More first time buyers entering the UK housing market

First time buyers in the UK have increased their dominance of the housing market but other buyers have fallen in number, according to estate agents.

The latest Housing Market Report from the National Association of Estate Agents (NAEA) also reveals that the supply of homes has reached a near decade low.

The average number of properties available per member branch in February fell from 45 in January to 43 in February, the fifth consecutive drop experienced in supply of properties coming on to the market.

The NAEA says that the supply of properties are now at similar levels seen in May 2004 but  despite the lack of properties in the market, the average number of sales agreed per branch continued to improve, up from an average of eight sales per branch in January to nine in February.

The number of first time buyers entering the market has also continued to improve with 29% of all homes sold by NAEA member agents being sold to them in February. However, these figures were recorded alongside a decrease in the in the total number of house hunters, with the average number registering with member agents down 6.2%.

This resulted in the average number of buyers per property remaining the same at eight, as both supply and house hunter numbers contract.

NAEA agents also reported that the percentage of properties sold to people purchasing a house using the Help to Buy equity loan scheme remained the same month on month at an average 4%.

The most popular group buying was those aged 31 to 40 years old, making up half of the buyers seen in February. NAEA agents also reported 22% home buyers were looking to re-locate, while the average length of time it takes to buy a property in the UK is 11 weeks from sale agreed through to completion.

‘The housing market remained strong in February with first time buyers continuing to turn out in force. As confidence in the housing market continues to rise, NAEA agents expect the number of first time buyers to remain strong,’ said NAEA president Jan Hÿtch.

‘This confidence may be increasing, but the lack of properties entering the market has slowed considerably and is a real concern that needs to be addressed now, particularly for those already on the housing ladder who want to move onwards. With Help to Buy making it easier for new purchasers with low deposits to buy a home, the appetite for buying in this price range, combined with the diminishing supply of first time buyer properties, could drive property prices up further in this sector,’ Hÿtch added.

Lending for homes in UK up 43% compared to a year ago, latest figures show

Gross mortgage lending in the UK was £15.2 billion in February, down some 6% compared with January but still 43% higher than the £10.6 billion lent in February last year, the latest data from the Council of Mortgage Lenders shows.

The CML also pointed out that it is the highest total for a February since 2008. CML chief economist Bob Pannell said that housing market indicators have continued to be strong over recent months, once seasonal factors have been taken into account.

‘First time buyers have benefitted most from the government’s Help to Buy initiatives, with the more recent mortgage guarantee scheme now starting to push typical loan to value levels higher,’ he explained.

‘The housing market got a further boost from this week’s Budget. This, together with benign developments in the economy more widely, should bolster short term sentiment and activity,’ he added.

Experts believe that more new homes are needed to help the property market continue its recovery as lack of supply is holding it back. Duncan Kreeger, director of West One Loans, a privately funded short term lender, comments, believes that the market can only go so far without a sustainable supply of new homes.

‘While mortgages might be catching up with pre-recession levels, house building in the UK still falls considerably below these peaks,’ he said but added that building may have got a boost in yesterday’s Budget.

‘However, there are still many questions left unanswered. Some 200,000 new homes looks good on paper but we still don’t know where these will be placed. It’s all very well to build a garden city in Ebbsfleet, but if demand is greatest in urban areas, it’s unclear how this will help,’ he explained.

‘The hard truth is that to really increase the supply of homes where they are most needed requires complex property conversions and refurbishments and it’s still almost impossible to get mainstream funding for these types of projects,’ he added.

According to Ian McGrail, managing director, FirstMortgage, the data supports the level of growth that his firm as seen at a company level year on year, as demand for mortgages from first time buyers and home movers remains consistently strong.
 
‘The results, showing the highest total for a February since 2008, pair well with our in house monthly figures, where similarly we have seen record levels of production. This growth looks set to continue steadily into the year, although we would expect activity to slow down temporarily at the end of April when the Mortgage Market Review comes into effect, as lenders get to grips with the reality of the reforms imposed,’ he added. 

