Abu Dhabi Islamic Bank Arranges Islamic Financing Deal for London Property

This article by WAM of gulfnews.com on October 30th, 2013 reveals the deal that marks ADIB's debut in London's real estate market.

Abu Dhabi: Abu Dhabi Islamic Bank (ADIB) has arranged a £20 million (Dh118.02 million) structured Islamic financing transaction to fund the development of Westbourne House, a prime 1980s commercial property in central London, combining office and retail space.

The deal marks ADIB’s debut in London’s real estate market at a time when the British government is promoting the city as a centre for Islamic finance. British Prime Minister David Cameron told a gathering of political and business leaders on Tuesday that he wanted London to “stand alongside Dubai and Kuala Lumpur as one of the great capitals of Islamic finance anywhere in the world.”

ADIB’s financing package for Westbourne House was specifically tailored to meet the investors’ aims of acquiring, refurbishing and reselling high-value luxury properties to overseas buyers.

Arif Usmani, global head of wholesale banking at ADIB, said: “ADIB welcomes the increasingly high profile role being played by the UK’s financial services sector to encourage the global acceptance and growth of Islamic finance products and services. Resilient demand from international buyers for prime residential real estate has underpinned the performance of London’s property market which has outpaced most other markets in recent years. ADIB appreciates the value of building strategic partnerships with investors in international markets, which enable us to extend our global reach and to identify similar opportunities in London and other key international locations for our clients.”

Article Source: http://gulfnews.com/business/general/abu-dhabi-islamic-bank-arranges-islamic-financing-deal-for-london-property-1.1249375

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Here's Who's Buying Those Insanely Expensive Homes In London

This article by Joe Weisenthal of Business Insider on October 28th, 2013 reveals the interested parties who are buying the insanely  expensive homes in London.

The insanely-hot London housing market has become the subject of global fascination.

But who's buying it all?

Deutsche Bank is out with a new report on the London housing market, and it includes this fascinating chart, which breaks down origin of purchaser by price range.

As you can see, at the low end, the dominant share of buyers is domestic UK buyers.

But at the high end, UK-based purchasers make up a tiny slice of the pie. A massive swath of the buyers is Eastern European or Russian. Chinese and Middle Eastern buyers are also quite significant. Chinese buyers actually make up a bigger purchase of the slightly cheaper ranges.

So basically, tons of Chinese buyers at the expensive levels, and then at the ultra-rich level it's a lot of Russian and Eastern European money.

Deutsche Bank, Knight Frank

And as for why they're buying so much.

Lots for investments, and some are buying for their children.

Deutsche Bank

Article Source: http://www.businessinsider.com/whos-buying-london-property-2013-10

Pound Little Changed Versus Euro as British House Prices Climb

This article by Emma Charlton of Bloomberg on October 29th, 2013 reveals that their is a house price increase in UK and changed the value of pound against euro.

The pound was little changed against the euro following last week’s drop as an industry report showed U.K. house prices increased for a ninth month in October.

Britain’s currency was within two U.S. cents of a four-week high versus the dollar as the data added to evidence the economy is strengthening. Gross domestic product grew 0.8 percent in the third quarter, the most since 2010, the government said last week. British government bonds were little changed.

“The U.K. data should continue to be pretty good,” said Lutz Karpowitz, a senior currency strategist at Commerzbank AG in Frankfurt. “The GDP data last week were pretty strong, so this is something which could lead to some more sterling strength.”

The pound traded at 85.45 pence per euro at 4:26 p.m. London time, after depreciating to 85.55 pence on Oct. 24, the weakest level since Aug. 29. It slid 0.9 percent last week. Sterling dropped 0.2 percent to $1.6132 after rising to $1.6257 on Oct. 23, the highest since Oct. 1.

Average home values in England and Wales rose 0.5 percent this month, matching September’s increase, Hometrack said in a statement. They’ve climbed each month since stagnating in January. Annual price inflation accelerated to 3.1 percent, the most since November 2007, according to the London-based property researcher.

Millions of U.K. commuters were told to stay at home and more than 220,000 properties lost power as southern England’s worst storm since 2008 blocked rail tracks, severed electricity cables and closed a nuclear power plant.

Best Performer

The pound gained 3.1 percent in the past three months, the best performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, on optimism economic growth was quickening. The euro rose 1.9 percent, while the dollar weakened 2.3 percent.

Under its forward-guidance policy announced Aug. 7, the Bank of England pledged to keep the benchmark interest rate at 0.5 percent at least until unemployment falls to 7 percent, subject to caveats on inflation and financial stability. Officials are preparing new quarterly forecasts for growth and inflation, which Governor Mark Carney will present on Nov. 13.

“The forecasts that form the basis of the report appear set to show an upgraded growth outlook and a bringing forward of the unemployment rate threshold by one or two quarters compared to the previous forecast,” Paul Robson, a London-based foreign-exchange strategist at Royal Bank of Scotland Group Plc, wrote in a note to clients today. “The focus now turns back to whether this solid pace of expansion can continue.”

The pound will “benefit” from any significant change to the BOE’s forecasts, he wrote.

U.K. Growth

The U.K. economy expanded 0.8 percent in the third quarter, up from 0.7 percent growth between April and June and the most since the second quarter of 2010, the Office for National Statistics said on Oct. 25.

The benchmark 10-year gilt yield was at 2.61 percent after falling 10 basis points, or 0.1 percentage point, last week. The price of the 2.25 percent bond due in September 2023 was at 96.895.

The extra yield investors demand to hold 10-year gilts instead of similar-maturity German bunds was 86 basis points, up from 51 basis points at the end of 2012.

“We see gilts as likely to remain vulnerable to better economic data,” Gary Dugan, Singapore-based chief investment officer for Asia and the Middle East and Alan Higgins, London-based U.K. chief investment officer for Coutts & Co. wrote in a note to clients today. “We continue to expect them to underperform their peers in Europe, where growth is more sluggish.”

Gilts lost 2.2 percent this year through Oct. 25, according to Bloomberg World Bond Indexes. Treasuries fell 1.8 percent and German securities slid 1.4 percent.

To contact the reporter on this story: Emma Charlton in London at echarlton1@bloomberg.net
 
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net

Article Source: http://www.bloomberg.com/news/2013-10-28/pound-little-changed-versus-dollar-after-u-k-house-price-report.html 

89% 'Expect House Prices to Rise'

This article by the Express on October 15th, 2013 reveals that 9 in 10 homeowners confident that house prices to rise to highest level in four years.

Nine in 10 home owners expect house prices to rise in the coming months as market confidence surges to its highest level in at least four years, research has found.

Confidence in the housing market has surged to its highest level in four years, research suggests [PA]
 

Some 89% of more than 9,000 home owners surveyed by property search website Zoopla predict further house price hikes in the next six months, marking the highest proportion seen since its records began in 2009.

Just 4% of home owners across Britain believe prices will drop, down from 17% this time a year ago. People typically expect prices to rise by 5.7% between now and next spring, with London home owners predicting particularly strong growth at 8.3%.

Some 97% of Londoners surveyed expect to see values increase. Separate research by another website, Rightmove, published earlier this week showed that house sellers' asking prices in London have jumped by 10% in the space of just one month to reach a new high of over £544,000.

Two-thirds (66%) of those across the survey who think property prices are on the up said the level of property sales they have already seen in their local area is their main reason for believing this.

Despite home owner confidence remaining higher in the South than the rest of Britain, every region recorded an increase in the proportion of people who think prices in their area are rising. Even in areas of the North and Wales, where confidence was at its lowest, 84% of home owners believe prices are rising.

