House prices unaffordable on Isle of Wight

A new report, published by the National Housing Federation South East and the Chartered Institute of Housing, shows the current average house price in the Isle of Wight is 10.2 times the average salary.

The report shows house prices on the Island are among the most unaffordable in the south-east and will continue to rise, fuelled by a severe lack of housing and a growing population. Prices have been inflated due the large number of properties sold for second homes, to developers for buy-to-lets, and to people looking to retire on the Island.

Head of the association's southern region, Derek Cash, said: "Many more affordable homes are urgently needed. People will be unable to find a home in the area where they grew up and key public sector workers will have to move to cheaper parts of the country, making essential services more vulnerable. This will not help build the balanced neighbourhoods required for sustainability, which will have devastating consequences on communities — rich and poor alike."

House prices rise again

According to Nationwide house prices were up 1.3% in September so far, bringing the annual rate of house price inflation to 8.2% - its fastest rate since February 2005.

Analysts said the figures suggested house prices still had further to rise and reinforced expectations the Bank of England might need to raise interest rates again this year from 4.75%.

"Just like the weather, the housing market was unseasonably warm in September," said Fionnuala Early, Nationwide's Group Economist.

Mortgage approval rise

The British Bankers' Association said today that mortgage approvals for house purchases totalled 71,278 in August, up from 68,612 in July, while the value of approvals rose to £10.09 billion from £9.55 billion in July.

Net mortgage lending in August meanwhile rose by a record 6.2 billion, 0.4 billion higher than the 5.8 billion rise in July and well above the monthly average of 5.4 billion over the past six months. The numbers add to the weight of evidence recently suggesting that the UK housing market is strengthening, despite the Bank of England's surprise quarter-point rate hike during the month of August.

August's gross mortgage lending was a record £20.9 bn, some 9% higher than July, and 24% higher than the £16.8bn in August last year.

West is best for buy-to-let

According to the mortgage lender, Birmingham Midshires, four of the top five areas in the UK for investing in buy-to-let property are located in western areas of the British Isles.

For overall rate of return (including rental yields and capital appreciation) Bath and South-East Avon ranked first at 36.4%, closely followed by the only area outside of the west, Kent, at 34.4 %. The three remaining areas closing out the top five are Worcester (32.7%), Newport in Wales (28.4%) and Torbay on the south coast (27.2%).

Tim Hague, director of mortgages at Birmingham Midshires commented: "The buy-to-let market has experienced consistent growth over the last ten years. More and more people now see letting property as an achievable investment and an important part of a balanced investment portfolio."

The buy-to-let market is currently worth £84 billion.

Halifax calls for IHT threshold rise

According to Halifax, Britain's largest mortgage lender, the inheritance tax (IHT) threshold should be hiked to £430,000.

Inheritance tax takes 40% of all money and assets passed on over its minimum threshold of £285,000. Halfax reports that average house prices in one town in ten are above this minimum limit already and by 2020 one home in five (20%) in England will be worth more than the inheritance tax threshold.

Halifax economist Tim Crawford said "We call on the government to raise the inheritance tax threshold to £430,000. Doing so would allow for the significant increase in property prices over the past decade. It would also ensure that many middle income home owners avoid a tax which was never intended that they pay in the first instance."

46 out of 48 towns with an average property price above the rate band, are in the south of England, according to the Halifax data. The other two are Wilmslow in Cheshire and Ilkley in West Yorkshire.

House prices outstrip salaries

In Yorkshire, more than a quarter of couples under the age of 40 cannot afford to buy even the most modest of homes, according to a new report produced for the Joseph Rowntree Foundation.

The latest figures from Halifax suggest house prices in Yorkshire have risen by 12.5% in the last 12 months and 140% in the last five years. The average house price in Yorkshire is now just under £140,000 although this remains substantially less than the national figure of £178,000

Halifax chief economist Martin Ellis said: "We are seeing house prices that are five times average earnings in Yorkshire and that is higher than any time in the last 20 years. It is making it extremely difficult for people to get into the market.

