House prices in biggest month-on-month rise for six years

HOUSE prices in England and Wales posted their biggest month-on-month gain in more than six years in September, but talk of a price bubble is overdone, property analysis firm Hometrack said in a survey on Monday.

House prices rose 0.5 percent from August, the biggest increase since May 2007, Hometrack said. Prices were up 2.4 percent from the same month last year, the biggest annual increase since December 2007.

British house prices have picked up over the past 12 months, and some are concerned about an unsustainable price boom. But Richard Donnell, director of research at Hometrack, played down these fears.

"Prices are rising off a low base and talk of a housing bubble in relation to the national market is overdone," he said.

"We are seeing continued house price growth in London combining with modest gains across other regions and creating a picture of a broadening market recovery," he added.

Hometrack said it expected prices to continue to rise in the short term but cautioned that the market remained very sensitive to changes in demand and especially changing expectations over the outlook for mortgage rates.

Separate data from lender Nationwide released on Friday showed that British house prices shot up at their fastest annual pace in more than three years in September

September house price infographic from Rightmove

South West London house prices surge

Prime central London house prices continue to show steady year on year growth, while the predominantly domestic markets of southwest London have recorded double digit rises as a wave of equity pushes out from the core central zone, says international real estate adviser, Savills.
 
Values in prime central London rose by 1.9 per cent in the three months to the end of September, according to the Savills prime central London index.  This takes annual growth to a relatively modest  5.6 per cent, but continues a record-breaking period of steady, single digit annual price growth.   
 
There are now clear signs of outer prime London playing catch-up, with average prices across the wider markets of prime London rising 3.3 per cent in the quarter and 9.2 per cent year on year.
 
The standout performer is prime southwest London – a largely domestic market that stretches from Fulham to Wimbledon – where prices rose 4.0 per cent in the last quarter and 11.8 per cent year on year.    These markets are now on average 28.1 per cent above their 2007 peak, just behind prime central London at 30.1 per cent. 
 
Less accentuated but nonetheless robust price growth  has also been seen in other locations that have historically lagged central London, such as Islington and Wapping.
 
Properties valued up to £1million have performed particularly strongly, while year on year growth in the £10million+ central London sub-market is just 1.8 per cent as prices appearing to have broadly plateaued at 38 per cent above their 2007 levels.

See which university cities are the top for buy-to-let investors

UNIVERSITY cities Glasgow, Hull and Manchester have been named as the country’s top buy-to-let hot spots for landlords looking to invest in student properties.
Low house prices in Glasgow combined with an average rent of more than £1,000 a month on a typical four-bedroom student property mean that landlords there can expect the best rental yields in the UK at around 4.95%, according to property search website Zoopla, which used its own database for the findings.
The rental yield on a property is the annual return an investor can expect to make. It is worked out by calculating a year’s rental income as a percentage of how much the rental property cost in the first place. Zoopla’s findings were for made for gross yields, before the deduction of tax and expenses.Hull had the second best rental yield at 4.80%, followed by Manchester at 4.59%.
Many of the cities offering better potential returns for landlords are outside the more expensive areas of the South where property prices are relatively high. The size of the profit a landlord can expect to make also depends on the strength of demand from potential tenants.
Despite having the largest student population in the UK, London was only the 10th most attractive place to invest in student accommodation. 
Zoopla said this is because London house prices are rising faster than rents, which is reducing the potential returns for landlords. .
The average yield on a student property in London was found to be 4.20%, putting the English capital behind places including Cheltenham, Cambridge, Bristol and Luton.
Oxford did not make the top 10, despite its worldwide reputation. Ranked at number 14, with a typical potential rental yield of 4.02%, Oxford came behind Sunderland and Coventry.
Belfast was in 18th place with a potential yield of 3.96%, while Swansea was in 24th and Cardiff was at 30.
Carlisle, Middlesbrough and Bournemouth were found to offer the lowest potential returns to landlords. The typical potential rental yield in Carlisle was found to be 2.58%, putting it well below the UK average of 3.79%.In terms of the best value for students, Middlesbrough was found to have the cheapest digs. The average rent for a four-bedroom property in Middlesbrough was £562 a month.
At the other end of the scale, the average rent on a four-bedroom property in London costs more than six times that of Middlesbrough, at £3,485 a month.
Lawrence Hall, Zoopla.co.uk spokesman, said: "The largest number of students or the most prestigious university clearly isn’t necessarily best for investment returns.
"Landlords need to do their research and take into account the student demand, property supply, average property values and average monthly rents.
"There is no apparent North/South divide when it comes to student buy-to-let investments and a number of towns in the North are showing higher gross yields than the South as a result of property values having remained lower over the past few years whilst rental demand has increased."Best-performing student buy-to-let cities and towns for landlords, according to Zoopla, with the average monthly rent on a four-bedroom house, the average house price and the gross yield:1. Glasgow, £1,083, £262,888, 4.95%
2. Hull, £737, £184,440, 4.80%
3. Manchester, £1,053, £275,132, 4.59%
4. Cheltenham, £1,631, £429,585, 4.56%
5. Cambridge, £1,628, £429,976, 4.54%
6. Buckingham, £1,502, £405,017, 4.45%
7. Luton, £1,076, £291,454, 4.43%
8. Bristol, £1,224, £342,699, 4.29%
9. Lincoln, £877, £248,980, 4.23%
10. London, £3,485, £995,104, 4.20%

