UK house prices rose 1.11% during 2011, according to Nationwide. However in inflation-adjusted terms, UK house prices were actually down by 3.4%, building on a series of annual house price drops during the past three quarters.
There was a surge of first-time buyers in January 2012, with volumes up 22% from a year ago, according to the Council of Mortgage Lenders (CML). However, this was a reaction to the soon-to-be expiration of the first-time buyer stamp duty exemption in March 24, 2012 and is expected to wear off.
A key feature of UK’s housing market is location:
UK house price drops are likely to continue in 2012, because of the weak economy, low consumer confidence and restricted mortgages, according to Jones Lang LaSalle. The paucity of first-time buyers has also hit transaction levels.
However the vast majority of surveyors reported only modest falls in the Royal Institution of Chartered Surveyors (RICS) Housing Market Survey of November 2011, mostly in the 0 to -2% range. The UK housing market is expected to be broadly flat in nominal terms in coming years, while house prices will be gradually eroded by inflation.
Expectations for a rise in the Bank of England’s (BoE) base rate to 0.75% did not materialize, as the BoE decided to keep its record low base rate of 0.5%, in place since July 2011, despite an inflation rate twice the 2% target till December 2011. The low rate will probably remain unchanged until August 2012 according to British Chamber of Commerce (BCC) Chief Economist David Kern. Moreover, an increase of benchmark rate to 1% is expected in Q4 2012 and to 2.25% by end of 2013. Even though the headline CPI remains above the target of 2%, it is a rather improvement from 2011’s average rate of 4.48%.
At the beginning of 2012, the BoE implemented a further £50 billion (€60.12 billion) of quantitative easing. The UK is suffering from high unemployment, which rose to 8.4% of the working population, to 2.67 million, according to January’s Office for National Statistics (ONS) report. Economic activity only grew by a 0.8% during 2011, a decline from 2010’s 2.1% growth. The OECD warned that the UK economy will face a double-dip recession in the first half of 2012.
The UK’s credit ratings are on the verge of being downgraded from AAA by Moody’s and Fitch. Both have a negative outlook for the UK, warning that the UK should stabilize its public debt at around 94% of GDP by 2014-2015. By the end of January 2012, if financial interventions are included, UK public debt is around 147.3% of GDP.
- In early 2009, UK’s housing house prices began to fall due to the global credit crunch. However, house prices recovered in 2010, but fell again in 2011 and continue to be weak, at least nationally:
- Nationwide: average house price in February 2012 increased by 0.1% over the year to £162,712 (€195,649).
- Halifax: house prices declined to February by 1.9% from a year earlier, to £160,118 (€192,530).
There was a surge of first-time buyers in January 2012, with volumes up 22% from a year ago, according to the Council of Mortgage Lenders (CML). However, this was a reaction to the soon-to-be expiration of the first-time buyer stamp duty exemption in March 24, 2012 and is expected to wear off.
A key feature of UK’s housing market is location:
- London has had positive house price growth over the past year
- the south has had slight price drops;
- the midlands and the north have experienced significant price falls.
UK house price drops are likely to continue in 2012, because of the weak economy, low consumer confidence and restricted mortgages, according to Jones Lang LaSalle. The paucity of first-time buyers has also hit transaction levels.
However the vast majority of surveyors reported only modest falls in the Royal Institution of Chartered Surveyors (RICS) Housing Market Survey of November 2011, mostly in the 0 to -2% range. The UK housing market is expected to be broadly flat in nominal terms in coming years, while house prices will be gradually eroded by inflation.
Expectations for a rise in the Bank of England’s (BoE) base rate to 0.75% did not materialize, as the BoE decided to keep its record low base rate of 0.5%, in place since July 2011, despite an inflation rate twice the 2% target till December 2011. The low rate will probably remain unchanged until August 2012 according to British Chamber of Commerce (BCC) Chief Economist David Kern. Moreover, an increase of benchmark rate to 1% is expected in Q4 2012 and to 2.25% by end of 2013. Even though the headline CPI remains above the target of 2%, it is a rather improvement from 2011’s average rate of 4.48%.
At the beginning of 2012, the BoE implemented a further £50 billion (€60.12 billion) of quantitative easing. The UK is suffering from high unemployment, which rose to 8.4% of the working population, to 2.67 million, according to January’s Office for National Statistics (ONS) report. Economic activity only grew by a 0.8% during 2011, a decline from 2010’s 2.1% growth. The OECD warned that the UK economy will face a double-dip recession in the first half of 2012.The UK’s credit ratings are on the verge of being downgraded from AAA by Moody’s and Fitch. Both have a negative outlook for the UK, warning that the UK should stabilize its public debt at around 94% of GDP by 2014-2015. By the end of January 2012, if financial interventions are included, UK public debt is around 147.3% of GDP.
Analysis of United Kingdom Residential Property Market »
RENTAL YIELDS
Last Updated: Jun 01, 2011
Gross rental yields on apartments in central London are low.
