According to the Nationwide the property market across Britain remains buoyant and showed no signs of cooling down in February. Prices are 9.4% higher on average across Britain than a year ago with many analysts believing that prices have a way to go if the Help To Buy Scheme is left in place. Some commentators believe that the government should reduce the upper limit on house purchases under the scheme. Currently the scheme allows buyers to purchase a property up to £600k but many experts feel that this has caused priced to rise to unsustainable levels and that the maximum purchase price should be set and £300k – £400k. Of course there are many others that want it to remain at £600k because £400k will not buy you very much in London.
House prices across Britain have risen for the last 14 consecutive months according to Nationwide with the average price of a home now standing at £177,000. This is the highest level since April 2008 and is likely to roll through the pre-crisis levels soon. Price growth is being supported by many factors but mortgages at very affordable levels along with the growing economy and the Help To Buy Schemes have helped. Prices are also being driven up by the lack of available property to buy and this is likely to continue in the short term. Some have accused the government of stoking up the property market without providing new homes for people to buy
If average earners are to get on the housing ladder they would need to have seen their wages more than double over the last decade. This is despite the crash in 2008 and the subsequent problems that this brought with it. The property market has seen a significant recovery in prices whereas wages have seen very little growth. This means that property values are now totally out of sync with wages and average earners in London would need to see wages increase by £100,000 per year in order to buy in some parts of London. These figures have been put forward by Shelter, the housing charity that have carried out research from 1997 to the present date.
Since 2003 house prices on average have gone up by £1000,000. This compares to the annual average salary that has risen by just £6,750. If you take London and the south-east out of the equation the average house price across the country has risen by £73,000. You can see why house prices look very inflated when wages growth has been so low. Average earnings have a long way to catch up and house prices look as though they will continue to rise further particularly if there are not enough new affordable homes being built to satisfy demand
The government’s flag ship policy Help To Buy Scheme has been slammed by PricedOut. The organisation which campaigns for more affordable housing said that the whilst the scheme had help just under 19,000 first time buyers get onto the housing ladder a further 245,000 were now unable to buy a home because prices had spiralled out of control. The group has calculated English Housing Survey’s income profile of private renters along with figures from the Office Of national Statistics on the latest house price index to show that three-quarters of private renters could no longer afford to buy their own property.
This is on the basis that a borrower would not borrow more that four times their income. With house prices predicted to rise by a further 8% in 2014 and wages growth not likely to increase significantly there is more concern that more first time buyers are going to be locked out of the market.
Although there are other factors that are pushing up prices the shear volume of buyers that are out there along with the lack of new homes being built the Help To Buy Scheme may have the opposite effect of what is was rolled out for. Instead of helping buyers get on the ladder it is actually inhibiting borrowers from buying. Of course there are two sides to this and many commentators have said that the Help to Buy Scheme has been the main driver for the housing market and has pulled the country out of the recession but this still doesn’t help those that still can’t afford to buy.
Help To Buy benefitting first time buyers
Estate agents are reporting a surge in first time buyer registrations as the number of people looking to buy their first home increases. Many of the buyers are borrowing money with the help of the taxpayer backed scheme. The boost in numbers has been welcomed by the government who say that they are giving families and individuals the opportunity to get a foot on the housing ladder.
The number of mortgages being approved has also risen along with completed sales. The picture is very different in the north of the country where the Help To Buy scheme has yet to take hold. Much of the activity in the south has been put down to the number of foreign buyers that have been buying in the south-east of Britain. This has pushed prices higher and has had an adverse affect on the number of homes that are available for first time buyers.
Londoners being forced to buy outside of London
New evidence suggests that Londoners are now being forced to move out to the suburbs so that they can buy a home. The high house prices in London and the south east is affecting the growth of many businesses in ~London because they are struggling to find staff that can afford the rents in and around london.
The government has said that it is doing everything it can to encourage new homes to be built. The Chancellor announced in the Autumn Statement that the government would be giving a further £1bn of new funding to help boost the supply of new homes in Manchester and Leeds
Good News For The Economy
There is further good news today from official figures that show the economic recovery is continuing and with house prices heading upwards across the country as a whole. This is indeed good news for homeowners but of course many first time buyers are still struggling to get onto the housing ladder despite the Help To Buy scheme that has been brought forward. The scheme has been welcomed by many people as the shot in the arm that the property market needs but has been lambasted by others who are concerned that there simply isn’t enough houses for purchasers to move into.
