Scottish Property Market Sees Boost In Lending To First Time Buyers

The number of loans advanced to first time buyers increased again in the third quarter of this year, according to new figures released today (Monday 26 November) by the Council of Mortgage Lenders in Scotland.

There were 5,100 loans advanced to first time buyers in the third quarter, a 6% increase compared to the second quarter and up by 9% on the same period last year, the highest number of first time buyers in nearly three years.

This represented the third successive quarter of growth but below the rate of growth shown in the rest of the UK at 16%.

By value, first time buyers in Scotland borrowed 460 million, up from ã450 million in the previous quarter and 440 million in the third quarter of last year. As in the UK overall, first time buyers typically borrowed 80% of their property value , a figure largely unchanged in the last 18 months.

The percentage of income spent on mortgage payments by first time buyers in Scotland also remained stable at 17.8%, spending less of their income than in the UK overall which is 20.1%.

The figures also show that first time buyers typically borrowed 2.83 times their income, lower than the 3.25 in the UK, and reflecting the lower house prices in Scotland.

A total of 3,200 first time buyers bought a property under ã125,000 in the third quarter, falling below the stamp duty threshold, and representing 63% of all loans to first time buyers compared to 39% in the UK.

While there was an increase in lending to first time buyers in Scotland, there was a slight fall in lending to home movers in the third quarter. There were 7,400 loans advanced to home movers, a 3% fall compared to the third quarter and down by 6% on the same period last year.

By value, home movers borrowed 1 billion in the third quarter of 2012, down from ã1.01 billion in the previous quarter and 1.05 billion in the same quarter of 2011. In contrast, the number of loans taken out by home movers in the UK in the third quarter rose by 12%.

The increase in first time buyers and slight fall in home movers led to a small increase in the total number of house purchase loans advanced in the third quarter. A total of 12,500 house purchase loans were advanced worth ã1,460 million, up by 1% compared to the second quarter, but down by 1% on the same period in 2011.

While the number of loans increased, the value of loans remained the same as in the second quarter at 1,460 million.

Compared to the rest of the UK, loans for house purchase exhibited a weaker rate of growth, where house purchase lending increased by 13%.

As in the UK overall, there was a fall in remortgage lending in Scotland compared to both the previous quarter and the third quarter of 2011. A total of ã670 million was advanced to borrowers remortgaging, down from 740 million in the last quarter and a 28% fall compared to the ã930 million advanced this time last year.

The boost in first time buyers is encouraging but the rest of the market still remains broadly flat. The Funding for Lending scheme is likely to assist with growth going forward and we welcome the MI New Home scheme, enabling people to access higher loan to value mortgages on new build properties. But itђs still too early to see any meaningful effects flowing into the market as yet, said Iain Malloch, chair of CML Scotland.

Spanish Government Announces Plan To Attract Foreign Buyers For Empty Property

The Spanish government is appealing to foreigners to buy property in Spain and in return they will be fast tracked for residency permits.

It is estimated that there are millions of empty new properties in the country that Spaniards can’t afford to buy. Now the government has decided the only solution it to encourage buyers from outside the European Union who can be tempted to come and live in the country.

The government has also announced it is to offer an amnesty to people living properties who don’t have title deeds and therefore are not paying property tax.

There may be thousands of properties in Spain that have not been properly inscribed in the Cadastre, which means owners have not been paying the correct amount of local property tax known as the IBI.

Under the proposal owners who have not paid taxes on properties can now register their homes and avoid fines for back taxes by paying a penalty of just €60. Under the current law, the fine could be as high as €6,000.

The amnesty will only benefit owners of properties that do not contravene any planning laws. It will still not be possible to register illegally built properties in either the Property Register or the Cadastre.

The announcements come at a time when there are indications that the Spanish property market is improving. The latest figures show that sales in September were up by 3% compared with the same month last year.

‘It may not be much but any good news for the market is welcome in these dark days. The market has found a floor at just over 20,000 home sales per month, which translates into 250,000 a year. Assuming there are 16 million households in Spain, that means just 1.5% households buy a new home each year,’ said Mark Stucklin of Spanish Property Insight.

But in the boom years it used to be 2.5 to 3% more. ‘Now people are either renting or staying put,’ explained Stucklin. He added that even although there has been a small annual gain, sales were down 9% on a monthly basis. ‘Things are clearly not out of the woods yet,’ he added.

