London property

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Anybody dabble in London property here? So many adverts over the weekend.

How are their sales going?
Talk of the town - London's housing boom

Escalating values, foreigners with piles of cash are what's abuzz in the city

Frenzy in London: Burgeoning demand amid low supply, near record-low borrowing costs, policies to stoke growth and a cultural obsession with property are among the factors feeding the property craze. - PHOTO: REUTERS
[LONDON] Rohit Sabhlok said he's upset he lost a bidding war on a London house. Katy Barnes bought her home to avoid rising rents, while Holly Martin purchased hers as an investment - and both are hooked on a website that shows their property values soaring. Kay Durrant used her home's growing equity value to pay bills.
Welcome to London's frenzied housing market, where low mortgage rates and a dearth of properties for sale have sent prices rising in a year by an amount almost twice the average annual London wage.
From centuries-old pubs to Mayfair clubs to the halls of Parliament, London is abuzz with talk of escalating values, foreign buyers with piles of cash and half-built garages selling for vast sums.
London's housing boom "has become a mainstay of conversation", said Paul Stenson, an asset manager at Dunbar Assets plc as he sipped a pint of Aspall cider at Ye Olde Cock Tavern on Fleet Street, a pub dating back to 1549. "Never mind the hackneyed view of it being the conversation of dinner parties, it's gone beyond that. It's like the elevator music that's constantly on play."
Burgeoning demand amid the lack of supply, near record-low borrowing costs, government policies to stoke growth and a cultural obsession with property are among the factors feeding the property craze.
Its effects are being felt across the economic spectrum from trophy-home buyers in central London to immigrants seeking shelter on the city's outskirts to average families using homeownership as a means to a better life. A typical London home now goes for £458,000 (S$970,000).
Last Sunday, Bank of England (BOE) governor Mark Carney called surging home prices the No 1 risk to the economy and listed possible policy responses, moving a step closer to taking action to rein in housing inflation.
Deputy London Mayor Edward Lister said housing is the dominant topic at City Hall and coping with residential planning has never consumed so much time or resources.
Pressure to get in on the action is mounting as concern grows that London prices will keep climbing. Asking prices rose to a record this month as all 32 of the capital's boroughs logged increases, property-website operator Rightmove plc said this week.
Average home values rose by more than £60,000, a 17.7 per cent jump, in the 12 months to February, the most since July 2007, according to the Office for National Statistics. Bidding battles for everything from patches of grass to sprawling mansions to parking spaces and garages are now commonplace.
Prices for first-time buyers reached a record of eight times average earnings in the first three months of 2014, compared with an average of 4.9 times income since 1983, according to mortgage lender Nationwide Building Society. Price gains in a year were almost double the £34,200 median annual income of a full-time London worker. Values are now about 25 per cent higher than the previous peak before the 2008 financial crisis.
Katy Barnes bought a home in Tooting in south-west London in April 2013 because her mortgage payments would be about the same as the rent she'd been paying in Clapham about 4 km away. She now checks the website regularly to see how much her property has gained in value and estimates it's at least 14 per cent and probably a lot more.
The successful purchase made her one of a lucky few. Homeownership in London fell to 50.7 per cent in 2011 from 59.6 per cent in 2000, according to the Department for Communities and Local Government. It's probably fallen to less than 50 per cent by now, according to Bloomberg economist Niraj Shah.
A survey of Britons from ages 20 to 45 published last month by mortgage lender Halifax showed the proportion that want to buy a home and aren't able to save for a down payment rose to 57 per cent from 42 per cent a year earlier.
It's not just homes selling like crazy. A yard in Chelsea measuring 55 feet by 40 feet sold for £84,000, despite not having planning permission for development. Six rundown garages also without approval in nearby Parsons Green were auctioned with a guide price of about £70,000. They sold for 10 times that. The former coach house in south London's Camberwell area that housed its mayor's car was put up for sale by the local government at almost £1,000 a square foot, an asking price comparable to some luxury homes.
Surging home values have sparked concern that the boom is unsustainable. That's ratcheting up pressure to cool the market after the latest series of fresh signals pointed to property prices continuing to surge.
"The London market is looking particularly frothy," said Martin Beck, an economic adviser to EY's Item Club, a research group sponsored by accounting firm EY (formerly Ernst & Young). "The onus remains firmly on the Bank of England to ensure that the market doesn't enter bubble territory."
Homes in the 10 wealthiest London boroughs have a total value of £609 billion, broker Savills plc said in January.
That's 9 per cent more than all of the houses and apartments in Scotland, Wales and Northern Ireland combined.
Policy makers "could do more" to tackle home-price excesses if needed, Mr Carney said in the May 18 interview with Sky News's "Murnaghan" show. Options include imposing more checks on the affordability of mortgages, limiting types of loans or advising the government to rein in its Help-to-Buy programme, which provides equity loans and mortgage guarantees to homebuyers.
The BOE's Financial Policy Committee will publish its recommendations on June 26 and has said it's ready to take more action if needed. It's already ended incentives for mortgages and announced a set of bank stress tests that include a property-crash scenario. The standard variable rate for mortgages up to and including April was 4.4 per cent, according to data compiled by the BOE.
The low interest rates are sparking demand at a time when building is failing to keep up with London's population growth.
Bolstering the economy outside of London is the only way to reduce the city's housing crisis because that would tempt Londoners to move away, says Christine Whitehead, a professor at the London School of Economics who researches housing. - Bloomberg
Lloyds limits mortgage lending to cool London housing prices

