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Sales volumes sharply reduced!

Sales volumes of prime homes right across the country have been hit hard, cutting the Government’s take from Stamp Duty Land Tax by millions. Asking prices have also been sharply reduced, as the top end of the London market has crashed.
In the six months from May to October there was a 75% reduction in sales of properties above £10m – down to just 15 from 61 in the same period last year.
There was also a 51% reduction in sales between £5m and £10m – a fall from 201 to 99.
There was also a 33% drop in sales between £1m and £2m (7,285 falling to 4,913) and a 36% drop in sales between £2m and £5m (down from 1,473 to 947).
Worst affected was the prime new-build sector where there was a 83% reduction in the number of sales of new homes above £5m. This equates to a fall from 52 in the same period last year to just nine in the six months from May to October.
According to analysis of Land Registry figures by investment firm London Central Portfolio, the reduction in sales activity above £1m between May and October could have cost the Exchequer nearly £500m.
The firm says that the fall could be as much as £1bn by the end of the financial year.
London Central Portfolio CEO Naomi Heaton said: “This slowdown in the luxury property market – a big contributor for the Exchequer and UK economy in general – is very concerning, particularly as the Government faces wider economic and financial instability in the face of Brexit.
“With an already increasing deficit to address and the Government’s declared intent to increase tax revenues, these statistics should make some worrying reading for Chancellor Hammond.
“Having missed the opportunity to reconsider Osborne’s strategy at the Autumn Statement, we hope the Government will now look to relax some of these measures before there are detrimental knock-on effects for developers, the Exchequer’s balance sheet and the wider UK economy.”
Most of Britain’s most expensive homes are concentrated in London, where high-end agents have made job cuts and developer Berkeley Homes has slashed its prices  by around 10%.
Separate research, by Propcision, has also shown huge cuts, of up to 46%, in asking prices of some London properties.
Michelle Ricci, co-founder of analyst firm Propcision which has an ‘add on to Rightmove’ which is neither approved nor authorised by the portal, said some of these properties had ambitious pricing to begin with. Her research shows that since June, the price cuts became more concentrated in central London as the Brexit vote compounded pre-existing problems in the market.
The blame on the central London housing market crash has been put on an increasingly harsh tax regime scaring off wealthy purchasers.
While there might not be much sympathy for this segment, there must nevertheless be concerns about a market that needs to flow freely from top to bottom.
Specifically, as agents know, what historically happens at the top end of the market tends to ripple down – and that what happens in London, tends to spread out.

Rent rises are likely to accelerate in 2017

Rent rises are likely to accelerate in 2017. A third of landlords expected to increase rents in the next 6 months alone, by an average of 5.4% - equivalent £571 per year for households. Two thirds cite higher future taxes, and 43% the strength of tenant demand. Indeed, twice as many landlords are seeing an increase in tenant demand as the number seeing a decline. The recent budget announcement to ban letting fees, while providing a welcome reduction in tenants’ upfront costs, will see any additional costs for landlords factored into rents.
Extra pressure will also come from the Prudential Regulation Authority’s new underwriting standards, due for implementation next year; these will see landlords needing to demonstrate higher yields to secure finance, unless they can provide larger deposits. As a result, Kent Reliance forecasts that rents will rise by an average of 3% in 2017.
Growth in the number of households has moderated, growing at 5.4% in September compared to 5.5% in the first quarter, with 5.3million rented households in total. Combined with strong house price growth, the value of the PRS in Great Britain has risen to £1.3trn, with £174bn added since September 2016.  
Andy Golding, Chief Executive of OneSavings Bank, had this to say: “Property investors have had to roll with punches in 2016. The stamp duty levy clearly took its toll on the market, and combined with the forthcoming tax changes, landlords have felt at the mercy of a political agenda. But confidence is returning as landlords take action to limit the damage to their finances. The use of limited companies is soaring, and rents are increasing, even after one of the biggest surges in rental supply in recent history.
There is still more to come for the buy to let sector next year. The PRA’s new underwriting standards are due to be implemented, the tax changes begin to take effect, and there is yet more potential intervention in the form of the FPC’s new powers. If the cumulative effect of constant change undermines the expansion of rental properties, this will simply exacerbate the housing crisis.
The raft of recent measures aimed at the buy to let sector singularly sought to increase home ownership levels. Ironically, they will achieve the opposite, with even greater upward pressure on rents combined with the prospect of declining real incomes likely to stretch affordability even further. We have warned all along that the tax changes will push up rents, and this is already starting to happen. The ban on often unjustifiably high letting fees is well intentioned. However, it also means landlords could pass higher costs onto tenants, doing little to bring down the overall cost of renting.  
Only through a substantive and long-term building programme across all tenures will we see an end to escalating house prices and rents. The Chancellor has moved to provide more support for house building, but it is not yet enough to see the step-change in supply that we need.”

The property rental market is booming

The property rental market is booming at the expense of the sales market, making it look as if house-buying will be outstripped for the first time in eight decades next year, as home-buyers face a continued struggle to find properties they can afford.
Activity in the sales market has cooled since June’s Brexit vote and a lack of property for sale combined with rising prices are set to lead to more new lets than purchases, the UK’s largest estate agency chain, Countrywide, said.
Johnny Morris, research director at Countrywide, said: “As some would-be buyers and sellers sit on their hands, Brexit-induced uncertainty has continued to boost the rental market … September saw record activity, with increasing numbers of lets agreed and tenants choosing to renew their contracts. On current trends 2017 could be the first time since the 1930s that more homes are let than sold.”
Separate reports suggest that affording a new home is becoming increasingly difficult for would-be buyers, with asking prices rising since the summer and borrowers having to find bigger deposits than in 2015.