Property agents are hoping that a planned increase to VAT on new property due in January will be cancelled as they are convinced that it is the current reduction in VAT of 4% that is helping sales.

‘I have spoken with banks, lawyers and other experts and few think the Prime Minister would be so stupid as to raise VAT up to 10%. An extra 6% would add €15,000 in costs for a property priced at €250,000, hard to swallow at a time when the Spanish construction business is on its knees,’ said Nick Stuart, director of Spanish Hot Properties.

 

‘The government knows that it has to get rid of housing stock before the construction industry can pick up and I think that it will do anything to help facilitate the sale of new builds from developers or the banks. However Rajoy will no doubt wait until the end of December before he shows his hand so as not to derail the current buying,’ he explained.

France Is Most Popular Foreign Destination For British Buyers, Survey Reveals

British people seeking second homes abroad favour France over Spain despite recent real estate tax increases across the Channel.

The ongoing Eurozone crisis is doing little to deter ambitious home buyers, with many, 23%,  still keen to pick up a property bargain abroad, according to the latest HiFX Property Hotspots Report.

‘France remains a safe bet for Brits. It goes without saying that the sun and lifestyle are a big pull but buyers can now get better value for their money and take advantage of the weakening euro,’ said Mark Bodega of HiFX.

  

Neighbouring Spain is in second place with two in ten potential buyers, 19%, hoping to purchase a property there. However, the allure of Spain falls down the rankings for experienced property owners, with just 9% saying they would buy there if they were considering purchasing another property.

 

‘Spain is still popular with Brits who are hoping to take advantage of lower property prices. The average property price in the country is down almost 13% in the last year alone.  In years gone by bargain hunters would focus inland, particularly looking for run down properties that needed some work. As inland prices have fallen the most since the property crash this is till true, however prices have fallen on the coast dramatically as well giving bargain hunters plenty of choice,’ explained Bodega. 

 

The US is the next most popular destination with 7% and then Italy, Cyprus, Portugal and Switzerland all came in with 3%.

The report also shows that 35% of UK adults surveyed said they are looking to buy a property abroad within the next one to two years, whilst 30% are even looking to purchase abroad within the next six months.

Some 28% said that they will spend between £50,000 and £100,000 on their property, with 16% saying they plan to spend between £100,000 to £150,000.

They will largely be funding their property purchase through savings, with 43% stating this was how they planned to buy abroad, whilst almost a quarter said they plan to sell their UK home to buy abroad.

Lifestyle and culture are the most appealing aspects for 59% of UK adults when it comes to considering buying a place abroad, closely followed by the allure of foreign weather at 51%. Whilst having a better standard of living and the belief that it is cheaper to own a property abroad than in the UK are the key reasons for 24% of UK adults surveyed.

‘It's still a big dream for many Brits to either sell up and move abroad or own a second property overseas, and many understandably think now is a good time to pick up a bargain in the sun and make the most of the foreign weather and culture,’ said Bodega.

‘Our advice is always to make sure people research their options fully first, there are chances now to pick up some great deals but the current Eurozone problems still mean some countries can be quite unstable,’ he added.

UK Residential Rents Set To Rise Well Above Inflation In Next Five Years

Rents across the UK will continue to rise well ahead of inflation over the next five years, as growing numbers of young singles and families remain unable to raise the deposits necessary to access home ownership.

But a North/South divide will open, reflecting the ability of tenants to afford rent rises. Higher economic and wage growth in the South East, coupled with strongest demand and most limited supply will mean greater increases in London and its commuter belt.

According to the new five year forecast from global real estate service provider Savills average rents are expected to rise by 2.5% in 2013 and 18.2% over the next five years.

The amount of rent paid by the under 35s is forecast to rise by 53% from 24 billion to ã37 billion over the period, making this a growing and attractive destination for investment. This is particularly for those investors seeking long-term income streams, linked to wage growth and underwritten by fundamental human need,ђ said Yolande Barnes, director of Savills world research.

If utilities, water companies and food production appeal to this type of investor, so too should residential property,ђ she added.

The research also shows that a growing demand from rentysomethingsђ, particularly in and around Greater London means that over the mid term, mainstream rents in the capital will outperform both the UK average and even prime central London.  Greater London average rents are forecast to rise by 3% next year, slightly ahead of the UK average, but will significantly outperform over the next five years, rising by 26.4%.

