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Inflation wiping out house price growth in many areas – claim

Soaring inflation means that house price growth in much of the country is being wiped out, according to a leading housing market analysis.

The latest monthly market report from the Home website says that only four English regions, plus Wales, show annual growth over and above the latest RPI inflation figure of 7.7 per cent for November.

Home also warns that with RPI inflation – according to some analysts – heading for 10 per cent, “some regions are treading water while others are suffering significant price falls in real terms.”

The website cautions that with cannier buyers fixing seven year mortgage deals at as low a rate as two per cent, there are hedges against the growing inflation threat – so it is not expecting any significant impact on the number of buyers in the housing market in 2022.

Home also quantifies the large gap between supply and demand.

It says agents’ inventories over the past 12 months have dropped 41 per cent – and actually 50 per cent less than in January 2019.

Supply in London is down 33 per cent year-on-year, sales stock is down 25% and prices are already up 1.3% over the last six months, making it one of the top four performing English regions.

Monthly supply of new sales listings remains comparatively low across the UK, down 18 per cent compared to the month of December 2020. Greater London shows the greatest contraction again this month.

Scarcity is also prevalent in the rental market and Home warns that it’s getting worse – the supply of rental properties is down 24 per cent on January 2021, making further rent hikes inevitable this year.

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Revealed – what customers REALLY think of estate agents

A new survey of people who have sold their home in the past six months has given a strong backing to the performance of their estate agents – with a few exceptions.

Some 1,159 owners who moved in the past six months were questioned in early January, and asked to rate their agent from 1 (top ) to 10 (bottom).

Over 50 per cent of respondents were within the top five scores, 15% rated their estate agent’s performance during their last sale as a five – the most prominent individual score. Exactly 30 per cent gave their agent one of the top three scores.

However, at the other end of the scale, eight per cent stated that they thought their agent’s performance was terrible.

When it came to the asking price achieved, buyers reflected roughly the split seen in wider market snapshots – 47 per cent said their agent didn’t achieve the asking price agreed, but 39 per cent did get the asking price and 14 per cent said they got above asking.

When requesting feedback on areas of improvement, the respondents listed:

– More proactive during the transaction in order to speed up the process;

– Better or more frequent communication;

– Better customer service in general;

– More information on how their sale was progressing;

– A higher percentage of asking price achieved;

– Better quality of property listing and/or photos of their home;

– More help on what was needed from the agent to progress the sale.

The survey was commissioned by online agency Nested, from which a spokeswoman says: “It’s clear that sellers view the added value of an estate agent above and beyond the price they achieve and constant, clear communication and a proactive approach to selling are some of the key areas they value most.

“This is hardly surprising given the fact that it takes an average of 320 days to sell a home and the vast majority of this time is spent progressing the sale to completion once an offer is accepted, during which time it’s still susceptible to falling through.”

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Tax clampdown on second homes announced by government

Owners of second homes who abuse a tax loophole by claiming their often-empty properties are holiday lets will be forced to pay under new measures announced by the government today.

The Department of Levelling Up, Housing and Communities says the changes will target people who take advantage of the system “to avoid paying their fair share” towards local services in popular destinations such as Cornwall, Devon, the Lake District, Suffolk, West Sussex and the Isles of Scilly.

Currently, owners of second homes in England can avoid paying council tax and access small business rates relief by declaring an intention to let the property out to holidaymakers.

However, concerns have been raised that many never actually let their homes and leave them empty and are therefore unfairly benefiting from the tax break.

Following a consultation, the government says it will now bring changes to the tax system, which will mean second homeowners must pay council tax if they are not genuine holiday lets.

From April 2023, second homeowners will have to prove holiday lets are being rented out for a minimum of 70 days a year to access small business rates relief, where they meet the criteria.

Holiday let owners will have to provide evidence such as the website or brochure used to advertise the property, letting details and receipts.

Properties will also have to be available to be rented out for 140 days a year to qualify for this relief.

Housing Secretary Michael Gove says: “The government backs small businesses, including responsible short-term letting, which attracts tourists and brings significant investment to local communities.

