Property prices to rise

Demand for homes is strong but a shortage of available properties is going to push prices up over the next three months.

Would be sellers are still refusing to bring their properties to market in the hope that prices will rise – and the way in which many big contractors have mothballed major estates leaving them in a half-finished state is also adding to the shortage of homes.

These factors plus the hugely-damaging mortgage ‘drought’ caused by bankers who still remain shy of lending – or who demand a criteria which is almost impossible to fulfil – will almost certainly guarantee an increase in prices.

The Treasury’s Asset-backed Guarantee Scheme – which was supposed to help ease the shortage of mortgage finance – has been criticised by politicians and property experts as an insufficiently bold initiative whose presence will do little to reduce the crisis.

Property reaching asking price

The great property crash left a lot of people with the idea that they could wander the land making ludicrous offers and snapping up unbelievable bargains – even if it meant sometimes leaving the seller in a state of serious distress.

That might have been the case a few months ago. And there are still bargains to be had. But the days of circling carrion are numbered.

The gap between what sellers ask – and what buyers get – has narrowed to less than two per cent. It’s a big change from a few weeks ago when the difference between asking and getting was over 6 per cent.

It’s excellent news for vendors – though prices overall, of course, are down from their peak in the summer of 2007 – and sometimes by chunky amounts.

This latest news – from the National Association of Estate Agents – shows that the maxim about property always bouncing back is starting to ring true.

According to the association estate agents, for the third month a row, sold an average of ten homes in June, up from six in December. Sales of flats were better than houses. The average asking price was £144,000 for flats compared with a ‘getting’ price of £143,000.

The figures are encouraging given that there is still a mortgage ‘drought’ with lenders ignoring government strictures and demanding big deposits and flawless credit records.

A leading estate agent who asked not to be named said: “ The market’s unrecognisably better than it was. But the government has to bring lenders in line. The tax payer owns many of them. It must tell them to start lending on terms people can afford. First time buyers can’t get a look in without help from the Bank of Mum and Dad.”

The habit of parents helping offsprings to get a foot on the housing ladder has moved from the exception to almost the norm. Early evidence suggests that this can cause extreme heartache for parents who had tried to build a nest-egg for their retirement – exacerbated by the decimation of pension schemes over the past decade or two.

The agent said: “ Bankers are again paying themselves vast bonuses with public money. But they won’t help the public who saved them by offering them sensible lending opportunities. It’s very unfair. Their behaviour is obscene. Property demand is sky-high but the number of mortgages on offer in the market place is miniscule. The health of the economy rests on a thriving property sector. It’s high time the government realised that.”

TAX MAN TARGETS LANDLORDS

Any property landlords who are pocketing the cash and giving two fingers to the tax man had better watch out.

The Inland Revenue is being given new and sweeping powers to chase up tax dodgers.

Top of the list are seriously rich individuals – those who are trying to avoid the new 50 per cent top rate tax band which comes into force soon – and landlords who have been trying to get away with it all.

The Revenue is going to trap errant landlords by forcing lettings agents to reveal details of all their previous clients.

At the moment the Revenue can only ask letting agents to give them the names of landlords for whom they currently collect rent.

But under the new arrangements it will be able to demand that letting agents give them details of any landlords who they introduced to tenants for a fee in the past. And this will apply even if rent is now paid directly to the landlord.

Renting experts reckon this move might winkle out landlords who are on- the- make. But it will also create the need for a lot more paper work on the part of letting agents. Letting agents will have to be scrupulous about keeping detailed records.

The Revenue is urging any buy-to-let landlords who have undisclosed income to reveal themselves and to face the music. It is understood that ‘confession’ might help to mitigate penalties.

The Revenue crack-down on the very rich is partly aimed at destroying methods being promoted by accountancy companies who are trying to sell their clients schemes which get round the 50 per cent tax threshold.

Some schemes involve employees taking share options instead of cash bonuses which would be subject to capital gains tax rather than income tax.

But under its new powers the Revenue will be able to demand that accountancy firms identify and give the addresses of their clients who might use such schemes.

The new get tough stance by the Revenue comes hot on the heels of news that offshore taxpayers and overseas tax-avoidance schemes are being targeted more rigorously.

The Inland Revenue estimates that it will get £500m from offshore savers and £300m from buy to let landlords.

Unfair Foxtons contracts

Estate agency Foxtons has been criticised by a High Court judge for imposing what were called “trap” and “time-bomb” conditions on landlords.

Foxtons demanded up to 11 per cent commission if a tenant renewed their contract. The National Landlords Association had fought the imposition of such fees for nearly two years. Its defence and the criticism of Foxtons has been hailed as a victory for landlords.

There had been reports of landlords being charged 11 per cent by Foxtons on the first year’s rent and another 11 per cent up front if the tenant wanted to renew their contract.

John Socha, of the NLA, was reported as saying the findings “ sent a direct message to letting agents that this lack of transparency must stop.”

The Office of Fair Trading brought the case against Foxtons after receiving numerous complaints about Foxtons terms in its contracts with landlords.

They included clauses about landlords having to pay full commission fees to Foxtons of 2.5 per cent if the home was sold to the tenant.

Foxtons was alleged to have demanded large sums in commission when a tenant stayed in a rental property beyond the initial rental period. Commission applied even if Foxtons had done nothing to persuade the tenant to stay and had not collected the rent.

