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House prices hit another record high in May with average now above £260k

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Property prices reached another record high in May, with the average home adding more than £3,000 of value in the last month alone.

The typical home is now worth nearly £262,000 according to the Halifax price index – this is £22,000 or 9.5 per cent more than in May 2020.

Prices increased by £3,000 or 1.3 per cent between April and May of this year alone, although that was slightly lower than the 1.5 per cent growth the previous month.

Bricks and mortar: The price of a home in the UK is now more than £260,000 according to the latest Halifax House Price Index: an increase of £22,000 year on year

Bricks and mortar: The price of a home in the UK is now more than £260,000 according to the latest Halifax House Price Index: an increase of £22,000 year on year 

Halifax, one of Britain’s biggest lenders, said house price inflation was now at its strongest level in almost seven years.

Wales saw the strongest price growth of any region, with prices having increased by 11.9 per cent in the last year.

It was followed by the North West and Yorkshire & Humber, both of which posted double-digit annual growth.

For Wales and the North West, these are the biggest percentage gains since April 2005, and for Yorkshire & Humber since June 2006.

All regions bar the North East saw an acceleration in year-on-year house price inflation last month.

However, the South is lagging somewhat behind the rest of the country. 

In Greater London, average prices are still 3.1 per cent higher than a year ago but growing more slowly than the rest of the UK.

This four-bed detached home in Lincoln is listed on Rightmove for £875,000

This four-bed detached home in Lincoln is listed on Rightmove for £875,000

A four-bed home in Stratford Sub Castle near Salisbury is listed for £795,000 on Rightmove

A four-bed home in Stratford Sub Castle near Salisbury is listed for £795,000 on Rightmove

In Heswall, Wirral, this five-bed home is on Rightmove with an asking price of £450,000

In Heswall, Wirral, this five-bed home is on Rightmove with an asking price of £450,000

This new-build, two-bed property near Buxton in Derbyshire is on Rightmove for £274,995

This new-build, two-bed property near Buxton in Derbyshire is on Rightmove for £274,995

In Hove, East Sussex, this two-bed home is listed on Rightmove for £475,000

In Hove, East Sussex, this two-bed home is listed on Rightmove for £475,000

In Bishop Auckland, County Durham, this four-bed home is on Rightmove for £215,000

In Bishop Auckland, County Durham, this four-bed home is on Rightmove for £215,000

This has been influenced by a trend towards moving away from cities and into more rural areas during the pandemic, linked to working from home.

House price rises in the last year have been boosted by these kind of lifestyle changes, as well as the Government’s stamp duty holiday which has eliminated the tax on the portion of a property purchase under £500,000, saving home buyers up to £15,000.

The threshold will be lowered to £250,000 on 1 July, and then back to the normal level of £125,000 on 1 October.

Some experts are predicting house prices will fall after this deadline – but Russell Galley, managing director at Halifax, is more bullish. 

‘Heading into the traditionally busy summer period, market activity continues to be boosted by the Government’s stamp duty holiday, with prospective buyers racing to complete purchases in time to benefit from the maximum tax break ahead of June’s deadline, after which there will be a phased return to full rates,’ he said. 

House prices have increased by 9.5 per cent in the last year, according to Halifax

House prices have increased by 9.5 per cent in the last year, according to Halifax

House prices are being driven up in part by a shortage of properties on the market

House prices are being driven up in part by a shortage of properties on the market

‘For some homebuyers, lockdown restrictions have also resulted in an unexpected build-up of savings, which can now be deployed to fund bigger deposits for bigger properties, potentially pushing property prices even higher.

‘Whilst these effects will be temporary, the current strength in house prices also points to a deeper and long-lasting change as buyer preferences shift in anticipation of new, post-pandemic lifestyles – as greater demand for larger properties with more space might warrant an increased willingness to spend a higher proportion of income on housing.

‘These trends, coupled with growing confidence in a more rapid recovery in economic activity if restrictions continue to be eased, are likely to support house prices for some time to come, particularly given the continued shortage of properties for sale.’

