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2012 ended on a high for private sector landlords in the UK as severe tenant arrears dropped by 15.6% in the final months of the year.
In the fourth quarter of the year there were 16,000 fewer tenants in severe arrears of more than two months compared with the previous quarter, meaning that the number in this situation has fallen for the first time in over a year.
However, the improvement has yet to filter through to evictions, with court orders up 5.5% in the third quarter of the year, the latest tracker report by Templeton LPA, part of LSL Property Services.
The arrears improvement contrasts with the trend in the preceding four quarters, where severe arrears rose by an average 10.8% per quarter. They are now at their lowest level since the end of 2011. The fall leaves the level of severe arrears cases 9.2% lower than the average for the previous four quarters.
The quarterly drop slowed annual growth in the number of tenants in severe arrears to just 0.3%. Such tenants now represent 2.2% of tenancies in England and Wales, down from 2.5% in the previous quarter.
There was also a wider improvement in tenant finance. According to LSLs latest buy to let index, overall tenant arrears fell in November, with 7.4% of all rent late or unpaid. This compares with 8.1% in the previous month.
ґTenants finances have suffered a gruelling combination of rising living costs and rental inflation throughout much of 2012. With many budgets balanced on a knife edge, a slight reprieve from rapid rent rises towards the end of the year has been very significant. But the recent strength of the labour market has played the biggest role in halting the upwards climb in the number of tenants in severe financial difficulty,Ғ said Paul Jardine, director and receiver at Templeton LPA.
Unemployment has fallen dramatically to 7.8%, and with 44,000 more full time jobs in the three months to November, fewer households have faced seeing their monthly income halted and their ability to meet the monthly rent cheque hampered. If the UKђs economy can avoid falling into a triple dip recession in 2013, a further improvement in employment levels will go some way towards preventing arrears cases from rocketing up, he explained.
However, those facing eviction through court order are yet to feel the impact of a better financial situation for tenants. In the third quarter, 25,756 tenants faced eviction notices, a quarterly rise of 5.5%. On an annual basis this puts evictions marginally up, increasing 0.25% from a year ago.
Improvements in tenant arrears also havenҒt yet filtered through into landlords mortgage arrears. The number of buy to let mortgages over three months in arrears rose by 0.9% to 21,900 by the end of the third quarter of 2012, compared with a fall in the previous quarter of 9%. Despite this small step backwards in the third quarter of 2012, on an annual basis, buy to let mortgages more than three months in arrears fell by 15.8%.
ґImprovements in tenants finances come on the back of surprisingly strong unemployment figures. But after a year of increasing severe arrears, landlords are more aware of their legal protection than ever, and a more proactive approach to tackling arrears has helped rein in severe tenant arrears,Ғ Jardine pointed out.
However, the Funding for Lending scheme is bringing historically low mortgage rates down further, and this should continue into 2013, which will leave landlords increasing room for manoeuvre when cash flow problems do emerge. In turn, this is likely to place downwards pressure on buy to let arrears over the medium-term, in the absence of a major downturn in the labour market,ђ he added.
David Brown, commercial director of LSL Property Services, said that more investment in the private rented sector is needed. Thankfully strong tenant demand and yields are tempting more people to invest in the sector and existing landlords to expand their portfolios,ђ he said.
But investors should place financial suitability of any prospective tenant high up their agenda when letting a property. Cutting corners at the point of vetting a tenant is a false economy, and can prove costly. It is far easier to take action to prevent arrears in the first place, than to resolve them after they have occurred,ђ he added.
The recently established Funding for Lending scheme in the UK could help residential prices climb by 5% in 2013, it is claimed.
The scheme which was launched a couple of months ago is set to have a big impact on mortgage rates and availability and the residential property market is hoping it will help more first time buyers onto the property ladder and therefore boost the real estate sector overall.
Buy to let specialist Assetz is predicting a 5% growth in house prices as a result and it says its prediction a year ago of 3% growth is on target.
The Assetz analysts also expect that interest from international buyers that has helped property prices in London to soar, will continue in 2013 but move out beyond the capital city and help surrounding markets.
It is also predicting a 4% increase in residential rents across the country and strong growth in the buy to let sector.
The housing market is on track to end this year with growth of around 3%, in line with our 2012 prediction, according to Assetz House Price Watch, a summary of the leading UK house price indices.
Prices overall have been buoyed by a strong performance in key locations, particularly London and upmarket commuter hotspots in the South East, while many parts of the country have seen no growth or marginal price falls,ђ said chief executive Stuart Law.
