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Housing Market update - 04/04/2014

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Housing crisis "to spread across the South of England"

By 2018 the South of England will face a combined shortfall of at least 160,000 homes a new report from international real estate adviser, Savills has claimed. The report identifies that local planning authorities are simply not planning enough new homes to meet the growing housing need.

In a new report, Planning: Countdown to the Election, the Savills planning team has examined locally planned targets across the South East, South West and East of England. Their analysis found that these regions will be short of 91,323 homes when targets are compared to need. Furthermore, this number does not take into account the additional demand that will continue to spill out from London.

The difference between house prices in London and the South East is now higher than it has ever been and this is expected to translate into increased demand overflowing into the Home Counties and to locations as far afield as Cambridge, Brighton, Reading and Oxford.

Savills has identified key migratory hotspots around London and concludes that the majority are already facing their own local housing shortfalls. The firm is calling for local planning authorities to form an 'arc of cooperation' around London, working towards solutions that look beyond individual local authority boundaries to maximise housing delivery.

"Local planning authorities need to act with urgency and in cooperation with neighbouring authorities to plan for the scale of housing delivery now needed right across the South of England," says Savills planning director, David Jackson. "Currently planned targets fall well below the projected need, without accounting for the issues of years of undersupply at a local level. Add to this the projected flows of demand from London and there is a real crisis looming."

England currently needs 240,000 new homes a year according to Town and Country Planning Association estimates. Translating this national figure down to the local level, Savills has identified particular hotspots where planned levels of housing are well below levels of need: the annual shortfall peaks in Brighton & Hove at over 700 homes, followed by Luton at over 500, Epping Forest around 400 and Elmbridge at over 350 each year. Authorities within the more affordable, lower demand areas to the east of London (Thurrock, Dartford, Gravesham) are amongst the few planning to deliver relatively high levels of new homes. Conversely, in Surrey, Berkshire and Buckinghamshire, where there is higher demand from Londoners, housing targets are well below the rate required.

"We need to plan larger scale developments as a matter of urgency to meet local need and anticipated London overspill," says Savills planning director, Jonathan Steele, "Without this we face a growing housing shortfall, with affordability an inevitable consequence.

"The Chancellor's recent commitment to a new 'garden city' in Ebbsfleet, with an initial 15,000 new homes is welcome, but it is a drop in the ocean - the equivalent of just four months' requirement for housing in London. New towns or Garden cities alone are not therefore a panacea. A long term commitment is required by government and other agencies to unblock infrastructure and other constraints to ensure that rates of housebuilding achieve a sustained and substantial increase."

Source: www.estateagenttoday.co.uk

Stratford - a compelling market for hotel investment?

The London district of Stratford has come a long way since the early 11th century when it was referred to as Strætforda or "ford on a Roman road" and was primarily an agricultural community. In the 18th century, the location was also a sought after country retreat for wealthy merchants and financiers and interestingly, in the 19th century it became an important transport hub, with omnibuses and coaches running into London four times every hour and coaches from East Anglia passing through hourly.

With that in mind, it may come as less of a surprise that when the Olympic Committee elected London as the City Hosting the 2012 Summer Olympic Games, Stratford was chosen as the area where most of the facilities were going to be built including the main stadium, the Olympic Village, the cycling track and the swimming facilities.

The district undeniably benefitted from the worldwide publicity and upgraded infrastructure that includes no less than a high speed train taking commuters to London Kings Cross in 7 minutes, two major tube lines, the DLR and Overground. Further it established itself as a major shopping district with the opening in 2011 of Westfield Stratford City: home to 300 stores, it is one of the largest shopping centres in Europe.

Stratford's future ambitious developments include new facilities for the Victoria & Albert Museum and University College London, approx. 1,000,000 sq ft of office space, two residential buildings (in addition to the 1,500 residential units that were completed in 2013) as well as at least one 4-star hotel. Stratford is increasingly a popular base for London's business and leisure travelers thanks to its proximity to Canary Wharf, the City of London, its brand new facilities and its 24 hour Casino, resulting in very strong hotel trading figures in the area – even now the Olympics are long over.

