Property Investment News

The FSA plan to publish proposals to include buy-to-let regulations and second charges secured on homes, say reports by The Independent. The FSA are blaming the global economic crisis on poor regulations for home lending, and they plan to clamp down on mortgages.

Another consideration by the MD of the FSA is to restrict the amount that can be lent on a mortgage, limiting the number of multiples of the buyer’s income or the percentage of the value of the property. Loans to subprime borrowers and mortgages loaned without proof of income will be shortened.

The FSA are trying to rule out 5 times multiples of income and 125% loan to value mortgages in the future.

The mortgage market was being reviewed before the credit crunch had started, but has since seen the collapse of Bradford & Bingley and Northern Rock. Greedy borrowers and lenient rules were to blame, according to the FSA. Some were lying on self-certification forms in order to get higher loans.

Lenders must make clearer explanations about the risks and the costs involved in mortgages.

Although in 2004 FSA regulation left out buy to let mortgages, as they are property investment loans rather than owner dwellings, it’s thought that the FSA will now recommend this is looked at also.

The FSA also wants to control secondary loans that are secured against a property, and says that such loans add to the borrower’s debt.

The Land Registry has stated that house prices in England and Wales have been fairly flat.

The annual drop of 9.4% was up from the 16.3% low that was seen in February, bringing average house prices to £155,968.

More recent figures has shown house prices have steadied and has been regarded as the beginning of the way out of recession for some forecasters. Others are regarding it as a ‘false dawn’.

Figures from the Land Registry have shown that the West Midlands and London have experienced the greatest monthly price increase at 0.8%. This has brought the price of a London property to almost double the average in England and Wales combined, at £310,640.

The Land Registry’s figures are only based on completed transactions though, so are generally slightly behind actual transactions.

The recent figures still show that there will be more price rises.

Even though mortgage lending is still fairly restricted there has been a large increase in the number of enquiries looking for advice on the best mortgage deals available for investors to purchase investment property.

The figures today shows that all regions are experiencing a decrease in average property values in the last year. The most significant fall has been seen in the North West at 12.7%. The most, however, has been Hartlepool where the greatest annual fall was 23.7%.

Predictions have been made that UK GDP (Gross Domestic Product) will see growth by 0.3% between July and September from the previous three months. Then a further rise of 0.4% between October and December.

However, a lack of demand means it is difficult to predict any rapid growth.

The rise in VAT in January would reduce spending, while companies would be wary in production.

Growth in three months up to the end of September follows five successive quarters of reduction which has seen a fall in the UK GDP by a total 5.5%.

There is likely to be a pick up from companies who have been running down their stocks and raising their output to meet demand. Consumers are also likely to spend more before the VAT goes back up to 17.5% in January.

The next 18 months will be very fragile. House=hold spending will still be tight, businesses will be much more careful, and the government will be firmer, especially with the elections next year.

This said though, unemployment is expected to keep rising. The amount of people who are not in work at present is 2.47 million, the highest it has been in 14 years. It is expected that this won’t reach its peak until the second quarter of 2010 where it may reach 3 million.

Concerns about job losses and low pay rises means that most households are opting to stay in and pay off debt and save, rather than go out and spend money.

Hopefully this will gradually start to change as the positive signs of growth begin to show. There will be confidence in the economy again perhaps by the second quarter of 2010 and hopefully by the end of 2010 will show a gradual healthy recovery for the consumer industry and for the property market and the property investment sector, which has also suffered during the recession.

The property investment market has seen buy to lets fade from the market as lenders stepped away.

However, hopes are now growing that lenders might soon be starting to offer more buy-to-let loans as house prices look to be nearing the bottom, and rental demand holds up.

Moneysupermarket.com reports that the amount of enquiries regarding buy-to-let mortgages has increased by almost 50% in the last year.

There are, however, now 70% less products available on the market.

Both new and existing landlords are finding a difficult challenge in finding a suitable mortgage for them.

With fewer products available the interest rates will increase on the few available mortgage products.

The result of this will be that first time buyers will also struggle to get into the mortgage market, so will have to rent, leading to an increase in rental demand and rents will then rise.

Also, the influx of overseas workers and students looking for single person homes means that rental demand will be even higher. The increase in rents would then appeal more to landlords as they would have more attractive returns.

People’s desire to own investment property and possibly to earn their retirement income, means that a recovery in buy-to-let soon is very likely.

A shortage of quality investment property is causing house prices to increase, and it is also putting off those wanting to move up the property ladder according to Rightmove.

The average asking prices rose by 0.6% during September. This is because of the declining availability of property on agent’s books at present.

The average property asking price is down 1.5% from last year to £223,996.