With the country tentatively unlocking and many families unable to go on foreign holidays, Nicky Stevenson, managing director of estate agent Fine & Country, is predicting the housing boom will continue throughout the summer. 

She said: ‘This market is moving so fast that if you blink, it increases in value. 

‘If the unlocking goes ahead later this month, this new blood, which until now has been cautious due to the pandemic, will enter the market and there will be even more buyers chasing the must-have properties of the year, namely detached homes with plenty of outside space. 

‘If the change to the stamp duty relief creates even a wrinkle in July that would come as a bit of a surprise.

‘The market normally has a lull in the summer months but, now almost all foreign holidays appear to be off, there’s nothing stopping the freight train that is unbridled demand from crashing straight through June, July and August.’

Cheap mortgage borrowing and a shortage of homes coming on to the market are also helping to push up prices.  

Tomer Aboody, director of property lender MT Finance, said: ‘Stamp duty holiday or not, the housing market has never been at this level before and will continue to be so while interest rates are so low. 

‘With buyers looking for more space, coupled with a lack of supply, multiple purchasers per property are pushing up prices to new highs.’

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Could equity release be used to help more younger homebuyers?

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Younger first-time buyers could be given more financial help from the Bank of Grandma and Grandad, through the use of improved equity release products, a new report suggests.

The document written by Tom McPhail, of consultancy The Lang Cat, claimed that younger buyers are missing out because older members of their family are unable to satisfactorily tap into their property wealth.

Mr McPhail said: ‘Releasing some of the equity in a property means older homeowners can choose when and how they share their wealth with younger generations.

‘An equity release by grandparents of say £20,000 now, could be transformational for a 20 something struggling to raise a deposit and get on the housing ladder but would make only a very modest dent to the value of the grandparent’s house.’

Releasing some of the equity in a property means older homeowners can choose when and how they share their wealth with younger generations, says new report

Releasing some of the equity in a property means older homeowners can choose when and how they share their wealth with younger generations, says new report

The report acknowledged that equity release has endured a poor reputation in the past after customers suffered ‘severe’ financial knocks.

The sector has been criticised for encouraging people to take on debt, particularly later on in life.

There has also been other concerns about equity release, such as customers falling into negative equity where the value of a property is less than the loan taken out against it when house prices fall.

The report suggested that while the equity release sector has since begun to put ‘its house in order’, it is ‘still not perfect’ and some regulatory safeguards need to be strengthened.

It called for several issues to be looked at, including early redemption charges on equity release products.

It said that most providers apply a simple sliding scale of charges, for example 10 per cent in year on to 1 per cent in year 10.

However, it claimed that some providers apply an early redemption charge based on prevailing gilt rates at that time, putting customers at an ‘unfair disadvantage’.

This is because the fees are not transparent as there is no way a customer can know in advance whether they’d be liable for a charge and if so, how much. 

In the past, customers have also fallen foul of the small print on their equity release loans when it comes to early-redemption penalties – such as couples who must pay an exit fee unless both of them need to go into care.

The report also raised questions about interest rates on equity release products. It said providers should be consistent with their lending criteria and not move the goalposts after customers have taken out a loan, as this can make it harder for them to access a top-up loan in the future, potentially forcing them to remortgage. 

Equity release products could help people access their property wealth to help younger members of their family onto the property ladder

Equity release products could help people access their property wealth to help younger members of their family onto the property ladder

The report argued that equity release products could help people access their property wealth to help younger members of their family onto the property ladder.

Mr McPhail added: ‘Raising a deposit has become an increasingly significant barrier to getting on the housing ladder, with increasing numbers of first-time buyers having to rely on financial help from older generations.

‘Releasing some of the equity in a property allows older homeowners to choose when and how they share their wealth with the younger generation.

‘This more targeted approach gives them greater control to use their assets to the maximum benefit at the point of need.’

