chestertons residential observer · figure 4: london borough monthly asking rents for 2-bed flats...

1Chestertons Residential Observer Monthly Edition – April 2015

Report highlights – Total property wealth of over 65s is now at its highest level since records began. – Average annual void period for residential landlords has dropped to its lowest level since 2002. – The proportion of mortgages granted at LTVs of 90% - 95% doubled in 2014. – 2014 housing completions up 11% on 2010 low point, but 25% below five year pre-global recession average.

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Chestertons NationalBarometer

Latest available Land Registry figures show that annual price growth at national level stabilised in February and in London accelerated slightly for the first time since last August. Whether this marks a turning point in the cycle is too soon to say, however it is encouraging news. Anecdotally, the General Election so far appears to be proving less of a distraction for buyers than has been reported. Nonetheless, there is concern about the possible introduction of a Mansion Tax which has impacted on price negotiations just above the £2m threshold. Fears of an early interest rate rise are dwindling and some very attractive mortgage deals are still available, although credit approval for some buyer categories, such as first time buyers, has become more difficult. The general market should remain active over the next three months subject to the availability of both

mortgages and properties for sale.

National barometer

Chestertons Residential Observer

No. 37April 2015Monthly Edition

House prices page 2

Rental values page 4

Mortgage market page 6

Tax & regulatory news page 7

The last word page 8Housing market activity page 5

Islin

gton

Mer

ton

Brom

ley

Bexl

ey

Sout

h-w

ark

Lam

beth

Wan

dsw

orth

King

ston

upon

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es

Rich

mon

d up

onTh

ames

Lew

isha

m

Croy

don

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on

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ich

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er

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ing

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alth

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ld

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y

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et

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row

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kney

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g

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w

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m.

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ul.

Kens

.&

Che

l.

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erH

amle

ts

26%

-30%

21%

-25%

16%

-20%

11%

-15%

6%-1

0%

0%-5

%

Islin

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– La

nd R

egist

ry’s

Hou

se P

rice

Inde

x re

veal

s

that

ave

rage

ann

ual p

rice

grow

th a

ccel

erat

ed

sligh

tly in

Feb

ruar

y (+

13.1

%),

the

first

tim

e

since

last

Aug

ust.

This

take

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ave

rage

hous

e pr

ice

in L

ondo

n to

£46

3,87

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ns th

e bo

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h w

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t ann

ual p

rice

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ut

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beth

mov

es in

to se

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pla

ce (+

18.7

%).

Kens

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on &

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cont

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s to

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the

slow

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am

ong

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ughs

alth

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Febr

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figu

re o

f

7.8%

is u

p on

the

7.2%

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in Ja

nuar

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NB

com

men

t: w

hile

pric

e gr

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in th

e w

ider

m

arke

t pic

ked

up in

Febr

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, it r

emai

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be

seen

whe

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this

repr

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ts a

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the

cycle

. Whi

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thei

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the

shor

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of a

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ain

pric

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owth

.

Figu

re 1

: Lon

don

boro

ugh

hous

e pr

ice

grow

th:

12 m

onth

s to

Febr

uary

201

5So

urce

: Lan

d Re

gist

ry

Top

5 bo

roug

hs

1. N

ewha

m 2

1.4%

2. L

ambe

th 1

8.7%

3. G

reen

wich

18.

5%4.

Lew

isham

18.

5%5.

Wal

tham

For

est 1

8.5%

2Ch

este

rtons

Res

iden

tial O

bser

ver M

onth

ly E

ditio

n –

April

201

5

Hou

se p

rices

– L

ondo

n


North East0.1%

£97,974

North East3.7%

£102,061

East Midlands4.4%

£134,032

East10.5%

£202,394

London13.1%

£463,872

South East9.0%

£242,469South West

5.1%£186,124

Wales5.4%

£123,941

North West0.7%

£111,259Yorks and Humber

2.8%£121,454

West Midlands5.0%

£138,982

Source Price (£) 12 month change

3 month change

Monthly change

Data as at Definition

Land Registry £180,252 6.5% 1.9% 0.5% Feb-15 England & Wales: sold price

Rightmove £281,752 5.4% 9.0% 1.0% Mar-15 England & Wales: asking price

Home.co.uk £271,089 6.8% 2.1% 1.1% Mar-15 England & Wales: asking price

LSL Acadametrics £273,528 6.8% 0.7% 0.5% Feb-15 England & Wales: based on Land Registry data

