Uk residential property landscape 2015

UK Residential Property Landscape August 2015

60 Eastern Green Road Coventry, CV5 7LH [email protected]

UK Residential Property Landscape © IRN Research 2015 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise without prior permission of IRN Research. While every care is taken in the preparation of this report, responsibility for any omissions or errors, which may have occurred, cannot be accepted. IRN Research would like to give thanks to those providing information for this research. IRN Research 60 Eastern Green Road Coventry CV5 7LH UK E-mail: [email protected] URL: www.irn-research.com ___________________________________________________________________________ IRN Research (trading name of IRN Consultants Ltd) was formed in 1991 and has a strong track record in providing market research services to the financial services, property, travel, legal and information sectors.

UK Residential Property Landscape Table of Contents EXECUTIVE SUMMARY ................................................................................................................................... 4

AIM OF THE SURVEY ........................................................................................................................................................................... 4 DANGER AHEAD FOR THE UK HOUSING MARKET… ................................................................................................................. 4 A MARKET IN FUNDAMENTAL DISEQUILIBRIUM ........................................................................................................................... 4 WHERE LONDON AND A FEW PRIME LOCATIONS CAN DISTORT THE NATIONAL PICTURE .................................................. 5 WHERE IT BECOMES EASIER TO RENT THAT BUY FOR FIRST TIME BUYERS .............................................................................. 5 AND WHERE IT BECOMES HARDER OR LESS IMPORTANT FOR EXISTING OWNERS TO MOVE HOUSE… ............................. 6 WHERE HOUSING WEALTH IS RISING BUT IS HELD BY FEWER INDIVIDUALS ........................................................................... 7 A MARKET WHICH WILL NOT HAVE RECOVERED FROM THE GLOBAL FINANCIAL CRASH BY 2020 ...................................... 7 MARKET ENVIRONMENT .............................................................................................................................. 8

AIMS OF THIS SECTION ....................................................................................................................................................................... 8 OVER 80,000 COMPANIES ACTIVE IN THE PROPERTY MARKET .................................................................................................. 8 A RISING POPULATION DRIVES THE DEMAND FOR HOUSING ..................................................................................................... 9 WITH THE DESIRE TO OWN A HOME AS STRONG AS EVER......................................................................................................... 10 OVER £70 BILLION INVESTED IN HOUSING… ............................................................................................................................ 10 BUT SUPPLY FAILS TO KEEP PACE WITH DEMAND ...................................................................................................................... 10 THE GOVERNMENT TRIES TO REFORM THE PLANNING SYSTEM BUT PROBLEMS REMAIN .................................................. 12 THE GOVERNMENT TRIES TO BOOST THE SUPPLY OF LAND FOR HOUSING AND NEW HOMES ......................................... 13 BUT NOT EVERY INITIATIVE TO BOOST HOUSING SUPPLY IS WELCOME… ............................................................................ 15 AND NOT EVERY INITIATIVE GETS LEGAL APPROVAL ............................................................................................................... 15 AND SOME GOVERNMENT ACTIONS COULD REDUCE HOUSING SUPPLY… ........................................................................... 15 OR BOOST DEMAND EVEN FURTHER ............................................................................................................................................. 16 DEMAND GROWS AS PROPERTY GENERATES BETTER RETURNS THAN CASH OR EQUITIES ................................................. 18 BUT BUY-TO-LET MADE LESS FINANCIALLY ATTRACTIVE… .................................................................................................... 18 WHICH COULD FORCE UP RENTS .................................................................................................................................................... 19 A TIPPING POINT FOR MORTGAGE AFFORDABILITY ................................................................................................................... 19 AND STAMP DUTY REFORMS HAVE TAKEN THE EDGE OFF THE TOP END OF THE MARKET .............................................. 20 WHILE THE MORTGAGE MARKET REVIEW HAS SLOWED THE RATE OF MORTGAGE APPLICATIONS ............................... 20 TRENDS IN HOUSEHOLD TENURE ........................................................................................................... 22

AIMS OF THIS SECTION ..................................................................................................................................................................... 22 THE RISE OF THE LANDLORD ......................................................................................................................................................... 22 OWNER OCCUPATION GETS PROGRESSIVELY HARDER FOR FIRST TIME BUYERS….............................................................. 23 WHO ARE INCREASINGLY IN A CATCH 22 SITUATION ................................................................................................................ 25 HOUSING WEALTH ........................................................................................................................................ 26

RISING HOUSE PRICES INCREASE THE HOUSING WEALTH EFFECT .......................................................................................... 26 ALMOST £6 TRILLION OF WEALTH HELD IN DWELLINGS .......................................................................................................... 26 WITH HOUSEHOLDS OWNING THE LION SHARE ......................................................................................................................... 27 AND PRIVATE LANDLORDS OWNING AROUND 16% OF HOUSING WEALTH .......................................................................... 27 OVERSEAS OWNERS IMPORTANT AT THE TOP END OF THE MARKET ...................................................................................... 27 RESIDENTIAL PROPERTY SALES ................................................................................................................ 28

INTRODUCTION ................................................................................................................................................................................. 28 1.2 MILLION RESIDENTIAL PROPERTY SALES ............................................................................................................................... 28 HOUSES DOMINATE THE MARKET ................................................................................................................................................. 29 NEW BUILDS LOSING POPULARITY ................................................................................................................................................. 30 LONDON DOMINATES THE UK HOUSING MARKET .................................................................................................................... 31 WITH SELECTED POSTCODES OF NATIONAL IMPORTANCE....................................................................................................... 32 LESS THAN HALF OF HOME SALES FINANCED WITH A MORTGAGE .......................................................................................... 32 BUY TO LET LANDLORDS AND FIRST TIME BUYERS A GROWING FORCE ................................................................................. 33

UK Residential Property Landscape FUTURE ISSUES .............................................................................................................................................. 34

AIMS OF THIS SECTION ..................................................................................................................................................................... 34 BASE RATE STARTS TO RISE FROM 2016 ONWARDS INCREASING MORTGAGE RATES… ...................................................... 34 BUT HOUSEHOLD INCOMES WILL RISE, AS LONG AS UNEMPLOYMENT STAYS LOW .............................................................. 34 HOUSE PRICES ARE SET TO CONTINUE TO RISE AS HOUSING DEMAND OUTSTRIPS SUPPLY ............................................... 34 HOUSE SALES EXPECTED TO RISE BY 19% BETWEEN 2015 AND 2020 .................................................................................... 35 FEWER OWNERS OF HOUSING WEALTH ........................................................................................................................................ 35 WILL THE HOUSING MARKET BECOME INCREASINGLY ILLIQUID? .......................................................................................... 36 APPENDIX ........................................................................................................................................................ 38

ABBREVIATIONS AND DEFINITIONS USED IN THIS REPORT ...................................................................................................... 38

UK Residential Property Landscape

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Executive Summary Aim of the survey The aim of this survey is to review the UK residential property market landscape and outline some of the key developments impacting on the market at this point in time. It considers the social, political and economic forces acting on the market and then looks at the market for residential property and how the market will change in the future. This report contains a range of statistics, presented in graphic form. All the underlying data can be purchased for an additional £100. IRN Research also holds the Land Registry home sales data from 2010 to 2015. IRN Research can conduct further bespoke analysis on this data at a cost based on the complexity of the data request and the time to complete the analysis. Danger ahead for the UK Housing Market… The UK housing market could be heading for a difficult period. While home sales are expected to rise over the coming five years, even after this period of growth the annual level of sales will remain below the level recorded prior to the financial crisis of 2007/08. There are four key dangers facing the market: Housing wealth is becoming concentrated in fewer hands making is harder for wealth to trickle down the generations and help finance a new cohort of first time buyers. Because house prices are set to continue to rise faster than incomes over the coming five years, especially the incomes of younger consumers, growing numbers of young adults will opt to rent rather than buy a home. The supply of first time buyers in the market, the buyers who sit at the bottom of many housing chains could decline. The rising cost of moving up the housing ladder, combined with the increased age of becoming a home owner for the first time, is lowering the incentive and ability of existing home owners to move home, thereby reducing the supply of homes coming onto the market. The incentive for elderly home owners to sell their homes before they die to save on inheritance tax has declined given recent tax changes. The supply of properties coming onto the market could, again, be restricted. A market in fundamental disequilibrium The UK housing market is characterised by a lack of housing supply relative to housing demand. This problem has multiple causes, including problems with the planning system, local resistance to new housing estates, a restricted supply of land for housebuilding and a national fixation with owning a home. While Governments have developed schemes to overcome the supply-side problems, such as Housing Zones and planning law relaxation, it remains the case that housebuilding and land supply are inadequate to meet the housing needs of a growing population, boosted by increased longevity and


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immigration. Moreover, some official actions may have made the situation worse by potentially harming future housing supply (like the restriction of social housing rents and extension of the Right to Buy to Housing Associations) and boosting future housing demand (like the new Help to Buy schemes which are boosting demand for existing and not just new build properties). What we know The number of households in the UK is set to rise from 27.5 million in 2015 to 28.8 million in 2020 and 31.2 million in 2029. In 2015, investment in dwelling will be just under £72 billion but the number of homes built in England and Wales in the financial year 2014/15 was only 125,110 compared with 306,860 in 1969-70. More than 250,000 homes per year are required to meet housing demand. Since the launch of the Help to Buy: mortgage guarantee scheme 46,877 mortgages have been completed with the support of the scheme. Of these, 78% were purchases by first time buyers. Housing Associations claim that the recently announced government measure on social housing rents and Right to Buy could cut housing building activity by 27,000 units per year.

