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The Brief.EDITION SEVEN

Property Investment News that matters.

Stephen Binge Managing Partner

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It’s set to be an exciting year for IPIN, making a return to London in more ways than one: we are finalising SES applications on various asset classes in the capital, and we will be present at April’s Property Investor Show, with a stand better equipped to deal with the interest we received last time! On top of this, we’d like to announce our Membership of the Association of International Property Professionals (AIPP) – the industry body for the international property market – strengthening our commitment to professionalism and accountability as an organisation. We look forward to doing business with you in 2013!

Contents02 welcome

From Stephen Binge – Managing Partner

03 keep calm and carry on UK property transactions expected to increase in 2013

04 Some day your printS will come Significant rise in UK planning approvals

05 Stand up and be counted 2011 UK Census: More people renting property

06 the loan arranger UK mortgages hit an 11-month high

08 there’S no buSineSS like Show buSineSS! See us at the Property Investor Show, London

09 the Shape of thingS to come US undergoing housing market recovery

10 firSt among equalS Global property prices to remain stable in 2013

12 the laSt word Latest Secure Exit Strategy™ Application

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UK property transactions expected to increase in 2013Residential property transactions will rise marginally this year on the back of an increase in mortgage lending, according to the latest projection from the Royal Institution of Chartered Surveyors (RICS).

Despite the sluggish nature of the UK housing market and weak wider economy, RICS estimate that the number of property transactions will rise by close to 3% this year to 960,000, up from 930,000 in 2012. However, the volume of homes changing hands is expected to remain significantly below the 1.67 million sales recorded pre-credit crunch in 2006.

RICS believe that the estimated increase in transactions will be helped by a rise in mortgage lending, supported by the government-backed Funding for Lending Scheme which was introduced in August in order to increase the availability of cheaper loans and mortgages for businesses and households.

Simon Rubinsohn, RICS Chief Economist, said: “The amount of sales going through should see an increase across the country, climbing to its best level since 2007, as the Funding for Lending scheme helps boost the availability of mortgage finance.”

Property transactions should also benefit from a general improvement in the wider economy, with employment and inflation figures both moving in the right direction.

David Newnes, director of LSL Property Services (owners of Your Move and Reeds Rains) commented: “As the economy springs back into shape following months of recession, it is encouraging that lending has bounced back too.”

RICS also estimate that the average price of a home in the UK will appreciate by 2% this year on the back of greater transactions.

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There was a sharp increase in the volume of new homes granted planning consent during the third quarter of 2012, fresh data released by the Home Builders Federation (HBF) reveals. However, many more new homes are still urgently needed to meet growing housing demand.

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The HBF’s latest Housing Pipeline report shows that approvals for 33,881 new homes across England were granted in the third quarter, representing a staggering 36% rise on the preceding quarter when 24,872 new homes were approved and 17% on the same period in 2011 when 29,059 consents were issued.

Although these figures are a welcome rise on historically low data, the number of new homes approved is still significantly below the 60,000 per quarter needed to meet housing demand, or the 64,500 that were being granted in 2006/07.

Planning permissions granted now will, in the main, be built over the next three or four years. Around 110,000 homes a year in England are currently being built, against a requirement for 240,000, so the need to see a continued and steady increase on the number of permissions granted is quite clear.

Stewart Baseley, Executive Chairman of the HBF, commented: “The increase is good news and hopefully a reflection of the positive planning principles of the new system. It is just one quarterly increase and we are still well short of the number needed, but we hope it starts a trend that will continue in 2013.”

In November, Deputy Prime Minister Nick Clegg vowed to provide greater support to help increase the supply of new affordable homes with a £225 million funding boost, with an emphasis on establishing a new generation of locally-driven “garden cities”.

Clegg remarked: “The babyboomers of the fifties and sixties, people who were largely catered for by the massive housing expansion after the Second World War, are now watching their children struggle.

“The plight of the next generation is making what was an abstract housing shortage increasingly tangible and real. And as we, as a society, become more open to development that creates the space for politicians to be bold.”

Some day your prints will come...Significant rise in UK planning approvals

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The Brief.The Brief.

