News Review: Property


London property bubble as UK market fragments


by Nigel Stockton, financial services director, Countrywide


depending on which index you’ve been following, the first three months of 2011 have shown little change in house prices. according to Halifax, Q1 year-on-year has seen a fall of 2.9% whilst nationwide claims house prices are only down 0.3% (Q1 2011 vs. Q1 2010). When looking at these


figures and shaking your head it’s important to remember what a boost the housing market was given towards the end of 2009. the end of the stamp duty holiday and the end of the Vat reduction boosted the number of sales being completed during this period. the regional picture is


fragmented though. it is clear that London and the South east are performing much better than the rest of the market. the global nature of the London housing market is brought into significant focus at a time of conflict – a number of our high end estate agencies including Hamptons


John d Wood & co and Faron Sutaria, have seen an influx of north african buyers in the last month. We definitely have signs


of an asset bubble in certain postcodes in central London. the combination of instability in the world, a significant currency devaluation of up to 30% and the different levels of wealth


means that up to 50% of London buyers don’t reside in the uK and many are paying cash. research from Hamptons


international


shows that house prices in Kensington for example, have risen over 5% in 2011 to date – that’s just 14 weeks into the year. the picture of the rest of


the uK outside of the London bubble is very different. House sellers are having to be much more realistic about their expectations, with reasonably priced properties still generating a sale, it is becoming more evident that buyers very definitely have the upper hand.


Moving onto mortgages the council of mortgage Lenders’ data is interesting and a welcome, if small, shot in the arm for remortgaging but the number and volume of loans still point to a relatively flat lending market and subdued market conditions (See table 1). it’s a stable market which


international,


at best case looks around £140bn for the year, although remortgaging could yet give this a little bolster. the Bank of england and treasury claiming that the banks shouldn’t have trouble with the Special Liquidity Scheme refinancing was


encouraging though. Whilst capital doesn’t appear to be the issue for our lending friends – it’s funding and liquidity that are, and remain, the biggest issue. until we see the back of this funding and liquidity crisis then we are unlikely see significant and sustained increases in lending. consumers now prefer


“House prices in Kensington have risen over 5% in 2011 to date - that’s just 14 weeks into the year.”


fixed rates and are repaying down debt. in February, cmL data showed 57% of all mortgages advanced were at a fixed rate. in march, all of countrywide’s top 10 most popular mortgages were fixed rate products, but following the latest inflation figures, tracker rate customers will be pleased to hear they may save a couple of hundred pounds over the next few months. according to recent


Bank of england statistics, households paid off £7bn in the last quarter, making an


Table 1: Loans for house purchase and remortgage Number of


house purchase loans


February 2011


Change from January 2011 Change from February 2010


6 mortgage introducer MAY 2011


32,300 8%


-12%


Value of house purchase loans £m


4,600 5%


-12%


overall reduction of £24bn through 2010, resulting in lenders books slowly declining. interestingly, only 10% of homeowners are overpaying their mortgage according to Barclays, which goes some way to also explain why the Bank of england found that in the first quarter of 2011, mortgage default rates increased unexpectedly over the previous quarter, and say that this figure is expected to rise further over the next three months.


Lettings the rental sector remains buoyant as buy-to-let products and new entrants continue to flourish. Buy- to-let product availability is probably the highest it’s been since the credit crunch. the private rental sector was boosted by an influx of higher value property in Q1 of 2011. in the last quarter, there has been an 11.6% increase in the average capital value of rental houses, from £401,400 to £447,900. However, stock availability remains the biggest issue affecting the market and whilst rents are not rising quite as quickly as they were in 2010, there are still more tenants chasing lower levels of stock than required.


Number of remortgage loans


24,300 5% 3%


Value of


remortgage loans, £m


2,900 n/c


-3%


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