Housing round up: House prices fall and rental demand rises

Posted on December 10th, 2011 | Categories - News

Housing & mortgage round upFigures released by the Halifax last week show that house prices have fallen in the UK over the last year. However, data from the Royal Society of Chartered Surveyors show that the rental and buy to let sectors are booming.

In other news the government have announced plans to review a scheme which helps people who can’t meet their mortgage interest payments due to unemployment.

UK house prices fell by 0.9% in November

The Halifax, the UK mortgage lender now part of Lloyds Banking Group, said the average house price has fallen by 1% over the past year and by 0.9% in November.

According to the Halifax the average home is now worth £161,731, down from £164,299 last November.

The survey confirms that property values continue to suffer, due mainly to deflated demand, the poor economic climate, tight lending criteria and job insecurity.

Halifax property expert Martin Ellis, commented on the recent report: “House prices have remained remarkably stable in 2011 despite the difficult and deteriorating economic climate and the substantial pressure on households.”

He continued by saying: “We expect the market to remain broadly unchanged in the coming months.”

Last month, Nationwide, the UK’s largest building society, published a report suggesting that UK house prices will slide further down in 2012.

Demand for rental properties grows across the UK

Figures from the Royal Institute of Chartered Surveyors (RICS), the professional body for qualifications and standards in land, property and construction, says that rental prices and rental yields increased in the three months to the end of November.

With strict lending on mortgages demand for rental property has grown, resulting in an increase in rents.

With people unable to gather deposits for mortgages and concerns over job security, sellers are increasingly unable to sell their property and often resort to renting the property instead of continuing to try and sell. This has led to a 10% increase in the number of landlords in the third quarter of 2011; the fastest growth since early 2009.

Rising rents are good news for landlords, who are able to ask higher rents for their property than this time last year. Falling property values are also potentially good news, allowing landlords to buy more property, of course providing current buy to let mortgage lending criteria can be met.

James Scott-Lee, RICS spokesman, said: “The current economic gloom and the prospect of further job losses in some sectors and areas was likely to continue to underpin the residential lettings market in the near-term”.

Change to mortgage support for the unemployed?

The government’s proposed changes in the Support for Mortgage Interest (SMI) scheme has worried some mortgage lenders.

UK lenders have raised concerns about potential changes in the way support is given to those unable to pay their mortgage. The government is scheme as it says the annual £400 million cost is unsustainable.

The SMI scheme is designed to help those people struggling to pay their mortgage after they have lost their job. Currently help to meet mortgage interest payments comes have 13 weeks, and can last for up to two years.

The government, who have said that the scheme will last until at least January 2013, have launched a review of the scheme. Lord Freud, minister for welfare reform, said:  “We are committed to supporting homeowners to stay in their own homes when times are hard, but in the future this type of support must be fair and affordable.”

One possible change would see a charge put on the houses of people who receive help, allowing any money paid out by the SMI scheme to be recovered if the house is sold in the future.

This suggestion was welcomed by the Council for Mortgage Lenders (CML) which represents mortgage lenders. However the CML expressed concerns over other proposals, which could see payments made to homeowners and not directly to the lender, and also the possibility of an extension to 39 weeks before homeowners receive help.

CML director general Paul Smee (right) said: “The principle of paying the benefit to claimants rather than lenders is dangerous in terms of potentially reducing its effectiveness in meeting its intended purpose”.

Increase in mortgage approvals

E.surv chartered surveyors, the country’s largest provider of residential valuations, reports that loans for home purchases hit their highest level since December 2009 in November.

The increase was due to more relaxed lending criteria and ongoing low interest rates. Purchase approvals rose from 52,743 in October to 54,658 in November, an increase of 4%, and 15% higher than in November 2010.

There was also encouraging news for first time buyers. Approvals for home purchases valued below £125,000, which are typically bought by first time buyers, rose to 12,791 in November, up from 11,904 in October. The average deposit also fell to 31%, the lowest since August 2008, and down from 33% in October.

Richard Sexton, director of E.surv, said: “The market is thus far showing resilience in the face of the chaos emanating from the eurozone. For the last few months, the banks have been focusing their lending on specific groups, particularly buy-to-let investors, but this is the first time they appear to have increased lending to first time buyers in any notable sort of volume”.

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