Homeowners expect UK house prices to rise

Households expect the sharpest increase in prices over next 12 months than at any time since January 2010

Households perceive that the value of their property rose over the last month at the fastest rate since the index began in early 2009

Price expectations rise to record in London, while households in Wales and North East expect the most modest rise in prices

Those aged between 45 and 54 are most optimistic that prices will rise over the year

Change in current house prices

Households perceived that the value of their homes rose in September, for the sixth consecutive month, according to the House Price Sentiment Index (HPSI) from Knight Frank and Markit.

More than 21% of the 1,500 households surveyed across the UK said that the value of their home had risen over the last month, while 5.7% said the value had fallen, giving a HPSI reading of 57.9 (see figure 1).

Any figure over 50 indicates that prices are rising. The higher the figure, the stronger the increase. Any figure under 50 indicates that prices are falling.

This is up from August’s reading of 55.3, and marks the highest reading since the index began in early 2009. On the smoother three-month rolling average, the reading has risen to 56.7 in the three months to September, up from 52 in the previous quarter.

A lead indicator

Since the inception of the HPSI, the index has been a clear lead indicator for house price trends. Figure 3 shows that the index moves ahead of mainstream house price indices, confirming the advantage of an opinion‐based survey which provides a current view on household sentiment, rather than historic evidence from transactions or mortgage market evidence.

While households in every region perceived that the value of their home had increased, the rate of the increases varied. Households in the North East, who in August reported that the value of their home had fallen, are now reporting only modest rises (53.9). In contrast, households in London (67.0) and the South East (61.0) reported the biggest increases.

Outlook for house prices

The future HPSI, which measures what households think will happen to the value of their property over the next year, rose again in September to a its highest since January 2010, reversing the slight dip seen in August.
On the smoother three-month average basis, the future HPSI reading was 68.2, the highest level since the index began, up from 63.1 in the previous three-month period.

Regional outlook

Respondents in all regions expect the value of their property to rise over the next 12 months, but there are significant differences between many regions in the North and South. Those in London (80.1) and the South East (71.4) expect the biggest rise in prices, while households in Wales (64.3) and the North East (64.4) anticipate the most modest increase in values.

Mortgage borrowers are the most confident that prices will rise over the next year (75.8), followed by those who own their home outright (74.6). Those who are renting are the more downbeat about the future movement in house prices (55.6).

Those aged between 45 and 54 (75.7) expect the biggest increase in the value of their home over the next year, followed by those aged over 55 (73.1). In contrast, those aged 18-24 (59.1) are expecting more moderate price rises.

This ‘age-gap’ is also mirrored in earnings data, with the highest earners (earning more than £57,800 a year) expecting the largest increases in prices over the next 12 months, with a reading of 79.9, although this is down from the record high of 81.1 seen in July.

Scrap bedroom tax say majority of UK public

New research has revealed the groundswell of public opinion is growing against the bedroom tax with almost three in five people (59%) saying that the Government should abandon the policy entirely.

A ComRes poll of more than 2,000 adults, conducted on behalf of the National Housing Federation this month, shows public opinion is shifting further against the policy as new evidence reveals the bedroom tax is pushing many vulnerable and disabled people into debt. Released on the last day of the National Housing Federation’s annual conference, the poll reveals that the bedroom tax has the potential to alienate a significant proportion of the electorate:

·         Four fifths (79%) of people who intend to vote Labour in the next election believe the Government should abandon the bedroom tax, while five in six (83%) potential Labour voters say the policy shows the Government is out of touch.

·         Two thirds (65%) of potential Liberal Democrat voters and more than a third (34%) of people who intend to vote Conservative in the next election say that David Cameron should abandon the bedroom tax entirely and think of other ways to save money.

