Chestertons Residential Observer

Chestertons Residential Observer
Monthly Edition
November 2014 No. 32
House prices
page 2
Mortgage market
page 6
Rental values
page 4
Tax & regulatory news
page 7
The last word
page 8
Housing market activity page 5
Report highlights
• Latest Land Registry data show annual house prices accelerating both in London and nationally
• 19 out of 33 London boroughs are experiencing annual price growth in excess of 20%
• London rents still rising – now 9.4% higher than a year ago
• Residential sales increase in October
National barometer
Although some indicators show that the national
housing market is slowing, latest data show average
Settled
annual price growth accelerated while nonseasonally adjusted sale transactions rose in October.
Cl
o
y
ud
Fa
ir
Uncertainty surrounding the shorter term health
of the economy and the outcome of the General
the first half of next year. However, this does not
Fine
issues, are likely to act as a drag on the market in
Stormy
Election, together with continued affordability
mean a crash is coming: the economy is forecast to
continue to expand next year albeit at a slower pace,
while unemployment is projected to reduce further.
Mortgage interest rates remain low and any increases
will likely be incremental, although lending volumes
may be lower next year as the effects of the tighter
Chestertons National
Barometer
regulatory environment take more hold.
Chestertons Residential Observer Monthly Edition – November 2014
1
House prices – London
26%-30%
Figure 1: London borough house price
growth: 12 months to Oct 2014
21%-25%
Enfield
Source: Land Registry
16%-20%
11%-15%
Barnet
Harrow
Haringey
Brent
Camden
Ealing
Hillingdon
Hamm.
& Ful.
Islington
Westminster
Kens.
& Chel.
Hounslow
City
Waltham
Forest
Havering
Hackney
Tower
Hamlets
Newham
Southwark
Richmond upon
Thames
0%-5%
Barking &
Dagenham
• Average house price growth in London
Greenwich
Bexley
Lambeth
Wandsworth
6%-10%
Redbridge
accelerated slightly from 18.4% in September
to 18.6% in October. 19 out of 33 boroughs
are experiencing annual price growth in excess
Lewisham
of 20% with Lambeth (+27.9%), Southwark
(+27.8%) and Waltham Forest (+27.2%)
Kingston
upon
Thames
Top 5 boroughs
1. Lambeth 27.9%
2. Southwark 27.8%
3. Waltham Forest 27.2%
4. Lewisham 25.9%
5. Newham 24.1%
Chestertons Residential Observer Monthly Edition – October 2014
Merton
Sutton
leading the pack.
Croydon
Bromley
NB comment: although there is some evidence
that transaction numbers are slowing in London,
prices continue to rise strongly. The combination
of owner occupiers and investors – enhanced
by foreign buyers – continues to drive values in
the wider market, although the prime sector has
slowed considerably.
2
Key national housing market indicators
Source
Price (£)
12 month
change
3 month
change
Monthly
change
Data
as at
Definition
Land Registry
£177,377
7.7%
0.9%
0.1%
Oct-14
England & Wales: sold price
Rightmove
£267,127
8.5%
1.8%
-1.7%
Nov-14
England & Wales: asking price
Home.co.uk
£267,466
8.2%
1.9%
0.2%
Nov-14
England & Wales: asking price
LSL Acadametrics
£277,390
10.5%
1.8%
0.7%
Oct-14
England & Wales: based on Land Registry data
ONS (not seasonally
£273,000
12.1%
3.0%
-0.4%
Sep-14
UK: price at mortgage completion
Nationwide
£189,333
9.0%
0.2%
0.5%
Oct-14
UK: price at mortgage approval
Halifax
£186,135
8.8%
0.3%
-0.4%
Oct-14
UK: price at mortgage approval
adjusted)
Figure 2: Average national house prices & price growth
House prices – national & regional
• Latest Land Registry data reveal that average
annual sold prices in England & Wales
accelerated to 7.7% in October compared to
7.2% in September. The average national house
price now stands at £177,377 compared with a
peak of £181,269 in November 2007.
North East
North West
2.7%
£97,356
4.5%
£112,642
• At regional level, the South East (+11.4%) and
East (+11.0%) remain the strongest regional
performers on an annual measure. Only three
regions (excluding London) report average
prices above the national average, namely East,
South East and South West.
