homes, but they will drive up prices at a time when it seems likely that house prices are already over-valued.

“When the scheme is withdrawn any rise in prices that has taken place will be undermined, with potentially disastrous results. There is a real risk that the housing market will become dependent on the underwriting by government, making it very difficult politically to shut the scheme down. This should be of great concern.

“The world must have gone mad for us to now be discussing endless taxpayer guarantees for mortgages.

”Instead of trying to pump-up prices, the Government should focus on relaxing planning laws and reducing Local Authority charges on developers to make it easier to build more homes.“

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Spanish house prices back to 2003 levels

Spanish house prices fell another 10% in quarter two of the year according to statistics released this week by Tinsa, a leading appraisal company.

The peak-to-present drop in house prices has now hit -37.1%, taking Spanish property values back to where they were towards the end of 2003. The rate at which prices are dropping has slowed slightly since the 1st quarter, when they fell 12.1pc.

The regional breakdown of price data for the second quarter shows that Cantabria is the region that has seen the largest year on year decrease in its property prices at 15.7%, it is followed by Catalonia, 15.2%, and Murcia & Castilla la Mancha, both at -13.9%.

All regions saw house prices fall, but those in which they fell the least were La Rioja, 5.0%, the Balearic Islands, 5.1%, and the Canary Islands, 5.3%. What is evident in the second quarter is that, in general, prices have been more robust in Spain’s tourist areas.

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Prime London rents tipped to rise 14% over five years

The dominant market drivers of prime rents of the past year are likely to continue to influence the market over the next 12 to 24 months, say Savills.

Weak employment forecasts for the financial and insurance services sector are likely to temper rental growth for prime central London property.

Much stronger employment growth in the professional, technological, media and communications sectors are likely to underpin demand in other prime and upper mainstream markets.

Accordingly, rental growth across London and the South East as a whole is likely to be relatively strong. Notwithstanding measures to boost homeownership, employment driven demand is likely to be supplemented by demand from those unable or unwilling to enter the world of homeownership; at the bottom of the market pressures on housing benefit will put a cap on rents.

A Savills spokesman said: "In the mainstream markets supply is likely to remain constrained, but less so in the more valuable markets where new activity is concentrated and international investors are particularly active. We therefore expect that rental growth prospects in the prime markets of central London are likely to be more suppressed in the short-term than we have previously anticipated.

"However we do not believe that this will be a barrier to investment in markets, where the motivation for investment has been more weighted to capital growth as opposed to income returns."

In central London gross income yields currently average 3.2%, yet investors still account for one in five buyers of second hand stock. Since 1979, real (inflation adjusted) capital growth has averaged 4.9% per annum on an annualised basis.

That figure in part reflects the very strong growth in capital values in the period since 2005 (even accounting for the 2008 downturn). Whilst we expect lower capital growth over the next five years, we still expect this market to outperform the UK mainstream market and deliver competitive total returns.

Within the context of the prime markets, the East of City markets are far more of an income play. Whilst gross yields in central London vary and tend to be higher for property worth less than £2million, our analysis suggests that they rarely exceed 4%.

By contrast, the markets of Canary Wharf and Docklands, that have far more in common with the UK mainstream market, deliver an average yield of 4.3% for the typical two bedroom property worth in the order of £700,000, a figure which rises to 5.1% for a one bedroom 

Prime central London property bubble ‘bigger and still vulnerable’

As London’s prime residential property prices rise even further relative to the rest of the UK, a new report commissioned by Development Securities PLC and carried out by Fathom Consulting, today concludes that while economic drivers can partially explain this growing premium, a proportion remains difficult to explain – the core characteristics of an asset price ‘bubble’.

The report, Prime Central London: One year on, and even higher, uses a unique statistical model to identify the key economic drivers behind Prime Central London’s (PCL) price movements. These are materially different from those affecting house prices in the rest of the UK, and include: global equity prices; the relative value of sterling; and safe-haven flows. Over long periods of time, the model has accounted for 85% of the movement in PCL prices. The report finds that the price of a typical property in PCL is now more than 6.5 times the national average, and has risen by almost 20% since the time of our first report published last year. Moreover, PCL prices are more than 10% higher than Fathom’s economic model suggests they ought to be. PCL valuations now seem less sustainable and more vulnerable to correction.

