MARKET REVIEW
Developer confiDence improving – a little Half-year statements from developers seem to show that they are more confident in the market. They are building more houses than at any time since the start of the credit crunch. Many have addressed the issues affecting their balance sheets, reducing indebtedness and several have raised funds from their shareholders. Developers are also looking at solutions to help buyers, such as teaming up with finance companies and providing, for example, a second charge over properties. With a five per cent deposit some developers will help arrange a further 15 per cent loan thus allowing buyers to obtain a mortgage. Nonetheless UK property is still seen as overvalued and prices
will need to return to a more realistic level, though it is in nobody’s interest for this to happen rapidly. Grant Shapps, the Housing Minister, launched the Coalition’s
plans for a house building revolution late last year. The nub of the coalition approach is that the government is hoping that by revamping the rules surrounding planning permission, more local decisions will be made, more permissions granted and more families will be encouraged to construct their own homes. The House Builders Federation however warned that planning permissions for homes in England fell to a near five year low of 31,533 between July and September 2010. This has angered housebuilders who see the government’s localism obstructing new development when there is a shortage of housing.
Buy-to-let coulD improve 2010 did show some signs of improvement in some markets. The Mortgage Works introduced an 80 per cent buy-to-let mortgage. New mortgage lenders have also come into or returned to the market, such as Kensington, Precise and Paragon. More providers in the market should bring greater competition. Despite this the market was, however, still thwarted last year by the lack of mortgage lending. But stronger demand for rental accommodation may create a
rise in the number of properties bought as buy-to-let. Dorian Gonsalves, MD of Belvoir, the letting specialist, says the restriction on lending and other economic factors “will result in investment landlords being attracted back to the buy-to-let market as they see better rental yields combined with lower purchase prices. There will also be the return of the accidental landlord who is unable or unwilling to sell their property and turns to the rental market as a viable alternative.”
Investment landlords will be attracted back to the market by better yields and lower
purchase prices.” Dorian gonsalves
The Government should be doing more, not less, to help those struggling to get on the
property ladder.” melanie Bien
This market will, however, be affected by the cap in Housing
Benefit (£400 per week for a 4 bedroom house, £350 per week for a 3 bedroom house, £290 per week for a 2 bedroom house and £250 for a 1 bedroom house) from April 2011. Landlords in city centres will be particularly affected as the rents
may be higher than the benefits received by tenants and some tenants will have to move to cheaper areas. London and some other major cities may be less affected due to the level of demand as more affluent tenants move in. The higher rate of Capital Gains tax will also make the returns from buy-to-let investing a less attractive proposition.
first time Buyers Eighty-five per cent of first time buyers now rely on parental help as they are still finding it difficult to obtain loans without providing a high deposit although loan-to-value ratios appear to have eased a little, particularly for first time buyers who, on average, borrowed 80 per cent of their home’s value in November; the highest the market has seen since November 2008. CML Director General Michael Coogan said, “It is encouraging
to see credit criteria becoming a little more liberal for first-time buyers. But the funding and capital constraints on lenders will continue to exert a dampening effect on lending, and criteria are unlikely to loosen substantially.” The Government’s cuts to the housing budget will particularly
affect first time buyers. The Government is looking to build only 37,500 affordable homes over the next four years. This will miss the current target of 155,000 in the three years to 2011 by a whopping 25 per cent. Melanie Bien of Private Finance, the mortgage broker, said,
“First-time buyers are the lifeblood of the housing market, but numbers are dwindling to dangerously low levels. Fewer affordable homes make it even tougher. The Government should be doing more, not less, to help those struggling to get on the property ladder.”
income, tax, Borrowing anD DeBt Economic pressures will continue to affect the UK. November 2010 saw inflation rise to 3.3 per cent – substantially above the government’s target of two per cent. Obviously the higher the increase the greater the effect on standards of living; if it hits four per cent the Government will seriously have to think about increasing interest rates.
PROPERTYdrum FEBRUARY 2011 15
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