Yorks and Humber
4.3%
£120,807
East Midlands
5.7%
£131,274
West Midlands
Wales
4.4%
£135,378
East
11.0%
£198,338
2.0%
£118,437
London
South West
6.4%
£185,615
18.6%
£460,060
South East
11.4%
£240,070
Figure 3: Regional average house prices & 12 month
price growth (Oct 2014)
• Rightmove reports that average asking prices of
property coming to the market in October rose
by 2.6%, up from 0.9% in September. On annual
measure, asking price growth slowed to 7.6%
from 7.9% in the previous month.
• A study from the Centre for Cities has concluded
that Oxford is the most unaffordable city in
the UK in terms of housing, ahead even of
London. Measuring average earnings against
average house prices, Oxford topped the list
with the average house costing 14.9 times the
city’s average salary. The comparable figure in
second-placed London was 13.9.
NB comment: after a slow September, sales
activity and price growth picked up in October.
Buyer appetite outside London remains supported
by cheap mortgage credit but limited by supply
shortages.
Source: Land Registry
Chestertons Residential Observer Monthly Edition – November 2014
3
Rental values
• The latest Homelet Rental Index reveals that growth in
average rents in London slowed to just 0.1% between
August and September compared to 2.4% in the previous
month. Average rents in the Capital now stand at £1,466
pcm - 9.4% higher than in September 2013.
NB comment: Affordability (as measured by income versus
housing costs) in the private rented sector in London is now
worse than that for the average homeowner. Average rents
have risen in almost every month since the end of last year
and according to the GLA now account for around 46% of
average earnings.
£1,132
Barking & Dagenham
£1,544
Barnet
£1,007
Bexley
£1,693
Brent
£1,181
Bromley
£2,751
Camden
£1,215
Croydon
£1,730
Ealing
£1,296
Enfield
£1,634
Greenwich
£2,099
£2,208
Hackney
Hammersmith & Fulham
£1,600
£1,345
£1,072
£1,454
£1,907
Haringey
Harrow
Havering
Hillingdon
Hounslow
£2,417
Islington
£3,905
Kensington & Chelsea
£1,739
£1,856
£1,445
£1,899
£1,565
£1,235
£2,107
£2,173
£1,129
£2,485
£1,274
£2,092
Kingston upon Thames
Lambeth
Lewisham
Merton
Newham
Redbridge
Richmond upon Thames
Southwark
Sutton
Tower Hamlets
Waltham Forest
Wandsworth
£4,213
Westminster
Figure 4: London borough monthly asking rents for 2-bedroom flats (as at 21 Nov 2014)
£7,098
NB: size of circle indicates average rent
£4,265
£1,819
Source: Zoopla
£5,632
£2,615
Ave. Rent:
£3,042
All Properties
1-bed
2-bed
3-bed
Figure 5: London rental values by property type (as at 21 Nov 2014)
Chestertons Residential Observer Monthly Edition – November 2014
4-bed
5-bed
Source: home.co.uk
4
Housing market activity: sales, rentals, development & investment
• Provisional data from HMRC show that the number
of residential property transactions (non-seasonally
adjusted) in October was 6.6% higher than in
September and 11.6% up on October 2013.
• Southwark Council has approved plans for a new
residential development next to the Shard. 148
apartments will be delivered in a 26 storey tower block,
together with 1,300 sq m of retail space. A feature of
the scheme will be a 300 sq m communal roof garden.
Work is expected to start next year with completion
scheduled for the end of 2018.
• The latest Housing Market Report from the National
Association of Estate Agents (NAEA) shows that the
number of people actively looking to buy property
in September reached the highest level since 2004.
However, the report also noted that the number of
properties available to buy in September was the
lowest for that month since 2002. Despite the supplydemand imbalance, most properties are being sold
for under the original asking price, with just 4% of
properties sold in September for over the original
asking price, while 82% were sold for below asking
price.
• VSM (the joint venture between St. Modwen Properties
and French construction group Vinci) and its partner,
Covent Garden Market Authority (CGMA), has been
granted planning consent for the redevelopment of the
23-hectare New Covent Garden Market site in London’s
Nine Elms district. Eight hectares will be transformed
into three residential neighbourhoods comprising
3,000 new homes, 135,000 sq ft of office space and
100,000 sq ft of retail, leisure and new community
facilities, including shops, cafés and restaurants.