Peter Haigh, Partner at Gerald Eve LLP: "The London 2012 Olympics put Stratford on the international map with hotel supply increasing to cater for the Olympic period and beyond. The five years prior to the Olympics saw the opening of circa 730 branded hotel rooms / apartments within one mile of the Olympic Park. The pipeline remains strong with over 800 bedrooms expected to come on stream illustrating confidence in the market. Demand for London hotels continues to rise and increasingly this demand is being displaced to London's outer zones. Stratford, with its excellent transport links and recognition within the international market has become a practical accommodation solution for both corporate and leisure tourists. The market has considerable further potential with hoteliers able to capitalise on Westfield shopping centre, the regeneration of the Olympic Park and Cross Rail."

Due to the continual strong demand for hotel accommodation from ExCel and Canary Wharf-related business, hotels in the vicinity perform well. Current provision of accommodation comes predominately from the budget sector, with a marked lack of choice of service levels unable to meet the demand of future requirements based on the changing business and tourist profile of the area.

There exists a clear, strong market opportunity for the development of quality, large-scale serviced accommodation in the immediate area. The regeneration of Stratford City will create an East London destination location in the short term, the reputation of which will only be enhanced as significant retail, leisure and commercial developments are concluded. These, coupled with Stratford's superb communication links will transform the market environment for hotel accommodation, away from the price-conscious corporate and leisure demand to more varied markets.

The current lack of options can only be to the benefit of any new quality development – demand for a higher standard of accommodation already exists and is expected to grow rapidly. Property investment leaders IPIN Global have seized this opportunity and announced the planned development of an addition to the Urban Villa brand of Extended Stay facilities. The Secure Exit StrategyTM offers the chance to profit from hotel development without the need to complete on the purchase. In the context of Stratford, early investment into the upscale hotel market carries a compelling presentation. Click here to find out more.

Source: www.ipinglobal.com

Ghost gazumping: Can home sellers demand a higher price after a deal is agreed?

Ask the experts: "Ghost gazumping" is on the rise as sellers cash in on rapidly rising house prices. We look at the point at which a sale price is binding.

We were buying a house and had agreed a price with the seller, but they raised it just before we exchanged contracts. We were told there was no rival buyer but the seller decided they wanted more money. Are they allowed to do this and how can we protect ourselves from this in future?

The recent recovery in the property market has seen demand for homes soar and a return of "gazumping" - where a seller accepts an offer but later reneges on the deal in favour of a higher bid.

Brokers say this has now gone a step further and some sellers are insisting on a higher price after a deal has been done, even though there are no rival bidders. With property prices rising, sellers know they can put their property back on the market and achieve a higher price just weeks after a sale is agreed.

Aaron Strutt of brokerage Trinity Financial said while this may not be a nice thing for sellers to do, they are allowed to increase their asking price at any point until the contracts have been exchanged. And in some cases it may also be understandable, particularly if a buyer is taking too long to organise their finances.

So what can you do to prevent it?

The more organised you are and the quicker you can get to the point of exchanging contracts, the less time there is for movement in the market. Importantly, this means less time for the seller to increase their asking price.

Mr Strutt said vendors are becoming increasingly impatient and are likely to expect a fast mortgage offer and valuation.

"If you need a mortgage, it is important that you do your research and apply to the right lender," he said. "Some of the biggest high street banks currently have large processing delays and this could be a significant problem if you need to complete quickly."

To avoid delays check how long your lender will take to produce a mortgage offer and have all your financial documents in order. Make sure your solicitor knows how fast you need to move and ask for regular progress updates.

If you do find out that the vendor has increased the asking price and you decide to pay the additional money, there is a good chance you will need to go back to the mortgage lender to ask for additional funds.

"This can be a tricky process particularly if you are already stretching yourself financially to buy the property," said Mr Strutt. "You may well be forced to apply to the Bank of Mum and Dad, if that's an option."

Source: www.telegraph.co.uk

Property news update: Who is the average first time buyer?

The number of first time buyers increased 42 per cent year-on-year in February, according to LSL Property Services. There were 22,400 first time buyer transactions in February 2014, up from 15,800 in February 2013.

Eight out of ten of first time buyers surveyed said they expect prices to rise in the next year, with nine per cent expecting prices to rise by more than 10% (although five per cent predict house prices will fall).

Two-thirds of first time buyers said they wanted to buy a house rather than a flat in February, with just under half looking for a house with three or more bedrooms, and a further quarter looking for a two bedroom house.

Overall, the average first time buyer was 31 and earning an annual salary of £36,330, although in London and the South East they were 33 and earning £41,885. Half of buyers in London and the South East said they would consider buying a new property, compared to a quarter in the rest of the UK.

First time buyers in London paid more than three times as much as first time buyers in Northern Ireland (£280,477 compared to £91,583). The South East and the South West were the second and third most expensive regions, with average purchase prices of £191,242 and £169,672 respectively.

