31% Pay 'Unaffordable' Rent or Mortgage Costs

This article by Adam Shaw of BBC News UK on November 11th, 2013 reveals how people think property prices are too high in their area.

Thirty one per cent of people paying a mortgage or rent spend more than a third of their disposable income each month doing so, a survey for BBC Panorama suggests.

Housing charity Shelter said that makes mortgage or rent costs "unaffordable".

It said family budgets are being put under "enormous pressure" because of a "shortage of affordable homes".

The survey of 1,003 people also suggests 46% of people think property prices are too high in their area.

According to Shelter and the Joseph Rowntree Foundation, spending more than a third of your disposable income on rent or a mortgage means you may not be able to afford other basic needs.

'Impossible choices'

Shelter chief executive Campbell Robb said: "The widely accepted test of affordability is that housing costs should take up no more than a third of your income."

"But in reality, many families don't have any option but to pay out much more," he said.

"This sees some faced with impossible choices every day - including between putting enough food on the table or paying for the roof over their head."

Among those affected by rising property prices is Abi Reilly, a 33-year-old special needs school teacher.

She lives in a terraced house in Reading with her husband, Chris, and two children, five-year-old Daniel and four-month-old Elsie.

They spend around 40% of their disposable income on rent.

Having rented 13 different properties over the past 10 years, Mrs Reilly said homeownership does not feel realistic.

"It feels too far away," she said. "How can we save for a deposit when our rents are going up, energy's going up, everything's going up, wages stay the same, house prices go up? Mathematically it doesn't work."

The Ipsos MORI survey commissioned by Panorama questioned a total of 1,003 adults - of whom 697 pay a mortgage or renting a property. Mrs Reilly would belong to the 31% of people in this latter group who pay more than a third of their disposable income on their mortgage or rent.

The survey also suggested that 46% of people think property prices are too high in their area and 39% would like to see property prices fall.

In August, the Office for National Statistics said the average price of a property had reached a record high of £247,000.

ONS figures also show that home ownership peaked at 69% of households 12 years ago. Since then it has been falling and is now at 64%.

'Risk of overheating'

Panorama has also looked at the Help to Buy scheme set up by the government in April to assist people who could afford mortgage repayments but were struggling to raise a deposit.

It allows buyers of new-build homes to put down a 5% deposit and take out a government loan for up to 20% of the value of the property. Help to Buy was extended to existing homes in October, under which the government partially guarantees mortgages.

Since it began, there has been a 6% rise in the number of new homes being built.

Merryn Somerset Webb, editor-in-chief of MoneyWeek magazine, said Help to Buy risks inflating prices and overheating the housing market.

"It's like pouring petrol over the car and setting fire to the whole thing," she said.

"You know you might get a little heat in the short-term but the end result is not actually what you wanted."

But the government has dismissed concerns about a property price bubble.

Housing Minister Kris Hopkins said: "In Yorkshire, the North East and Scotland, house prices have moved very little or in some cases have actually gone backwards."

"And that's reflecting where wages are and what money people have actually got to spend. "

He also told Panorama: "We've seen nothing yet to suggest there is anything, going anywhere near a bubble at this moment in time."

Article Source: http://www.bbc.co.uk/news/uk-24856594

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Scottish House Price 'Reality Gap' Narrows

This article by BBC News on November 11th, 2013 reveals the new report that buyers are willing to pay more than they actually achieve.

 

S1homes said buyers were now prepared to pay more than they had been "for quite some time" 

 

The gap between what Scots hope to sell their properties for and the price they actually achieve has narrowed, according to a new report.

Property website S1homes found the "reality gap" narrowed in Scotland from 9% to 2% in the third quarter.

The change was driven by an increase in the amount buyers were prepared to pay, and not a drop in prices.

The S1homes report compared average asking prices with officially-registered settlement prices.

It found that the average selling price in Scotland increased by more than £8,500 to £161,748 in the third quarter, while, on average, properties sold for about £4,000 less than their asking price. The difference in the previous quarter was £14,500.

However, there were significant variations between the top and bottom of the market, with all property types except detached homes achieving more than the asking price.

Flats continued to perform well across Scotland, selling on average more than 17%, or £19,000, above their advertised price.

Terraced and semi-detached houses also sold well above what sellers hoped to achieve.