• The November Rightmove House Price Index reports
that stock for sale per estate agency branch fell to
the lowest ever level recorded at this time of year. The
volume of property coming to market is also slowing
down and November saw new listings down 1% on the
same period last year and 15% on the previous month.
• The shortage of available privately rented
accommodation has spawned a new phenomenon –
“speed flatmating”. Flatseekers and flat owners seeking
tenants are invited to a neutral venue and given the
opportunity to meet. According to Spareroom which
organises such events, there are 10 people chasing
every room in London.
Figure 6: UK residential transactions (Oct 2013 – Oct 2014)
Chestertons Residential Observer Monthly Edition – November 2014
May-14
Aug-14
Sep-14
113,660
Jul-14
106,640
Jun-14
114,450
110,110
Apr-14
108,350
Mar-14
103,040
Feb-14
NB comment: after slowing in September, transaction
numbers picked up in October and have broken the 1m
barrier in the year to date. Annualised data for Jan-Oct
suggest full year transactions will be 13.4% higher than in
2013 – talk of a slowdown other than in London appears
somewhat premature.
94,270
Jan-14
91,570
104,580
Dec-13
85,940
Nov-13
87,280
Oct-13
109,580
101,850
• National House Building Council (NHBC) data reveal
that housebuilding is at its strongest levels since 2007.
In London, registrations were up by 6% in the third
quarter of this year compared with a year earlier,
although in the South East they fell by 15% compared
with a year ago.
Oct-14
Source: HMRC
5
Mortgage market
• Having dipped in September, gross mortgage lending
rose 5% in October to reach £19bn. This is the highest
October lending figure since 2008, although the July
figure was higher at £19.8bn.
• Data from the Council of Mortgage Lenders (CML) shows
that new loans to first time buyers in Q3 were 3% up on
Q2 and 15% higher than in Q3 2013. Loans for home
movers were likewise higher in Q3 – by 12% compared
to Q2 and by 10% compared to Q3 last year. Buy-to-Let
loans also rose – by 12% on a quarterly basis and by 18%
compared to Q3 2013.
• The Bank of England has introduced further new rules on
bank safety nets which some industry leaders say could
result in increased mortgage costs. By 2019 the minimum
amount of capital banks must hold relative to their loans
(known as the leverage ratio) could rise to 4.95% from the
current 3% requirement. That would mean banks have to
hold £1 of capital for every £20 they lend, compared to
£1 for every £33 under current rules.
• 31% of landlords say they will look for additional buy
to let lending or re-mortgage in the next three months
according to the National Landlords Association
(NLA). 67% of landlords rely on a buy to let mortgage
to fund their portfolio, however the NLA research shows
that one in five landlords have not been able to expand
due to difficulties in accessing buy to let finance over the
past year.
• The average size of mortgage loans for house purchase
stood at £161,500 in October according to the British
Bankers’ Association (BBA). This represents a 3.3%
increase from October 2013 and is 42.8% higher than
the corresponding month 10 years ago.
NB comment: Mortgage lending rose in October although
the proposed increase in regulatory control from the Bank
of England on the residential mortgage market is likely
to constrain lending going forward - even without the
uncertain impact of the EU Mortgage Credit Directive
which is due for implementation by March 2016.
Meanwhile interest rates appear set to remain low for
some time to come.
19,795
19,000
17,986
18,205
18,087
Aug-14
Sep-14
17,545
16,924
16,978
16,709
16,682
16,123
15,433
14,755
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Figure 7: National gross mortgage lending (£m) (Oct 2013 – Oct 2014)
Jul-14
Oct-14
Source: Council for Mortgage Lenders
4.0%
3.5%
3.0%
2.5%
5 year
3 year
2 year
2.0%
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Figure 8: Average residential mortgage interest rates: 2, 3 & 5 year fixed (75% LTV)
Chestertons Residential Observer Monthly Edition – November 2014
Jul-14
Aug-14
Sep-14
Oct-14
Source: Bank of England
6
Tax & regulatory news
• The controversy surrounding Labour’s proposed Mansion
Tax is gathering pace. Hammersmith & Fulham’s Labour
council has rejected its party’s proposed “Mansion Tax”
policy saying the plans would affect its residents unfairly.
The council recently passed a motion promising to “lobby
against” the plans stating that they could result in “many
local people being forced to move out of the borough”.
This follows news that several Labour MPs in London
have also expressed concerns about the policy.
