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Unemployment falls by 17,000

The number of unemployed men fell by 31,000 on the quarter to reach 1.45 million but the number of unemployed women increased by 14,000 to reach 1.03 million. Figures from the Office of National Statistics show the number of people unemployed for up to 12 months fell by 29,000 to reach 1.63 million but the number of people unemployed for over 12 months increased by 11,000 to reach 847,000. But the employment rate for those aged from 16 to 64 for the three months to February 2011 was 70.7%, up 0.2 on the quarter.

The number of people in employment aged 16 and over increased by 143,000 on the quarter and by 390,000 on the year to reach 29.23 million. The number of people claiming Jobseeker’s Allowance increased by 700 between February and March 2011 to reach 1.45 million. The total number of male claimants fell by 4,400 on the month to reach 988,200 in March 2011 but the number of female claimants increased by 5,100 to reach 462,300, the highest figure since October 1996.

Housing market activity sees spring bounce

March saw a strong lift in housing market activity, with 7% more residential mortgage valuations conducted compared to a year ago, according to the latest research by Connells Survey and Valuation.

Four successive months in which residential mortgage valuation activity has risen year on year, indicate a sustained recovery in the housing and mortgage market. In the first quarter of 2011, valuation activity was 16% higher than in the same period a year ago.

In March, the total number of valuations for residential property increased by 5% compared to February – even allowing for the 15% more working days in March. In the first quarter of the year, nearly a quarter (24%) more valuations were conducted than in the previous quarter.

March also saw an encouraging increase in the number of first-time buyers entering the market. There were one fifth more valuations for first-timers (21%) than in February, and 26% more in the first quarter of 2011 than in the previous quarter.

With 34% of all valuations conducted on behalf of first-time buyers, this is the highest proportion of all Connells’ valuations since September 2010.

“The real barometer of the health of the housing market is activity and this is showing signs of picking up – with a welcome boost in first-time buyer demand.

“While we are still 4% below last year’s level in March, the recent increase in the number of higher LTV mortgage products helped breathe some life into the first-time buyer market, and first-time buyer numbers have risen steadily for four consecutive months.

“The government’s new FirstBuy scheme should provide added relief for a limited number, but the real lifeblood of first-time buyer market is mortgage finance, and we still need lenders to do more to fan the flames of recovery.”

Increasing commitment from buy-to-let investors has played a vital role in the pick-up in housing market activity.

The number of valuations for prospective buy-to-let landlords rose by 14% in March compared to a year ago – 5% more than last month. In fact, in the first quarter of the year, there were 55% more valuations for property investors than in the same period last year.

“The resurgence of the buy-to-let sector continues apace as landlords look to exploit generous – and rising – rental incomes and strong demand from tenants who cannot get a foot on the property ladder.

“On the back of the changes to stamp duty on bulk property purchases, and the removal of REITs conversion changes announced in the budget, we should see pick-up in institutional investment, and the sector go from strength to strength.”

Homeowner valuation activity also rose, increasing by 2% compared to month before, although this figure was down by 9% compared to March 2010.

Although remortgaging activity dropped back slightly in March following February’s spike, there were 56% more valuations for remortgagors conducted during the month than in March last year.

“In recent months, mortgage activity has been buoyed by the strong demand for remortgage products as homeowners look to get household finances in order before interest rate rises.

“This has been somewhat balanced by the rising costs of remortgage products, but there is still substantial demand from borrowers looking to fix rates while interest rates are low.”

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Gold rush as rich buyers beat Stamp Duty deadline

An extraordinary rush to beat the stamp duty deadline for millionaires has pumped billions of pounds into the property industry. One property in Mayfair sold for £27m, with the purchaser reluctant to hand over 5% tax to the Treasury when 4% would do.

Winkworth reported that it exchanged and completed on two expensive properties in one day, whilst Foxtons simultaneously exchanged and completed on ten prime central London houses in the 24 hours before the deadline.  In the same 24 hours, Savills completed on £90m worth of property as the deadline closed in. One-third of it was in south-west London.
 
Wednesday was the day that new stamp duty came in, adding 1% in tax for buyers of properties priced at £1m and above. In the week leading up to it, Savills completed on £200m of property in total.

This was after a record March which saw ‘furious activity’, and in which Savills’ prime London sales beat its sales at the peak of the market back in July 2007 “by a significant margin”. Deals went through quickly.