But detached properties continued to sell significantly below their asking price despite an increase in the average selling price during the quarter.

The average asking price for properties fell in most areas, except for East Renfrewshire, Fife and West Lothian.

In Edinburgh, the average selling price overtook the advertised price, due to an increase of 4.5% in the amount homes were sold for.

S1homes commercial director Ewan Stark said: "This quarter's report shows that there have been significant changes taking place in the property market.

"Buyers are now prepared to pay more than they have been for quite some time and that, coupled with a slight decline in average asking prices, is what has led to the upsurge in the volume of properties being sold.

"That's positive if you're looking to sell a property but the sharply rising prices at the lower end of the market aren't good news for first-time buyers."

Article Source: http://www.bbc.co.uk/news/uk-scotland-scotland-business-24865606

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UK ‘Pays Highest Property Taxes’

This article by This is Guernsey on November 7th, 2013 tells us that in the developed world, British people are the one who pays the highest level of property taxes.

British people pay the highest levels of property taxes in the developed world, a think-tank says.

 

British people pay the highest levels of property taxes in the developed world and more than twice the average for the 34 rich countries in the Organisation of Economic Co-operation and Development, according to a think-tank report.

The right-of-centre Policy Exchange said politicians should reject new levies on property – such as the “mansion tax” on residences worth over £2 million favoured by Liberal Democrats and Labour – and instead pledge to bring down housing costs by building 1.5 million new homes by the end of the decade.

The report called for at least one new “garden city” and changes to planning rules to deliver 300,000 new houses a year.

Councils that fail to hit their own housing targets should be forced to release land to local people who want to design and build their own homes, said the thinktank.
The report calculated that property taxes including council tax, stamp duty, inheritance tax and capital gains tax amount to 4.1% of GDP in the UK – the highest in the OECD and well above the average 1.8%.

By comparison, Canada levies 3.5% of national income in property taxes, the USA 3%, Japan 2.8% and Germany 0.9%.

Alex Morton, head of housing and planning at Policy Exchange, said: “No other developed country taxes property more heavily than the UK. Yet rising house prices and falling levels of home ownership have led to many calling for an increase to land and property taxes.

“But these issues will only be solved by genuine reform of the outdated planning system, not a tax raid on peoples’ homes. Politicians cannot try to do everything at once and must focus on the most crucial issues.

“The evidence shows where excess credit and under-supply exist, taxation or subsidy can only have a limited impact. That is why policymakers should ignore calls for a new round of property taxes and instead commit to spreading the benefits of homeownership and stabilising the UK economy by building at least 1.5 million new homes over the course of the next Parliament.

“This means serious reform of the planning system and creating new ways to deliver housing.”

A Government spokesman said: “The UK has the fourth lowest transaction costs for moving house with property taxation making up the smallest component of overall costs.

“The Chancellor has been clear there are no plans for a new house price tax on family homes. This Government has frozen Council Tax for hard-working people and cut business rates for small firms, despite the need to pay off the deficit left by the last administration.

“We have delivered a series of reforms to speed up and simplify the planning system, including a comprehensive package to support self-builders. House builders credit Government action for getting the housing market moving again, and schemes like Help to Buy are giving hard-working people a helping hand to increase home-ownership”
Dan Wilson Craw, spokesman for the PricedOut campaign for people who would like to buy a home but cannot afford to, said: “Every month, private tenants are seeing their dream of home-ownership slipping further from their grasp – and all the while they’re paying off the mortgage of their landlord who gets rich from rising house prices.

“This is a symptom of a society that treats houses as an asset to speculate on rather than somewhere for people to live. Tinkering with the tax system could help make the system fairer, but under-supply is the real problem. If political leaders were bold and built 1.5 million more homes over the next Parliament, they could make a real difference to the cost of living.”

Article Source: http://www.thisisguernsey.com/news/uk-news/2013/11/07/uk-pays-highest-property-taxes/

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UK Services Sector Grows at Fastest Pace in 16 Years

This article by RTE News on November 5th, 2013 tells us that Britain's services sector activities increased at the fastest rate since May 1997.

Latest strong data on UK services sector may see Bank of England revising its growth forecasts upwards

Activity in Britain's services sector increased at the fastest rate since May 1997 last month, a closely watched survey showed today.

