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Property sales hit their highest monthly level of the year so far in November figures from HM Revenue and Customs (HMRC) have shown. There were 85,000 property sales during the month, up from 79,000 in October, it said.
However, despite the apparent pick-up in transactions, the number of sales in the first 11 months of the year was lower than the same period in 2010.
The property market has been subdued for some time.
Since 2007 sales have been weighed down by the continued rationing of mortgages and the initial reluctance of sellers to drop their asking prices.
There have also been concerns among potential buyers about the state of the economy and the outlook for their jobs.
The HMRC figures show that there were 9,000 more property sales in November, compared with the same month the previous year.
The new monthly total was the highest since July 2010.
However, in the first 11 months of 2011, there were 787,000 sales compared with 810,000 in the same period of 2010.
New rules to stop a resurgence in risky mortgage lending are likely to be imposed in 2013 by the Financial Services Authority (FSA). The regulator’s revised proposals still intend to bring in “common sense” standards that will stop home buyers borrowing more than they can afford.
Lenders are being told they must assess the affordability of loans better. But some flexibility is being allowed for existing customers who might have been prevented from remortgaging.
Lord Turner, chairman of the FSA, said: “While the excesses of the pre-crisis period have largely disappeared from the current market, it is important to ensure that better practice endures in future when memories of the crisis recede and the dangers of poor practice return.”
The regulator wants to stop any possibility of a return to the early years of the past decade, in which some lenders handed out mortgages with only cursory checks on borrowers’ real ability to repay.
The most notorious examples were the “Together” mortgages offered by the Northern Rock bank, which granted loans worth 125% of the value of homes.
In some other extreme cases, lenders offered mortgages worth seven times a borrower’s income, or allowed them to exaggerate their real income, especially in the case of “self-certified” mortgages.
The thrust of the FSA’s proposals, which are now going out to a further round of public consultation, is still that lenders must judge properly the ability of individual borrowers to repay.
“The proposals will see prospective borrowers – whether they are first-time buyers, right-to-buy tenants or home movers – get the right information and advice, at the right time, and ensure mortgage lenders will be properly checking each applicant’s realistic ability to repay their mortgage,” the FSA said.
Specifically, when lenders assess a mortgage application, they will have to:
- assume interest rates may rise from their current low levels.
- not let borrowers rely on the possibility of rising house prices to claim they can eventually repay.
- assess interest-only mortgages as repayment ones, unless there is a “believable” source of money to pay off the loan.
Although lenders will still have to check income details in each mortgage application, the FSA is no longer proposing that a borrower undergoes a detailed check of how they spend their money, but only be given a broad assessment of their “committed and essential household expenditure” instead.
Under the proposed new rules, interest-only mortgages can still be offered if there is a “credible” plan to repay the loan, which does not involve a borrower assuming he or she can eventually cash in on the rising value of their home.
The cost of renting a home in England and Wales fell for the first time in 10 months in November, a survey has found. Rent at a typical property dropped by 0.4% compared with October, to £717 a month, LSL Property Services said.
However, a tenant still typically paid 3.5% – or £25 – more in rent than a year earlier, the survey found.
The changes seen last month showed regional variations, with prices rising the sharpest in Yorkshire and the Humber, as well as in Wales.
LSL, which owns lettings agents including Your Move and Reeds Rains, said that prices did tend to fall at this time of year.
x The biggest drop was in the East Midlands, which recorded a 2.2% monthly fall.
“Following their relentless march upward throughout the year, rent rises have taken a pause for breath,” said LSL director David Newnes.
“Landlords are looking to avoid having properties vacant over the Christmas period, and can be less aggressive with pricing as tenant activity slows in the run-up to the new year.”
However, rents in London, Yorkshire and the Humber, Wales and the West Midlands still rose in November compared with the previous month. Mr Newnes said he expected average rents to rise again at the start of 2012.
The fall in the cost of renting coincided with a decrease in the number of tenants getting behind on rent payments.
“We are still also seeing the impact of a changed tenant mix, which is helping keep arrears below historic levels,” Mr Newnes said.
“A large proportion of current renters are would-be credit-worthy buyers, were they able to provide a big enough deposit to satisfy tight mortgage lending criteria. These tenants are typically financially sound, and less likely to experience payment issues.”
However, the economic climate and the risk to jobs meant tenant arrears were likely to rise again next year, he added.
