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House prices in England and Wales see fastest annual growth for six months

The annual rate of house price growth across England and Wales increased to 5.2% in October, the fastest increase for six months, according to the latest property index.

Average property prices increased 0.9% or £2,500 last month, equal to £80 a day, to £288,421 and it is the tenth record high recorded this year, the data from the Your Move Reed Rains index shows.

The price growth is once again being driven by London, as values in the city increased £24,636 in the last year, the index also shows. Excluding London and the South East of England takes the annual price growth to 3.9%.

As far as sales are concerned it was the strongest October since 2007, with the north seeing biggest sales boost due to better levels of supply on the market. But sales of homes worth over £1.5 million were down 35% year on year with this sector still being affected by the Stamp Duty change from almost a year ago.

East Anglia saw the strongest year on year rise of any region, with growth of 6.2%, taking the average price for a property in the area to £241,284, Richard Sexton, director of e.surv chartered surveyors pointed out.
 
He also pointed out that in London house prices are recovering from the more subdued growth seen during the second half of 2014. Annually, there has been a 4.4% price increase in the capital, with property values rising by an average of £24,636.

However, most of the recent price increases have emanated from the lower rungs of the market with Harrow, Newham and Barking and Dagenham showing the strongest annual growth.

‘These rapid rises are currently outweighing the decline at the top of the market, carrying average values higher. While many commentators are forecasting significant house price growth in London and the UK in the coming years, these need to be viewed in historical context and we’re unlikely to see a return to the unsustainable rises of the past decade,’ said Sexton.

‘Most current predictions are still a slowdown from the past five years of growth, and overall since September 2005 average prices across the country have soared 43.5%, while average property values in London have more than doubled, jumping 104%,’ he added.
 
He also explained that properties worth over £1.5 million have been hit with a stamp duty increase, currently set at 12% of the portion of the property’s value above £1.5 million, up from 5% previously.

‘As a result, sales of homes worth more than £1.5 million have fallen by 35% in the third quarter compared to a year ago. This tax has really put the shackles on the prime market in the capital, as three quarters of these sales since January 2014 took place in London,’ said Sexton.

‘The implications can be seen in the 12.6% annual drop in prices in Kensington and Chelsea, while prices in the City of Westminster have also fallen, 5.5% year on year. Stamp duty has had strong implications for the South East too, with prices dropping in other typically more expensive areas, such as Windsor and Maidenhead,’ he added.
 
Regionally, the pattern of property sales is the reverse of what has been happening with house prices, with activity increasing fastest in the North, Yorkshire and Humber and North West, but falling in the southern half of the country.

‘Supply of properties on the market seems to be the sticking point for sales growth, and activity in the northern most regions of England is also being facilitated by more affordable prices,’ Sexton explained.

‘With low interest rates now likely …

Call for UK mortgages to be more user friendly for older people

Building Societies in the UK are being urged to review the maximum age limits for mortgage borrowers to support home owners needing finance into and in retirement as life expectancy rises.

This is one of nine recommendations contained in an interim report entitled Lending into Retirement, from the Building Societies Association (BSA) which points out that the UK already has 11.6 million people over the age of 65.

By 2034 it is estimated that around a quarter of the population will be 65 plus and lifestyle changes, including divorce, mean that people are tending to buy later and go for longer repayment terms.

BSA research shows that around half of 25 to 34 year olds think they will need a mortgage that lasts into retirement and the average age of an unassisted first time buyer has already hit 31.

The report also calls for more availability of suitable housing options for older home owners who want to move to a property that meets their changing needs and better cross departmental co-ordination to rationalise Government policy on the treatment of older borrower’s housing wealth.

It would also like to see the delivery of regulation that encourages innovation along with the provision of clear information that empowers older consumers and points out that working with insurers would develop policies that enable lenders to mitigate the different risks involved in lending to older borrowers.

Other areas for improvement include make holistic financial planning in retirement available, the formation of a cross-industry alliance with other bodies focused on the needs of older consumers and the creation of a mortgage product that adapts to the different stages of a person’s life.

‘We have been working together as a sector to look at this issue and we are making some early recommendations for change. Some put the ball firmly in our court, others can only be delivered in partnership and a few may require regulatory change,’ said Dick Jenkins, chair of the BSA.

He explained that the Financial conduct Authority has been involved in preparatory work. ‘We have also sought the views of many others and these will now contribute to the next stage of the project, to deliver progress for those who want, need and deserve to buy a home of their own into and in retirement,’ he added.

According to BSA head of mortgage policy, Paul Broadhead, it is natural for the building society sector to kick-start and lead this work. ‘We already tend to have a more flexible approach to lending with higher and sometimes no age limits and a willingness to assess applications considering an individual’s circumstances,’ he said.

‘As the average age of a first time buyer continues to increase, borrowing into retirement is becoming increasingly commonplace, rather than a niche form of lending. This report identifies a number of areas that need further attention if we are going to meet the inevitable growth in demand for borrowing into, and in, retirement,’ he added.

‘The time is right to review lending policies, examine how advice is provided and to work closely with a range of organisations across different sectors to ensure that lenders are equipped with the appropriate tools to respond to the rapidly changing demographics across the UK,’ he concluded.

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Central London office rental values hit double digit annual growth

Rental values in central London’s booming office market grew by 10.3% in the year to October 2015, the first time annual growth has hit double digits since April 2008.

The capital saw 1.1% growth in October, as demand for office space continues to overwhelm limited availability, according to the latest CBRE Monthly Index.
 
Despite rapidly rising rents, take-up of offices in central London continues to outpace the 10 year average. Some 3.6 million square feet of space was snapped up by businesses in the third quarter of 2015, with a further 3.8 million currently under offer and expected to complete before the end of the year.
 
Office rents aren’t just rising rapidly in London. Rental values in the office sector grew by 1% across the UK last month, only the third time rents have grown this quickly since the financial crisis, and much faster than the 0.4% seen across commercial property as a whole.
 
Capital values are also growing fastest in the London office market, at 1% in October, some way ahead of the 0.6% for offices outside London, and twice as fast as the 0.5% growth seen across all commercial property. Together, the rising rents and capital values in the UK office market are giving investors total monthly returns of 1.2%.
 
This strong rental value growth means that UK offices are now highly reversionary. The average initial yield for UK offices is now 4.1%, below the pre-crisis low of 4.2%. This compares with the average equivalent yield of 5.4%.
 
The position is even more marked in central London Offices where the average initial yield of 3.1% compares to an average equivalent yield of 4.5%, although strong income growth has closed the gap over the last few months.
 
‘London’s office market has been heating up for some time now, but there is still strong business demand across the capital,’ said Kevin McCauley, head of central London research at CBRE.

‘Rental value growth has not been this sustained since before the financial crisis, and together with rapidly rising property values, landlords and investors are experiencing a booming market,’ he added.

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