Prime central London rents are driven by City sentiment and corporate demand, with strong ties to the health of the FTSE and are more volatile than the citys mainstream rental market. Growth is expected to be 3% in 2013 and 24% by the end of 2017. Prime central London investors will, however, benefit from higher capital value growth over the forecast period.

The report also says that rents are taking up a growing percentage of tenantҒs income, but this stretched affordability is still within normal bands at a national level.Although, in the North, the lack of income growth is limiting the potential for rental growth, the fundamentals of occupier demand and affordability remain sound, though more uncomfortable for tenants, at a national level.

Different borrowing and demand conditions will reinforce the very varied rental market conditions across the UK and determine the potential for rental growth at a local level. Deposit affordability will continue to be the main brake on home ownership levels, fuelling demand for rented accommodation, while income growth will ultimately determine the ability of rents to continue to rise,ђ said Barnes.

For investors, the UKђs private rented sector looks an attractive option. Rental growth is a function of constrained deposit affordability and underlying demand for shelter, while recent population trends suggest that demand will continue to increase in coming years. This is especially true for London where the relative strength of the economy and strong international in-migration continue to put upwards pressure on rental values, she explained.

ґIndeed, current levels of occupier demand make the private rented sector the only truly fully functioning market in the UK residential sector. Yields and income in London remain strong by world city standards and make the capital an attractive buy in a global context.This is particularly the case when compared to new world cities, such as Shanghai, where the motives of capital investors have driven values way above the underlying growth in rents, she added.

Barnes also pointed out that if rental levels are a good indicator of underlying occupier fundamentals, then low yields can be an indication that capital values are overheating.ґGiven the disparity between the two, there is little chance that this is the case in the UK, she said.

New Property Tax Not Impacting On Luxury Real Estate Market In Italy

A challenging economic outlook in Italy has led to a more cautionary attitude amongst property buyers but the world’s wealthy still consider it to be one of the most desirable second home hotspots. 

Unlike the UK, the US, Ireland and Spain, Italy did not experience a housing market bubble prior to the financial crisis. Although official data reports that mainstream prices are only 10.5% lower than their peak in the second quarter of 2008, most analysts acknowledge that mainstream prices have dropped by around 30% over this period.

According to an analysis by Kate Everett-Allen, from Knight Frank’s international research team, the absence of a housing bubble meant Italy’s banks coped relatively well with the credit crunch in 2008/2009 but strains appeared in 2011 when the Eurozone’s sovereign debt crisis deepened and the banks’ large holding of Italian public debt left them exposed.

Italy’s public debt to GDP ratio now stands at 120% and it is forecast to be 2014 before GDP growth re-enters positive territory.

However, Italy’s prime residential market has outperformed its mainstream counterpart. The €3 million plus market is in good shape and sales volumes are healthy. But in some markets such as Tuscany, Umbria and Florence the €450,000 to €1 million price bracket is sluggish as buyers in this market segment tend to be more heavily reliant on finance.

 

‘Nonetheless, there remains strong demand for development products below €1 million and for many international buyers, Italy’s established prime locations offer a more secure second home option without the risk that many emerging European markets present,’ said Everett-Allen.

‘A weaker euro in the first half of 2012 made very little difference to the volumes of sales but interest from non-Eurozone buyers improved once the euro reached 1.20 against the pound,’ she added.

The Knight Frank research shows that buyers from the UK, the US, Belgium, Denmark, the Netherlands and Russia are the most active. ‘The one issue that connects these buyers is their level of wealth, many are increasingly internationally mobile with multiple residences globally,’ said Everett-Allen.

Knight Frank does not expect the new IMU tax introduced in late 2011 by Mario Monti’s new government of technocrats as part of a strict austerity programme to have much impact on the luxury property market. For the first time Italians now have to pay tax on all their properties, including their primary residence and the tax also applies to non-resident second home owners.

‘We do not expect the IMU tax to have a significant impact on Italy’s luxury housing market for two reasons. Firstly, because the sums remain relatively small. Home owners are due to pay 0.4% of the cadastral value on a primary residence and up to 1.06% on a second home. Secondly, despite the IMU tax changes Italy’s purchase costs and annual property charges continue to compare favourably with some of Europe’s other prime second home destinations,’ explained Everett-Allen.

She added that foreign buyers who use a company structure to purchase property are advised to seek tax advice as they are now potentially subject to higher taxes.