Where London and a few prime locations can distort the national picture The UK housing market is in reality a series of distinct local housing markets. However, some local and regional markets are of such scale as to distort the overall national picture. Greater London is by far the most important county-level housing market in the UK and within London the housing markets in a few select postcodes, mainly in Westminster and Kensington and Chelsea, are of a scale that dwarfs the markets in other postcodes in the UK. What we know

In 2014, Greater London accounted for 13% of all home sales in England and Wales and 26% of the value of home sales in England and Wales Four London postcodes in 2014 generated annual housing sales exceeding £100 million each, with the postcode of SW1W 9AH (Westminster) generating house sales of £199 million and the average home sold in the postcode of SW7 1QJ (Kensington and Chelsea) being worth £26 million.

Where it becomes easier to rent that buy for first time buyers Private renting has become a first choice for many younger adults as the cost of housing has made buying unaffordable for many would-be first time buyers. Tighter lending criteria due to banks’ efforts to restore their financial health after the financial crisis and the new Mortgage Market Review regulations, combined with the demise of interest-only mortgages have exacerbated the problem. At the same time, the supply of rented properties has increased as buy-to-let landlords have moved into the market, attracted by the ability of housing to generate market-leading income and capital returns. The supply of affordable, social housing has remained little changed over the past 10 years: the decline of local authorities housing stock (due to a halt to housebuilding and the continued impact of the Right to Buy rules) have been almost exactly offset by the increased supply of housing association properties. The growth of buy-to-let landlords have also made it harder for first time buyers to purchase a home as landlords compete for the limited supply of housing in the UK with owner occupiers. BTL landlords have


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also enjoyed tax advantages over owner occupiers which have made it more affordable for landlords to purchase a property: these tax advantages are, however, due to be eroded in 2016. What we know Between January 1992 and June 2015, UK house prices have risen by 192%, while those in London have risen by 424% The income returns on rented properties have been around 5% for landlords over the past five years, compared with 3%-4% dividend returns on share ownership and less than 2% on Government bonds of less than 10 years duration or bank accounts In 2015, an estimated 5.5 million privately rented properties were available to rent, compared with 3.1 million in 2005. Over the same period, the supply of social housing has remained stuck at 5 million, while the number of owner occupied properties has declined from 18.1 million properties to 17.8 million. In England in 2003-04, 51% of under-35 year olds were owner occupiers (50% buying with a mortgage) but by 2013/14 this had declined to 31% (29% buying with a mortgage). Over the same period, the percentage in privately rented accommodation has increased from 26% to 52% In 2010, 4.3% of home sales by value were generated by landlords buying with a buy-to-let mortgage, rising to 10.9% in 2015.

And where it becomes harder or less important for existing owners to move house… Not only is it becoming harder for first time buyers to get onto the housing ladder, it is becoming harder or less imperative for existing home owners to move. As the age of becoming a first time buyer rises each year, the window of opportunity (in years) left to homeowners to move home and still get a 25 year mortgage is declining. More mature homeowners often face the prospects of trying to buy a more expensive home with mortgages of less than 25 years (implying high monthly repayments) and facing high moving costs. These forces are reducing the number of times homeowners move in their lifetime and is helping limit the supply of existing properties coming on to the market, thereby helping to increase property prices further. Moreover, changes to inheritance tax announced in the 2015 Budget may also increase the incentive for the elderly to remain in their homes and not sell or pass on ownership to their children before they die. What we know

The typical age of a first time buyer is now 31 but most mortgage companies insist that mortgage repayments must be finished once the mortgage holder is aged 65 or 70, making 45 the cut off age for taking out a 25 year mortgage. According to research from Post Office Money and the Centre for Economics and Business Research (CEBR) the cost of moving home has grown by 59% over the last decade A study by Lloyds Bank found that homeowners paid more than £50,000 extra in 2015 to take their next step on the property ladder than they would have done five years ago Parents and grandparents will be able to leave homes worth up to £850,000 to their children without them paying inheritance tax from 2017, rising to £1 million by 2020.


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Where housing wealth is rising but is held by fewer individuals At the end of 2015, almost £6 trillion of wealth will be held in UK dwellings, the vast majority of this held by households and non-profit making institutions serving households. Housing wealth is rising in importance as a generator of wealth for the UK economy, with landlords estimated to be taking a growing share of this wealth. With owner occupation declining as private renting rises, housing wealth is being concentrated into fewer hands. The concentration of wealth will only increase in the future, when by 2021 it is estimated that around £8 trillion will be held in housing wealth. With fewer individuals owning houses, there are fewer older owner occupiers to pass on their housing wealth to their children or engage in remortgaging to generate money to help their children buy a home. What we know

In 2015, IRN Research estimates UK dwellings will have a collective value of £5.7 trillion, compared with £3.92 trillion in 2008 just after the financial crisis hit the UK economy. In 2015, dwellings represented around 12% of total UK national wealth, compared with 9% in 2008. Around 95% of the wealth held in dwellings in the UK is owned by households and non-profit making organisations serving housings Landlords owned around 16%-17% of the total wealth held in dwellings in the UK in 2014. The rise in house prices over the coming five years will mean that by 2021, £8 trillion of wealth will be held in houses in the UK, a rise of 41% over the level of wealth in 2015.

A market which will not have recovered from the global financial crash by 2020 In 2015, there will be around 1.2 million residential property transactions in the UK, compared with 1.7 million in 2006, the year before the global financial crisis started. Transactions are expected to grow by 19% over 2015 to 2020 but even by 2020 transactions will be below the 2006 level. House sales will rise relatively quickly from 2015 to 2018 but the rate of increase will slow in 2019 and 2020, at which time Base Rates will exceed 2% and house price inflation will be nearing 6% per annum: house prices will continue to rise as housing demand exceeds housing supply. The problems facing the UK housing market today will remain by 2020. Despite efforts to boost housebuilding, new build sales will remain a small niche sector of the housing market and the regional disparities will remain. What we know

By Q 1 2021 house prices will be around 34% higher than they were in Q1 2015. Over that same period, consumer disposable income is expected to rise by around 28%, meaning homes will become less affordable. By 2020, there will be 1.4 million residential property transactions in the UK (1.2 million house sales) compared with 1.2 million in 2015 (1 million property sales). In 2015, property transactions will be worth £315 billion. In 2006, there were 1.7 million UK residential property transactions.


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Market Environment Aims of this section This section will outline some of the key social, economic and political influences operating in the property landscape of the UK. Over 80,000 companies active in the property market The residential property market is part of the wider UK property industry, which also includes commercial property. The UK property market segments into three broad sectors:

Buying and selling of own real estate Renting and operating of own or leased real estate Real estate activities on a fee or contract basis, including real estate agencies and management of real estate on a fee or contract basis There are some 84,000 VAT/PAYE-registered property businesses in the UK. Most of these are small-scale enterprises employing less than 50 people. Collectively these businesses operate over 97,000 units. The property industry is very fragmented and competitive, comprising a wide variety of companies, together with a relatively small number of large national and international operators. The distinction between companies outlined opposite is often very blurred. A property developer, for example, is engaged in the construction or renovation of property, which is then either sold or used to generate income via short-term leases (e.g. rental). In most cases, this encompasses single property projects rather than multiple properties. Some large property companies will also have estate management arms, which manage property on behalf of an owner. Moreover, estate agents earn their income in the following ways: • Fees from property sales, which are calculated on a percentage of a property's selling price. • From lettings, i.e. rentals. • Property management services. • Sale of financial products, e.g. mortgages and insurance.

Employee numbersBuying and

selling of own real estate

Renting and operating of

own or leased real estate

Real estate agencies

Management of real estate

on a fee or contract basis

Total

Businesses0-4 3,025 43,480 12,325 9,760 68,5905-9 255 4,005 3,470 1,750 9,480 10-19 80 1,675 1,290 665 3,710 20-49 15 375 500 235 1,125 50-99 0 140 120 70 330100-249 0 135 55 45 235250+ 0 135 35 35 205 Total 3,375 49,945 17,795 12,560 83,675Units0-4 3,050 46,845 14,765 10,960 75,6205-9 255 4,930 6,125 2,010 13,320 10-19 80 2,375 2,205 880 5,540 20-49 15 870 555 385 1,825 50-99 0 310 85 115 510100-249 0 250 45 90 385250+ 0 65 15 20 100 Total 3,400 55,645 23,795 14,460 97,300Source: ONS/IRN Research

The Number of UK Property Companies by Employee Numbers, 2014


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The property market is also very dynamic, with many young businesses entering and exiting the market. While it is tempting to talk of the UK property market, in practice, the property market varies according to local market conditions, which in turn is strongly influenced by local social conditions, e.g. wealth, composition of the population and availability of land. There are usually a large number of people willing to bid for the right property or piece of land, especially as both are in short supply in some regions A rising population drives the demand for housing The UK population is rising. A combination of increased longevity and immigration is boosting the number of people living in the UK. At the same time, the typical household size is falling with more people living alone (especially elderly females), which means more individual housing units are required. Therefore, individual household numbers are growing thereby increasing the demand for homes in the UK.


