Nationwide: London house price boom may be coming to an end
Wednesday 28 May 2014
The boom in London house prices may be coming to an end, the boss of Britain’s biggest building society warned on Wednesday.
Graham Beale, the chief executive of Nationwide, said he believed there were signs of “natural moderation” coming through in the capital’s housing market.
His comments came as new data from the Council of Mortgage Lenders showed a dip in lending to first-time buyers in London, who are now typically borrowing 3.83 times their gross incomes and taking out loans of £200,000, nearly twice the UK average of £118,750.
Mr Beale said some buyers were already walking away from deals they felt were overpriced. “There’s a point at which people say no,” he added.
The Governor of the Bank of England recently warned that the property market posed the biggest threat to recovery and many commentators expect the Bank will act as soon as next month to curb lending.
The Nationwide’s figures for March showed prices across the country 10 per cent higher than a year ago and, despite a quarter-on-quarter fall, the CML data reveals lending in London, Scotland and Wales between January and March was 30 per cent higher than at the start of 2013.
However, Mr Beale believes the Bank and Treasury should hold off taking any measures to calm the housing market. “I’m a fan of allowing the market to run through its usual season and see where we are in September and October,” he said. “Any sort of intervention, if it is needed, should be directed towards London activity and not across the whole country.”
His caution was echoed by Paul Smee, the CML’s director-general, who said: “We are increasingly looking at not one overall UK housing market, but many smaller regional markets with different characteristics, and Greater London has particular challenges. Affordability remains a crucial factor and policymakers need to be aware that any measures they implement may have different effects in different locations.”
According to the CML figures, lending to first-time buyers also slowed in Scotland and Wales in the first quarter compared with the end of 2013. But affordability outside London is less of an issue, with first-time borrowers in the two countries taking out average loans of £89,975 and £98,000 respectively, equivalent to 2.98 and 3.2 per cent times income.
Mr Beale was speaking as Nationwide announced a doubling of its annual underlying profits to £924m.
Gross mortgage lending rose by 31 per cent to £28.1m, giving the society a 14.9 per cent share of the market, which is well above its long-term trend of 10-11 per cent. In the first-time buyer market, Nationwide saw a 37 per cent rise in loans and took a 20 per cent share of the market.
Savings rose by £4.9bn to £130bn with the new Loyalty Saver accounts attracting £9.2bn. However, Mr Beale warned that the Chancellor’s plans for new pensioner bonds could hit banks and building societies’ savings products next year.
“The kind of rates which are being suggested are way outside the normal competitive range,” he said. “I am sympathetic to what is being done by the Chancellor, but we simply cannot compete.”
George Osborne announced the new pensioner bonds from National Savings & Investments allowing over-65s to invest up to £10,000 in one year or three year savings bonds. The rates will be announced in this year’s Autumn Statement but early estimates are 2.8 per cent for a one-year bond and 4 per cent for a three-year one.
Mr Beale said that he thought that the outflows of savings into pensioner bonds could well be matched by inflows into new cash Isas where he welcomed the Chancellor’s decision to raise the limits.
Having raised an extra £550m in new capital in March, Nationwide has passed the Prudential Regulation Authority’s leverage ratio of 3 per cent well before the December 2015 deadline.
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