London's inflated rental prices double those in rest of UK

Prices 'flat or falling' despite strong auction market DateOctober 1, 2014 - 12:29PM 150 reading now Stephen Nicholls National Domain Editor View more articles from Stephen Nicholls Follow Stephen on Twitter Email Stephen Hordes of buyers are competing at home auctions but new data suggests prices are flat. Photo: Photo: Janie Barrett. Property prices in Melbourne and Sydney are apparently flat as a tack, despite an exceptionally strong spring auction market. RP Data's head of research, Tim Lawless, said after Sydney dwelling prices grew 1.8 per cent in the last month of winter (with quarterly growth over winter of 5 per cent) they rose just 0.8 per cent during September, as auction clearance rates were a boom-like 80 per cent or more. And in Melbourne, after rising 0.8 per cent in August (and rallying during the three months of winter with an extraordinary 6.4 per cent growth), prices suddenly dropped 0.8 per cent in September, when clearance rates were averaging 77 per cent. "I was quite surprised at seeing a flat market coming into September," said RP Data's head of research, Tim Lawless. He said there was usually a strong correlation between auction clearance rates and rising prices. This was a point raised in a Reserve Bank report last week which said auctions were the best way of measuring property price growth: "We find evidence to suggest that average prices of dwelling sold at auction are informative for forecasting growth in average private treaty prices and average sales prices overall," the authors David Genesove and James Hansen said in the discussion paper 'Predicting Dwelling Prices with Consideration of the Sales Mechanism'. Mr Lawless said that rather than focusing on the monthly figures a better indicator of the property market were the quarterly figures showing 4.1 per cent growth for Sydney and 3.7 per cent growth for Melbourne. Or even the six monthly trend of 5.2 per cent growth for Sydney or 1.2 per cent for Melbourne. RP Data's year-on-year price price growth for Sydney had now dropped to 14.3 per cent, down from 16.2 per cent last month. And the annual figure for Melbourne was now 8.1 per cent, down from 11.7 per cent. "I'm not saying the monthly data isn't important, but you need to take it in context with the overall trend in the data," he said. RP Data says Brisbane prices grew 0.7 per cent over September and 0.6 per cent over the quarter; Adelaide prices were up 0.9 per cent over the month (up 3.1 per cent quarterly); Perth prices dropped 0.4 per cent (-0.6 per cent); Canberra -.5 per cent (1.4 per cent); Hobart -0.3 per cent (-1 per cent); Darwin -1 per cent (1.4 per cent) and for the combined capitals 0.1 per cent (2.9 per cent). ============ Renting drives U.S. homeownership to 19-year low Tue, Jul 29 12:53 PM EDT image By Lucia Mutikani WASHINGTON (Reuters) - Homeownership in the United States hit a 19-year low in the second quarter as tight finances continued to drive Americans toward renting, one of the lasting legacies of the recession. The seasonally adjusted homeownership rate fell to 64.8 percent, the lowest level since the second quarter of 1995, the Commerce Department said on Tuesday. That compared to 65.0 percent in the first three months of 2014 and 65.1 percent a year ago. Economists said homeownership, which peaked at 69.4 percent in 2004, could fall even further as banks maintain stringent lending practices and wage growth remains tepid, despite an acceleration in job creation. "We are becoming more of a rental society. It's becoming harder to own a home," said Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts. "People who lost their homes to foreclosure are now renting and credit standards have tightened significantly." The 2007-2009 recession, sparked by the collapse of the U.S. housing market, has left the economy with deep scars that will take long to heal. Wage growth remains lackluster, even though the unemployment rate is at six-year lows and the economy has recouped all the jobs lost during the downturn. Weak wage gains have combined with higher mortgage rates and home prices to force many to give up on the American dream of home ownership, leading to a tightening of the rental market. In the second quarter, the residential rental vacancy rate dropped to 7.5 percent, the lowest level in more than 19 years. "That is not surprising, young adults are choosing to rent," said Yelena Shulyatyeva, an economist at BNP Paribas in New York. "The shock from the financial crisis is still here." The shift toward renting could further boost the construction of multi-family units and undermine the single-family segment, the biggest sector of the housing market. Multi-family