Calling the bottom?

Property News Round-up:
WHAT THE EXPERTS ARE SAYING…

The Mail on-line reported recently that in the bear pit of the housing market - the auction room - there are signs that the property free-fall may be coming to a halt. 

In their first big central London auction of the year, Barnard Marcus saw a packed salesroom and a hunger for deals, as buyers and gawpers watched 178 lots go under the hammer, three-quarters of them distressed sales.  Many sold for above guide price and £15 million was raised.  “I don't believe in calling the bottom of the market on one sale”, says auctioneer Chris Glenn.  “But if this is anything to go by then we're almost there”.

Couple these strong signs with another dynamic which has emerged out of the global shares rollercoaster:  Welcome to Generation Rent.

 

Generation Rent

Home ownership is falling out of favour….apparently!  Anne Ashworth writing for the TimesOnline cites this as the message of the latest English Housing Survey which states that 68.3% of people now have a place of their own against 70.9% in 2003.

Further examination, however, of these figures, she writes, indicates that the decline is a by-product of the boom, rather than distaste for owner-occupation.

Younger would-be buyers, without the cash to climb on to the ladder, have been compelled to opt for the rental accommodation accumulated by cash-rich people who have become landlords thanks to the equity in their family homes. 

For this burgeoning population of young tenants, saving up for several years to reach the magic 15-20% deposit + costs now required to get on the ladder, is now a given. 

Your ready-made renting population.

Couple this with the building industry slow-down leading to reduced supply of housing stock: there lies the opportunity for the canny investor into residential property right now.

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, concurs: "The level of new mortgage approvals continues to languish. The disconnect between buyer enquiries and actual mortgages approved, highlights the inability of many buyers to access the property market at the present time because of the substantial deposits being sought by lenders”.

Yolande Barnes, Savills' head of residential research, highlights the increasing dominance of the older, richer homeowner.

The number of properties bought with a mortgage has fallen to 37.3%; an astonishing 45% of owner-occupiers have paid off their loans.  This means that, should they choose to borrow to acquire more properties, these fortunate ones will be warmly welcomed by lenders who, as Ms Barnes predicts, will continue to give preferential treatment to this well-endowed clientele.

PM’s View 

Her view is confirmed by the disapproval voiced last week by the Prime Minister for 100 per cent loans - not so long ago, a popular twentysomething way on to the ladder. Northern Rock, the state-owned bank that was once the first-time buyer's benefactor, has started lending again.  But these days Northern Rock seems set to concentrate its efforts on the twentysomethings' parents, the group able to exploit lower prices to pursue their yen for second homes and rental properties.

This should ensure that there are plenty of flats to let for twentysomethings and thirtysomethings who, despite the return of the Rock, remain in Generation Rent.

Michael Coogan, director general of the Council of Mortgage Lenders, explained the move could help other banks increase mortgage lending: "While other lenders will no doubt be watching carefully to assess the competitive impacts of Northern Rock returning to the market as an active mortgage lender, in overall market terms anything that improves the supply of lending is a positive.

BBC Online reports this week that mortgage approvals are levelling out.  The Bank of England records that the number of mortgage approvals in January for house purchases held steady at 31,000.  While approvals are still less than half the level of a year ago, they have now averaged 31,000 a month for the past six months.

This suggests the slump in mortgage lending seen during the past year and a half may have now reached its trough.

The housing intelligence group Hometrack reported some encouraging signs of a pick-up in activity in the market this week, reports The Daily Telegraph, including a 17% jump in the number of new buyers registering with estate agents, and a 6.7% rise in new homes being put on to the market.

Hometrack said estate agents in some parts of the country had reported that new properties coming on to the market that were correctly priced were going under offer relatively quickly, while others were receiving multiple bids on homes.  The pick-up in buyer demand was strongest in southern England, with rises of more than 20% in the number of people registering with estate agents in London, the South East and the South West.

Following three successive monthly increases in the RICS’ new buyer enquiry series, a reliable lead indicator of transaction activity, RICS has asked further questions of its members to determine what is underpinning this sustained pick up in interest.  71% of Chartered Surveyors stated that lower house prices were responsible for the growth in enquires while 48% believed that buyers are increasingly convinced that the bottom of the market is insight.

New from IAP Global

Freedom Portfolio

A long term strategy for building wealth through property investment, with £125,000 potential instant equity*.

Summary of benefits of the Freedom Portfolio

• Our team sources properties below market value properties
• Secure a discount, currently of 25% or more on each property
• We manage the entire process of buying the property including negotiation, solicitors, brokers, and mortgages
• Liaise with a letting agency to aid rental

Andrew Jones joins the team as Group Acquisitions Director for Freedom Portfolio.

Previously Partner at Knight Frank and before that, Operations Director for CBRE Richard Ellis and Hamptons joint venture

 

Show Case Property of the week

Malham Drive, Whitefield, Manchester £229,950
Gross market value £230K
25%BMV
£172,500 @5.69%
There is a £7500 incentive for a quick sale on this deal.
This deal works on a 75% LTV mortgage.
Rentals in the area are from £850 to £950 PCM with Martin and Co

We are currently sourcing a high number of BMV properties for our Freedom Portfolio clients. Every suitable property we secure is typically taken within 48 hours - such is the high demand. In the current climate we are finding some fantastic investment opportunities.

 

 

The IAP Global Newsletter is for general information only and is not intended to be relied upon by readers in making or not making specific investment decisions.

Disclaimer

Comments made are based on current tax law and may, (in fact almost certainly will), change in the months/years ahead. Material supplied has been carefully checked for accuracy but no responsibility can be accepted for inaccuracies or errors or from subsequent use of this material. Specific professional advice must always be sought based on your own individual circumstances. As always, the buck stops with you. We recommend you take independent advice before making any such decision.

The writer, IAP Global Newsletter and associated companies, do not accept any responsibility for any loss suffered by readers as a result of any such decision.