UK property market shows signs of upturn

Philippine Times Friday 10th February, 2012

LONDON - Strong indicators of Britain's property market looking up to be are seen with a rise in those investing for renting out and first time buyers making a strong return, while loan defaults leading to repossession has showed a drop in 2011.

According to latest data from the Council of Mortgage Lenders (CML) the number of properties being bought with buy-to-let mortgages increased by around 84,000 in 2011, modestly helping to increase the supply of private rented housing in the UK.

"These figures do not suggest that buy-to-let is crowding out first-time buyers; more that it is performing a really important role within the overall housing market," CML director general Paul Smee said.

"Buy-to-let lending continues to perform well. Demand for rented property remains high, so the rationale for buy-to-let remains strong, and there is little reason to foresee any change to this positive outlook for the sector."

The CML's members, including banks, building societies and other lenders, together undertake around 94% of all residential mortgage lending in the UK.

There are 11.2 million mortgages in the UK, with loans worth over 1.2 trillion pounds.

During the fourth quarter of 2011, a total of 34,800 buy-to-let mortgages (of which 15,600 were remortgages) were advanced, with a total value of 4 billion pounds, almost identical to the volume in the third quarter.(34,300 loans worth 4 billion pounds)

But the October-December 2011 quarter numbers were a big jump over the performance in corresponding period in 2010 (26,300 loans worth 2.9 billion pounds).

Compared with the height of the market in the third quarter of 2007, when quarterly lending totaled over 93,000 loans worth 12.7 billion pounds, the buy-to-let market continues to operate at relatively subdued levels, but it is clearly continuing to recover from its low point in 2009.

Buy-to-let mortgages account for nearly 13% of the total outstanding value of mortgages in the UK, and buy-to-let lending represented nearly 11% of total gross mortgage lending in the fourth quarter of 2011.

The total number of properties taken into possession by first-charge mortgage lenders in 2011 was 36,200, the lowest annual total since 2007 when it was to 37,100.

The pre-downturn level of 25,000 repossessions a year has not been reached as yet.

During the fourth quarter of 2011, the number of repossessions was 8,500 - nearly 9% down from 9,300 in the third quarter, but 5% up from 8,100 in the fourth quarter of 2010.

Experts at the CML believe that the market is improving, mainly due to the low mortgage interest rates and good arrears management policies implemented by lenders.

Smee is however worried that in the face of wider economic difficulties and rising unemployment, "we are concerned that there will be a higher number of people facing more serious problems in 2012."

He has stressed that anyone experiencing financial difficulties should talk to a lender as soon as possible to get the "best possible chance of staying in their home."

The arrears performance of buy-to-let loans is better than the owner-occupier market, but the repossession rate is higher.

This should be no surprise. For obvious reasons, lenders make particularly strenuous efforts to show forbearance, sometimes over very extended periods, to home-owners to try to help them keep their homes wherever realistically possible.

This is a less marked imperative in the buy-to-let sector where greater fluidity over shorter timescales is normal.

Provided the landlord has a bona fide buy-to-let mortgage and tenancy is recognised by the lender, the tenant's rights are unchanged even if their landlord does default.