However, Peter Williams, executive director of the Intermediary Mortgage Lenders Association (IMLA), warned that growth could slow this year partly because regulatory changes on 26 April will act as a temporary buffer and also because the bar was significantly raised in the second half of last year.

'But the recovery is well underway and should continue to strengthen as the wider economic outlook improves. Budget measures to boost the construction of new homes will help to balance supply and demand in the property market, while the extension of Help to Buy equity loans also reduces fears of a drop off in activity after 2016,' he said.

'The government continues to call on extraordinary measures and new stimuli to progress the housing and mortgage market recovery. Its commitment is paying off, but we need to stay focused and monitor the consequences so we are left with a self sustaining market when such schemes are eventually phased out,' he added.

Neighbourhood plans take up edging towards maintaining status quo, research finds

The take up of neighbourhood plans, a cornerstone of the UK government’s Localism agenda, is concentrated in the south of England, according to new research.

They are generally in more affluent areas within Conservative led authorities, with a mixed picture of providing for or resisting development, says the research published by planning consultancy Turley.

To date, over 980 applications have been made by neighbourhood organisations for formal approval to draw up a neighbourhood plan. Of these, over 750 areas have been approved by local authorities to proceed.
  
The research also shows that 75 neighbourhood plans have been published for consultation, but only six Neighbourhood Plans were formally in place at the end of February 2014.

Of those plans published, 73% have been produced in areas with Conservative led councils, with just 9% having been produced in areas which are Labour controlled and 75% of all published plans have been produced in the south of England.
 
The Turley research also highlights that areas of below average affluence have so far been less involved in the neighbourhood planning processes, with just nine plans published in areas categorised as ‘most deprived’.

‘We have reviewed over 4,000 pages of draft neighbourhood plans and a clear picture is emerging. The preparation of neighbourhood plans is popular but is being recognised more by communities in the south of England compared to the North. It also appears that less affluent communities are not yet engaging fully in the neighbourhood planning process,’ said Rob Peters, executive director in Turley’s Bristol office who led the research.

The research found that, of the plans published so far, the smallest population of a neighbourhood plan area is Walton in Wakefield in West Yorkshire, representing just 225 people. The largest is Winsford in Cheshire representing over 30,000 people, highlighting the difference in size, scale and geography of the plans.

Some 67% of all published plans cover rural neighbourhoods and one third relate to urban areas while 55% of all neighbourhood plans seek primarily to resist new development, with that number increasing to 63% in rural areas.

‘I am not yet convinced that neighbourhood planning is an emphatic success or that the plans are making satisfactory provision for development, as the government has suggested, when so few plans have been made (i.e. adopted),’ said Peters.

He pointed out that neighbourhood plans have been stalling in their progress to adoption with adjourned examinations in Winslow, Aylesbury Vale, rejections by Examiners in Slaugham, and legal challenges in Tattenhall, Cheshire.

‘The picture that emerges from the published neighbourhood plans is one of the majority seeking to maintain the status quo and restricting new development, with a smaller minority of plans encouraging growth. This suggests a potential for conflict between localism delivered through neighbourhood planning and the positive presumptions and growth that underpin Government policy,’ he added.

The Turley research recognises that neighbourhood forums can provide a useful route to achieve meaningful engagement, but in some cases the views of land owners and developers are given insufficient weight. This means that increasingly developers will need to factor this into their monitoring and actions for promotional activity through the development plan process.

‘Residential developers in particular are aware of the potential of neighbourhood plans to influence the timescale for advancing their development proposals. Where possible they are trying to move ahead of emerging neighbourhood plans to limit the effects of possible new local policy constraints,’ Peters pointed out.

‘Our report also suggests that neighbourhood planning processes are starting to become important to the business community. There are 11 Business Neighbourhood Plans under preparation. These can extend to trading estates, business parks or town centres where there is no Parish Council. In such areas the benefits are a streamlined route for applications, with the potential to boost job creation and regeneration whilst working collaboratively with local communities. The mixed referendums of businesses and residents is however yet to be tested and there are signs of conflicting interests,’ he explained.