Mr. Justice Mann said landlords would be “ astonished ”to find they had to pay Foxtons commission for the sale of a property even if the agency had played no part in the sale.

The judge agreed that the conditions were in the small print and not in “plain and intelligible language.” The OFT said unexpected terms in con tracts should not be buried away. “ Contracts need to be in clear and straightforward language,” the OFT said.

Foxtons said it had now altered the wording of its contracts with landlords and reduced its renewal commission charges.

Housing slump over – but growth weak

After months of bad news on the housing front there are now many reports that the worst is over. The latest more positive bulletin comes from Professor David Miles who is the new Bank of England sage on Britain’s battered building industry.

He is also an expert on mortgages being the author five years ago of a Treasury report on the subject, although how much of its content is applicable today – given the mortgage tsunami of the past eighteen months – would seem debatable.

In his upbeat remarks Miles reckons the economy generally – and the housing market in particular – had now endured the worst of the recession and prophesied that somewhat calmer waters should lie ahead.

Testifying to the Treasury Select Committee ahead of the BoE Monetary Policy Committee next week he said it was his hunch that the country had seen most of the house price falls. But he also predicted that the UK economy could only hope for ‘anaemic’ growth in the coming years because of the severity of the financial crisis.

Hedgie decline cuts Mayfair rents

Quarterly rents for some of the poshest offices in London have dived because of the way the Great Recession has cut a swathe through London’s once thriving hedge fund sector.

In Mayfair’s hedgie-belt quarterly rents for a typical 5,000 square foot top-end office have collapsed from around £144,000 to £69,000. At the height of the boom in mid 2007 lets in Mayfair and St James – which boasts some of the finest property in the UK – were running at around d £120 a sq.ft. Today they are going for £55 a sq.ft.

It’s been reported that some hedge fund managers are relocating to Switzerland. But many appear to have simply vanished off the financial map. Little start-up hedge fund operations, however, are beginning to spring up in London. They often comprise redundant employees or directors of bigger hedge funds which went kaput.

Start-up hedgies can find bargains. The rents are a fraction of what they were in the choicest corners of Mayfair and St. James and lucky tenants can benefit from toys
and gizmos abandoned in their flight by the bigger hedge fund tenants.

In the boom period plasma screen TVs and leather furnishings were a must for image conscious hedge funders. Now – little groups who are appearing from the wreckage – can find themselves the beneficiaries of such largesse.

From the landlords point of view it’s sometimes cheaper to accept lower rents than to be lumbered with empty offices where the rates alone can cost £25,000 a quarter.

Abbey cuts deposits

At long last some rather more competitive deals are beginning to trickle into the mortgage market. Today (Friday) the UK’s second biggest lender, Abbey, owned by the Spanish Bank of Santander, is cutting the minimum deposit necessary for its best fixed-rate deals to 30 per cent from 40 per cent.

It means buyers will still have to find a hefty down payment – but slicing ten per cent off the required deposit can only be applauded.

Abbey is offering a two-year fixed rate at 3.65 per cent on deals worth 70 per cent of the value of a property. It will charge just under £1000 as the arrangement fee.

Given that the past months have seen nothing but a tightening of mortgages any loosening up will be seen as encouraging for the market and further evidence that the property market is slowly starting to pick up.

The Bank of England’s latest decision not to tamper further with interest rates – but to hold them at their historic low of 0.5 per cent - is being interpreted by many property professionals as a sign that rates will be kept low for at least another year, possibly two.
This view is compounded by the Bank’s view that recovery from the recession will be slow and protracted and will take longer to achieve than had been earlier predicted.

The Abbey cut is almost certain to trigger copy-cat moves by competitors which is good news for putative borrowers.

The property market, though, is still hampered by a reluctance on the part of sellers to bring their properties to market in the vain hope that increased stability will bring in its wake a rise in property prices. There is little evidence to support such hopes, and certainly not in the short term. In today’s property market cash remains king. And first-time buyers need either rich parents or friends to be able to stump up deposits.

A further brake is that even at 30 per cent the mortgage market is still a universe away from offering competitive pay-back rates and 10 per cent deposits, a combination which was commonplace when the market was buoyant.

When similar combinations are offered by lenders, who remain still largely timid and recalcitrant, and who are insisting that borrowers meet corset-tight lending criteria, that first-time buyers, who are vital to the market, will be able to get on the housing ladder.

Buy to let market still strong

The scarcity of properties being put up for sale is acting as a serious brake on the health of the housing market. Would-be-sellers are hanging on as long as they can in the hope that prices will begin to pick up.

The sentiment is understandable but given that demand is now strong they are probably making a mistake. If they dither for too long they could miss the boat.

The demand for buy to let properties is also increasing. Cash is still king. But for buy to let landlords who want a mortgage there are now a number of offers around which are beginning to look attractive.

Cheaper properties – and the sharp reduction in mortgage repayments – has caused a lot of investors to re-think their strategies. Buy-to-let is certainly a more seductive option than it seemed a few months ago. And if a reasonable mortgage can be found the yields are certainly better than in recent months.

The downside, of course, is that mortgage companies usually demand sizeable deposits, the putative landlord has to tie up his or capital for a lengthy period to see a sensible return, and there is also the expense of having to refurbish and maintain older properties.

