Harlow Property Values increase by 1.54% ... good or bad news?

“How's the Harlow housing market doing?” asked an upbeat Harlow landlord last week.  “Quite strange”, I replied. Our landlord was perplexed! Let me explain...

Even the Brexit vote has not hindered Harlow’s steady rise in property value, as Harlow property values went up 1.54% last month alone, leaving Harlow values 16.7% higher than a year ago. An increase in demand from buyers and an uninspiring level of supply (i.e. the number of properties on the market) has driven up the value of the Harlow’s housing.

...And that is where the issue is. With Brexit, the coalition of the 2010-15, a double-dip recession and post credit crunch fallout – I was perplexed that the Harlow property market (and values) has remained so strong, still 24.6% higher than 20 months ago. That is until you start to look into the real reasons why we find ourselves in such a great place.

The Harlow (and the UK) housing market is built on the foundations of basic economic rules that any GCSE Economics student should understand. However, at a time when, as a country, we seem eager to uncouple ourselves from all manner of proven facts, anything is up for grabs.

Even the wary RICS said throughout the UK, most of its Chartered Surveyors anticipated house prices to increase in the next six months, which seems contradictory given economic cautions from Mr Hammond and HM Treasury. Even though inflation will rise to around 2% to 3% in 2017 and perhaps a little more in 2018 because of Sterling’s devaluation, together with a high probability of a decelerating GDP and a slight rise in unemployment, how can the RICS and most of my landlords be so confident about the value of our homes?

Well, look from where we are starting. Nationally, a base of low unemployment, low inflation and preposterously low interest rates, while in Harlow, the local economy is doing quite well for itself. Confidence also plays a part. Confidence can supersede basic economic facts for a short time at least, which is why actual property market changes tend to be more exaggerated, as confidence can turn both positive and negative very quickly. The fact is, there is a long-term relationship between property values, wages and unemployment. For example, looking at the graph below, you can quite clearly see the ratio of property values to earnings is nowhere near as high as it reached in 2008 and currently is in the middle of the range for the last 30 years. As a country, we are in a good place.

 

By April 2017, Article 50 will be invoked. This will bring additional political tomfooleries and economic ups and downs. With both purchasers and vendors predisposed by the 24-hour news cycle, which let’s face it, gets more haphazard by the day, it is likely to prove a challenging couple of years … and yes, Harlow property values might drop slightly in 2017, but based on what we know of the UK plc now, the UK and Harlow property values are not projected to move that much over 2017 or 2018.  Going into the next two years, we are in much better financial shape as a country compared to the last two crashes of 1987 and 2008.

 

But, on the other side of the coin, what we also know is that we don't know much about the form of our economic future or indeed many other facets of our lives. Confidence will continue to be the key player in the Harlow housing market for a while longer - yet this may spur some much needed second-hand market activity? Now, where is my crystal ball?

 

£13m paid in Stamp Duty by Harlow Residents

 

“A pound saved is worth two pounds earned . . . after taxes” is what my Grandfather used to say. He loved his irony, yet was always a wise man, and it is tax I want to talk about today, in particular, property taxation .. Stamp Duty in fact.

Apart from some minor exemptions, Stamp Duty is paid by anyone buying a property over £125,000 in the UK. It presently raises £10.68bn a year for the HM Treasury (interesting when compared with £27.6bn in fuel duty, £10.69bn in alcohol duty and £9.48bn in tobacco duty).

 In the latest set of data from HMRC, in the MP constituency that covers Harlow, property buyers paid £13m stamp duty in one year alone – a lot of money in anyone’s eyes (although not as much as the £196m in income tax that all of us in the same area paid last year).

 

However, as you may know, George Osborne introduced an additional tax for landlords and from 1^st April 2016 they had to pay an additional 3% stamp duty surcharge on top of the normal stamp duty rate when purchasing a buy to let property. There were tales of woe and Armageddon with a report by Deutsche Bank suggesting that the new surcharge could see house prices fall by as much as 20%.

 HMRC data released in the Summer for Quarter 2 (Q2) of 2016 did seem to back up those fears as they published some worrying figures; only one in seven properties purchased was a second home or buy-to-let (in real numbers, only 30,300 of the 207,900 properties in Q2 were bought by landlords).