But Jonathan Hewlett, head of Savills London, suggested the party is not yet over. He said: “The most important element to this tale, we believe, is the pipeline of deals still coming through which remain very strong. “Importantly, the number of properties under offer at the end of the month are well ahead of March 2007 when the market was building towards its peak, suggesting that this is not a blip but a reflection of the strength of London’s prime market.
 
“While this deadline focused minds and made a difference to the speed of transactions at all pricing levels, our pipeline of agreed deals is ahead of the March 2007 level. “Our sense is that this momentum could continue and that there will be price inflation for the right stock.”

The most up-market parts of London were beneficiaries of the Stamp Duty race. In Fulham, Savills pushed through £12m of property sales in the week before the deadline, but also agreed nine sales that had no chance of meeting the deadline, and has since agreed two more. Savills’ branch in Sloane Street agreed 14 sales to the total value of £94m in March, a record month for the office since June 2007. In Knightsbridge, Savills’ Charlie Bubear, who specialises in flat sales, completed on ten deals in the last week, including three which only went under offer on Monday.

A Savills spokeswoman said: “To achieve such tight sales, tactics such as attended exhange and completion are used, and in some cases the seller secures a leaseback to allow for a move after the completion date. Charlie has even been helping clients clear flats to allow them to complete, mopping floors and carrying potted plants out of gardens.” Not to be outdone, Knight Frank completed on £333m of transactions in the three weeks leading up to April 5, compared with £74m in the same period of 2010.  Liam Bailey, head of residential research at Knight Frank, said: “This 350% increase is reflective of the huge rush to transact prior to the introduction of the new 5% £1m-plus stamp duty rate.”

Whilst some of the streets of London were paved with gold, the leafiest lanes in the shires were also awash with rich buyers. Rupert Sweeting, head of the country department at Knight Frank,said: “We saw an unprecedented rise in the number of exchanges and completions, which was solely down to buyers keen to avoid paying an extra 1% in stamp duty. This is entirely understandable, as on a £3m purchase a buyer saves £30,000. “We even had buyers completing before April 5 and, under a rental / licence agreement, the vendors were allowed to stay living in the property to give them time to find a new house. In one case, this period is a year.”

Like Savills, Knight Frank believe that the passing of the deadline will not deter the wealthy – but Sweeting warned that tax avoidance schemes would become more popular. Sweeting said: “Going forward, buyers have accepted that, in the grand scheme, it is an amount that they can and will swallow. “It would have caused a lot more distress had the £1m stamp duty been bumped up by 3% or more. Given the stamp duty on a £3m home purchase is now £150,000, I imagine that stamp duty avoidance schemes will become more popular, as buyers try to avoid paying such a significant amount to the government.”

David King, director of Winkworth’s country house department, said: “The stamp duty increase generated a significant amount of activity in the weeks leading up to April 6. There was a rush to complete this week alone, with two cases of exchange and completion on the same day.”

The rise in stamp duty is likely to cost £1m-plus buyers an extra £17,112 on average, according to Zoopla. The average stamp duty paid on £1m-plus properties last year was £68,449 but the increased stamp duty will take average duty to £85,561. In 2010, there were 6,610 property transactions conducted in Britain at a value over £1m.

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Stamp duty should be paid by sellers not buyers, says HSBC

A new and permanent reform of stamp duty would mean that the tax would be paid by sellers and not buyers. The call for reform has come from HSBC which found that 85% of non home-owning young adults (18 to 34-years-old) want to own their own home, but only 19% of the 85% expect to be able to do so within the next five years. And almost half – 45% of aspiring home-owners – do not ever expect to be able to purchase.

In its report, First Time Buyers: Roadblocks and Ways Forward, HSBC found that the younger, 18 to 24-year-old age group was the more optimistic. Around 22% expect to purchase within five years. However, 21% do not expect ever to be able to purchase.

For each of the past three years there have been around 200,000 first-time buyers, according to the Council of Mortgage Lenders. This is less than half of the 400,000 to 500,000 of those recorded in more typical market conditions, before the credit crunch hit.

The key reasons holding aspiring home owners back from house purchase are:

69% cited “raising the required deposit”
59% cited “insufficient income to support the mortgage.”
27% said “concerns over unemployment”
12% said “concern over future falling house prices”

The current average FTB house price of £136,842 is 6.6 times a young single person’s average earnings of £20,654 (source: Nationwide Building Society and National Earnings Survey).

