On the day Obama makes history in the US – likely to give a fillip to global property prices - Britain’s second biggest mortgage lender, the Abbey, spits in the eye of the government and the taxpayer by raising its rates by half a point. It’s done so just before rates are expected to be cut by the Bank of England.
It’s a highly cynical move which has caused outrage. If the Bank of England does cut rates – and it’s under immense pressure to do so - it means the cuts will be cancelled out and the Abbey will not pass on any benefits to the people who have saved it, British taxpayers, who recently bailed out the banks for more than $37bn.
Such behaviour can only add to the uncertainty which grips the UK property market. There are now conflicting reports about the state of the property rental market in London which further confuse what is already a volatile and quixotic picture.
The excitement and sense of expectation triggered by Obama’s victory is likely to give a fillip to the American property market. It was hoped that it would also help to spread confidence throughout the UK residential and commercial property sector.
But the blatant self-seeking in Abbey’s move will probably quench such hopes. It will antagonise a growing lobby which believes the banks should have been taken into wholesale public ownership and that the recent part-nationalisation, which depends for its success on the bankers displaying goodwill and support, can never work in the way in which Prime Minister Brown and Chancellor Darling had expected.
The clamour for Whitehall to be more dictatorial with the banks is reaching crescendo levels. It is axial that the banks start offering a range of flexible mortgages at attractive rates; that they start showing a little compassion to householders and businesses and stop their glint-eyed level of repossessions; and that they start offering competitive loans to businesses and cease pulling the plug on them with such heartless ferocity.
In the meantime it is still of importance to everybody involved in the property market that several recent reports suggest demand for rental properties in Britain – especially those in London – is actually quite robust and growing.
This is partly because the mortgage freeze continues – exemplified by the Abbey and its conduct – repossessions are gathering pace as unemployment bites, and those with funding are opting to rent, biding their time, waiting for a bargain, before rushing to buy.
That’s one view. Other reports suggest a contrary scenario. They claim the number of properties available is outstripping demand. That tenants are spoiled for choice with a surplus of properties on the market and that consequently rents are beginning to tail off.
This is possible, perhaps, if hard-pressed developers are off-loading new properties at knock-down prices. Or if buy-to-let landlords are giving up the ghost and selling because they can’t secure competitive mortgage rates and a proper return on their outlay.
For landlords that would be a bleak outlook. But it’s not necessarily true. Few properties of any type are actually being sold. So if buy-to-letters are quitting their properties are likely to be stagnating on agents’ books rather than being sold or having much effect on the market beyond tightening it up.
And any shrinking or tightening of the market is good news for those landlords who can stick it out and endure the pain. The smaller the rental market the more valuable those properties which remain will become, in terms of capital appreciation and rental returns.
There’s little doubt that serious investors – those with funding and nerve – are becoming very active in the rental property market. It’s at times like these that they can build portfolios which are cheap now but which will be worth a fortune in the future.
A factor acting as a brake is the uncertainty about if and when the bottom of the market has been reached. Nobody wants to snap up what looks like a bargain today which turns out to be a turkey tomorrow. Calling the bottom of any market is never easy.
But even in this market fundamentals in London still apply. There is always a demand from tenants for flats with good transport links which can be rented at a sensible price.
These are golden rules for landlords. Crises may come and go but they don’t change. Perhaps landlords at the very top end of the renting market will be squeezed. It depends how many top earners lose their jobs in places like Canary Wharf and the Square Mile.
But most tenants live in ‘standard’ flats in London. They are in the majority and they are not the City’s front-line glamour-boys. They work in the back offices away from the limelight earning reasonable wages and expecting to pay sensible rents.
Such people are not those Masters of the Universe who bought estates in the shires and rented penthouses in Mayfair. In times of unemployment it’s the ‘little people’ who are generally – not always, of course – who are marginally safer than the high rollers. And there will always be an abundance of ‘little people’ needing somewhere to live.
London is London. As one of the great capitals it constantly reinvents itself and its population continues to grow. The key word for landlords is ‘sensible.’ It might not mean exciting. But who cares? Landlords have had enough excitement to last a lifetime.
To reiterate: there will always be demand for sensible flats in sensible areas to rent at sensible prices from a swelling army of people earning sensible amounts of money. And it’s these folk who sensible landlords have always depended on and catered for
Landlords also know that historically property has always bounced back – no matter how far it falls - and that they will, one day, enjoy capital appreciation on their portfolios.
Nobody can say how long it will take. But as sure as eggs is eggs it will happen.
With prices in the US beginning to stabilise – as the market finds its own equilibrium - there is now a flicker of hope that property in Britain will steady and begin to pick up. But it’s not helped by the sort of behaviour in which the Abbey has just indulged.
It is critical banks and mortgage companies do their bit. They have to think about what is in the public and the national interest. It’s no longer all about their balance sheets.
They have been saved, they owe their living, their continued existence, to the people, the taxpayers. There is a palpable sense of frustration and impatience with their behaviour. And it really is about time that they began to understand that.
If things turn much nastier for the ‘little people,’ including buy-to-let landlords who have been given a kicking and who are vital in supplying the accommodation which is beyond the wit of government, the men of usury would do well to look to the pages of history.
They should remember cataclysmic events of the past which were fired, in part, by brazen and hard-faced bankers who behaved high-handedly, who ignored public opinion and who became out of step with popular thinking. They would be wise to recall the maxim: What the people give .. the people can take away. That was not Keynes. It was Lenin.
Posts
No comments:
Post a Comment