The West Midlands and Yorkshire and the Humber recorded the biggest jumps in home owner confidence over the last quarter. The proportion of owners predicting price rises has risen from 78% to 90% in the West Midlands, while Yorkshire and the Humber has seen a jump from 72% to 84%.

The low point for home owner confidence recorded by the study was in winter 2010, when just over half (54%) of home owners were expecting price increases.

The Zoopla research was conducted between the end of September and the start of October - just after Prime Minister David Cameron announced that the launch of new phase of the Government's flagship Help to Buy scheme offering state-backed low-deposit mortgages was being brought forward by three months.

Mr Cameron has rejected fears that the UK is heading for a house price bubble, with borrowers being encouraged to over-stretch themselves in a market where the number of houses for sale is in relatively short supply, which is putting an upward pressure on house prices. He has said the market is generally still recovering from a low base.

State-backed lenders Royal Bank of Scotland (RBS), NatWest, Halifax and Bank of Scotland all started offering loans to first-time buyers and home-movers with 5% deposits under the new phase of the Help to Buy scheme from this month. Other major lenders including Santander, HSBC and Barclays have confirmed plans to join the scheme at a later date.

Lawrence Hall, spokesman for Zoopla, said the new phase of the Help to Buy should boost confidence further "across the country" and not just in London, which has continued to attract wealthy overseas buyers looking for a safe haven to place their cash.

Office for National Statistics recently showed that even before the new phase of Help to Buy was launched, UK house prices reached a record high of £247,000 in August and the British Bankers' Association (BBA) reported this week that mortgage approvals to home buyers are at a four-year high.

The Government's Funding for Lending scheme, which was launched in 2012 and has given lenders access to cheap finance to help borrowers, has already had a major impact on the housing market, with the choice of mortgages rapidly increasing and lenders dropping their rates to ultra-low levels.

Here is the proportion of home owners predicting house prices will rise over the next six months by region, according to Zoopla:

:: Yorkshire and the Humber, 84%

:: West Midlands, 90%

:: Wales, 84%

:: South-west England, 90%

:: South-east England, 95%

:: Scotland, 85%

:: North-west England, 84%

:: North-east England, 84%

:: London, 97%

:: East of England, 92%

:: East Midlands, 88%

Article Source: http://www.express.co.uk/news/uk/439012/89-expect-house-prices-to-rise

Mortgage Approvals Rise Ahead of ‘Help to Buy’

This engaging article by Lucy Tesseras of Marketing Week on October 24th, 2013 tells us that Help to Buy scheme could open doors to brands but could damaged consumer trust.

A rivival in the property market thanks to government schemes such as Help to Buy could open new doors for brands, but damaged consumer trust and squeezed disposable incomes requires a fresh marketing approach. 

 

Above: Furniture company BoConcept is tapping into the market where people can’t afford to move and so need to use the space they do have more effectively. It has seen a huge uptake of its free interior design service it launched to raise its brand profile

Signs that the property market is recovering may feel like a boon to businesses related to the sector, but brands must meet this potential mini-boom with new strategies, according to marketers from companies including Santander, retailer Furniture Village and estate agent Savills.

Mortgage lending, house prices and transactions are beginning to bounce back thanks in part to government incentives including the Help to Buy scheme, which means marketers will have to adapt quickly. House building was up 6 per cent in the second quarter of the year, while mortgage debt dropped by £15.4bn, according to the Bank of England. This will greatly affect industries beyond those that deal solely with the buying and selling of houses.

The £12bn Help to Buy scheme continues to be the cause of much debate both inside and outside government. Some parties expect it to fuel recovery and open up the market for first-time buyers, while others are against it, fearing it could create another pricing bubble.

Despite a Bloomberg survey of 31 economists finding that two-thirds believe it is a “bad” move, there is interest from consumers. The Royal Bank of Scotland is offering loans under the scheme and booked 5,000 mortgage appointments within three hours of the scheme being launched on 8 October; appointments doubled to 10,000 after four days – twice the number it typically expects.

Either way, there is movement in the sector so a level of adjustment is necessary in the way brands communicate with consumers.

Santander, which will begin offering mortgages under the scheme in the new year, has embarked on a big marketing push for its existing mortgage products. The ads are fronted by Formula One champion Jenson Button and their tone is very different from previous ones.

“The market has realised that price is not the be-all and end-all,” says Keith Moor, director of brand and communications. “Consumers are much more savvy. It’s a value judgement now. They understand that going with the cheapest doesn’t necessarily mean going with the best.

It’s still a competitive market and you have to be priced in the game to play it but companies are increasingly realising that leading on that one dimension is not wise. Banks have a big job to do to rebuild trust and part of that is not forcing people to make big decisions based solely on price.”

This year, Ikea launched its ’Make small spaces big’ campaign in the UK and Ireland after finding that homes here are 15 per cent smaller than in Europe

Santander’s approach this time is based on insight about how consumers feel about mortgages. As they are a long-term investment, people fear it will be a noose around their neck.

“To answer that concern we have launched a range of mortgages that give people more freedom. People are free to overpay within the mortgage, but people are also free to leave whenever they want. It’s tapping into insight rather than the commoditised approach based on price,” says Moor.

Other banks are taking a similar tack. Lloyds Bank kicked off a £30m marketing campaign following its rebrand from Lloyds TSB in September, which focuses on the ‘moments that matter’. One example is an ad that tells the story of a 31-year-old man who is relieved of the frustrations of having to live with his parents after getting a mortgage through the bank. Barclays has based its proposition around listening to customers’ ideas, while TSB has relaunched with the message: ‘welcome back to local banking’.

Signs of initial recovery in the housing market have sparked renewed interest from investors too, encouraging estate agents Foxtons and Countrywide, as well as housebuilder Crest Nicholson, to float on the stock exchange. There has also been speculation that property website Zoopla is contemplating an IPO after it appointed Credit Suisse to explore “strategic opportunities”, though the Daily Mail and General Trust-owned business has downplayed such talk.

Zoopla estimates that the second phase of Help to Buy could reduce mortgage debt by £22.1bn. Its research finds there are 665,000 eligible homes on the market with an average price of £222,168. Under the mortgage guarantee scheme, the deposit needed to buy a property has dropped by two-thirds to £11,108.

As a result, property searches are going to be at an all-time high over the next year, according to the company, so it will be investing heavily to tap into consumer interest.
“First-time buyers are arguably the most important segment of the property market, as they allow those further up the chain to move, which creates supply and fluidity in the market,” says Charlotte Harper, marketing director of Zoopla Property Group. The company also owns PrimeLocation and has acquired four property portals from Trinity Mirror to compete with market leader Rightmove.

People spend more on their homes in the first 6 months than in the next 5 years so any growth in the property market is good news for us

Although the government schemes will not affect Zoopla’s marketing activity directly, says Harper, it is likely to influence some of the content it produces to ensure consumers have up-to-date information and understand the likely consequences of being involved in such a scheme (see Q&A).

The company became a sponsor of Premier League team West Bromwich Albion last season, which has helped it widen its reach and profile in the UK. It also launched its largest marketing campaign to date at the beginning of September, which incorporates outdoor ads for the first

time in addition to a major TV push. The multi-million pound ‘Smart’ campaign illustrates key features of the website’s property search, such as data about proximity to local schools and transport links.