“However, we will not stand by and allow people in privileged positions to abuse the system by unfairly claiming tax relief and leaving local people counting the cost.

“The action we are taking will create a fairer system, ensuring that second homeowners are contributing their share to the local services they benefit from.”

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Property Wealth Tax proposed by former agency boss

A wealth tax on overseas owners of UK homes could raise £5 billion a year to help local people buy their first properties at reduced rates, a former estate agency chief has suggested.

Kevin Hollinrake – a former chairman of Hunters estate agency chain prior to its acquisition by The Property Franchise Group – is now Conservative MP for Thirsk and Malden.

He told a debate in the House of Commons that the government had to strike a balance between personal freedom to buy homes wherever an individual wanted, with the broader freedom of local people to afford homes in their own areas.

One suggestion he had was to increase taxes on non-resident purchases of additional homes, whether holiday properties or buy to lets or occasional residences.

He told MPs: “I do not think there is any argument for not taxing those people pretty heavily if they own property in the UK and are non-resident.

“We already have a two per cent surcharge, on top of the per cent surcharge, for overseas owners. These people are having a profound effect on some house prices in urban areas as well as rural areas.

“I think 28 per cent of properties sold above £2m are bought by overseas owners. Around 20 per cent of all properties in London—and probably a decent quantity in York and other cities—are owned by overseas residents. I do not see a reason why we would not seek to tax those people even more heavily than with a 100 per cent increase in council tax.”

Hollinrake went on to say that a one per cent wealth tax on UK properties —bought by non-UK residents – would raise up to £5 billion a year.

“There would still be an incentive for those people to invest their money in the UK, which I am not against, but the reality is that this would make it a fair and level playing field. They would still benefit from the very high house price growth.

“As we have heard today, house prices have been rising by around 10%, so it still makes sense for people to invest, but such a tax would mean that we could take a little bit out of the money they are making every year from house price inflation and put it elsewhere.”

The former agency chief said the revenue from such a property-related wealth tax could go into the government’s First Homes programme, which offers new-build discounted properties to local first time buyers.

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No Impact: interest rate change not hurting housing market

The Bank of England has raised interest rates for the first time in more than three years, in response to surging price rises.

Most analysts believe the increase – to 0.25 per cent from 0.1 per cent- will make negligible difference to the housing market.

The decision by the Bank of England will add just over £15 to the typical monthly repayment for a tracker mortgage customer. A standard variable rate mortgage-holder is likely to pay nearly £10 extra a month.

Around 50 per cent of all homes are owned outright anyway, with no mortgage owed on them, and of the rest around three quarters have fixed rate mortgage deals, meaning their repayments won’t change until their current deal ends.

The remaining two million owners are on standard variable rate mortgages or tracker mortgages so their repayments will go up as individual mortgage lenders increase their rates in response to the Bank of England announcement.

Cory Askew, head of sales at Chestertons, says: “We expect the Bank of England’s decision to increase the interest rate to 0.25% to have very limited impact on property buyers and existing homeowners. Further indicating that buyer demand remains strong, is the fact that we have seen no seasonal slowdown this year.”

Simon Gammon of Knight Frank adds: “By raising the base rate it’s clear that the Bank of England believes the economy will shrug off most of the effects of Omicron. Getting a grip on rising inflation appears to be the number one priority.

“Mortgage rates on the high street have been edging upwards during recent weeks in anticipation of this moment and it’s clear the lenders believe there could be at least one more hike in the base rate next year.”

“This rate rise may not be significant but it is a clear statement of intent” says Vanessa Hale, head of insights and residential research at Strutt & Parker.

“The rise has been a long time coming, and with inflation now at decade high levels, there really is little alternative. The rate rise has been priced in to mortgages, and with fixed mortgages making up around 80% of the current market, the housing sector is unlikely to be impacted too dramatically.

“The reality is that demand for housing continues to outstrip supply which will sustain prices for 2022. But with the cost of living continuing to rise, this could have an impact on the housing market for the medium term.”

