A passive income of £100,000 in a year? Here’s how many homeowners are achieving just that

How can you sit still and earn more than £100,000 in a year? The answer can be in owning a property – and not just in central London where values have soared.

House prices

House price inflation has seen property values in popular central London venues, such as Kensington and Chelsea, increase by hundreds of thousands of pounds during the past year.

But the ripple effect of buyers being priced out these areas and looking further afield in the capital means house prices in leafy London boroughs such as Chiswick have also seen values rise by six figures during the past year.

The average price of a property in Chiswick – six miles from central London – currently stands just shy of £1m, having risen 13. 6 per cent during the past 12 month, the equivalent of more than £115,000.

The location offers overland trains into Waterloo Station with a commute time of 25 minutes as well access to Chiswick Park Underground Station on the district line.

House prices 1It is not just the West of London which has benefited from house prices rises. Clapham Common in South West London, has also seen values increase sharply. Its open park spaces are attractive to families, while the area also provides good transport links via London Underground and Clapham High Street train station.

The average price of a home in the area climbed by more than a fifth or £80,000 during the past year to almost £900,000.

And the north of the capital is not immune from six figure price increases during the past year. The borough of Highgate has seen average values increase by more than £125,000 to more than £1,151,000.

Properties for sale:

1. Six bedroom semi-detached property in Chiswick for £2,495,000

02.04.14 Chiswick 1

2. Two bedroom flat in Clapham for £1,495,000

02.04.14 Chiswick 2

3. Five bedroom semi-detached house in Chiswick for £1,950,000

02.04.14 Chiswick 3

 

April 2, 2014 at 10:28 AM Leave a comment

House price rises could threaten economic recovery, warns the City watchdog

Rising house prices could pose a threat to Britain’s economy if a property market boom leads to irresponsible lending, the City watchdog has warned.

01.04.14 FCA A rapid acceleration in house price inflation was highlighted as one of a number of potential threats to Britain’s financial system by the Financial Conduct Authority in its annual Risk Outlook.

The watchdog pointed out that housing market activity appeared to be gaining momentum, particularly in London, while property prices remained elevated relative to incomes and rents.

House prices have risen by 5.2 per cent across the UK during the past year, but growth in London has been more than double this figure at 11 per cent, taking prices back above their 2008 peak, according to the Land Registry.

The FCA cautioned that steep gains in house prices could lead to banks and building societies loosening their lending criteria and advancing mortgages to riskier borrowers.

It said: “The current growth in house prices may be driving lenders and consumers to accept risks and debt levels that may be unsustainable in the long term particularly when interest rates start to rise.”

But it added the Mortgage Market Review, which comes into force this month, would go some way to limiting unaffordable lending practices for new mortgage loans in the future.

The FCA,which takes over regulation of credit providers and debt management firms today, also expressed concern that some borrowers may not be able to keep up with their mortgage repayments if interest rates rose significantly.

It warned: “Perceptions that house prices will continue to grow could lead consumers to make poor affordability decisions on their mortgages based on price expectations of their home rather than details of the loan itself.”

Recent gains have left the average home in England costing £259,745, according to Zoopla.

But it is far from clear that the UK is facing a house price boom.

Although house prices jumped at their fastest rate for five years in February, according to Halifax, lending levels still remain well down on the peak seen before the credit crisis hit. Figures from the Bank of England also showed a dip in the number of mortgages approved for house purchase during February.

01.04.14 Mike

Mike Lawton, managing director of Which? Mortgage Advisers

Mike Lawton, managing director of Which? Mortgage Advisers, said:“The decline in approvals in February proves that the housing market isn’t quite the runaway train some are describing and that things are still tough out there for those trying to arrange a mortgage.”

Robert Chote, head of the Office for Budget Responsibility (OBR), also dismissed concerns that a bubble was building up in the housing market.

Appearing before the Treasury Select Committee, he told MPs that although there may be “bubbly activity” in some parts of the country, the recent rise in house prices could be explained by fundamentals.