“With the property market beginning to turn, consumers are looking for guidance and information in order to help them make better property-related decisions,” she says. “Our Smart campaign seeks to own the rational side of home-buying and help people to make confident and informed choices within that process.”

While some analysts have predicted the Help to Buy mortgage guarantee initiative will lead to another property boom, specialists at Savills and Knight Frank believe that idea might be premature.

Yolande Barnes, director of residential research at Savills, said in the firm’s Q3 market analysis: “Despite all the talk of an artificially induced housing boom, resulting from Help to Buy and other government measures, this infant housing market is far from performing like the previous housing cycle did [in 2006/2007]. We are still far from a housing market boom, although the next three years may look like a mini boom in relation to the past five.”

Knight Frank associate John Waters has a similar view but nonetheless is positive about the market.

“I don’t think it is likely to cause a pricing bubble,” he says. “Central London has been quite solid for the past few years in terms of pricing, but outside of London it is a very different story. As the broader economy improves, prices will begin to rise outside of the capital a lot more than they have done for a long time. I think it will help the market to recover and it will certainly help many people outside of London that are in negative equity to get back to where they were.”

Santander will offer mortgages under the Help to Buy scheme from early next year

Lynda Clark, editor of First Time Buyer magazine, which hosts the First Time Buyer Home Show in London, confirms that consumer’s interest is on the increase as both registrations and exhibitor numbers are “markedly up”.

“Help to Buy is making the prospect of owning a home more affordable for people, even in central London where prices are much higher than elsewhere in the country. I know there’s lots of controversy about it, but anything that helps somebody buy their own home, which will be one of the biggest purchases of their life, has got to be a good thing,” she says.

An uplift in the property market will benefit home retailers too. Charlie Harrison, marketing and ecommerce director at Furniture Village, says: “We know that people spend more on their homes in the first six months [after moving in] than in the next 5 years, so any growth in the property market is good news for furniture retailers.”

He expects to see many more first-time buyers entering the market following the launch of the second stage of Help to Buy and has been scaling up accordingly.

“We have been increasing our range of fast delivery items and introduced more lines that are available to take home the same day, such as vacuum packed mattresses that fit into a car. Furniture Village offers an interest-free credit option, which is also popular with customers furnishing their first home, and we will continue to include this as a key promotional message.”

While budgets might be tight, Capital Economics property economist Matthew Pointon does expect the fortunes of home retailers to bounce back if the housing market improves.

“When the number of transactions rise you tend to get an increase in spending on things such as white goods and home improvements as people do up their homes. I’m not sure we’ve seen much evidence of that occurring just yet but it is certainly what I would expect to happen if transactions really take off,” he says.

However, he is doubtful the mortgage guarantee aspect of Help to Buy will help to fuel the industry as much as the government believes, since the monthly payments on a 95 per cent mortgage could make it more expensive than renting.

“We’re not convinced it’s going to lead to a huge increase in buyers. Even though you can get a mortgage with a 5 per cent deposit, you still need to pass strict affordability checks in order to obtain them. Concerns that there is going to be a stampede of demand are exaggerated,” he adds.

Retailers may have another crack at the whip though, because over the past year while transactions have been down, people have turned their attention to renovating existing homes by building extensions, redecorating and generally improving their home environment.

Furniture Village, Ikea and BoConcept have all tapped into the idea of making better use of space in the realisation that not everyone has been in a position to move up the property ladder.

Harrison says: “As a result of the ‘don’t move, improve’ trend, Furniture Village has expanded its range of items that help homeowners make the most of their existing space. Products with hidden storage, such as ottoman beds, are proving popular and we have also seen an increase in sales of compact kitchen dining.”

Likewise, Ikea launched its ‘Make Small Spaces Big’ campaign in the UK and Ireland this summer after learning that homes in Britain are 15 per cent smaller than in Europe. Its global sales jumped 3.1 per cent to €27.9bn in the year to the end of August, although it does not separate UK figures.

BoConcept has seen a “huge increase” in the uptake of its free interior design service in the UK, according to country manager Zoe Shields.

“A trained member of the BoConcept sales team visits the customer’s home, measures the space and works with them to find the best possible solutions,” she says. They are then invited back to the store where they are presented with “mood boards, 3D design drawings and a set-up to reflect the products they have selected”.

As the market picks up, BoConcept will be looking to partner with local estate agents to offer the service to their clients and will also promote options such as deferred payment.
In June, B&Q launched a campaign urging homeowners to turn their attention to ‘unloved’ rooms. The retailer struggled in the early part of the year, blaming bad weather for the poor sales. But B&Q owner Kingfisher was more positive at the half-way point with a 4.3 per cent rise in group sales.

”With the property market beginning to turn, consumers are looking for guidance and information in order to help make better decisions.” - Charlotte Harper, managing director, Zoopla Property Group

Group chief executive Ian Cheshire says: “We remain ready to capitalise on any improvement in conditions or opportunities as they arise, including the potential pick-up in the UK housing market.”

However, Sainsbury’s chief executive Justin King is not so positive. He believes UK consumers are likely to have less disposable income this time next year as inflation will be around 3 per cent, while average wages will increase by 1 per cent. Despite the bleak outlook, the retailer has posted a 4.4 per cent lift in total sales for the first half of 2013.

“Although we are starting to see encouraging signs in key economic indicators, our customers’ approach to savvy shopping, which started at the beginning of the downturn, has persisted and continues,” he said in a statement.

The economic downturn has made consumers more cautious, which means companies need to be smarter in their communication.

“Whether there is a boom or not, I don’t think we will see organisations promoting in the same way,” says Santander’s Moor. “It is incumbent on us all to be responsible in the way that we lend and the conversations that we have with customers. Everyone is much more responsible than they used to be and that’s partly because consumers are more cautious but also because organisations need to address some of the concerns, fears and trust issues that people have, particularly with banks.”

Article Source: http://www.marketingweek.co.uk/trends/propertys-path-of-potential/4008241.article

Home Owners Across the UK Confident About Property Price Rises

This article by Property Wire on October 22nd, 2013 reveals that UK homeowners are confident that property price rises over the next 12 months.

Households in every region across the UK expect the value of their property to increase over the next 12 months, with those in London the most confident about price growth followed by those in the South East.

The latest House Price Sentiment Index (HPSI) from Knight Frank and Markit, which reflects the opinions of 1,500 households across the country, illustrates the localised nature of the market at present, with households in the North East and Wales expecting more modest rises in values.

October’s survey is the first taken since the government brought forward the second phase of its Help to Buy scheme and, while the jump in price perceptions since September was relatively muted, the overall level of confidence about house price gains remains at unprecedented levels in the survey history.

Only one in 14 households expect the value of their home to decline over next 12 months and mortgage borrowers and those who own their home outright anticipate the largest rise in the value of their home in the next year.

Overall it is the seventh month in a row that the index has increased and more than 23% of the home owners surveyed said that the value of their home had risen over the last month, up from 6.3% in October last year. Only 5% of households said the value of their home had fallen over the last month, giving a HPSI reading of 59.1. Any figure under 50 indicates that prices are falling, and the lower the figure, the steeper the decline. Any figure over 50 indicates that prices are rising.

This is up from last month’s record reading of 57.9 and marks the highest reading since the index began in February 2009. This is the most sustained period of upward price movements in three years.

The future HPSI, which measures what households think will happen to the value of their property over the next year, rose to a new high in October at 71.1, up from 69.6, in September. On a smoother three month average basis, the future HPSI reading was 68.8, up from 68.2 in the previous three month period.

