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Research 26 June 2015

Chestertons Residential Observer - June 2015

There is little sign yet of a jump in sales activity following the Election. Is the market now waiting to see what surprises the July Budget brings?

Nick Barnes, Head of Research
  • HMRC data for April reveal that UK residential sales fell by 5.5% compared to the previous month and were 6.8% lower than in April 2014.
  • According to the Halifax, the average age of first time buyers is now 31 - up from 28 in 1995. Affordability has worsened to the extent that research from the Sunday Times suggests that 52% of first-time buyers receive cash contributions towards mortgages from their parents. Furthermore, new research from Shelter shows that 49% of parents in Britain whose children haven't yet bought a home think that the only way they will be able to do so is with an inheritance from them.
  • An indication of the extent of the housing shortage has come from the RICS who report that the average stock per surveyor fell to a record low at 52 in May, its lowest level in almost 40 years.
  • A study by the Council of Mortgage Lenders estimates the value of the private rented sector was £990 billion in 2014 and is expected to break the £1 trn barrier in 2015. The sector has grown 70% since the onset of the financial crisis in 2007.
  • Recent research from buy-to-let (BTL) lender Landbay shows that BTL investments have outperformed other major asset classes over the past 18 years. Every £1,000 invested in an average BTL property purchased with a 75% loan to value mortgage in Q4 1996 would have been worth £14,897 by Q4 2014. The same investment in UK commercial property would have grown to £4,494, in gilts to £3,329, in UK shares to £3,119 and in cash to £1,959.
  • Direct Line for Business is urging landlords, or anybody managing a property on their behalf, to lookout for obvious signs that their properties are being used as secret cannabis farms. This is in response to news that the number of cannabis seizures in rented homes soared by 195% in 2014, with most seizures occurring in London. Cannabis farms can not only cause significant damage to properties, but could also potentially void landlord insurance policies.
  • The UK's second residential REIT is about to be listed on AIM. REITs are typically able to reward investors with higher dividends because they are exempt from UK tax on rental income and gains from property investment as long as a minimum of 90% of their profits are distributed to shareholders as dividends. The K&C REIT will invest in residential properties in central London.