superbly accurate or to be treated with caution
So what have our surveys shown us this month, and how is this relevant to your clients? • Average house prices increased by 0.2% in September, registering just a modest 1% growth over the last six months.
• The average price of a home in England and Wales is now £223,965, down £7,863, or 3.5%, from its peak in February 2008 of £231,828. • We estimate that 66,000 homes were sold in September - an increase of 3.4% over the number of homes sold in August 2010 and an increase of 11.4% over September of last year.
• September experienced the biggest drop in LTVs for a year, reversing six months of improvement in credit conditions – an extra £11,500 deposit is needed on £100k home, but only £18,800 extra on a £500k home. • Rents reached a record high of £689 per month surpassing those seen in August 2008, the previous market peak. The average UK rent is now 3.1% higher than the same time last year after eight consecutive months of rises. • London rents rose by 2% to reach all- time high, a driving force behind UK rental inflation in 2010. • Tenant arrears fell in September, but remain high with 10% of all rent in arrears.
Establishing likely house values is, of course, very relevant for intermediaries who are trying to fit ever tighter deposits or loan to value (LTV) requirements from lenders. Recent
e.surv Mortgage
14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 -2.0 -4.0 -6.0
Oct 09 Nov 09 Dec 09 Jan 10 Feb 10 Mar 10 Apr 10 May 10 Jun 10 Jul 10 Aug 10 Sep10 LSL Acad HPI September 2010
Monitor data suggests that average LTVs in September fell away, after gradual increases earlier in the year. The average LTV dropped to 57.2% in September from a two year high of 58.1% in August, the biggest fall in LTVs in a year. There was however some good news suggesting that, based on September valuation levels, overall mortgage lending will have risen in the region of 1.8% in September over August’s levels.
Whatever mortgage lending and sales
turn out to be in coming months, it is clear that when sales are down, as a related phenomenon, letting activity picks up. People who may wish to obtain a mortgage but can’t (and culturally we remain a nation of wannabe home owners), get on with their lives and compromise by renting in the hope that they will be able to buy in the future. This does, of course, mean that pent up purchase demand continues to build.
Growing demand for houses to rent does put upward pressure on rental rates; LSL rental market commentator David Brown recently said: “Rents are jumping up as more and more potential home buyers opt to rent. People are wary of a crash in house prices and are concerned over the effect of government cuts on their own ability to meet long-term financial commitments. Additionally, many can’t get a mortgage at an affordable rate”. The rental index graph below shows that both yields for landlords and rents are on the rise. For intermediaries, this means that Buy-to-Let mortgages, if they can be sourced, should be attractive for investors. One final note of caution on all statistics is that, by definition, we naturally tend to talk about national figures. Experiences in London versus say Northern Ireland will be at extreme ends of a spectrum and both will look very different from any national averages. The lesson here: know your market. Of course ultimately, I can strongly recommend one method which is by far and away the best to establish any specific value - ask a qualified valuer! n
ANNUAL CHANGE IN HOUSE PRICES - COMPARISON OF INDICES CHART
Mortgage introducer NOVEMBER 2010 43
percentages
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