ONS (not seasonally adjusted) £273,000 8.4% 0.7% 0.4% Jan-15 UK: price at mortgage completion

Nationwide £189,454 5.1% 0.5% 0.1% Mar-15 UK: price at mortgage approval

Halifax (not season-ally adjusted) £192,270 8.1% 1.9% 0.4% Mar-15 UK: price at mortgage approval

Key national housing market indicators

Figure 2: Average national house prices & price growth Source: Various

Figure 3: Regional average house prices & 12 month price growth (February 2015)Source: Land Registry

House prices – national & regional – Land Registry data show that average house

prices in England & Wales rose by 6.5% in the year to February, the same growth rate as the revised January figure.

– Outside London, the East remains the region with the fastest rising house prices with 12 month growth slightly accelerating to 10.5% in February. In the South East price growth slowed to 9.0% from 9.4% in January. However, the average house price of £202,394 in the East is 16.5% lower than that of the South East.

NB comment: house price growth appears to be stabilising, however as with London we need more than one month’s data to confirm this. Meanwhile, the north-south divide is no closer to narrowing. Hopefully the recently announced plans to boost regional economic growth will be implemented and bear fruit, which can only benefit regional housing markets in the north.


Westminster

Wandsworth

Waltham Forest

Tower Hamlets

Sutton

Southwark

Richmond upon Thames

Redbridge

Newham

Merton

Lewisham

Lambeth

Kingston upon Thames

Kensington & Chelsea

Islington

Hounslow

Hillingdon

Havering

Harrow

Harringey

Hammersmith & Fulham

Hackney

Greenwich

Enfield

Ealing

Croydon

Camden

Bromley

Brent

Bexley

Barnet

Barking & Dagenham £1,140 £1,570

£1,041 £1,811

£1,302 £2,890

£1,225 £1,809

£1,340£1,638 £2,059

£2,289 £1,577

£1,416 £1,065

£1,480 £1,940

£2,432 £3,947

£1,758 £1,924

£1,474 £1,827

£1,513 £1,239

£2,143 £2,233

£1,251 £2,381

£1,317 £2,172

£3,928

– According to the Homelet Rental Index, average UK rental values for new tenancies in the three months to February were 9.2% higher than in the same period in 2014. Average UK rents for new tenancies over the three month period to February 2014 were £899 per calendar month.

– Average rents for new tenancies in London were 5.1% higher in February compared to the corresponding month in 2014 and now stand at £1,390 per calendar month.

NB comment: rental growth at national level accelerated over the past three months whereas in London, despite the demand pressure for rented accommodation, rental growth slowed.

Rental values

Figure 4: London borough monthly asking rents for 2-bed flats (as at 2 April 2015) Source: Zoopla

5-bed4-bed 3-bed 2-bed1-bedAll Properties

£1,869 £2,699£4,392

£5,620

£7,621

Ave. Rent:£2,985

Figure 5: London average monthly asking rents by property type (as at 2 April 2015) Source: home.co.uk


– HMRC data reveal that national residential house sales in February were marginally higher (+0.6%) than in January but were 7.6% lower than in February 2014.

– New research from financial specialist Key Retirement Solutions says that the total property wealth of over 65s is now at its highest level since the firm started monitoring it five years ago. Retired homeowners in the UK now collectively own property worth £861 billion, with their total property wealth increasing by more than £33 billion in the past six months. The figures show almost a fifth of all pensioner property equity is owned by over-65s in London with total wealth of £167.7 billion.