Alternatively, if would-be landlords want to buy new-build – the cyclone which has hit developers has produced cheap flats in empty blocks. – they come with risks attached.
The price might appear juicy but starter-landlords could find they have invested in a block in which most flats stay empty for years. This creates a moribund feel, which over time becomes one of dereliction, with an inevitable collapse in rents and yields

The pitifully poor rates for savers – many banks are paying almost zero interest – savers are plumping to put their money into bricks and mortar. Some are helping offsprings purchase their first property – stumping up the chunky deposit many mortgage lenders now demand – while others are putting a first toe into the buy to let market.

The old adage that property always comes back remains true. It is a tangible asset in an unstable climate in which so many bankers and politicians who control the levers of the economy have been exposed as flaky and untrustworthy.

More good property news. Or is it?

More figures showing that the property market is improving. This time from the Halifax. But they have been followed by the customary gloomy forecasts of several economists who argue that the market is still too fragile to start making optimistic forecasts.

Over the past few weeks it’s become almost a game. A group of supposed experts will produce cheery figures and another group will shoot them down. So what’s going on? The truth is that nobody really knows. The property market has taken a Hellish beating and is still in a state of volatility and uncertainty.

A number of factors stand out. It is indisputable that there is a far greater interest being shown in buying property than has been the case for many months. House price falls have begun to level off. Sales are up – but only fractionally. Lenders are still nervous and their continuing intransigence is acting as a brake on the market.

The latest goodish figures come from the Halifax. They show that the rate at which house prices fell tailed off marginally in April. The average price for a property in the UK dropped to 1.7 per cent compared with 1.9 per cent for March.

These encouraging signs of stabilisation are due to the government printing money – quantitative easing – and filtering it into the market in the hope that the banks and other lenders will begin to lend it back into the property sector. It is also to do with the very sharp blade with which the Bank of England has hacked into interest rates, producing far cheaper mortgages for millions of people as a direct consequence.

But, and this is where it gets murky, any improvements are to do with a sense of confidence on the part of the consumer. And this is extremely difficult to gauge.

Nationwide sponsors a consumer confidence index. It showed that 19 per cent of people in March thought things were getting better. But their latest survey shows a jump to 26 per cent in April. That’s very good news.

But such surveys must not be judged as the Tablets from the Mount. Indeed, cynics and pessimists would argue that they add up to little more than a bag of piffle. But if they are to be believed – and after all, when it comes to it, there’s not much else to go on – each contributes, in its own small way, to an overall feel-good factor.

Services and retailing – the latter led by the John Lewis group who have announced expansion plans – have just turned in some good figures. When those reports are added to the tiny green shoots in the property sector even the most pessimistic of the seers might dare to think that perhaps the worst of the recession is over or is drawing to a close.

Few real deals for first-time buyers

Reports of an apparent race to attract first-time buyers by mortgage companies have been met with widespread scepticism by property professionals.

First timers with small deposits are still desperate to find mortgages which offer a competitive rate.

There have recently been a clutch of incentivised offers that have suddenly flooded on to the market, a number of which appear quite attractive.

But mortgage offers which address the central issue of small deposits and cheap rates are still exceedingly thin on the ground. The scarcity of such offers is one of the principal brakes on the well-being of the property sector.

As well as the limited choice of such offers banks are also insisting that borrowers have an impeccable credit record and are in ‘safe’ jobs. Such criteria can be difficult to reach. First-time buyers – generally young people – often do not have any sort of credit record on which their loan-suitability can be assessed. Only the most optimistic or ingenuous in any sector could describe their job as ‘safe’ in the UK’s depressed and highly volatile market in which something like 3,000 people a week are being thrown out of work.

First-time buyer mortgages shrank in January to 8,900, the lowest number since records began. Buyers had to save – on average – almost £31,000 in deposit compared to £12,000 before the Great Crash.

HSBC were the first off the block in trying to attract first-time buyers. They recently cut the price of a mortgage to 4.99 per cent for buyers with a ten per cent deposit. Now other lenders have begun to follow suit with a range of different incentives.

Abbey – owned by the Spanish conglomerate Santander – has reduced its five-year fixed rate deal for those with a ten per cent deposit to 6.89 per cent and cut its fee from £2500 to £1000. The Halifax will pay stamp duty for anyone buying for the first time. They recently announced a similar deal to pay a percentage of council tax.

The Co-op Bank – soon to join forces with the Britannia Building Society – has said it will allow first-timers to use the income of a relative or family friend to guarantee repayments.

One estate agent who wished to remain anonymous said: “ It’s all very well offering sweeties but an awful lot of first-timers still need rich parents to stump up deposits and to help with repayments if they are going to be able to buy a home.”

There has been a big increase in the interest buyers are showing in wanting to purchase property. But the demand is being stifled by the nervousness of banks and lenders.

Government must not wreck buy to let market

The announcement that the government is intending to bring in legislation which will hit landlords has been presented in a way which is both pernicious and inaccurate.

The government is suggesting that it wishes to tighten up on unscrupulous landlords who treat their tenants in a shoddy fashion. Few would disagree with such aims – though the broad-brush condemnation of landlords is unfair in the extreme.

Only a tiny minority of landlords would be foolish enough to behave in such a way given the torrent of legislation which already exists to protect tenants rights.

