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

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

US Consumer Confidence Drops as House Prices Rise at the Fastest Rate in 7 Years

This article by AFP of The Telegraph on September 24th, 2013 reveals the decrease in consumer confidence as house prices rise and shortage in jobs and earnings resurfaced.

US consumer confidence fell slightly in September as Americans grew more wary about the outlook in coming months, according to a closely watched report. 

The Conference Board said its consumer confidence index fell to 79.7 in September, down from a revised 81.8 in August.

Though a decline was expected for September, the figure was weaker than the 80.0 consensus estimate.

"This is in line... with buyers awaiting a battle among lawmakers over raising the Treasury debt ceiling that could threaten a government shutdown," said Nate Kelley of Moody's Analytics.

The Present Situation Index rose to 73.2 in September from 70.9 in August.

The Expectations Index, indicating consumers' views on the outlook six months into the future, dived to 84.1 from 89.0 last month.

"Consumer confidence decreased in September as concerns about the short-term outlook for both jobs and earnings resurfaced, while expectations for future business conditions were little changed," said Lynn Franco, the Conference Board's director of economic indicators.

"While overall economic conditions appear to have moderately improved, consumers are uncertain that the momentum can be sustained in the months ahead."

Consumers' outlook on jobs and incomes in the coming months darkened.

The number of consumers expecting more jobs fell to 16.9pc from 17.5pc in August, while those anticipating fewer jobs rose to 19.7pc from 17.2pc.

Income expectations were sharply lower. Those expecting their incomes to increase tumbled to 15.4pc from 17.5pc.

The concerns about lower incomes could crimp consumer spending, the engine of US economic growth.

The decline in expectations "also gibes with our call for a relatively weak holiday shopping season this year," said Moody's Kelley.

But while consumer confidence declined, a closely-watched survey of house prices across 20 major US cities showed that property values increased 12.4pc in the year to July. The rise, the highest in seven years, was widely expected by economists, but some foresee a cooling over the rest of the year as mortgage rates climb.

Lawrence Yun, chief economist at the Realtors group, said the surge in sales in August was probably the “last hurrah” for the next year to 18 months as higher prices and the jump in mortgage rates hurts affordability for some buyers.

Article Source: http://www.telegraph.co.uk/finance/economics/10331727/US-consumer-confidence-slips-as-house-prices-rise-at-the-fastest-rate-in-seven-years.html

Average Property Price Sits at All-Time High of £257,000

This article by Lauren Everitt of EADT 24 on September 18th, 2013 shows that the property market is on its way to recovery with house prices on rise according to experts.

Property in the East of England now costs an average of £257,000 compared to £210,000 in July 2009 when the region felt the knock-on effects of the economic downturn.

Statistics from the Office for National Statistics (ONS) said a 1.4% rise in property prices from July 2012 to this July have helped increase the value of homes, surpassing the previous peak of £235,000 before the recession.

James Girling, director of Colin Girling & Company Ltd and PR representative for the Suffolk branch of the National Association of Estate Agents, said: “Since May the market has improved although it is still a buyer market.

“The Government talk about this ‘bubble’ but there isn’t one. Here in the east of the region we haven’t noticed this boom or bust scenario coming our way.

“It’s been a gradual increase of business and the first time buyers are coming through.
“The market is improving and we are optimistic but everything is two or three steps down from where it needs to be.

“The volume of activity is not where it was in 2006 and 2007 before it all went wrong.”
Michael Bedford, a partner at Bedfords in Aldeburgh, said the market has seen more activity.

“There has been more constant activity as well whereas there were peaks and troughs during the past few years,” he added.

“To many people’s surprise we had a record year in 2010 and this year has been as good but it’s too early to tell if it’s going to be better.”

However concerns have been raised that Government initiatives to kick-start the housing market such as Funding for Lending and Help to Buy are in danger of creating a property bubble, with borrowers over-stretching themselves as access to low-deposit deals returns.

Richard Sexton, director of e.surv chartered surveyors, warned that rising house prices threaten to price some people trying to get on the property ladder out of the market at a time when households are still under pressure from high inflation and stagnant wages.