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With the desire to own a home as strong as ever The desire to own one’s own home remains a core goal of most adults in the UK. Over six-in-ten private renters are expecting to own their own home one day (26% in less than two years’ time) and even around one-quarter of social renters expect to eventually be a home owner (12% expecting in less than 2 years). Therefore, not only are new households being formed in the UK at a relatively rapid rate, the presumption of many renters is that they will also become home owners.

Over £70 billion invested in housing… In 2015, the public and private sector will collectively invest just under £72 billion in UK dwellings, covering investment in new dwellings and improvements to existing dwellings. Investment by the public sector held up better during the financial crisis than did investment by the private sector but since 2009, the main driver of growth has been private sector investment and work. In 2015, IRN estimates the public sector will account for only 5% of the investment in dwellings compared with 9% in 2009.

But supply fails to keep pace with demand Despite the sums invested in dwellings, the overall level of house building in the UK has declined since 1980. Data from England (which accounts for around 84% of UK house building) shows that 140,490 house builds were started in financial year 2014/15 – a fall of more than 53% from the 300,530 built in 1972/73. A very similar pattern emerges when looking at housing completions in England.

£57,867

£67,055

£47,757£67,184

£31,697

£55,031£46,522

£71,977

£25,000£30,000£35,000£40,000£45,000£50,000£55,000£60,000£65,000£70,000£75,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015(est)

Gross Fixed Capital Formation in Dwellings

Constant 2011 prices Current Prices

Source: ONS/IRN Research

£31,697

£55,031£46,522

£71,977

£57,867

£67,055

£47,757£67,184

£25,000£30,000£35,000£40,000£45,000£50,000£55,000£60,000£65,000£70,000£75,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015(est)

£m

Gross Fixed Capital Formation in Dwellings

Constant 2011 prices Current Prices


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From financial year 2000/01, the number of build starts saw a short term increase, peaking in 2005/06. Afterwards, the number of houses started dropped as the global financial crisis hit the UK, reaching a low point of just 88,000 starts in 2008/09. Since then housing starts have picked help, helped by Government schemes to boost demand for new build properties (see below).

Source: Department for Communities and Local Government (DCLG)/IRN Research

1972-73, 300,5301976-77, 279,210

1988-89, 219,950

2005-06, 183,3702007-08, 170,440

2008-09, 88,0002012-13, 103,520

2014-15, 140,490

0

50,000

100,000

150,000

200,000

250,000

300,000196

9-70

1970-7

1197

1-72

1972-7

3197

3-74

1974-7

5197

5-76

1976-7

7197

7-78

1978-7

9197

9-80

1980-8

1198

1-82

1982-8

3198

3-84

1984-8

5198

5-86

1986-8

7198

7-88

1988-8

9198

9-90

1990-9

1199

1-92

1992-9

3199

3-94

1994-9

5199

5-96

1996-9

7199

7-98

1998-9

9199

9-00

2000-0

1200

1-02

2002-0

3200

3-04

2004-0

5200

5-06

2006-0

7200

7-08

2008-0

9200

9-10

2010-1

1201

1-12

2012-1

3201

3-14

2014-1

5

Housbuilding Starts in England, 1968-2015

Local authorities Housing association Private

Source: Department for Communities and Local Government (DCLG)/IRN Research

1972-73, 272,5201976-77, 263,430

1988-89, 202,930

2005-06, 163,400

2007-08, 170,610

2010-11, 107,8702012-13, 107,980

2014-15, 125,110

0

50,000

100,000

150,000

200,000

250,000

300,000

1969-7

0197

1-72

1973-7

4197

5-76

1977-7

8197

9-80

1981-8

2198

3-84

1985-8

6198

7-88

1989-9

0199

1-92

1993-9

4199

5-96

1997-9

8199

9-00

2001-0

2200

3-04

2005-0

6200

7-08

2009-1

0201

1-12

2013-1

4Housbuilding Completions in England, 1968-2015

Local authorities Housing association Private


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Despite this growth, housing starts remain well below that required to fulfil rising housing demand. The 2004 Barker Review of Housing Supply noted that about 250,000 homes needed to be built every year to prevent spiraling house prices and a shortage of affordable homes. In particular, the report noted that the UK had experienced a long term upward trend of 2.4% in real house prices over the past 30 years. In order to reduce this rate of increase to 1.8% an additional 70,000 houses in England each year may be required. In order to reduce this rate to the EU average of 1.1% an additional 120,000 houses each year may be required. The Five Causes of inadequate supply There are five fundamental causes for low levels of housebuilding in the UK.

Planning system and local opposition. Many house builders believe that given the current planning system and the continued power of local residents to block new developments, even a target of 200,000 housing completions by 2016 is unachievable. The planning system is considered too slow, bureaucratic and expensive. Land is in short supply. The UK is a relatively small geographic area and most of its population is concentrated in the major urban areas especially in and around London. This is part of the reason why there is a shortage of available land for building new homes. Many feel that local plans drawn up by councils often fail to identify enough land to meet local housing needs. Moreover, the public sector and the private sector both have large land banks. Private companies often hold land as an investment and even house builders tend to only release their land gradually for building, so as to keep land prices up. The decline in social housebuilding. Up until the Thatcher Government of 1979, local authorities were among the biggest house builders in the UK, building more than 100,000 homes per year in the 1970s. Since the Thatcher Government, public sector housebuilding has declined: in the 2014/15 financial year just 1,820 homes were built by local authorities in the UK and the 2010 Spending Review reduced the DCLG's annual housing spending - which supports social housing - by about 60%. Housing associations have taken over from local authorities as builders of social housing but their ability to build is restricted by rules governing their rents, lets and how their housing stock is valued. New Right to Buy rules and restrictions on social rents (see below) may further restrict their ability to build. Financial crisis. The financial crisis did more than cut the ability of house builders to raise funds to invest in new housing and cut mortgage demand, it also led to an exodus of skilled workers from the construction industry which the industry is still struggling to overcome. The crisis also forced many smaller house builders out of the market, leading to a drop in housebuilding capacity.

The Government tries to reform the planning system but problems remain


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In 2012, the government introduced a simplified and streamlined National Planning Policy Framework, which aimed to simplify the planning system. This appears to be increasing the number of planning permissions for house builders and for householders (e.g. extensions and loft conversions). House builders still say it can still be slow to get from outline to detailed planning on a housebuilding project. However, the move towards localism started by the previous Coalition Government has, many argue, encouraged Nimbyism. Local resistance to new housing is especially strong around the greenbelt, the protected green zones around urban areas in the UK. The previous Coalition government actually tightened planning rules regarding the greenbelt. Many feel a more flexible approach is needed with some development on the greenbelt allowed with land elsewhere converted into green spaces. In the Housing Bill, announced in the Queen Speech in 2015, the new Conservative Government announced it was to simplify and speed up the neighbourhood planning system, to support communities that seek to meet local housing and other development needs through neighbourhood planning. The Government tries to boost the supply of land for housing and new homes The Government has instigated a range of measures to improve the supply of land for housebuilding. Government directly releases land According to the Department for Communities and Local Government (DCLG), the previous Coalition Government released enough formerly used surplus public sector land for 100,000 homes and the 2014 Autumn Statement included plans to identify similar land for an additional 150,000 homes in the next five years. Despite £1.7 billion worth of land and property sales in the last parliament, the Government still owns more than £300 billion worth of land and buildings. First 20 Housing Zones designated The Housing Zones programme is designed to unlock brownfield land that has the potential to provide viable housing schemes. This is through a combination of long term investment funding, planning simplification (e.g. local development orders), local authority leadership and dedicated brokerage support from central government and the Advisory Team for Large Applications (ATLAS) planning support. Central government is making available £200 million of recoverable investment funding for Housing Zones in England outside of London The Budget 2015 announced the government is designating the first 20 Housing Zones outside London, and continuing to work with the 8 other shortlisted areas. The Zones announced in the Budget could support up to 45,000 new homes.

Type of development Mar-14 Mar-15Major Developments 5.6 5.5 68% 75%Minor Developments 35.7 38.3 83% 84%Householder developments 167.9 177.1 97% 97%Total 209.2 220.9Source: DCLG/IRN Research

Number (000), year ending

Decisions made within 16 weeks of aplication

or agreed time

District Planning Authorities in England: Housing-related planning applications granted


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Land registers As Part of the Queen’s speech, the new Conservative Government outlined the Housing Bill. One of the Bill’s proposals is the introduction of a statutory register for brownfield land, to help achieve the target of getting Local Development Orders in place for 90% of suitable brownfield sites by 2020. The housebuilding industry, while it supports this move, worries that there might not be sufficient infrastructure provision on the allocated sites and that there will not be enough brownfield land coming onto the market. Local Development Orders are not a silver bullet and experience shows that they are costly for local authorities to produce. Previously, in February 2015, the government had announced the creation of the London Land Commission (LLC), which aims to develop brownfield and public sector land in the Capital. The Budget 2015 provides £1 million to allow the LLC to create a comprehensive database of public sector and brownfield land. Alongside ongoing support for the regeneration of Barking Riverside and Brent Cross, the government will also provide £7 million to the Greater London Authority to support the development of the Croydon Growth Zone. This could unlock over 4,000 homes and 10,000 jobs. Starter Homes The 2015 Housing Bill announced Government plans to deliver 200,000 new Starter Homes across the country. These new homes will be sold with a 20% discount to first-time buyers under 40. In August 2015, the Government invested £26m in a new fund to acquire brownfield sites that will be used to build Starter Homes, to be sold to young first-time buyers under the Help to Buy scheme (see below). The government has also indicated it intends to make proposals to ensure that every “reasonably sized” housing site includes a proportion of starter homes, and is looking into exempting developers from certain levies if they are building starter homes. Right to Build Also part of the Housing Bill was a ‘Right to Build’, which is designed to help increase housing supply and diversify the housing sector by giving people the right to be allocated land with planning permission for them to self-build or commission a local builder to build a home. Cities and Local Government Devolution Bill This Bill was also part of the Queen’s speech in 2015 and is designed to introduce directly-elected mayors to combined local authorities in England and to devolve housing, transport, planning and policing powers to them. The Bill was broadly welcomed by the property industry which has long advocated the role that devolution can play in unlocking regeneration and growth around the country, and the potential it has for the creation of jobs, homes and infrastructure. £3.5billion private rented sector fund In December 2014, the previous Coalition Government announced the signing of a £3.5billion deal to fund purpose built rental homes in the UK. The deal was struck with PRS Operations Limited, a subsidiary of Venn Partners LLP, and will make loans available to landlords looking to invest at least £10million in the private rented sector.