The data raised the prospect of a big jump in economic growth in the final three months of 2013.

Financial data company Markit said its services purchasing managers' index (PMI) rose to 62.5 in October from September's 60.3.

This easily beat economists' forecasts for a fall to 59.8 and increased the chance that the Bank of England will revise up its quarterly growth forecasts next week.

Readings above 50 point to growth, and Markit said that combined with strong PMI surveys for manufacturing and construction, the latest data suggest quarterly economic growth of 1.3%, up from 0.8% between July and September.

"The UK economic recovery moved up a gear again in October," said Chris Williamson, chief economist at Markit.

"Manufacturing, services and construction all continued to see very strong rates of expansion, pointing to an ongoing broad-based upturn. However it is the services sector which, due to its sheer size, is the major driving force," he added.

Britain's economy - which looked on the verge of its third recession in five years at the start of 2013 - has repeatedly surprised on the upside this year, and Markit's composite PMI is its highest since records began in 1996.

Britain's position contrasts sharply with that of the euro zone, where last week unemployment hit a record high while the annual inflation rate tumbled, bringing a possible European Central Bank interest rate cut into view.

However total UK output is still well below its 2008 peak - a much weaker state of affairs than in most other big advanced economies - and in August the Bank of England pledged not to raise interest rates before unemployment falls to 7%.

The bank forecast in August that Britain's jobless rate - now 7.7% - would take more than three years to sink that low, a timescale many economists think will be brought forward when the central bank publishes fresh forecasts next week.

The Markit survey showed that employers in the services sector were hiring staff at the fastest rate since May 1997. A broader composite employment index, which includes manufacturers and construction firms, rose to its highest since that series started in January 1998.

Markit's surveys do not cover the UK public sector - where more cuts to jobs and spending are planned as part of the government's austerity programme - or British retailers, who have had mixed fortunes due to falling disposable income.

The British Retail Consortium, which represents larger chains, said earlier today that its members experienced modest annual sales growth of 2.6% in value terms in October.

However, prospects for the rest of the services sector appear brighter. The services PMI's new orders component rose to 63.4 in October from 60.6 in September, indicating the fastest inflow of orders since the survey started in July 1996.

Firms reported getting longer-term contracts than before, and that some were linked to growing activity in the UK property market, where the government has announced several measures aimed at boosting construction and home purchase.

The services PMI also pointed to potential future inflation pressures. Firms reported that they were reaching capacity constraints, with backlogs of work rising at the fastest rate since May 1997, and that as well as hiring more staff, they were also raising salaries.

Companies also faced the biggest rise in input costs in eight months, and raised the prices they charged to consumers at the fastest rate since May 2011.

 

Article Source: http://www.rte.ie/news/business/2013/1105/484741-uk-services-activity/

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U.K. Outlook Raised by NIESR as Property Boom Feeds Spending

This article by Jennifer Ryan of BloombergBusinessWeek on November 4th, 2013 reveals the fast growth of the UK economy as opposed to what was previously reported according to NIESR.

The U.K. economy will grow faster than previously forecast as a pickup in house prices stokes consumer spending, according to the National Institute of Economic and Social Research. 

Gross domestic product will expand 1.4 percent this year and 2 percent in 2014, a 0.2 percentage-point increase for each year, London-based Niesr said in a report published today. Forecasts for annual house-price growth in 2014 were raised to 5 percent from 0.5 percent, adding about 0.5 percentage point to spending projections.

“The housing market has thawed quite noticeably by almost every measure you want to look at,” Simon Kirby, an economist at Niesr, said at a press conference yesterday. “We’ve got quite a buoyant housing market compared with the previous few years. That feeds through and has a knock-on effect to our consumer-spending growth forecasts.”

k Ltd. said last week prices in England and Wales rose 3.1 percent from a year earlier, the biggest gain since 2007.

Bubble Warnings

Help to Buy allows people to buy homes costing as much as 600,000 pounds ($957,000) with a 5 percent down payment. The program began in April with interest-free loans for buyers of newly built properties and the second phase -- mortgage guarantees covering all homes -- was brought forward to last month from January.

The plan has drawn warnings from the International Monetary Fund, and former Financial Services Authority Chairman Adair Turner said last month that Britain risks a repeat of the debt-fueled binge that led to the credit crisis.

