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Industry Roundup – June 2019

As we enter Q3 of 2019, we round up the latest property investment news from the industry in June, exploring the price growth slowdown that is affecting the South and how mortgage rates and housing supply continues to impact buying power and demand. 

Hometrack

Price growth has weakened across the south of England, hitting higher-priced cities such as London and Cambridge where residential values have continued to fall. The result of this is certain areas experiencing weaker demand and lower price growth. Despite this, UK house price growth continues to run at a rate of more than 2.1%.

The Hometrack report also details the average gross household income required by a first-time buyer to purchase a typical home has increased by 9% since 2016 to a new average of £54,000. The ‘income to buy’ figure has fallen across the three most expensive UK cities since 2016 and equals an average of a 5% decline. At the same time, income to buy across other cities – particularly regional cores – has increased significantly. This is a result of above-average house price inflation over the last three years.

Mortgage rates continue to influence house prices

There’s no doubt that low mortgage rates have increased buying power over the last two decades and at this point, it’s difficult to imagine rates moving any lower than the 2.5% they’ve been since 2016. Any increase in mortgage rates would also increase the ‘income to buy’ figure, having a direct impact on the level of housing demand and price inflation. In the current market, housing demand is incredibly sensitive to material changes in mortgage rates and housing affordability, although forecasts show a more ‘benign’ outlook.

Housing supply continues to grow in 2019

The number of Energy Performance Certificates (EPCs) registered, a necessary document for all new houses in the UK, grew by 244,630 in the lead up to Q1 2019, a 13% increase on the previous year. This is a significant increase that was most apparent in the North West market, although figures show that during Q2 the amount of new housing has plateaued. Savills have forecasted that in 2019, 61% of local authorities will ‘pass’ their housing delivery quotas, delivering over 95% in the three years leading to Q1 2019. With 369,000 planning consents in Q4 2018, this is a reversal of the decreases seen in Q3 2018 but still 1% lower year-on-year when compared to planning consents in 2017.

Rising numbers of middle-aged renters

Increasing UK house prices continue to affect workers of all ages, creating a new wave of ‘middle-aged renters’. Whether they’re looking to buy a first home or find themselves renting due to personal circumstances, significantly older tenants are now renting from a private landlord. According to Intus Lettings, this is demonstrated by a 15% rise since 2016 in the number of people renting a home aged 35 – 54. The same study also revealed that just under 20% of renters over 55 believe they will be able to afford a property.

Research by Knight Frank confirms this growing trend in their 2019 Tenant Survey they found that renters aged 35 – 49 make up the largest proportion of the private rented sector.

Hope McKendrick, lettings manager at Intus Lettings, said: “With the cost of rent rising faster than wages, it’s no surprise that an increasing number of people find themselves unable to save up for a deposit to buy a home well into their 40s, 50s and beyond.”

Looking at the performance of the UK market during Q2 as a whole, regional cores continue to outperform the South in terms of price growth, boosted by increased investment and low mortgage rates. Housing supply seems to be more of a pressing issue for the UK, with forecasts showing housing supply is still struggling to meet increased demand.

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