In order to afford a 90% LTV mortgage, a typical FTB would need to earn £30,800 – 49% higher than current average earnings for a single young adult.

Even then, a 10% deposit of £13,684 is equivalent to 42% of this higher annual income, a major impediment to home purchase without external financial assistance. It is therefore not surprising that 84% of young FTBs are buying with assistance, mostly from parents. This compares to 38% in 2005, according to the CML.

Stuart Beattie, HSBC’s head of mortgages, said: “Our study proves that the aspiration to be a home owner continues to be exceptionally strong. Over 80% of young non-home owners are aspiring to buy a home but are being prevented from doing so due to lack of affordable homes.

“The key to helping buyers back into the market is to help them obtain the cash deposit that responsible lenders require before granting a mortgage.

“To this end, both government and private sector interested parties need to come up with innovative schemes to help aspiring FTBs.”

The report says that government-supported initiatives have helped around 22,000 FTBs a year in each of the last three years.

HSBC is also suggesting that Stamp Duty should be applied to sales, not purchases. This would mean that FTBs would be excused it when the £250,000 stamp duty holiday ends next March.

The bank also suggests that 95% mortgage lending could be deemed prudent, if it could be backed by insurance to cover both lenders and borrowers.

The cheapest streets in the country are in towns in the north of England and in Wales.

The cheapest street of all is Angle Street in Burnley, where the average house value is £32,400. It is followed by Fernhill in Mountain Ash, with an average value of £32,700.

In the North-East, you can pick up a house for £39,600 in Haig Street, Ferryhill. In Yorkshire and the Humber, Alfred Street in Halifax is the cheapest in the region (£42,200).

In the East, the cheapest street is Austin Avenue, Clacton-on-Sea (£51,600); in the East Midlands it is Recreation Drive, Shirebrook (£48,500), and in the West Midlands the honour goes to St Cecilia Close in Hoobrook (£43,800).

Even London has some bargain areas: the cheapest is Arthur Street, Bexley (technically Kent, unless you’re Mouseprice, which brings us this information) with an average value of £99,900.

In the South-East, Plaintain Court in Milton Keynes has houses with an average value of £45,200, making the South-West look expensive – there, the cheapest place is Cheriton Close in Plymouth (£65,300).

UK Asset Resolution, the government owned company that runs Northern Rock Asset Management and Bradford & Bingley has revealed that both companies returned to profit in 2010.

Northern Rock Asset management, the so-called bad part of Northern Rock made an underlying profit before tax of £277.4m, compared with a £313.4m loss in 2009 and a statutory profit of £400.5m, compared with £257.5m loss in 2009.

Earlier this month, Northern Rock plc, the so-called good bank which was formed when the bank separated revealed a £232.4m pre-tax loss for 2010.

Bradford & Bingley made underlying profits of £200.1m in 2010, compared with losses of £166.5m in 2009.

Both companies continued to benefit from the support of the government in the form of lower interest rate loans.  NRAM repaid £1.1bn of its loan to reduce the balance to £21.7bn during the year. B&B government funding of £27.0bn has remained stable, and no further drawings were made in 2010.

B&B received £2.1bn in redemption payments and NRAM £4.3bn. 

The lenders say redemptions are lower compared to the previous year due to the reduced book size in both organisations and the challenge faced by many customers to find suitable remortgage opportunities with other lenders due to the continuing difficult market conditions.

The number of arrears at B&B has fallen in 2010.  Arrears at NRAM have continued to increase but at a slower rate than in 2009. As at the end of 2010 there were 13,096 cases of B&B mortgages in arrears for three or more months including possessions, a fall of 32% compared to the end of 2009.

For NRAM, the equivalent figure was 25,419, up by 3%, a reduced rate of increase compared to the 18% year-on-year rise experienced in 2009.

During 2010 B&B says it made good progress in respect of customers with serious arrears, reflecting tight management of collection activity. Most buy-to-let customers also benefited from a borrowing rate that is less than the rental yield, the result being that the number of customers more than three months in arrears fell from 5.5% to 4.1%, which includes possessions.

NRAM arrears rose from 4.7% to 6.6% resulting from the transfer of £10.3bn mortgages to Northern Rock plc on 1 January 2010, the declining total book and the nature of the mortgages in the book which have high loan-to-value ratios and do not benefit from the lower interest rates applicable to the majority of B&B buy-to-let customers.