‘The momentum in house price expectations gained over the past few months continued this month, with households across the country expecting the value of their home to rise over the next 12 months,’ said Gráinne Gilmore, head of UK residential research at Knight Frank.
‘This is the latest evidence of increased confidence in the market, which has been boosted by the Government’s Help to Buy mortgage guarantee scheme, introduced at the start of the month,’ she explained.

‘The difference in the rate of growth expected in the regions is quite pronounced however, reflecting the localised nature of the housing market at present. Households in London and the South East expect the largest rise in prices over the next year, an indication of the strength of the housing market in the capital and in surrounding areas within easy commuting distance,’ she added.

Tim Moore, senior economist at Markit, said the outlook is positive. ‘Looking ahead, only one in 14 households forecast a decline in their property value over the next 12 months. In London, the number of respondents expecting a price fall between now and October 2014 stands at around one in 30 households, and across the wider South East this proportion has reached just one in 20,’ he pointed out.

Article Source: http://www.propertywire.com/news/europe/uk-property-price-outlook-201310228373.html

London House Prices 'Frenzy' Propels UK Property Market Back to Growth

According to Rightmove, a property website, home prices in UK increased by 2.8% in October as revealed on this article by Jerin Mathew of IB Times on October 21st, 2013.

UK home prices up 2.8% in October, according to Rightmove. (Reuters)

UK house prices rebounded from two previous monthly falls in October as they rose by more than £50,000 in the capital city.

According to property website Rightmove, the average asking price for homes increased by 2.8% to £252,418 (€156,274, $252,418) in October, returning to a growth trend that started in January 2013.

London witnessed an "unsustainable" 10.2% rise in asking prices in October, following falls of 2.8% and 1.5% in August and September, respectively.

Many of October's best performers are boroughs in inner London, the website said. Among London boroughs, City of Westminster saw the highest 11.9% increase in house prices, followed by an 11.8% increase each in Kensington and Chelsea and Hammersmith and Fulham.

Home prices are now up 5.6% on July's all-time high of £515,379, pushing the year-on-year increase in London to 13.8%, according to Rightmove.

"Fewer sellers coming to market in the capital during the traditional summer recess resulted in total price falls of 4.3% over August and September. However, this month's rebound in the number of sellers brings the quarterly growth figure back into line with the recent trend at around 2% a month," Rightmove director Mills Shipside said in a statement.

"Although not sustainable in the longer term, some agents currently report there is a buying frenzy in parts of prime inner London, with available stock so low that their shelves are now bare."

Demand-Supply Mismatch in London

Analysts have warned that the continued rise in home prices in the country is primarily due to higher housing demand exceeding supply.

Rightmove noted that "London needs an increase in supply from a combination of more new-build properties and more existing owners coming to market" in order to satisfy at least some of the rising demand.

It added that though the number of sellers in the capital increased 15% on month in October, the recovery is from a low base.

Overseas investors are considering London properties as safe havens for investments. Rising overseas demand is swallowing up much of the new-build supply, adding to shortages and price increase.

"At a time when safe assets are increasingly scarce, and developers are building and marketing a lot of one and two bedroom flats to meet that demand," said Shipside.
"While they can achieve volume sales at premium prices, this eats up a much needed source of fresh supply and drags up existing property prices at an even faster rate".

Income-House Price Mismatch

In addition, taking a mortgage will be a "greater challenge" for many Londoners that are planning to buy a house, says the website.

Rightmove research indicates that 80% of those who intend to buy in the next 12 months will put down a deposit of 10% or more, a substantially high amount given the current prices of houses.

It added that that the current range of 5% deposit Help to Buy products is of no benefit to many Londoners as the income to service a mortgage will be a greater challenge for them.

"In London, the buying power required to get onto or move up the housing ladder means you have to tap into the Bank of Mum and Dad rather than buy courtesy of a helping hand from Uncle George. Indeed, nearly two in five would be first-time buyers in the capital state that they expect to receive parental assistance," said Shipside.

Article Source: http://www.ibtimes.co.uk/articles/515552/20131021/rightmove-house-prices-london-safe-haven-demand.htm

Future of London: The New York Times on the Foreign Rich Buying Up Property

This article by Michael Goldfarb of theguardian on October 20th 2013, tells us that property in the capital has become a global reserve currency for the elite.

Aerial view of Tower Bridge and the River Thames at night. Photograph: Jason Hawkes/theguardian.com

 

Our neighbours Lauren and Matt and their kids moved out of London to Cambridge the other week. Bibi, Andy and their two left for Bristol in June. Another of my eight-year-old's classmates and her family are heading out after Christmas. In my book this is a trend.

The moves are not examples of the lifecycle of the striving middle classes. Nor are they examples of middle-class folks being thrown on hard times by the sluggish British economy.

The families moving out had good incomes. Matt, who had been looking for a house for more than three years, summed up the reason for leaving best: "I don't want to be a slave to a mortgage for the next 25 years." Given the astronomical rise in house prices here, he wasn't speaking metaphorically.

This is what happens when property in your city becomes a global reserve currency. For that is what property in London has become, first and foremost. The property market is no longer about people making a long-term investment in owning their shelter, but a place for the world's richest people to park their money at an annualised rate of return of around 10%. It has made my adopted hometown a no-go area for increasing numbers of the middle class.

According to Britain's Office for National Statistics, London house prices rose by 9.7% between July 2012 and July 2013. In the surrounding suburbs they rose by a mere 2.6%. The farther away from London you go, the lower the numbers get. When you finally cross the border into Scotland, house prices actually decline by 2%.

The gap between London prices and those of the rest of the country is now at a historic high and there is only one way to explain it.

London houses and apartments are a form of money.

The reasons are simple to understand. In 2011, at the height of the eurozone crisis, citizens of the two countries at the epicentre of the cataclysm – Greece and Italy – bought £400m of London bricks and mortar. The Italian and Greek rich, fearing the single currency would collapse, got their money out of euros and parked it some place where government was relatively stable and the tax regime was gentle – very, very gentle. Considering that tax evasion in Italy and Greece was a significant contributory factor to their debt problems, it just seems grotesquely cynical to encourage this kind of behaviour.

But that's what Britain in general, and London in particular, does. The city is essentially a tax haven with great theatre, free museums and formidable dining. If you can demonstrate that you have a residence in another country, you are taxed only on your British earnings.

And the savings on property taxes are phenomenal. The property taxes on New York mayor Michael R. Bloomberg's $20m London home come to £2,143.30 a year. That's $3,430.

Clearly, the mayor bought in at the right time. The Google executive chairman, Eric Schmidt, is reported to be house-hunting here – he's looking in the £30m (about $48m) price range. Yet he will pay a similar amount in property tax as Bloomberg does.

There are other facets of London real estate as a medium of exchange. British gross domestic product has yet to return to pre-crash levels, but the financial services industry has roared back. Banks are paying out big bonuses again, and anyone looking for a safe investment is getting into London property.

From the top of Parliament Hill, on Hampstead Heath, look eastward. Out around the Olympic Park and beyond you see clumps of highrise apartment buildings sprouting like toadstools in a meadow after heavy rain. These aren't being built to meet the calamitous shortage of affordable family housing in the city; they are studio and one- or two-bedroom apartments.

The developments are financed by "off plan" buying. Bonus babies look at the blueprints and put their money down with no intention of living in what they've bought – just collecting decades of rent. And it's not just those who work in London's financial district, the City, who buy in. Hot money from China, Singapore, India and other countries with fast-growing economies and short traditions of good governance is pouring into London.

