chestertons residential observer monthly edition november 2014 … · chestertons residential...

1Chestertons Residential Observer Monthly Edition – November 2014

Report highlights• LatestLandRegistrydatashowannualhousepricesacceleratingbothinLondonandnationally

• 19outof33Londonboroughsareexperiencingannualpricegrowthinexcessof20%

• Londonrentsstillrising–now9.4%higherthanayearago

• ResidentialsalesincreaseinOctober

Stor

my

Cloudy

Settled

Fair

Fine

Chestertons NationalBarometer

Althoughsomeindicatorsshowthatthenational

housingmarketisslowing,latestdatashowaverage

annualpricegrowthacceleratedwhilenon-

seasonallyadjustedsaletransactionsroseinOctober.

Uncertaintysurroundingtheshortertermhealth

oftheeconomyandtheoutcomeoftheGeneral

Election,togetherwithcontinuedaffordability

issues,arelikelytoactasadragonthemarketin

thefirsthalfofnextyear.However,thisdoesnot

meanacrashiscoming:theeconomyisforecastto

continuetoexpandnextyearalbeitataslowerpace,

whileunemploymentisprojectedtoreducefurther.

Mortgageinterestratesremainlowandanyincreases

willlikelybeincremental,althoughlendingvolumes

maybelowernextyearastheeffectsofthetighter

regulatoryenvironmenttakemorehold.

National barometer

Chestertons Residential Observer

No.32November 2014Monthly Edition

House prices page 2

Rental values page 4

Mortgage market page 6

Tax & regulatory news page 7

The last word page 8Housing market activity page 5

Merton

Bromley

Bexley

South-wark

LambethWandsworth

Kingstonupon

Thames

Richmond uponThames Lewisham

CroydonSutton

Greenwich

West-minster

NewhamBarking &

Dagenham

HaveringRedbridge

WalthamForest

Enfield

Haringey

Barnet

Harrow

Hillingdon

Brent

City

HackneyIslington

Camden

Ealing

Hounslow

Hamm.& Ful. Kens.

& Chel.

TowerHamlets

26%-30%

21%-25%

16%-20%

11%-15%

6%-10%

0%-5%

Top 5 boroughs

1. Lambeth 27.9%2. Southwark 27.8%3. Waltham Forest 27.2%4. Lewisham 25.9%5. Newham 24.1%

• AveragehousepricegrowthinLondon

acceleratedslightlyfrom18.4%inSeptember

to18.6%inOctober.19outof33boroughs

areexperiencingannualpricegrowthinexcess

of20%withLambeth(+27.9%),Southwark

(+27.8%)andWalthamForest(+27.2%)

leadingthepack.

NB comment: although there is some evidence that transaction numbers are slowing in London, prices continue to rise strongly. The combination of owner occupiers and investors – enhanced by foreign buyers – continues to drive values in the wider market, although the prime sector has slowed considerably.

Figure 1: London borough house price growth: 12 months to Oct 2014Source: Land Registry

2ChestertonsResidentialObserverMonthlyEdition–October2014

Houseprices–London


North East2.7%

£97,356

East Midlands5.7%

£131,274

East11.0%

£198,338

London18.6%

£460,060

South East11.4%

£240,070South West

6.4%£185,615

Wales2.0%

£118,437

North West4.5%

£112,642Yorks and Humber

4.3%£120,807

West Midlands4.4%

£135,378

Source Price (£) 12 month change

3 month change

Monthly change

Data as at Definition

Land Registry £177,377 7.7% 0.9% 0.1% Oct-14 England&Wales:soldprice

Rightmove £267,127 8.5% 1.8% -1.7% Nov-14 England&Wales:askingprice

Home.co.uk £267,466 8.2% 1.9% 0.2% Nov-14 England&Wales:askingprice

LSL Acadametrics £277,390 10.5% 1.8% 0.7% Oct-14 England&Wales:basedonLandRegistrydata

ONS(notseasonallyadjusted) £273,000 12.1% 3.0% -0.4% Sep-14 UK:priceatmortgagecompletion

Nationwide £189,333 9.0% 0.2% 0.5% Oct-14 UK:priceatmortgageapproval

Halifax £186,135 8.8% 0.3% -0.4% Oct-14 UK:priceatmortgageapproval

Keynationalhousingmarketindicators

Figure 2: Average national house prices & price growth

Figure 3: Regional average house prices & 12 month price growth (Oct 2014)Source: Land Registry

Houseprices–national&regional• LatestLandRegistrydatarevealthataverageannualsoldpricesinEngland&Walesacceleratedto7.7%inOctobercomparedto7.2%inSeptember.Theaveragenationalhousepricenowstandsat£177,377comparedwithapeakof£181,269inNovember2007.