A growing proportion of surveyors and estate agents believe that economic uncertainty is holding back housing market activity. This was considered to be a bigger reason than the availability of mortgages and worries about house price falls, the Royal Institution of Chartered Surveyors (Rics) said.
However, the latest Rics survey shows a slight rise in buyer demand and sales in November with price changes continue to show regional variations.
New buyer enquiries “increased modestly” for a third consecutive month, the Rics survey showed.
The average number of sales per surveyor branch climbed to 15.4 in the three months to the end of November, compared with 15 a month earlier. This was the highest level since last September.
Slightly more surveyors expected sales to increase in the coming months than the number who expected sales to fall.
However, these slight rises were coming after a sustained period of subdued activity. More surveyors expect prices to fall in the coming months, than the number who expected prices to rise.
Annual house price changes
- England: down 0.2%
- Wales: down 0.5%
- Scotland: down 1.5%
- Northern Ireland: down 12.1%
“A meaningful recovery still seems some way off,” said Alan Collett, Rics’ housing spokesman.
On a regional basis, London registered a rise in annual house prices of 3.9%, whereas prices dropped by 4.6% over the same period in the north east of England.
Mortgage lenders have raised concerns about potential changes to the way support is given to those struggling to pay their mortgage. The government is reviewing the Support for Mortgage Interest Scheme, where homeowners who lose their jobs may receive financial help.
It says the programme, which costs £400 million a year, is unsustainable.
The Support for Mortgage Interest (SMI) scheme, which helps people receiving some benefits, operates across the UK.
Under the SMI, those who lose their jobs receive financial help with mortgage interest payments. This comes 13 weeks after losing their job, a timescale previously cut from 39 weeks. However, the assistance only lasts for up to two years.
Chancellor George Osborne said in this year’s Budget that the scheme would operate until at least January 2013.
Support for Mortgage Interest is a UK scheme aimed at helping those with a sudden change of circumstances make mortgage payments rather than be thrown out of their home.
Some people on benefits are eligible and can receive help to make mortgage interest payments 13 weeks after losing their job.
Now Lord Freud, the minister for welfare reform, has launched a review of the scheme.
These changes could see a charge put on the property of anyone who receives the assistance, which is recovered when the house is sold.
The suggestion was welcomed by the Council of Mortgage Lenders (CML) and the Building Societies Association (BSA).
Two other proposals have raised worries from the CML, which represents those who give home loans.
The first is a plan to make the payment to the homeowners themselves, rather than straight from the government to the lender. Lord Freud said the current system did not encourage people to get on top of their own finances.
The CML is also concerned that the qualifying period may return to 39 weeks after somebody has lost their job.
The BSA is calling for the amount received in SMI payments to reflect the actual rate the borrower is paying, rather than a set standard rate.
The London property market has seen a huge increase in global capital flight- as it is seen by many as a safe haven during the eurozone credit crunch. On the high end of this scale of capital investment is the commercial property market.
Since 2008, London has been the most traded real estate market in the world with 60% of the total investment from foreign investors.
The system in London is very investor friendly with transparent legal structures and it has fiscal benefits in terms of tax and capital gains which give it a certain advantage.
International corporations use London as a base for Europe, Africa and the Middle East- and London also responds quickly to global market pressures.
In late 2008, there was a 40% drop in values post the Lehman Brothers crash and as Sterling weakened. Bizarrely, perhaps, this huge markdown did little to dampen investor sentiment. In contrast to the fortunes of the US and other real estate markets, it led to a substantial increase in overseas interest.
As such, London stole the crown from New York in 2008 as the most traded real estate market in the world.
During the 2008-2011 period, some 42% of sales were from UK owners to foreign investors, with just 6% being traded the other way.
These foreign investors are discerning and are focusing on prime assets.
UK buyers are still the biggest group, holding 48% of all property here, followed by German investors which own 16%, US investors which own 10% and Middle Eastern investors which own 6%.
Japanese investment has fallen two percentage points from a high of 11% in 1995, while and European investment excluding Germany has fallen to 5% from a high of 8% in 1995.
There has also been a growing trend towards the super-rich, often labelled high net worth individuals, buying property.
The super-rich are also buying in the City. Officially they own some 6% of the office space there, but many think that could be an underestimate as it is difficult to trace ownership and there is a culture of secrecy.