·         Opposition to the bedroom tax has grown over the last few months, with 59% of the general public now agreeing the bedroom tax should be abandoned – up from 51% of the public in April.

The polling results come just two days after new data by the Federation suggested that half of families hit by the bedroom tax were pushed into debt in the first three months of the policy. The survey of 51 housing associations around England, carried out by the National Housing Federation, found that 51% of households affected by the bedroom tax (32,432 households) were pushed into rent arrears in the first three months of the controversial policy.²

National Housing Federation Chief Executive David Orr said:

“This public opinion poll must act as a wake-up call to both the Government and the Opposition. The general public see that the bedroom tax is a disastrous policy which is causing real hardship for people up and down the country. Families are spiralling into debt and with winter just around the corner they are facing terrible decisions of whether to pay the bedroom tax or cut back on essentials such as food and heating. It’s hitting the most vulnerable in our society the hardest – two-thirds of those facing the cut are disabled. And on top of that the majority have no option of moving because there is a chronic shortage of smaller homes for them to move in to.

“Potential Labour voters in particular believe the bedroom tax shows the Government is out of touch with the lives of real people. We need a commitment to repeal the bedroom tax before yet more damage is done and tens of thousands more people spiral into debt as a result of this ill-conceived policy risk the roofs over their heads.”

Meanwhile, nearly nine out of ten (87%) members of the public agree that people who need a spare room for sick or disabled family members should be exempt from the bedroom tax. According to the Government’s own estimates, 420,000 disabled people across the country are being hit by the bedroom tax.

More than two thirds (68%) of the general public say no-one should lose Housing Benefit unless they refuse to move into suitable smaller accommodation. Research by the National Housing Federation indicates that there is a huge shortage of smaller homes for people affected by the bedroom tax to downsize into. In March, the Federation estimated that although 180,000 households were under-occupying two bedroom social homes, only 85,000 one-bed social homes became available in 2011-12.²

Supply of homes in regional housing markets

To fully understand the nature of the UK property market, it is important to recognise that there are significant variations in supply dynamics across mainland UK.

In fact, it should come as no surprise that the balance of supply and demand for property in each region is fundamentally correlated with price performance.

Although the regional disparities in price recovery have been widely reported, regional supply dynamics, whilst equally important, have not garnered sufficient attention. 

The current volume of vendors entering the market (around 100,000 per month across the UK) is less than half of what it was during the property boom year of 2007. It may be argued that restricted supply of property for sale has been instrumental in both preventing a greater crash and facilitating a much more rapid recovery. The same thesis applies at a regional level.

The consequences of low supply and high demand are all too apparent in the overheating London property market, where supply is down 19% and prices are up 10.5% (year-on-year). 

Contrastingly, the North East is the real contrarian in the country's supply crisis. In this region, the supply of new and resale property has actually risen by 16% over the last 12 months while pricing is essentially stagnant (+0.5% but falling in real terms).

Clearly, in the current market, homeowners in areas where prices are growing at a reasonable rate are reluctant to sell. Concerns about the lack of suitable properties are discouraging many would-be vendors. Another considerable influence is the strong rental market. 

As sales prices continue to rise, property owners are choosing to bide their time and enjoy the high rental yields and income generated from a strong lettings market, hence the growing number of 'double renters'.

Even in London, where the average property price has risen 10.5% in the last 12 months, the strong rental market can offer landlords an average monthly rent of £2,369 for a flat and £3,636 for a house.

On the other hand, we are also witnessing increases in the number of vendors in the poorly performing northern regions. This is an alarming trend for areas such as the North East and the North West where price growth is already negligible. 

Increasing supply looks set to keep prices in such regions in check, at least for the rest of the year. Hence, in contrast to the South, the North remains, for the time being, a buyer's market.

Doug Shephard, director at Home.co.uk, commented:

"These regional supply dynamics suggest that the bipolar nature of the UK property market is only going to get worse. Starved of new and resale stock, pricing in the London and South East property markets looks set to go ballistic. 

"Prices in the capital are already increasing too fast and further restrictions in supply can only serve to make matters worse. Meanwhile, increases in supply in the sluggish northern markets can only exacerbate their problems of slow sales and price stagnation."

London house prices rise nearly 10% in a year

House prices in London have risen by nearly 10% in the last year, adding to signs of a sharp north-south divide in the market.

A 9.7% increase in prices in London over the year to July helped to push the value of homes across England to a new high of £255,000 on average, the Office for National Statistics (ONS) said.

