Housing market ‘settles down’ post-Brexit, says RICS

The price of houses and sales will likely continue to rise in the aftermath of the Brexit vote, with prices predicted to go up by 3.3% a year over the next five years, per the latest poll of surveyors.

BREXIT The Royal Institution of Chartered Surveyors (RICS) found that a higher proportion of surveyors expected sales to rise in the next three months than at any time since February.

Simon Rubinsohn, chief economist at RICS, says:

“There are clear signs that the housing market is settling down after the initial surprise of the outcome to the EU referendum.

“Buyer enquiries did dip again in August but only modestly and, more significantly, sales expectations are beginning to edge upwards once again. It is likely the swift response from the Bank of England, both in terms of the lowering of the capital buffer and the cut in interest rates, has played a role in helping to support confidence.”

The poll suggests that both prices and sales are set to rise over both the next three months and 12 months as market activity becomes more stable.

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Can Help-To-Buy time extension boost housing market?

Redrow founder and chairman Steve Morgan has called for stamp duty and Help-to-Buy changes to drive the housing market forward and keep the economy growing.

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Steve Morgan was speaking at the launch of Woodford Garden Village, one of the largest brownfield redevelopments in the North West, where local community groups, politicians and industry professionals had gathered to help Redrow celebrate its opening.

During the day he highlighted how housing transactions have gone down as stamp duty has gone up and the tax was affecting people’s mobility: “Stamp duty has a huge impact on the market. Not only do buyers have to raise huge deposits, they then have to find thousands more in stamp duty. The last two increases have been very damaging, particularly to the London market.”

He also called for Government to extend the time limit from application to completion on Help-to-Buy equity loans to 12 months from the current 6. This would enable first time buyers to reserve a new build house farther in advance of its completion when using the incentive; allowing them to compete with investors who are free to reserve at an earlier stage.

Overall though the Redrow chairman was positive about the housing market, and saw the current climate as a good time for housebuilders, with land finally coming through the planning system – albeit still too slowly for his liking – and for customers, with mortgage interest costs remaining low.

He was particularly passionate about the much-anticipated Woodford Garden Village development, on the former Woodford Aerodrome site, near Stockport, in Greater Manchester; a major brownfield site that will eventually feature around 920 new homes, a new primary school, and significant green space.

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Residential values saw increase in May

Contract award values within the residential sector in May were considerably higher than last year showing the continued strength of the sector.

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According to the economic and structure and construction review, activity in the residential sector sustained its recent strength in May with the total value of contract awards £1.79 billion, based on a three month rolling average.

This is 10% higher than April and is also a 3% increase compared to April 2013 indicating the rise in activity experienced in the sector over the last 12 months.

The amount of units associated with residential contracts awarded dropped by 1.3% between April and May 2014, based on a three month rolling average, but were 19.2% higher than May 2013, confirming the upturn in the market.

Sector Performance

The latest house price indices for May from Nationwide and Halifax showed that current prices were

11.1% and 8.7% higher than last year. Price rises, which are even more severe in London, are creating fears of a house price bubble and as such calls for controls to be put in place have been made.

Other factors however suggest that the market may be calming down as the Bank of England reports that mortgage approvals fell to a nine month low in April, and RICS reported that new buyer inquiries slowed for the fifth month in a row.

It is however unclear whether or not tighter restrictions in lending set out in the Mortgage Market Review are the cause. There has already been notable shifts from two of the UK’s largest lenders in the last month with RBS and Lloyd’s both cutting back lending on loans with high loan to income multiples.

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Build-Zone supports Government strategy to deliver homes and strengthen the economy

An ambitious new strategy to tackle the housing shortage, boost the economy, create jobs and give people the opportunity to get on the housing ladder was announced today (21 November 2011) by the Prime Minister and the Deputy Prime Minister.

The Prime Minister and Deputy Prime Minister said the Government has inherited a broken housing market and a devastating collapse in construction from the era of top down targets, but new plans will give the housing market a shot in the arm by boosting supply, easing financial pressures and helping with demand. The action we take will drive up the level of housebuilding, ensure we are helping new home owners and boost consumer confidence.

The Strategy will break the current cycle in which lenders won’t lend, builders can’t build and buyers can’t buy. We’ll be making it easier for people to secure mortgages on new homes, help people get on the property ladder, address unfairness in social housing and ensure homes that have been left empty for years are lived in once again.

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Major housebuilders expected to see double-digit profits in 2012

Housebuilders’ profit margins are expected to return to double digits next year, analysts said last week, providing hopes of improved trading for domestic service suppliers.

Numis Securities analyst Chris Millington said margins are set to climb from 5-10 per cent to 20-25 per cent, figures not seen since the downturn.

Persimmon and Bovis Homes have both stressed a focus on margins in their trading updates to the Stock Exchange for the first six months of 2011.

Mike Farley, chief executive of Persimmon, the biggest housebuilder by volume, anticipates the underlying operating margin for H1 2011 will hit 9 per cent, up from 8 per cent the year before.

Barratt has also reported a return to profit thanks to its London and South-east market, it said last week.

In a trading update for the year ended 30 June, the company said it expects to deliver a profit before tax and exceptional items of £40 million, compared with a loss of £33m in 2010.

Although after the costs of a four-year £1 billion refinancing are taken into account, the company is expected to make a small loss, its chief executive Mark Clare confirmed.

Meanwhile, Bovis chief executive David Ritchie said he is also confident of delivering an operating margin of at least 7 per cent for the same period, compared with 4.2 per cent for 2010.

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