July 27, 2018
In this week’s post, we’ll be discussing how transactions have dropped by nearly 9% in the last year, the costly effect of “down valuations” for buyers, how more women are practicing as solicitors, SRA’s Risk Outlook 2018/19, the Law Commission’s radical proposals, and more.
Property transactions down nearly 9% from last year, HMRC records show
According to the taxman’s most recent UK Property Transaction Statistics, there were 107,750 recorded sales during June this year on a non-adjusted basis. Property sales across the UK generally improved between May and June – partly due to a spike in activity in Scotland – meaning that this figure is up 13% on a monthly basis but is down by 8.8% when compared to June 2017.
As mentioned before, Scotland experienced increased activity between May and June, with a monthly increase in transactions of 50.9%. However, when compared to last year, this is still down by 8.1% annually.
England’s sales rose by 11.8% on a monthly basis but had an annual decrease of 8.2%. Northern Ireland saw a monthly increase of 14.1% but an annual fall of 4%. Wales came off worst with monthly sales falling by 3.4% and 21% annually.
London house prices are 13 times a first-time buyer’s salary
The Office for National Statistics (ONS) released an “affordability ratio” this week which reveals how the rate of growth in house prices – specifically in London – significantly outgrows the rate of salary growth of 22-29-year olds.
In fact, they found that a typical Londoner within this age bracket earns, on average, £25,780 whereas the average lowest quartile house price in the capital stands at £336,000 – this is 13 times higher than the salary.
These figures have risen dramatically throughout the past 20 years. In 1999, average house prices were 4 times the salary of prospective London buyers. Just 5 years ago the gap was 9.8 times the income. It’s said that in 2017, 78% of local authorities in England and Wales found that property became much less affordable for first-time buyers.
And it’s not just London, either. In the East, South East and South West, first-time buyers will be spending over 10 times their salary on a property. In contrast, the average first-time buyer in the North East, North West, Wales and Yorkshire can expect to spend 5-7 times their income – this figure has been fairly static in the past year. Nationwide, the average entry-level home is 8.6 times the average salary of somebody in their 20s.
“Down valuations” by lenders are costing buyers £1000s extra to save sales from collapsing
The term “down valuations” refers to the event where a mortgage valuation conducted by a surveyor comes back at a lower value than the agreed sale price. This has resulted in buyers having to pay thousands of pounds to prevent losing the property.
Online estate agent, Emoov, claims that 1 in 5 of its sales results in down valuations, up from under 1 in 20 recorded just two years ago, which is the highest rate since the 2008 UK financial crash. Emoov also suggests that these down valuations reflect surveyors predicting another financial crash and are “simply covering their backs”.
One young couple from Port Talbot experienced two down valuations while buying their first home together. They said that they’d got through to the very end stages of buying a house they had their heart set on before being told that the mortgage valuation was lower than the agreed selling price – a down valuation of £10,000.
As the seller refused to drop the price, they lost the first house. The same thing happened again on a second home and in order to secure it they had to borrow £5,000 from family. Mortgage advisers London and Country said that the number of its advisers witnessing down valuations on a daily basis “outweighs” those who do not.
Figures reveal that more women are practicing as solicitors than men
A “historic shift” has found that more women are practicing as solicitors than men, according to figures by the Law Society of England.
It’s been revealed that out of 139,624 PC holders, 50.1% are female, and 48% of solicitors working in private practice are women.
Furthermore, women made up 61.6% of new admissions in 2016/2017, indicating that females could be on track to leading the industry. It’s also said that the average age of female PC holders is 40 while male PC holders are, on average, 45 years old.
Clydesdale Bank to offer mortgage loans up to £600,000 with only a 5% deposit required
Mortgage loans to first-time buyers became slashed after the financial crash in 2008. Before the crash, banks would hand out 95% or 100% loans that were 5 times a borrower’s income or more.
This week, however, Clydesdale Bank has announced that they’ll grant first-time buyers with mortgages of 5.5 times their income, lending up to £600,000. The most controversial part is that they only require a 5% deposit. Other lenders have eased restrictions since the crash, but none to the extent of Clydesdale.
This news has surprised a lot of people within the mortgage industry which has had warnings about “reckless spending” since before the financial crash. Santander (previously known as Abbey) offered mortgages of 5 times salary in 2006, but they required a 25% deposit to qualify. Lib-Dem Treasury spokesman at the time, Vince Cable, was alarmed by this, warning that it was “likely that these irresponsible lending practices will lead to financial disaster for many people”.
There are of course some terms and conditions with Clydesdale’s offer: it’s only targeted at a select group of people. To qualify, the first-time buyer must have an income of at least £40,000, as well as recently qualifying in a list of professional jobs such as accountants, architects, chartered surveyors, dentists, doctors, pilots, solicitors and vets.
So how have mortgage brokers reacted to this news? On the whole, they seem fairly relaxed. “I think that this is more about being able to lend borrowers the amount that they can demonstrate will be affordable and to keep a degree of flexibility where appropriate, rather than a move to remove the reins on what a lender is prepared to lend,” says London & Country’s David Hollingworth.
SRA release their Risk Outlook 2018/19
The Solicitors Regulation Authority (SRA) have released their “Risk Outlook 2018/19” this week, which includes two new priority risks this year: “managing claims” and “cyber security”.
The Risk Outlooks seems to focus on the risk of cyber security, something which is very relevant to conveyancers – criminals often target residential property due to the high value of the transactions. In 2017, the total reported amount of client monies that was lost as a result of cybercrime was £10.7m.
One of the most common methods of cybercrime amongst conveyancers is email impersonation, which seems to be a priority for the SRA, as it’s fairly easy to access confidential files either through clients or the firm’s employees, be it a fraudulent link in an email or an attachment that leads to malware attacks.
The SRA advises conveyancers on how they can prevent and combat such attacks. They suggest ensuring that everybody working in a firm knows how to detect and recognise fraudulent emails and common phishing scams.
Click here to access the full Risk Outlook 2018/19.
Research suggests that the majority of Brits look for environmental sustainability when purchasing a home
A recent study by BLP Insurance found that when looking at houses to buy, 78% of people believe that the property’s environmentally sustainable performance is an important aspect.
Regionally, 81% of London-based participants feel that the long-term environmental sustainability of a home is important, compared to Sheffield (68%) and Newcastle (75%).
In terms of the specific environmentally sustainable features of a home, nearly 25% agreed that energy efficient heating and hot water systems were the top priority. These were closely followed by double glazing and solar panels. Some participants claimed to be more attracted to new-builds than older property because they have more environmentally friendly fittings.
When asked about smart meters, only 5% of respondents viewed this as an important feature. This varied depending on age: 10% of 16-24 year olds argued that this technology was a significant addition to a home compared to just 2% of over 55s.
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