‘We are seeing developers adopt strategies to either work with or around neighbourhood plans by seeking greater engagement with higher tier policies, preparing early planning applications and/or trying to engage effectively with the Neighbourhood Plan process,’ he concluded.

Rising prices and bad weather hit home sales in the US in February say agents

Home prices in the US continued to show solid growth in most of the country due to limited inventory conditions, but rising prices and severe winter weather caused existing home sales to slip in February.

According to the latest existing home sales index report from the National Association of Realtors, completed transactions fell 0.4% to a seasonally adjusted annual rate of 4.60 million in February from 4.62 million in January.

Sales were 7.1% below the 4.95 million unit level recorded in February 2013 and the month’s pace of sales was the lowest since July 2012, when it stood at 4.59 million.

‘We had ongoing unusual weather disruptions across much of the country last month, with the continuing frictions of constrained inventory, restrictive mortgage lending standards and housing affordability less favourable than a year ago,’ said Lawrence Yun, NAR chief economist.

‘Some transactions are simply being delayed, so there should be some improvement in the months ahead. With an expected pickup in job creation, home sales should trend up modestly over the course of the year,’ he added.

The median existing home price for all housing types in February was $189,000, which is 9.1% above February 2013. ‘Price gains have translated into an additional $4 trillion of housing wealth recovery over the past three years,’ Yun explained.

The NAR data also shows that distressed homes sales, that is foreclosures and short sales, accounted for 16% of February sales, compared with 15% in January and 25% on February 2013. Some 11% of February sales were foreclosures and 5% were short sales. Foreclosures sold for an average discount of 16% below market value in February, while short sales were discounted 11%.

Total housing inventory at the end of February rose 6.4% to two million homes available for sale, which represents a 5.2 month supply at the current sales pace, up from 4.9 months in January. Unsold inventory is 5.3% above a year ago, when there was a 4.6 month supply.

The median time on market for all homes was 62 days in February, down from 67 days in January and 74 days on market in February 2013. Short sales were on the market for a median of 94 days in February, while foreclosures typically sold in 60 days and non-distressed homes took 61 days. Some 34% of homes sold in February were on the market for less than a month.

First time buyers accounted for 28% of purchases in February, up from 26% in January, but down from 30% in February 2013.

NAR president Steve Brown believes that student debt appears to be a factor in the weak level of first time buyers. ‘The biggest problems for first time buyers are tight credit and limited inventory in the lower price ranges. However, 20% of buyers under the age of 33, the prime group of first time buyers, delayed their purchase because of outstanding debt,’ he said.

‘In our recent consumer survey, some 56% of younger buyers who took longer to save for a down payment identified student debt as the biggest obstacle. It is also clear there are other people who would like to buy a home that are not in the market because of debt issues, so we can expect a lingering impact of delayed home buying,’ Brown added.

All cash sales comprised 35% of transactions in February, up from 33% in January and 32% in February 2013. Individual investors, who account for many cash sales, purchased 21% of homes in February, compared with 20% in January and 22% in February 2013. Overall 73%  of investors paid cash in February.

Single family home sales edged down 0.2% to a seasonally adjusted annual rate of 4.04 million in February from 4.05 million in January, and are 6.9% below the 4.34 million unit level in February 2013. The median existing single family home price was $189,200 in February, up 9% from a year ago.

Existing condominium and co-op sales declined 1.8% to an annual rate of 560,000 units in February from 570,000 in January, and are 8.2% below a year ago. The median existing condo price was $187,900 in February, which is 9.8% above February 2013.

Regionally, existing home sales in the Northeast fell 11.3% to an annual rate of 550,000 in February, and are 12.7% below February 2013. The median price in the Northeast was $237,800, up 1.5% from a year ago.

Existing home sales in the Midwest declined 3.8% in February to a pace of one million, and are 12.3% below a year ago. The median price in the Midwest was $140,900, which is 8.6% higher than February 2013.

In the South, existing home sales rose 1.5% to an annual level of 1.98 million in January, but are 0.5% below February 2013. The median price in the South was $163,400, up 8.3% from a year ago.