• Atregionallevel,theSouthEast(+11.4%)andEast(+11.0%)remainthestrongestregionalperformersonanannualmeasure.Onlythreeregions(excludingLondon)reportaveragepricesabovethenationalaverage,namelyEast,SouthEastandSouthWest.

• RightmovereportsthataverageaskingpricesofpropertycomingtothemarketinOctoberroseby2.6%,upfrom0.9%inSeptember.Onannualmeasure,askingpricegrowthslowedto7.6%from7.9%inthepreviousmonth.

• AstudyfromtheCentreforCitieshasconcludedthatOxfordisthemostunaffordablecityintheUKintermsofhousing,aheadevenofLondon.Measuringaverageearningsagainstaveragehouseprices,Oxfordtoppedthelistwiththeaveragehousecosting14.9timesthecity’saveragesalary.Thecomparablefigureinsecond-placedLondonwas13.9.

NB comment: after a slow September, sales activity and price growth picked up in October. Buyer appetite outside London remains supported by cheap mortgage credit but limited by supply shortages.


£1,132£1,544

£1,007£1,693

£1,181£2,751

£1,215£1,730

£1,296£1,634

£2,099£2,208

£1,600£1,345

£1,072£1,454

£1,907£2,417

£3,905£1,739

£1,856£1,445

£1,899£1,565

£1,235£2,107

£2,173£1,129

£2,485£1,274

£2,092£4,213Westminster

Wandsworth

Waltham Forest

Tower Hamlets

Sutton

Southwark

Richmond upon Thames

Redbridge

Newham

Merton

Lewisham

Lambeth

Kingston upon Thames

Kensington & Chelsea

Islington

Hounslow

Hillingdon

Havering

Harrow

Haringey

Hammersmith & Fulham

Hackney

Greenwich

Enfield

Ealing

Croydon

Camden

Bromley

Brent

Bexley

Barnet

Barking & Dagenham

• ThelatestHomeletRentalIndexrevealsthatgrowthinaveragerentsinLondonslowedtojust0.1%betweenAugustandSeptembercomparedto2.4%inthepreviousmonth.AveragerentsintheCapitalnowstandat£1,466pcm-9.4%higherthaninSeptember2013.

NB comment: Affordability (as measured by income versus housing costs) in the private rented sector in London is now worse than that for the average homeowner. Average rents have risen in almost every month since the end of last year and according to the GLA now account for around 46% of average earnings.

Rentalvalues

Figure 4: London borough monthly asking rents for 2-bedroom flats (as at 21 Nov 2014) Source: Zoopla

NB: size of circle indicates average rent

5-bed4-bed 3-bed 2-bed1-bedAll Properties

£1,819£2,615

£4,265£5,632

£7,098

Ave. Rent:£3,042

Figure 5: London rental values by property type (as at 21 Nov 2014) Source: home.co.uk


• ProvisionaldatafromHMRCshowthatthenumberofresidentialpropertytransactions(non-seasonallyadjusted)inOctoberwas6.6%higherthaninSeptemberand11.6%uponOctober2013.

• ThelatestHousingMarketReportfromtheNationalAssociationofEstateAgents(NAEA)showsthatthenumberofpeopleactivelylookingtobuypropertyinSeptemberreachedthehighestlevelsince2004.However,thereportalsonotedthatthenumberofpropertiesavailabletobuyinSeptemberwasthelowestforthatmonthsince2002.Despitethesupply-demandimbalance,mostpropertiesarebeingsoldforundertheoriginalaskingprice,withjust4%ofpropertiessoldinSeptemberforovertheoriginalaskingprice,while82%weresoldforbelowaskingprice.

• TheNovemberRightmoveHousePriceIndexreportsthatstockforsaleperestateagencybranchfelltothelowesteverlevelrecordedatthistimeofyear.ThevolumeofpropertycomingtomarketisalsoslowingdownandNovembersawnewlistingsdown1%onthesameperiodlastyearand15%onthepreviousmonth.

• NationalHouseBuildingCouncil(NHBC)datarevealthathousebuildingisatitsstrongestlevelssince2007.InLondon,registrationswereupby6%inthethirdquarterofthisyearcomparedwithayearearlier,althoughintheSouthEasttheyfellby15%comparedwithayearago.

• SouthwarkCouncilhasapprovedplansforanewresidentialdevelopmentnexttotheShard.148apartmentswillbedeliveredina26storeytowerblock,togetherwith1,300sqmofretailspace.Afeatureoftheschemewillbea300sqmcommunalroofgarden.Workisexpectedtostartnextyearwithcompletionscheduledfortheendof2018.

