Property Investment News

With the property investment market rebounding, property prices have seen an increase of nearly 10%.The property market’s rapid turnaround caused prices to increase by 9.9 per cent in January, despite many seeing a poor outlook at the early part of the recession.

Halifax told The Daily Telegraph, that the average value of a home rose to £169,777, an increase of 0.6 per cent from the previous month of December.

Despite the good news, it is thought that the rises may not last as it is too early to tell after coming out of the recession. But it is certainly an excellent start to 2010.

The latest property price news from Halifax has shown that UK house prices have risen for the fifth consecutive month.

The survey, conducted by one of the largest lenders in the UK, said that prices were up 1.4% in November, bringing the average price of a UK house to £167,664. This figure is still 1.6% lower than this time last year, but it is 4.2% up on the beginning of 2009.

The figures came with a Halifax prediction that house prices would most likely stay flat throughout 2010 if more properties came on the market.

A Halifax economist stated that the recovery in prices since the spring has been driven by the increase in property demand, caused by the improvement in affordability of existing homeowners. It was stated that the increase in demand plus the shortage of available properties have pushed up property prices. The property investment market has also shown increased demand but a shortage of investment property at present.

According to the Halifax index, UK property prices were at the lowest levels in April of this year, but have increased 8.5% since. The housing market had seen a 23% decline since the peak in August 2007.

The Bank of England’s Monetary Policy Committee has maintained interest rates at the record low of 0.5% after the meeting today.

Economists have widely expected this, saying that the committee was unlikely to make any significant changes until having more time to study the pre-budget report yesterday.

Although the maintained base rate is not good news for savers, who are making almost nothing on their savings, it is better news for those in property investment as the buy to let mortgage rates may remain low for some time.

The economy had been expected to come out of the recession during the final quarter of 2009, after suffering the longest recession on record.

However, data released this week shows that the manufacturing sector still struggled in October, and the trade deficit grew to the biggest margin since January, showing that neither of these would help boost the economy growth during the final quarter.

Disappointing high street reports in November also quashed hopes that consumer spending would boost an economic turnaround.

New data released this morning also confirmed that Italy had returned to economic growth during the third quarter, which leaves the UK the only G20 nation that is still stuck in the recession.

Property investors and tenants should be prepared for rent rises as the property market appears to be making a recovery.

Average rents rose 0.1% to £831 per month between October and November, making it the 7^th month in a row for increases.

The November rental index showed the lettings cost is still 2.5% down from last year but the gap is getting smaller month by month. It is thought that rental prices may before long be back to the 2008 levels.

Tenants taking advantage of rental bargains or trading up during the last 18 months should be prepared in case prices increase.

While too much property supply has led to rents decreasing over the past year, research has shown the amount of properties available to rent has also gone down by 3.5% this month and 10% last month.

A possible explanation previously offered by experts is that the fall in property prices between the end of 2007 and April this year forced many potential sellers, hesitant to take a low offer, to instead opt to become ‘accidental landlords’ renting out their own properties.

Since March, however, prices have been rising, prompting some owners to try and take advantage of the gradual recovery. Rightmove stated that there was a window of opportunity again with London asking prices being back up to the peak level in 2007.

Findaproperty stated that a decline in available properties was causing the rental costs to increase.

Potential tenants appear to be moving faster to snap up an available property, the average number of days taken for a property to let now being 55 days down from 71 days in January.

Per region, however, trends in recovery are varying; London, the South East and the South West are showing a market recovery. Wales, the North and the West Midlands have seen a reduction in rental values.

The average rentals in London increased to £1,640pcm in November, an increase of 0.2%. In Wales, however, it fell to £626pcm, a decline of 0.8%.

Property investment yields were recorded at around 4.5% in most regions, with the exception of the South West where investors received yields of 4.05% as margins have been squeezed due to rising house prices and increased rental supply.

It appears that the family market is driving up rental prices, as house rental figures are increasing faster than flats.

It has also been revealed last month that landlords are gradually becoming more optimistic of a turnaround in property values.