Existing home sales in the West rose 5.9% to a pace of 1.07 million in February, but are 10.1% below a year ago. The median price in the West was $279,400, up 18% from February 2013.

Strong real estate market in Miami with properties selling near asking price

The performance of the Miami real estate market remained strong in February, as prices continue to rise while properties are selling rapidly and near asking price, according to the latest report from the Miami Association of Realtors.

Miami is one of the most popular parts of the United States for foreign property buyers and attracts enquiries particularly from Europeans and South Americans seeking to buy property for investment in Florida.

The data shows that median sale prices again increased significantly for both single family homes and condominiums in February. The median sales price for single family homes jumped 17% to $227,000, marking 27 straight months of growth. The average sale price for single family homes increased 6.7% to $415,312 last month.

‘Despite the recent increase in inventory, sales activity remains at historically strong levels, resulting in rising prices,’ said Liza Mendez,  chairman of the board of the Miami Association of Realtors.

'While additional inventory is creating a more balanced market, the fact that homes continue to sell fast and almost at asking price is still indicative of a seller’s market,’ she added.

The median sales price for condominiums has increased for 32 consecutive months, up 7.3% to $177,000 compared to February 2013. The average sale price for condominiums increased 10.8% to $337,382 from a year ago.

The report points out that Miami real estate continues to sell at a rapid pace and nearly at asking price, indicating properties are being priced right and buyers realize they need to be competitive in the current market.

The median number of days on the market for single family homes sold in February was just 47 days, a decrease of 2.1% from February 2013. The average percent of original list price received was 95.2%, up 1.4% from February 2013.

The median number of days on the market for condominiums sold in February was 57 days, an increase of 18.8% compared to the same period in 2013. The average sales price was 95% of the asking price, a negligible decrease of 0.8%.

In February, residential real estate sales in Miami-Dade County decreased a negligible 1.9% compared to 2,075 in February of last year. Single family home sales increased 1.3% relative to February 2013. Compared to February 2013, condominium sales declined 4.1%.

‘The Miami real estate market also offers great opportunities for buyers. Prices are still low, comparable to what they were more than 10 years ago,’ said Francisco Angulo, residential president of the association.

‘And, interest rates are still at historical lows, making buying a home more affordable. Consumers considering buying a home should take advantage of all of the current favourable market conditions,’ Angulo added.

The data also shows that active listings at the end of February increased 26.8% compared with a year ago. Inventory of single family homes increased 18.3% and  condominium inventory increased 32.2%.

At the current sales pace, there is a 5.6 month supply of single family homes, an increase of 6% from 5.3 months in February 2013, and a 7.5 month supply of condominiums, up from 5.9 months in February 2013, an increase of 26.2%.

New listings of single family homes increased 10.6% in February while condominium listings increased 11.3%.  
Sales of distressed properties continue to sharply decline in Miami-Dade County. In February, only 36% of all closed residential sales in Miami-Dade County were distressed, including REOs (bank-owned properties) and short sales, compared to 42.2% in February 2013. Sales of REOs increased 26% while sales of short sales sharply declined by 51%.

The median sales price of single-family home and condominium foreclosures in Miami-Dade increased 20.9% to $163,150 and 13.6% to $110,750 respectively.

The data also shows that 62.5% of total closed sales in February were all cash transactions, compared to 66.5% in February 2013. Cash sales in Miami are still significantly higher than the national average of 35%.

All cash sales accounted for 49.5% of single family homes and 72% of condominium closings, compared to a year ago when cash sales were 49.6% of single family home sales and 78.1% of condominium sales.

Since nearly 90% of foreign buyers in Florida purchase properties all cash, this continues to reflect the much stronger presence of international buyers in the Miami real estate market.

Distressed sales fall in the US as transaction increase overall, latest index shows

US home sales increased by 8%  year on year in February and 3.8% month on month, according to the latest data from CoreLogic.

Sales rose to a non-seasonally adjusted annual sales pace of 4.09 million and the monthly rise was the highest sales pace for the month of February since 2007.
 
