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Residential buy-to-Let

Rightmove: House prices close to all-time high

Author: Gemma

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The Rightmove House Price Index has shown that house prices are close to the all-time high.

Prices are now only £30 below peak prices which were recorded in June 2014.

The price of property coming to market is 1% (£2,748) higher than this time last year. Property prices are increasing at a slower rate but this is to be expected due to the uncertainty surrounding the upcoming general election.

According to figures from Rightmove, the number of newly-listed properties is up by 3.2% when compared to last month.

Miles Shipside, Rightmove director and housing market analyst commented: “The distraction and uncertainty of an election typically force sellers to price more keenly, though this is often short-lived. The MMR introduced in April 2014 laid out a much needed longer-term framework for responsible lending, but within a year its dampening effects have been muted by high demand outstripping supply in many locations, and by buyers putting down larger deposits. The price of property coming to market is now just £30 off the record set nine months ago. The MMR has been a positive restraint on what buyers can afford to pay and has assisted in lessening the price rise pace. However, with new-build levels remaining low and only a small increase in properties coming to market compared to last month, the supply side is still a critical but missing part of the jigsaw if pent-up demand is to be satisfied.”

The index suggests that there has been an influx in buy-to-let landlords aged over 55 due to the recent pension reform. Pensioners appear to be cashing in on their pension pots which may drive prices higher.

Shipside commented: “Agents report a high level of interest from new landlords, or ‘granlords’, who are typically first time, retirement age, buy-to-let investors. With the highest returns for the lowest investment being at the lower end of the market, the first-time buyer property sector will be the greatest recipient of any increase in demand from investors with substantial pension pots. Unfortunately flats and terraced houses with two bedrooms or fewer are coming to the market in smaller numbers than the middle and upper tier sectors, so are the least prepared for an up-surge in demand.”

Shipside added: “The lower-end properties favoured by first-time buyers and investors are in short supply in many locations due to increased competition among mortgage lenders, who are also chasing landlords with offers of low rates for lower risk. Some cash-rich pension pot buy-to-let investors will also be tempted by those tax-deductible mortgage rates, creating further upwards price pressure in a market sector that is already outstripping the higher-priced ones. While many pension pots may not fund a sufficiently large tax-free lump sum to facilitate a property purchase, for some it will provide enough for a mortgage deposit and others may feel it worth paying some income tax now to release more money. For example, someone aged over 55 with £120,000 in their pension pot and £10,000 in an ISA can raise up to £40,000 tax free for a buy-to-let mortgage deposit, which can be topped up further if required by paying their marginal rate of tax on a larger withdrawal from their pension. When the realities of the possible tax penalties on larger withdrawals are better understood by aspiring new landlords, their appetite for buy-to-let may diminish and anticipated demand may be less than speculated. It’s a hard one to call.”

The Rightmove House Price Index is the largest monthly sample of residential property prices in the UK.

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