Hadley Taylor Blog
At Hadley Taylor we like to keep our clients updated on the latest local property news and opinion.
31st October 2016
Growth in the economy proves doubters wrong but what does it mean for the property market?
Gross domestic product grew in the third quarter by 0.5% which is considerably more than economic forecasters were hoping for and also considerably more than most other developed economies. This is more evidence that the economy is proving to be incredibly resilient following the historic vote to leave the EU. Let’s not forget the legion of doom mongers who predicted a recession immediately after June’s referendum if we voted to leave. This army of learned individuals and organisations included David Cameron, George Osborne, Mark Carney, the Treasury, the IMF, TUC, CBI and many more have all been proved wrong. David Cameron and George Osborne have departed the scene and the governor of the Bank of England, Mark Carney, may follow shortly because his dour outlook simply doesn’t fit with what’s actually going on.
So what does this have to do with the property market I hear you say? Well the property market depends to a large degree on confidence and sentiment, and if the establishment and the ruling classes try to scare us to death about the state of the economy, which is what happened for the first half of this year, then the natural thing for us to do is to hold back. As a consequence many buyers, and particularly, sellers up and down the country have been delaying their plans.
Now that we know that the gloom mongering was all about spin and nothing to do with hard evidence, the good news for the property market is that we can now all get off the fence and get on with business. Property prices are rising steadily, demand from buyers moving to Norwich is strong and with interest rates at an all-time low, affordability has never been better. So whether you’re buying or selling now is the time to make your move with confidence. East Anglia has led the way in recent months as the fastest growing property market in the UK and Norwich remains a highly desirable destination for buyers relocating from other parts of the country.
24 October 2016
Should we feel so sorry for Millennials?
Millennials are people in their twenties and early thirties. They are widely considered to be less well-off and have poorer prospects than their parents, the Baby Boomers. I have written in the past about the unfairness that many young people feel when compared with older generations particularly in relation to property. However, if we take a closer look at some of the data, the lot of the Millennial might not look so bleak.
Firstly, Millennials pay less tax than their parents did. Income tax, corporation tax and many other taxes are considerably lower today than they were in the seventies, eighties and nineties and tax allowances are more generous today than they were then. As a consequence, disposable income is greater today than it was thirty years ago.
Interest rates are at an all-time low, so despite the inexorable rise in property prices, it is actually more affordable for a Millennial to buy a house today than it was for their parents when mortgage payments are calculated as a proportion of income. The only other hurdle in recent years has been the size of deposits that lenders have insisted on from first time buyers, however, this too has been relaxed with many lenders once again offering 95% or even 100% mortgages in certain circumstances.
Millennials are more likely to enjoy a comfortable retirement than their parents thanks to auto-enrolment. Employers are now legally bound to provide and contribute to work place pensions. Baby Boomers enjoy a good income in retirement today only if they worked in the public sector, if they benefitted from a final salary pension or if they had the foresight to make their own private pension arrangements. An alarming number of Baby Boomers have had to fall back on their state pension and whatever savings they may have put by.
So, despite high property prices, Millennials have never had it so good when it comes to buying their first home.
18 October 2016
What does the post Brexit economic landscape hold for the property market?
As we move towards independence from the EU the economic landscape of the UK will change considerably. In fact quite a lot has changed already.
The pound is worth considerably less than it was on June 23rd and, although it looks like our currency has stabilised at a new level against the US dollar of about $1.23, there has been a shift in the way the economy will work from now on. A weaker pound means that our holidays abroad will be more expensive and that retired Brits living in other EU countries who draw their pension in pounds will be worse off. Most importantly, everything we import will be more expensive. This, together with a rising oil price, will result in higher inflation. Higher inflation means that the Bank of England will have to raise interest rates sometime soon and keep raising them to keep the lid on inflationary pressures in the years to come. I felt that the last BOE interest rate cut was unnecessary and now I see that many economists and columnists are saying the same thing. For many people, higher interest rates will be a good thing rather than a complete disaster. After all we have more savers in this country than borrowers and asset prices have become hugely inflated due to ultra-low rates of interest. Individuals with shares or property have become disproportionately wealthy compared to those with cash since 2008.