The real and unstated aim of the new legislation is to help the government to dig itself out of the financial black hole it has created by the bail out of the banks with public monies.

The Treasury and the Inland Revenue are under orders to claw back and to scavenge for every penny they can in a desperate bid to make up the massive short fall.

That’s the real reason the government’s beady eye has fallen on landlords and the buy-to-let market. It also has a cheap vote-catching appeal playing on 1960s fears and clichés about Rachman style-landlords.

The proposals have the same populist, greed and envy scent, as those which crack down on high earners (the new 50 per cent tax bracket ) and announcements that the Revenue is going after tax dodgers in havens like Switzerland, Monaco and the Cayman Isles. All very praiseworthy perhaps – why shouldn’t the vulgar rich be clobbered? – but in reality such moves will raise peanuts when judged against the enormity of the national debt.

The Inland Revenue knows that a number of landlords are not declaring all their takings and are being paid cash by their tenants. It’s well known that some of the worst offenders are in areas with high numbers of immigrants who are often working in the UK illegally.

It’s the oldest trick in the book to let a property to a person listed as the official tenant and then to cram the accommodation with many more people who are all paying in cash.

Sometimes tenants paying in cash work shifts and have to ‘hot-bed’ – using beds vacated by others on different shifts. Sometimes camp beds are crammed into rooms and the roof space in properties in which many people have to share a single kitchen and bathroom.

Such arrangements can be dangerous and unhealthy – especially in the era of swine flu and the like – and are open to abuse and exploitation by unscrupulous landlords. This type of practice is known to be prevalent in certain areas of London and in some provincial towns and cities such as Bradford, Leeds, Manchester and Rochdale.

But given the overall size of the letting market the level of abuse is still small. A healthy buy to let market is essential to the well-being of the UK, especially as the government’s property building programme has now fallen several universes behind its stated targets.

If buy to let landlords decide to pull out of the market – because of yet more government interference - the accommodation situation is going to become far worse.

If buy to let landlords don’t offer reasonable accommodation who will house the millions of people who cannot find – or do not wish – to buy a home? Certainly not the government and for one very simple reason. It’s skint. Bust. Bankrupt.

The government needs to encourage buy to let landlords. It must not frighten them off with a welter of punitive red tape and licensing costs. Already buy to let landlords have been seriously discouraged by seeing their capital investment – the worth of their properties – plummet when the property market went into freefall.

More government legislation would also increase the state bureaucracy – thousands of civil servants and pen-pushers and inspectors would be needed to enforce the proposed new legislation. This at the very time that the government is trying to curb public spending which the electorate knows is running out of control.

So any savings the government comes up with by cracking down on a few unscrupulous landlords would disappear on paying the wages of a new army of bureaucrats.

It should not be beyond the wit of government – utilising existing resources rather than adding to them – to finger the unscrupulous minority. Everybody knows who they are. Only the other day an inspector who surveys for Warm Front, the government’s scheme to insulate houses, said he had inspected a house in Peterborough where there were half a a dozen camp beds in every room. In another house he would not check the attic because junkies lived in the house and threw their discarded needles up into the loft.

Instead of jeopardising law-abiding buy to let landlords the government should be encouraging them with tax breaks and other incentives.

After all, with falling property prices, and the need to invest and to tie up capital in buying and maintaining property ( property is always a long-term investment) there are not that many reasons left for people to enter the sector.

Crack down on the unscrupulous by all means – but don’t use the same brush to tar and to imperil the whole letting market. That would be detrimental not just to the sector – but especially to the government and its responsibility to help accommodate its citizens.

If buy to let landlords are scared off it can only worsen the plight of first-time buyers. In spite of widespread criticism and the bail-out with billions of pounds of public money mortgage lenders continue to make impossible demands.

Lenders want big deposits, credit ratings which are almost impossible to fulfil, and costly repayments that most people cannot afford – or are frightened of committing to given the volatility of the UK economy in which 3,000 people a week are losing their jobs and where the unemployment total will undoubtedly exceed three million by 2010.

Budget bad for property

The shortage of housing is now so severe in Britain – with 70,000 homes being built rather than the 240,000 target – it could trigger another major price boom in a year or two. The shortage is also certain to fire up demand for rental properties.

If the housing market is one of the great propellants of the British economy it was given insufficient and inappropriate fuel in the Budget yesterday.

There was hardly anything in it to encourage first-time buyers. Until first-timers return to the market the private property sector will remain in the doldrums.

The extension of the so-called stamp duty holiday – it’s going to be re-introduced at the start of next year – was met with widespread derision and condemned as tokenism.

It’s likely to benefit only homeowners in areas outside London and the south east where most homes already cost more than the £175,000 cut off. Anybody trying to buy property above that figure will still face the full cost of stamp duty.

It’s estimated that only 3,500 first-time buyers will be helped by the extra £80 million which the Chancellor pledged to the HomeBuy Direct shared equity scheme.

Over 4.5 million people are on waiting lists for council homes. The figure is certain to rise to 5 million as more homes are repossessed.

Housing groups wanted at least £6bn to build 100,000 low cost homes in the next two years. But there was no sign of any type of comprehensive building strategy. Smaller amounts – such as the £100m being earmarked for councils to build 900 homes on town hall land for social housing to rent – were described as piecemeal to paltry.