House prices in London and the South East both raced past their 2008 peaks and stood at an average of £438,000 and £303,000 respectively, while prices in the East of England and the South West also edged close to their previous highs.

But the UK market was still patchy and while house prices were up by 3.7% year-on-year in England they dropped by 2% in Scotland and 0.7% in Wales. 

Prices in Northern Ireland were up by 1.8% year-on-year as the market showed signs of starting a slow recovery after some sharp falls following the economic downturn.

The annual pace of house price inflation picked up across the UK in July to its fastest rate recorded in 2013 so far at 3.3%, taking values to £245,000 on average. Prices rose by 0.3% month-on-month.

Peter Rollings, CEO at Marsh & Parsons, comments: “A strong recovery is evident across much of the UK as house prices continue to rise at their fastest rate in many years.  The market is helped by an improving economy, low interest rates, and government-backed schemes such as Help to Buy. But while the market buoyancy is clear, any talk of a housing bubble is wide of the mark. 

"Prices in most parts of the country are still well below the market highs of 2007, and the recovery in many parts of the UK is relatively muted. Ultimately, house prices can only increase at a rate that people can afford – so while wages remain low, and lending continues to be checked, there is a limit to how high house prices can rise.

 “However the London property market tells a different story, with price increases that dwarf those in the rest of the UK.  In the Prime London property market, an imbalance of supply and demand means that prices rise faster than in other areas.  

"The huge demand for property in the most desirable parts of the capital, from both UK and overseas buyers, is helping to push prices higher. In the three months to June, we recorded 11% more buyers entering the market in competition for 14% fewer properties. Property is changing hands in record time and for close to the asking price, with 98% of the asking price for Prime London property regularly being achieved.”

Rightmove raise house price forecast to 6%

RIGHTMOVE is raising its 2013 forecast again, from 4% to 6%, as high search activity and a fall in stock of property on agents’ books look set to create an autumn price surge.

August saw Rightmove’s traffic up more than 20% year-on-year and average property stock per estate agency branch has fallen from 72 properties to 70 as property coming off the market exceeds the amount coming on.

The average price of new to the market property is down by 1.5% (-£3,704) this month, though remains up by 7.2% (+£16,506) so far in 2013.

Miles Shipside, Rightmove director and housing market analyst comments: “We forecast the national average increase in new seller pricing for the whole of 2013 to be in the region of 6%, partly driven by the strength of southern markets but increasingly contributed to by the more buoyant areas of the north. 

"Potential sellers should note that there is the possibility of this autumn’s market being a better time to sell than 2014 if you are trading up. The price gap to trade up might be smaller now and there may be more competition from other sellers next year if January’s second phase of Help to Buy unlocks the housing market”.

Limit UK house price inflation to 5% say RICS

The Royal Institution of Chartered Surveyors has called on the Bank of England to limit annual house price inflation to 5% to prevent another property bubble.

RICS said the Bank should police its proposed cap in house price inflation through its Financial Policy Committee (FPC). If prices pushed above the limit, the FPC could enforce lower loan-to-value or loan-to-income ratios, shorten mortgage terms, or restrict lending to prevent them spiralling higher.

Property prices are already rising at more than 5% a year according to mortgage lender Halifax, and the RICS has joined a chorus of voices warning that such rises could become unsustainable.

Figures from LSL/Acadametrics on Friday showed a 30% rise in the number of first-time buyers.

"Sending a clear and simple statement to the public that the Bank will not tolerate house price rises above five percent would help restrict excessive price expectations across the country," the RICS report said.

"This policy would discourage households from taking on excessive debt out of fear of missing out on a price boom, and discourage lenders from rushing to relax their lending standards as they compete for market share."

The industry group notes that limits on property price inflation have been used by a variety of countries, including Canada between 2008 and 2012, when Bank Governor Mark Carney headed the country's central bank.

Under Carney's watch, Canada's national regulator the amount buyers could borrow in relation to their deposit and imposed more stringent credit checks - measures that appeared successful in bringing price inflation back down.

House prices hit a record high in August

Key points from LSL house price index:

·         The number of sales exceed 70,000 for the second month in a row

·         House prices increased £7,275 in the past twelve months, reaching an average of £233,776

·         Number of first-time buyers up by more than 30% over the year

House Price	Index	Monthly Change %	Annual Change %
£233,776	238.0	0.4	3.2

David Newnes, director of LSL Property Services plc, owner of Your Move and Reeds Rains estate agents, comments: “House prices soared to a new record high in August – the fourth record high so far this year. The property market has turned over a new leaf after years of restrained activity following the financial crisis. 

