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House price sentiment dips, but still strong: Halifax

Consumer confidence in house prices has slipped over the past month, with fewer people believing the value of their home has increased in November compared to October, the latest sentiment index from Halifax has shown.

However, the survey, conducted in partnership IHS Markit suggests that sentiment remains relatively stable.

While 14 per cent of home owners polled in November felt the value of their property rose over the last month, down from 17 per cent in both September and October, the figure remains significantly above the low of 4 per cent recorded in May when the country was under the first national lockdown.

Looking ahead, more people think their property value will increase over the next 12 months than believe it will decrease. 

The poll found that 27 per cent of households believe the home will be worth more by this time next year, compared to just 16 per cent back in May.

This compares to 18 per cent of home owners who believe their properly value will be lower in a year’s time, which is down from a peak of 34 per cent in May. 

In seven of the 11 regions monitored by the index, people felt that property prices rose on the previous month, with the sharpest increase in Yorkshire & Humberside, followed by the South West.

However, in the East of England, Wales, London and the North East, people felt that the value of their home had fallen, with the rate of decline sharpest in the North East.

Looking to the future, households in the South West of England were most confident of higher property prices in the next year, while in the North East sentiment turned negative for the first time since August, although only marginally so.

The survey also looked at barriers to home ownership among tenants who do not expect to buy a home within the next two years.

It found that 67 per cent cited a lack of savings as the reason, while 55 per cent say they do not earn enough and 26 per cent believe they would be prevented from getting on the ladder by their poor credit score. 

Despite the ongoing economic uncertainty, around 8 per cent of UK households say they plan to buy a property within the next year, 13 per cent plan to do so within the next two to five years and 14 per cent within the next five to 10 years.

Halifax managing director Russell Galley says: “UK households remain broadly confident in the strength of the property market.

“The perceived rate of house price growth weakened slightly during November but is nonetheless above average and a noticeable reversal from the period of negative sentiment we saw between April through to August.

“People also remain cautiously optimistic that property prices across the country will be higher in 12 months’ time. 

“However, expectations softened from October, and remain subdued by historical standards. 

“This is unlikely to change significantly while the macroeconomic landscape remains uncertain, with most housing market experts predicting greater downward pressure on house prices as we move into 2021.”

MT Finance director Tomer Aboody says: “Confidence is always key for the housing market. 

“Current sentiment continues to be strong, with the perception that prices will continue rising in the near future at least. 

“This is persuading buyers to purchase now rather than wait in the hope that prices may fall.

“Interesting times are on the horizon however, with the first quarter of next year seeing the end of furlough and the stamp duty holiday, plus the Budget. 

“Future sentiment is therefore very much in the hands of the chancellor, who has some difficult decisions to make. 

“The continued confidence being demonstrated by buyers suggests that they are not worried as yet and plan to take advantage of continuous low interest rates. 

“The potential of high LTV mortgages, as set out by the government, and the probable extension of stamp duty relief, would also keep sentiment strong.”

Original Article from Mortgage Strategy 30/11/2020

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Mortgage approval numbers hit new highs: BoE

Mortgage approvals

Mortgage approval totals for house purchases rose again in October after spiking in September, rising from 92,000 to 97,500, show Bank of England figures.

This, it says, is the highest number counted since 2007 and is 33 per cent higher than the figure seen in February of this year.

October’s purchase approvals equaled £20.6bn in value compared to £19.5bn in September.

Remortgage approval figures, meanwhile, were steady, rising from 32,800 in September to 32,900 in October – but were still 40 per cent lower than seen in February 2020.

The value of remortgage approvals decreased slightly from September to October, moving from £6.2bn to £6.1bn.

Households borrowed an additional £4.3bn in October compared to £4.9bn in September, the BoE adds.

It also says that the interest rate paid on newly drawn mortgages rose from 1.74 per cent to 1.78 per cent on a monthly basis in October, which is still below the level seen in January this year – 1.85 per cent.

Coreco managing director Andrew Montlake says: “For mortgage approvals to be the highest since September 2007, the month when people queued outside Northern Rock and the Global Financial Crisis symbolically began, shows the sheer extent of the pent-up demand caused by the first national lockdown.

“This data is bittersweet, of course, as we all know that 2021 could see the real economic impact of the pandemic start to bite. It’s hard to celebrate such robust mortgage approvals data when we all know what’s round the corner.

“Unsurprisingly, lenders are circling the wagons due to concerns over rising unemployment levels and their impact on house price growth. Getting a mortgage at higher loan to values remains an almost insurmountable challenge.

“What’s vital is that lenders don’t become overly cautious and stop lending to borrowers with larger deposits. With a vaccine looming, lenders will hopefully avoid entering panic mode.

“There are still many landlords and owner-occupiers with equity and decent incomes, who are perfectly viable borrowers, and the banks shouldn’t forget this.”

Phoebus Software sales and marketing director Richard Pike adds: “It is not only the stamp duty saving that is driving the market but there is also the number of people looking to escape city life since the lockdown. And, as the ‘working from home’ culture continues this is likely to endure past the limitations imposed by Covid-19.

“The problem then will be the age-old one of supply and demand. Despite the government’s promises, we are, according to the ONS last week, way behind our target for new housebuilding in the last year.

“With the knock-on effect of the pandemic, this is something that isn’t going to be fixed quickly. So, the mass exodus from our cities that has been predicted, could turn into a trickle come the spring.”

Original Article from Mortgage Strategy 30/11/2020

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Sunak’s Big Day: “Don’t make knee-jerk property tax rises” he’s told

Chancellor

Today sees the government’s Spending Review, with Chancellor Rishi Sunak taking centre stage as he presents a 12 month spending plan to MPs.

Although traditionally such spending reviews are not opportunities to change taxes – that’s reserved for the annual Budget, which is not scheduled until next year – there has nonetheless been widespread speculation about possible reform of the Capital Gains Tax system.

Now industry commentator and property management company owner David Alexander is calling on Sunak not to tackle CGT, which could risk “unmprecedented negative impact” on not just the rental sector but the wider housing market.

A recent report commissioned by Sunak advocated CGT rises to match income tax rates. 

Alexander argues that for investors, given their additional stamp duty costs, such a CGT change would effectively deter future purchases.

“While the Spending Review is not the time when the Chancellor will announce any tax hikes it is clear from the Treasury’s messaging over the last week that increases are coming next year” he says. 

“CGT seems set to be top of the list for substantial increases and there is little doubt that landlords, second home owners and property investors are firmly in Rishi Sunak’s sights. He sees this as an easy target politically and financially. Unlike many other assets property can’t hide and as CGT affects a relatively small part of the population it looks like an easy fix for the enormous debt accrued during the pandemic.”

Alexander is warning that if Sunak widens the take and breadth of CGT the number of people liable will rise and landlords with one or a small number of properties will be drawn into the tax. 

“The targeting of the tax may have unintended consequences. Equally he will understand that simply increasing a tax by a certain percentage rarely results in a directly comparable increase in revenues. The larger institutional investors will always have the option of shifting their investments elsewhere either geographically or into a different asset class resulting in a lower tax take” he warns.

Alexander says larger investors may be able to absorb the changes, or use their accountants to minimise the disadvantage, but that would not apply to smaller scale investors who have purchased one or two buy to lets.

And he warns: “A property used to shore up retirement funds, or care home fees, could suddenly be hit by a tax which is imposed with little warning, on a sector that is exposed, at a time when the market is potentially fragile.”

Original Article from Estate Agent Today 25/11/2020