With the target of building 240,000 new homes a year being missed by a spectacular mile there will be an increase in the demand for rented property. Logic demands that the inevitable consequence of this will be seen in rising rents.

Landlords had been hoping for tax breaks or concessions to encourage them to stay in the market and to expand their portfolios. But there was no mention of any such scheme.

If buy-to-let landlords bail-out because rental returns hardly cover their mortgages – and capital appreciation is negligible – then the problem of providing sufficient accommodation for growing numbers of people will be exacerbated.

It was also a major disappointment to property professionals that nothing was being done to coerce lenders into offering a wider range of competitive mortgages at affordable rates, without vast deposits and free of impossibly harsh lending conditions.

Government backed mortgages possible

Alistair Darling’s plan to underwrite mortgages could give an important fillip to the property market – he’s hoping to inject £50bn into the scheme – but there are serious concerns that he is being wildly over-optimistic in his forecasts.

All should be revealed on Wednesday when he presents his pre-Budget Report – which in reality is effectively a second budget. It’s been widely reported that he will predict growth of 1 per cent next year. But critics claim it’s a nonsensical figure given that growth will have crashed by around 3.5 per cent this year.

He has to severely prune public spending – cut backs in the NHS and in education are being mooted – but his critics will be waiting to see if has any plans to curb public sector employment which continues to grow.

So-called Town Hall fat cats, gold-plated pensions for state workers, and high-level tax cheats evading their dues by using complicated accountancy ploys are an increasing embarrassment.

Plans to make £15 bn worth of ‘efficiency savings’ have already been announced.

The property market needs to be given a major boost with many first-time buyers being locked out of the market and a million householders in or close to negative equity.

In the past Gordon Brown – when he was Chancellor – targeted pensions. It caused uproar at the time and has had repercussions ever since. Given the scale of the deficit now facing the government pensions could again be in the frame. Higher rate tax relief on pension contributions could be scrapped in a move which would raise up to £7bn.

Falling prices spell negative equity

The Council of Mortgage Lenders has reported that almost a million people are now in negative equity because of the sharp fall in property prices.

Thirteen per cent of people who took out a mortgage between April 2005 and the end of 2008 are now in negative equity.

It’s estimated that a quarter of a million borrowers have a shortfall of nearly £20,000. About three in four have an average shortfall of between £6000 and £8000. Approximately 13,000 mortgagees are in negative equity by £37,000.

About 150,000 mortgagees in the South East owe more on their property than it is worth. This represents about 5.2 per cent of all households in the area. In the North the situation is worse with 70,000 homes worth less than the figure they were valued at when the mortgages were granted – which accounts for 9 per cent of households in the region.

Another 1.1 million borrowers have seen the equity stake in their home collapse to less than 10 per cent. Having only a small degree of equity in ones home makes it difficult to get a competitive fixed rate deal when their existing home loan comes to an end.

House prices have fallen by nearly 20 per cent since the market peaked two years ago.

Bad though they are the negative equity figures are still less than in the early 1990s property crash when there were more than 1.5 million householders in negative equity.
Recent figures predicting that 5 million people will move into negative equity were dismissed as alarmist by the Council of Mortgage Lenders.

Barclays shove mortgage costs up

There is still a mortgage famine – and despite the billions of pounds of public money being pumped into the banks – one of the leading lenders is going to increase the cost of fixed-rate mortgages.

Barclays is pulling its 3.99% four year fixed rate deal which was on offer to borrowers with a 40% deposit. The offer was a market leader.

It also going to raise the cost of its three and four-year fixed rate mortgages by up to 0.4 percentage points.

The move by Barclays is likely to trigger similar moves by other lenders.

The Barclays price hike comes in the face of massive public and political criticism. The government has pumped in millions of pounds worth of taxpayers money to save the banks from collapse and the government has implored banks to start offering a wider range of competitively priced mortgages without demanding a massive deposit.

The rise comes despite the Bank of England leaving rates untouched earlier this month after a series of swingeing cuts which have left interest rates at an historic all-time low of just 0.5 per cent. It also comes at a time when banks such as Goldman Sachs have said they will persist with massive 33 per cent salary hikes – despite the public’s outrage over bankers greed and the bonus culture.

Woolwich – the mortgage limb of Barclays – says it is having to raise rates because of the rising cost of longer-term wholesale borrowing with which it funds mortgage lending.

Other mortgage providers are thought likely to follow the Barclays/Woolwich move and brokers are predicting a rush of people trying to secure longer-term fixed rate mortgages before anymore rises take place.

The lack of appropriate mortgages in the market is acting as a major brake on the property market.

Latest figures show that there has been a four-fold increase in the number of good – or credit-worthy borrowers – being turned down by lenders. Nearly nine per cent of applications have been rejected by lenders – compare with 2.3 per cent in 2007.

Mortgage misery continues

Despite having billions of pounds of taxpayers’ money pumped in by the government banks are still being highly recalcitrant in offering mortgages to anybody who does not have a flawless credit-record and who can stump up a hefty deposit.

One estate agent in west London said he recently had a professional couple who were both earning over £100,000 a year in secure jobs but lenders had turned them down on a house valued at £650,000 because they could not raise a 40 per cent deposit of £260,000.

“ It’s an absolute scandal,” said the estate agent, who did not want to be named. “ Even trying to get a 10 per cent deposit at anything like an affordable rate of interest is proving almost impossible as there are so few lenders in the market offering sensible deals.”