Richard Banks, chief executive of UKAR, says: “We achieved all our business objectives in 2010.  B&B and NRAM moved from loss to profit and we continue to focus on managing customer arrears.  We will continue to help customers alleviate short term issues and also work with customers with more fundamental problems to enable them to exit the housing market in an orderly way.

“The combined business is now better placed to move forward in 2011. However, the uncertain economic environment, increases in taxes, inflation and unemployment will, inevitably, impact our customers and our financial results.”

31 March 2011 | By Natalie Thomas

On the face of it, if certain commentators are to be believed, the turmoil in the property market is set to run well into 2013, with low interest rates, more quantitative easing and a fall in property prices of at least 20%.

But this is not a view that I subscribe to for several reasons.
For me, with the benefit of hindsight, 2011 will prove to have been the year that many of the best property bargains were bagged.

If we are to follow a general cycle of recovery in 2012 and beyond, it therefore follows that 2011 will prove to be the nadir for house prices and also interest rates. As the economy improves and confidence returns to the market, demand for property will grow once more. Given that there is a chronic undersupply of quality property, particularly in areas like London, house prices will begin to recover.

I still believe that house prices in the South East will still rise by around the 3% level next year as a whole, with any falls being concentrated in the first half of the year.

This will also coincide with an increase in interest rates as the Bank of England finally has to start controlling inflation, returning interest rates to more normal levels. The days of tracker rates at 2.5% and 5 year fixes below 4% will seem a long way away.

In fact, interest rate changes could be seen as early as the Spring, if people like Monetary Policy Committee member Andrew Sentance begin to win their argument that rate changes earlier rather than later are the best method of keeping a lid on inflation as the economy improves.

I would not at all be surprised to see a Bank Base Rate up at 1.5% – 2% by the end of the year if not sooner.

Certainly it is unlikely that we will see general mortgage rates in the latter half of 2011 being as competitive as they are now. For those looking to remortgage and finally enjoy the sanctuary of a fixed rate, I would be looking to do something within the next few months.

In other words if you do want to take advantage of low interest rates and competitive house prices, 2011 will seem to be as good a bet as any. In fact, it could prove to be the best time for many years to come.

The problem for many next year however, especially 1st Time Buyers, will be the ability to take advantage of such a situation given that mortgage lending will continue to be the preserve of those with large deposits, perfect credit and steady jobs. Those with just a 10% deposit, the self-employed and  erratic income sources will find the going particularly tough, being constrained by tough lending criteria and, for those lucky to still qualify, priced out by higher than average interest rates.

In fact, if the Council of Mortgage Lenders are to be believed, mortgage lending could well dry up next year due to a combination of having to pay back government loans, tougher capital adequacy requirements and the Financial Services Authority’s latest set of proposed regulation.

While on the whole I expect gross lending to be similar to the figures for 2010 of around £135bn, actually maybe a slight rise to £140bn, and net lending to almost certainly drop further as many continue to pay their loans back, I believe that this is more of a veiled threat to the FSA and government with regards to further regulation than anything else.

There is talk of more lenders heading back into the market next year and brand new lenders following the likes of Metro Bank to bring in some much needed competition, which, whilst not changing the landscape dramatically, will assist in bringing in some more lending capacity.

It does seem to be the case that at times like these many commentators like to make out that things are worse than they actually are, so it is down to each individual to decide whether to wallow in despair, or to concentrate on only that which you can control and get on with making the best of things.

There is no doubt that a recovery will be upon us in the next couple of years. Whether this is sooner or later does not really matter, as we all know that the best deals are done just before the upturn is in full swing.

22 December 2010 | By Andrew Montlake

Government plans tax for high value homes Deputy prime minister, Nick Clegg has revealed plans to introduce a tax on high value homes, allowing the government to scrap the 50p income tax rate.

Speaking to the Financial Times, Clegg says the tax on owners of big properties had gone almost unnoticed in George Osborne’s Budget last week.

Speaking to the FT, he says: “As well as reviewing revenues from the 50p tax rate, we will also be redoubling our efforts to find ways of ensuring that owners of high value property cannot avoid paying their fair share.”

He also says it would not be reviving the old Lib Dem policy of a 1% mansion tax on properties worth more than £2m but it is looking at a range of measures such as the way the council tax system is structured and the way Stamp Duty is structured.

via Mortgage and Insurance Advice: Government plans tax for high value homes.