• Members of the all-party Parliamentary group on
housing and care for older people have recommended
a Stamp Duty concession for older homeowners looking
to downsize. The MPs’ report, The Affordability of
Retirement Housing, argues that many older people
occupy homes that are too large, too difficult to maintain
and too expensive to run. The MPs are therefore
recommending removal of the 1% Stamp Duty band plus
the creation of a “Help to Move” package, offering tax
incentives and comprehensive financial advice for older
downsizers.
• 89% of HMRC’s £100 m revenue from the 2013/14
annual tax on enveloped dwellings (ATED) was
Figure 9: Northern Line extension
collected from London properties. Owners of houses
in Westminster contributed more than half (£52m) of
the national total, while £28m was raised on homes in
Kensington and Chelsea.
• Transport Secretary Patrick McLoughlin has announced
that he will make an order giving the go-ahead for plans
to construct a 3.2km extension of the Northern Line from
Kennington to a new station at the site of the disused
Battersea Power Station within the Vauxhall Nine Elms
Battersea regeneration zone. Transport for London says
the new stations at Nine Elms and Battersea could be
open by 2020.
• Government consultation on proposed further controls
over mortgage lending ended on 28th November. The
Financial Policy Committee (FPC) of the Bank of England
recommends that it should be granted powers to control
loan-to-value (LTV) ratios and debt-to-income (DTI)
ratios, including interest coverage ratios, in respect of
lending to homeowners and buy-to-let landlords. These
limits would not apply to re-mortgages where there was
no increase in principal. Details of what the ratios would
be have not yet been disclosed.
Source: Transport for London
NB comment: Good news for pensioners and those approaching retirement age wishing to downsize in the form of the
proposals to grant SDLT concessions – although £250,000 (the upper limit for the 1% SDLT rate) won’t buy much in
some parts of the country. Meanwhile, the proposed extended controls on mortgage lending are likely to result in fewer
mortgage approvals going forward. It is also not clear how this might affect first time buyers utilising the Help-to-Buy
scheme.
Chestertons Residential Observer Monthly Edition – November 2014
7
The last word
• Havering contains more green space than any other
London borough with 59.3%of its total area classified
as “green”. In contrast, the City of London hast just
4.8% of its area classified as green. This compares to a
London-wide average of 38.3%. A sizeable gap, however,
exists between Inner London (2.17%) and Outer London
(42.5%).
• With regard to domestic gardens, Harrow has the highest
borough ratio compared to overall space (34.7%) while
the City is again in bottom place with just 0.1% of its
space taken up by domestic gardens. The London-wide
average is 23.8%, although the gap between Inner
London (19.5%) and Outer London (25.0%) is much
narrower.
• Management consultancy firm AT Kearney’s 2014 Global
Cities Index ranks London in second place after New
York. London scores particularly well in the categories of
business activity, human capital and cultural experience.
Forward looking analysis from Citigroup and the
Economist last year additionally predicted that London
will retain its top two position until at least 2025.
Whole World
Europe
1. New York
2. London
3. Paris
4. Tokyo
5. Hong Kong
6. Los Angeles
7. Chicago
8. Beijing
9. Singapore
10. Washington
2. London
3. Paris
11. Brussels
15. Madrid
16. Vienna
17. Moscow
19. Berlin
23. Frankfurt
24. Barcelona
26. Amsterdam
Figure 10: Top 10 global cities of today – whole world & Europe (2014)
Source: AT Kearney
Contacts
Nicholas Barnes
Head of Research
T: 020 3040 8406
E: [email protected]
Richard Davies
Head of Residential
T: 020 3040 8244
E: [email protected]
Robert Bartlett
Chief Executive
T: 020 3040 8241
E: [email protected]
John Woolley
Head of Valuation
T: 020 3040 8513
E: [email protected]
Sam Warren
Head of New Homes
T: 020 3040 8267
E: [email protected]
Mark Holliday
Head of Investment
T: 020 3040 8299
E: [email protected]
The information contained above is of a general nature for guidance purposes only and is not a substitute for professional advice. Before acting, or refraining from acting, you are
recommended to obtain bespoke tax / legal advice in relation to your personal circumstances from a qualified tax / legal adviser. Accordingly, Chesterton Global Limited and/or its
agents cannot be held responsible for any loss as a result of acting or refraining from acting in relation to the information given.
Chestertons Residential Observer Monthly Edition – November 2014
8