At the beginning of the year auction prices were at a 40% discount to the conventional market price. However, last week the FT reported that in May that figure had reduced to an 11% discount. The discount is at its lowest level for 15 months.

Despite the positive news though, all is not rosy. The article went on to report that futures markets are still pricing in modest falls in prices in the coming year - about 7 per cent.

When house prices are rising steadily, homes often sell at auction for more than the value implied by general house price inflation, because those bidding know they will not have to wait many months for a sale to be completed.

When house prices are falling, the sales at auctions can be expected to have lower prices than in the conventional market because bidders expect prices to continue to fall.

The reduction in the discount is consistent with a number of other housing data recently available showing the rate of decline in prices has definitely slowed.

However, mortgage finance is still very limited particularly for first time buyers without a large deposit. This will prevent any significant rebound in the housing market.

Clear signs of a recovery in Britain’s buy to let sector was reported last week by Residential Landlords Association (RLA) news

Rents have fallen during the past 12 months. However RLA news reported rents had stabilised in May to an average of £795. The extent of the fall in rents is seen by the fact that average monthly rent last year was £895.

Buy to let landlords are no longer adding to their portfolios due to the problems in securing appropriate mortgage funding. In addition, a number of landlords have reduced their portfolio, adding to the reduction in supply. The rise in rents is therefore due to reduction in rental properties coming onto the market.

All positive news on the buy to let sector is to be welcomed. However, I think it’s inappropriate to talk of recovery based on 1 month’s figures. Rental figures and capital values are likely to be rather erratic over the coming months as the housing market looks for stability.  But the fact that rents may have stopped falling (even if only temporarily) is a good sign amidst all the bad news the sector has had in the past year.

Fixed rate mortgages from a number of lenders have increased today following increases in funding costs. Rates are now expected to rise to deal with increasing inflation.

Interest rates are at an all time low but it is considered there is now only one way they can go. Once they start rising the rise could potentially be quite steep.

The Guardian highlights the following reasons why there are fears of inflation:

• Oil prices have more than doubled, hitting an eight-month high of $72 a barrel yesterday;
• Manufacturing output in the UK increased in April, prompting predictions that the recession is coming to an end;
• There are fears the Bank of England’s £125bn quantitative easing policy could feed through into rising prices if consumer demand recovers rapidly.

There are growing signs that the housing market is experiencing a spring bounce. Figures issued by the Council of Mortgage Lenders today showed a 16% jump in mortgage lending to people buying a home during April.

Once a few lenders start raising rates the others are quick to follow. In the current environment no lender wants to be the one out of step with all the competition getting more business than they can cope with.

If you haven’t yet fixed your rate now would be the time to start discussing it with your mortgage adviser, before rates go even higher,

On 6^th April 2009 changes were introduced for when you are selling your property regarding Home Information Packs (HIPS).

Prior to that date it was acceptable to market your property provided a HIP had been instructed. However, this exemption has now been removed and it is unlawful to market a property unless the HIP is actually available.

The housing market is currently struggling and there has been much criticism that the new rules are deterring potential vendors from putting their property on the market.  HIPS cost circa £300. This cost therefore has to be incurred by a potential vendor just to “test the water” and see how much demand there may be for their property.

The Telegraph has recently quoted that one in 10 estate agents thinks the number of people selling their home would be double its current level if the need for the packs was withdrawn. In addition they state a further fifth of agents thought the supply of property would increase by between 20 to 25 per cent if sellers no longer needed to have a HIP in place prior to marketing their property.

The housing market has recently shown some signs of improvement. However, this can only continue if more properties for sale become available on the market to meet the demand.

In my view the government should very quickly consider scrapping the need for HIPs at least as a temporary measure until the market has recovered. The property market has potentially shown some signs of improvement. The government should be doing all it can to build on this.

Let me know your thoughts.

A buy to let mortgage is typically taken out at the time the property is purchased. As such it falls within HM Revenue & Custom’s guidelines of an expenses needs to be “wholly and exclusively” for business purposes to be tax allowable.

However, if you were to draw additional funds on the mortgage eg for a holiday that element of the interest would not be tax allowable.  That is because what is relevant is not whether it is a buy to let mortgage but what the funds will be used for.

If you draw on a buy to let mortgage for a non property related expense the interest on that part of the loan would not be allowable.

To see further property tax information please see here

For tax purposes all income and expenditure must be on accruals basis. This means that it is irrelevant when you are invoiced or when you pay for an expense. What is relevant to the taxman is when the income or expenditure arises.

So for example, let’s assume you have repair work done to your property on 29^th March 2009 but you don’t get invoice until 10^th April. Even though you didn’t receive the invoice or pay for it until the following tax year, the expense needs to go into your tax return for the period to 5^th April 2009. The rule is you need to include the expense in the return for the year in which the expenditure was incurred- not the year in which it is paid.

The same rule applies for income. So rents which are due for the year but are not received until the following year must also be included as income for the relevant tax year.

You must therefore look carefully at all income and expenses paid and received in the period following the tax year to see if any items need to be accrued for the previous tax year.

If you want more advice on tax please see http://www.marywaring.co.uk/propertytaxsecrets.html

There has been an increase in positive data coming relating to the housing market over the past few days:

• Hometrack, recorded that house prices remained unchanged in May. This is the first time in 20 months that the survey has not shown a fall.
• Data from UK Land Registry showed that although house prices in England and Wales fell in April, the drop was the smallest monthly drop in nearly a year.
• The latest house price survey from Nationwide showed an increase of 1.2% in May. This has been the single highest monthly improvement since late 2006. It is also the second average rise in the past 3 months.
• During April there was an 8 per cent rise in the number of mortgages approved for house purchases. This was the third consecutive monthly rise.
• The decline in the construction sector eased in May to its slowest level in more than a year.

No one would suggest that the housing market problems are over. However, it does make a change to see that some positive data is available. Having seen monthly falls for so long it does raise my spirits.

House prices often move erratically up or down rather than show steady monthly movements in a single direction. I suspect that any increase in actual house purchases is likely to be gradual and rather fitful for some time to come.