He added that he expected growth to slow naturally, with gains easing from 8.5 per cent this year to 3.7 per cent in 2017 and 2018, leaving the average cost of a home around 30 per cent higher than at the start of 2014.

The Bank of England has also said it is ready to take “proportionate and graduated action” if it looks like a property price bubble is developing.

April 1, 2014 at 2:25 PM Leave a comment

Help to Buy scheme celebrates first birthday

George Osborne is celebrating his baby’s first birthday today – metophorically speaking, of course, as his two actual children have already reached school age. Indeed, this baby is his Help to Buy project that he announced in last year’s Budget.

George_Osborne

Borrowers were able to apply for a mortgage under the Help to Buy scheme from April 1, 2013, and since then it has gone on to help more than 17,000 households to buy a home, with 88 per cent of these being first time buyers.

The Chancellor marked this particular baby’s anniversary in last month’s Budget with the news that the first part of the scheme – the equity loan scheme – would be extended until 2020 amid concerns that the scheme was proving so popular that funding would run out.

Under this part of the scheme, borrowers with a deposit as low as 5 per cent can purchase a home, with the Government providing a loan of 20 per cent of the value of the property, meaning only a 75 per cent mortgage is required from a lender. It is only available on new build properties.

scheme_help_to_buy_equity_mortgage

Ray Boulger, of mortgage brokers John Charcol, said the equity loan scheme offered ‘excellent value’.

“For buyers, Help to Buy equity loan offers excellent value with a 20 per cent equity mortgage, which is interest free for five years and then only carries a low interest rate.

“As a result of only needing a 75 per cent normal mortgage, purchasers qualify for the much cheaper rates available compared to 95 per cent rates – which are around 2 per cent less,” he explained.

“And the combination of a much lower mortgage rate and that rate being payable on only 75 per cent of the purchase price means monthly payments for the same purchase price are much lower.”

Under the second part of the Help to Buy scheme – the mortgage guarantee – a mortgage of up to 95 per cent is required from a lender, of which the Government will guarantee the lender up to 15 per cent of the property’s value.

The marking of Help to Buy’s first birthday follows warnings by the Office for Budget Responsibility that the average cost of a home could increase by 30 per cent between now and 2018.

Robert Chote, head of the OBR, said house prices were being pushed up by a combination of a lack of supply and rising demand, driven by increased confidence, higher mortgage lending and Government schemes, such as Help to Buy.

A 30 per cent increase would add £77,000 to the cost of the typical home in England, which currently stands at 258,837, according to Zoopla.

What's your view on the impact of "Help to Buy"? Let us know in the comments below.

What’s your view on the impact of “Help to Buy”? Let us know in the comments below.

April 1, 2014 at 8:00 AM Leave a comment

Help to Buy scheme demand boosts mortgage lending

Mortgage lending soared to a five and a half year high during February, boosted by strong demand from people buying a home, figures showed today.

borrowing

 

Banks and building societies advanced a total of £17.82bn during the month, the highest level since August 2008, according to the Bank of England.

The figure was also 40 per cent higher than the amount lent in February 2013, as the mortgage market continued to recover.

Net lending, which strips out repayments and people switching mortgages, was also strong at £1.72bn, in line with the four year high reached in December.

Lending levels were boosted by strong demand from people purchasing a property, with more than two-thirds of mortgages approved in January taken out by those buying a property.

This trend looks set to continue going forward, with loans worth £11.15bn agreed for house purchase in February, although the figure was slightly down on January’s level of £12.23bn.

Today’s data is in line with figures reported by the British Bankers’ Association and the Council of Mortgage Lenders for the same month.

The BBA recorded a 47 per cent year-on-year rise in total mortgage advances during February, while the CML said gross mortgage lending was up 43 per cent on a year earlier.

The pick up in mortgage lending, combined with the improving economic outlook and rising employment is helping to drive strong demand for property, pushing prices higher.