Recession Hit UK Commercial Real Estate Sector Not Set To Recover Until 2023

The UK’s commercial real estate construction market faces a long, slow recovery as output values drop and demand falters, it is claimed.

Overall output values dropped by 32% between 2007 and 2011 to £28 billion, their lowest level in 10 years and representing a £13 billion loss to UK Plc.

Peak to trough decline in commercial real estate construction follows GDP, and highlights a clear double dip in the British economy, says the report from RSA, the UK’s largest commercial insurer.

It highlights reduced demand for new development across all UK regions, except in central London and says that positive growth is not expected until 2014 and no return to pre-crisis highs until 2023.

Despite latest GDP figures confirming that the UK is officially out of recession, the country's construction industry still faces a challenging trading climate.

It shows that the recession has led to a peak to trough decline of 42% in commercial real estate construction output, which closely follows GDP. In fact, between 2007 and 2011 the value of CRE construction activity fell by as much as 32% from £41 billion to £28 billion. Looking forward, this figure is predicted to drop again in 2012 to £27 billion and is not expected to return to positive growth until 2014, when only a modest 0.3% rise is anticipated, far below the rate of growth currently reported on a national level.

The decline seen at a national level is echoed across the UK regions, although a North/South divide is clear. Scotland and the North West have been hardest hit by the downturn, experiencing sharp 51% and 49% drops respectively. At the same time, London and the South East have shown more resilience, with smaller falls of 16% and 24%, respectively.

 

‘The commercial real estate sector has been hit hard by the recession, and with CRE construction growth so closely tied to GDP, it's not surprising that we've seen such a sharp decline in output values since 2007,’ said Paul Greensmith, RSA's director of risk managed business, global specialty lines.

‘While a return to the pre-recession highs of 2007 may not be wholly realistic, what's important now is that developers approach new investment opportunities sensibly and with sustainable growth in mind,’ he added.

The study also reveals that demand for new projects has stalled across the UK. Over the past five years, the value of CRE construction output has declined across most sectors, with warehouses and offices seeing the largest declines at 62% and 51% respectively.

Retail has also seen a significant drop in output at 27% at a time when demand for retail space remains subdued and vacancy rates are climbing. Of the eight cities examined in this report, only central London saw an increase in retail rents between 2007 and 2011, where average rents rose by seven per cent.

At the same time, retail vacancy rates have eclipsed pre-crisis levels, rising from almost 8% in the second quarter of 2007 to over 10% in the same quarter of 2012, suggesting a sizeable over supply of retail property.

 

Similarly, in the office sector, rents have fallen by an average 16% across the UK. With vacancy rates in the first quarter of 2012 standing at 12.6% and employment in financial and business services predicted to fall, demand for new prime office real estate is likely to remain weak for some time.

‘High vacancy rates are set to become a huge issue for the commercial real estate and construction industries as recovery remains elusive, threatening profits and presenting new risks associated with empty sites and buildings,’ explained Greensmith.

‘Adequate security and regular checks are recommended for property owners in this situation to mitigate the increased risks of burglary, arson and water damage.  However, despite vacancy issues and the growing trend of ‘mothballing' developments to save ongoing costs, there is still an appetite for the right kind of development. The City skyline is a prime example of that, with builds such as The Shard in London demonstrating that certain projects, particularly mixed use developments, are still going ahead,’ he added.

Prices And Rents In Prime Central London Both Rise Strongly After Slower Summer

Following the expected Olympic lull in London’s prime property market in early summer, the post Games rebound has seen capital and rental values rise, according to the Cluttons Residential Investment Monitor for the third quarter of 2012.

Average house prices across the capital grew by 3.1% in the third quarter after a more modest rise of 0.9% in the second quarter.

Cluttons says that this healthy growth leaves average property values in prime central London some 3.33% above the market peak in the third quarter of 2007 market peak and 7.1% higher than this time last year.

Cluttons also reports a surge in London’s rental values with growth of 1.5% in the third quarter following three quarters of negative growth. This leaves annualised rental growth unchanged compared to the third quarter of 2011.

International private investment trends in the capital showcased a distinct geographical divide. Property investors from India, Western Europe, Russia and other Eastern Europe countries are increasing their focus on low yielding prime core assets.