"Prices are up £883 in the last month and are £7,275 higher than a year ago due to a substantial boost in mortgage lending to first-time buyers. 

"The UK’s economy is showing signs of sustained recovery which is pushing the housing market forward. Sales are rising rapidly; in May to August 2013 they have been higher than the equivalent period for the previous three years."

Mortgage lending

“The improving availability and pricing of mortgages is boosting demand for properties. Although prices are rising, competition among lenders has opened up the market for first-time buyers, with growing product choice and competitive rates. 

"There has been a concerted effort by lenders to boost mortgage lending. The Government has been pivotal in providing the aid that the market has been craving for many years. The number of first time buyer mortgages is at the highest it has been in five years. 

"The Funding for Lending Scheme has enabled banks to lend to a wider pool of borrowers thanks to cheaper funding, while the Help to Buy scheme is helping buyers overcome many hurdles such as high inflation and hefty deposit requirements. A vast number of aspiring homeowners have already signed up and many can finally afford to get on to the housing ladder.

“Higher loan-to-value (LTV) mortgages are much more readily available and at lower rates, which has been the catalyst behind the vast improvement in the housing market coupled with increasing consumer confidence. True, those with the largest deposits have access to the best rates, but overall they are falling and those with small deposits are able to grab cheap deals. LSL data shows that the average age of a first-time buyer is 30 and the average deposit is £30,109. 

"First-time buyer activity, proving particularly strong in London, as well as the rest of the UK, has been crucial in opening up many housing chains and in helping boost house prices further up the ladder. The road to recovery is a long way off from the levels of activity seen before the financial crisis, but the rise in first-time buyer activity is sending positive waves of confidence.

Growth across all regions

“As expected, London is fuelling the significant rise in house prices on a national level. But signs suggest price growth is happening across the board. All ten regions in the country showed an increase in the annual rate of house price inflation compared to a month ago showing prices will climb across the whole of England and Wales. 

"It is still too early to predict what impact the economy will have on prices, especially as the Bank’s Financial Policy Committee may apply downward pressure on prices through the controls over mortgage supply and pricing. Thus nothing can be set in stone yet. One thing is crystal clear: the market has become more fluid thanks to the increase in activity from the lower tier of the market.”

First time buyers up 41% on last year

Survey results published by the Council of Mortgage Lenders today show that this growth in July continued to be buoyed by home-owner house purchase lending, in particular by growth in first-time buyers.

The CML data (which, as of this month, includes buy-to-let) shows:

• Total home-owner house purchase lending continued to grow, up 9% on June and 21% on July last year.
• First-time buyers took out 25,300 loans in July, an increase of 5% on June and of 41% compared to July 2012.
• Home movers took out 32,000 loans, an increase of 12% compared to June and up 9% on July last year.
• Home-owner remortgage lending continued to pick up compared to July 2012 and recent months, although the £3.8bn advanced remains subdued compared to historical volumes.  
• Total buy-to-let loans advanced increased to 15,200 in July, up 12% compared to June.
• Within this, 7,600 buy-to-let loans in July were for house purchase, up by 7% compared to June.
• In contrast to the picture in the home-owner market, buy-to-let remortgage lending grew more strongly than house purchase, increasing by 24% compared to June to £1.1bn. 

Lending for home-owner house purchase

Total home-owner house purchase loans (both movers and first-time buyers) continued to show the resilience and growth seen throughout 2013. 57,400 house purchase loans were advanced in July, an increase of 9% on June and up by 21% on July last year. These loans had a total value of £9.1bn, which was an increase of 12% on June and 23% compared to July last year. 

Table 1: Loans for house purchase and remortgage

	Number of house purchase loans	Value of house  purchase loans, £m	Number of  remortgage loans	Value of remortgage loans, £m
July 2013	57,400	9,100	27,000	3,800
Change from June 2013	8.9%	12.3%	5.5%	8.6%
Change from July 2012	21.1%	23.0%	7.6%	15.2%

Lending to first-time buyers

The strong growth in lending to first-time buyers since the beginning of the year has continued, with the number of loans advanced increasing by 5% compared to June. In July, 25,300 loans were advanced to first-time buyers, worth £3.5bn. By value, first-time buyer lending was 6% up on June and 46% up on July last year. 

The typical first-time buyer loan size stayed almost unchanged from June at £117,038, while average first-time buyer household income increased to £36,142 from £35,873 in June.

