The property market has been desperate for new build housing stock and assistance for first time buyers. The governments announcement that it will back the proposed new-build mortgage indemnity scheme coupled with the 4 billion it plans to invest to kick start stalled developments means Christmas has come early for the property sector? Well it is good news but is it what they really want? Developers, house builders, main contractors and surveyors are all keen to see a sensible return to 95% loan to value mortgages. Once home buyers can easily secure their dream homes with a 5% deposit the housing market will open up. This will really assist the UK’s economic recovery as it will increase employment in the property and construction sectors.
The third quarter of 2011 has seen an increase in the number of loans to landlords by 16 percent. Interestingly this quarter has also seen investment banks looking to lend to the mortgage lenders who specialise in the buy to let market. The investment funds passed to these mortgage lenders has increased by 19 percent. This gives a clear indication that organisations and individuals that are best placed to predict the future of the buy to let property market are rapidly gaining confidence in the market. The 3.2 billion pounds that has been lent into the buy to let residential housing market is the highest level of investment funding hitting the market since the previous boom.
Figures from the website SmartNewHomes shows that nearly one quarter of all new homes are available with shared equity schemes. 23 percent of the properties offered offer the scheme the scheme offers matched funding for property deposits. In essence the first time buyer can apply for 50% of the required deposit as long as they can fund the remaining 50% themselves. The scheme is working partially well when the Governments FirstBuy scheme is utilised this allows for a 20% loan provided by the house builder and the government with 5% coming from the first time buyer. The remained is secured with a 75% loan to value mortgage which also has the advantage of better mortgage rates and fees. When you consider that the first half of this year had half the first time buyers of the same period in 2007, it shows how critical these schemes are to recovery in the housing market and ultimately the UK’s GDP.
A report from the Council of mortgage lenders has shown that over 48000 mortgage loans totalling over seven billion pounds where secured in September. Good news was that first time buyer’s loans raised by one percent in September with an increase of five percent over the year even those this was from a historic high. A further encouraging figure showed a fall in the size of deposits with an average of twenty percent deposits compared to a twenty four percent deposit in September of this time last year. This coupled with lower purchase prices is increasing the purchase power of buyers.
The Royal Institute of Chartered Surveyors have reported modest price drops for residential property coupled with increased sales and demand. This is an unusual situation as simple economic show that increased demand should add inflationary pressure to the capital values of property. However it seems that the increased sales are as a direct result of small reductions in property prices. This has made more properties affordable and more importantly more properties financeable. With the mortgage freeze larger deposits and stricter lending criteria have made buyers more sensitive to even small price reductions. This in turns leads to increased sales transactions as more properties simply become affordable. The report sighted vendors more realistic marketing prices as a key part of increased sales transactions.
Many landlords are changing their letting policies and are no longer prepared to opt for housing benefit claimants as the government has capped payments. A survey has shown that over three quarters of landlords who currently let to housing benefit claimants are taking steps to avoid these tenants in the future. This is a worrying statistic as over 1.3 million households receive housing benefit payments which are sent direct to their landlords. This comes at a time when more and more households are receiving housing benefit.
Areas around the west midlands are outperforming the London buy to let market and returning better yields. The report also showed that student buy to lets continue to return the highest yields at around the 7.6% mark. With HMO’s houses in multiple occupation running a close second at 7.5%. The data released from paragon the buy to let specialist show increasing yields on buy to let properties. This in turn will attract landlords who have been reluctant to expand their buy to let portfolios in recent years.