Raising a deposit is a barrier to getting on the housing ladder, with increasing numbers of first-time buyers having to rely on financial help from older generations, says the report's author Tom McPhail

Raising a deposit is a barrier to getting on the housing ladder, with increasing numbers of first-time buyers having to rely on financial help from older generations, says the report’s author Tom McPhail

Equity release: How it works and advice

To help readers considering equity release, This is Money has partnered with Age Partnership+, independent advisers who specialise in retirement mortgages and equity release. 

Age Partnership+ compares deals across the whole of the market and their advisers can help you work out whether equity release is right for you – or whether there are better options, such as downsizing. 

Age Partnership+ advisers can also see if those with existing equity release deals can save money by switching. 

You can compare equity release rates and work out how much you could potentially borrow with This is Money’s new calculator powered by broker Age Partnership+.* 

 * Partner link

Jonathan Harris, of mortgage broker Forensic Property Finance, said: ‘Equity release has historically been viewed as a ‘murky’, high-risk sector, fuelled by minimal regulation, poorly-qualified advisers, only a handful of lenders and extortionately high interest rates.

‘Fast forward to today and we see a dramatically transformed sector, benefiting from strict regulation, highly-qualified advisers, multiple lenders and access to very competitive interest rates. 

‘Not surprisingly, equity release is now a viable and growing market for older borrowers looking to utilise the gains seen on property prices to bolster lifestyles, as well as pass on wealth to children when they need it.

‘Those considering equity release should make sure they understand the implications and involve family in any decision-making. It is always important to seek advice from suitably-qualified advisers.’

It comes as a separate report by Legal & General suggested that one in every £90 spent by retired Britons is funded by equity release.

It said that equity release funded an estimated £3billion in retirement spending last year, although it didn’t mentioned the money going to younger generations towards buying a property.

Instead, the report’s survey of 2,000 homeowners found that those with equity release have most frequently used the product to finance home improvements, at 26 per cent.

It said equity release is also being used to support costs such as medical expenses at 17 per cent, maintaining living standards in retirement at 16 per cent, and paying off personal debt at 16 per cent, for example paying off interest-only mortgages. 

It suggested that equity release is likely to play an increasingly important role in financing care-related expenses, with 19 per cent of prospective homeowners citing it as a consideration.

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Allianz Real Estate buys prime office building in Rome (IT)

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Allianz Real Estate, advised by Dils, has acquired an office property in the centre of Rome. The transaction, worth circa €175m, is one of the most important to have been carried out on the real estate market in Rome in recent years.

 

The building, consisting of eleven storeys, comprising nine above-ground and two underground, has a gross lettable area of circa 22,000m² and has undergone a major refurbishment, offering the highest environmental sustainability and energy efficiency standards (LEED Gold Certification). The strategic location, between the CBD and Termini Station, is enjoying great success, especially among corporate occupiers. 

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NCC sells Valby office scheme (DK)

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NCC is selling Kontorværket 1 office project in Valby, Copenhagen to Industriens Pension. The building will become biotech company Genmab’s new headquarters and will meet high environmental standards for both the building and the area. The transaction will be conducted as a company divestment, based on an underlying property value of approximately €81.9m (SEK875m). Transfer of the project and payment of the purchase consideration is expected to result in a positive earnings effect in the NCC Property Development business area in the first quarter of 2023.

 

“We are now selling Kontorværket 1, the first phase of our development project in Valby in the central parts of Copenhagen. Here we have developed property with an optimal infrastructure and appealing architecture, and I am pleased that Industriens Pension is now taking over,” said Joachim Holmberg, Business Area Manager, NCC Property Development.

 

Kontorværket 1 encompasses 16,000m² of lettable area and also includes a basement featuring a parking garage next to the building, with space for 280 vehicles and facilities for parking bicycles.

 

“This is an attractive and future-proof office property, located in an area with very good infrastructure, a motorway, a nearby metro and S-train station. The 15-year lease with Genmab fits well with our strategy as a long-term owner, and we expect the property to contribute a stable return for our members for many years to come. We look forward to welcoming Genmab’s experts in biotechnology,” said Soren Tang Kristensen, Head of Real Estate Investments, Industriens Pension.

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