 In previous articles, I spoke about the slump of property transactions after the 1^st of April (as landlords rushed through their property purchases in March to beat the April deadline). In Q2 of 2016, £1.976bn was raised in Stamp Duty from Residential Property. Of that £1.976bn, £652m was paid by buy to let landlords (£424m in normal stamp duty and £228m in the additional 3% surcharge).

 However, looking at Q3, the numbers have improved significantly. Of the 235,000 property sales, nearly one in four of them (56,100 to be precise) were bought by buy to let landlords and of the £2.208bn in stamp duty, £864m was paid in ‘normal’ stamp duty by BTL landlords and an impressive £442m paid by those same landlords in the additional stamp duty surcharge.

 The statistics suggest buy to let investors have thankfully not been deterred by the stamp duty surcharge introduced in April this year. The figures also show that 65.4% of "buy to let" purchases cost less than £250,000, 23.7% of properties were in the £250k to £500k range and 10.9% (or 6,100 additional properties) of buy to let properties bought cost over £500k – interestingly nearly one in four (22.2%) of £500k properties purchased in Q3 were buy to let properties.

 It just goes to back up what I stated a few weeks ago when I suggested that many investors had rushed to make purchases before 31^st March, making figures in the following months (Q2) artificially low when the 3% supplement was introduced, but in Q3 the number of buy to let properties purchased increased by 85%.

 It just goes to show you shouldn’t believe everything you read in the newspapers! I can assure you the Harlow property market is doing just fine.

For more thoughts on the Harlow Property Market like this... visit the Harlow Property Market Blog

http://harlowproperty.blogspot.co.uk/

 

 

Harlow First Time Buyers Are Paying 15.5% More Than 12 Months Ago

Figures just released by the Bank of England, show that for the first half of 2016, £128.73bn was lent by UK banks to buy UK property - impressive when you consider only £106.7bn was lent in the first half of 2015. Even more interesting, was that most of the difference was in Q2, as £68.12bn was lent by UK banks in new mortgages for house purchase, which is the highest it has been for two years. Looking locally, in Harlow last quarter, £301.1m was loaned on CM19 properties alone!

Even though the Bank won’t be releasing the Q3 figures until December 2016, as I discussed a few weeks ago, HMRC have published their own preliminary data to suggest Q3 will be even better, with a massive growth of buy-to-let landlords to the housing market in that time frame. Fascinating, as it seems to fly in the face of the popular narrative – that the uncertainty surrounding Brexit would negatively impact buyer sentiment.

And it’s not just buy-to-let landlords that seem to be flourishing. I am finding that first-time buyers are also a lot more confident too. Low, and now negative, inflation has had a tangible impact on household finances and first-time buyers feel more secure in their jobs. Couple with a low interest rate environment and you have all the ingredients for a strengthening property market. To back that up with numbers, of the £68.12bn of mortgages lent in the Quarter (Q2), £14.9bn was lent to first-time buyers (the highest proportion of that overall lending for over two years at 21.99%).

 When I looked at the data for Harlow Council area, the average price paid by first-time buyers (FTB’S) was £227,500, which is a rise of 0.93% from last month and a rise of 15.56% to twelve months ago. The Land Registry then categorise the remaining buyers into cash buyers or those buying with a mortgage. The average price paid by cash buyers was £233,225, a rise of 0.72% from last month and a rise of 15.29% to twelve months ago, whilst buyers with mortgages (but not FTB’s), the average price paid by them was £254,521, a rise of 0.97% from last month and a rise of 15.59% to twelve months ago.

 

 

 

What surprised me with these figures was how close the property prices, values and percentages were to each other. It just goes to show the combination of low mortgage rates and a stable job market will continue to have a positive effect on the Harlow and UK market.  And that is why, while there is undoubtedly more cautiousness in the market at present than a year or so ago (among borrowers and mortgage companies alike) - mortgage rates are so competitive that they are inducing people to commit to a home purchase.

It seems the great Brexit uncertainty was over hyped, and house price growth as well as mortgage approvals, could pick up pace into 2017.

For more thoughts on the Harlow Property Market like this .. visit the Harlow Property Market Blog http://harlowproperty.blogspot.co.uk/