Lloyds is the first of Britain's biggest mortgage lenders to announce measures to cool house-price gains and protect itself from potential future losses - PHOTO: REUTERS
[LONDON] Lloyds Banking Group Plc, the UK's biggest mortgage lender, said it will impose limits on lending to homebuyers to counteract rising house prices in London.
The bank will cap lending at four times salary on loans of more than £500,000 (S$1.1 million), Lloyds said in a statement on Tuesday. The lender, which is 25 per cent owned by the government, said the policy will affect about 8 per cent of its lending in the UK capital.
"This is a targeted response to an issue largely in the upper tiers of the London housing market," Stephen Noakes, group director of mortgages at Lloyds, said in the statement. "This prudent update to our lending policies is intended to manage risks to our business and for our customers."
Lloyds is the first of Britain's biggest mortgage lenders to announce measures to cool house-price gains and protect itself from potential future losses. Bank of England Governor Mark Carney has warned housing poses the biggest risk to Britain's economy. London prices have reached record highs, with a typical home now going for £458,000.
Sarah Bailey, a spokeswoman for the Bank of England, said that Lloyds's move was a "commercial decision for the firm". Lloyds said the government's Help to Buy mortgage-support programme isn't driving prices in London, and said 2 per cent of purchases in the city this year have used the plan.
"The group continues to support the Help to Buy mortgage guarantee scheme as it has raised confidence in the housing market, particularly outside of London," Noakes said.
The UK's coalition government is coming under pressure from opposition politicians to modify Help to Buy, which allows homebuyers to purchase properties with small deposits. - Bloomberg
so when everyone starts talking property it is a bad time to be in property Big Grin
Virtual currencies are worth virtually nothing.
House prices: A very British binge
702 words
24 May 2014
The Economist
© The Economist Newspaper Limited, London 2014. All rights reserved
The housing market is a huge problem in Britain. Blame the government, not the banks

HAVING risen by 8% in the past year, British house prices are almost back to the double-digit pace that preceded the financial crisis. That parallel makes many anxious. Vince Cable, the business secretary, calls runaway house prices a "real, real, real worry". Sir Jon Cunliffe, the central banker responsible for Britain’s financial stability, says housing is "too dangerous to ignore". David Cameron, the prime minister, describes the rampant market as the biggest risk to Britain’s recovery.

The housing headache is made worse because different parts of the country are on completely different tracks. Much of Britain is calm, even tepid. In Scotland and Northern Ireland, house prices are up by less than 1% in a year, meaning real prices are going backwards. But the south-east is red hot: London is the core, with prices up 17% in a year. It gives policymakers a conundrum: can they tamp down the south without snuffing out the recovery elsewhere?

The big worry is not the house prices themselves: a house is an asset, after all. The problem is the debt that sits behind it. Britons are stretching to meet ever-rising prices by borrowing more. Average loan-to-income ratios have passed their 2007 peak. This threatens to throttle the economy. Interest-rate rises within a year are starting to look likely: with more pay devoted to mortgage repayments, consumption is bound to fall. That is bad news for firms, and, in turn, workers. A household-debt hangover also reduces the funds that could be channelled towards productive investment. This slows GDP now, and lowers potential too.

The boom runs on two types of fuel. The first is a rush of cash. Mortgage rates are low, and banks are keen to make loans on property. Money has also flooded in from abroad, as fancy flats are snapped up by foreigners whose governments are less friendly than Britain’s. French money underpins Knightsbridge; Belgravia-fancying Russians keep prices rising there.

The second problem is bigger: a long-standing mismatch between supply and demand. Since 2004 Britain’s working-age population has risen by nearly 4m, the number of homes by just 1.8m. New supply is stagnant despite high prices. Dream conditions for house-builders (debt is cheap, as are labourers) should be creating a building boom. Yet the puny 135,000 houses completed in 2012-13 was the lowest number since records began in 1969. In ten years the construction industry has shrunk by more than 12%.