The report identifies that the biggest threat to PCL property prices would be the failure of the US Federal Reserve to engineer a smooth exit from its Quantitative Easing programme. By tapering too soon and implementing a simultaneous tightening of both fiscal and monetary policy, the report identifies a risk that the US Federal Reserve sparks a fall in the price of assets, including PCL property. The report warns that a disorderly unwinding of the US QE programme could knock around 40% off global equity prices and about half of this amount off PCL property prices.

This is the second report in a series on Prime Central London property. The previous report, Prime Central London: In a Class of its own? was published in May 2012 and showed that global investors seeking a safe-haven, immune from the threat of the euro demise, had significantly boosted PCL prices. 

Michael Marx, Chief Executive of Development Securities PLC, said: "We remain convinced of the underlying attraction of Prime Central London property. As a place in which to live, Prime Central London is unique. But of course that does not make it immune from the laws of supply and demand. With the average Prime Central London property now a little under £1.5 million, valuations have never been more stretched. We are less confident now than we were back in May 2012 that Prime Central London prices are sustainable.”

Danny Gabay, Director of Fathom Consulting, said: “With the prospect of a euro break-up moved to the back burner, ‘tapering’ by the US Federal Reserve has come to the fore as the biggest threat to PCL prices. The gradual withdrawal of monetary stimulus by the world’s largest central banks risks removing one of the key supports to global asset prices, including PCL. In the event that tapering triggers a sharp fall in asset prices, the response of sterling will be key. If Bank of England Governor Carney can convince markets that a policy tightening in the UK remains a very distant prospect, sterling may fall against the US dollar, and against other currencies more generally. This would mitigate some of the downward pressure on PCL values.”

Fall in Welsh house prices

Welsh house price sink £2,935 in the past year

·         Prices fall a further £1,552 from April

·         May’s monthly fall the biggest since January 2012

House Price	Index	Monthly Change %	Annual Change %
£150,376	233.3	-1.0	-1.9

Richard Sexton, director of e.surv, part of LSL Property Services, comments: “The Welsh housing market is still caught in the clutches of restricted mortgage availability. Prices have fallen by almost £3,000 over the past 12 months, and £1,552 in the last two months. It’s a sharp contrast with England and particularly London, which is starting to fire at all cylinders. Buyers in Wales are struggling to get mortgage finances, which is clogging the whole property chain.

“But things are looking up. The lending environment is slowly improving for first time buyers, who are able to access wider and cheaper a range of mortgage deals. Low interest rates are helping and more affordable options are surfacing that are helping boost activity from the bottom end of the market. But deposit requirements remain the sticking point with plenty of buyers unable to cobble together enough savings while inflation remains high and wages remain suppressed. Wealthier buyers and equity-rich retirees represent the largest slice of buying power: this is sustaining sales-levels, and propping up prices.

“On a regional level prices tend to vary prominently depending on the distribution of wealthier buyers. Prices have fallen in poorer ends of the spectrum in areas with more first time buyers. The sinking prices are bucking the normal summer trend of sales rising over the summer and sales figures are below average historically, by almost half what they were in 2006.

“But given how difficult it is to get a mortgage at the moment, the small rise in house sales is a cause for celebration. Sales have increased by 6.2% compared to May 2012, reflecting the improvement in first-time buyers flocking to the market, many of who have been supported by improved lending conditions.

 “The property market could do with a spark to boost its rate of recovery. The good news is that the Welsh Government plans to up its game, having recently announced the drafting of a new Housing Bill which will focus on the quality and supply of housing, as well as homelessness and the private rented sector. This bodes well for the future, while the long-term effects of the Funding for Lending scheme and Help to Buy feed through into the market. Hopefully this combination will drive the Welsh property market into safe territory as the year progresses.”

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