Posted by Gareth Williams, Partner
On 1 September 2016 Withy King LLP merged with Royds LLP. The trading name for the merged firm is Royds Withy King. All content produced prior to this date will remain in the name of the firms pre-merger.
An update on the residential housing market
First time buyers – end of Stamp Duty exemption
In case you missed the various news reports, the two year stamp duty exemption for first time buyers for homes costing less than £250,000 (saving up to £2,500) ends on 24th March 2012. The Government’s view is believed to be that it didn’t manage to stimulate the property market and get young people onto the property ladder.
Various commentators – such as the Council of Mortgage Lenders (CML) and the National Association of Estate Agents (NAEA) – have urged the Government to look at other methods to get things moving.
Increase in private rental market
As a result, private tenants are typically renting their homes for the record duration of 19 months. The average length of a tenancy has risen by 17% in two years, from 16 months and two weeks at the end of 2009 to around 19 months and a week by the end of 2011, the Association of Residential Letting Agents (ARLA) has reported.
So would-be first-time buyers unable to raise a deposit or meet borrowing criteria have remained trapped in their current homes, meaning that the rental sector boomed last year as the housing market remained flat.
The housing market – London and South East increases
Savills, agents for the top end of the residential market, recently produced a report http://www.savills.co.uk/research/residential-research.aspx which says:
■ The shift to equity has favoured the housing markets of London and the South East. These two markets hold the greatest pool of housing wealth, and together account for 26% of the UK’s housing stock but, at £1.55 trillion, 36% of its value.
■ London is operating as a global city – almost completely divorced from the surrounding nation. Unsurprisingly, the way that equity is flowing is reflected in London, which is acting as a wealth preserver in a sea of global uncertainty.
■ By 2016 they expect new housing completions to increase to 125,000 per annum as market capacity increases slowly, together with support from government measures.
■ They expect the private rented sector to expand to 20%-23% of housing stock in England by the end of 2016.
Higher value properties attract overseas investors
From our perspective, most of our clients have properties that are of a much higher value than first time buyers typically purchase – there is still the issue around confidence.
On a daily basis we receive multiple media messages about the potential of a double dip recession, higher inflation, increasing unemployment and the failure of banks to extend credit to either consumers or commerce.
And our interest rates have been at an unprecedented low level for some time now – most people believe that the rate will increase (especially as inflation continues to increase) and this causes concerns about mortgages.
An article yesterday on Overseas Property Professional http://opp.org.uk/news-article.php?id=6219 stated:
- The central London residential market remains resilient with home prices back to pre-financial crisis levels and rental values rocketing (Colliers International).
- Overseas property buyers are driving the boom as since 2000 property values in London have consistently outperformed the FTSE 100 over the long term. London’s super prime residential market is particularly attractive to many high net worth individuals (Incredibly, the article notes that the development at One Hyde Park contains Britain’s most expensive flat – a £136m, triplex apartment acquired by the Ukrainian oligarch Rinat Akhmetov).
- Financial insecurity in the eurozone is driving money into the London residential market. According to Real Capital Analytics, London saw £11.3bn of commercial cross-border real estate transactions in 2011, compared with only £5.1bn in Paris. Colliers commented: “Anecdotally, the Greeks, Russians and Chinese seem to be the most active in the London prime residential market”
- The result of all this has been a renewed effort from developers in London. “In addition to the London-focused developers (such as Barratt and Berkeley Group), other house-builders and contractors, who have traditionally focused on areas of the UK outside of the South East, are now pursuing a London development plan,” says Colliers. “For example, Taylor Wimpey, Redrow, Crest, Galliard, and Ardmore, have now focused their attention on London. Last year, Crest Nicholson began a £100m residential development drive in London targeting mid-range sites and developing 50 to 150 units at a time. Contractor Ardmore, already involved in luxury hotel work, is now involved with high-end luxury residential developments in the capital.”
Banker’s choice reduces home owner choice
Closer to home, a number of our clients have mentioned the impact of HSBC’s decision to restrict its panel of just 43 firms of legal advisers. There was an article on 17th February indicating that a conveyancing regulator also expressed concern that “the limited size panel risks inadvertently restricting consumer choice and distorting competition in the conveyancing market”.
Mr Olowe of CLC said: “HSBC maintain that their panel arrangements support consumer choice at competitive fees. However, our concern, if this type of approach did become more widespread, is the extent to which the legitimate choice of individual consumers could be compromised by powerful institutional consumers. If the choice of lenders adversely compromises the choices of many individual consumers, it might be in the public interest for us to consider requiring each party to have separate representation on all future transactions”.