• VSM(thejointventurebetweenSt.ModwenPropertiesandFrenchconstructiongroupVinci)anditspartner,CoventGardenMarketAuthority(CGMA),hasbeengrantedplanningconsentfortheredevelopmentofthe23-hectareNewCoventGardenMarketsiteinLondon’sNineElmsdistrict.Eighthectareswillbetransformedintothreeresidentialneighbourhoodscomprising3,000newhomes,135,000sqftofofficespaceand100,000sqftofretail,leisureandnewcommunityfacilities,includingshops,cafésandrestaurants.

• Theshortageofavailableprivatelyrentedaccommodationhasspawnedanewphenomenon–“speedflatmating”.Flatseekersandflatownersseekingtenantsareinvitedtoaneutralvenueandgiventheopportunitytomeet.AccordingtoSpareroomwhichorganisessuchevents,thereare10peoplechasingeveryroominLondon.

NB comment: after slowing in September, transaction numbers picked up in October and have broken the 1m barrier in the year to date. Annualised data for Jan-Oct suggest full year transactions will be 13.4% higher than in 2013 – talk of a slowdown other than in London appears somewhat premature.

Figure 6: UK residential transactions (Oct 2013 – Oct 2014)

Housingmarketactivity:sales,rentals,development&investment

Oct-14Sep-14Aug-14Jul-14Jun-14May-14Apr-14Mar-14Feb-14Jan-14Dec-13Nov-13Oct-13

113,

660

101,

850

109,

580

104,

580

87,2

80

85,9

40

91,5

70

94,2

70

103,

040

108,

350

110,

110

114,

450

106,

640

Source: HMRC



17,545

16,92416,682

16,123

14,755

15,433

16,70916,978

17,986

19,795

18,205 18,087

19,000

2.0%

2.5%

3.0%

3.5%

4.0%


2 year

3 year

5 year

• HavingdippedinSeptember,grossmortgagelendingrose5%inOctobertoreach£19bn.ThisisthehighestOctoberlendingfiguresince2008,althoughtheJulyfigurewashigherat£19.8bn.

• DatafromtheCouncilofMortgageLenders(CML)showsthatnewloanstofirsttimebuyersinQ3were3%uponQ2and15%higherthaninQ32013.LoansforhomemoverswerelikewisehigherinQ3–by12%comparedtoQ2andby10%comparedtoQ3lastyear.Buy-to-Letloansalsorose–by12%onaquarterlybasisandby18%comparedtoQ32013.

• TheBankofEnglandhasintroducedfurthernewrulesonbanksafetynetswhichsomeindustryleaderssaycouldresultinincreasedmortgagecosts.By2019theminimumamountofcapitalbanksmustholdrelativetotheirloans(knownastheleverageratio)couldriseto4.95%fromthecurrent3%requirement.Thatwouldmeanbankshavetohold£1ofcapitalforevery£20theylend,comparedto£1forevery£33undercurrentrules.

• 31%oflandlordssaytheywilllookforadditionalbuytoletlendingorre-mortgageinthenextthreemonthsaccordingtotheNationalLandlordsAssociation(NLA). 67%oflandlordsrelyonabuytoletmortgagetofundtheirportfolio,howevertheNLAresearchshowsthatoneinfivelandlordshavenotbeenabletoexpandduetodifficultiesinaccessingbuytoletfinanceoverthepastyear.

• Theaveragesizeofmortgageloansforhousepurchasestoodat£161,500inOctoberaccordingtotheBritishBankers’Association(BBA).Thisrepresentsa3.3%increasefromOctober2013andis42.8%higherthanthecorrespondingmonth10yearsago.

NB comment: Mortgage lending rose in October although the proposed increase in regulatory control from the Bank of England on the residential mortgage market is likely to constrain lending going forward - even without the uncertain impact of the EU Mortgage Credit Directive which is due for implementation by March 2016. Meanwhile interest rates appear set to remain low for some time to come.

Mortgagemarket

Figure 7: National gross mortgage lending (£m) (Oct 2013 – Oct 2014)

Figure 8: Average residential mortgage interest rates: 2, 3 & 5 year fixed (75% LTV)

Source: Council for Mortgage Lenders

Source: Bank of England


• ThecontroversysurroundingLabour’sproposedMansionTaxisgatheringpace.Hammersmith&Fulham’sLabourcouncilhasrejecteditsparty’sproposed“MansionTax”policysayingtheplanswouldaffectitsresidentsunfairly.Thecouncilrecentlypassedamotionpromisingto“lobbyagainst”theplansstatingthattheycouldresultin“manylocalpeoplebeingforcedtomoveoutoftheborough”.ThisfollowsnewsthatseveralLabourMPsinLondonhavealsoexpressedconcernsaboutthepolicy.