However, the rental market continues to face the crucial headwind of rising unemployment. Although the increase in rate for jobless has been lower than previously predicted, it is still expected that there will be further increases from the current 7.8% rate, just short of 2.5 million. Some expect a total peak of 3 million in 2010.

The latest mortgage figures show that a 2 year fixed rate mortgage is at its lowest average since June this year. Calculations by Moneyfacts show that the average interest rate for fixed rate mortgages has fallen below 5%.

July saw an increase to an average rate of 5.21%, but lender competition is bringing the rates down further.

If, however, any homeowner wants to fix a mortgage for a longer period, then the rates have continued rising.

There were positive signs that the worst in the mortgage market was over. Homeowners, first time buyers and investment property buyers can now find mortgages where there were previously few around.

Over the last week, RICS property experts have expressed concern about the end of the stamp duty holiday at the end of the year having a negative effect on the property market.

Earlier RICS had expressed concerns saying the housing market was already struggling in certain areas of the UK, and the end of the stamp duty holiday could make matters much worse in those areas.

The stamp duty threshold was raised from £125,000 to £175,000 temporarily to help the property market recover, but on 1^st January 2010, it will return to £125,000 once again. RICS surveyors have expressed fear that this could cause housing activity to fall to almost zero if this happens, which the Government has said it will.

The property investment market also needs to be aware of this when putting cash into property, so they are aware of the additional amount to pay over £125,000.

Rental supply has fallen by 20% during the last quarter caused by the market going through a sharp balance correction of supply and demand, according to figures from a leading UK lettings chain. During the last 2 years there has been an oversupply of properties and dropping rents, but this picture is changing rapidly. A survey was carried out by Countrywide Residential Lettings from more than 200 of its offices, and it found that in the three months leading up to October the number of new tenant enquiries increased by 11%, while the number of new rental properties dropped. The south east region had the highest proportion of enquiries for new tenants. As the property investment market improves, landlords will at present find it easier to fill properties in the current market.

UK mortgage lending rose by 5% in October compared with the previous month, according to a lenders’ group. That said, the £13.5 billion of overall mortgage lending recorded by the Council of Mortgage Lenders was down by 27% in comparison to the same month a year ago. The group said that the month-on-month rise in lending was typical seasonal activity. But the type of lending has changed since the start of the year, with remortgaging at “decade-low levels”. This shows it is still hard to predict a rise or a fall for the property investment buy to let market at present. Although increased lending is good news.

The recent survey results which was issued by RICS has suggested that house prices will continue to increase in the short term.

The survey showed that sellers are now coming back to the property investment market, but they are still being outnumbered by the number of buyers waiting for property. Most of the surveyors who observed an increase rather than a fall in October went up from 30% the previous month to 34%. RICS stated that this result was the strongest balance of price increases since December 2006.

According to RICS, London has led the way for the price rises, although there was a significant upward trend in all regions in October, especially in the North of England and the South West.

The survey also provided evidence that activity was rising, but were slowing due to supply shortage which was limiting activity.

Completed sales have gradually risen to an average of 19% per surveyor during the past three months, amounting to marginally less than three sales every two weeks.

Recent data has found that lenders are making it slightly easier to obtain a mortgage, as reported by BBC News.

The number of mortgages needing a 15% minimum deposit has increased from 189 to 226 in the past month, reaching the year’s peak. The number of mortgages for the same period requiring a 20% deposit has dropped from 136 to 117.

Despite the figures switching, two-thirds of mortgages that require a smaller deposit was good news for first time buyers. It is also encouraging news that the 85% loan to value mortgages had increased in the last month. This could indicate that mortgage providers have been watching house prices and regained confidence in the market.

The easing may also reflect an increase in lender competition. Northern Rock, for example, have re-entered the market with some aggressive deals.

This has increased competition for lower loan to value deals, which has pushed other lenders towards lending more at higher loan to value.

According to recent CML figures, more first time buyers are still required to put down a 25% deposit. It does appear, however, that lenders have relaxed slightly their fear of losing large amounts if the borrower should default.

The fact that lenders are becoming more relaxed with LTV is a good sign for the property investment market which means investors could soon get mortgages more easily, and buy to let LTV could be next for lenders to relax on.