Help to Buy in the North East

Help to Buy Equity Loans are responsible for one in three new homes sales in the North East, according to Countrywide, with figures up to 50 per cent in some areas. By comparison, just under one in 10 in London have been funded this way.

Its figures also suggest that in the first three months of this year, an average of 12 buyers are chasing each property on the market, the highest level since 2008.

Grenville Turner, Chief Executive, Countrywide, said: "Claims that the Help to Buy Scheme is causing a housing bubble are far from the truth and the facts speak for themselves. As a proportion of transactions both parts of Help to Buy together support only two per cent of transactions in London compared with 10 per cent in the North West, where support is most needed.

"The scheme has had a positive impact on house builder confidence with many now believing that they can sell what they build, which as we know means they will build more. The extending of the equity loan guarantee allows developers to plan with some certainty that demand will continue to exist in 12 months' time and goes some way to bridging the increasing gap between new supply and demand for property in the UK."

Edinburgh property market

Property prices in Edinburgh increased by 1.3 per cent in the first three months of 2014 and by 4.6 per cent year-on-year, according to figures from Knight Frank. Price increases were particularly strong in the New Town and West End areas, up by 1.5 per cent between January and March. Edinburgh also accounted for nearly two thirds of all £1m+ Scottish property sales in 2013

Edward Douglas-Home, head of Edinburgh City Sales, said: "Many vendors are cautious about putting their home on the market before the Independence Referendum in September. However, our analysis suggests that this caution may be misplaced, with the number of new applicants registering their interest in buying a home up significantly so far this year and the number of transactions completed in the three months to March more than double that of the same three month period last year."

Source: www.independent.co.uk

Number of buyers for each property on sale in England reaches 12, new report reveals

The number of buyers chasing each property in England hits highest level since 2008 in the first quarter of 2014, research shows.

Some 12 buyers are chasing each new property coming on the market, an increase of over 20% compared to the 9.7 buyers in the first three months in 2013, according to the latest quarterly housing market review from Countrywide.

In London, the figure was much higher with 25 buyers for every new property and the research also shows that 47% of people aged between 20 and 30 live in a city, a number expected to reach 50% by 2018 if current rates of growth continue.

At a time when the population of England is ageing, the average age of residents within the 10 largest cities has fallen since 2001.

The research also shows the success of the government's Help to Buy schemes. Some 19% of new homes built since April 2013 were sold through the Help to Buy Equity Loan scheme, with some housing markets seeing half of properties transacted this way.

The Countrywide report found that significant regional variations exist in how and where the Help to Buy Equity Loan scheme is having the greatest impact. Over the past nine months some 28% of new houses built in the North East sold via Help to Buy Equity Loan compared to just 9% of new houses built in London.

In the first 10 months of the Help to Buy Equity Loan scheme being introduced, a total of 14,823 new properties have been purchased through the scheme, the majority by first time buyers. A further 4,666 new homes have been reserved. This equates to 19% of all private dwellings built in England being sold through the scheme.

Countrywide has found that more new homes have been bought using the Help to Buy Equity Loan scheme in areas which have seen the smallest increases in house prices over the past 12 months. House builders in areas of the North East in particular, where house prices remain well below 2007 levels, have relied heavily on the Help to Buy Equity Loan scheme to sell houses. In Newcastle nearly half, 49%, of new private homes built in the past nine months have been sold using an equity loan.

If developers believe they can sell what they build, they tend to build more of it. Up to a third of some house builders order books are composed of home buyers using the Help to Buy Equity Loan scheme to buy their new home. This highlights the extent to which the scheme is supporting new house building, and the reliance of developers on it outside London and the South East to achieve sales.

'Claims that the Help to Buy Scheme is causing a housing bubble are far from the truth and the facts speak for themselves. As a proportion of transactions both parts of Help to Buy together support only 2% of transactions in London compared with 10% in the North West, where support is most needed,' said Grenville Turner, chief executive of Countrywide plc.

'The scheme has had a positive impact on house builder confidence with many now believing that they can sell what they build, which as we know means they will build more. The extending of the equity loan guarantee allows developers to plan with some certainty that demand will continue to exist in 12 months' time and goes some way to bridging the increasing gap between new supply and demand for property in the UK,' he added.

The research also shows that the ratio of buyers to sellers has increased by 25% from 9.7 buyers to each new seller in the first quarter of 2013, to 12.3 buyers to each new seller in the first three months of 2014.

