Newsletter November 2005

RICS housing market survey September 2005

Chartered surveyors are predicting a rise in house prices for the first time in 18 months says the RICS housing market survey released this month (Tuesday 18th October).
The number of chartered surveyors reporting price falls for September dropped again, to 21 percent, down from 25 percent in August.
Though the increase in buyer interest is modest, it points to a gradual rise in demand, helped by August’s interest rate cut. New buyer enquiries for September show a further increase, up for the fourth consecutive month.
Buyers continue to maintain their upper hand in the market as levels of unsold property remain high, giving buyers more choice and room to negotiate on prices.  However, increasing demand and a possibility of further interest rate cuts have led surveyors to expect house prices to rise marginally by the end of the year. This turnaround in confidence adds to the evidence pointing to a stabilising of the market.
After declining since mid 2004, London’s house prices are now static. Elsewhere price falls have slowed, most notably in East Anglia and the North, with prices in Scotland continuing to rise. The pace of price falls increased slightly in the South East and Wales, while the North West saw renewed declines after two months of stability.
According to RICS housing spokesperson, Ian Perry: ‘While sellers asking for unrealistic prices are still struggling to find potential buyers, they are beginning to feel more confident as fears of a sharp fall in house prices have largely dissipated. The amount of new property coming onto the market fell in September for the first time in 1½ years.
’The upturn in demand and improved outlook on interest rates has led surveyors to predict house price rises for the first time since early 2004, though these are expected to be small. RICS expects the recovery in activity to be sustained due to continued expansion in employment, which bodes well for a stable housing market.’

Buy-to-let bounces back

Confidence continues to grow among residential property investors. Latest research from specialist buy-to-let lender Paragon Mortgages shows that landlords expect the net value of their investment portfolios to grow by 5% over the next 12 months. This is the highest growth expected for more than a year and reflects a significant upswing in sentiment since the beginning of 2005.
Last year, the survey indicated that landlords were relatively more cautious in terms of the growth they expected in the value of their portfolios. By the end of 2004, landlords were forecasting the size of their portfolios to be virtually flat over the coming year.
John Heron, Paragon Mortgages’ managing director, said: "We’re clearly now in a more buoyant phase for landlords. The market has proved more resilient than many people expected and we’re definitely seeing a bounce back in buy-to-let."
"This is to a significant extent a result of lower financing costs following the interest rate reductions, with investors able to borrow at very competitive prices, either on a fixed or variable rate basis. This has fed through into the recent resurgence of activity. In numerical terms, property investors expect to grow the size of their portfolios by 3.4% from the current 11.8 to an average of 12.2 properties."
With the average value of landlords’ property portfolios currently standing at £1.45 million, they are forecast to increase by £72,500 over the next year to reach a value of £1.52 million.
Looking at current portfolio sizes, more than six out of ten respondents (62%) own properties currently worth more than £0.5 million. In fact, over a quarter (26%) have portfolios worth more than £1 million and a significant minority (13%) over £3 million.
John Heron added: "Two-thirds of landlords say that demand is stable, but an important 21% report that it is growing, while a small 2% say it’s booming."
"This growth is reflected in an increase in the number of households, driven by inward migration, a burgeoning student population, growth in the number of people who live on their own, among other factors."
The growth in demand is having a knock-on effect on rents. 38% of landlords say that rents have increased over the past 6 months, while just under half report that they are stable.

Are you paying the right house insurance?

A new online service allows people to calculate the cost of rebuilding their houses. This will help those renewing their house insurance, which is based on rebuild costs, not the market value of a property.
RICS Building Cost Information Service (BCIS) cost calculator tells you approximately how much it would cost to rebuild your house if it was destroyed by fire or an act of God. The site asks a few simple questions about the age, type and quality of the property. The only thing that the owner may have to check is the external floor area within the external walls, excluding the garden.
93% of homeowners have household buildings paying on average £173 a year. After the Lewes floods in 2000 the district council found that 20% of local residents were underinsured by up to £15K.  Joe Martin, BCIS director, said: ‘Many people will find they are paying too little house insurance and some may find they are paying too much. Few people realise that insurance on buildings is driven by construction inflation rather than market prices. Most have ideas about the rebuild costs of their homes which are way out.  ‘Rebuild cost are not always proportionate to size and market value. It is possible that a highly valued, new-build house in Mayfair will need to be insured for less than a Victorian terrace in Bridlington. The cost calculator gives people a starting point to check they are paying the right home insurance.’
Bronja Whitlock, manager of Property Insurance Division at Mortgages for Business adds: ‘It is vitally important that property investors have a current rebuilding valuation on their properties when buying insurance to make sure that any claim made can be paid in full."
Use the BCIS calculator here http://calculator.bcis.co.uk/ to calculate the rebuilding costs of your home or to arrange buildings insurance contact the Property Insurance Division of Mortgages for Business on 0845 6016450.

Property Auctions Simplified

Auctions are becoming an increasingly popular way to buy and sell property, with the top 20 commercial and residential auctioneers seeing a 16 per cent increase in property sold at auction in 2004, at a total value of £3.38bn.
The Royal Institution of Chartered Surveyors (RICS) has published a new edition of Common Auction Conditions, designed to improve the auction process for all those involved.
The conditions have been created by buyers, sellers, solicitors and auctioneers in an effort to make the legal process of buying and selling property at auction more transparent and easier to understand.
Adopted by most auction houses and used by vendors’ solicitors, RICS’ Common Auction Conditions, originally published in 2002, have been produced for real estate auctions in England and Wales to be used by all auctioneers and set a common standard across the industry.
More people are turning to auctions to buy and sell property because of the simplicity and speed of the process, with deals agreed on the day. Auctions have become more open and transparent, and often an ideal place to find competitively priced properties.
According to Richard Auterac, Chairman of RICS’ Real Estate Auction Group: ‘RICS have ensured that the conditions have evolved to meet the current needs of the marketplace and stem from the belief that professionals active in the auction market should act as innovators and examples of best practice for the entire real estate transactional market.’