When I say property is money I mean it. An astonishing £83bn of properties were purchased in 2012 with no financing – all cash purchases. That's around $133bn.

I suppose the development that houses equals medium of exchange isn't all bad. I have friends who were very successful "creatives" (architects, cinematographers, commercial and television directors, etc) in their 30s and 40s. They bought houses when houses were places to live in. Once they turned 50, they passed through a mirror that turned them invisible. Work dried up. They have survived in London via the magic of remortgaging. They accept that their children will never be able to afford to stay on in the city.

The ripple effect of this frankly demented situation is felt all over town. The foreign rich and the City rich (there is some overlap) have made most of the centre of London unaffordable to any but their own kind. Those who were once considered rich – in the top 10% of earners – now can barely afford to move to my neighbourhood, where a typical row (terraced) house, with three bedrooms (the third bedroom wouldn't qualify as a closet in Manhattan) and a total living space of around 950 square feet tops a million dollars, three times what it cost in 2000.

The overall economy of Britain certainly doesn't justify these prices. Bank lending for businesses is flat, but mortgage lending? Hoo-ha, it's soaring up and up and the bulk of it is concentrated in London. It's as if the whole British economy is based on housing speculation in the capital.

David Cameron's government seems to think that is the case. Cameron may be pursuing austerity policies elsewhere in the economy, doing virtually nothing to help subsidise employment or industry, but his government has just started a "help to buy" scheme. The government will guarantee up to 15% of the purchase price of a house up to £600,000 ($960,000), if you have a 5% down payment.

The ordinary uses of the city have been changed beyond recognition. London was never a cheap place to live, but now more expensive property means more expensive everything else: restaurants, cinemas, bars and theatre tickets.As for services, the minimal tax paid by those who have made property into money means that a city whose population has increased by 14% in the last decade can't afford to build new schools. There will be a capacity shortfall of an estimated 90,000 places by 2015. Children won't be turned away from school, but class sizes will grow to untenable proportions.

So younger people, like my former neighbours, feel compelled to leave – even though they were making a very decent living. The delicate social ecology that made London's transformation into a great world city over the last two decades is past the tipping point, I fear.

For the quarter of a century I have lived here, a sense of community has defined my life. A very organic sense of London pride has allowed this city to withstand substantial shocks – some welcome, like its transformation into a true cosmopolis; some unwelcome, like jihadist terrorism.

Now it is beginning to feel that the next phase of London's history will be one of transience, with no allegiance to the city. I wonder whether those just parking their money here by buying real estate will ever be able to provide the communal sensibility to help the city survive the inevitable shocks it will experience in years to come.

How this story will end doesn't bear thinking about. It seems a very reasonable bet, though, that those who use London property as just another form of money aren't thinking about it at all.

Michael Goldfarb is a writer whose most recent book is Emancipation: How Liberating Europe's Jews From the Ghetto Led to Revolution and Renaissance
© 2013 The New York Times Syndicate

WHY MY STORY HAD SUCH AN IMPACT

When I wrote this piece in September, shortly after the ONS published its report showing a 9.7% increase in London house prices, I never thought to send it to a British paper. Everybody here knows the score – no one will publish it, I thought. Wrong. It went viral. Clearly, it spoke to people's fears.

They fear that property prices make no sense. It feels like 2005-07 all over again. People shake their heads and say it can't go on like this. Since nothing has changed in oversight of the City and the rest of the global financial system, people fear what the next property- driven crash will do to their lives.

People fear for their jobs. The time frame of productive economic life for the middle classes is growing shorter. People don't get into good full-time work now until their late 20s. By the time they are 50, they are living on borrowed time (it's more like 40 if they work at Silicon Roundabout). And anyway wages are not rising in line with house prices, so they have to take out massive mortgages.

Finally, they fear what I write about at the end of the essay. The balance in London's complex social ecology has been lost. The balance point in any society should be between stability and stasis. Stability is good; stasis is bad. What's happening in London has shifted the ground so dramatically that stability isn't something most people can contemplate. How do you raise your children knowing that the place they were born and raised is – on current trends – not a place they will be able to afford to live when they grow up?

Article Source: http://www.theguardian.com/uk-news/2013/oct/20/london-new-york-times-foreign-rich-property

Rents in Private Sector Hit Record High

This article by BBC News Business on October 17th, 2013 is about the average cost of renting a home has now rise according to a survey by LSL Property Services.

 

The rental market has been affected by young adults' ability to buy

The average cost of renting a home privately across England and Wales has reached a record high of £757 a month, according to a survey.

Average rents rose by 2.1% in September compared with the same month a year earlier, LSL Property Services said.

This was a 1.8% increase on August, driven by a 3.3% rise in the south east of England.
The lettings group said that greater demand from tenants was pushing up prices.

"Higher rents in almost every region show that, despite government schemes, buying a first home is still a difficult aspiration," said David Newnes, director of LSL, which owns estate agents Reeds Rains and Your Move.

"This is not only down to low salary growth, but also a general shortage of supply - which is the underlying reason why homes are getting more expensive. The long-term trend to renting therefore looks unlikely to change significantly in the near future."

The government has brought forward its Help to Buy scheme, which aims to assist those who can afford mortgage payments, but struggle to raise the necessary deposit to secure a mortgage and purchase a home.

However, critics have said that the scheme could create a housing market bubble, with official statistics suggesting UK house prices are already at a record high.

The LSL survey suggested that tenants' finances were stretched. Some 8.5% of all rent across England and Wales was late in September, up from 7.8% in August.

Article Source: http://www.bbc.co.uk/news/business-24566849

Opportunities as the UK Property Market Comes Back to Life

This article by Richard Watt of Money Observer on October 16th, 2013 reveals that property market in the UK has now regain its life and eager for further developments.

Housing has a unique place in the UK economy. There is a special sense of fulfilment in home-ownership.

‘First-time’ buyers have a priority on the political agenda, while rising home values translate to near-instant voter gratification. A revival in the housing market is front-page news.

This national attitude to our homes creates a number of anomalies. One is the traditional approach to investing in the housing market through direct purchase, buying or upgrading a home or taking on buy-to-let. Home-ownership can be immensely rewarding, but a house is a particularly illiquid investment, while mortgages create a conduit from Bank of England base rates to disposable income that is short, brutal and sometimes nasty.

The flotation of Foxtons, the London-area estate agent, is a sign that the equity market is increasingly providing an alternative route to participation in the property market. A basket of shares might not keep you warm at night, not in a literal sense, but it is a lot more liquid, shouldn’t require a six-figure mortgage and its sensitivity to interest rates is a little less direct.

The Foxtons IPO was heavily over-subscribed, rising 16 per cent on the first day, valuing the business at more than £650 million. Foxtons has some 40 offices, mainly in central London. It is an exceptionally well-run company, with special strength in marketing. The average price of its house sales is £400,000, which puts it in the sweet spot in terms of transaction growth as the recovery develops. It is the right section of the market for the second phase of Help to Buy, which will provide mortgage indemnity for homes worth up to £600,000. In our view, Foxtons is in a position to increase its footprint potentially to 100 offices and possibly more.

Foxtons is not the first estate agent to come to the market. Countrywide floated in March and has outperformed the FTSE All Share (ex investment trusts) by 40 per cent since then (to 24 September). Savills, since its near-term trough in the midst of the eurozone crisis on 4 October 2011, has outperformed the FTSE All Share by 134 per cent.