The firm says that consumer sentiment driven by a recovering economy, government support and increasing mortgage availability is stimulating new and existing demand but it still expect the number of transactions in 2014 to be less that 75% of the long run average.

January 2014 saw the highest level of demand with 13 buyers chasing each new property coming on the market. In London, the figure was much higher with 25 buyers for every new property, an increase from an average of 11 as recently as July 2013. However, towards the end of the first quarter in March, there were signs that demand eased off slightly as the market slowed to draw breath, but a shortage of stock in many areas remains, especially in London where the number of properties on the market has fallen 20% year on year.

The report suggests that house price increases are yet to tempt sellers to the market in significant numbers and equally competition for property in London makes the construction of longer chains difficult and thus making it harder for people to move home. Sellers who receive multiple offers for their property are more likely to accept one from a first time or cash buyer because of the shorter chain they provide.

'Cities are playing an increasingly important role in leading the economic recovery. While understandably London receives a significant amount of attention, cities outside London have been quietly growing, adding new jobs and people at a record rate. The London versus the rest of the country is a false debate. In reality, London now competes on a global stage for different sources of investment, people and resources. While regional cities do compete internationally with other cities which share similar economic profiles, primarily they compete on a national level with each other,' said Turner.

'Competition and the development of clusters of expertise have driven young people to cities and in doing so have reversed their ageing populations. While the average age of the country increases, in our largest cities it is decreasing. A rapidly growing private rented sector, affordable housing and good public transport are attracting young people, and the social and financial barriers to life in a city are reducing,' he explained.

'Flat, car and bike sharing schemes have all grown rapidly which have significantly reduced the upfront costs needed to live and work in a city. In a country whose population is ageing and number of retirees growing, cities will play an increasingly important role in generating future tax revenues and economic growth,' he added.

Source: www.propertywire.com

Bank of England: Mortgage approvals fall for the first time in a year

The number of people taking out mortgages in the UK has fallen for the first time in a year, according to new figures from the Bank of England.

There were 70,309 mortgage approvals in February, a sharp fall on January, when 76,753 loans were approved.

The news surprised some economists - until now the number has increased every month since February 2013.

But the Bank said January's figure had been "erratically high," and the fall did not indicate a slow-down.

Analysts had expected a small dip in mortgage approvals in February, due to bad weather.

However they had not anticipated a drop of more than 6,000.

Business loans

Nevertheless Howard Archer, chief UK economist with IHS Global Insight, pointed out that the number of approvals in February was still up by more than 33% on a year ago.

"The dip in approvals does little to dilute the view that the housing market is sustaining robust momentum," he said.

The Bank of England figures also showed that lending to businesses continued to fall.

UK businesses borrowed £447.5bn in February, down £0.8bn on January, and a fall of 3.7% over the last 12 months.

Since the beginning of this year, the government's Funding for Lending Scheme (FLS) has been re-focused on business loans, in an attempt to stimulate lending.

Through FLS lenders are able to borrow money at cheap rates, providing they pass the money on to companies or small businesses.

Source: www.bbc.com

Property prices unaffected by windfarms, says CEBR

Giant wind turbines have long been accused of damaging house prices. But a new report says that is not the case

Windfarms have no negative impact on the prices of property within a 5km radius of turbines, and can even push up house prices in some areas, according to an analysis of 82,000 transactions over the past two decades by the Centre for Economics and Business Research.

The financial damage to local house prices from nearby giant "eyesore" turbines is frequently cited by campaigners against windfarm developments. But independent CEBR research, commissioned by RenewableUK, the trade body for the windfarm industry, found there was no negative impact when house price data was analysed at seven sites across England and Wales, either during the planning, construction or completion phases of the project.

"At last we have a detailed independent analysis into what actually happens to property prices before, during and after windfarms are constructed, over a period of nearly 20 years. This shows that claims that windfarms might have a negative effect on house prices are unfounded," said RenewableUK chief executive Maria McCaffery.

But campaigners called the research "shoddy and blatantly self-serving". Graham Lang of Scotland Against Spin, said: "As the trade body for the wind industry, RenewableUK's job is to maximise the possibility for profit for its members. Every one knows the closer a property is to gigantic industrial turbines, the less desirable it becomes.

"A house near a wind farm may be harder, even impossible, to sell, as the researchers would have found out if they had sought qualitative evidence from wind farm neighbours or estate agents. The shocking thing is that our politicians have allowed wind developers to get away with avoiding the planning controls and compensation mechanisms which apply to other environmentally harmful development, such as motorways, railways and airports."

