A recent government backed opinion poll has reviled that the demand from first time buyers is still very high. With nine out of ten young people still aspiring to own their own homes their main obstacle is still a severe drought in the mortgage markets. Over half of those polled sighted a lack of available finance as the reason they were unable to buy their own home. Three quarters of those polled also believed that it is now harder to buy a house than it was five years ago. The number of first time buyers has been decimated down to around 200,000 last year half the pre recession numbers. This has lead to nearly five million people now on local authority waiting lists for housing. With over eighty percent believing that home ownership still represents a good long term investment there is still signs of clear pent up demand. This is at a time when the number of new homes being built still languishes at the lowest levels since 1923. This gives further strength to the government’s case for improvements to the UK planning policies.
All shares have had a turbulent few weeks and property companies are not immune from market turbulence. The markets have rewarded those companies that have the safest of property investments long leases to blue chips in prime locations. Those companies who have a higher risk portfolio holding secondary and tertiary property holdings have fared worse in market losses. The markets are also looking at short income streams and leases as rents and ultimately capital values rely on tenant demand. The final item on the investors check list is imminent bank re-financing which in these times equates to increases in finance costs and therefore reductions in profits.
Are wealthy high net worth individuals looking to place their funds in tangible assets rather than paper bonds? Does this explain the fact that the ultra prime London residential market is making such incredible capital gains and reductions in average sales periods? Estate Agents are talking of millions of pounds of foreign money being pumped into prime London residential market as quickly as possible. The supply is dwindling which will of course have an upward pressure on capital values. Interestingly many in the property industry look at the prime and ultra prime London markets as a key indicator of future performance in other parts of the UK residential property market.
The Royal institute of Chartered Surveyors has reported improved valuations on properties that feature stainable and low energy improvements and features. Buyers and agents have been slow in appreciating the increases in a properties capital value from money invested in sustainable and energy saving features. Now reports are showing that both property purchasers and Estate agents are prepared to up sale prices for greener and more eco friendly dwellings. With the introduction of energy ratings and the increases in fuel costs buyers are much more switched on to energy saving additions to properties. It seems that buyers are more focused on savings in running costs than their green credentials but the outcome is the same. Interestingly it has been sited that a similar issue revolved around central heating in the 70’s when buyers were not prepared to pay a premium for properties featuring central heating. In the 70’s many buyers did not see this as an essential on their wish list. With the running costs of large period properties ever increasing those that feature retrospective insulation and other sustainable features buyer can now see a clear pay back and are more prepared to pay more for these additions.
Rightmove reported a very small increase in the number of new instructions or properties coming to market up just 1.2%. This is keeping the average agencies unsold stock in estate agencies running in the late 70’s. There is a balance between oversupply of housing stock for sale and more motivated sellers dropping asking prices and flooding the market with cheap stock. The continued buyers strike caused mainly by a lack of suitable mortgage funding continuing to suppress the achieved sale prices. Sentiment always drives prices and sales in the residential housing market, buyers simply have no urgency. Many are “waiting to see what happens”, vendors too are reluctant to drop prices as they too “wait and see”. In the days of the boom buyers where desperate to buy quickly as many worried that property inflation could simply price them out of the market. Developers are also wary of overpaying for property and are building in extra margin into their figures to cover any minor falls in sale prices.
Eric Pickles Secretary of State Department for Communities and Local Government called for an end to the shoe box developments as part of his keynote speech at the RESI conference. The conference which is attended by many key players in the property industry. Was told that Housing was a key tool for boosting the economy but that the government sort an end to shoe box residential property development. Outlined in the speech was the need for the property industry and new planning policy to stop identical shoe box housing springing up in different parts of the country. Regional diversity should play key role in future residential housing developments. He went on to point out that previous government’s failure to produce enough new homes had left centralised planning without credibility as a solution to the new homes shortages. He warned developers that it was the government’s intension to make sure that such developments would no longer obtain planning permission. The conference was also told that the government was dedicated to its pledge to build a further 150,000 new homes by 2015. He also confirmed that he was working with lending institutions to unlock funding for further new build property development.
This leaves the average rent for a home on England at hefty £713 per calendar month. Average rents in London have also beaten the previous record high now they have again risen to a record high of £1025.00. This is good news for landlords who will be pleased to see rents rising so fast as declines in properties capital values slow.
I was recently called in to assist a home owner who had suffered from some cowboy building work. The work formed a gabled rear single story extension to a bungalow. The extension was split into two rooms and contained a large steel to support the knocked through room. Although the work was not the tidiest I have ever come across if was of a reasonable standard apart from two sections. They were the roof and the internal floor which because of it raised levels was a suspended floor and put in towards the end of the build. The roof was terrible valleys very badly constructed and the pointing was of a very poor standard. The floor simple contained no insulation which is quite expensive material.
The owner of the property explained how the build had gone quite well but the builder had started trying to cut corners towards the end. I ask for a few more details of the history of the project, the chosen contractors tender price had been around 30% lower than his competitors. I assume he had either miss priced the job and simply run out of money or if less honest had decided he would cut a few corners to win the job on a low price. So what is the outcome? The owner is now paying for the works to be redone; they are engaged in a court battle with builder 1. They are dealing with the local authority building control department to work towards a completion certificate. So how have they fared with costs, well my rough calculations show that the project will come in all in all around 30% more than you would have expected to pay? Buy cheap, buy twice?
Unemployment running high, lack of economic stimulus, shortage of new homes, a challenging combination or the perfect conditions for a construction boom? Well that’s what faced the UK government in the 1930’s and many of you reading this will be reclining a pleasant 1930’s 3 bed semi. Thanking your lucky stars that you could afford to live in this comfort. So is now the time for the government to encourage house building and large infrastructure projects to get Britain building? With rents, squatting and homelessness climbing, civil unrest in recent week is house building the answer to get the young workers of today busy building and stimulate economic growth?
A lack of supply in some of the most improving areas of central London has produced these huge increases in projected property prices. The development of the Crossrail and other infrastructure projects combined with new build schemes is leading to the increase in demand for properties in these areas. This is feeding through to property prices. Many in the property sector closely follow the London property market as one of the key indicators of the future performance of the rest of the UK. Many of the gains have also been linked to a number of property development projects that have been postponed by planning permission issues or a lack of development funding. The recent easing of property development funding streams has tipped the balance with several deals that have been mothballed.