Pre-emptive hangover cures

The Bank of England needs to toughen up. George Osborne, the chancellor of the exchequer, has cannily lobbed the hot potato that is Help to Buy, a mortgage-subsidy scheme, to Mark Carney, the bank’s governor. Mr Carney should call time on it. And he should deploy his new "macroprudential" powers: the plan to "stress test" banks against a 35% house-price crash and a jump in unemployment is a good one. Lenders that cannot withstand this hypothetical shock will need to raise more capital, making them less eager to extend riskier housing loans.

Many British borrowers could do with a hard word from the governor, too. Mr Carney has new powers to stop Britons gorging on loans: debt blockers, such as loan-to-value or loan-to-income caps, would limit household leverage, and thus have most impact on over-borrowed London. Shifting the burden of tax from income to property would reduce the flood of foreign cash.

The biggest let-down has been the government. It has talked a good game about freeing up land for building in the south-east: weak construction figures show how little it has achieved. Mr Cameron should demand a faster planning process. Selling off unused government land would help builders and bring in revenue. Taxing land rather than buildings would encourage speculative construction and would push those sitting on large stocks to build or sell up. Building more around London will not be popular with shrub-loving Conservative voters, but it is the best way to stop another mortgage binge.

The Economist Newspaper Limited (The Economist)

UK property loan defaults up 13% in 2013
Rising real estate values, improving economy spur lenders to get tougher on delinquent borrowers

[LONDON] UK commercial property lenders pushed defaults to a record high last year as rising values and an improving economy spurred them to get tougher on long-delinquent borrowers.
Loans in default climbed 13 per cent to £24.5 billion (S$51.4 billion) as banks became more willing to "pull the plug" over late repayment, according to data from a De Montfort University survey of 76 lenders seen by Bloomberg News.
The value of other loans in breach of their covenants declined 21 per cent to £15.8 billion.
"There has been a lot of pretend and extend as lenders worked through their loan books to take into account falling values and the lack of money available for refinancing," said Bill Maxted, a senior lecturer at De Montfort. "Now that values are improving and provisions are rising, they're demanding repayment."

UK house prices rise in June at fastest rate in over 9 years - Nationwide
Wednesday 02 July 2014 17.44
The price of a typical property in London has reached the £400,000 mark for the first time
The price of a typical property in London has reached the £400,000 mark for the first time
British house prices rose at their fastest annual pace in more than nine years last month, and prices in London have shown their biggest jump in a generation, figures from mortgage lender Nationwide showed today.

UK house prices rose by 1% on the month in June after a 0.7% rise in May, taking the annual rate of increase to 11.8% - the biggest rise since January 2005.

Both the monthly and the annual growth rates exceeded all forecasts in a Reuters poll, in which economists had predicted that the rate of growth would stabilise.

But the most striking number was for London, where house prices in the three months to June were 25.8% higher thana year earlier - an annual increase not seen since 1987.

"The price of a typical property in London reached the £400,000 mark for the first time, with prices in the capital now around 30% above their 2007 highs and more than twice the level prevailing in the rest of the UK," said Nationwide's chief economist Robert Gardner.

Average house prices outside London are a fraction below their 2007 peak, Gardner said, while transaction levels nationally are still well below their historic average.

The figures throw into sharp relief the challenge facing the Bank of England as it tries to stop a regional housing boom from destabilising the rest of the economy.

In an attempt to stop Britons borrowing too much, last week the central bank said that no more than 15% of new mortgages could be to people seeking to borrow over 4.5 times their annual income. Around 10% of loans fall into this category around the UK, rising to roughly 20% in London.

Keywords: london, nationwide, uk house prices
Tech boom lifts London's game
Property observed Robert Harley
622 words
14 Aug 2014
The Australian Financial Review
Copyright 2014. Fairfax Media Management Pty Limited.
Robert Harley

Last week in London, I walked the two Westfield Corporation flagships, visited Lend Lease's Elephant & Castle site, and was introduced to one local real estate investment trust with a highly successful market niche.

London is one of the hottest real estate markets in the world.

House prices have surged, helped by offshore buying. However, agency Savills now expects prices to plateau in 2014 and 2015, ahead of a general election, the possibility of new property taxes and higher rates.

Commercial values have also risen, helped by rising rents. Niche REIT, Derwent London, has just sold two holdings at 40 per cent above December 30 valuations.

Behind those market moves are some key real-estate themes.

For Lend Lease's David Hutton, the keys are new infrastructure and, unlike in Australia, a genuine drive for institutional investment in affordable rental housing.

Car use has fallen. At the two Westfield centres, over 70 per cent of customers come by public transport. The city's new infrastructure project, the £14.8 billion ($26.8 billion) Cross Rail, due to open in 2018 and expected to boost rail capacity by 10 per cent, by linking Heathrow in the west directly with stations like Canary Wharf in the east, will have a dramatic impact.