“I don’t think any of us are fans of Help to Buy,” said Jonathan Portes, director at Niesr. Angus Armstrong, an economist at the institute, said “the design of it is so wretched, that’s what’s depressing about it.”

“Banks have an incentive to loosen underwriting requirements for mortgages,” Armstrong said. “If you’re going to intervene in the mortgage market there are a lot better ways to do that,” such as through the mortgage-backed securities market, he said.

‘Unsustainable’ Growth

Growth based on consumer spending is “unsustainable” because it’s based on the housing market rather than increases in real incomes, and it’s coming at the expense of household saving, Kirby said. Significant contributions from business investment and trade won’t start until 2015 and 2016, respectively, he said.

Unemployment, now at 7.7 percent, will fall below 7 percent at the start of 2016, though there’s a one-in-five chance it will reach that level in the first quarter of next year, Kirby said. A 7 percent jobless rate is the threshold at which Bank of England policy makers say they’ll consider raising the benchmark interest rate, provided none of the three “knockouts” in their forward-guidance policy are first triggered.

Kirby said that the knockout related to financial stability risks will probably lead to a rate increase in the second half of 2015. The caveats related to inflation forecasts and inflation expectations won’t be triggered, as inflation will drop to the bank’s 2 percent target in the first quarter of 2015, he said.

Article Source: http://www.businessweek.com/news/2013-11-04/u-dot-k-dot-outlook-raised-by-niesr-as-property-boom-feeds-spending

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Treasury Considering Further Taxes on Foreign UK Property Owners

This article by Outlaw.com on November 1st, 2013 tells us about  George Orborne's statement to impose additional taxes on foreign owners of UK properties as revealed by press reports.

Sky News has reported that the Treasury is "actively investigating" imposing capital gains tax (CGT) on foreign owners who resell a UK property. Non-residents are currently exempt from CGT on property sales, while UK residents are subject to CGT on profits made when reselling all but their main homes. CGT is charged at 18% for basic rate taxpayers and 28% for higher rate taxpayers.g

A spokesperson for the Treasury told Out-Law.com that the report was "pre-Autumn Statement speculation".

According to the report, bringing foreign-owned properties into the scope of CGT would not raise significant sums, but would address concerns about favourable treatment for overseas property investors. Foreign property owners are liable for CGT in many other European countries.

Around 70% of the most expensive newly-built properties in London are purchased by non-UK citizens, and around 65% of these buyers intend to rent their properties rather than live in them, according to estate agency Knight Frank. The Office for National Statistics (ONS) said that house prices in London rose by nearly 9% in the year to August, compared with around 2% elsewhere in the UK.

Responding to the report, the British Property Federation said that the reason behind this increase was the lack of supply, not foreign buyers. Penalising people who wanted to invest in the UK would lead to fewer homes being built, as would the related uncertainty, its chief executive Liz Peace said.

"It makes no sense to slap kneejerk taxes on people who want to spend money in the UK and contribute to the UK economy," she said. "Uncertainty of this kind is hugely damaging to Britain's image as a country that is 'open for business', and far outweighs the paltry sums which this tax would raise – indeed, it is only with foreign investment that many London schemes are able to go ahead."

Property expert Suzanne Gill said that the introduction of CGT on these transactions would be "a real issue, administratively" for the tax authorities.

"An increase in stamp duty land tax (SDLT) would be less burdensome, and must be more likely: recent changes in rates have not affected the property market," she said.

"What does affect the market is uncertainty. An SDLT announcement can be quickly absorbed, but a period of consultation over CGT will have an impact - especially following on from the introduction of the annual tax on enveloped dwellings (ATED) earlier this year," she said.

ATED came into force on 1 April this year, and the first payments were due in October. It applies to company-owned residential properties valued at over £2 million, and is intended to ensure that people who purchase high value residential properties in the name of a company, partnership or other 'non-natural person' pay their fair share of tax. Dwellings purchased as part of a genuine property rental business, held for charitable purposes or run as a commercial business are exempt from the charge.

Article Source: http://www.out-law.com/en/articles/2013/november/treasury-considering-further-taxes-on-foreign-uk-property-owners-according-to-press-reports/

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