He said: “If the Government wants to make housing more affordable - and avoid inflating another property bubble - then it needs to encourage more house building.”

Article Source: http://www.eadt.co.uk/news/east_of_england_average_property_price_sits_at_all_time_high_of_257_000_1_2643933

Prices on Climb Amid Strongest Market Conditions for Six Years in UK

The market is in its best shape since the financial crisis as demand continues to outpace the number of homes for sale, adding to values, according to this recent article by South China Morning Post on September 4th, 2013.

British house price growth accelerated last month amid the strongest market conditions for six years as demand continued to outpace the number of homes for sale, Hometrack said.

Average values in England and Wales rose 0.4 per cent after a 0.3 per cent gain in July, the London-based property researcher said. Prices were up 1.8 per cent from a year earlier, the most since July 2010.

In a separate report, the Engineering Employers' Federation raised its forecasts for UK economic growth and manufacturing output.

Hometrack's survey adds to evidence of a mini-boom in the housing market, with reports last week showing values rising and mortgage approvals at their highest since 2008.

Bank of England Governor Mark Carney said he was alert to risks from the property market and policymakers would act if signs of a bubble emerged.

Richard Donnell, director of research at Hometrack, said: "A lack of housing for sale is set to remain a feature of the market and this will keep an upward pressure on prices in the near term.

"We expect demand to continue to expand over the remainder of the year so long as the outlook for the economy and mortgage rates remains unchanged."

Underlying market conditions are at levels not seen since the financial crisis, with the average time taken to sell a property falling to 8.1 weeks and sellers achieving 94.6 per cent of the price sought last month, Hometrack reported.

New buyers registering with real estate agents to browse property rose 1.1 per cent, the same as in July. Demand fell in August in each of the last three years. Growth in new property listings slowed to 0.8 per cent from 2.4 per cent.

Seven of the 10 regions tracked by Hometrack showed price gains, led by a 0.9 per cent increase in London. Two regions showed no change while values dropped 0.1 per cent in the northeast.

Signs of economic growth have lifted consumer confidence. The economy expanded 0.7 per cent in the second quarter, and recent data suggests the recovery is gaining traction.

A survey by the manufacturers' organisation EEF and the accounting firm BDO showed manufacturing output rose to a three-year high in the third quarter, with a gauge of production rising to 32 from 12.

A measure of investment intentions rose to 24, the highest in six years.

The group raised its forecast for manufacturing growth next year to 2.1 per cent from 1.9 per cent, following a 0.5 per cent contraction this year.

It also raised its forecast for UK gross domestic product growth to 1.2 per cent this year and 2 per cent next year, versus earlier projections of 1.1 per cent and 1.8 per cent.

"Industry's prospects have brightened considerably," said Lee Hopley, chief economist at the EEF. "There is growing confidence that improving trading conditions will continue into the final months of this year and then accelerate through the gears in 2014."

Nationwide Building Society said last week that home prices rose 0.6 per cent last month and the Bank of England's commitment to maintain record-low interest rates until at least the end of 2016 may be helping to support demand.

Article Source: http://www.scmp.com/property/international/article/1302634/prices-climb-amid-strongest-market-conditions-six-years-uk

Mortgages Up By Third as Housing Sales Soar

Sarah O'Grady of Express discusses the banks' approved mortgages is third higher compared to last year as the housing market continues to step up according to this article on 24th August, 2013.

The number of mortgages approved by banks is a third higher than a year ago as the housing market revival continues to gather pace.

Some 37,200 approvals for house purchases worth a total of £5.7billion got the green light in July, the British Bankers’ Association reported.

This was only slightly down on a 17-month high of 37,337 the previous month.

The BBA said the “stronger pattern” seen in the mortgage market since the start of the year has continued into the summer.

Mortgage approvals to home buyers are 31 per cent higher than in the same period last year and re-mortgaging approvals are 40 per cent higher.

However, overall mortgage lending remains “subdued” because homeowners are making high repayments on their loans, the BBA said.

Various Government schemes to boost the housing market mean several mortgage lenders have been offering their lowest ever rates.