We are just starting to see the impact of the Funding for Lending Scheme, which is bringing liquidity to the money markets and is already bringing about a reduction in mortgage rates for lower loan to value borrowers. The competition we are now seeing among lenders for business at 60% loan to value (LTV) is an excellent sign, as over the coming months this competition is likely to creep up to 65% and 70%, bringing better deals to homebuyers and boosting lending levels,ђ he explained.
He said that as transaction levels remain very modest, a real improvement in lending could open the floodgates to buyers who suddenly find themselves in a position to move. This would have a considerable impact from such a low base, particularly in popular residential areas where there is good infrastructure and a sound employment market. Areas that are reliant on manufacturing or the public sector, which are struggling with higher levels of unemployment, will see very low transaction levels next year and price falls,ђ said Law.
House builders are targeting better quality and larger properties around the country and are beginning to expand again. While house building starts remain low at around half the peak levels of activity we expect a slight pickup in building in 2013 but this minimal growth in supply will have no measurable effect upon rising rents and the strengthening prices of quality property,ђ he pointed out.
He believes that high levels of activity in the buy to let sector will continue to underpin the market next year. In recent months, international money has been seeking alternatives to the now inflated London market, which is likely to see price and rent corrections in 2013. Strong regional cities such as Manchester and Liverpool are appealing to foreign investors who are drawn by high local rental demand and yields in the region of 8%, which are hard to come by in the south east,ђ said Law.
The rental market is in an excellent position, with tenant demand extremely strong and rents expected to rise 4% across the UK next year. Buy to let investors are pouring into the sector, seeking a home for their cash which will offer a secure monthly income as well as an asset which is likely to grow over the long term, funded by cheap borrowing,ђ he explained.
Our research, carried out in September 2012, shows that three quarters of buy to let investors intend to expand their portfolios next year. We now have 55,000 registered cash rich investors on our books and expect to end 2013 at 75,000 active registered buyers,) he added.
More than one in four wannabe first time buyers say that it will take them 10 years or more to raise the necessary deposit to buy a property, according to the Building Societies Association.
But 26% of potential buyers surveyed at the end of 2012 believe that they can raise a deposit in three years or less. This is in stark comparison to the 69% who said they did this before the start of the credit crunch in 2008, says the BSA.
Since September 2010 raising a deposit has consistently been the biggest barrier to property ownership right across the spectrum of home buyers.
Looking ahead to 2013, nearly a third of first time buyers are pessimistic about their chances, believing that things will only get harder next year. Most are reliant solely on their own savings, rather than the bank of mum and dad, to raise a deposit. Below inflation wage rises, higher rents and the increasing cost of living are all making saving harder.
Although deposits are plainly still an issue, access to mortgage finance has eased with less then half of the public, 45%, now saying that it is a barrier to property purchase. This is the lowest since the BSA started tracking consumer views on home purchase in 2008.
Looking ahead to 2013, amongst those planning to buy for the first time in the future, 23% said that they believed they would be living in a property that they owned by the end of the year, whereas 73% said they would still be renting or living with family or friends.
Since the credit crunch owner occupation has been falling in the UK, down from 14.7 million to 14.5 million households between 2007 and 2011. This is backed up by 2011 Census data released last week.
Buyers and lenders alike are adjusting to a new kind of normal in the UK housing market and the headwinds generated by a weak economic environment mean that it is here to stay right now,ђ said BSA head of mortgage policy Paul Broadhead.
But he said it is a complete myth that no first time buyers are getting their feet onto the housing ladder. Between January and October 2012, building societies and other mutual lenders helped 22,000 more first timers buy their own home than in the same period last year, with around one in every three mortgages made to this group. Mutual lenders have contributed most of the net lending in the UK this year as some banks have shrunk their balance sheets,ђ he explained.
Looking ahead to 2013, there is no doubt that sensible creativity will be required from all of those involved in the mortgage market. There is potential to grow and develop alternative forms of tenure for the future, although simplicity and transparency for the consumer must be at the core of any such developments) he said.
In addition, it would be helpful if government and regulators could decide their priority between the lend and lend now rhetoric and the demands to grow capital as lenders can't do both,ђ he added.
Many of the world’s wealthiest property buyers opt for central London, survey suggests - 3 Oct 2012
Some 57% of overseas high net worth individuals name London real estate as their top target investment class, according to a report unveiled today by international property consultants Cluttons.
The global appetite for both London residential and commercial real estate assets has seen an upturn in the last 12 months with overseas investors, both institutional and individual, contributing almost 90% in recent commercial asset transactions, says its Private Capital Survey 2012.
However, the firm says that headline reports of London being a safe haven throughout the global economic crisis, although not inaccurate should not be overplayed.
According to Cluttons, 86% of HNWIs pinpointing London as their top investment city already have strong ties to the UK whether through second homes, children's education or expansion of existing investment portfolio. London has always been a solid investment choice.