Estate agents are an interesting and expanding area of the equity market, but the heart of the sector in equity terms is the housebuilders. The sector has seen tremendous outperformance in recent years, with key companies such as Persimmon and Barratt Developments, which over the past three years have outperformed the FTSE All Share by 126 per cent and 156 per cent respectively. In our view, despite inevitable set-backs, the sector should continue to offer robust, market-leading returns.

Current demographics suggest the demand for new housing in the UK should run at around 260,000 units per year, but the market is only supplying half that, around 130,000. It is highly unlikely that supply will reach, let alone overtake demand, on almost any scenario.

The block has been financing, with capital constrained banks requiring significant cash deposits. The government – and everybody who reads a newspaper or watches television or listens to the radio – is aware of this and given the economic benefits of house-building it has taken some bold measures.

The first phase of Help to Buy, under which the government lends new home-buyers 20 per cent of the price towards a 25 per cent deposit, is already having a significant impact, with 30 per cent of new-built homes being reserved through the scheme.

The second phase starts in 2014, providing mortgage guarantees, and should stimulate the market further. The schemes are intended as temporary kick-starts, but the first phase is proving so popular its £3.5 billion funding is likely to expire at some point in 2015 – a date whose proximity to the next election suggests to us it could be replaced, should need arise, by something either as good or better. In the meantime, the banking sector should by then be further on the road to recovery, opening the possibility that affordable commercial mortgages will increasingly become available.

A less publicised but important change is in planning law. Under the new National Planning Policy local authorities are required to maintain a five year plan. In the absence of such a plan, where any planning application is denied, it will be automatically granted on appeal.

This has unleashed fresh tracts of buildable land, a flow unlikely to be completely staunched as plans come to be adopted more widely. So much for the environment – what about the stock specifics? Housebuilders have done well – is there more to come? In my view there is and the numbers tend to support a positive argument. The key decision is whether the UK property market will continue to recover into the medium to longer term.

Let’s take Barratts as an example. We believe it is capable of achieving a return on equity of around 18 per cent on a two to three year view as it builds out land acquired in recent years at attractive profit margins. We expect the industry to be building around 170,000 units a year by the end of this period, significantly higher than current levels but still well below the demographic requirement. From this level, it fair to assume that Barratts’ unit sales can continue to grow at relatively modest minimum of 4-5 per cent a year – given natural demand, government support and ongoing economic recovery – that would leave Barratts with around 75 per cent of its earnings free to distribute as cash to shareholders, which at current share prices implies a dividend yield at around 10 per cent. That is a high yield for a well-run business in a growing market and we would expect most investors to accept something significantly lower, possibly down to around 5 per cent – and that, in turn, implies a much higher share price.

One of the most satisfying aspects of investing in UK mid-cap equities is the dynamism and variety of the opportunities. As the property market comes back to life, it is likely there will be mid-cap companies there to reap the benefits. And as they say in the property business – we are eager for further developments.

Article Source: http://www.moneyobserver.com/news/13-10-16/opportunities-uk-property-market-comes-back-to-life

Bank of England Signals Caution Over Help to Buy

This article by Hilary Osborne of theguardian on October 16th, 2013 reveals BoE's concern on the impact of Help to Buy that cause housing prices to rise.

Concern at the Bank of England about the impact of the government's Help to Buy mortgage scheme came to light on Tuesday as official figures showed the British property market has exceeded its 2008 peak.

Martin Weale, one of nine members of the Bank's rate-setting monetary policy committtee (MPC), warned that the scheme to underwrite home loans could push up prices.

Admitting that house prices were already rising "appreciably more rapidly" than had been expected, Weale said there was a risk that "if the mortgage-guarantee element of Help to Buy is not priced satisfactorily, it will add to demand while supply is weak, leading to increased pressure on prices".

The British property market hit a record high in August, according to the latest figures from the Office for National Statistics (ONS), which showed the average cost of a home is now almost £250,000.

The ONS data showed that even before the launch of the second phase of the mortgage-guarantee scheme, house price growth was gathering pace.

Its main index, which measures the price paid in purchases financed with mortgages over the month, surpassed its previous peak by 0.3% to hit 186 in August. That was its highest level since its launch in 1968. It put the average price of a home in Britain at £247,000.

In written evidence to the Treasury select committee, Weale said a booming property market could distort the economy. "Rising house prices may make people feel cheerful and more prosperous, thereby supporting household spending," he warned.

"But rising house prices impose a burden on those who do not yet own houses but aspire to in the future. Like government borrowing, rising house prices can crowd out productive investment."

Weale's submission was published 24 hours after the incoming deputy governor of the Bank, Sir Jon Cunliffe, said Threadneedle Street would keep a "very firm eye" on lenders as Help to Buy was rolled out.

However, Cunliffe said it was "too early to say we are entering into a bubble".

The second part of the Help to Buy scheme, which offers lenders a taxpayer-backed guarantee to encourage them to offer loans to borrowers with small deposits, launched last week and has already prompted a flurry of mortgage applications from homebuyers.

Royal Bank of Scotland, which was the first lender to offer 95% mortgages through the latest phase of the scheme, reported that it had booked 5,000 appointments with prospective borrowers in the first three hours after the launch and taken 10,000 calls in the first four days – double its usual volume. It has extended branch opening hours to cope with demand.

According to the ONS figures, the rate of house price inflation increased through the summer, with the year-on-year increase reaching 3.8% in August, up from 3.3% in July.

However, the growth figures harboured wide regional disparities: the year-on-year increase reflected growth of 4.1% in England, 1.1% in Northern Ireland and 1.0% in Wales, in contrast to a fall of 0.7% in Scotland.

The ONS noted that the capital remains a strong outlier in the property market.
It said that while "house price growth remains stable across most of the UK … prices in London are increasing faster than the UK average".

Its index showed prices in London rose by 8.7% in the 12 months to August and that, when figures for the capital and the rest of the south-east were stripped out, UK house prices were up by 2.1% over the 12 months.

Only in London and the south-east were prices higher than at their previous peak. However, the east of England and the south-west were coming close to that level, the ONS said. The ONS data showed that new entrants to the housing market have seen a steeper rise in prices than homemovers, with prices paid by first-time buyers up 4.9% on August 2012's figure, compared with a 3.3% rise for movers.

In August 2013, the average price paid for a house by a first-time buyer was £185,000, while existing owners paid an average of £283,000.

Despite the headline figures suggesting that prices are running away, economists said activity was still well below the levels recorded before the financial crisis began, and only London was giving real cause for concern.

Howard Archer, chief UK economist at IHS Global Insight, said: "While the strength of house price rises in London is becoming an increasing concern and pushing up the overall national increase in house prices, the ONS data support the view that we are currently a long way off from an overall housing market bubble emerging.

He added: "In fact, in many areas house prices are still well below their 2007 peak levels and rising only modestly at the moment." Housing eceonomists at Capital Economics said the ONS figures were "weighted towards high-value homes and therefore the very strong London market. On most measures, prices are still 10% to 15% below their previous peak."

However, they ackowledged that price rises had outstripped their expectations and that in the short term Help to Buy could give a "significant boost" to the number of buyers.

"While we suspect many will fail the affordability tests, it will put some upward pressure on prices," they said.

"There is a risk that expectations of a new house price boom will become self-fulfilling, even if Help to Buy supports only a few buyers. In that case, the Bank of England is likely to step in to calm the market."