Another big problem is that very few properties are being put up for sale. An estate agent in Hampshire said: “ People are hanging on trying to get a better price. They are living in cloud-cuckoo land if they think prices are going to rocket in a short space of time.

“ The market is definately getting better. But it will take a while. There is a great upsurge in interest. People want to buy. But with mortgages thin on the ground and so few properties for sale the market still has a way to go. The banks and lenders have got to start living up to their side of the bargain. They’ve been saved from bankruptcy with public money and it’s now high time they started showing a little appreciation.”

HSBC fires 10% mortgage salvo

At long last there’s some seriously good news for people trying to hunt down a competitively priced mortgage.

It is especially heartening news for first time buyers and for those who can only raise a 10 per cent deposit.

Property experts are wondering if HSBC’s move will now trigger a lending war.

It is – perhaps – one of the first fruits to come out of the Bank of England’s high-risk strategy of continually slashing bank rates. Today the BoE held bank rate at its record low of 0.5 per cent.

HSBC has cut hard into loan rates for those buyers who can raise only a small deposit. To date this has been one of the biggest brakes on the housing market.

It could bring back into the property sector the first-time buyers. Their re-entry could be the spark which lights up the property sector.

HSBC is offering a tracker deal at 4.59 per cent for those with a 10 per cent deposit. It is also offering a fixed-rate deal for two years at 4.99 per cent for a 10 per cent deposit.

The two-year fixed deal has a £1499 arrangement fee but both deals are considerably cheaper and more competitive than those offered by rivals.

There is a catch. Anybody who signs up to one of the HSBC deals must also sign up for one of its new fee-paying current accounts costing £12.95 every month.

But even when this is included repayments on an average size loan seriously undercut any of the offerings from rival lenders.

The monthly repayments on a typical £150,000 mortgage work out at £854 for the 4.59 per cent tracker with a 10 per cent deposit.

Monthly repayments on the 4.99 per cent two-year fixed deal work out at £889. Tha include the current account fee that is necessary.

The move by HSBC could trigger a cut-price mortgage war but lenders will be wary not to let it get out of control – a root cause of the present recession.

Best mortgages beyond reach of first-time buyers

A Bank of England survey shows that building societies and banks are expected to lend more money to would-be homebuyers – and to businesses – over the next three months.

This is more encouraging news for the property sector which has shown distinct signs recently of beginning to perk up.

But there is still a sizeable downside to the more positive news. It is likely that lenders will be tightening – not easing – their lending criteria over the coming quarter. This, plus a dearth of competitive deals which are available to the majority of putative buyers is still acting as a brake on the property sector.

Homebuyers who cannot rake together a chunky 40 per cent deposit are still excluded from the most competitive mortgage deals – and people who can only muster 10 per cent of the purchase price or less will have to pay high rates of 6 per cent or more.

These factors, plus a shortage of properties coming to market for sale, are impeding the recovery of the property sector.

One of the UK’s major lenders, HSBC – the biggest bank in Europe – has said that it’s going to ease its criteria for lending from today.

Until now only buyers with a 40 per cent deposit would have been eligible for a competitive 2.95 per cent tracker deal. But from today it’s lowering the required deposit to 25 per cent.

This is clearly good news for property buyers – but it still rules out a huge swathe of first-time buyers who simply cannot raise a quarter of the asking price of a property.

A slight rise in property prices has been recently reported – and a surge in interest from would-be buyers.

In parts of London it is reported that boom conditions are beginning to reveal themselves with some agents talking about gazumping and interest from buyers being so intense in a number of isolated incidents that sealed bids are once again in evidence.

The most common complaint from estate agents remains, however, that competitive 10 per cent mortgages are virtually non-existent and there are too few properties to sell.

Rental demand increases

There is now little doubt that encouraging signs are cropping up all over the property sector. The rental sector is beginning to look especially encouraging.

Recently there have been a surplus of properties to rent. But the demand for rental properties is increasing rapidly. There are a number of reasons for this.

One is that repossessions are rising so the pressure on social housing is increasing. There is not enough social housing so rented properties are coming into play. A massive 67,000 repossessions are predicted for this year.

Another factor is that first time buyers still cannot get on the property ladder because they have insufficient monies for the chunky deposits demanded by the majority of lenders.

Again, frustrated buyers are choosing to rent while they save for a big enough deposit to buy their first home.

Life could get even tougher if 100 per cent mortgages are definitely going to be banned by the Financial Services Agency and if mortgages are going to be restricted – as in the distant past – to three times a borrower’s income.

Grainger, which is the UK’s largest residential landlord with a portfolio of 14,000 tenanted properties, will be letting a third of its new flats on the Hornsey Road, in north London, with rents starting at about £220 a week.

Developers are choosing to let their properties rather than selling them – for some of them, of course, it is a last resort – but for the first time in more than two years landlords are buying more homes than they are selling.

A number of surveys have suggested that in ten years time one in five homes in the UK will need to be in the rental sector to meet demand.

It is likely that housing patterns are shifting in the UK. House ownership in Britain was falling even before the Great Crash, partly, a tendency quickened by the sudden boom in prices which caused the lower end of the market – that for first-time buyers – to stall.