Some 71% of HNWIs surveyed said they were planning investment activity in the next three to six months in their first choice target city. And at over two thirds higher than last year, investors stated that the target city will be outside their domestic market.
Middle Eastern investors interviewed identified London as their first choice city. In particular those from Dubai and Bahrain were continuing to look at prime central London residential as their obvious target location.
The report suggests that growing demand pressure on this scarce asset class will drive values up further and the rapid recovery of central London residential markets from the impact of the global credit crunch is a key factor influencing investment decisions.
Investors surveyed in Kuala Lumpur and Singapore also identified central London residential as their primary offshore investment target. While HNWIs in Bangkok ranked London behind Myanmar and Indonesian wealthy private investors were still looking to Singaporean and Australian residential before considering London.
‘This new survey from Cluttons takes a unique insight into the live investment intentions of HNWIs across the Middle East and Asia Pacific regions. Quite remarkably, 43% of these highly mobile investors state that the global financial crisis has had no impact on their view of London as a top investment target location,’ said Bill Siegle, senior partner, Cluttons.
‘In fact, almost a third go on to claim that London is better placed because of the Eurozone difficulties. But Cluttons’ global view is that there remains no room for complacency,’ he added.
He also pointed out that private individuals in Dubai felt there would be less outflows of capital from the United Arab Emirates over the next 12 to 18 months as the UAE’s economic recovery gains momentum. Furthermore, the bulk of Asia Pacific HNWIs increasingly are expected to look at their home markets more favourably.
‘The fundamentals of the London economy remain strong. The city attracts dynamic businesses and skilled professionals from around the globe. This gravity effect underpins the city's appeal to wealthy individuals looking for investment opportunities in the next 12 months,’ concluded Siegle.
There is little sign of gloom among households across the UK, with a house price sentiment index hitting the highest level for more than two years in September.
The latest Knight Frank/Markit House Price Sentiment Index (HPSI) shows that while households perceived that the value of their home fell again in September, the declines were the most modest in more than two years.
Nearly 10% of the 1,500 households questioned said the price of their home had risen, while 15% said that the value of their home had declined. This gave a HPSI reading of 46.8, up from 44.5 in August and the highest reading since July 2010.
Any figure under 50 indicates that prices are falling, and the lower the figure, the steeper the decline. Any figure over 50 indicates that prices are rising.
Since the inception of the HPSI, the index has been a clear lead indicator for house price trends.
Looking ahead around 28% of households anticipate a rise in the value of their home over the next 12 months, compared with 21% expecting a decline. The resulting index reading is 53.2, up from August's reading of 51.8 and marking the highest reading since May this year.
London continues to lead the way, with households in the Capital expecting the biggest price rises over the next year with a reading of 63.1, up from 61.3 in August.
‘September saw some confidence continue to return to the UK housing market, but expectations of where house prices will be in 12 months' time remain well below levels seen earlier in the recovery and suggest little overall change in house prices,’ said Chris Williamson, chief economist at Markit.
‘However growing evidence of a rebound in the domestic economy since the second quarter and recent better news on the labour market have all helped to buoy sentiment in September, which could perhaps lead to further gains in the HPSI in coming months if the news flow continues to improve,’ he added.
Expectations for house price rises were recorded in seven of the 11 regions in August. But the north/south divide became blurred amid a turnaround in expectations among households in the North East (54.6), West Midlands (52.2) and the East Midlands (51). Households in these regions now expect prices to rise over the next year whereas in August they had expected prices to fall.
In contrast, households in Yorkshire and the Humber (46.4) and Scotland (47.1) now expectprice falls, whereas they had predicted prices would rise in August.
London continues to lead the way, with households in the Capital expecting the biggest price rises over the next year with a reading of 63.1, up from 61.3 in August.
Those living rent free (56.8) are the most optimistic about prices, while those renting from social landlords (51.2) expect the most modest rises in prices, followed by those who own their home outright (51.3) with no mortgage.
The top earners continue to be the most optimistic about house prices. Those earning more than £58,000 a year have an average future HPSI reading of 56.6, although this is down from 57.5 in August. Those earning less than £15,000 a year were next in line, with a reading of 52.8, up from 48.5 in August. Those earning between
£15,000 and £23,000 expect the smallest increase, with a reading of 50.6.
'This bounce in sentiment coincides with some brighter news on the economy, with serious questions being raised about whether the country is actually in recession. Better than expected employment data, as well as encouraging signs from the services and manufacturing sectors, are also helping to bolster economic confidence,' said Gráinne Gilmore, head of UK residential research at Knight Frank.