Affordability improved marginally in July compared to June reflecting the average loan size remaining largely unchanged but a higher income average, alongside a further fall in typical interest rates. Typically, first-time buyers in July borrowed 3.31 times their income in comparison to 3.33 in June and mortgage payments (capital and interest) accounted for 19.2% of income, down from 19.3% in June.

Increase in houses coming onto UK property market

Rising prices and burgeoning buyer demand have led to significant increases in homes coming onto the UK property market in August, say RICS.

Relatively low numbers of new properties coming up for sale has been holding the market back in recent months. However, during August, 26% more chartered surveyors reported increases not decreases in new instructions (from +16% in July). With positivity starting to return to areas right across the UK, it seems those who may have been waiting for the right time to sell are choosing now to do so.

However, although supply did jump considerably last month, it did not rise sharply enough to keep pace with the sheer weight of demand. 

During August, the number of would-be buyers increased yet again as increasingly accessible finance allowed more people to enter the market. A net balance of 66% more respondents reported growing numbers of enquiries from potential buyers last month. 

Perhaps unsurprisingly, price increases became more widespread, as 40% more surveyors reported rises rather than falls across the UK. This is the highest reading since November 2006 and demonstrates the extent to which the market is starting to recover.

Across the country, each region saw supply increase as the recovery continues to spread from the South East of England to other areas. The South West and the North East, in particular, saw the number of new homes coming onto the market rise significantly.

Looking ahead, it seems that recent price rises are going to continue unabated. A net balance of 45% more surveyors expect further price growth over the next three months as the market continues find its feet.

Peter Bolton King, RICS Global Residential Director, said: "It’s not surprising that more and more people are looking to sell their homes. The buyers are out there and prices are on the up so if you’re looking to move it’s a good time to do so. 

"What we don’t wish to see, however, is prices rise to such an extent that they become unaffordable. For the market to work properly, it’s vital that property is both accessible and affordable, and we’ll be monitoring the situation very carefully as the housing sector continues to recover."

Lack of affordable housing puts pressure on parents

The lack of affordable housing in Britain is increasing the emotional and financial burden on parents as their grown-up children can no longer afford to move out, new research has revealed.

A ComRes poll of more than 1,100 parents with adult children aged 21 to 40, conducted on behalf of the National Housing Federation, found that:

• Three out of ten parents (27%) have at least one adult child aged between 21 and 40 living at home.
• Two-thirds (66%) of parents with at least one adult child living at home say they are doing so because they simply can’t afford to move out.
• Nine out of ten (89%) parents with grown-up children believe there is not enough housing in Britain that people can afford.

This is increasing pressure on family life. While a quarter (26%) say having grown-up children living at home had brought their family closer together, other parents were not so positive. A fifth (23%) say having a grown-up child living at home has caused them stress and a further fifth (18%) say it had caused family arguments. Worryingly, one in ten (8%) parents say having a grown-up child living at home has caused them to fall into debt.

 

Parents in higher income brackets are more likely to have at least one grown-up child living at home. More than a third (36%) of parents with grown-up children with a household income of more than £30,000 have at least one of their adult children living at home, compared to a fifth (21%) of parents with adult children with a total household income of £30,000 or less.

 

More than a third (41%) of parents with at least one adult child living at home say they are doing so because the cost of living away from home is too high, while a further fifth (22%) say they are living at home while they save up for a deposit. 

 

Unless more homes are built, the situation soon could become even bleaker for parents with children in their twenties and thirties. First-time buyer house prices are set to increase by 42% by 2020, while rents in 2020 will be 46% higher that they are today. That means parents could be forced to look after their grown-up children for even longer as they struggle to save up enough money to get a place of their own. 

Rightmove - 8 key tips for buy to let investors

Research the market 

Before you start looking at properties, make sure you know what you're getting into. Look at all theoperty is a long term investment, so you need to consider whether you can afford to have money tied up for this long. If you might need quick access to your money, then this isn't the right investment for you. You also need to think about what happens if house prices fall further and whether you'll still be able to afford the property. Speak to other investors and see what their experiences are.

Choose the right area
When you're researching areas, it's essential that you think about who your potential tenants are and where they want to live. This isn't going to be your family home, so you need to forget about your own preferences. Look at the local transport links, schools and amenities and how these factor into the lives of your tenants.

Check the finances
Before you commit to an investment, you need to ensure that it's affordable. Look at the price of local properties and the possible rental income to see if the figures add up. A good guide for buy to let investors is for the rent to cover 125% of the mortgage, as this provides a buffer if the property is left empty at some stage. Mortgage deals for new property investors will require larger deposits (usually around 25% to get the best deals) and arrangement fees can cost more.