Article Source: http://www.theguardian.com/money/2013/oct/15/house-prices-hit-record-high

Boston Landlord Licensing Plans to Tackle Anti-social Behaviour

This article by BBC News Lincolnshire on October 14th, 2013 reveals Lincolnshire council's plan to introduce a licensing system for landlords.

A Lincolnshire council is planning to introduce a licensing system for landlords to crack down on anti-social behaviour at their properties.

Boston Borough Council said the licenses, which could cost upwards of £490, would help tackle disruption and low-quality housing.

It said there was a link between anti-social behaviour and poor property management.
The National Landlord Association said it could put up costs for good tenants.

Gavin Dick, from the association, said: "There's over 100 pieces of legislation that landlords have to comply with that the council can use to drive out criminal landlords.

"We would encourage the council to use current legislation rather than imposing more costs on good landlords which will be passed through to tenants and increase the cost of accommodation in Boston."

'Sleepless nights'
 
But Kevin Martin, the lead of housing projects at Boston Borough Council, said landlords needed to take responsibility for anti-social behaviour that happens within their property.

"Crime and anti-social behaviour figures in Boston are one and a half times higher than the average for Lincoln, so it's serious enough to present a problem and hence the council's initiative around licensing," he said.

The council said some Houses of Multiple Occupation (HMO), which can be a house split into bedsits or a flat where each tenant has their own tenancy agreement, are a big problem and have resulted in anti-social behaviour, noise nuisance and a build up of refuse.
It said this was linked to the failure of some private landlords and why a licensing system was required.

One woman, who did not want to be named but has been affected by noisy neighbours, said landlords should take more responsibility.

She said: "I've been stressed, I've lost weight, I have sleepless nights, I've gone to bed and put ear plugs in as music is played into the early hours of the morning.

"I've had the police out twice. They don't take notice of the police either."

Consultation about the plans will take place from November to January before a decision is made.

Article Source: http://www.bbc.co.uk/news/uk-england-lincolnshire-24519290

Top Forecaster Says Housing Bubble Risk 'extremely slim'

This interesting article by BBC News Business on October 13th, 2013 tells us that there will be a lesser chance of housing bubble in the UK because according to ET Item Club investment in housing is forecast to rise 7.5% next year.

The risk of a housing bubble in the UK is "extremely slim", according to one of the country's leading economic forecasters, the EY Item Club.

In its quarterly report on the economy, the Item Club said government schemes such as Help to Buy will help boost house prices by 3.5% this year.

It also forecast that house prices will rise 6.6% next year.

Business Secretary Vince Cable is one of those concerned about the effects of the Help to Buy scheme.

Last month he said there were already signs of "serious housing inflationary pressures" in parts of the country.

And in an interview with the Financial Times on Monday, the chief executive of Lloyds Banking Group, Antonio Horta-Osorio expressed his concerns.

He said that new home building needed to be encouraged by easing planning restrictions, to avoid a "substantial" increase in house prices.
'Well-timed' But Peter Spencer, the Item Club's chief economic adviser, said government efforts to revive the mortgage market had been "well-timed and targeted".

"Despite the recent criticism of these initiatives, the chances of seeing another housing market bubble are extremely slim," he said.

"House prices and transactions are only just recovering from the credit crunch and will be paltry in comparison to those of a decade ago.

"Household finances are also in much better shape, with debt to income ratios now at sustainable levels."

Under the second phase of the Help to Buy scheme, now in place, borrowers across the UK can put down a deposit of as little as 5% of the property price.

The government provides a seven-year taxpayer guarantee to the lender covering 15% of the loan value. It is available for properties sold for up to £600,000 in the UK.

The Item Club forecasts investment in new housing will rise by 7.5% next year and an additional 10% in 2015.

It has also raised its forecast for economic growth this year to 1.4%, up from 1.1%. And next year it expects growth of 2.4%, up from its previous forecast of 2.2%.

Article Source: http://www.bbc.co.uk/news/business-24515285

New Sales Process Launched for Residential Leasehold Properties in the UK

This article by the Property Wire on October 10th, 2013 discusses the introduction of a new sales process welcomed by the British Property Federation.

The British Property Federation has welcomed the introduction of a new property sales process which will reduce leasehold transaction times by five to 10 days and save UK consumers a combined total of over a million days each year.
 
The new process, based on a standardised questionnaire for the industry has been created by the BPF and all the major trade bodies, including The Law Society and the Royal Institution of Chartered Surveyors (RICS), facilitated by Move with Us, and will be available to all parties in the process.

The BPF pointed out that buyers and sellers of leasehold properties have experienced added complications and expensive delays because of differing information requirements from both the buyer’s and seller’s conveyancers meaning the landlord or managing agent has to deal with a different set of enquiries every time a leasehold property is sold.

By creating an approved set of enquiries for leasehold properties both landlords and managing agents can introduce systems to collate the information safe in the knowledge that both the buyer’s and seller’s conveyancers will accept it, saving an estimated five to 10 working days on average. Consumers will also save money as the additional requests for information will only be required where an issue is revealed which requires further investigation.

‘It is great to see that the whole residential leasehold sector pulling together and delivering a benefit to its customers,’ said Ian Fletcher, director of policy at the British Property Federation.

‘The commercial leasehold sector has had standard enquiries for 10 years and seen the advantages flowing from a more efficient conveyancing process. The same will be true of these residential enquiries and we will be promoting them amongst our membership as the standard for the sector,’ he added.

The new industry created and approved Leasehold Property Enquiries, Form LPE1 will be available from 10 October and the overall concept has been approved by the Council of Mortgage Lenders (CML) and The Building Societies Association (BSA).

Landlords, managing agents and conveyancers interested in accessing the new leasehold enquiries form should contact Beth de Montjoie Rudolf at Move with Us.

Article Source: http://www.propertywire.com/news/europe/uk-leaeshold-property-sales-201310108334.html

Help To Buy Lending Scheme Launch Sparks Homes Frenzy

This article by Sarah O'Grady of the Express on October 9th, 2013 tells us the launching of the 2nd version of the Help to Buy scheme swept up Britain's housing market in frenzy.

Borrowers leapt on the new Government initiative which will allow them to buy homes with 95 per mortgages and slash average deposit amounts.

As details emerged of the deals available from lenders, David Cameron said the project would unlock the housing market and help young people without rich parents get their own home.

HSBC became the first major bank outside state-backed Royal Bank of Scotland and Lloyds to announce it was joining the £12billion scheme.

Britain’s biggest mortgage lender Halifax also ann­ounced details of the home loans it would be offering.

Homes valued at up to £600,000 will be eligible with some estimates suggesting 180,000 loans could be taken out – despite fears that the scheme could spark a housing price bubble.

Taxpayers will guarantee up to 15 per cent of a property’s value, in return for a fee charged to lenders, allowing homebuyers to purchase with deposits as low as five per cent.

As the scheme was laun­ched, Mr Cameron visited a three-bedroom show home in Weston Favell, Northampton and met first-time buyers Kayleigh Groom, 28, and her partner Chris Day, 29, from Kettering.

The couple, who have been renting for five years, told him that Help To Buy would enable them to get on the property ladder.

Mr Cameron said: “What we’re doing is making sure that the typical family can buy the typical home.

“The couple I’ve just been with. They’ve both got good jobs. They’ve both got good prospects. They can afford mortgage payments but because they haven’t got a rich mum and dad they can’t get a mortgage. That isn’t fair. That isn’t right.

“So the Help To Buy scheme will help them to get a mortgage and make them homeowners.”

RBS and its NatWest subsidiary said they expect to sign up 25,500 first and next-time buyers over the three-year scheme. The two lenders are extending opening hours at 740 branches to cope with the demand.

