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UK House Prices at Record High After Biggest Leap Since 2016

It is looking like good news for homeowners and anyone looking to sell a residential property in the near future. Once again, UK property prices have spiked above and beyond all expectations – August having brought about the biggest monthly boost since 2016.

According to the latest figures released by Halifax, the average price for a UK home in August has reached a new high of £245,747. This indicates a monthly increase of 1.6% compared to the average house price in July, along with a huge 5.2% increase over the same month in 2019.

The figure came in slightly under the maximum year-on-year increase of 6% some analysts had predicted, though remains remarkable performance.  Particularly when considering the fact that the UK’s economy is still finding its feet after an extensive period on lockdown, a spike to record-high house prices is a welcome indicator of a strong recovery.

Mortgage Lending Activity up 66%

This remarkable growth in average property prices has been attributed to both the Chancellor’s temporary stamp duty holiday on purchases under £500,000 and pent-up demand being unleashed on the sector post-lockdown.

In addition to the market’s impressive record performance reported by Halifax, rival lender Nationwide also indicated an impressive spike of 2% in average house prices between July and August, along with a 3.7% increase year-on-year.

Predictions of pent-up demand being released when the housing market reopened appear to have been accurate, with the Bank of England reporting an enormous 66.2% spike in mortgage lending activity between June and July. In July alone, figures suggest that more than 66,300 mortgage applications were approved by lenders in England alone.

A Housing Bubble on the Horizon?

Despite the ongoing complications brought about by the COVID-19 crisis, the UK’s housing market is nonetheless tipped for a strong recovery. Given with predictions that Britain’s GDP could contract by as much as 10% this year, the housing market is expected to continue performing with strength for the immediate future at least.

However, experts do not necessarily see the current record-breaking house price acceleration continuing, which will most likely slow over the coming months.

“Rising house prices contrast with the adverse impact of the pandemic on household earnings and with most economic commentators believing that unemployment will continue to rise, we do expect greater downward pressure on house prices in the medium-term,” commented Russell Galley, managing director of Halifax.

Meanwhile, property consultancy Knight Frank stated that while the current level of acceleration is unsustainable, property prices will continue to increase for the rest of the year. Those with larger outdoor spaces or in close proximity to green spaces in particular are expected to see ongoing gains.

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Other Finance News

Nationwide Reports Highest Ever Average House Prices

In stark contrast to the steep declines brought about by the COVID-19 lockdown, house prices have once again skyrocketed to a new record high.  According to the latest figures from Nationwide, average house prices for August rose at their fastest monthly rate in more than 16 years.

Despite having experienced heavy losses in May and June, property prices spiked a full 2% in August. This took the average asking price for a home to a new high of £224,123, reported Nationwide bank chief economist, Robert Gardner.

Many economists believe, however, that the knock-on effects of the coronavirus crisis – particularly in relation to employment – may result in a steady slowdown of recent property price hikes.

An Unexpectedly Rapid Spike

Nationwide admitted that while the release of pent-up demand among buyers was predicted to result in property price increases, the sheer speed of the market’s recovery had been “unexpected”.

The latest figures from the lender indicate that average house price growth for August outpaced every month since February 2004. Year on year, average property prices were found to be up an impressive 3.7% compared to the same time last year.

A recent report from the Halifax mirrored the findings of Nationwide, suggesting all-time record-high property prices during the summer.

All Change in 2022?

Speaking on behalf of Nationwide, chief economist Robert Gardner stated that while the trend is likely to continue for a while, it’s unlikely the market’s huge growth will maintain its current pace long-term.

“This rebound reflects a number of factors. Pent-up demand is coming through, where decisions taken to move before lockdown are progressing,” commented Mr Gardner.

“These trends look set to continue in the near term, further boosted by the recently announced stamp duty holiday, which will serve to bring some activity forward,”

“However, most forecasters expect labour market conditions to weaken significantly in the quarters ahead as a result of the after-effects of the pandemic and as government support schemes wind down,”

“If this comes to pass, it would likely dampen housing activity once again in the quarters ahead.”

Likewise, the Office for Budget Responsibility – the official forecaster for the government – has also predicted a decline in average house prices next year.

Interviewed by the BBC,  a London based mortgage broker also predicted that irrespective of the market’s current buoyancy, the situation as it looks today will be temporary at best.

“Two words: reality check. As strong as the property market is right now, it will not last,” he told the BBC.

“Demand is understandably strong after lockdown and the added bonus of the stamp duty holiday, but unemployment is rising by the day and the economic outlook is highly uncertain as the furlough scheme ends,”

“In the final months of the year we will start to see a reversal in the current rate of house price growth.”

