Property prices have risen by 2.6 per cent in May, according to a recent report published by Halifax in UK.
House prices have now risen for two consecutive months in the UK. This is good news for the UK property market that has been hit hard in recent months. Although the 2.6% rise in average house prices is a positive sign for the property market, property analysts say that a down turn in the property market is still far and not in sight. a 2.6% rise in house prices happens to be the largest increase in prices in the last 7 years.
The report on house prices published by Halifax bank has warned not to out too much emphasis on one or two month’s figures even though the finding follows reports from estate agents that there has been a resurgence in buyer interest. According to Halifax who published the report marking the rise in house prices, even though the average price in the year can fall in spite of a rise in house prices in some months. For example during the 1991 and 1992 period, there were 5 months where the house prices rose. Nevertheless, average house prices fell by 11 % in that year. In spite of all this, this is still some cause for celebration as it can be seen as a tentative sign that the housing market has begun to stabilise.
A report by the Bank of England adds to the positive sign displayed by the housing market stating that there were 43,201 in mortgage approvals in April. This is the highest number of mortgage approvals in a one year period. There are many factors that can be attributed to this rise in house prices. Some property analysts believe that the price has risen because there is a reduced supply pf houses for sale in the market. House prices had fallen consecutively fr many months which has made property owners wary of selling property at such low rates. In addition to this many new property development projects have been postponed till the market improves.
At the same time property analysts also point out to the fact that in the 21 months, property prices have risen in only 3 of the months.
Some property analysts argue that although recently there may have been one or two positive indications in the property market, it is tool early to expect a down turn in the market. The overall economic conditions are still bleak and unemployment is set to increase further in coming months. Property finance is still harder to receive and lenders remain cautious. First time buyers are still finding it difficult to raise finance for buying property.
The property industry has been one of the worst hit in the recent economic recession. Mortgages have become tougher to receive as lenders are cautious in approving new mortgage loans. The mortgage market across UK has been negatively affected however some regions have witnesses a bigger decline than others. Mortgages in Scotland have been one of the Worst in UK according to the Council of Mortgage Lenders. They have claimed that mortgages in Scotland has declined the most and is lagging behind other regions in UK.
The average deposit required to secure a mortgage for a new property is higher in Scotland than ioj most other parts of UK. In Scotland prospective property buyers typically need to produce a 25 per cent deposit towards the property they are buying which is much higher than the rest of UK. The difference in price of the 12 months accounted for an extra £12,000 on average.
According to mortgage lenders, property lending has fallen by 44 per cent in the UK. However in Scotland the decline has been higher and it stands at almost 52 per cent. In spite of this report, property analysts are confident that the situation will begin to improve or art least stay at the same level.
Scotland is lagging behind the rest of UK may continue to stay behind other regions of UK even when the recovery in the property market begins. However property analysts expect the rate of decline in lending volumes to slow in coming months. In recent months there have been some encouraging results by some lenders who have developed innovative mortgage products to assist first-time buyers. however significant lending challenges still exist and there may be some time before the results start to improve.
Recent findings by Mortgage Lenders Council show that first-time buyers are still being locked out of home ownership despite falls in house prices and low interest rates.
In spite of this there are some signs of recovery in Scotland. A property firm in Scotland has registered an increase in the sales of new build properties, sparking fresh hope in the industry.
After more than a year of financial instability and downturn in the property market, the property market in UK has finally started to show signs of improvements. The property lettings market has started to show initial signs of stabilisation. Houses seem to be stabilising faster than flats but overall this is nevertheless a a positive result.
Houses in particular are starting to show the first signs of recovery. The property lettings index for May published by one of UK’s leading property portals has shown that the property rental market for houses and flats are showing a divide. For the 3rd month in a row, there has been a fall in the supply of houses in the rental market. The same period has shown a slight rise in average rent of properties in UK.
In contrast to this, there has been a rise in the supply of flats and at the same time rent of flats have fallen.
Property analysts in UK are unanimous in their analysis that the property lettings market in UK have started to show initial signs of recovery. The monthly rental price has risen especially in the south-east, Scotland and West Midland regions of UK.
The overall Rental yield fell a little to 4.56 per cent and the average rental yield now stands at 4.31 per cent for houses and 5.25 per cent for flats.
The growth rate of supply is now falling. Asking rents have started to stabilise. This indicates that we may be close to the bottom of the rental market. The main reasons for the divide in the rental market of flats and houses seems to be falling supply of houses in the rental market and rising prices. In the case of flats thing are different. The flat market seems to be lagging behind the house rental market with increasing supply levels and falling asking rents.