Rightmove stated that estate agents had the lowest number of houses for sale for 18 a year and a half. There are a third more properties coming off the books than coming up for sale. This is because sellers are still waiting for prices to increase before selling, as there are so many conflicting reports that they are still waiting for more solid evidence that the market is indeed recovering.

More than half of the population currently believe that the time to buy a house is now. This comes as reports are coming in saying that the housing market is coming back to a degree of stabilisation.

The Building Societies Association state that 58% of people in the UK agree about now being the time to buy property. Only 19% of people as cautious about this matter. There are more mortgages becoming available which has contributed to this confidence boost in the market. There are also more people looking to purchase investment property in this current climate.

It is expected over the next year that house prices will rise by around 1.6% on average. 61% of people are looking to see house prices increase in the next 12 months.

These findings are much different from last September when the predictions were very negative. Only 34% at the time believed then was a good time to buy.

The biggest obstacle in buying a home is securing a mortgage. 49% of people are still finding that mortgage availability is the biggest issue, followed by job security issues.

The lack of job security was a big factor for buyers not moving forward and buying a property, 58% of people say this is why they are hanging back. 52% said that raising a large enough deposit was the major barrier.

As time goes on, it seems more likely that the UK property investment market is beginning to recover. The increase in buyer enquiries at the beginning of the year were soon followed by more transactions and an increase in mortgage lending. Now, it appears, house prices are mostly increasing.

Halifax reported that August was a month that has seen price increases. The average went up by 0.8% to £160,973, which may be seasonally adjusted. While the annual rate of change is still at a 10.1% fall, meaning that four months in 2009 has seen price rises. In addition to this, it shows a second consecutive rise, suggesting the recent figures could be the most relevant when assessing the possible future trend.

There is definitely evidence of a strengthening market; the 3 monthly rate of increase up until August was 1.7%, the greatest rise since July 2007 at the beginning of the credit crunch.

At the same time, affordability has improved a great deal. This would help the property investment market, and also first time buyers. Of course this might mean that there will be less people looking to rent as they can afford to buy, but there will always be those without a large enough deposit who would still have to rent for the time being.

The Bank of England have announced today that they will be maintaining the base rate of 0.5%, which remains unchanged since 5th March 2009. The next meeting will be due on 8th October 2009.

This is good news for the property investment market as investors may still get lower mortgage rates for the time being.

The stamp duty holiday, which saved thousands of pounds for property buyers, is to come to an end at the end of this year.

 The government introduced the stamp duty holiday which freed buyers of an obligation to pay stamp duty if they purchase a property under £175,000.

 As the best deals are going to customers with a 25% deposit for a mortgage, the discount worth as much as £1,750 would be a huge help to some purchasers.

 Mortgage companies are therefore encouraging those looking to buy a home, or investment property, to act now.

 House purchases can take months to complete, so now is a time to make up your mind on a purchase as the deadline nears.

 It has been speculated that the government may extend the deal in order to boost the mortgage market.

 In recent months, the number of mortgage agreements for buyers have increased, and prices have risen slightly also.

 Stamp duty is currently divided into stages from under £175,000, to £175,000-£250,000, £500,000, then above £500,000. The rates go from zero, to one, two, three and four per cent in that order.

 Mortgage and property industry members have called on the government for a long time for a fairer system for stamp duty, where fixed thresholds are to be replaced with a more adaptable set of charges, which would prevent artificial price levels at each threshold.

 Any changes to be made to stamp duty will come in the autumn in the pre-Budget report by the chancellor.

It was clear throughout the credit crunch that buy-to-let market and property investment had not died out as some had previously predicted, even if some less wise investors had exposed their errors by the fall in values and being unable to make a quick return.

However, at the same time many investors have taken advantage of the recent property slump, offering cash rich investors to be able to pick up some great investment property bargains. In addition, the inability of first time buyers to get on the property ladder has had an impact on the property market. This means that they would need to rent, so property investors could also fill their properties reasonably easily.

An investor who had bought wisely would just be able hang on to their property and ride out the recession, as they know a price increase is not far off.

Although this might be the experience for some investors, there are also individuals who want to invest but cannot start or add to existing portfolios because of the current buy to let mortgage market. According to a survey carried out by Money Supermarket, the number of enquiries over the past year regarding buy-to-let mortgages rose by almost 50%, but the number of agreed buy-to-let mortgages dropped by over 70%.

The marketing manager at Mortgages for Business, Michael Aglony, he remarked that the lack of buy-to-let mortgage competition has had an impact on the market, and that if the Bank of China is to arrive in the market then this might change. So far it has not appeared to have happened though.

He also mentioned that as lenders try to reach their end of year targets, more firms will be encouraged to lend again.

Whether this does happen before the end of the year though still remains to be seen.