– New research from the National Landlords Association (NLA) indicates that tenants are securing a larger proportion of private rented homes in the UK at below advertised rents. The data shows that 16% of private rented homes are let to tenants at below advertised rents, with 8% of homes being let to tenants at above the asking price. 76% of private rented homes are let to tenants at the advertised rent.

– The average annual void period for residential landlords in the UK has dropped to its lowest level since 2002, according to new research from Paragon Mortgages. The average void period in Q1 2015 was just 2.4 weeks. The survey also found that in the first quarter of 2015 some 42% of landlords said that in their view tenant demand was either growing or booming, while 54% felt demand was stable.

– Residential Land has secured one of the largest refinancing deals ever seen in the UK prs sector. HSBC has backed Residential Land with a five year £320m facility at a loan-to-value of 55%. Residential Land has also entered into a new £650m joint venture fund with Ivanhoe Cambridge. The fund will invest in a wider area of prime London, including locations such as the South Bank, parts of north & east London and the Isle of Dogs.

– Housing supply continues to lag behind demand. Last year around 214,000 new homes were built in England. This is 11% higher than the low point in 2010 but 25% lower than the five year average before the global recession, which in turn was already insufficient to match demand.

NB comment: a number of positive surveys regarding the buy-to-let market have emerged recently. Low void periods, strengthening tenant demand, low mortgage interest rates and low returns on fixed income assets are all combining to make residential property an attractive investment proposition. It will be interesting to see whether the new pension freedom triggers an increase in investment purchases.

Figure 6: UK residential transactions, non-seasonally adjusted (Feb 2014 – Feb 2015)

Housing market activity: sales, rentals, development & investment

Feb-15Jan-15Dec-14Nov-14Oct-14Sep-14Aug-14Jul-14Jun-14May-14Apr-14Mar-14Feb-14

91,5

70

94,3

10

85,9

40 103,

090

108,

440

110,

260

114,

670

105,

110

114,

920

98,9

30

103,

720

78,9

30

79,4

00

Source: HMRC


– The Council of Mortgage Lenders estimates that gross mortgage lending reached £13.4 billion in February. This is 9% down on both January and on last February and is the lowest monthly estimate for gross mortgage lending since April 2013.

– Recent research from Barclays highlights that mortgage market competition among lenders remains intense. For those able to transact with 60% loan to values, two year deals are available (at the time of writing) at a fixed rate of around 1.2% and 10 year deals are available at rates below 3%.

– The Times reported that proposals from the Basel Committee on Banking Supervision could lead to banks having to increase the cost of mortgages for higher risk customers such as first-time buyers and others who need high loan-to-value products. The article suggested that the new rules could more than double the amount of capital that banks have to hold against lending.

– Under the EU Mortgage Credit Directive (which will introduce EU-wide conduct standards for firms selling mortgages), anyone wishing to remortgage with a new lender will need to satisfy affordability tests – although these will not apply if they remortgage with their existing lender. The requirements of the Directive must be implemented by 21st March 2016 although the intention is to implement the requirements into legislation this year.

– The latest monthly survey by the National Association of Estate Agents (NAEA) has shown that some first time buyers may be reaping the benefits of low interest rates and very competitive lending products as 30% of those who purchased a house in February were first time buyers. That is the highest number since September 2014 and may also reflect that new stamp duty rules have prompted some people into buying.

– Data from the Financial Conduct Authority show that the proportion of regulated mortgage loans granted at loan-to-values of more than 90% and up to 95% has more than doubled from 2.0% in Q4 2013 to 4.2% in Q4 2014.

NB comment: with consumer price inflation falling to zero in February, a rise in Bank Rate appears further away than last month. Meanwhile, the ongoing competition between lenders means that mortgage interest rates remain very attractive, although the qualifying criteria have been tightened.