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2011 UK Census: More people renting property

Stand up and be

counted

The latest Census released last week shows that there has been a major rise in private rental sector (PRS) tenants since 2001, with almost a quarter of all people now renting property in the English capital.

The census found that there has been a sharp rise in the number of people renting property across the UK with figures rising from 9% in 2001 to 15% in 2011. In London, the current figure is even higher at 24%; something which will please buy-to-let investors.

With the rise in tenants has come a 6% fall in home ownership, with the number of households with a mortgage having fallen from 8.4 million in 2001 to 7.6 million in 2011.

More tenants, particularly in London, reflects a real shift in the attitudes towards renting in the UK with it no longer seen as just a step on the road to buying, but a long-term life choice for many. Additionally, there are also lots more obstacles preventing would-be homebuyers from being able to gain a foot on the housing ladder.

Ian Potter, managing director at ARLA, said: “The census data confirms what our members have already told us, that would-be home owners are increasingly turning to the private rented sector after being priced out of buying their own property.”

Paul Masters of Kinleigh Folkard & Hayward concurred: “In October of last year, our tenant registrations across all branches [in London] were 70% higher than our average taken from the past three years and this is unlikely to fall in 2013. A lack of financing and the high deposits required by lenders in the sales arena is bolstering the lettings market as many Londoners find themselves unable to buy.”

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The Loan Arranger

Residential property purchase lending in November rose to its highest level for eleven months in November 2012, according to e.surv chartered surveyors, but only a small proportion of these loans are reaching first-time buyers.

Their Mortgage Monitor revealed there were 53,259 house purchase loans in November, the highest since January, a rise of 1% between October and November. However, banks are lowering their risks by opting to focus on lending home loans to wealthier property buyers rather than first-time buyers.

The data shows that first-time buyers continued to struggle, with purchase approvals on cheaper properties priced below £125,000 accounting for just 22% of

overall house purchase lending – the lowest proportion for 14 months.

The fact that the banks focused on lending more to wealthier buyers is reflected by a rise in home loans on all property valued at over £500,000, particularly in the £500,000 to £750,000 bracket.

Lending to borrowers with small deposits - a good barometer for the health of the first-time buyer market – slipped to its lowest since July 2011. Loans to borrowers with a deposit of less than 15% accounted for just one in eleven of total house purchase loans in November. Lending to borrowers with a small deposit fell by 33% compared to last November, with just 4,847 loans compared to 7,180 last year.

UK mortgages hit an 11-month high

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Overall, despite the improvement in lending, it was the third weakest November for house purchase lending since records began in 1993. To underline the lack of improvement in the long-term, lending was 10% lower than November 2009.

Richard Sexton, business development director of e.surv, explains: “The slight improvement in overall lending glosses over the on-going struggles of first-time buyers. High LTV [loan-to-value] lending is a third lower than it was this time last year, which suggests things remain challenging for new buyers. Mindful of their risk profile and capital adequacy requirements, lenders appear to be focusing increased lending on relatively wealthy borrowers.

“Although banks’ can access cheaper funds to use for lending, they’ve kept criteria tight on mortgages for first-time buyers. Although rates have fallen on some of these mortgages, lenders still require big deposits to access them, which means first-time buyers who couldn’t qualify for a mortgage three months ago are still no better off.”

The mortgage barrier preventing many people from being able to buy property means that many would-be purchasers are being forced to rent property for longer, especially in London where property prices are among the most expensive in the world; an attractive proposition for rental investors.

First-time buyers who couldn’t qualify for a

mortgage three months ago are still no better off...

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Last weekend IPIN took to the road again and exhibited at the OPP Live Property Investor Show at London ExCel. We found the show to be time extremely well spent in many ways. Not only did it provide another great opportunity to meet many of our existing Members face to face, but it was also encouraging

to see the influx of interest in our Secure Exit Strategy™, particularly when compared to many of the opportunities on display elsewhere at the show. Thank you to everyone that took the time to come and see us, we look forward to taking part in more shows in the future.