•Membersoftheall-partyParliamentarygrouponhousingandcareforolderpeoplehaverecommendedaStampDutyconcessionforolderhomeownerslookingtodownsize.TheMPs’report,TheAffordabilityofRetirementHousing,arguesthatmanyolderpeopleoccupyhomesthataretoolarge,toodifficulttomaintainandtooexpensivetorun. TheMPsarethereforerecommendingremovalofthe1%StampDutybandplusthecreationofa“HelptoMove”package,offeringtaxincentivesandcomprehensivefinancialadviceforolderdownsizers.

• 89%ofHMRC’s£100mrevenuefromthe2013/14annualtaxonenvelopeddwellings(ATED)was

collectedfromLondonproperties.OwnersofhousesinWestminstercontributedmorethanhalf(£52m)ofthenationaltotal,while£28mwasraisedonhomesinKensingtonandChelsea.

• TransportSecretaryPatrickMcLoughlinhasannouncedthathewillmakeanordergivingthego-aheadforplanstoconstructa3.2kmextensionoftheNorthernLinefromKenningtontoanewstationatthesiteofthedisusedBatterseaPowerStationwithintheVauxhallNineElmsBattersearegenerationzone.TransportforLondonsaysthenewstationsatNineElmsandBatterseacouldbeopenby2020.

• Governmentconsultationonproposedfurthercontrolsovermortgagelendingendedon28thNovember.TheFinancialPolicyCommittee(FPC)oftheBankofEnglandrecommendsthatitshouldbegrantedpowerstocontrolloan-to-value(LTV)ratiosanddebt-to-income(DTI)ratios,includinginterestcoverageratios,inrespectoflendingtohomeownersandbuy-to-letlandlords.Theselimitswouldnotapplytore-mortgageswheretherewasnoincreaseinprincipal.Detailsofwhattheratioswouldbehavenotyetbeendisclosed.

NB comment: Good news for pensioners and those approaching retirement age wishing to downsize in the form of the proposals to grant SDLT concessions – although £250,000 (the upper limit for the 1% SDLT rate) won’t buy much in some parts of the country. Meanwhile, the proposed extended controls on mortgage lending are likely to result in fewer mortgage approvals going forward. It is also not clear how this might affect first time buyers utilising the Help-to-Buy scheme.

Tax&regulatorynews

Figure 9: Northern Line extension Source: Transport for London


• HaveringcontainsmoregreenspacethananyotherLondonboroughwith59.3%ofitstotalareaclassifiedas“green”.Incontrast,theCityofLondonhastjust4.8%ofitsareaclassifiedasgreen.ThiscomparestoaLondon-wideaverageof38.3%.Asizeablegap,however,existsbetweenInnerLondon(2.17%)andOuterLondon(42.5%).

•Withregardtodomesticgardens,Harrowhasthehighestboroughratiocomparedtooverallspace(34.7%)whiletheCityisagaininbottomplacewithjust0.1%ofitsspacetakenupbydomesticgardens.TheLondon-wide

averageis23.8%,althoughthegapbetweenInnerLondon(19.5%)andOuterLondon(25.0%)ismuchnarrower.

•ManagementconsultancyfirmATKearney’s2014GlobalCitiesIndexranksLondoninsecondplaceafterNewYork.Londonscoresparticularlywellinthecategoriesofbusinessactivity,humancapitalandculturalexperience.ForwardlookinganalysisfromCitigroupandtheEconomistlastyearadditionallypredictedthatLondonwillretainitstoptwopositionuntilatleast2025.

Thelastword

ContactsNicholas BarnesHeadofResearchT:02030408406E:[email protected]

Richard DaviesHeadofResidential T:02030408244E:[email protected]

John WoolleyHeadofValuation T:02030408513E:[email protected]

Mark HollidayHeadofInvestment T:02030408299E:[email protected]

Robert BartlettChiefExecutiveT:02030408241E:[email protected]

Sam Warren HeadofNewHomesT:02030408267E:[email protected]

The information contained above is of a general nature for guidance purposes only and is not a substitute for professional advice. Before acting, or refraining from acting, you are

recommended to obtain bespoke tax / legal advice in relation to your personal circumstances from a qualified tax / legal adviser. Accordingly, Chesterton Global Limited and/or its

agents cannot be held responsible for any loss as a result of acting or refraining from acting in relation to the information given.

Figure 10: Top 10 global cities of today – whole world & Europe (2014) Source: AT Kearney

Whole World

1. New York2. London

3. Paris4. Tokyo

5. Hong Kong6. Los Angeles

7. Chicago8. Beijing

9. Singapore10. Washington

Europe

2. London3. Paris

11. Brussels15. Madrid16. Vienna17. Moscow

19. Berlin23. Frankfurt24. Barcelona

26. Amsterdam

chestertons residential observer monthly edition november 2014 … · chestertons residential...

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