Westfield and Lend Lease benefit at Stratford: Derwent is reworking its holdings around Tottenham Court Road and Farringdon stations; another developer, Argent, has 50 new buildings under way at a massive urban redevelopment at Kings Cross.

The foot traffic at Westfield Stratford is extraordinary. From a standing start in 2012, the centre now attracts 38 million visits a year which is more than at Westfield London.

Stratford also demonstrates the drive for institutional investment in private rental with 1400 homes in the former Olympic Village set aside for long-term rents in a £557 million deal backed by Qatari Diar.

Last year the government's Private Sector Rented Taskforce identified over £10 billion of institutional investment for rental homes helped by government subsidies.

Local government sets a share of affordable housing in projects like Elephant & Castle. And developers work with authorities.

Another key to London real estate has been the rise in demand from the high-tech work force, particularly in financial technology.

Tech City UK estimates that 27 per cent of the city's jobs growth is in the digital sector with some 582,000 people now working in the sector. Most are not working in the City. Many are in a so-called high-tech belt of reworked industrial and older office buildings between Bloomsbury and Shoreditch. The rise in high-tech demand, and the infrastructure opportunities, have been a boon to Derwent London.

"It's not the bankers driving growth, it's about the creative industries," says Derwent director David Silverman.

Derwent has never chased the bankers in the City, specialising in offices in "villages" like Fitzrovia. The group buys low-value buildings with modest rents and short-term leases, reworking to gain the upside in rents, and then picking the time to sell to help fund for future projects.

It's a focused strategy, driven by three executives with a big capital stake, low overheads, and no funds management extras. And it has delivered. Investors did not suffer dilutive raisings during the global financial crisis. Distribution per security has risen a compound 10 per cent a year since 1989. The total return is above the EPRA UK benchmark.

I toured some Derwent properties, like the Tea Building in Shoreditch, with Australian fund manager Resolution Capital director Andrew Parsons. Not surprisingly, it is one of his top 10 stocks.

Fairfax Media Management Pty Limited

Document AFNR000020140813ea8e0002t

London property millionaire? You’re not alone
Catherine Boyle | @cboylecnbc
10 Hours Ago

There are now close to 500,000 property millionaires in the U.K., after several years of house price growth which have surprised even estate agents.

And the priciest properties are, unsurprisingly, in London, according to research from property website Zoopla.

Oli Scarff | Getty Images News | Getty Images
There are 12 streets in the U.K. where the average house will set you back over £10 million ($16.6 million), and they are all in London. The most expensive is Kensington Palace Gardens, with an average house valued at over £42 million, where international business tycoons like Lakshmi Mittal and Roman Abramovich have their London base – a stone's throw from the Duke and Duchess of Cambridge.
Property: The greatest risk to the UK economy?
Lower down the scale, the kind of wealth creation through property shown in these numbers (there are now 49 percent more property millionaires in the U.K. than last year) is unlikely to continue at the same pace, with rate repayments on mortgages set to rise.

House price growth in London is likely to slow in 2015, before stalling completely in 2016, according to new predictions from estate agents Savills. London house prices will grow by 15 percent, the estate agent predicts, a rise in its earlier forecasts, but growth will be slower than forecast for the next four years.

London house price growth seen tumbling 80%
"House price growth in the mainstream market has been underpinned by record low interest rates, rising loan-to-income lending and pent up demand from buyers re-entering the market as the economy and consumer sentiment have improved," Lucian Cook, Savills UK head of residential research, said in a statement.

"But these extraordinary rates of house price growth cannot continue in the current, more regulated mortgage environment, particularly in the face of likely interest rate rises."

- By CNBC's Catherine Boyle
UK house prices surge to new all-time high
AAP AUGUST 29, 2014 5:45PM

British house prices surged by 11 per cent year-on-year in August to reach another new all-time average high of £189,306 ($A345,543).

Property values were pushed up by 0.8 per cent month-on-month, marking the 16th monthly increase in a row, and the annual pace of price growth accelerated from 10.6 per cent in July as a result, according to the Nationwide building society.

Typical UK house prices first surpassed their 2007 peak in cash terms in May this year and they have been hitting new records every month since.

Year-on-year house price growth has been in double digits since April, according to the building society's study.

Despite property values reaching record highs over the British summer, there have also been signs of a cool down in the market in recent months.

Mortgage approvals generally dipped after stricter lending rules, which force lenders to ask for more detail about a mortgage applicant's spending habits, came into force at the end of April but approvals have since rebounded slightly.

Nationwide said it is still unclear how much of the cooling in activity was due to the introduction of the new Mortgage Market Review (MMR) rules as opposed to an underlying loss of momentum in the market.

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