In London things are a bit different to other parts of UK. Here the asking rents were experiencing a rise of 0.4 per cent for May, now standing at £1,630 pcm, compared with the average UK asking rent of £819.
Scotland is another area faring above the UK average. In Scotland there has been one of the largest month-on-month increase in property rents. Here there was a rise of 0.9 per cent which has taken the average asking rent to £693 per month. Another area where the property rental market has benefited form increase in rents is west Midlands which witnessed a 0.3 per cent month-on-month increase in rental prices.
The overall UK property rental market is certainly showing initial signs of revival, with London, the south-east and Scotland leading the way in overall rental growth.
All in all there is still a long way before the overall property market can make a full recovery. While some regions as discussed above are showing signs of recovery, most other regions in UK continue to show rental declines from previous years. A number of regional cities are still registering double-digit falls in price.
A recent study into the buy to let market has found that recently there has been a significant rise in the cost of letting a property. The total cost of letting your property today has increased. The increasing costs of becoming a landlord may prevent property owners or investors from entering the Buy to let market in UK according to a lettings business.
There are many reasons for the increase in costs of the buy to let market. The Government has recently released new regulatory proposals for the property rental market. Under the new regulations, landlords will need to register themselves on a national landlords register and pay an annual licence fee of £50.
According to some property businesses, the existing regulations are already in place in the rental sector and new legislation are not necessary. According to lettings analysts, further legislation will only prevent new landlords from entering the property lettings market.
Already there are many costs for a landlord purchasing a property. A landlord purchasing a property will need to pay for a gas safety inspection which can cost approximately £75. Landlords purchasing a property also require an electrical safety inspection which can cost over £100. An energy performance certificate costs a further £100. They also incur a tenant finding fee of nearly £500 from Estate Agents and they also pay inventory charges. Some landlords will also require an HMO (Houses in Multiple Occupation) licence at an approximate cost of £800 and a fire certificate at an approximate cost of £400. Unfortunately a landlords needs to pay for all these items before being able to rent their properly out and receive rent from the tenants.
The above mentioned expenses that Landlords have to incur can add up to over £2,000 and yet landlords are potentially going to be subjected to more fees under the new Government proposals. In addition to all these expenses, landlords also face ongoing obligations for repair and maintenance of the property and the tax liability on the income generated.
The property market is already suffering form the receding economy. In the property market in UK, Landlords already face problems from government legislations. Adding new registration schemes with an additional licence fee will only make it worse for landlords and deter people from entering the property market. According to property analysts, we need to do more to encourage landlords to enter and remain in the market. Having more landlords is good for the market as it promotes choices for tenants. As such more people should be encouraged t o enter the market as landlords and not discouraged from doing so.
There are many UK property buyers with investments in emerging European markets such as Bulgaria and Romania. During the property boom of the last decade there was a marked increase in British Property buyers buying properties in this region of Europe. The recent global recession has also had a huge impact on property prices in these countries. According to property analysts residential property prices in Bulgaria and Romania are set to continue in a steep decline in 2009. While those property buyers and investors looking for a bargain may be able to benefit from the steep fall in property prices, by and large this is bad news for a large spectrum of the property market.
Analysts expect prices in Sofia, the capital of Bulgaria to fall by up to 10 to 12 per cent. Similarly property analysts predict an overall average fall of up to 20 per cent in Bucharest during the coming year. All other areas in these countries are expected to witness a similar decline in property prices.
Property experts believe that the trend of fall in property prices will continue throughout the year. Property analysts do not expect to see positive increase in prices till as late as 2010. Property analysts expect businesses and property investors to adopt a wait and see approach and be more cautious in their approach.
The main factor that is driving down the property markets in Bulgaria and Romania is the withdrawal of foreign investors, but they are also suffering from tight credit conditions that cut into funding options for local investors.
Studies and news on the property markets in the UK, Ireland and Spain have already reported that the market has hi t its rock bottom. In these regions a recovery may be expected sooner.
These real estate markets are seeing signs of increased activity as investors show interest in finding opportunities even before confirmation of the market reaching a turning point. In places like London and Spain, some analysts have said that the overall confidence has already started to improve. The property market here may start improving sooner than 2010 as investors will start looking to create new opportunities to maximise investments.
According to some property analysts the current crisis has already started to subside in markets such as London and the property prices are expected to start improving in the coming months. Although signs of improvement could start in the coming months, a complete recovery of the property market will only be possible a couple of years after the economy starts to show signs of improvement. This is based on its historical research into the behaviour of the property markets which shows that recovery in the property market usually takes two years after the economy has started to improve.
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