Its not just Yorkshire that has affordibilty problems, throughout the UK people on average salaries are struggling to buy houses. House prices in East Anglia have rocketed to nearly seven times the average salary - and mortgage repayments now account for nearly half of most people's wages, and in Scotland mortgage repayments account for one third of monthly income with properties in Edinburgh 6.85 times annual salaries.

Record mortgage lending rise

According to the British Bankers' Association, net mortgage lending rose by a record amount in August.

Net mortgage lending rose by 6.2 billion pounds, up from an 5.8 billion increase in July and well above the monthly average rise of 5.4 billion over the previous six months. The BBA said August's mortgage lending number beat the last record set in April 2004 when it increased by 6 billion pounds.

BBA Director of Statistics David Dooks said "The draw-down of house purchase loans in particular has driven net mortgage lending higher of late and August's increase set a new monthly record".

BoE surprised

The strength of house price inflation has surprised the Bank of England, according to Monetary Policy Committee member Kate Barker.

Housing market surveys for August showed robust price growth, indicating that the surprise rise in interest rates to 4.75% last month has had little effect on demand.

"House prices are rising faster than earnings and I have to say that's a surprise," Barker said in an interview with the Daily Telegraph. In the very long run, it is difficult to think of house price growth being perpetually above earnings, unless there's something else going on, like a constraint of supply."

Even the most affordable region in the UK, Yorkshire and Humberside, still has a house price to earnings ratio of 8x the average salary.

House prices subdued

House prices ran out of steam in the past month, according to Rightmove. They believe buyers are struggling to match asking prices after the summer’s mini property boom.

The UK’s largest property website said the average asking price rose just 0.2% in the four weeks to September 9th to £214,566 after dropping 1.6% in the previous four weeks

It is not just first-time buyers who are struggling to afford their first home, many people hoping to upgrade to more desirable properties are finding them too expensive.

Many predict that interest rates will increase before the end of the year, however, Miles Shipside Rightmove’s commercial director does not regard this as a good idea "Asking prices are at a virtual standstill. The market appears to be correcting affordability issues itself and does not need further intervention for the Bank of England. At this pivotal stage it is likely to do more harm than good."

London house prices up £9k in a month

According to research by property website Rightmove, sellers in London are now asking an average £9,000 more for their homes than last month.

For London as a whole it is the biggest monthly increase in asking prices since November. Asking prices in Kensington and Chelsea rose sharply by more than £71,000 in August alone, a rise of 8.6%, bringing the borough average to more than £836,000. In Richmond, the average asking price is now almost £415,000, a monthly increase of more than £21,000.

Every borough showed some growth although Greenwich managed only 0.1% for the month and Hounslow and Islington both achieved growth of only 0.8%.

Rightmove director Miles Shipside said: 'London hasn't been affected by seasonal factors and is not experiencing the traditional highs and lows of the summer property market. ' It is thought a shortage of supply in the London housing market is continuing to drive up prices.

IMF warn rates must rise

International financial watchdogs, The International Monetary Fund , have warned that interest rates must rise to cool the UK housing market.

Recently The Royal Institution of Chartered Surveyors revealed that house prices in the UK are now growing at the fastest rate since May 2004 as house prices accelerated for the fifth month running in August.

According to the IMF, interest rates must be increased from the present 4.75%. They say that house prices are ' overvalued by most conventional measures' and that house prices 'still look elevated, and could come under pressure in a rising interest rate environment'.

With house prices outpacing wage rises, they warn that soaring prices posed one of the biggest risks to the UK economy.

Lindley is first-time buyers hotspot

According to the latest Royal Bank of Scotland property index, the number one property hotspot for first-time buyers is Lindley in Huddersfield. Recent redevelopment and good affordabilty make it an attractive option for first-time buyers. The average property price in Lindley is £138,886.

Bo'ness in West Lothian, Scotland, came second where the town on the banks of the River Forth has been ranked according to affordability and investment potential . A low average house price at under £100,000 and regeneration plans for the town centre have earned its reputation as a property hotspot.