Our research divides central London into ‘prime central London’ – i.e., the super-luxurious districts, and ‘other luxurious areas’.
Normally, the rental yields in ‘prime central London’ are well below those elsewhere, but this year we seem to have noticed some equalization. We find yields of around 4% to be typical of both districts.
Our research divides central London into ‘prime central London’ – i.e., the super-luxurious districts, and ‘other luxurious areas’.
Normally, the rental yields in ‘prime central London’ are well below those elsewhere, but this year we seem to have noticed some equalization. We find yields of around 4% to be typical of both districts.
TAXES AND COSTS
Last Updated: Nov 08, 2010
Rental Income: Unless non-residents take specific steps, they will be taxed on net rental income ssourced from the UK at a flat rate of 20%, which must be withheld by the tenant or letting agent. However, effective tax rates can be brought down to around 9% with all the allowable deductions.
Capital Gains: Capital gains are taxed are taxed at progressive rates, from 18% to 28%.
Inheritance: Estates or assets exceeding the current tax threshold of £285,000 (€418,446) are subject to inheritance tax at 40%. In calculating the amount of the estate, the value of any gifts made by the deceased within 7 years of death must be added (some small gifts are exempt).
Residents: UK residents are taxed on their worldwide income and on capital gains from disposal of their UK assets, and most likely on their overseas properties too.
Capital Gains: Capital gains are taxed are taxed at progressive rates, from 18% to 28%.
Inheritance: Estates or assets exceeding the current tax threshold of £285,000 (€418,446) are subject to inheritance tax at 40%. In calculating the amount of the estate, the value of any gifts made by the deceased within 7 years of death must be added (some small gifts are exempt).
Residents: UK residents are taxed on their worldwide income and on capital gains from disposal of their UK assets, and most likely on their overseas properties too.
BUYING GUIDE
Last Updated: Mar 23, 2007
Total roundtrip transaction costs range from 2.9% to 9.3%. Almost all buyers, UK-based or not, employ lawyers as well as real estate agents. Legal fees are around 0.5% to 1% while agent's fees are around 2% - 3.5%, plus 17.5% VAT. Buyers must pay stamp duty on a sliding scale, rising sharply to 4%, on properties worth over £500,000 (approx €736,000).
LANDLORD AND TENANT
Last Updated: May 25, 2006
Rents: Landlords and tenants can freely agree on rent levels. They can freely agree any mechanism of increasing rent levels. Deposits are lawful.
Tenant Security: Contracts naturally revert to a standard monthly contract which, after an initial six month's period of security of tenure, allows the tenant to be evicted at two months' notice. However in practice the eviction process can disadvantage the landlord.
Tenant Security: Contracts naturally revert to a standard monthly contract which, after an initial six month's period of security of tenure, allows the tenant to be evicted at two months' notice. However in practice the eviction process can disadvantage the landlord.
ECONOMIC GROWTH
Last Updated: Mar 19, 2012
Heading towards recession?
UK’s economy possibly faces a double-dip recession this year. GDP grew by a measly 0.8% in 2011, a sharp decline from 2010’s 2.1% growth. But industry surveys in recent months have been encouraging, so economists are still unsure if UK’s economy is deteriorating.
Opinion on the issue is divided:
There really is a big possibility of a recession, as in the last quarter of 2011 GDP fell by 0.2% q-o-q.
The OECD warned UK about the situation in November 2011. It expects a slump in the first two quarters of 2012, and growth of just 0.5% for the full year. Last year’s GDP fall was largely caused by a decline in business investment, as well as a 1.4% decline in production.
Unemployment was about 8.4% in January 2012, the highest number of unemployed since 1994, according to the Office for National Statistics.
In January 2012, the BoE Consumer Price Index rose 3.6%, far above the central bank’s 2% target. BoE governor Mervyn King expects inflation to fall continuously from now on, as the impact of the 2011 VAT increase wears off, and smaller increases in the cost of commodities and oil kick in.
If you are in need of remortgage advice visit remortgage.com today
Opinion on the issue is divided:
- The British Chamber of Commerce (BCC) believes that the UK can avoid the recession
- authorities such as the OECD and Standard Chartered think that Britain will face a double-dip recession.
There really is a big possibility of a recession, as in the last quarter of 2011 GDP fell by 0.2% q-o-q.
The OECD warned UK about the situation in November 2011. It expects a slump in the first two quarters of 2012, and growth of just 0.5% for the full year. Last year’s GDP fall was largely caused by a decline in business investment, as well as a 1.4% decline in production.Unemployment was about 8.4% in January 2012, the highest number of unemployed since 1994, according to the Office for National Statistics.
In January 2012, the BoE Consumer Price Index rose 3.6%, far above the central bank’s 2% target. BoE governor Mervyn King expects inflation to fall continuously from now on, as the impact of the 2011 VAT increase wears off, and smaller increases in the cost of commodities and oil kick in.
If you are in need of remortgage advice visit remortgage.com today
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