Eleanor Bateman, policy officer at Propertymark, comments: “The increase in base rate to 0.25 per cent is a small and necessary step and one that most had anticipated for some time.

“Mortgage rates have been creeping up over the past few months, and while those on variable rates will see payments increase, the cost of borrowing remains low relative to historic levels.

“Though, traditionally, the winter months see a decline in activity, our housing market report shows sustained demand with average sales agreed maintained to the end of October.

“With indications that lifestyle factors are continuing to prompt many into making a move, we do not expect the announcement to have a significant, negative impact on the market.”

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Green Mortgages linked to EPC ratings set to soar in number

Around a quarter of mortgage lenders currently have ‘green’ products promoting improved EPCs – and the vast majority of the rest say similar mortgages are on their way.

The Mortgage Advice Bureau tested 64 major lenders – some 25 per cent currently offer green or net zero mortgages, and of the others 88 per cent say they have plans to do so.

MAB also sought to uncover how many consumers are being offered green mortgages. Of those who have either bought a property or remortgaged in the past 18 months, just 14 per cent had been offered a green mortgage product.

Research amongst borrowers has found that 69 per cent of respondents have not heard of a green mortgage, despite it potentially reducing monthly mortgage payments based on how eco-friendly their property might be.

When asked if they would pay more for a green mortgage, knowing they would be helping with sustainability and the environment, nearly two in five (38 per cent) said they would.

Two in five said they would not pay more for a green mortgage, even knowing it would help the environment. Delving into the reasons why, 24 per cent said they can’t afford to pay any more, 20 per cent don’t want to have to pay any more for their mortgage, and 12 per cent said they already pay enough.

A further 16 per cent said they shouldn’t have to pay more to help the environment and 13 per cent said they don’t know how it will help.

Ben Thompson, deputy chief executive officer at Mortgage Advice Bureau, comments: “Green mortgages are a well-intended product, but they’re only scratching the surface in terms of helping to make the housing market more energy efficient. Existing borrowers, homeowners, and landlords who have properties below a C rating are encouraged to invest their own money to make their homes more efficient and less polluting. However, grants and incentives being offered by government is comparable to a drop in the ocean.

“Retrofitting a property could cost thousands of pounds which most homeowners may not have at hand to call upon. They’re therefore reliant on potentially borrowing against their property, which is where issues bubble to the surface.

“We welcome recent moves by lenders to look more favourably upon borrowers’ affordability based on them buying more energy efficient homes. This makes good sense and we’d like to see more of this positive action.

“However, we need combined industry thinking and innovation to work out how best and who best can influence those properties not meeting A, B, or C ratings to make sure the challenge is being properly tackled. Only then will the real benefits start to be felt.”

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Cost of moving soars for second year in a row

Research by price comparison service MoneySuperMarket has itemised the additional fees incurred by people moving home.

This year’s 12 per cent rise in the cost of moving home follows an eight per cent rise in 2020, when costs jumped from £3,417 to £3,688.

Now the average cost is £4,116 excluding the cost of the property and mortgage.

After agency fees, legal services and stamp duty, additional charges – mostly for removals, cleaning and storage – now average £748.

MoneySuperMarket’s findings uncover significant cost differences between cities. Aberdeen is the most expensive location, with additional moving costs of £1,020.

The five most common additional costs are buying new furniture, purchasing new household items such as bedding and kitchen utensils, paying for post to be re-directed,  changing utility providers, and removals.

Jo Thornhill, money expert at MoneySuperMarket, comments: “The cost of moving house is … an issue that has come into sharp focus over the past 18 months with the housing market booming in response to government incentives like the stamp duty holiday.

“What is less well known are those additional costs of moving that can add a significant amount to your bill, over and above items like stamp duty, legal and estate agency fees.”

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Referral fees and sales and finance back-up offered to agents

A new service has been launched claiming to offer ‘a new supportive partnership opportunity’ for agents to earn referral fees.

Cox & Flight Financial Solutions also claims agents using the service will speed up individual sales.

It suggests it offers mortgage and protection products from across the market, as well as access to exclusive mortgage deals not available on the High Street.