In third place is is the Cardiff Bay area in Wales where an average one-bedroom home in the area around Butetown sells for £135,421. It is thought that the recent regeneration in Cardiff Bay has made the area more desirable.

Scotland shows sharp rise

According to government figures released yesterday, Scotland has seen a 9.3% rise in property prices over the last year. This outstrips the overall rise of 6% in the UK.

The average home in Scotland costs £140,460, lower than the UK average of £194,454. The most expensive area was Edinburgh and the Lothians, where the average price was £168,914, 5.5% up on the quarter and 9.8% up on the same quarter last year.

The biggest annual increase, 16.7%, was in the Highlands and Islands, where the average house price is now £129,295. Glasgow remains Scotland's biggest housing market, with sales totalling £1.5bn in the past quarter, 20% up on the corresponding period last year.

House price inflation rise in July

House price inflation rose to a 14-month high in July, with gains in the London area leading the rise, government figures show today.

According to The Department for Communities and Local Government, house prices rose 6.0% year-on-year in July compared with 5.3% the previous month. Annual house price inflation in London rose to 7.1 %.

This tallies with surveys from Nationwide and Halifax, both of which reported rises in property prices in recent months. However, house price inflation for first time buyers fell from 6.9% in June to 5.6% in July, indicating that affordability may be starting to take a toll.

Interest rate on hold

The Bank of England is holding interest rates at 4.75% in September. This will be a welcome relief to many homeowners who are feeling the pinch from last month's rate rise.

However, many speculate that there will be a further rate rise this year, possibly in November following the next quarterly inflation report.

For people looking for a mortgage, Drew Wotherspoon of mortgage brokers John Charcol says "Trackers will continue to be a good option unless base rate rises above 5.25 percent, which won't happen in the near future. However, those who need the certainty that their repayments will not rise, even if the bank does increase interest rates, should still opt for a fixed rate".

1.0% rise in August

In its monthly survey, Halifax has reported that house prices rose by 1.0% in August. This is 8.2% higher than the three months to August last year.

The cost of an average home now stands at 179,043 pounds. This continued rise in prices suggest that the Bank of England's interest rate rise at the start of August has so far done little to dampen the property market.

However, growing pressure on household finances from increased utility bills and higher mortgage payments could see a slight cooling off according to Martin Ellis, Halifax's chief economist “A number of developments are expected to constrain housing demand and moderate house price inflation over the remainder of 2006”.

Cheaper to rent in London

According to estate agents Savills it is cheaper to rent a London property than to buy one.

House prices in London have risen so much that properties worth over £750,000 are actually cheaper to rent. Rental prices have only gone up 6% compared to a 20% increase in house prices. Even interest-only mortgages are costing more per month than rental payments. Another benefit of renting is avoiding paying service charges, which at the top end of the market could run into the tens of thousands.

The number of people renting in central London actually fell after 2001 due to fewer companies wanting properties for their staff.

Abandoned homes blight communties

The government has granted local authorities new powers to seize vacant properties and rent them out against the wishes of their owners. The controversial empty dwelling management orders enable councils to confiscate privately-owned homes after just six months.

Authorities believe that the rise in abandoned houses, which are targeted by squatters, drug-dealers and arsonists, are blightling local communites. Hampshire in particular saw a rise in abandoned homes with 10,679 vacant properties in November 2004 to 11,119 last October, with 2906 from Southhampton alone.

Obviously there are exemptions, the new powers will not be used against people who leave their property vacant to go abroad or against second-home owners, also properties awaiting repairs, planning or on sale.

Rightmove profit rise

Rightmove, which runs Britain's busiest property website Rightmove, said on Friday that their first-half operating profits had more than doubled. They believe this is down to an increase in advertisers coming to their site.

Rightmove said that the number of property firms using its site had risen 53 percent to 14,680 with the average price paid per advertiser per month up 22 percent to 181 pounds and that it saw potential for further increases.

Visits to Rightmove are now at 15.4 million per month and they alone account for 80% of all the property pages viewed.