Paul Smith, of haart estate agent, predicted Help To Buy will boost property deals by 10-15 per cent in the next 12 months and cut first-time buyers’ average deposit from £33,948 to £7,218.

He said: “We have seen a frenzy of activity with our branches overwhelmed by enquiries in the wake of the launch of Help To Buy.

“We have had the best first week of October for nine years. Last year we had 3,800 buyers registering in that first week, this year it was 7,281 – that’s a staggering 92 per cent increase.”

Article Source: http://www.express.co.uk/news/property/435438/Help-To-Buy-lending-scheme-launch-sparks-homes-frenzy

 

Concerns that UK is Fueling Property Market

This interesting article by The Irish Times on October 8th, 2013 reveals how the UK's government help-to-buy scheme allows people to buy a home with a deposit of as little as 5%.

UK Chancellor of the Exchequer George Osborne began the second phase of his mortgage-boosting plan as concerns persist that it will fuel a property bubble.

Royal Bank of Scotland’s Natwest unit and Lloyds Banking Group ’s Halifax and Bank of Scotland will start offering Help-to-Buy mortgages this week, with Virgin Money Holdings and Aldermore Bank planning to start in 2014, the Treasury in London said in a statement today. 

The program allows people to buy a home costing as much as £600,000 pounds (€709,000) with a deposit of as little as 5 per cent. The first phase came into effect in April, and Prime Minister David Cameron last week brought forward the start of the second from January, dismissing criticism that the plan may help fuel a bubble. 

Halifax said this month that house prices rose for an eighth month in September and lawmaker Andrew Tyrie, who heads the Parliament’s Treasury Committee, said today that intervention in the property market risks causing distortions. 

“The government has yet to allay the committee’s concerns,” Mr Tyrie, a member of Cameron’s Conservative Party, said. “Given the checkered history of interventions in residential property, great care will need to be taken in both the construction and running of this scheme.” 

Under the mortgage plan, the government guarantees as much as 15 per cent of the purchase price in return for a fee from the lender. Fees will be charged as a percentage of the original loan amount and be reset every year. For 2014, they will range from 28 basis points, or 0.28 percentage points, for mortgages between 80 per cent and 85 per cent of the value of the property, to 90 basis points for loans between 90 per cent and 95 per cent, Osborne said in a written statement to lawmakers today. 

Cameron said today the government “had to act” to help prospective homebuyers.

“Too many hardworking people are finding it impossible to buy their own home,” he said. “Buying your first home is about far more than four walls to sleep at night. It’s somewhere to put down roots and raise a family. It’s an investment for the future.” 

Halifax customers will be able to apply for mortgages under the program starting October 11th. The bank is offering a two-year fixed-rate of 5.19 per cent. That’s more than the 1.94 per cent fixed rate it offers first-time buyers who can put down a 40 per cent deposit, according to the bank’s website. Similarly, RBS is offering two- and five-year fixed rates at 4.99 per cent and 5.49 per cent. That compares with a two-year fixed-rate of 1.95 per cent for first-time buyers who are able to put down a 40 per cent deposit, according to its website. HSBC said in an e-mailed statement today that it will also participate in Help to Buy later this year. 

Article Source:  http://www.irishtimes.com/business/sectors/financial-services/concerns-that-uk-is-fueling-property-market-1.1553937

Help to Buy Scheme: How it Works?

This engaging article by The Week on October 7th, 2013 reveals the purpose and objective of the government in launching the help to buy scheme.

The Help to Buy scheme - a government initiative designed to help struggling home-buyers get onto or move up the property ladder - has two phases. The first, a £3.5bn scheme aimed at buyers of newly-built properties worth up to £600,000, was introduced in April and has already been taken up by about 7,000 people. The second phase, which applies to new or second-hand properties up to the same value, starts accepting applications today. David Cameron believes the initiative is essential because "the mortgage market today isn't working". Critics argue that it may trigger a housing bubble, particularly in the over-heated London market. But what is the Help to Buy scheme and who will be eligible?

How does phase one of Help to Buy work? 

The first phase of Help to Buy applies only to new homes and first-time buyers. Borrowers need to raise a 5 per cent deposit on the property and can then borrow a further 20 per cent from the government, initially interest free, up to a maximum of £120,000. After five years, what remains of the loan will attract interest at 1.75 per cent per year. The rate will increasing each year by 1 per cent above inflation. The £3.5bn scheme, which will be administered by home builders will support about 74,000 home purchases.

What happens if you can't pay your mortgage?

If you take out an equity loan and find you can't pay your mortgage, you'll probably have to sell the property or the bank will repossess it and sell it for you. Citywire points out that the 20 per cent equity loan will still need to be paid back to the government.

And phase two?

Phase two of Help to Buy applies to home movers as well as first-time buyers and second-hand houses as well as new ones. In this phase, the government does not loan money to the homebuyer but provides a guarantee to the lender for up to 15 per cent of the loan. That will allow borrowers with only a 5 per cent deposits a much wider choice of mortgage deals. As in phase one, there is a limit of £600,000 on the value of the property.

Why do lenders need loan guarantees?

The government guarantee reduces the bank's losses if a borrower defaults on his or her payments. "That allows them to offer cheaper mortgages to would-be home-buyers with small deposits, who are currently locked out of the market," explains the Daily Telegraph.

Why has the second phase been brought forward?

The second phase was due to start in January. Asked why the government had brought the start date forward three months, David Cameron said: "I am impatient to help young people get on the housing ladder.

Does that mean I can buy a new home this week?

No. Lenders won't be able to get loan guarantees from the government until 1 January, 2014. That means you won't be able to use the second phase of Help to Buy for home purchases that complete before 2014.

Which banks will offer the 95 per cent mortgages?

The scheme will initially be available from the Nat West, RBS and Halifax, but the government says other banks and building societies are expected to sign up over time.

Are there an unlimited number of 95 per cent loans on offer?

No. The government is making £12bn available in loan guarantees, enough to fund mortgages worth a total of £130bn. The scheme will remain open for three years. Mortgage brokers fear "a stampede of new applications" for loans when the scheme opens, reports The Guardian.

What interest rates will borrowers have to pay?

Citywire says there "could be a catch" in the mortgage rates lenders offer borrowers in the scheme. In the mortgage market those with a large deposit are often able to negotiate a lower interest rate. "It could be that a 5 per cent deposit mortgage incurs a high interest rate particularly if banks are told to hold more capital to cover the risky loan," says Citywire. Banks will also have to pay a fee of 0.9 per cent of the loan value to take part in the scheme. They are likely to recoup that from customers in the form of higher interest rates.

Who is excluded from Help to Buy?

The new loans aren't means tested, but they won't be available to people wanting to buy second homes or buy-to-let properties. Prospective borrowers will be required to sign documents confirming they are first home buyers or, if they already own a home, that they are in the process of selling it.

What do supporters of the scheme say?

The incoming chief executive of the state-backed RBS, Ross McEwan, told The Guardian that his bank was backing the scheme because: "We are committed to helping as many people as possible across Britain to get on with their lives, to buy their first home, to move to a bigger house as their family grows."

What do critics say? 

Business Secretary Vince Cable says the scheme may trigger an unsustainable boom in house prices, particularly in the south-east of England. "I am worried of the danger of getting into another housing bubble," Cable told the BBC. · 

Article Source: http://www.theweek.co.uk/uk-news/55455/help-buy-scheme-how-it-works