1 Chestertons Residential Observer Monthly Edition – November 2014 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 S t o r m y C l o u d y S e t tle d F a ir F i n e Chestertons National Barometer Although some indicators show that the national housing market is slowing, latest data show average annual price growth accelerated while non- seasonally adjusted sale transactions rose in October. Uncertainty surrounding the shorter term health of the economy and the outcome of the General Election, together with continued affordability issues, are likely to act as a drag on the market in the first half of next year. However, this does not 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 regulatory environment take more hold. National barometer Chestertons Residential Observer No. 32 November 2014 Monthly Edition House prices page 2 Rental values page 4 Mortgage market page 6 Tax & regulatory news page 7 The last word page 8 Housing market activity page 5
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Chestertons Residential Observer Monthly Edition November 2014 … · Chestertons Residential Observer Monthly Edition – November 2014 3 North East 2.7% £97,356 East Midlands 5.7%
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1Chestertons Residential Observer Monthly Edition – November 2014
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.
Figure 1: London borough house price growth: 12 months to Oct 2014Source: Land Registry
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.
4Chestertons Residential Observer Monthly Edition – November 2014
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.
Rentalvalues
Figure 4: London borough monthly asking rents for 2-bedroom flats (as at 21 Nov 2014) Source: Zoopla
NB: size of circle indicates average rent
5-bed4-bed 3-bed 2-bed1-bedAll Properties
£1,819£2,615
£4,265£5,632
£7,098
Ave. Rent:£3,042
Figure 5: London rental values by property type (as at 21 Nov 2014) Source: home.co.uk
5Chestertons Residential Observer Monthly Edition – November 2014
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.
Figure 6: UK residential transactions (Oct 2013 – Oct 2014)
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.
Mortgagemarket
Figure 7: National gross mortgage lending (£m) (Oct 2013 – Oct 2014)
Figure 8: Average residential mortgage interest rates: 2, 3 & 5 year fixed (75% LTV)
Source: Council for Mortgage Lenders
Source: Bank of England
7Chestertons Residential Observer Monthly Edition – November 2014
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.
Tax®ulatorynews
Figure 9: Northern Line extension Source: Transport for London
8Chestertons Residential Observer Monthly Edition – November 2014
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.
Figure 10: Top 10 global cities of today – whole world & Europe (2014) Source: AT Kearney