But investors from the Asia Pacific region have remained primarily interested in the new build offering of central south east London, which includes east London sub-markets and key areas south of the Thames, where gross yields are higher. 

Cluttons says that the common denominator for private investment remains the generally shared focused on long term performance, with Russian and other Eastern European investors being equipped with the highest budgets of £5 to 20 million, closely followed by Western European investors with budgets varying from £2 to 15 million.

Domestic lending remains restricted for both development funding and investment, with overseas banks becoming more and more of a financial alternative, with a clear upturn in lending by key players like Barclays Singapore and Bank of China.

‘Despite the promising growth in rental values this quarter, we expect average rents in prime Central London to end the year marginally negative, or flat at best. This is due to a market readjustment following the unusual and unsustainable pace of growth recorded in 2011. However, as demand is still outpacing available properties, we are expecting a slight adjustment rather than a significant decrease,’ said Sue Foxley, head of research, Cluttons.

‘Central north west London was the best performing London region during the third quarter of 2012, with an outstanding upturn of 7.5% in capital values being recorded. Calculated yields in Maida Vale and St. John’s Wood are consistently high, reaching 6.38% and 6.36% respectively,’ she added.

Prime City Rents Increasing, Especially In Emerging Markets, Eurozone Remains Weak

Prime rents in key cities worldwide rose by 2.3% in the year to June as corporate demand, particularly in the world’s emerging markets, is driving rents higher, according to the latest index from Knight Frank.

However, although the index recorded annual growth of 2.3% in the year to June, this modest performance remains some way off the double digit growth seen before 2008, suggesting that the prevailing economic conditions continue to impede growth. The index shows the Eurozone remains weak.

The performance of prime rents across global cities is intrinsically linked to employment, business confidence and recruitment, says Knight Frank.

At the top end of the world’s rental markets corporate demand is increasingly influential, accounting for up to 85% of prime rental demand in some cities.

As in the prime sales market, it is those cities that generate strong foreign demand that have seen the strongest uplift in rents since the global recession hit in 2008. Prime rents in London, New York and Hong Kong have risen by 25.7%, 23.9% and 35.6% respectively since their recessional lows.

While the latest results show prime rents continue to push higher in New York, annual rental growth is weaker in London and Hong Kong.

‘London’s current weakness in headline rents is not due to a wider downturn in demand from tenants. Instead, affordability constraints and the weaker performance of London’s economy are limiting the scope for rental growth,’ said Jemma Scott, Knight Frank’s head of Corporate Services.

‘Lettings volumes were strong in the second quarter as the Olympic Games prompted some corporate tenants to arrive early to secure the best properties. Demand from US and French tenants proved particularly strong,’ he added.

In Manhattan prime rents are at their highest since the recession. An improving regional economy, rising employment and strict bank lending has helped drive rents upwards as potential buyers have opted to rent until mortgage lending rules are relaxed.

In Hong Kong and Singapore a heated sales market in recent years has seen prime prices rise by 76.5% and 31.2% respectively from their recession lows. Affordability pressures accompanied by rising interest rates and growing demand from foreign tenants have boosted prime rents.

 

But rents in Hong Kong and Singapore still trail prices, with growth of 35.6% and 20.6% respectively over the same period.

Knight Frank says that future rental growth is likely to be focussed on the world’s developing markets as business globalisation increases. Nairobi, Tel Aviv and Guangzhou’s positions at the top of the rankings this quarter are not incidental.

 

In sharp contrast to many western economies, Kenya, Israel and China are forecast to see chunky GDP growth of 4.7%, 2.3% and 7.8% respectively in 2012, due in large part to a surge in foreign investment.

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Noticeable Decline In Interest In Buyers For Top End UK Properties Due To Tax Changes

Tax changes have resulted in a noticeable decline in interest in property worth over £2 million in most regions of the UK, it has been revealed.

The highest activity in the prime property sector in the third quarter of 2012 has been in the £1 million to £2 million price range, according to the Buying Solution, the independent buying consultancy of Knight Frank.

The super wealthy are turning their backs on London and looking to the Home Counties where there has been a substantial increase in transactions in the £15 million plus range and good quality farm land is also selling well.

‘In both the London and country markets, there has been a noticeable falling away of interest in property above £2 million which is almost certainly due to the stamp duty increases announced in the March 2012 Budget. We believe that a number of buyers are sitting on their hands awaiting the outcome of the proposed annual Capital Gains Tax charges on properties priced above £2 million owned by non-natural persons,’ said Philip Selway, managing partner and head of London at the firm.