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The government’s private rented sector housing guarantee scheme enables landlords of new rented homes to use a government guarantee to secure long-term financing. This investment will increase the supply of purpose built, professionally managed private rental homes giving tenants more choice of better quality homes. But not every initiative to boost housing supply is welcome… The Government in 2013 made it easier for property developers to convert empty offices into homes. However, many developers used the new freedoms to convert occupied offices into homes, given the much higher returns on residential properties compared with commercial properties. Such was the level of conversions that may business leaders and local councils feared there would be a shortage of office space and a decline in available jobs, especially in areas of high house prices like central London. It was reported that the London Borough of Westminster lost 5% of its office space, enough space for 78,000 workers. The 2013 rule change was for an initial 3 year period but the Government was set on making this permanent until it read the responses to a consultation conducted in 2014. As a result in 2015, the Government abandoned its plans but did announced plans to allow casinos, distribution centres and storage facilities to be turned into homes more easily. And not every initiative gets legal approval In August 2015, the High Court forced the Government to reverse its plans to relax the rules for small house builders. Under the plans, announced in November 2014, the requirement for small house builders to include some housing priced at below market level on their schemes or in some cases pay an equivalent sum in cash was lifted for sites of 10 homes or fewer. The Government claimed this move would make it £15,000 cheaper to build each home, but councils claimed it would cut the number of low-cost homes available by more than 20%. The High Court ruled the new rules were “incompatible” with the existing statutory planning framework. The Department for Communities and Local Government is seeking leave to appeal against the decision. And some Government actions could reduce housing supply… The Budget of 2014 and the Housing Bill outlined in the Queen’s speech could collectively have the impact of reducing the number of new homes built by at least 14,000 units and possible much more. The Housing Bill outlined an extension to the “Right to Buy” programme to the 2 million people living in Housing Association properties. The Right to Buy scheme for Housing Associations, however, may not get off the ground as Housing Associations point out that they are legally barred from selling homes at below market value and hence cannot offer them at a discount to their tenants. Therefore, the government would need to introduce legislation to allow Housing Associations to sell houses to tenants at a discount but this could mean that Housing Association total borrowing of £60 billion would be put onto the public balance sheet. The 2015 Budget also announced that social housing tenants will see their rent reduced by 1% a year for the next four years. Previously, social housing rents could increase by 1% more than inflation – a formula set by the chancellor in 2013 and intended to last for 10 years. Housing Associations have warned this will reduce their ability to build new homes, with the Office of Budget Responsibility


16 | P A G E

indicating it will cut house building by 14,000 and Housing Associations warning the cut could be much larger, possibly up to 27,000. Or boost demand even further The Coalition and the new Conservative Government has introduced measures which have aided the demand for housing. These often centre on first time buyer and some have specifically targeted demand for new build properties, which it is hoped will spur new housebuilding. Key initiatives include the following. First Buy This scheme came into force in March 2011. Under this scheme, which is only available for new build homes from participating developers, first time buyers receive a 20% deposit towards the purchase of their first home in the form of an equity loan. The loan is funded equally between the UK Government and the House Builder. First time buyers under this scheme must show they can afford a 75% mortgage and have the funds to put down a 5% deposit as well as up to £5000 to cover legal costs and mortgage fees. For the first five years, the loan is interest free and charged at 1.75% in year 6, and inflation plus 1% thereafter. On sale of the property, the loan is paid back equal to 20% of the sale price, unless the homeowner has purchased the remaining shares. Help to Buy Equity Loans

The Help to Buy scheme was launched in April 2013 and in essence is an extended version of First Buy. Again, it is restricted to the purchase of new build homes but is not restricted to first time buyers. Under the scheme the government provides an equity loan worth up to 20% of the value of a new build home, interest free for the first 5 years, which can be repaid at any time or when the home is sold. The maximum home value is £600,000 and there is no income cap constraint. Help to Buy mortgage guarantees Launched in October 2013, this scheme is open to all home buyers and for all types of home (not just new builds) and requires home buyers to have only a minimum 5% deposit of the purchase price (it is open to buyers with up to a 20% deposit). The guarantee is provided to the mortgage lender, not the mortgagee. The guarantee compensates participating mortgage lenders for a portion of net losses suffered in the event of repossession. The guarantee applies down to 80% of the purchase value of the guaranteed property covering 95% of these net losses. The lender therefore retains a 5% risk in the portion of losses covered by the guarantee. This ensures that the lender retains some risk in every mortgage originated.


17 | P A G E

To qualify for a Help to Buy mortgage guarantee, the home being purchased must be valued at £600,000 or less and must not be a shared ownership or shared equity purchase. Since 1 October 2014, no new loans with a loan-to-income ratio of 4.5 and above can be included in the scheme.

Shared ownership The government also helps social tenants and other first-time buyers to buy a home through shared ownership schemes. These allow people to buy an initial share of a home and pay rent on the remainder, usually to a housing association. Shared ownership is aimed at first-time buyers who are unable to buy a property suitable for their needs without financial help. Rent to buy With Rent to Buy, consumers can rent a newly built home at approximately 20% below the market rate for up to five years (exact period of time varies by property). During that time period, the tenant has the option to buy the property or to buy part of the property under a Shared Ownership scheme. When the tenant gets to the end of the time period they either have to buy part of the property or leave. This scheme is open to first time buyers with a household income of £60,000 a year or less (or £64,300 if looking at homes in London). In additional to FTBs, the scheme is also open to consumers who used to own their own home but cannot afford to buy one on the open market now. Help to Buy ISA The Help to Buy ISAs was announced in the 2015 Budget. It will give first-time buyers a 25% deposit subsidy — an extra £50 for every £200 they save. The maximum initial deposit in the account will be

Since the launch of the Help to Buy: mortgage guarantee 46,877 mortgages have been completed with the support of the scheme. Of

these, 78% were purchases by first time buyers. Compared to total mortgage completions in each region, the scheme is supporting a

higher proportion of mortgages in the North West and the East, and a lower proportion in London and the South East

The total value of homes purchased under the scheme is £7.29 billion. The mean value of a property

purchased or remortgaged through the scheme was £155,603, compared to a national average house price

of £273,000.

Source: HM Treasury/IRN Research

4 162 817 1578

2090

2648

3322

4031

3872

4379

3893

3419

3823

3145

2847

2266

2098

2483

£1 £21£112

£226£306

£383£479

£585 £567£661

£587£515 £562

£459 £425£331 £305 £351

£0£100£200£300£400£500£600£700

0500

1,0001,5002,0002,5003,0003,5004,0004,5005,000

Octobe

rNov

ember

Decem

berJan

uary

Februa

ryMa

rch April

May

June July

August

Septem

berOct

ober

Novem

berDec

ember

Januar

yFeb

ruary

March

2013 2014 2015

£m

Number

of com

pletion

s

Help to Buy: mortgage guarantee. No. mortgage completions and value properties from October 2013 to March 2015

Completions Value of mortgage loans


18 | P A G E

£1,000, with maximum monthly deposits of £200. The measure has been criticised for not helping housing supply and for the fact that with the current deposit subsidy it would take savers four and a half years to build up £15,000, or a 10 per cent deposit on the average UK home. Researchers at Capital Economics estimate that the scheme would give potential buyers an extra £60,000 to spend, once their additional borrowing scope is taken into account, so it will boost demand for housing. However, it has also been argued the scheme may perversely reduce housing demand in 2015, as potential buyers wait for the official launch of the scheme in autumn 2015. The Institute of Fiscal Studies has argued the scheme may have a negative effect on demand until 2020 when the first buyers to use the scheme would make their purchases. The housing charity, Shelter, have pointed out that the scheme will cost £2.2 billion over the coming five years, enough to build 65,000 affordable homes. Demand grows as property generates better returns than cash or equities

