Northern regions see fastest rise in equity release – research
Equity release sales rose at 31.1% year-on-year, according to the latest data released by Equity Release Supermarket.
Although the South dominates the sales, the Northern regions grew the fastest with the North East rising by 117 % year-on-year.
This was followed by the East Midlands, Scotland and Wales, standing at 92%, 79% and 71% respectively.
On the other hand, the East Midlands led the way in growth measured by sales value, with 140% rise year-on-year, which is linked to the four per cent annual house price rise in the region.
The East Midlands was the second fastest growing region for house prices in 2018, with Northern Ireland leading at 5.8%.
Scotland followed the East Midlands with a 135% increase year on year, Yorkshire and Humberside came in at 91% and the North East at 89%.
London saw the smallest rise in plan sales, with a 19% rise. This is likely to be linked to house prices falling 0.8% year-on-year in the capital.
That said, the average house price in London at Q4 2018 is still 118% above the national average, standing at £466,988 versus £214,178.
Mark Gregory, founder and CEO of Equity Release Supermarket, said that this year has seen an exceptional growth in terms of both the number of plans sold and the value of these plans.
He added: “However, growth in the equity market is in stark contrast to the broader housing market, which continues to be weighed down by ongoing economic uncertainty.
“It will be interesting to see if these trends continue in 2019 as it could impact how equity release providers, particularly those with regional lending policies or those with ‘on the ground’ sales forces, manage their businesses in the year ahead.”
South East is top region for home renovations
The findings follow views from the industry that home renovations are responsible for the boom in second charge lending.
Data from the Finance and Leasing Association (FLA) published this week showed that second charge lending grew for the fourth consecutive month in June and by 36% over the second quarter of 2017.
And brokers in the market have noted that the shortage of properties available to buy is leading home owners to take out second charge mortgages to develop their existing properties.
The five areas which saw the biggest increases in planning applications in the past two years are all based within commuting distance from London with Barking and Dagenham taking the top spot with 114% hike in applications.
Luton shows the second highest increase of 59%, with Milton Keynes in third with a 54% increase, and Wokingham taking the fourth spot with a 42% increase in planning applications.
Hull was the only area in the north of England to make the top ten at number seven with a 40% increase since 2015.
At the other end of the scale the majority of areas with a decrease in renovation applications came from northern and midlands areas, despite the top two locations being London based (Islington at 28% and Tower Hamlets at 18%). Hartlepool, near Newcastle, was third (15%), followed by Bracknell Forest (14%), and Stoke-on-Trent (14%).
Stephen Jury, spokesman for Plentific, said: “We’ve seen a large increase in demand for bigger renovation projects in many areas over the last two years. With house prices seeing substantial rise in recent times, the logical option for many homeowners is to stay and improve, rather than move. For others, moving up the ladder might not be an option due to price, so they must instead think about expanding their current home.
“The fact is, many homeowners now look at a large garden, garage, or loft as an opportunity to renovate, with the majority thinking of it as an investment in the future value of a property. Plus, with the boom in property prices, there are also plenty of property developers looking at opportunities from making profit from renovations.”
Northern Powerhouse best for property investment: Kuflink
The index looks at the average house price and median rent in 50 major towns and cities across the UK, calculating the average rental yield for each location. It found that since January this year average rental yields have remained strong across 34 of the 50 areas analysed.
But it is northern towns which it believes will prove most alluring to investors with three major cities topping the list of highest yields:
||Average rental yield (%) March 2017
At the other end of the scale, some southern areas have struggled, with Chelmsford in Essex providing rental yields of less than 3%. London is also found in the bottom ten for rental yields at 3.45%.
Tarlochan Garcha, CEO at Kuflink, said: “This index shows that savvy investors should look to the regions where strong rents and more affordable house prices make for fruitful investment opportunities. The Northern Powerhouse is leading the way, while London falls by the wayside, as rents fail to keep up with rocketing house prices.
“The stability of both house prices and rents is a positive sign for buy-to-let investors, proving the strength of the UK’s property market, which is able to withstand the uncertainty surrounding the UK’s exit from the EU. The following few months will be the true test of the market, as Article 50 negotiations get underway.”
Kuflink’s index chimes with research from BM Solutions, which found that northern landlords were enjoying rental yields of more than 7%, while their counterparts in the south were generating returns of around 4.5%.
Negative February auction figures misleading
The total raised in residential auctions in February fell by 16.6% to £403m from £484m for the same period last year. The number of lots offered was 15.3% down, at 3,183, while the lots sold fell 16.7% to 2,438. Only 76.6% of the lots offered sold, compared with 78% last February.
However, EIG managing director David Sandeman said: “Whilst a cursory glance at the figures shows a sea of red, in February 2016 we saw a major spike in sales due to buyers and sellers wanting to complete before the impending stamp duty changes, which subsequently came into effect on 1st April 2016.”
Sandeman said the next month’s statistics should give a better indication of the market’s progress, and to a greater extent in May, as properties sold within the comparative periods will be subject to the same stamp duty land tax (SDLT) rates.
“Notwithstanding this, positive gains are evident in many northern regions of the UK for the rolling quarter, where lower house prices mean that stamp duty is less of an influencing factor,” said Sandeman.
Scotland saw positive figures across the board for both residential and commercial. Lots offered were up 62% to 264, with lots sold up 94.9% to 191. The total raised was £23m, up from £11m last February.
Sandeman said anecdotal evidence from auctioneers so far in March suggests more expensive London and South East lots are not selling, while lots in cheaper Northern, Scottish and Welsh markets are being snapped up.
Analysing the market’s performance during February over the course of the last decade illustrates that last month’s results are on a par with previous years’ results, and not in disarray that the percentage falls would at first glance suggest.
Whilst both down 14% on last year, the overall lots offered (3,849) and lots sold (2,989) for residential and commercial are at largely the same level as they were in February 2015 (3,381 and 2,995 respectively).
The amount raised at auction fell 15% on last year but it still totalled £93m more than in February 2015 – a gain of 20%.
The figures follow a quiet January, when only 15 sales were held across the UK and only 315 lots sold.