A weaker pound is of course also a great opportunity for us in the longer term. Many economists have felt that the pound has been over valued for some considerable time and a weaker currency will boost exports, reduce imports and, in time, significantly help to re-balance our economy.
GDP will increase less next year than it did this year but our economy is still predicted to grow faster than most other developed economies. The FTSE 100 share index has performed incredibly well since the Brexit vote so anyone with a pension fund is far wealthier today than they were on June 23rd. In recent months pensions have outperformed property by a country mile so this may change our attitude towards planning for retirement in the future.
House prices in most of England are still rising although in some parts of London prices are cooling. This rise is due almost entirely to demand rather than any other economic indicator. Although the trend is still upward for most of us, it’s very hard to see how house prices will rise faster during the next five years than they have during the last five years.
5 October 2016
Have the over 40’s been hoarding property?
Recent research by the London School of Economics confirms a view I have often shared in my columns which is that the over 40’s are hoarding property in this country. Since the financial crisis in 2008 many middle class professionals in their forties have been retaining their old home and renting them out before moving on to their new homes. This trend has caused a distinct lack of housing stock across the country and has seen a decline in property transactions ever since. Anyone looking for a family house in Norwich right now will know exactly what I mean.
These accidental landlords have unwittingly put the brakes on economic and social mobility for millions of younger people who want to relocate or take their first step onto the property ladder. The consequence of there being fewer properties on the market for sale is of course higher prices and whilst this is all fine and dandy for the property owning classes, it is a disaster for our children.
We now have a property apartheid in the UK. Older people own most of the property whilst younger generations can only aspire to property ownership and many have come to the conclusion that they will never own their own home.
In recent months the government have made various tax changes to make buy to let less attractive in an attempt to level the playing field. Stamp duty, which is the tax payable on a property purchase, is considerably higher on any residential property that is not your main residence. Tax relief on buy to let mortgages will soon be reduced which will in turn reduce rental yields still further. The other significant change is that lenders are now stricter with their lending criteria on buy to let mortgages which will bring them in line with the rules on residential mortgages.
As rental yields decline further landlords have been looking to capital growth for their returns. This is all well and good in a rising market but what if prices rise at a slower rate as they are forecast to do during the next few years? People have very short memories. They tend to air brush out the fact that only five years ago we were in negative territory in most parts of the UK and falling property prices could return if our economy took a turn for the worst in the future. This scenario would leave landlords with very meagre returns if not a loss.
Buyers are moving to Norwich in droves so if you have a property or two to spare you could do your fellow man a favour and put it up for sale. After all buy to let isn’t all it’s cracked up to be.
15 September 2016
Less than half of home movers end up buying a property they found on a portal.
Property portals, such as rightmove.co.uk and onthemarket.com, have become a key component in how we search for a new home but they are in fact less influential in the process than we are led to believe according to a recent survey by consumer organisation, Which.
Property portals would have us believe that the vast majority, if not all house hunters find their dream home using the internet. The truth is very different. In fact only 45% of buyers end up buying a property they found on a portal. This begs the question as to how they found their home if not on the internet.
The majority of buyers find their new home by traditional mechanisms. For example, 11% find their home in an estate agents window which is bad news for any agent that doesn’t have one. A further 11% are introduced to their new home because an agent telephones them or emails them about it, which is more bad news for online agents who don’t do this because they don’t believe in human intervention. If you have a for sale board outside your house this will increase your chances of selling because 10% of buyers find their new home by driving round your area looking for boards. Make sure your agent advertises in the local paper because 6% of buyers still find their new home in the local rag. The remaining 17% of buyers found their dream house using other traditional mechanisms such as word of mouth or because they have visited and talked to an estate agent.
What this survey confirms is that selling property isn’t just about the internet and that most properties are sold by property professionals using traditional methods of sale. If consumers think they are being clever by using an online agent, the truth is they are only getting their property marketed to part of the market and if they are to achieve the optimum price for their biggest asset they need to be using the whole of the market which is where the proper estate agent comes in.
With housing stock in short supply the best advice from Which was to put your laptop away, visit estate agents, get to know them and make sure they understand what you are looking for.
8 September 2016
Why does it take so long to buy a house?