House prices jumped by 2.4 per cent during February, the biggest monthly increase since May 2009, data from Halifax showed.

Recent gains have left the average home in England costing £258,837, according to Zoopla.

Rapid gains in house prices have led to concerns in some quarters that a property market bubble could be building up.

ed

Ed Stansfield

But Ed Stansfield, chief property economist at Capital Economics, said that while the fall in mortgage approvals for house purchase seen in today’s data was likely to be temporary, it should help to calm fears that the housing market recovery was getting out of control.

He said: “It is hard to find an obvious trigger for the drop in mortgage approvals in the latest macro-economic data.

“It may, therefore, be an early sign that pent-up demand released by the launch of Help to Buy scheme and the broader economic recovery is being exhausted.”

Robert Chote, head of the Office for Budget Responsibility last week told MPs that although there may be “bubbly activity” in some parts of the country, the recent rise in house prices could be explained by fundamentals.

He added that he expected growth to slow naturally, with gains easing from 8.5 per cent this year to 3.7 per cent in 2017 and 2018, leaving the average cost of a home around 30 per cent higher than at the start of 2014.

March 31, 2014 at 12:40 PM Leave a comment

In some parts of the UK house prices fall as London continues to surge

The cost of a home in London hit a new record high in February as house prices continued to race ahead, figures showed today.

House prices

The average value of a property in the capital surged by 13.8 per cent during the 12 months to the end of February, to stand at £414,356 – the highest level ever recorded.

Across England and Wales as a whole property prices rose by 5.3 per cent during the same period, to leave a typical home costing £170,000, according to the Land Registry.

But there were significant regional variations in house price performance.

London led the charge, followed by the South East, which recorded annual house price of growth of 7.1 per cent, leaving the average home costing £223,733, and the East, where prices were 6.2 per cent higher year-on-year at £183,285.

But at the other end of the scale, properties prices in the North East fell by 1.3 per cent during the 12 months, with the average home costing £97,332 at the end of February.

In Yorkshire and the Humber and Wales, prices edged ahead by just 1.2 per cent and 1.7 per cent respectively.

Sales levels across England and Wales continued to rebound, with 75,182 homes changing hands in December, the latest month for which figures are available, 33 per cent more than in the same month of 2012.

Within this total, the number of homes sold for more than £1 million soared by 44 per cent to 898.

There was also a 24 per cent drop in repossessions, with 966 homes taken back by lenders during December, down from 1,278 in the same month of 2012.

Nicholas Ayre, managing director of homebuying agency Home Fusion, said: “The gulf in property prices across the UK grows ever bigger with London house prices hitting a new all-time high in February.

“Transaction volumes are rising but are still some way off the peak of the market and the lack of supply is helping fuel soaring house prices in parts of the country.”

Today’s figures are the latest in a run of positive data on the housing market.

Earlier this week the Office for National Statistics said house prices rose at their fastest rate for nearly three-and-a-half years during January, while the British Bankers’ Association said mortgage lending was up 47 per cent in February compared with a year earlier.

House prices are being stoked by a combination of rising demand on the back of the improving economy, and a shortage of supply.

Recent gains have left the average home in England costing £258,837, according to Zoopla.

Meanwhile the number of people taking their first step on the property ladder has jumped 42 per cent year-on-year, boosted by better mortgage availability and the Government’s Help to Buy scheme.

A total of 22,400 first-time buyers entered the housing market during February, according to LSL Property Services.

They put down average deposits of £25,773, the lowest level for 16 months.

Around 81 per cent of first-time buyers expect house prices to rise in the coming year, with most expecting gains of up to 5 per cent.

28.03.14 David Newnes

David Newnes is a director of estate agents Your Move

David Newnes, director of estate agents Your Move and Reeds Rains, said: “The reason first-time buyers are taking advantage of Help to Buy in such numbers is that they expect prices to keep rising.

“That’s pushing up demand in the short term, which is supporting prices in the long term.”

March 28, 2014 at 12:34 PM 1 comment

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