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See us at the Property Investor Show, LondonLast year’s exhibition proved a great success – both for meeting existing

Members and welcoming on board new ones.

This year our stand will be bigger, there will be more of the team, and we’ll be showcasing all forthcoming SES applications.

We’re on Stand 250 – and we look forward to seeing you there!

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US undergoing housing market recovery

The shape of things to comeThere are growing signs that the US property market is finally on the long road to recovery, following almost four years of declining prices.

The recent surge in demand for properties in the US means that it is now a seller’s market, with fewer vendors currently willing to negotiate on asking price, resulting in higher achieved prices across many parts of the country, according to the latest Zillow ranking of national buyers’ and sellers’ markets.

The Zillow research found that the market is particularly strong across various parts of California, Nevada and Arizona, all areas which were all hard hit by the 2008 global banking crisis and consequent housing crash.

Zillow suggests that homebuyers looking to negotiate the best discounts should check out property in the Midwestern and Mid-Atlantic metros

including Chicago, Cleveland and Philadelphia which offer among some of the greatest house price reductions in the country. This is due to the fact that properties in these areas are still struggling to sell, with property listings remaining active in some cases for in excess of 100 days.

Zillow analysed data on actual sales prices compared to asking prices, the number of days listings spent on Zillow and the percentage of homes on the market with a price cut, and ranked the 30 largest metro areas in the country to determine whether buyers or sellers have more negotiating power in a given market.

Although the vast majority of residential property markets are improving across the USA, the relative position of buyers and sellers continues to vary considerably by geography, according to Zillow chief economist Stan Humphries.

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Global property prices to remain stable in 2013

First amongst equals Residential property prices in mainstream markets globally have increased on average by just 1% across 2012 and this stagnation is likely continue well into 2013, according to the latest global house price index from Knight Frank.

The index rose by 0.1% in the third quarter of 2012, despite the fact that buyer confidence is at an all-time low in Europe, as property markets across the continent continued to struggle as a consequence of the Eurozone crisis.

Greece replaced Ireland as the worst property market in the region (where it had resided for five consecutive quarters) by recording an

average price fall of 11.7% in the last year. Ireland, by comparison, has seen its rate of decline improve, up from -14.3% a year ago to -9.6%.

In stark contrast to the turmoil in Europe, property prices continue to rise sharply in various hotspots, including Brazil, Hong Kong, Turkey, Russia, Colombia and Austria which all experienced double digit growth in average property values in the past year.

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The Eurozone’s 17 member states had on average seen prices fall by 1.8% in the 12 months to September. Other world regions such as South America and Asia Pacific had seen growth of 9.8% and 4.2% respectively.

Kate Everett-Allen, International Residential Researcher at Knight Frank, said: “Confidence, affordability and debt are constraining Europe. Strict lending and the threat of the (then) looming fiscal cliff may have dented the early signs of growth in the US while regulatory measures in Asia are keeping housing markets in check. The current period of stagnation looks set to continue well into 2013.”

Amid much global economic uncertainty in 2012, particularly in the Eurozone, many wealthy

overseas nationals have quite sensibly invested in London’s property market in more recent times for its perceived safe haven qualities, and this trend is likely to continue in 2013, resulting in an even greater shortage of housing in the capital.

With international demand for homes in the city, particularly in prime central London, showing little sign of slowing and house building levels at an historic low, it is difficult to see where the much needed additional houses and apartments for sale in Central London are going to come from.

The shortage of properties has resulted in a central London property boom in recent years, fuelled by overseas investment. The flow of foreign money coming into the London property

market has long kept property values in the capital above those homes elsewhere in the UK and it is highly unlikely that this trend is going to change anytime soon.

Strong international demand and a growing housing shortage is widely expected to place upward pressure on property prices in central London which are already at a record high, resulting in an even greater gap between London property prices and those in the rest of the country. Consequently, it is fair to say that London’s economy and housing market now has more in common with New York and Monaco than it does with other UK cities such as Leeds or Manchester.

London’s economy and housing market now has more in common

with New York and Monaco than it does with other UK cities such as

Leeds or Manchester.

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