Moving cost

Moving costs have increased £870 in the past year to £10,996, according to the research by Lloyds. The figure takes into account stamp duty, estate agency fees and home removal costs, as well as conveyancing fees and the price of an energy performance certificate.

The Halifax

The Halifax, part of Lloyds Banking Group, said that the average home in the UK cost £213,930.
Prices in the three months to the end of August were 0.7% higher than the previous quarter - marking a slowdown in the pace of growth.
Property values fell by 0.2% in August compared with July, the lender added.
"House price growth continued the trend of the past few months in August with a further moderation in both the annual and quarterly rates of increase. There are also signs of a softening in sales activity," said Martin Ellis, housing economist at the Halifax.

"The slowdown in the rate of house price growth is consistent with the forecast that we made at the end of 2015. Increasing difficulties in purchasing a home as house prices continued to increase more quickly than earnings were expected to constrain demand, curbing house price growth."

Parents in the capital are giving their children almost twice as much financial help

Parents in the capital are giving their children almost twice as much financial help to get on the property ladder than those elsewhere in the country, research suggests.

The report by insurer Aviva found that the average amounts given by those over 45 to their children and grandchildren differs significantly depending on where they live.

The average amounts range from £20,000 given by those living in the East of England to £36,000 given by those living in London.

Nationally, parents who help out their children with the purchase of a home give on average £25,090, Aviva said.

However, its regional figures - given exclusively to us - show that parents in the capital are giving the largest amount of cash.
This region is also where average house prices are among the highest in the country at almost £600,000.

Parents in the East Midlands and North East followed closely behind with generous contributions of £32,500 and £27,950 respectively. 

Those in the East of England gave the least on average.

There were also differences in the way parents funded the financial gifts to their offspring, with 71 per cent using savings and investments to help with a deposit and 10 per cent used this to buy a property outright.

A further 10 per cent moved to a smaller property to help the younger members of their family to get onto the property ladder.

The Yorkshire and Humberside branch of the Bank of Mum and Dad is most likely to use their savings or other investors to contribute towards a deposit for their family, according to the research.

Four out of five suggested they will help in this way, compared to 71 per cent on average nationally.

The research went on to suggest that over 45 homeowners in the North East are more likely than any other region to use their savings and investments to buy a property outright for younger generations in their family, with a quarter either having done so already or planning to do so.

At the same time, 17 per cent of the London and West Midlands branches of the Bank of Mum and Dad plan or have already downsized to help with a deposit and are the most likely regions across the country to use this method.

The research found that 43 per cent of over 45 homeowners believe their children or grandchildren will never be able to afford to buy a property without family help.

However, not all over 45 homeowners can give the financial assistance they would like to. Almost two out of five said they would like to help a family member but couldn't afford to do so. And 12 per cent plan to skip a generation by giving money to their grandchildren instead.

Alistair McQueen, savings and retirement manager at Aviva, said: 'Home ownership is being talked about more than ever as today's millennials struggle to get their foot on the housing ladder. 

'We are seeing a growing effort among parents and older generations, who have traditionally benefitted from high levels of home-ownership and house prices, to financially support their family members. However, these trends have not freed young people from financial worries and there appears to be great divergences in terms of support given in different parts of the country.

'In our latest research, we have been able to unlock the hopes and worries of over-45 homeowners across the UK and take a closer look at how today's millennials are being supported by the 'Bank of Mum and Dad'. The findings show a real sense of wanting to help younger relatives overcome barriers to property ownership, and those who have been helped in the capital have received around £36,000 on average. 

However, financial pressures elsewhere in the country mean the story isn't the same for all young people, with the average amount from family members in the East of England dropping to £20,000. Offering a helping hand is not practical for everyone, which begs the question: if the financial pressures facing today's over-45s mean they cannot help as much as they would like, how will the next generation fare when it comes to supporting their own children?' 

£40,000 higher!

The price of a home will be about £40,000 higher in five years’ time, even though prices are expected to slow in the wake of the Brexit vote. The Centre for Economics and Business Research (CEBR) said house prices will rise by 5.7 per cent this year, but growth will fall to 2.2 per cent next year. Earlier this year, annual house price growth across the UK was running as high as 8 per cent.

Taking into account the CEBR’s projections, the average house price in Britain could increase from £194,000 in 2016 to £234,000 in 2021 – a rise of £40,000. Slower growth will partly come from the greater uncertainty that has hit the housing market while a deal with the European Union is negotiated after Britons voted to quit the single bloc last month. However, a three percentage point stamp duty hike which came into force for buy-to-let investors in April is also causing the slowdown, according to the CEBR. The organisation added that the top end of the London housing market, which has attracted strong interest from foreign investors in recent years, was “showing cracks” well before the referendum vote on 23 June. In the capital, house prices are expected to drop by 5.6 per cent in 2017. This is because a relatively high share of its residents are non-UK nationals, while the finance sector is also under pressure.

“Some of the global regions that many of London’s non-UK buyers come from, such as Russia and the Middle East, are experiencing economic turmoil and are not as able to invest,” said the report’s authors. Beyond 2021, housing market developments will depend heavily on the immigration and economic policies the UK negotiates with the rest of the world, the CEBR added. However, others in the property industry were feeling more optimistic about growth yesterday. The property listings website Rightmove reported robust profits and said it was confident of navigating a post-Brexit housing market. The company said its operating profit for the first half of the year rose 21 per cent to £80.6m on revenues of £107.9m, an increase of 16 per cent.

Chief executive Nick McKittrick said: “It is too early to gauge the impact of the result of the EU referendum on housing transactions.” He added that the website notched up 765 million website visits in the first six months of the year, up 15 per cent on last year.