Property Briefing-A daily roundup of all the key property news and views brought to you by Oracle Group
Posted by The Oracle Group on 17th June 2019 -
INDUSTRY
Key workers struggle to afford own home
Key workers including nurses, teachers and emergency services personnel can only afford to own a home in 8% of UK towns, a report claims. A Halifax analysis of housing affordability for five public sector professions across 515 towns, including 31 London boroughs, shows just one in 12 of these areas were affordable - down from one in four (24%) in 2014. In some areas, a home typically costs more than 18 times a key worker's average annual wage, according to the findings. Halifax's Andrew Mason, said: "Wages not rising in line with house prices has affected affordability for key workers."
Bank of mum and dad expected to hand out £6.3bn this year
The ‘Bank of mum and dad’ is predicted to hand out £6.3bn worth of loans this year as parents help their children get on the property ladder, according to new research. Parents are also becoming more generous lenders, handing out £24,100 on average which will give younger generations a leg up onto the housing ladder, according to Legal & General and the Centre for Economics and Business Research (CEBR). The study found that parents are expected to be involved in more than a quarter of a million (259,400) property purchases this year, making the bank of mum and dad equivalent to the UK's 11th biggest mortgage lender.
Surge in buy-to-let fuelled by Labour’s raid on pensions
A report from the Resolution Foundation claiming the buy-to-let boom was reducing the number of homes available for young people to buy has been widely criticised. The left-leaning think tank said the number of Britons with second homes had soared to 5.5m since 2001, with their extra homes rising in value from £610m to £941m over the period. But critics of the report point out that the rise in buy-to-let purchases was down to the Blair – Brown Labour government destroying final salary pensions in the private sector, prompting people to look after their own retirement needs by buying second properties to let. The Mail’s Alex Brummer says the foundation's report “offers yet another chilling glimpse of Labour thinking on property ownership.”
Pensions should not be used to fund first home
Following housing minister James Brokenshire’s suggestion that first-time buyers should be able to raid their pension pots to help them put together a deposit, Moneyweek’s David Prosser warns against the idea, claiming that “while pension savings might be an attractive target for home buyers needing a deposit, raiding the piggy bank simply means exchanging today’s problem of funding a property purchase for the problem tomorrow of funding retirement.” Instead, Mr Prosser points savers towards Lifetime Isas, which offer the chance to save simultaneously for a future housing purchase and for retirement. “Until you reach the age of 60 you are only supposed to take money out of your account if you’re using the money to purchase a property for the first time. Otherwise, there are penalties to pay on withdrawals made before your 60th birthday,” he writes.
Number of older buy to let investors increases
There was a 4% increase in the proportion of buy to let purchases and remortgages from over 55s last year, according to Commercial Trust. From 2017 to 2018, this age group represented 39% of buy to let activity, having accounted for 35% in 2017. By comparison, 25-34-year olds recorded a tiny increase of 0.03%. Commenting on the data, Andrew Turner, chief executive at Commercial Trust, said: “Our look at the age demographics for 2018 buy to let mortgage activity suggests that increasing numbers of older people are recognising the potential of buy to let investments.” He added that the data “indicates that many people, reaching retirement, are choosing to invest in bricks and mortar and the rental market, as a means to fund their retirement years.”
MORTGAGES
Two-year mortgages could be an expensive mistake
Writing for the Mirror, John Fitzsimons warns that, whilst two-year fixed-rate mortgages have been one of the most popular home loans for years, getting one now could prove to be a “costly mistake”. Mr Fitzsimons highlights that, although two-year deals have lower interest rates than longer plans, the difference between two and five-year deals has trimmed recently, with the difference between the average rate on two-year fixed deals and five-year fixed rates having dropped from 0.42% at the start of the year to 0.36% today – the smallest gap in seven years. This is further compounded by the fees involved in changing mortgage deals every two years. Mr Fitzsimons explains that, “if you took out a mortgage for £150,000 over a 25-year term, with the average two-year fixed rate your monthly repayments would come to £672. Meanwhile with the five-year deal those repayments would be only slightly more at £700 a month.” However, he goes on to say that changing mortgages every two years will cost around £1000 each time. “And if you end up paying above average fees,” he adds “all of a sudden the five-year can work out cheaper.”
RENTAL
More over-50s in rental accommodation
People aged over 50 now account for one in seven private lets in the UK, Hamptons International research suggests. Over 790,000 homes in Britain are now rented by the age group - a 61% rise since 2012. The figures mean that 15% of rented homes are now occupied by households aged over 50, with pensioners making up nearly a third of this group. “House prices have risen more than incomes, making it harder for people to buy homes. And to make matters worse, after the 2008 financial crisis it became harder to get a mortgage after banks tightened their lending rules,” said Aneisha Beveridge, of Hamptons.
FIRMS
Housebuilder blames Help To Buy for market weakness
Taylor Wimpey chief Pete Redfern believes the government’s Help to Buy scheme has fuelled recent weakness in the UK’s housing market, adding that prices would otherwise still be growing today.
RETAIL
CVA approach has led to closure of 1,000 shops
Retailers using controversial CVA tactics to restructure their empires has led to the closure of almost 1,000 shops in the last two years, according to recent research. The figures reveal the full effect of company voluntary arrangements on the high street, with retailers including Carpetright, Mothercare and Homebase having used the tactic to shut a total 954 stores since the start of 2017, according to analysis by Colliers International. The number of CVAs, which have become a tool to renegotiate rents with landlords, have doubled during that period.
LEGAL
Leading lawyer to challenge asylum seeker evictions
Leading Glasgow lawyer Mike Dailly, solicitor advocate at the Govan Law Centre, has said the centre is prepared to challenge all 300 evictions of refused asylum seekers proposed by the Home Office contractor Serco. He told the National: “Govan Law Centre stands ready to make applications for interim interdict for anyone subject to a lock-change eviction in Glasgow as we believe these are unlawful, and pending our client’s appeal to the Inner House of the Court of Session, Scots law is unsettled here.”
ECONOMY
Business investment expected to contract
The British Chambers of Commerce (BCC) has forecast 1.3% growth for the UK economy in 2019, up marginally from the 1.2% it predicted earlier, due to what it described as "exceptionally rapid stock-building early in the year". However, the BCC has downgraded its growth forecast for 2020 to 1% from 1.3% and to 1.2% from 1.4% in 2021 as the unwinding of historically-high inventory levels coupled with weaker business investment weigh on economic activity.
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