Property transactions in the UK are taking longer to go through at a time when one would have thought that advances in information technology would have hastened the process.
There are several reasons why transactions take so long and all of them are more to do with human intervention, or should I say lack of it, rather than any advances we may have made in the way information is shared on the internet.
It would be easy to say that solicitors take far too long with the conveyancing process. It is true that during August and between Christmas and New Year it’s hard to find a solicitor in the office. However, solicitors are not unlike most other professions in this regard. Gone are the days when we used to enjoy Christmas Day and Boxing Day and then return to work the day after. Extended periods of absence seem to be the norm in most businesses at certain times of year. However, if you employ a good local firm of solicitors they will ensure that the absence of your designated conveyancer does not have a negative impact on the progress of your sale. Alternatives to the traditional conveyancing model are now more common, but the very last thing sellers should do is use an online conveyancing service as this is often fraught with delay and incompetence.
Buyers and sellers have a responsibility to act in a timely fashion with proof of identity protocols, terms of business, payment on account, certification, planning permissions, building regulations and answers to enquiries. Delay with any of this will delay your sale so best to get your paperwork in order before you have a buyer.
By far the biggest factor affecting the speed at which a sale can proceed is the search process. Searches are processed by the local authority. Some local authorities around the country take as little as 48 hours to turn around a search request. Norwich City Council is currently taking five weeks to do a search and this is unacceptable given that they charge £120 for a local authority search and £150 for an environmental search. One would have thought that Norwich City Council would be so over endowed with fee income that it would have been able to put in place a state of the art search service but I’m afraid that’s not the case.
So my best advice for buyers and sellers hoping for a speedy transaction is to attend to your paperwork in a timely fashion and use an estate agent and a solicitor that has been recommended to you by someone you trust who has sold their house recently.
10 August 2016
The Bank of England interest rate was reduced last week to a new record low of 0.25%.
Whilst most estate agents think this is a good thing, I feel it was an unnecessary move, given the strength of the economy and will only add to demand for housing without doing anything to increase supply.
The economy grew by 0.6% in quarter two which is more than that of any other EU nation and this was during a period when we were being bombarded by scare stories from certain parties over the consequences of Brexit. Consumer spending in July was nearly two percent higher than the previous July which, again, is surprisingly good given the circumstances and the FTSE 100 currently stands at its highest point for well over a year. In light of all these indicators it is difficult to see why Mark Carney is in such a blind panic. He was particularly pessimistic about the UK economy during the referendum campaign so maybe he’s just being consistent.
What ultra-low interest rates do is to reduce further the cost of borrowing and this will push property prices up to eye watering levels and make property ownership unaffordable for millions of young people. We will soon live in a country where most people over the age of 50 own at least one property and nobody below the age of 35 owns anything at all. Equality means that everyone has the same chances in life but when it comes to property, most young people have no chance of home ownership unless their parents cough up a considerable sum to help their offspring onto the property ladder. This may be possible in some families but often, in the absence of appropriate pension arrangements, the family house is used as a cash machine to provide for old age and so helping out the next generation with a sizeable deposit isn’t always possible.
The other consequence of ultra-low rates is that it allows millions of younger mortgage holders to live in the false paradigm of cheap money. I can remember paying 17% on my mortgage in the early 1990’s and with interest rates being so low for so long we now have a whole generation who will get a great shock once rates start to rise.
I would have preferred to see interest rates stay where they were which would have allowed property prices to rise at a slower rate which, in the end, would be better for everyone.
1 August 2016
The latest house price inflation forecast
Residential property prices are set to rise by 20% during the next 5 years. That’s not just me talking, it’s the opinion of The Centre for Economics and Business Investment who made this prediction this week.
Property price inflation is going to be sluggish for the remainder of this year and next year but over the five year piece the direction of travel is up. London house prices will fall in 2017 but even in the capital prices will show an upward trend over the same five year period. The London market has been due a correction and prices have been hit in the capital particularly hard due to tax changes that came into effect in April and a drop off in the amount of foreign money being invested in the London market.
This bullish outlook rather contradicts the fear mongers’ predictions during the Brexit campaign. The underlying strength in property prices is due to short supply and continuing demand and Brexit fears will have little effect in the medium and long term.