But the UK still has the second highest percentage of owner occupied properties in Europe at almost 69 per cent. Spain is the highest, with 82 per cent. Germany has only 43 per cent.

In Germany – when people first buy they are likely to be aged in their forties. One reason is that German property is very expensive.

But in Britain it is still seen as the norm for twenty-somethings to get on the property ladder, something which will become rarer in the UK over the coming years.

It is widely predicted that now, in the UK, with the demand for big deposits, restrictions on the amounts of money which will be lent, and deep-seated fears about job security – 3000 people a week in Britain are still losing their jobs – the age at which the average British person will get on to the property ladder will rise to between thirty and forty.

If the British rental market begins to mirror the German market, for instance, there could be some seismic changes in the relationship between landlords and tenants.

In Germany the majority of landlords are small operators with small portfolios. As an incentive they are given tax breaks by the government to encourage them as buy to let landlords. It is something which any UK administration would be wise to consider, although given the parlous state of the economy any tax giveaways would seem unlikely.
Germany also allows tenants to negotiate lower rents the longer they stay in a property.

Property Prices Up

Experts were predicting today that some small encouraging signs in the property market could herald a more durable recovery.

On the day it was revealed that house prices rose in March for the first time since October – by 0.9%- comes news that householders have been paying off their mortgages at a record rate.

Mortgagees reduced their debt by £8bn between October and December of last year. This was the third consecutive quarter that repayments have outstripped equity withdrawals.

Much of it is because interest rates have plummeted – giving millions of people much cheaper mortgage repayments.

The big amounts that householders are choosing to pay back on their mortgagees reflects widespread uncertainty in the jobs market and abysmal rates offered to savers by banks.

Many people think it’s more prudent to reduce their mortgage commitment than to splash out on spending – or to save the monies from reduced mortgage costs in a bank account.

The news that house prices have had a slight bounce – as reported by the Nationwide building society – does not mean that the market has turned.

But it is good news coming on top of reports from the Royal Institute of Chartered Surveyors saying that there is a marked rise in interest from putative property buyers.

The total number of mortgages approved by lenders rose from 32,000 in January to 38,000 now. The average price of a house in the UK is £150,946.

No Benefits for Landlords

The government’s decision to pay housing benefits direct to tenants rather than to landlords continues to cause chaos. Almost a year ago it was decided to pay Local Housing Allowances – LHAs – to tenants in the vague hope that they would use them to pay their rent. It’s led to a shambles in the renting market.

The National Landlords’ Association is bringing out a survey which says that 52 per cent of landlords are now less likely to let their properties to people on benefits. And of those who are already letting to people on benefits more than 40 per cent said they would be less likely to do so again when the present tenancies expire.

Reports are coming in from disgruntled landlords across the country who say that tenants on benefits move in – pay up for a couple of months – then when they are settled they simply stop paying rent and spend the money in a variety of other ways. There is said to be a huge jump in the number of evictions because of the non-payment of benefit-rent.

Landlords report that some benefit tenants prefer to spend what is supposed to be their rent money on drink, drugs and holidays.

Beleagured Employment and Welfare reform boss Tony McNulty – who’s currently trying to sort out his own parliamentary benefits – is expected to bring in changes.

McNulty is one of a number of MPs who have been criticised over their allowances. He had claimed allowances for a house his parents live in – while Home Secretary Jacqui Smith’s husband charged expenses for watching blue movies.

Aldi Growth

Every estate agent in the land is said to be courting German discount retail chain Aldi. It is planning to open 50 stores a year boosting its rapid growth in Britain. It currently has 450 outlets in Britain and is aiming to spend about £200 million on opening new stores in Britain this year. The company is said to be interested in acquiring new sites and the redundant premises of retailers who have gone under in the recession. Commercial property has been hit hard and there have been some notable High Street casualties. While several other retial chains have been having a hard time Aldi and competitor Lidl have made good progress with their cut-price range as shoppers have become more and more canny as the recession has begun to grip.

Big demand for cheaper rental properties

Demand for rental properties is growing fast as first-time buyers are forced to rent because they cannot get mortgage facilities. Estate agents are reporting that the lower end of the rental market is seeing the steepest rise in demand.

Tenants looking for anything below £500 a week are faced with limited choice. In this sector of the market demand will soon outstrip supply if the trend continues. Decent accommodation at anything below £500 a week is being seen increasingly as a bargain.

However, higher up the prestige ladder, properties which are being let for more than £1000 a week are proving increasingly difficult to shift. In this sector rents have fallen by up to 30 per cent. It is thought that this is largely to do with the number of companies taking long leases for their staff beginning to decline.

According to one leading agent the supply of rental homes in London has grown by almost seven per cent – with people who cannot sell their properties renting them out – but demand for rental properties is up 20 per cent year on year.

Property on the move again

Property interest and sales are increasing. The Brook Green W14 office of leading estate agents Townends report a marked pick-up.

Close to Holland Park Townends have a 3-storey house with a fish and chip beneath. He whole development in need of refurbishment. It was worth £850,000 a year ago. It has now come back on to the market at £635,000 and the interest is intense.

Townends also had a new build in Shepherds Bush, a split-level development of just under 1,000 sq.ft. It has just sold for £390,000. Eighteen months ago it would have been closer to £500,000. The buyers – both of them in the medical industry – put down 20%. They got a Nationwide mortgage fixed for three years at 3.84%.