‘This does not appear, however, to deter wealthy overseas buyers, who continue to drive the prime central London market with investment as well as lifestyle purchases. The continued global financial uncertainty, particularly in a number of European countries, means that the UK is even more attractive to the overseas buyer, not only because of history and culture, but also because of political stability and a secure legal system,’ he explained.

‘In the long term, I don't expect that increased property taxes will deter buyers; they might lower values around the £2 million price range perhaps, but people do tend to carry on as normal once they have assimilated tax changes into their financial structures,’ he added.

In the Home Counties of Berkshire, Buckinghamshire, Surrey, South Oxfordshire, and West Sussex the majority of the market activity has been focused on property priced up to £1.5 million. Nick Mead, associate in the Home Counties, said that most buyers are needs driven UK buyers who are moving out of London for schooling and more space.

 

He pointed out that the £2 million to £3 million market has been significantly affected by the increase in stamp duty, and the proposed mansion tax has further dampened this market. ‘We're seeing a continued flurry of price reductions which, if anything, has grown in recent weeks. Ultimately, those who are likely to bear the brunt of a mansion tax are likely to be those who are already suffering the effects of middle class poverty, that is the asset rich and the cash poor,’ he said.

‘The sooner plans for the mansion tax and proposed higher rate council tax bands are finalised, the better, as the uncertainty and speculation is weighing heavily on the market. On a short to medium term basis, it is likely to actually lead to a reduction in the revenue that the exchequer might receive due to a fall in transactions,’ he added.

Mark Lawson, partner and head of the Home Counties team, added that the top end of the market has been incredibly active. ‘To our knowledge, in 2010, there was just one transaction at £15 million plus, last year there were eight in total, and this year, there have already been 12,’ he said.

‘This increase in transactions has been fuelled by international buyers who are seeing better value outside of prime London with prices approximately £1,000 per square foot for a top quality property in the Home Counties, compared to more than £6,000 per square foot in prime central London,’ he explained.

In the Southern region covering the M3/M4 corridors including West Berkshire, Hampshire, Wiltshire, Dorset and Somerset, there have been fewer transactions that the third quarter of last year.

In the Cotswolds and central region covering Gloucestershire, Oxfordshire, Warwickshire, Northamptonshire, Herefordshire, Worcestershire, the market is more buoyant than a year ago.

  

‘We are seeing most activity in the £1 million to £2 million price range which is unsurprising in light of the increase in stamp duty. There have been some significant sales at the £5 million plus level which just shows that best in class properties will always create interest, especially if within a one to one and a half hour journey from London,’ said Bobby Hall, head of the Southern region.

‘However, the biggest issue as we head into the autumn market is supply, and what does come onto the market needs to be correctly priced to spark interest. Buyers are prepared to purchase, but only if the price is right. If a house looks expensive, it can be quickly dismissed,’ he pointed out.

He explained that in towns such as Oxford and Cheltenham the market is still pretty strong due to the usual pull of good schooling. Further out where there are now fewer second home buyers there are some good deals to be had.

Good quality farmland is still selling well despite the weak harvest this year, according to Mark Lawson, the firm’s head of Home Counties and Country Estates, partly due to their being less on the market this year compared to last year, leading to a shortage of good quality farmland to purchase.

He added that as there are still good tax advantages for investing in farm land it is still deemed a good investment.

Prices For £4 Million Plus Prime Country Houses In UK Continue To Rise

The most expensive country properties in the UK are still seeing prices going up although those worth less than £4 million are seeing values fall, according to the latest index from Knight Frank.

Price growth is continuing particularly in an around Oxford, Guildford and Esher but prime country house under the £4 million mark have seen prices fall by 0.9% in the third quarter of the year. This comes on top of a 1.5% decline in the second quarter of 2012.

Grainne Gilmore, head of UK residential research at Knight Frank said that average values have been on a downward trajectory for much of the last two years but overall there has been a varied performance in the prime sector.

‘On average, homes worth up to £2 million have seen a 4.3% fall in value over the last year. Perhaps unsurprisingly, given the increase in the stamp duty charge levied on properties worth £2 million and more from 5% to 7% in March, homes worth between £2 million and £3 have seen the biggest falls in price since this time last year, dropping by more than 7%,’ she explained.