Research mortgage deals
Make sure you look at all the mortgage products available - don't just opt for the first one you find. There are organisations online that list details of the best buy to let deals. It's also worth considering using a specialist broker who can look across the whole market and might have access to exclusive products.

Your tenants
You always need to keep your potential tenants at the forefront of your mind to ensure that it's a property they want to live in. Decide on who you're aiming for. For example families will be looking for something very different from students or single people. Deciding on your target market will help you to focus on exactly what type of property you're looking for. The best types of tenants are those who want to stay for a considerable period of time and make the property their home. However, you also need to think about what will happen if you have unreliable tenants and how the tenants eviction process works.

Negotiate on price
As a buy to let investor you're in an excellent position to negotiate on the price of the property. With no onward chain there's less potential for the sale to fall through and you might be able to move faster. When you find the right property, make a low offer to start with and don't be tempted to pay too much.

Consider the negatives
When you're entering the property investment market, don't just think about the positives. Consider the negative aspects, including whether your investment will still work if prices fall – or demand drops. You need to think about what will happen if the property is empty for long periods, you need to start a tenants eviction process or the property needs essential repairs.

How involved will you be?
Will you want an agent to manage the property or will you deal with everything yourself? An agent will charge a management fee, but they'll take care of advertising, viewing and organising repairs. They will also be dealing with tenants for you - which can be a big plus. If you decide to go with an agent, research all the options and the different fees.

UK house prices up 5.4% say Halifax

House prices are 5.4% higher than last summer as property market activity intensifies, figures from the Halifax showed today.

The lender said prices rose 0.4% in August, the seventh consecutive monthly increase, resulting in an average figure of £170,231.

Prices in the three months to August were 5.4% higher than in the same three months a year earlier, better than July’s 4.6% increase and the highest annual rate since June 2010. The annual rate has picked up from 1.1% in March.

Halifax housing economist Martin Ellis said economic improvement and Government schemes have helped boosted demand, although activity is still being held back by the squeeze on household budgets.

“Overall, house prices are expected to rise gradually over the remainder of the year,” he said.

Halifax’s report follows similar findings from building society Nationwide last week that the housing market revival is gathering pace.

Lenders, surveyors, estate agents and property websites have all been reporting a strong pick-up in activity following the launch of Funding for Lending, which has prompted a big improvement in mortgage availability and rates.

Other initiatives such as NewBuy and Help to Buy have been aimed at giving people with smaller deposits a leg-up.

Half of tenants expect to buy in next five years

In July, 98% of registered tenants wanted to become a homeowner, up 2% from April, and 9% higher than in December, but only 12% are expecting to buy before the end of the year. 

Almost half (49%) are expecting to buy in the next five years, a significant increase from the start of the year. In December, only a third (36%) of tenants expected to buy in the next five years.

And tenants currently unable to become first-time buyers named the inability to save for a deposit as the biggest stumbling block to homeownership. 

More than half (46%) are unable to buy as they can’t save for a deposit, and a growing number of potential first-time buyers (19%) are concerned that rising costs like stamp duty will get in the way – up by a third from just 13% in December 2012.

London & the South East VS the rest of the UK

The concerns over building a deposit are even more apparent in London and the South East. In this region, 55% of tenants who can’t afford to buy are prevented by high deposit requirements, 12% higher than in the rest of the UK. 

This is a result of prices in the capital rising more quickly than the rest of the UK. The latest England and Wales house price index from LSL shows that house prices in London have risen by 7.1% over the year to June, whilst prices in England and Wales as a whole rose by just 2.2%

Transaction costs such as legal fees and stamp duty are more of a concern to tenants in London and the South East, with over a quarter (27%) naming these costs as a key factor blocking them from purchasing property, compared to just 16% in the rest of the UK. 

Worries about having enough income for repayments played a lesser role than in the rest of the UK, concerning just 8% of potential first-time buyers.

David Newnes continues: “It remains a huge challenge for first-time buyers to purchase property in the capital. House prices are more expensive, and the size of deposit required dwarfs that in the rest of the country. It’s the reason why six out of tenants in London can’t afford to buy. 

"And there are further concerns for the London market. Higher legal fees and stamp duty costs are turning further first-timers off buying.”

The profile of a first-time buyer

The average first-time buyer in July was 30 years old, with an annual salary of £36,299 per annum, 4% higher than in July 2012, when the average salary was £34,936.

The number of first-time buyers who were able to self-fund their purchase fell to 41% in July, from 51% in April. 36% of all first-time buyers in the UK received financial help to put together a deposit from parents or relatives, whilst 9% benefitted from an inheritance, and 2% received familial help with mortgage repayments. 4% received financial help from a government scheme such as Help to Buy, up from 1% in April.