Mortgage market

Figure 7: National gross mortgage lending (Feb 2014 – Feb 2015) Source: Council of Mortgage Lenders

Feb-15Jan-15Dec-14Nov-14Oct-14Sep-14Aug-14Jul-14Jun-14May-14Apr-14Mar-14Feb-14

15,4

33

16,7

11

14,7

55 16,9

80

17,9

88

19,5

56

17,9

28

17,8

49

18,3

70

16,1

17

16,5

88

14,7

74

13,4

00

£M


– Buy-to-let landlords face a possible raft of new regulations which will impact upon their businesses. The key measures are as follows:

– Landlord registration and licensing: After 1 April 2015 local councils will no longer be able to licence landlords across a whole borough or city without prior permission. Councils will now require government approval before implementing a licensing scheme if they plan to license a large proportion of the market.

– Energy efficiency standards: from April 2016, tenants will be able to request consent for energy efficiency measures that may not unreasonably be refused by the landlord. From April 2018, all privately rented properties where new leases are granted will be required to attain a minimum EPC (Energy Performance Certificate) rating of E. From April 2020, all privately rented residential properties will need to attain a minimum EPC rating of E.

– The Landlord’s Energy Saving Allowance will no longer be available after 31 March 2015 for corporate landlords and after April 2015 for unincorporated landlords of let residential properties.

– Revenge evictions: new legislation designed to prevent retaliatory eviction by landlords against tenants where they have a legitimate complaint is expected to be implemented by October 2015.

– Subletting: the Budget 2015 Red Book announced proposals to “make it easier for individuals to sub-let a room through its intention to legislate to prevent the use of clauses in private fixed-term residential tenancy agreements that expressly rule out sub-letting or otherwise sharing space on a short-term basis, and consider extending this prohibition to statutory periodic tenancies.” Depending on the Election outcome, this may or may not be progressed.

– T enant deposit protection: the Government has clarified tenant deposit protection legislation in response to recent court cases involving landlords withholding tenant deposits. As a result, where landlords took a deposit prior to the introduction of the tenancy deposit protection legislation on 6 April 2007 in respect of a tenancy which rolled over into a statutory periodic tenancy on or after that date they will have a period of 90 days from the date of Royal Assent (26th March 2015) to protect their tenant’s deposit or potentially face a fine.

NB comment: the regulatory environment for the private rented sector is being tightened. Moreover, if Labour comes to power following the Election there is the prospect of further regulation, including rent control.

Tax, planning & regulatory news


– The Independent recently published a list of the country’s top 10 most unusual street names. Letsby Avenue in Sheffield comes in at number one thanks to the fact that it is the address of the South Yorkshire police operations’ centre. A worthy second place is Whip-Ma-Whop-Ma-Gate in York. Among the names that just missed out are Labour in Vain Yard in Norwich and several No Name Streets.

The last word

ContactsNicholas BarnesHead of ResearchT: +44 (0)20 3040 8406E: [email protected]

Robert BartlettChief ExecutiveT: +44 (0)20 3040 8241E: [email protected]

John WoolleyHead of Valuation T: +44 (0)20 3040 8513E: [email protected]

Henry KnightSpringtide CapitalT: +44 (0)20 3040 4400 E: [email protected]

Richard DaviesHead of Residential T: +44 (0)20 3040 8244E: [email protected]

Sam Warren Head of New HomesT: +44 (0)20 3040 8267E: [email protected]

The contents of this report are intended for the purpose of general information and should not be relied upon as the basis for decision taking on the part of the reader. Although every

effort has been made to ensure the accuracy of the information contained within this report at the time of writing, no liability is accepted by Chesterton Global for any loss or damage

resulting from its use. Reproduction of this report in whole or in part is not permitted without the prior written approval of Chesterton Global.

Source: The Independent

Top 10 most unusual street names in the UK1. Letsby Avenue, Sheffield2. Whip-Ma-Whop-Ma-Gate, York3. Cavalier Approach, Leeds4. Crutched Friars, City of London5. Needless Alley, Birmingham6. Fort Lebanon, Cupar, Fife7. Ha-Ha Road, Greenwich8. Bow Wow, South Cerney, Gloucestershire9. Riddle Dumble Park, Galashiels10. Swing Swang Lane, Basingstoke

chestertons residential observer · figure 4: london borough monthly asking rents for 2-bed flats...

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