Cox & Flight also suggests it can help estate agents convert their sales pipeline into revenue by providing a value added service managing property sales from start to finish.

It adds that this will reduce fall-throughs.

Director Simon Cox comments:”We are tremendously excited to launch our new service. With an established background in estate agency and a long history of residential sales behind us, we are confident we can offer estate agency businesses the kind of complementary mortgage support package needed to compete in today’s home buying marketplace”.

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House prices will still rise even after interest rate hike, says senior analyst

Business consultancy Hargreaves Lansdown is predicting house prices will still rise, even after a possible hike in interest rates later this year or early next.

Sarah Coles, personal finance analyst at the consultancy, made her prediction after the latest government house price data showing values bouncing back close to their record highs in August, after a small dip in July.

She says the erratic movement in price growth was inevitable after the stamp duty holiday changes, but insists that “when these fall out of the figures, there’s every sign that prices will remain resilient – even after interest rates rise.

“Most of the value of the stamp duty holiday was lost at the end of June, so we saw a big surge in average prices in June as people rushed for the deadline and pushed prices up. After this passed, the market took a breath, and prices dropped back slightly in July. Then, in August, the final stamp duty holiday deadline started exerting an influence.

“And while people could save far less at this point, there was still the psychological effect of the final deadline at the end of September urging them on. Price rises bounced back in August, and there’s every sign they’ll remain strong in September too.”

Coles says an interest rate rise is on the cards, because of movement amongst financial levers such as swap rates – but she says the signs are that an interest rate rise will not trigger house price falls.

“The banks are currently prepared to increase their exposure to risk in a way they would be wary of, if they thought prices would fall. So, for example, HSBC has increased limits on how much wealthy buyers can borrow. Those with incomes of £75,000 or more can now borrow five and a half times their income – up from five times – and there’s every chance other banks will follow suit”

“Likewise, the Bank of England Credit Conditions survey last week showed that banks were increasingly willing to lend in the three months to September, particularly to those with less equity in their homes. They expected to make borrowing even easier towards the end of the year. When asked what affected their decision, while better economic conditions dominated, they were also positive about the future of house prices.”

Coles believes the immediate prospects for the property market aren’t tied so directly to the Bank of England base rate as they once were, partly because most mortgages are currently fixed over two or five years.

“Those who are locked into rock bottom rates are protected from rate rises for a significant period. Those who have deals coming to an end within the next six months can arrange a new fixed rate right now, which will kick in immediately after their deal expires.

“And while rate rises will be unwelcome, and will eventually feed into higher mortgage payments over the coming years, as yet, rate rises are being predicted at relatively modest levels, so there will still be deals available at historically affordable rates. So while we may see some of the heat come out of the market, we’re not currently expecting prices to fall.”

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Another jump in house prices confirmed by government figures

House price inflation accelerated to 10.6 per cent in August, up from 8.5 per cent in July as buyers rushed to beat the end of the stamp duty holiday.

Government figures from the Office for National Statistics data show that the average house price across the UK reached £264,000 in August, some £25,000 more than a year earlier.

Scotland saw the highest annual growth, with prices up by 16.9 per cent to £181,000; followed by Wales, where average prices were up 12.5 per cent to £195,000; England, where prices rose 9.8 per cent to £281,000; and Northern Ireland, where prices were up 9.0 per cent to £153,000.

Yet again London saw the lowest annual growth – for the ninth consecutive month – with prices up 7.5 per cent annually but on a monthly basis prices jumped 5.6 per cent in August alone in the capital.

Director of Benham and Reeves, Marc von Grundherr, commented: “Yet further proof that the drop in property prices following the initial stamp duty holiday deadline was merely a pause for breath in an otherwise marathon run of positive market momentum.

“There’s little sign of this letting up and should an increase in interest rates materialise, the likelihood is that it will be fairly palatable for the average homebuyer. Therefore, we don’t expect it to have any notable impact on the nation’s insatiable appetite for homeownership and the market should continue moving forward at pace well into next year.”