UK Housing Market Rises Steeply
By Bank of Scotland International
Summary: UK housing market rises steeply, but expected to level off as utility and council tax bills hit, says Bank of Scotland International.
It's a mixed view ahead for expatriates looking to invest in property as UK house prices showed strong growth for the year to March 2006, with prices rising by an average of 8% across the UK as a whole. The figure of 8% is the highest rise for 13 months, but importantly the figure in April alone was a more modest 2% rise, which suggests that prices will level off.
Indeed, this levelling off could well be fuelled by the joint costs of both utility and council tax bills. To illustrate this, Halifax House Price research now shows that the proportion of the typical household budget which will be absorbed by utility and council tax bills is now set to hit 35%- 36%, making this jointly the largest item of household expenditure, overtaking the cost of mortgage interest payments for the first time.
Ranald Caldwell, Head of Lending, Bank of Scotland International comments, "Now when we look ahead to 2006, we are expecting the rate of rise to slow down to more modest levels, as the significant effects of higher utility and council tax bills take effect. The net effect of such a rise will be to absorb disposable income, in exactly the same way as a base rate or taxation rise might."
Regionally, definite tends are now starting to emerge. In Greater London, for example, the quarterly rise was 7.2%, while in the South East region, it was a more modest 2.1%. In the South West, the trend remained on the low side, with a rise of just 1.7%. Elsewhere in the north of the UK, while rises were in the 7% - 9%, the evidence suggests these figures are now falling from previous double digit levels. Greater London, therefore, stands out, as prices here rose steeply in the first quarter, compared to the position 12 months ago. However, for the first time in seven years, all regions recorded only single digit gains, suggesting that over the medium term, the overall rate of rise is slowing to more modest levels.
Ranald Caldwell adds, "During the first four months of the year, the average price rise across the UK was 4.4%, which on the face of it, represents strong movement. However, City bonuses in particular added to the usual seasonal upturn in activity in London and the South East region, contributing to this stronger showing."
Activity levels appear to be trending gently upwards and this allied to a strong labour market, a healthy economy and low interest rates are all expected to underpin the housing market. However, evidence of recent softening of the labour market, added to high housing costs, is expected to provide a moderating influence.
Looking ahead to the rest of 2006, Ranald Caldwell comments, "Property prices are continuing to be underpinned by a strong economy. Indeed, recently, the consensus for interest rates seemed to shift in the short term from an expectation of a cut to the chance of a rise in the near term, as the Bank of England digested recent economic data. For expatriates looking to buy in the UK, this adds to the complexity of the planning task, but at Bank of Scotland International, these are market conditions we have seen before."
Ranald Caldwell ends, "Clients looking to purchase a UK residential property for buy-to-let or as their main residence need to be focused on the property investment potential and taxation efficiency of the transaction. Our Bank of Scotland International offshore mortgage business provides a client with everything they would expect from a traditional mortgage, but with the added potential of taxation planning benefits and personal service a particular strength."
For further information on the full service available, visit www.bankofscotland-international.com or call 01624 6440800.
For further information on Bank of Scotland International contact:
Guy Stephenson/Deborah Kent
Tel: +44 (0)20 8333 9125
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First Published: Jul 30, 2006