Many investors and adults looking to build up a nest egg for themselves in later life have faced a period of low investment returns as interest rates worldwide have been low after the financial crisis that stared in 2007/08. At the same time, many consumers have lost confidence in their pensions to provide them with a good retirement income or they have realised they do not have adequate pension provision. Low returns and a desire for a better income in the future has resulted in a significant growth in buy-to-let landlords. According to the Association of Residential Letting Agents (ARLA), the typical landlord generates an income (i.e. rental) return of around 5% and this has been the case over the 2010 to 2015 period. In contrast, equities generate typical dividend returns of 3%-4%, while cash assets and government bonds generate much lower returns. Buy-to-let landlords and other landlords are competing with home purchases to buy the limited supply of housing in the UK. This has helped push up house prices and squeeze many would-be home buyers, especially younger first-time buyers, out of the market. The tax advantages for buy-to-let landlords (see below) has also meant they have been better able to finance a house purchase compared with home owners. Not only has housing offered a better income return than many other assets it has also outperformed the stock market recently in terms of capital appreciation. According property adviser Savills, UK Landlords have made £177 billion profit from capital growth over the past five years with buy-to-let landlords the biggest beneficiaries of rising house prices. The £177 billion of profit only represents capital gain and excludes income from tenants’ rents. But Buy-to-let made less financially attractive… The 2015 Budget introduced measures to make the financial returns on renting a home less attractive to buy-to-let landlords. From April 2017, the offset of mortgage interest available to higher rate taxpayer-landlords will gradually be reduced to the basic rate. Under the four-year withdrawal of the relief, in 2017/18 landlords will only be able to apply the existing relief rules to 75% of their finance costs with

Annual average income return, 2014Rental yield - flats 5.18%Retail yield - houses 5.03%UK equities 3%-4%10 year Govt security 2.57%5 year government security 1.72%2 year fixed rate bond 1.60%Fixed rate cash ISA 1.49%Cash ISA* 1.17%Instant access deposit* 0.67%* including bonusesSource: ARLA/Bank of England/IRN Research


19 | P A G E

the remaining 25% using the basic rate reduction. The following three years will see the proportion change by 25% each year before the basic rate cap applies in full from 2020/21. Landlords who have small borrowings or are basic rate taxpayers will be unaffected by the change. In addition, landlords will be hit by a fall in their tax-deductible expenses. From 2016, the annual Wear and Tear Allowance will be removed. The Wear and Tear Allowance serves to reduce taxable property income and is available against lettings of furnished, residential properties. It was intended to account for the deterioration of the fixtures and fittings. It does not cover fixtures that are deemed to be “integral” to the building, such as baths, toilets, etc. Instead of the Wear and Tear Allowance, landlords will be able to deduct the actual costs they incur on replacing furnishings in the property; but no tax relief will be available on the initial cost of furnishing a property. The new relief will be available to unfurnished and part-furnished properties, as well as fully-furnished. Newer landlords or those undertaking refurbishments of their properties might benefit from the change, as they will be investing in kitting-out their properties. But well-established landlords whose properties need very little upkeep year-to-year are likely to miss the Wear and Tear Allowance. The mortgage interest restriction applies to individuals owning properties, not companies. Further plans to cut Corporation Tax were also announced in the Summer Budget, so operating as a limited company may become more viable. However, the tax advantages for owners of limited companies have already been slashed significantly (see the Housing Wealth section). Which could force up rents The above changes are likely to result in landlords increasing the rents they charge in order to account for the increase in their tax liabilities, which will hamper first-time buyers’ ability to save for their deposit. A tipping point for mortgage affordability

A feature of the past seven years has been an economy in which interest rates are low, which has contained mortgage interest costs. At the same time, however, consumer incomes have failed to grow significantly making it harder to afford a deposit for a home and obtain a large enough mortgage. These opposing forces have resulted in relatively subdued mortgage activity, compared with pre-financial crisis years.


88.090.092.094.096.098.0100.0102.0104.0106.0

-3.0-2.0-1.00.01.02.03.04.05.0

Index

% chan

ge

Real Household Disposable Income (% change over previous year)


88.090.092.094.096.098.0100.0102.0104.0106.0

-3.0-2.0-1.00.01.02.03.04.05.0

Index

% chan

ge

Real Household Disposable Income (% change over previous year)

% change over previous year Index, 2011=100


20 | P A G E

However, there are now signs that the economy has reached a tipping point. Data in mid-2015 suggests that incomes are starting to rise in real terms while mortgage rates have reached a floor and are set to rise. While the Bank of England is unlikely to increase Base Rates until the first quarter of 2016, fixed terms mortgage rates are already edging upwards in anticipation. May 2015 could well mark the point at which mortgage rates hit their lowest point. The Bank of England’s monthly series on quoted mortgage rates showed that in May short-term fixed rates advertised in the market fell to their lowest levels since records began in 1995 for those borrowing below 75% of the value of their homes. And Stamp duty reforms have taken the edge off the top end of the market In the 2014 Autumn Statement, Chancellor George Osborne announced the scrapping the current stamp duty system in favour of a sliding scale. Previously, Stamp duty had a slab structure, whereby homebuyers pay the tax rate on the full value of the property. Duty was charged at 1% on homes worth between £125,000 and £250,000, rising to 3% on homes costing more than £500,000, then 4% on homes up to £1m, reaching 5% on homes worth £1m and above. This system has been scrapped in favor of an incremental scale of tax rising to 12% on homes worth over £1.5m, with the new tax charged in a similar way to income tax. Under the new system 98% of buyers will pay less tax. Only those buying homes worth more than £937,000 will pay more under the new system. The result of these reforms has been to cut the upfront cost of buying a home for most buyers but it has made is much more expensive to buy higher prices homes, especially homes in prime locations in central London. This and other tax changes have led to prices of top-end London homes declining recently. While the Mortgage Market Review has slowed the rate of mortgage applications

11

3

1

1

1

Source: Bank of England/IRN Research

1.002.003.004.005.006.007.008.009.00

3 9 3 9 3 9 3 9 3 9 3 9 3 9 3 9 3 9 3 9 32005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

%

UK Mortgage Rates (%), 2005-2105

Tracker mortgage 2 year fixed (75% TLV) 2 year variable rate (75% TLV) Standard variable rate


21 | P A G E

The Mortgage Market Review rules came into effect April 2014. Under MMR, lenders are fully responsible for assessing whether a mortgage applicant can afford the loan, and they have to verify the customer's income. While lenders are still allowed to grant interest-only loans, this can only be done where there is a credible strategy for repaying the capital. The new MMR rules have resulted in lenders being more rigorous in the checks they make on mortgage applicants before granting a loan which has slowed the mortgage arrangement process and made it more difficult for applicants to get a mortgage approval. The impact of MMR was felt before the rules were formally applied with many lenders informally implementing the new rules earlier in 2014. Mortgage approvals have been relatively subdued since MMR came into force compared with the pre-MMR period.


22 | P A G E

Trends in Household Tenure Aims of this section This section presents a brief overview of household tenure the UK, indicating how changes in tenure will impact on the residential property market. The rise of the landlord A feature of the UK residential property market over the past twenty years has been the continued rise in private rental landlords. By 2015, almost one-in-five properties in the UK are expected to be owned by a private landlord, representing 5.47 million properties. In contrast, the number of properties in owner occupation peaked in 2008 when 18.14 million properties were owner occupied. By 2015, the number of owner occupied properties is expected to be down to 17.79 million.

Mirroring the changes in housebuilding, the number of properties owned by local authorities has declined. Under the 1988 Large Scale Voluntary Transfer (LSVT) policy, local authorities transferred much of their housing stock to housing associations and registered social landlords. Moreover, the introduction of Right to Buy in the 1980s led to a large transfer of properties from local authority control to owner occupation.

Source: DCLG/Welsh Assembly Government, Scottish Government/IRN Research

65.9% 66.9% 68.9% 69.0% 67.2% 65.5% 63.5% 63.0%

8.5% 9.4% 9.4% 11.9% 14.5% 16.4% 18.5% 19.4%3.0% 4.1% 5.8% 8.1% 9.0% 9.4% 9.9% 9.9%21.8% 19.1% 15.5% 10.6% 9.0% 8.4% 7.8% 7.6%

0%10%20%30%40%50%60%70%80%90%

100%

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014 (e

st)201

5 (est)

Breakdown of the UK Dwelling Stock by Tenure, 1991-2015

Owner occupation Privately Rented Housing Association Local Authority Other public sector


23 | P A G E

The privately rented sector began to take off in the UK with the introduction of Assured tenancies, which were introduced by the Housing Act 1988. The Act replaced most of the greater rent protection under the Rent Act 1977 and in rarer cases, other Rent Acts. Since February 1997, all new residential tenancies with three exceptions are deemed to be assured short-hold tenancies: the exceptions are those excluded by notice before or after the tenancy, those specifying it is not a short-hold, and lettings to existing assured tenants. Owner occupation gets progressively harder for first time buyers… The average age at which consumers can first enter the housing market is rising progressively. The difficulties saving for a deposit and the need to have a substantial salary to meet mortgage repayments are making it harder for younger consumers to buy their first home. Four factors have hit younger potential first time buyers in particular

House price inflation traditionally has, and certainly in the past few years has, outstripped wage and earnings inflation, making homes progressively more unaffordable to most individuals, but especially those with lower incomes. Younger adults tend to have lower incomes than their older, more established counterparts. The financial crisis has made mortgaged lenders more risk averse with the new MMR rules only increasing this attitude. As a result, the minimum deposit required for a home purchase is higher today that in pre-crisis times, making it harder for those with lower incomes the save the necessary amount. The financial crisis had made it very hard to get interest-only mortgages, a type of mortgage that makes it affordable for less affluent adults to finance relatively larger mortgages. The wages of younger adults have tended to rise slower than those of their older counterparts with younger adults more likely than other working adults to be in less secure modes of employment like part-time work or on zero hours contacts. The result of these developments is that an increasing number of younger adults are being forced into rental accommodation, with the percentage buying a home with a mortgage falling progressively in

Source: DCLG/Welsh Assembly Government, Scottish Government/IRN Research

2,010

3,920

5,469

711

2,440 2,795

5,133

2,427 2,149

15,531

18,184 17,791

14,000 14,500 15,000 15,500 16,000 16,500 17,000 17,500 18,000 18,500

-

1,000

2,000

3,000

4,000

5,000

6,000

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014 (e

st)201

5 (est)

Owner

occupi

ed

Non-ow

ner occ

uplied

The number of UK Dwellings by Tenure, 1991-2015

Privately Rented Housing Association Local Authority Owner occupation


24 | P A G E

recent years. Between 2003 and 2014, the proportion of under-35 year olds in England living in rented accommodation has doubled and the proportion buying with a mortgage has almost halved.