'But the house price performance is still localised, as the figures show, reflecting how the challenges
within the housing market are affecting different regions. A lack of mortgage lending continues to act as a dampener on activity in many areas,especially among first time buyers,' she added.
Weak Sterling bolsters London’s property price growth - 26 Aug 2012 from http://www.propertywire.com
International cash buyers benefitting from weak Sterling are contributing to demand for homes in the prime central London property market, according to the latest report from Cluttons.
Compared to the price peak in the third quarter of 2007 buyers from the Far East are now benefitting from price discounts of as much as 60% and buyers from the Middle East as much as 30% as a result of currency changes. Cluttons predicts that with no immediate appreciation in the value of Sterling expected this advantage looks set to continue.
Its report says that cash buyers, both domestic and foreign, are still very much in evidence in the prime central London market, which continues to be perceived internationally as a safe haven for cash. At the lower end of the market, demand is also being sustained by the greater availability of mortgage finance for first time buyers, particularly in the higher loan to value ratio brackets.
In the first seven months of the year, the number of first time buyers purchasing with a mortgage has more than doubled on the same period in 2011. The report says that these factors combined will maintain demand in the prime Central London market and supersede the 0.5% contraction in GDP expected this year. For this reason, Cluttons predicts annual growth of 3.2% despite the impact of the Olympics, which saw buyers and sellers delay moving plans, dampening the pace of growth. It adds that expectation of weak global economic conditions, however, will suppress the rate of growth next year, with prices rising 2.5%. Growth of 4% is expected to follow in 2014 and 2015 as domestic conditions improve, lifting the performance of the capitals housing market. Meanwhile, the wider UK market will see price falls of 1% this year with marginal falls again in 2013 and growth of 1% in 2014.
The prime central London property market continues to buck the national trend, putting in a slightly stronger performance than we had previously anticipated. Strong annual growth of 3.2% is forecast in spite of significant downward pressure on prices as the economy continues to muddle through, said Sue Foxley, head of research at Cluttons.
International buyers have long bolstered demand for property in the capital, pushing up prices as the supply shortage continues. However, a growing mortgaged first time buyer market means that we are likely to see increased competition for properties at the lower end, which will have a far reaching effect on the whole of the supply chain.
The Bank of Englands Funding for Lending scheme also appears to be re-energising the debt financing market, which is very positive news,Ғ she explained. The Central London rental market did not experience the much anticipated Olympic boost from tenants and a moratorium on corporate moves during the games compounded this.
However, evidence of a rise in recruitment in June and July suggests a flurry of activity in the autumn. Despite this, a rental growth readjustment is still underway, with a 1% contraction forecast this year. The report says that this is largely in response to the unsustainable rental growth seen in 2011. Cluttons expects positive growth of 2% to follow in 2014 and annual rises of 3.5% to 4% in 2014 and 2015.
Residential property prices up in 16 out of 20 key Indian cities, figures show - 24 Aug 2012 from http://www.propertywire.com
Residential property prices increased by up to 10% in many major cities in India in the second quarter of 2012, the latest data from the National Housing Bank shows.
The NHB RESIDEX index, which tracks the movement in prices of residential properties on a quarterly basis since 2007 shows that 16 out of 20 have seen values rise. Residential housing prices in 16 cities have shown rise in prices in this quarter ended June, 2012 over the previous quarter ended March, 2012,ђ the NHB said in a statement.
The biggest house price increase was 10.5% in Pune, followed by 8.7% in Bengaluru, 8.6% in Patna, 6.4% in Ahmedabad and 5.3% in Ludhiana. Housing prices also rose by 4.1% in Lucknow, by 3.7% in Mumbai, by 2.6% in Delhi and in Kolkata, while Bhubaneshwar, Bhopal and Chennai all experienced 1.7% price increases.
Smaller increases were found in Surat and Guwahati, both up 1.2% and in Vijaywada and Kochi, both up by 1.1%. However, property prices fell by 2.6% in Jaipur, by 2.4% in Indore and by 1% in Hyderabad, while prices in Faridabad remained stable.
Housing prices are likely to largely remain stable, according to NHB chairman and managing director R V Verma. He added that local factors such as infrastructure improvements seem to be the main influence on markets at present.
Meanwhile, the country's real estate organisation, CREDAI, has said that it is unrealistic on the part of the government to expect developers to cut housing prices and demanded that steps should be taken to boost supply of affordable homes.
President Lalit Jain said that the industry is glad that the government recognises that a boost in the real estate market will help the weakening economy but this can only happen if cosntruction costs are brought down and people encouraged to buy their own homes.
He pointed out that the government should focus on bridging the demand/supply gap by lowering the rates of interest and suggested that home loans be given at 7% for lower income groups. 'Banks and finance companies are still wary of financing the real estate sector,' he added.
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