Cheap Money Is Fuelling Property Market
The recent increases have been attributed to the cheap money that is available which has had a dramatic effect on the number of buyers looking. What worries many market watchers is that the house market is pushed up to levels that are not sustainable and that interest rates start to go up and the market then takes a hit. This has happened before and it will happen again. The market would appear to be going from strength to strength at the moment but many would say that it is being fuelled by the various schemes that have been put out there by the government and the Bank Of England. Once these schemes are withdrawn and interest rates start to go up as they will inevitably have to let’s hope the government ensure that there is not another collapse.
Bank Of England Continues To Watch Housing Market
he Bank Of England has said that there is not a property happening in Britain but that it would maintain it’s vigilance and would take the necessary action to calm the market if it felt prices were rising at unsustainable levels. The bank has said that it had a number of tools at its disposal to cool price increases but it did not want to increase interest rates as this would choke off the recovery in the economy. House prices rose 3.3% across Britain in the 12 months to July as a whole with London steaming ahead with an increase of 10%.
Labour To Build 200,000 New Homes Every Year
Many commentators are concerned that there is still not enough houses being built to satisfy demand and that prices could rise by more than the preferred 5% per annum. They are worried that the schemes that have been introduced by the government and the bank have led to many buyers coming into the market and not enough housing stock to satisfy the demand. They are also worried that the second part of the Help To Buy Scheme which will be rolled out in January 2014 will further fuel house price inflation.
The Labour leader has said that his party would build 200,000 new homes every year by the year 2020. It is argued that this would alleviate the house price increases and would also help many families that are simply unable to find an affordable home.
Please tell us if you are looking to sell any type of unmodernised property in London
- No housing bubble, but Bank of England says it is watching closely – Reuters UK (uk.reuters.com)
- How to spot a housing bubble (killerinvestorblog.wordpress.com)
Sitting Tenants Properties Wanted
If you are selling with a sitting tenant we can help you. We pay up to 90% of vacant values for properties with sitting tenants. We offer a one stop service for landlords. Fed up with your tenants? Many tenants are unwilling to allow viewings on their property which can sometimes make the property difficult to sell. Most of these tenants have been in residence for many years and quite rightly have the right to refuse entry to anybody. This is not a problem for us as we can buy your property without an internal viewing!
Therefore when a sale takes place on a protected tenancy the buyer will generally have to purchase the property without actually viewing the property internally. This can sometimes cause a problem if the house or flats is not a run of the mill property which means the buyer will have to take a view on the deal. Of course a discount will apply for these types of investments as the tenant has the right to stay in the property until they die or decide to move out. Very few tenants move out because they have a good tenancy and will never get another tenancy on such favourable terms.
Sitting Tenants – Protected Tenancies
You may be wondering why an investor would want to buy a protected tenancy and the answer is quite simple. Eventually the property is going to become vacant which is when it can be sold hopefully for a profit. Providing house prices increase the landlord will sell the house when it becomes vacant. From a landlord’s point of view you need to have capital to invest in these investments because they are unmortgageable in the current climate. So if a protected tenancy is sold for £250,000, it must be bought with cash as no bank will lend against it. Therefore you have to leave the cash in the property until it becomes vacant which could be twenty years or more from now.
Of course you might get lucky and the house may become empty 12 months after you have purchased it but this is definitely the exception rather than the rule. These properties are acquired for the long-term and you should not expect the house to become vacant in the near future. The tenant has security of tenure which means that they can stay in their home until they die. You are not able to increase the rent of your own accord as this will be done by the rent office or the rent assessment panel that deals with most aspects of the tenancy. You will be entitled to a rent increase every two years. The increase will be linked to the retail prices index and normally takes a couple of weeks to be implemented.
These types of tenancies are not for everyone as they do require a little specialist knowledge and considerable cash reserves. We have been buying these houses and flats with sitting tenants across Britain and would welcome the opportunity to discuss your tenancy with you. Please call our offices for an informal chat.