Among over 35 year olds the main tenure changes over 2004 to 2014 has been the substitution of buying a home with a mortgage with outright ownership. Among under-35 year olds the main changes were the substitution of buying a home with a mortgage with private renting.

Source: English Housing Survey 2013-14/DCLG/IRN Research

The tenure of individuals in England by age 2003-2014

50% 48% 46% 48% 45% 41% 38% 34% 33% 31% 29%

26% 28% 29% 32% 34% 37% 42% 46% 46% 49% 52%

13% 12% 12% 10% 10% 11% 9% 9% 8% 8% 7%9% 9% 10% 8% 9% 9% 10% 9% 10% 9% 11%

0%10%20%30%40%50%60%70%80%90%

100%

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

% of ad

ults

Under 35 year olds

own outright buying with mortgage private renterslocal authority housing association

35% 37% 36% 37% 40% 38% 38% 39% 38% 39% 40%

41% 38% 40% 38% 36% 35% 35% 34% 34% 33% 31%

6% 7% 7% 7% 7% 9% 10% 10% 11% 11% 12%11% 10% 9% 9% 9% 8% 8% 8% 8% 8% 7%7% 7% 8% 8% 8% 9% 9% 9% 9% 9% 10%

0%10%20%30%40%50%60%70%80%90%

100%

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

% of ad

ults

Over 35 year olds

own outright buying with mortgage private renterslocal authority housing association


25 | P A G E

Who are increasingly in a Catch 22 situation Young adults increasing find that they can neither find a deposit for their first home nor save up for that deposit if they are living in privately rented accommodation. This is especially true of young adults living in London and the South East of England. Rents across Great Britain rose by 10.2% between January 2011 and June 2015, with London driving the aggregate level forward. Excluding London, private rents rose by only 6.5% across GB. Over a similar period (January 2011 to May 2015), total weekly average earnings (regular pay plus bonuses) rose by 5.5%.


2.8%2.9%

3.3%3.3%

5.8%6.2%

6.5%7.0%

7.3%7.4%

9.7%10.2%

17.9%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0%North East

North WestWales

Yorkshire & the HumberWest MidlandsEast Midlands

GB excluding LondonScotland

South WestEast

South EastGreat Britain

LondonPercentage change in private sector rents, Jan 2011-June 2015


26 | P A G E

Housing Wealth Rising house prices increase the housing wealth effect

As house prices rise, so housing is becoming an important generator of wealth for families and landlords. For landlords, capital appreciation is often the main return on their housing investment. But with a the proportion of adults in the UK owning their own homes declining and likely to continue to decline into the future, housing wealth is being concentrated into a smaller number of hands. Moreover, the major difference in the rise in house prices across the UK is also accelerating regional inequalities in wealth. Almost £6 trillion of wealth held in dwellings At the end of 2015, IRN Research estimates UK dwelling will have a collective value of £5.7 trillion, compared with £3.92 trillion in 2008 just after the financial crisis hit the UK economy. The amount of wealth tied up in dwellings has tended to increase rapidly over the past couple of years reflecting rising house prices. With little house building, relative to the stock of homes, the value of wealth tends to move in tandem with house prices. IRN Research estimates that in 2015, dwellings represented around 12% of total UK national wealth, compared with 9% in 2008.

Source: Data produced by Land Registry © Crown copyright 2015/IRN Research

369.7 317.5

515.0

285.9 241.5292.4

233.3191.9 187.3

0.0

100.0

200.0

300.0

400.0

500.0

600.0

Jan-19

95Sep

-1995

May-1

996Jan

-1997

Sep-19

97Ma

y-1998

Jan-19

99Sep

-1999

May-2

000Jan

-2001

Sep-20

01Ma

y-2002

Jan-20

03Sep

-2003

May-2

004Jan

-2005

Sep-20

05Ma

y-2006

Jan-20

07Sep

-2007

May-2

008Jan

-2009

Sep-20

09Ma

y-2010

Jan-20

11Sep

-2011

May-2

012Jan

-2013

Sep-20

13Ma

y-2014

Jan-20

15

Index (

Jan 19

95=100

)

Index of House Prices (seasonally adjusted, Jan 1995=100)

London (fastest growing region) All England & Wales North East (slowest growing region)


£3.43 £3.56 £3.92 £4.31 £3.92 £4.05 £4.26 £4.28 £4.44 £4.65£5.28 £5.70

£0.00£1.00£2.00£3.00£4.00£5.00£6.00

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014(est) 2015(est)

£ trillio

n

Net UK Housing Wealth


27 | P A G E

With households owning the lion share Around 95% of the wealth held in dwellings in the UK is owned by households and non-profit making organisations serving housing (e.g. housing associations) with this percentage having been around this level since 2007. In 2015, IRN Research estimates households and non-profit making bodies had £5.4 trillion of dwelling wealth. And private landlords owning around 16% of housing wealth In 2014, UK tenants spent £61.1 billion on rents, equivalent to around £500 per month per rented property. Private landlord rents are considerably higher than this. According to ARLA, in Q4 2014, the average private landlord generated a rental income of £1,812/month for houses and £1,195/month for flats. Private landlords own around 51% of all rented property in the UK and given the high rents in the private sector, compared with the social housing sector, they probably account for around 70%-75% of the total rental income. If private landlords account for 70%-75% of rents (£43-£46 billion) a 5% return (as estimated by ARLA) implies an investment of £0.86-£0.92 trillion by private sector landlords in housing. This represents around 16%-17% of the total wealth held in dwellings in the UK or 17%-18% of housing wealth owned by households and non-profitmaking institutions serving households. Overseas owners important at the top end of the market The growth in house prices at the top end of the market – especially prime locations in London- have been driven by foreign buyers. Concerns have been raised that some of these transactions could be vehicles for money laundering. Land Registry figures show that in England and Wales, 2.2 million UK companies and 90,000 entities registered in tax havens but not beneficial owners own UK properties. More than 100,000 property titles are registered to overseas companies, with more than 36,000 properties in the capital owned by offshore firms. In total, at least £122bn of property in England and Wales is owned by offshore companies. This represents around 2% of UK housing wealth. The Government has changed the taxation on overseas companies owning UK property. From 6th April 2013, an offshore company owning a UK residential property valued above £2m has had to pay an Annual Residential Property Tax (ARPT), determined by the value of the property, ranging from £15,000 for properties between £2 million and £5m, up to £140,000 for properties with a value of more than £20m. This is on top of 15% Stamp Duty Land Tax that offshore companies pay on acquisitions of UK residential property costing more than £2m. In addition to the ARPT, from 6th April, Capital Gains Tax (CGT) will be charged to offshore companies disposing of UK residential property, where the disposals proceeds are over £2m. Only the gain from the April 2013 value will be taxed.


28 | P A G E

Residential Property Sales Introduction There are two main sources of data on residential property sales in the UK: data from HMRC and data from the property registries in England and Wales, Scotland and Northern Ireland. These figures differ in important ways. The HMRC figures are based on the HMRC's Stamp Duty Land Tax (SDLT) and the Scottish Administration's Land and Buildings Transactions Tax (LBTT) databases. These figures exclude any transactions valued at less than £40,000. The HMRC figures also include land transactions as well as home transactions. The data from land registries are narrower than the HMRC data in that they focus on specific types of property transactions. The Land Registry in England and Wales for example only records residential home sales that are sold for full market value and are lodged with its for registration. Therefore it excludes, for example, repossessions and transfers between parties and sales of properties with leases of less than seven years. However, Land registry data is useful for assessing the types of homes properties being sold. 1.2 million Residential property sales

HMRC data shows that around 1.2 million property transactions took place in 2014, valued at just over £300 billion. 2015 look set to be a year where property transactions broadly match those of 2014. While the number of transactions in 2015 is expected to slightly lower than the number of 2014, the value of transactions is expected to rise by 3.8%. House prices continue to rise in the UK, although the rate of growth is moderating, and the top end of the market for properties in prime locations in London has been falling, knocking some of the froth off of the value of property transactions.

