Lending-Housing activity ended 2015 in a stronger position than when it started. Positive domestic economic factors and competitive mortgage deals are helping to underpin household demand, but housing transaction volumes still remain much weaker than pre-crisis levels.
One of the key factors contributing to this has been the supply of properties on the market. For ten months in a row in 2015, the Royal Institution of Chartered Surveyors reported a fall in properties being put up for sale. While fewer existing homes are being put up for sale, the supply of newly built homes also remains low.
Housing starts and completions in the 12 months to September 2015 in England totalled 135,000, a figure which remains about 25% below pre-crisis peaks. The Government’s target of 240,000 new homes per annum hasn’t been achieved for almost a decade and is currently falling around 100,000 short every year. It’s a quarter of a century since it last hit such a figure.
Buy to Let-Data from a new survey from YouGov is showing signs of financial resilience on the part of buy-to-let landlords (BTL) as the BTL sector could be described as under attack and faced a challenging end to 2015. With impending Stamp Duty increases and the reduction in tax reliefs from 2017/18 a recent Residential Landlords Association survey also showed that only 10% of landlords plan to leave the market over the next five years.
Despite the tightening of lending criteria for Buy To Let applicants, with applications now being processed and underwritten similar to a standard residential purchase – the likelihood of landlords’ selling their rental properties and not purchasing any more seems unlikely.
With the BTL sector representing approximately 20% of the market, the strength of this sector will no doubt withstand any attack for some considerable time. The survey also highlighted the resilience of Landlords to interest rates increases.
The reduction of tax reliefs for private landlords from 2017-18 onwards, has had lenders slam the Treasury plans as rushed and flawed and has also got the wife of former prime minister Tony Blair involved with her using European Human Rights legislation in attempt to overturn the planned property tax.
The Council of Mortgage Lenders and the Intermediary Mortgage Lenders Association are urging the Government to rethink the higher tax rate, saying that the plans would backfire on the housing market as a whole.
The CML says there “is a risk of overkill in dampening investor sentiment to the extent that the flow of available private rented property could be disrupted” and that the number of homeowners would not necessarily increase. It also suggests landlords could put up rents because of the proposals.
CML director general Paul Smee says: “Our longstanding view is that stamp duty is a blunt policy lever. Given the complexity of the proposals, we also suspect that in practical terms the surcharge could cause more problems than it solves.
“We urge the government at least to move away from a position where people will have to pay and then potentially claim back to one where payment is deferred, and only triggered if the buyer genuinely falls into the intended target category”.
Intermediary Mortgage Lenders’ Association executive director Peter Williams says the proposal is a “poorly-constructed intervention in the housing market”.
The proposed tax surcharge would apply from 1 April 2016 and the proposed tax rise is one part of the Government’s Five Point Plan to help low-cost home ownership for first-time buyers announced in its Spending Review and Autumn Statement 2015.
First Time Buyers-Deposits are still seen as the greatest barrier to buying a home, according to new research from Halifax. The latest quarterly Halifax Housing Market Confidence Tracker shows that in the final quarter of 2015, 58% of people chose this as the biggest barrier to buying a property, up one point from the last quarter.
Job security is the number two reason, at 42% (no change).
Rising property prices were cited by 37% as the biggest barrier, up six points on the previous quarter, the highest since the survey’s inception.
Average UK house prices now stand at a record high of £208,286, while figures from Mortgage Advice Bureau revealed this week that the average deposit for a property rose by 15.0% last year to £81,721. Craig McKinlay, mortgages director at Halifax, said: “Difficulties in raising a deposit, concerns about job security and high property prices remain the main barriers to people buying a home. The proportion identifying rising prices has risen to the highest in the survey’s history. The decline in affordability that this highlights is expected to dampen housing demand and property price growth over the medium term.”
Concerns about interest rate rises have fallen, with only 11% of respondents seeing this as a barrier, down five points from last quarter.
Earlier this month the Bank of England governor ruled out an early rise in interest rates, citing falling oil prices and weaker than expected inflation and at the time of writing the Bank rate is expected to remain at 0.5%
Mark Carney said that the plummeting oil prices, volatility in China and poor wage growth in the UK had dragged down inflation, therefore delaying the need for a rise in interest rates.