With poor returns generally on offer on savings, this has made it more attractive for people to use any spare cash to pay down their mortgage debt.

BBA statistics director David Dooks said: ­“Mortgage activity has strengthened during 2013 with the help of Government schemes. But high ­repayments and redemptions mean that we are not seeing increases in net mortgage borrowing for the high street banks.”

Jonathan Harris, director of mortgage broker Anderson Harris, said that despite the uplift in activity, house sales are still far lower than they were at the height of the boom years.

Article Source: http://www.express.co.uk/news/property/424289/Mortgages-up-by-third-as-housing-sales-soar

UK Property Prices Rise By 5.5%

This article by Natasha Al-Atassi of Select Property on August 22, 2013 reveals that properties in the UK rose in price by 5.5% between August 2012 and August 2013 according to Rightmove.

Summary:

• House prices in the UK are £249,199 on average
• This is an increase of 5.5% in August 2012
• London saw the greatest price increase, rising 10.2% in the 12 months

Property values in the UK have risen by 5.5% over the last year, according to recent figures from Rightmove.

In the property search website’s latest House Price Index, it revealed average property prices rose significantly between August 2012 and August 2013, taking the typical asking price to £249,199.

According to figures, the average cost of a detached home in the UK is £364,254, up by 4.2% year-on-year, and semi-detached properties are typically £204,392, an increase of 3.8% over the 12 months.

Rightmove also reported terraces rose in value by 4.4%, taking them to £188,445, while apartments average £209,652, an increase of 5.9% over the year.

The area of the country with the most expensive average prices is London, which saw prices grow by 10.2% over the year to £501,067.

Comparatively, costs in the north were the cheapest in the UK with values averaging £149,362 in August, a rise of 0.8% over the year, followed by Yorkshire and Humberside’s low prices at £154,237, and the north-west at £164,503.

These results come after Knight Frank and Markit’s released findings that showed 18% of British homeowners believe their property increased in value in July, which is the fifth consecutive month households have thought real estate values in the UK are on the rise.

Article Source:  http://www.selectproperty.com/2013/08/rightmove-uk-property-prices-rise-by-5-5/

Outdoor Space Can Add 20% to the Value of a Property

This article by Alex Johnson of The Independent tackles how a green outdoor space can be very appealing to homebuyers than to those properties without gardens.

Londoners value a garden and will pay at least a 20% premium for outdoor space, according to Marsh & Parsons.

Their report suggests that comparable properties in the same area can vary significantly in price to the extent that an attractive garden, roof terrace or being near to green, open spaces like a park can add around a 20% premium to the price of a London property.

In Bayswater, for example, there are strong price differences between those properties which boast attractive outdoor space and those which do not with a one-bedroom property with an outdoor patio garden £75,000 more expensive than a comparable one bedroom property, also on the lower ground floor of a building only two minutes’ walk away. This equates to a premium of around 16% for a property of relatively the same size, on the same floor, in the same building and mainly due to one having a private patio.

Peter Rollings, CEO of Marsh & Parsons, said:  "In the summer months, Londoners yearn for some outdoor space and the freedom to have an external room in which to entertain. But fulfilling the dream of a countryside idyll in London comes at a premium. In such an urban area, outdoor space is both scarce and expensive. Thankfully, Londoners can also retreat to one of the capital’s treasured parks and green spaces, where it is possible to find a piece of the great outdoors here in the city.

"Location and outdoor space can make the difference between a desirable property and an incredible property with a wow factor. Gardens, roof terraces and the proximity to green space can all add substantial value. Properties without gardens are not as appealing for many home buyers and it can be harder to sell them during the summer months."

A report from Lloyds TSB Insurance earlier this year suggested that homeowners spent an average of £894 on outdoor furniture and decorations for their gardens in the past 12 months, and that the average UK garden is now estimated to be worth nearly £2,000.
The research found that a third said that spending a lot of time outside is the main reason for upgrading their outdoor spaces.

Article Source:  http://www.independent.co.uk/property/outdoor-space-can-add-20-to-the-value-of-a-property-8700314.html