See the Appendix for detailed tablesSource: HMRC/IRN Research

£258.3£339.0 £361.0

£199.4 £185.1 £207.0 £206.5 £214.8 £254.1 £303.3 £315.0

1,578 1,670 1,614

900 858 886 885 9321,074

1,219 1,201

£0.0£50.0£100.0£150.0£200.0£250.0£300.0£350.0£400.0

0200400600800

1,0001,2001,4001,6001,800

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015(est)

Value (£

bn)

Transa

ctions (

000)

UK Residential Property Transactions, 2005-2015

Value (£bn) Number (000)


29 | P A G E

Residential property transactions have been rising steadily since the low point of 2009 after the financial crisis of 2007/08. The Government’s Help to Buy scheme started to boost the first time buyer market which aided market recovery from 2013 onwards. However, the first half of 2015 saw transactions number fall compared with 2014. This reflected a lack of homes coming onto the market for sale, with pre-Election uncertainty one factor behind this. This drop in transactions is expected to be a temporary phenomenon and from mid-2015 the market looks set to pick up with rising transactions volumes seen in June and rising numbers of mortgage approvals. Houses dominate the market The residential property market is dominated by the sale of houses, with flats typically accounting for around one-in-five home sales. Detached homes represent around one-quarter of annual home sales but closer to one-third of the value of homes sales because of their higher cost. While the breakdown of home sales by types shows some variations year on year, the market have been relatively stable since 2010. Of more significance are the differences in sales composition between the difference regions of the UK. The market in Northern Ireland features far more detached home sales than is the case for the rest of the UK, while the market in Scotland features proportionately far more sales of flats than is the case for the rest of the UK and considerably more than the Northern Irish market. The market in England and Wales is strongly focused on semi-detached and terraced houses.

* change compared with the same month of the previous yearSource: HMRC/IRN Research

41%34%

16%

31%

13%19%

12% 9% 12% 13%

-10%-1%

-11% -9%0%

-8% -4%

6%

-20%-10%

0%10%20%30%40%50%

Annual monthly change* in residential property transactions, 2014-2105

* % percentage of volume sales** - January to June Source: England and Wales (Data produced by Land Registry © Crown copyright 2015)/Scotland (Registers of Scotland)/Northern Ireland (Department of Finance and Personnel)/IRN Research

25% 24% 24% 24% 32% 31% 25% 24%

27% 27% 18% 18%31% 30%

26% 26%

28% 30%21% 21%

29% 32%27% 29%

20% 19%37% 37%

8% 7% 22% 21%

0%10%20%30%40%50%60%70%80%90%

100%

2014 2015** 2014 2015** 2014 2015** 2014 2015**England and Wales Scotland Northern Ireland UK

The Structure* of Home Sales by Type and Region, 2014-15

Detached Semi-Detached Terrace Flat/maisonette


30 | P A G E

New builds losing popularity Given the relatively low rate of housebuilding in the UK, it is no surprise that most homes sold are existing/established properties rather than new builds. Data on composition by age of the home is only available in England and Wales but this shows clearly how new builds represent only a small share of the housing market. The share of home sales in England and Wales taken by new build properties has declined in the past couple of years, despite the Government’s efforts to boost housebuilding. The introduction of the mortgage guarantee Help to Buy Scheme, which applies to all types of home, may have skewed first time buyer demand away from new build properties. Up until 2015, new build sales grew the strongest for detached and semi-detached properties, possibly reflecting demand for new builds in new housing estates. Moreover, it appears new build sales have been most popular when buying more expensive executive type homes which are not in the price range of most first time buyers. The share of new build sales in the flats market has declined steadily since 2010.

DetachedSemi-

Detached TerraceFlat/

maisonette All2010 7% 5% 7% 21% 9%2011 8% 5% 7% 19% 9%2012 10% 6% 8% 18% 10%2013 10% 7% 8% 16% 10%2014 11% 7% 6% 14% 9%2015 (est) 9% 5% 4% 10% 6%Trend

Percentage of home sales taken by new build properties in England and Wales, 2010-2015

Source: Data produced by Land Registry © Crown copyright 2015/IRN Research


31 | P A G E

London dominates the UK housing market England and Wales account for around 90% of the property transactions in the UK. Trends in the England and Wales market tend to determine the trends across the UK as a whole. Within England and Wales, the Greater London market and the markets in the major conurbations are the most important. In the Figure opposite, the size of the bars reflects the number of home sales. It demonstrates how important the Greater London market is for England and Wales as a whole. In 2014, Greater London accounted for 13% of all home sales in England and Wales and 26% of the value of home sales in England and Wales. In the Figure opposite the bar size reflects the value of home sales in 2014 and it shows how in value terms Greater London is of even greater importance to the national picture than it is in volume terms. The housing market in London is very different to anywhere else in the UK with a far higher proportion of purchasers buying flats and a much smaller proportion of detached homes.


32 | P A G E

With selected postcodes of national importance It is not just Greater London as a whole which is significant for the UK home market. Within London there is considerable variation in average house prices so that selected postcodes within Greater London account for a relatively high share of the value of all home sales in England and Wales and the UK as a whole. The figure opposite indicates how a few postcodes in central/west London are of national importance in terms of the value of homes sold. This is shown more explicitly in the figure opposite, where key London postcodes, mainly in Westminster and Kensington and Chelsea account for very high levels of home sales in value terms.

Less than half of home sales financed with a mortgage While the majority of homes in the UK are purchased with a mortgage (an estimated 77% in 2014), these mortgaged homes represent less than half of the value of all home sales in the UK. Non-mortgage means of finance, including cash purchases, tend to be used when purchasing very expensive properties and whole blocks of flats.

PostCode BoroughHome

Sales 2014 (£m)

No of home

sales 2014Average Price per home (£)

SW1W 9AH Westminster £198.63 39 £5,093,128W14 8QA Kensington and Chelsea £188.36 131 £1,437,884SW8 2BW Vauxhall £163.14 47 £3,471,124SW1P 2FE Westminster £101.33 52 £1,948,575SW1P 2DU Westminster £88.54 71 £1,247,096SW3 5QP Kensington and Chelsea £79.32 13 £6,101,539SW7 1QJ Kensington and Chelsea £78.00 3 £26,000,000W2 1BF Westminster £68.21 48 £1,421,015SW6 1DQ Hammersmith and Fulham £65.18 19 £3,430,526W2 1AZ Westminster £60.97 57 £1,069,619E1 7AP Tower Hamlets £56.83 106 £536,148Source: Data produced by Land Registry © Crown copyright 2015/IRN Research

The Greater London Postcodes with the highest value of home sales, 2014


33 | P A G E

The share of home sales taken by mortgaged purchases has grown in recent years as the mortgage market has recovered from the shock of the global financial crisis and sales at the luxury, premium end of the UK (mainly London) market have begun to fall back. Buy to let landlords and first time buyers a growing force The Figure above also shows the growing importance of buy-to-let landlords in the housing market along with the rising demand from first-time buyers. The fact that the share of home purchases coming from existing home buyers is dropping confirms another problem facing the UK housing market: existing home buyers are tending to move less. With the average age of acquiring a home now past 30, it becomes harder for home owners to move multiple times before they retire, especially if they want to (or have to) repay their mortgage before they retire. The supply of properties coming on the market is slowing with a greater proportion of existing home owners extending or renovating a home rather than moving. Moving up to a more expensive property is become as hard as making a first time purchase for many home owners. (These issues are discussed more fully in the Future Issues section).

Source Home Sales: England and Wales (Data produced by Land Registry © Crown copyright 2015)/Scotland (Registers of Scotland)/Northern Ireland (Department of Finance and Personnel)/IRN ResearchSource Mortgages: Mortgage Lenders and Administrators Return (MLAR)/Bank of England/IRN Research

10.5% 10.8% 11.9% 12.2% 13.4% 13.6%

23.8% 23.5% 23.3% 21.5% 21.4% 21.0%4.3% 6.1% 7.0% 7.6% 9.0% 10.9%

61.4% 59.5% 57.8% 58.6% 56.2% 54.4%

0%10%20%30%40%50%60%70%80%90%

100%

2010 2011 2012 2013 2014 2015 (est)

The breakdown of value home sales in the UK by type of finance and mortgage borrower, 2010-2015

First Time Buyers Existing Owners Buy-to-let landlords Non-mortgagedMortgaged


34 | P A G E

Future issues Aims of this section The aims of this section is to consider the future shape of the residential mortgage market over the coming five years. Base Rate starts to rise from 2016 onwards increasing mortgage rates… The costs of borrowing money to purchase a home are set to rise over the coming years. Even if mortgage providers squeeze their margins, rising Base Rates will force up mortgage costs. According to the Office of Budget Responsibility (OBR), between the third quarter of 2015 and the first quarter of 2021, Base Rates will increase by 1.7 percentage points. But household incomes will rise, as long as unemployment stays low The OBR anticipates that household incomes will rise over the coming years as real wage growth returns to the UK. The one potential fly in the ointment is the rise in unemployed seen in mid-2015. As productivity rises in the UK, having been subdued or falling since the start of the financial crisis, there is a worry that employment levels could drop: employers will need fewer (but more productive) workers to fulfil their orders. If aggregate demand in the UK rises slower than anticipated, the rise in wages could be offset by their being fewer people in work. House prices are set to continue to rise as housing demand outstrips supply House prices will continue their rise in the UK despite efforts to boost housebuilding. The level of investment in dwellings (new building and renovations) is expected to rise by over 50% between 2015 and 2021. Despite this, demand for homes will continue to outstrip supply despite the fact that mortgage approvals will be restrained somewhat by the new Mortgage Market Review regulations and bank’s attempts to repair their balance sheets. The pace of house price inflation, according to the Office of Budget Responsibility, will rise over the coming five years so that by 2021 Q1 prices will be rising by almost 6% per year. The rate of growth over the coming five years is not anticipated to be high by historical standards. Even so, by Q 1 2021 house prices will be around 34% higher than they were in Q1 2015. Over that same period, consumer