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Other Finance News

Home Sales Gain Momentum, Transaction Speeds up 33%

It was predicted at the height of the COVID-19 that when lockdown restrictions were eventually eased, a pent-up wave of demand would be unleashed on the UK housing market. Predictions that appeared to be accurate, as new research from Zoopla suggests the speed of property sales is currently 33% faster than it was a year ago.

Examining the three months leading up to mid-August, Zoopla found that the average time taken for a three-bedroom home to sell was 24 days. In August last year, the same property would have taken an average of 36 days to sell. It is not just three-bedroom homes that are selling faster – Zoopla’s report indicated that all property types across the board are selling at an accelerated pace.

Shifting Priorities

Another prediction from the COVID-19 crisis that has proved accurate is the way in which homebuyers across the UK are showing a marked shift in priorities and preferences. Though all property types are selling faster, the slowest properties to sell in most regions are now one-bedroom flats.

This has been credited to the fact that first-time buyers and movers alike have been forced to reconsider their priorities and long-term intentions, in the wake of the COVID-19 pandemic.

The fact that the housing market in its entirety was put on hold for several weeks has inevitably impacted overall property sales for the year. Nevertheless, Zoopla has reported an encouraging boom in general housing market activity since the easing of lockdown restrictions, resulting in overall sales more than 75% higher than would be expected for this time of year.

“Buyer appetite has been widely attributed to pent-up demand resulting from lockdown, but it also reflects the impact on the nation as it collectively reassesses what it wants and needs from a home,” reported Zoopla.

“Quarantine has galvanised many homeowners and renters into reconsidering their housing requirements, resulting in demand for more space and changing work and commuting patterns.”

Outdoor Interest

Meanwhile, the experts at Rightmove are advising property sellers and landlords to place heavier emphasis on their gardens and outdoor spaces, when presenting their properties to potential buyers or tenants. Whereas the kitchen has typically been the deal-breaker for most buyers, more people than ever before are prioritising the quality and availability of outdoor living spaces.

The sudden spike in housing market activity is also having a direct impact on average property prices across the country. A recent report from Halifax suggested that in July, average home prices reached a new record high – a climb of 1.7% from the month before.

Specifically, the average property price (according to the Halifax House Price Index) stood at £241,604 for July, up from the £237,834 average recorded in June. This also indicated a huge 3.8% increase compared to the same period in 2019.

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Other Finance News

Landlords Continue to Discriminate Against Benefit Claimants, Research Suggests

In a landmark hearing that took place earlier this year, a judge ruled for the first time that blanket bans on benefit claimants by private landlords were unlawful.  The “No DSS” clause has been a standard feature in countless rental contracts and tenancy agreements for decades, though was recently declared discriminatory and in direct violation of equality laws.

Unfortunately, a new study conducted by the BBC suggests that most private landlords are in no hurry to alter their policies regarding DSS renters.  Conducting an analysis on more than 9,000 OpenRent listings, the BBC found that around 75% of all private listings excluded prospective tenants on benefits.

OpenRent stated that landlords are advised to assess tenants “on their own merits” and therefore could not be held responsible for the individual policies and practices of the landlords using their website.

A Wake-Up Call Going Unheard?

In the wake of the landmark ruling last month, housing charity Shelter’s chief executive insisted that the time had come for private landlords across the UK to put an end to unfair discrimination.

“Last month’s ruling should be a wake-up call for landlords and letting agents to clean up their act and treat all renters equally,” commented Polly Neate.

“We won’t stop fighting DSS discrimination until it’s banished for good,”

“OpenRent should ban landlords from advertising their properties as ‘DSS not accepted’ – and remind them of their legal duty not to discriminate.”

Her sentiments were shared by the Equality and Human Right Commission (EHRC), which went further to warn landlords that claims may be filed against them if their letting policies remain discriminatory.

“These figures show that there is still some way to go before we can truly end the discrimination against women and disabled people who claim benefits,” said a spokesman on behalf of the EHRC.

“If landlords and estate agents don’t change their policies and practices, they will be at risk of claims of discrimination from would-be tenants.”

A Joint Responsibility

During its assessment of OpenRent, the BBC discovered that the portal continues to provide landlords with the opportunity to tick or exclude a box with the description “DSS income accepted”. Those who do not tick this box effectively restricting their listings only to those who are not on benefits at the time.

When questioned on this policy by the BBC, OpenRent remained adamant that it “fully supported Shelter’s efforts to eliminate blanket bans.”

Though at the same time added: “based on speaking to our customers including surveying hundreds of benefit claimants directly, was that applicants should be made aware upfront of any conditions of renting a property”.

In addition, OpenRent claimed that some of the landlords they work with have terms and conditions in their own mortgage contracts which prohibit them from accepting DSS tenants.