The phenomenon is highlighted in a study by ONS statisticians identifying so-called 'concealed families' - those living as family units but who would not show up on statistics as a household in their own right because they live under the same roof as another family.

The CEBR findings contradict separate research by the London School of Economics, which found that if a windfarm is visible from a house, on average it knocks 5-6% off its sale price, and as much as 15%. It suggested that a typical windfarm of 11 turbines would face a bill of £12m to compensate houses within 4km. Currently, householders in the UK cannot claim compensation from windfarm developers " unlike in Denmark, where windfarm owners have to pay for loss of value to property.

The CEBR research examined seven windfarms, including England's biggest onshore site, Scout Moor in Lancashire.

It found that the average annual increase in house prices around a 5km radius of the windfarms from the year before construction through to 2013 was 0.8%, compared to 0.5% for the county where the scheme was sited. "There was, in fact, a statistically significant positive impact ¦ prices saw 2% higher annual price growth during the period after construction to the present day."

Data for the research came from the Land Registry, said the CEBR. But it said there was not sufficient data for houses within 2km of a wind turbine so it measured sales data out to 5km. "Over a 19-year period there were, on average, just 68 transactions within 1km, and 723 transactions within 2km. This low volume meant it was not possible to create a reliable house price series for the 1km and 2km areas. It was therefore only possible to use data for the 5km area."

Of the seven sites studied, Kiln Pit Hill in Northumberland did show an initial "substantial downturn" in prices, but these later recovered.

RenewableUK, said polling showed two-thirds of the public in favour of windfarm developments. In February, electricity output from Britain's windfarms hit an all-time high of 11% of total supply.

Chris Fiddes says he looks out over a Northamptonshire landscape "that could have stepped from the pages of Jane Austen". But plans by German operator Volkswind to plant five 375-feet high turbines within just 500 yards of his Regency-era home, won't just destroy his view, he says, they will also destroy the value of his property.

A local estate agent valued his home at around £400,000 before planning permission for the windfarm was given the go-ahead. "But afterwards, when I asked how much it was worth, he just laughed. He said it would be unsaleable," says Fiddes, 80, a painter who takes inspiration from his countryside location near the village of Crick. "The turbines are huge and completely out of scale with the landscape. Two other houses will also be seriously affected. The English landscape has always been the most important thing in my life. My wife was a great enthusiast for Jane Austen and it was she who found this house down a minor picturesque road."

Permission for the windfarm was initially refused by Daventry Council as "oppressively intrusive" but the decision was later overturned by the Planning Inspectorate, which handles national infrastructure issues. Volkswind argues that the Watford Lodge site "is not located in an area which is particularly sensitive in landscape or ecological terms."

Fiddes says he and other residents feel trampled over by the developers, who have offered no compensation and who he claims are turning his part of Northamptonshire into the "windfarm capital of England. If they had to pay the millions in compensation, that they should do, the whole industry would collapse," he says. Windfarm developers pay money into community benefit funds, but Fiddes says the amounts are laughably low. "It's the sort of thing that will pay for the redecoration of the village hall," he says. "This is going to make me a poorer man, but unfortunately neither I, nor the other residents, have the money for a high court action."

Several other owners told us their homes have been blighted by windfarms, but they are shy of being photographed because they fear the publicity would mean they were never able to sell.

George Matthews, who lives close to the Drone Hill windfarm, a complex of 22 225-foot turbines on the Scottish borders near Berwick, has been trying to sell his £500,000 home for three years.

"My mother has dementia, and I would like to move to be able to look after her, but we are stuck and can't get on with our lives. We can't sell it " we've had no offers. We have a beautiful home but the windfarm is putting people off. I asked for £100,000 in compensation, but they refused."

When he moved to the area eight years ago, there were no proposals to build a windfarm. He describes the community benefit fund " worth £40,000 a year for the next 25 years " as a "drop in the ocean" from an operator, AES, which is an American multinational worth billions.

"It's peanuts. The local communities get £40,000 when the landowner gets £300,000 for what is moorland, and the developer last year earned nearly £5m."

AES says the fund is worth £1m in total and the electricity generated will provide power for 14,700 homes.

This article was amended on 31 March 2014 to clarify that sales data from properties located less than 2km from a wind turbine was not excluded from the analysis.

Source: www.theguardian.com

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