Improvement in February home sales were led by newly constructed homes which increased by 23%, followed by re-sales which increased by 18%, the data also shows.

Distressed sales, which include real estate owned (REO) and short sales, were on the decline, continuing the trend in the shift towards healthy home sales.

Distressed sales accounted for 15.6% of total sales in February, a strong improvement from the same time a year ago when they made up 22.8% of total sales.

REO sales were down 16% year on year, making up 11.4% of total sales while short sales were down 44% year on year, at just 4.3% of total sales in February.
 
At its peak, the distressed sales share totalled 32.7% of all sales in January 2009, with REO sales making up 28.2% if that share. The firms says that the more recent shift away from REO sales is a driver of improving home prices, as REOs typically sell at a larger discount compared to healthy sales than do short sales.
 
‘There will always be some amount of distress in the housing market, so one would never expect a 0% distressed sales share, but the pre-crisis share of distressed sales was traditionally about 2%,’ the report explained.

Michigan had the largest share of distressed sales of any state at 30.5% in February, followed by Illinois at 26.6%, Nevada at 26%, Florida at 24.8% and Georgia at 23.5%.

California saw a 17.8% point drop in the distressed sales share, the largest of any state. Of the largest 25 Core Based Statistical Areas (CBSAs), Chicago-Naperville-Arlington Heights had the largest share of distressed sales at 29.5% followed by Miami-Miami Beach-Kendall at 27.9%, Las Vegas-Henderson-Paradise at 27.2%, Orlando-Kissimmee-Sanford, at 27% and Tampa-St. Petersburg-Clearwater at 25.5%.

Sacramento-Roseville-Arden-Arcade had the largest drop in its distressed share, falling by 21.7% from 41.6% in February 2013 to 19.9% in February 2014.

Majority of IFAs expect UK house prices to rise in next three years

Nine out of ten Independent Financial Advisers expect UK house prices to increase during the next three years.

Some 40% of IFAs would increase their own personal exposure to residential if it were easier to do so in a tax efficient way and 42% of IFA clients also more interested in residential property, according to new research.

The survey from Castle Trust, which offers investment products that track or beat the Halifax House Price Index, shows that between now and 2019, 86% of advisers expect house prices to rise with one in 20 anticipating a dramatic increase.

Also, when looking at the next 10 years, only 6% expect prices to fall and one in 14 think they will rise by over 50%.  By 2024, financial advisers on average think that house prices will increase by around 21%, which would add £37,773 to the value of a typical home.

According to the survey, the most common barrier to investing in a buy to let property is concerns about tenants or lack of tenants with 51% mentioning this followed by 49% saying it is the deposit and 41% thinking it is a hassle.

‘It is clear that confidence in the entire UK housing market is finally taking hold and is no longer just confined to London and the South East. This is starkly apparent from our own results as we have witnessed record flows into our Housa products, presumably because their returns are tightly pegged to the Halifax House Price Index,’ said Sean Oldfield, chief executive of Castle Trust.
 
He explained that the firm’s Housa products provide a simple alternative to buy to let which has never before existed which opens up the chance for more people to invest in residential property who previously weren’t able to do so.
 
Investors across Castle Trust’s range of Housas have seen growth since they were first launched in October 2012 and its unique Protected Housa investment product which both protects the capital invested and tracks the Halifax House Price Index (HHPI), has delivered capital growth of 3.1% in its first month alone.

Oldfield described Housas as a low cost and tax efficient way to get exposure to the housing market. ‘Unlike property funds, there are no upfront or ongoing management fees. Housas typically qualify for inclusion as an ISA, Junior ISA or SIPP with a minimum investment of just £1,000. Investors are eligible for protection by the Financial Services Compensation Scheme of up to £50,000 per individual,’ he pointed out.

UK residential property is one of the most stable asset classes. Analysis by Castle Trust reveals that over the last 30 years, it has historically delivered annual returns of about 6% per annum, which is comparable with equities, and superior to commercial property, but with much less volatility than both.