“We’re committed to solving root causes like these, however in the meantime our customers are overwhelmingly telling us we should not be pretending the problem doesn’t exist,” said OpenRent founder Adam Hyslop.

“Hiding conditions of renting over which the landlord has no discretion only wastes time for all involved, and indeed makes the situation far worse for the very people Shelter is trying to help.”

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Mortgages

Buy-to-Let Purchase Shows Signs of Recovery

After flatlining throughout much of the coronavirus crisis, the UK’s Buy to Let market is showing reassuring signs of a strong recovery. Property purchases and portfolio expansion plans put on hold during lockdown are now being unleashed on the sector, spurred in part by the current stamp duty holiday recently introduced by the Chancellor.

According to the results of an industry survey conducted by Cherry, upwards of 30% of brokers have reported a spike in individual Buy to Let purchase activity and interest. Likewise, almost the same amount (27%) reporting growing interest in Buy to Let property acquisitions from limited companies.

In total, Buy to Let market activity in terms of planned purchases or purchase enquiries is on the up at around 57% of brokers across the UK. At the same time, brokers are also seeing an upturn in the numbers of clients applying for short-term financial products like bridging loans. Most of which are being used by landlords and investors for property refurbishments and improvements.

“It’s clear there has been a spike in Buy to Let activity in recent weeks. Whereas the BTL market has been dominated by remortgage business in recent years, it is purchase enquiries that are currently keeping brokers busy,” said Donna Hopton, director at Cherry.

“This window of opportunity for reduced stamp duty land tax will certainly be helping to drive this demand, but we are seeing that the market is generally buoyant, which is a positive sign for advisers, and the economy.”

A Golden Opportunity for Landlords and Investors?

Traditionally, Buy to Let has been seen as something of a safe haven for investors in the UK. To some extent, an investment opportunity that more or less guaranteed generous and ongoing returns, with little to no risk involved.

More recently, Chancellor Rishi Sunak announced a temporary stamp duty adjustment. By significantly increasing the threshold at which Stamp Duty is payable on property purchases – from £125,000 to £500,000 – the Chancellor effectively shaved thousands of pounds off the purchase prices of properties for Buy to Let investors.

Coupled with rock-bottom mortgage calculator UK rates over the past few months, it was seen by many as a potential golden opportunity for landlords and investors.

A leading source stated “that in the right hands, Buy to Let can still be a useful and profitable investment vehicle.

Landlords will rush to buy homes before the stamp duty holiday ends in March next year, after which I think there may be a natural drop in activity.”

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Coronavirus Development Finance

Property Development Restriction Relaxations Draw a Mixed Response

Boris Johnson has confirmed details of an overhaul to planning permission requirements and restrictions, which will give housing developers and homeowners alike more direct control over their properties.

Despite facing accusations of having unnecessarily delayed essential reforms until now, the Prime Minister firmly believes the new planning system will boost affordable home availability across the UK.

“We’ve got fantastic builders that do a great job but for some reason or other, and planning has a lot to do with it, it takes far too long to build a home in this country,” he said.

However, some have warned that the alterations to existing policy could lead to a dangerous loss of control at a local council level, while at the same time leading to an influx of “bad-quality housing” on the market.

The statement from the government suggests that the new rules will reduce both the amount of time it takes to complete housing development projects and the number of planning applications that are declined. The result of which, according to the Prime Minister, being greater affordable housing availability and the opportunity for more first-time buyers to get on the property ladder.

Reduced Local Influence

One of the main sticking points for critics of the new scheme is the way in which it will limit local influence, where planned property developments are concerned. Housing Secretary Robert Jenrick confirmed that those in the locality of a planned development would still be given a “meaningful say” at an early juncture but would not be able to block housing development schemes at a later date.

Mr Johnson said that the removal of red tape would make it much easier for developers to complete projects, resulting in far more affordable housing becoming available across the UK.

By contrast, Labour leader Sir Keir Starmer argued that this reduction of local influence could prove harmful for the housing market, while highlighting that the new rules make no direct mention of the need for affordable housing.

“This is a developers’ charter, frankly, taking councils and communities out of it,” he warned.

“And on affordable housing, which is the critical issue, it says nothing. In fact it removes the initiatives that were there for affordable housing.”

His sentiments were shared by the President of the Royal Institute of British Architects, Alan Jones, who stated: “While there’s no doubt the planning system needs reform, these shameful proposals do almost nothing to guarantee the delivery of affordable, well-designed and sustainable homes.”

Eased Planning Permission Requirements

The government also recently confirmed a series of new planning measures, which from September will enable homeowners to conduct certain home improvements and alterations without the need for planning permission.

Developers will also be permitted to convert various different types of commercial premises and business properties into homes, though critics argue that such conversions often result in cramped, low-quality residences that are subsequently sold or let out at disproportionately high prices.

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