Source: Office of Budget Responsibility/IRN Research

0.5% 0.6%0.8%0.9%1.0%

1.2%1.3%1.4%1.5%1.6% 1.7% 1.8% 1.9% 2.0% 2.1% 2.2%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q12015 2016 2017 2018 2019 2020 2021

UK Base Rates (%), 2015-2021


35 | P A G E

disposable income is expected to rise by around 28%, meaning homes will continue to become less affordable for a large number of potential first time buyers. The rise in house prices will mean that by 2021, £8 trillion of wealth will be held in houses in the UK, a rise of 41% over the level of wealth in 2015. House sales expected to rise by 19% between 2015 and 2020 Based on forecasts by the Office of Budget Responsibility, IRN Research estimates that the coming five years will see a steady rise in the number of home sales, although even by 2020 the number of sales will remain below the levels recorded immediately before the 2007/8 financial crisis. Between 2015 and 2020, the OBR predict that residential property transactions will rise by 19% and IRN Research expects the number of house sales to move broadly in tandem with property transactions. House sales will rise relatively quickly from 2015 to 2018 but the rate of increase will slow in 2019 and 2020, at which time Base Rates will exceed 2% and house price inflation will be approaching 6% per annum. Fewer owners of housing wealth Housing wealth is being concentrated into the hands of fewer adults. With increasing numbers of younger adults renting rather than buying and with more landlords buying properties, younger adults

* % change over the same quarter of the previous yearSource: Office of Budget Responsibility/IRN Research

8.5%

4.3%3.7%

5.0%5.8%

3.0%4.0%5.0%6.0%7.0%8.0%9.0%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q12015 2016 2017 2018 2019 2020 2021

Annual percentage change in house prices, 2015-2012*House price inflationrises from 5% to almost 6%at a slow pace

0.8 percentage point rise in 12quarters

House price inflation rises from 3.7% to 5%at a fast pace.1.3 percentage point rise in 7quarters

Rapid decline inhouse price inflation

Source: Office of Budget Responsibility (property transactions)/IRN Research (House Sales)

879 884 9321067

1222 1201 1241 13011373 1418 1434

743 737 741893

1010 993 1027 1076 1136 1173 1186

600700800900

1000110012001300140015001600

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

(000) t

ransac

tions/sa

les

Actual and Forecast of House Sales and Property Transactions, 2010-2020

Property transactions House Sales

ACTUAL FORECAST


36 | P A G E

whose parents do not own their own homes are finding it harder to buy a property. The children of landlords and owner-occupying parents are likely to inherit housing wealth which can be used to finance their own buying activities. Moreover, the children of property owners can also benefit from their parents remortgaging their homes and providing cash to their children. It is now estimated that just over half of first time buyers receive cash injections from their parents. The narrower base of home ownership could increase if the number of buy-to-let landlords increases. Pension liberalisation (see IRN Research Pension Landscape report) could increase housing investments by buy-to-let landlords as pension holders aged 55 and over cash in their pension pots and invest in property. This is unlikely to have a very significant impact on the housing market as few pension holders have sufficiently large pension pots to invest in a property without taking out a mortgage and many will find it hard to get a mortgage given their closeness to retirement. Moreover, the restriction in mortgage interest rate relief to the basic rate and the removal of the ‘wear and tear allowance’ (see earlier in this report) will probably counter any increase in buy-to -let buying because of the pension reforms. Will the housing market become increasingly illiquid? Yes, if there are fewer first time buyers A real danger in the future is that increasingly fewer and fewer individual will ever get onto the housing ladder, which could permanently impact on the liquidity of the housing market. First time buyers are often the instigators of buying chains. Assuming they do not buy a new build, when first time buyers purchase their homes from existing home owners, they allow the seller to move up the housing ladder, creating a ripple of buying and selling further up the housing chain. Yes if there are not enough homes made available to buy The above problems are being compounded by the increasing age at which first time buyers are coming onto the market, thereby reducing the number of years between first purchase and retirement. The age of first time buying is now around 31 and is edging upwards every year. This limits the ability of home owners to move home multiple times while taking out a 25 year mortgage on each move. Once home owners pass the age of 45, they will find it hard to get a 25 year mortgage (most mortgage holders insist the mortgage is finished by the age of 65 or 70). Therefore, first time buyers today have a 14 year window to take out 25 year mortgages. Home moves past the age of 45 must be financed with mortgages less than 25 years in length which tends to increase monthly repayment costs, thereby making it harder and harder to move. According to Lloyds Bank, the average age of a home mover is 39 years old; down from 41 in 2005. This fall may be due to a reduction in the number of total home moves being made over a lifetime with fewer people over 40 now moving. Other studies have also shown that the cost of making a home move have risen sharply over the past decade again making it harder to move home multiple times. According to a study compiled by Post Office Money and the Centre for Economics and Business Research (CEBR), published in April 2015, the cost of moving home has leapt by 59% over the last decade to reach £11,894. The average cost of moving is forecast to increase further, reaching £15,414 by the end of 2020. Given the above factors, the number of house moves undertaken by the typical house owner before they retire is declining. A study by Lloyds Bank, published in August 2015, confirmed that the number of people moving home is in decline thanks to the huge costs involved. The bank estimates that that


37 | P A G E

homeowners paid more than £50,000 extra in 2015 to take their next step on the property ladder than they would have done five years ago, with the extra cost including the extra mortgage required and the costs of moving. According to Lloyds, the average price paid for a home in the first six months of 2015 by someone who was already on the property ladder and moving to their next property was £261,524. This was 25%, or £52,870, more than the typical home mover paid in 2010, when the home they were moving into home were valued at £208,654. The average deposit put down by a home mover in 2015 was £87,954; 8% higher than in 2014 (£81,549). This equates to 34% of the average price paid by home movers of £261,524. Changes to inheritance tax announced in the 2015 Budget may also increase the incentives for the elderly to remain in their homes and not sell or pass on ownership to their children before they die. Parents and grandparents will be able to leave homes worth up to £850,000 to their children without them paying inheritance tax from 2017, rising to £1 million by 2020. The new tax regime reduces the tax disincentives to hold a property to death, potentially reducing housing supply and putting upward pressure on house prices.


38 | P A G E

APPENDIX UK Property Transactions, 2005-2015 Transactions (000) Value (£bn)

England and Wales Scotland Northern Ireland UK

England and Wales Scotland Northern Ireland UK 2005 1,379 157 42 1,578 £235.3 £18.0 £5.0 £258.3 2006 1,476 144 50 1,670 £309.1 £21.4 £8.6 £339.0 2007 1,430 147 37 1,614 £327.4 £24.5 £9.1 £361.0 2008 790 96 14 900 £179.6 £16.8 £2.9 £199.4 2009 772 72 15 858 £170.6 £12.0 £2.5 £185.1 2010 798 73 14 886 £192.9 £12.0 £2.1 £207.0 2011 800 71 14 885 £193.1 £11.5 £1.9 £206.5 2012 843 74 16 932 £201.0 £11.9 £1.9 £214.8 2013 970 86 19 1,074 £237.9 £14.0 £2.2 £254.1 2014 1,101 94 23 1,219 £284.3 £16.1 £2.9 £303.3 2015 (est) 1,089 90 22 1,201 £295.7 £16.3 £3.0 £315.0

Source: HMRC/IRN Research Abbreviations and definitions used in this report Definitions for house sales House sales for England and Wales are gathered from monthly data produced by the Land Registry. The Land Registry’s monthly sales data covers the transactions received at Land Registry on the first working day of each month to the last working day of the month. © Crown copyright 2015 - See more at: http://www.landregistry.gov.uk/market-trend-data/public-data/price-paid-data#sthash.wHB4yc73.dpuf The statistical information for Scotland to cover all sales of residential properties registered with Registers of Scotland (RoS) in the quarter where the selling price of the property lies between £20,000 and £1,000,000. It exclude sales of blocks of properties and sales that are not "true" sales, e.g. transfers of ownership between family members, sales of pro indiviso shares, etc. Figures for each quarter relate to registrations in the quarter rather than sales in the period. The registration date is the date at which the title to the property is transferred and is generally within a few weeks of the date of sale. See http://www.ros.gov.uk/pdfs/StatisticsGuidanceNotes.pdf Data for Northern Ireland comes from the Department for Finance and Personnel (Land property Services). Sales in Northern Ireland are based on all the sales of residential properties that are notified for stamp duty. This includes all domestic property sales as well as non-domestic property sales, land sales and property rentals in Northern Ireland, regardless of how they are purchased e.g. this will include auction sales. However, there are a small number of property sales which do not require notification for Stamp Duty, these include: transactions where no money changes hands; property that's


39 | P A G E

left in a will; and transfers of property in a divorce or when a civil partnership is dissolved. See http://www.dfpni.gov.uk/lps/ni_rppi_quality_report.pdf

ARLA Association of Residential Letting Agents DCLG Department for Communities and Local Government HMRC Her Majesty’s Revenue and Customs MLAR Mortgage Lenders and Administrators Returns MMR Mortgage Market Review NISRA Northern Ireland Statistics and Research Agency OBR Office of Budget Responsibility ONS Office for National Statistics ROS Registers of Scotland

Economy & Finance

Uk residential property landscape 2015