Homebuilder Berkeley has seen a strong rise in profits to £101 million for the six months to the end of October. This was 64% up on the same period last year, but included a £30 million windfall due to the sale of Berkeley’s share in a project for Imperial College in London.
The firm confirmed strong demand for high quality homes in London and the South East, but said its overall market was affected by short-term volatility.
Berkeley said it was on target to meet its full-year forecasts.
“Looking forward, the further increase in forward sales and the strong balance sheet, which remains ungeared without debt, means Berkeley is increasingly well positioned to capitalise on the current market conditions,” said chairman Tony Pidgley.
Berkeley sold 1,506 homes in the half year at an average selling price of £254,000 compared with 1,249 homes sold at £262,000 a year earlier.
The construction company welcomed the government’s recent announcement of measures to boost home building, including a £400 million scheme to kick start stalled construction projects in England and a mortgage indemnity scheme to help up to 100,000 people buy homes with a 5% deposit.
Growth in the UK building sector fell back in November after a surprise gain in October new research suggests. The Markit/Cips Construction Purchasing Managers Index, which is based on a monthly survey of building firms, fell to 52.3, down from 53.9 in October. A value above 50 indicates growth.
November saw a rise in new contracts and the first increase in residential construction for six months.
Markit described growth as modest due to economic head-winds in the industry.
“Raw materials, energy and fuel prices continue to hinder the sector, construction companies cite these as the main contributing factors for high input prices which have increased for the 22nd month running,” said David Noble, chief executive at the Chartered Institute of
On Thursday, Markit/Cips data showed that the UK’s manufacturing sector shrank at its fastest pace in 18 months.
Housing market activity will improve in 2013 after a stagnant few years according to forecasts from the Office for Budget Responsibility (OBR). It said there would be a 20% rise in transactions in 2013/ 14, compared with the previous year.
The OBR also predicted that house prices would rise at levels above inflation from the same year, reaching annual growth of 4.5% in 2015-16.
Sales have been at comparatively low levels during the period of economic turmoil, owing in part to lenders’ caution when handing out mortgages, buyers’ worries about their jobs, and sellers’ unwillingness to reduce asking prices.
The latest figures from HM Revenue & Customs showed that 76,000 homes were sold in October, which was 1,000 more than in September, but still 3,000 fewer than in October last year.
It means that sales for the year so far have been 5% down on 2010.
However, the OBR – the independent, but government-funded, economic forecaster – said that this would change in a few years.
It predicted that transactions would fall by 3% in 2011-12, grow by 1.5% the following year, but then surge by 20.7% in 2013-14.
Meanwhile, house prices will fall by 0.9% in 2011-12, dip by 0.1% the following year, then rise by 2.7% in 2013-14, and increase by more than 4% in each of the next three years.
First time buyers will no longer receive an exemption from stamp duty from March 2012 as the government says the relief is “ineffective”.Documents with Chancellor George Osborne’s Autumn Statement reveal the view that the tax relief failed to get more people on the property ladder.
The temporary exemption meant first time buyers were free from the 1% stamp duty on homes costing under £250,000.
A lenders’ group described the decision as “disappointing”.
The Council of Mortgage Lenders (CML) said first-time buyers’ purchases could be bunched up at the start of next year before the concession is scrapped on 24 March.
The documents show that the Office for Budget Responsibility (OBR) believes that the UK housing market will remain relatively stagnant.
It predicts that, even without the relief for first-time buyers, stamp duty land tax receipts will only grow marginally from £6bn in 2010-11 to £6.4bn in 2012-13, before rising more sharply to £7.5bn in 2013-14, and accelerating to £11.4bn in 2016-17.
Stamp duty thresholds
- 1%: Properties of £125,000 to £250,000, but first-time buyers are currently exempt
- 3%: £250,000 to £500,000
- 4%: More than £500,000
- 5%: More than £1m, residential property only
In the Autumn Statement documents, the government said: “The government is publishing analysis showing that the stamp duty land tax relief for first-time buyers has been ineffective in increasing the number of first time buyers entering the market.
The government’s housing strategy, announced earlier in the month, included a mortgage guarantee scheme to encourage lenders to offer 95% mortgages to buyers of new homes.
Paul Smee, director general of the CML, said: “While the stamp duty concession may not have stimulated additional demand, it was a significant help to home-owners entering the market and its removal runs counter to the themes of the new housing strategy.
“It is likely that we will see a bunching of eligible first-time buyer transactions early next March to beat the expiry date on the concession.”
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