starts have seen double digit growth over the last few years as developers scrambled to meet demand for rental units, while groundbreaking for single-family homes generally has been weak. This trend suggests the housing market recovery will remain sluggish for a while. In the second quarter, the number of occupied housing units - a gauge of household formation- increased 458,000 from a year ago. Economists said the increase was far below what would be needed to signal a strong housing recovery. "Historically that number has been over a million, it has to be over a million in order for the housing market to start growing significantly," said IHS Global Insight's Newport. "We are not seeing much growth in household formation, which means that young people graduating from college are moving in with their parents. That trend has not changed much and is the key reason why the housing recovery has been so weak." (Reporting by Lucia Mutikani; Editing by Tom Brown) ======================= London's inflated rental prices double those in rest of UK Published time: July 28, 2014 19:03 Edited time: July 28, 2014 19:54 Get short URL London’s rental prices eclipse those in the rest of the UK by 100 per cent, according to newly published research. (Reuters/Suzanne Plunkett) Economy, Prices, Real Estate, UK London rental prices are double those throughout the UK for the first time in modern history, according to newly published research. Average rents across the nation increased by 6.3 percent over the past year, and are currently peaking at £862 (US$1,464) per month, according to the HomeLet Rental Index. HomeLet, a specialist insurer and tenancy referencing firm, provides comprehensive and current data on new tenancies throughout the UK. According to the company’s report, London-based tenants face rental prices of £1, 412 ($2,398) per month on average, in contrast to a much more affordable £694 ($1,178) outside the capital. Londoners have seen rental prices soar in the past year by approximately 11.2 percent, the index reveals. This stark rise eclipses what is considered affordable by experts, compounding widespread fear of a London-centered cost of living crisis. The UK’s North East and Scotland were the only UK regions to experience moderate decreases in rental prices – demonstrating yearly declines of 2.4 percent and 3.8 percent respectively. Monthly rental prices in Scotland average at £578 ($981), while the North East's tenants pay approximately £507 per calender month ($861). Martin Totty, the chief executive of HomeLet's parent company, emphasized that Britain’s private rental market continues to demonstrate “strong growth,” and is characterized by a state-wide trend of increased rental costs with very little exceptions. But while average incomes in the UK are rising, affordability with respect to private renting is becoming a problem for some, he admits. "As a rule of thumb, for a rental property to be affordable, a tenant's gross income must be at least two-and-a-half times his or her annual rent,” according to Totty. HomeLet’s “data shows that rents in London have pushed beyond that boundary, with the South East and South West of England close behind,” he cautioned. But the minister of state for housing and planning, Brandon Lewis, dismissed HomeLet’s research, claiming the firm’s data is misleading. "Contrary to this limited survey, figures from the Office for National Statistics clearly show private rents falling in real terms – while inflation currently stands at 1.9 per cent, nationally rents have risen by just 1 percent,” he argued. On the subject of tackling an over-inflated rental market in the UK, Lewis suggested “building more rented housing.” He added that “excessive red tape” will only drive rental costs upwards while reducing choice for prospective tenants. For this reason, the government is currently “investing £1 billion ($1.6 billion)” in a “Build to Rent fund, which is on track to have work started on 10,000 newly built homes specifically for private rent,” according to Lewis. Lewis announced an array of other planned measures designed to address the over-heated rental market in Britain. Among the proposed policies is a newly published, government-backed 'How to Rent' guide, which breaks down the complex realm of tenancy rights for those who wish to rent privately in the UK. But whether such policy prescriptions can adequately address the starkly inflated rental prices in Britain’s capital remains to be seen. Broadly accepted poverty indicators suggest that a household’s net income should be two-and-a-half times the figure allocated to housing costs. Yet according to HomeLet’s research, most tenants across Greater London channel over half their earnings into rent alone.