Rupert Sweeting, head of Knight Frank’s country department, pointed out that the upper end of the sector has bucked the trend, and prices continue to rise. ‘Homes worth between £4 million and £5 million have climbed in value by 1% over the last year, while properties valued at £5 million and above have risen in value by 3.2%, showing demand is still strong for the very best and unique country homes,’ he explained.

There are also some localised areas of outperformance. Prices in and around Oxford are up 2.3% on the year, while prices around Guildford have risen by 2%. Home owners in Esher have seen the value of their prime property rise by 4% over the last 12 months.

‘The rises in these areas partly reflect the increase in buyers from London who are looking to take advantage of record high prices by selling and moving to the country. International buyers are also a more significant feature in these markets. Indeed web searches for prime country property on Knight Frank’s global property search engine from the US, Germany, Canada and Spain have risen notably over the last three months, especially for properties worth £5 million or more,’ said Sweeting.

Activity in the market is steady with viewings up 1.3% in the third quarter of the year compared to the same period last year. ‘While the number of exchanges fell by 8%, the data on sales subject to contract, which captures transactions data earlier in the sale process, shows a 14% increase,’ said Gilmore.

‘The market is characterised by uncertainty at the moment, however, with transactions taking longer than they usually would and more deals de-railed before completion. Constrained mortgage lending continues to cast a pall over the market, especially in the lower price brackets, while the clarity on the new tax rules for offshore buyers expected in early December can only help bolster confidence in the market,’ she added.

Overseas Buyers Dominate The Top Of The London Property Market

The extent of interest from overseas in London property is demonstrated by one agent in the capital who has not sold a single property to a UK buyer since 2005.

Fine & Country’s Mayfair Office is dealing exclusively with foreign buyers who see London as a safe haven for investment, especially the upper end of the market.

The top 5% of property by value in London continues to outperform those of rival locations in New York, Paris and Hong Kong, according to Julian Lilley, of Fine & Country Mayfair.

‘It is seen as a safe haven both from a security and a financial perspective. London’s property market seems to defy gravity,’ he said.

Not only is the central area covered by Fine and Country Mayfair far exceeding other locations in the property stakes internationally but nationally as well.

‘Whereas most of Europe and many parts of The UK are showing declines in the market in excess of 10%, Central London prices continue to rise, with reports of some areas, such as Mayfair and Knightsbridge, showing increases of over 20% in the last year,’ explained Lilley.

A further pull for overseas buyers is the world class education provided in London. ‘Following the summer, our many Middle Eastern clients are returning to London eager to buy houses or to rent apartments for their student offspring. London is also an historic and cultural centre with a reputation for tolerance as well as being a funky place to live,’ he added.

The demand from overseas investors for expensive homes is reflected in the number of developments currently under construction in London which are presently priced at £38 billion.

Ireland Sees Second Consecutive Monthly Rise In Property Prices

The slowing of property price falls in Ireland is continuing with the latest data showing they increased by 0.5% last month.

This means that in the year to August residential property prices have fall by 11.8%, down from the 13.6% annual fall in July and the 13.9% recorded in the twelve months to August 2011.

The 0.5% rise adds to the increase of 0.2% recorded in July and is good news for the Irish property market. It was the first consecutive property price rise since the crash over five years ago.

But it still has a long way to climb back with overall the national index from the Central Statistical Office 50% lower than its highest level in 2007.

Also the Dublin housing market is still struggling. Property prices fell 0.5% last month and are 13.8% lower. Within that house prices decreased by 0.7% in the month and were 14.4% lower compared to a year earlier while apartment prices were 13.4% lower when compared with the same month of 2011.

The price of residential properties in the rest of Ireland rose by 1.3% in August compared with a decline of 0.3% in August last year. Prices were 10.7% lower than in August 2011.

 

It now means that house prices in Dublin are 56% lower than at their highest level in early 2007 and apartments prices 63% lower than they were in February 2007.

Overall property prices in Dublin are 57% lower than at their highest level in February 2007. The fall in the price of residential properties in the rest of Ireland is somewhat lower at 46%.

The CSO's monthly survey has become the official measure of Irish residential price trends and is based on data of housing market purchases funded by residential home loans starting in 2005.

A low level of transactions mean the index is still is catching up with declines in market prices, and residential prices already may have dropped by 60% from their peak, according to analysts.