Once again, Londoners need the most help to get onto the ladder, with 44% of all first-time buyers in London receiving help towards a deposit, compared to just 33%, and just 36% of buyers able to self-finance.

44% of all first-timers were looking for houses with three or more bedrooms, and the second most popular property type were two bedroom houses (31%). Flats continue to attract far fewer first-time buyers – with just a quarter of buyers looking for flats rather than houses.

Why buy now?

Four in ten (41%) first-time buyers said they were choosing to buy now as they had only recently been in  a position financially stable enough to purchase a property, while a quarter (26%) chose to buy to own a house with their partner, and a second quarter (25%) feel it is time for them to settle down. 

Only 8% bought for investment purposes,  expecting house prices to rise, down from 11% in April.

And first-time buyers are confident that the value of property is set to rise.

Almost half (46%) of UK first-time buyers think that house prices will rise by up to 5% in the next year, while a further two in ten (18%) believe prices will rise between 5% and 10%. Only three in ten (28%) first-time buyers believe prices will remain flat in the next year, while less than 4% believe prices are likely to fall.

First time buyers up 45% on last year

The number of first-time buyers rose 45% year-on-year in July, thanks largely to a sharp fall in mortgage rates,  according to the latest First Time Buyer Monitor from LSL Property Services.

There were 26,100 first-time buyer sales in July, 8,100 more than twelve months ago. It was the highest number of first-time buyers since November 2007, indicating the improvement in the first-time buyer market is gathering even more momentum.

A sharp increase in the affordability of mortgages drove the improvement. The average mortgage rate fell from 4.92% in July last year, to 3.99% this year, attracting more buyers to the market. Rates have now fallen every month for the last year, as banks are passing cheap credit from Funding for Lending onto borrowers.

The cheaper rates meant that mortgages were more affordable for first-time buyers. The proportion of income represented by mortgage repayments fell year-on-year from 21.6% to 20.4%.

	Transactions	Average Purchase Price (£)	Average LTV
July 2013	26,100	£146,726	79.5%
June 2013	25,300	£146,250	79.6%
1 month change	+3.2%	+0.3%	-0.1% (from 79.6%)
3 month change	+40.3%	+8.0%	-0.9% (from 80.4%)
1 year change	+45.0%	+8.0%	-0.4% (from 79.9%)

But there are warning signs ahead, with rapidly rising house prices threatening to price the next wave of first-time buyers out of the market. Deposits now represent a far greater proportion of the income of a first-time buyer, and are rising. The average deposit is now equal to 83.1% of annual income, up 5.0% on July last year – slowing the pace of the recovery in first-time buyer lending.This was a result of rising house prices, which have pushed average deposits skyward, despite banks’ willingness to lend to those with a smaller deposit size.

The average purchase price for a first-time buyer rose by 8% year-on-year in July, and is now £146,726. This was 0.3% higher compared than in June, when the average purchase price was £146,250 and 6.0% higher than the average price so far this year, which was £138,353.

And the average LTV for a first-time buyer remained broadly flat – down 0.4% year-on-year to 79.5% in July, and down just 0.1% from June.

First-Time Buyer Affordability

	Average deposit (£)		Deposit as proportion of income	Average mortgage rate	Mortgage repayment as proportion of income
July 2013		£30,109	83.1%	3.99%	20.4%
June 2013		£29,845	83.2%	4.06%	20.7%
1 month change		+0.9%	-0.1%	-0.07%	-0.3%
3 month change		+13.1%	+6.7%	-0.25%	+0.1%
1 year change		+10.0%	+5.0%	-0.93%	-1.2%

David Newnes, director of LSL Property Services, owners of estate agents Your Move and Reeds Rains, said: “Mortgages are much more affordable for first-time buyers compared to last year, which has opened the door to thousands of would-be buyers who were shut out of the market. Economic confidence is returning, nudging many more buyers in the direction of property, and nudging lenders to offer more loans to buyers with smaller deposits. Rates have fallen sharply, and there are good deals to be had for savvy first-time buyers, which has made a mortgage much easier to come by. The uptick in confidence, beneficial to both parties, is contagious.

“But there is a down-side to the good news. There is simply not enough housing stock to match continued demand. If supply fails to keep pace with demand the housing market will become increasingly unsustainable. Prices will rise sharply, and future first-time buyers will be left in the lurch. There is a desperate need for further cheap property in order for the run of success to continue.”