Across the country house sales last month were at their highest for a year. Increased interest turned into sales in January which averaged eight property sales per estate agent. This is the highest level since February 2008 and compares with the record low of five transactions a month in August 2008.

It is estimated he number of first time buyers in the market is currently running at about 25%. It has been that figure since January. In December the figure had dropped to 11%.

Mayfair is Little Moscow

They used to call the once proud mining community of Ebbw Vale in Wales Little Moscow because of its Left politics and its notoriety as a cockpit of industrial strife.
Today that mantle has been stolen for entirely different reasons by London’s Knightsbridge, Belgravia and Kensington. Little Moscow has moved to Mayfair.

In the swankiest and costliest corners of the capital estate agents are reporting an increasing interest by Russians who want to buy property in Britain’s most costly areas. The market had died down. But now the rich Russians are back in town.

These are the new oligarchs who have a particular fondness for period properties and new swish developments with 24-hour security and such niceties as a concierge service.

It’s estimated that property prices have dropped by nearly 25 per cent in some of the smartest areas. But it is still necessary if the process of looking is to be turned into buying for the sellers to clip asking prices even further. The Russians might be rich – and in many parts of London they are far from popular – but they still like to strike a bargain.

A top estate agent who did not want to be named said: “ It’s still difficult to sell or to rent hugely expensive places in those areas which became super fashionable in the boom times and which today have lost a lot of lustre. But the traditionally finest areas are still the places the rich want to live. They can walk into the West End without having the hassle of tubes or traffic jams and they have the world’s best shops and restaurants and cultural attractions literally on their doorsteps. People trying to sell or rent properties for astronomical prices in the Johnny come Lately nouveau areas must start getting real.”

Property Plight Continues

The property market will be one aspect of the economy in the minds of the leaders the G20 key economies when they meet in London at the end of this week. Dominique Strauss-Kahn of the International Monetary Fund says the world is in a ‘ Great Recession.’ He has warned that there could be civil unrest with millions of people forced into poverty.

Property in Britain is still in plight. Bank of England figures show that the gap between base rates and many home loans has widened – even though banks have slashed rates for savers and the BoE has brought in a succession of drastic rate cuts which means rates are now at their lowest ever figure of 0.5 per cent. It’s further proof of how lenders are still maintaining an iron grip – in spite of government pleas to start helping consumers.

Chase de Vere and Cobalt Capital – two leading and well-known mortgage brokers in London – have called in receivers and 100 people in the two firms have lost their jobs. It’s yet another indication of how desperate the mortgage market has become.

The Royal Institute of Chartered Surveyors has just put out figures showing that estate agents sales fell to a record low for the three months up to February. The RICS reckons each estate agent sold an average of 9.5 properties in the twelve week period. Sales by agents in London were even lower. They sold an average of six properties each.

The RICS figures confirm, though, a widely reported increase in interest among putative buyers. The limited number of mortgages on offer, the rigidity of the terms and the lenders demand for a hefty deposit are factors still discouraging sales.

Elsewhere in property, construction leader Bovis lost almost £80 million last year even though its sacked 60 per cent of its workforce. It wrote down the value of its houses and land bank by more than £93 million.

Scott Wilson the building design and engineering group has taken a battering on the stock market. It’s cutting ten per cent of its 6,600 staff and is freezing salaries. Its shares dropped 20p to 50 p yesterday. Clients in the UK and the Middle East were cancelling or postponing projects and some were abandoning projects which were in progress.

Free Rents for London Offices

London wants to tempt foreign companies by offering them rent free offices. There are too many empty offices in London chasing too few commercial tenants.

Boris Johnson the Mayor wants to lure continental businesses by offering them up to 12 months free office space and the use of a dedicated adviser to help them relocate to London.

Johnson chose Mipim, the annual European property industry bun-fight at Cannes, on the French Riviera, to launch his come to-London package.

The free rents could be worth up to £150,000 for a year. The hope is that foreign firms who shift to London will want to stay on for longer than the 12-month free trial period.

An estimated 13 per cent offices in the City are vacant which inevitably has a knock on effect on pushing down rents.

New jobs in financial services – the principal propellant of the capital’s economic growth – are down by more than 60 per cent.

New Rates & New Measures

The plight of Britain’s property, construction and adjacent industries was taken into account today when the Bank of England cut interest rates to a record half per cent and pumped £75 bn into the economy by utilising one of the most radical measures to date - QE – which stands for quantitative easing – otherwise known as printing money.

QE takes Britain into new and totally unknown waters. And reducing interest rates yet again to within a whisker of becoming zero rates is a final desperate shot at getting the economy moving again.

Of course the Band of England would have been mindful of how the Great Crash is affecting all corners of the economy. But a healthy property market is central to the well-being of the UK.

Though there has been a diversity of news lately from across the turbulent property sector most of it, sadly, continues to make worrying reading.

,Britain’s second biggest housebuilder Persimmon has ploughed into the red as the value of its land has plummeted.

It made a £780 million loss in 2008 compared to a profit of £582 million in 2007. The dive has been caused because it has had to write down £652 million from the value of its land stocks and work in progress. It also wrote down another £201 million in goodwill.

It’s been rumoured for a while that Persimmon was about to breach its banking covenants. But it’s managed to renegotiate its debts and has come up with new banking facilities. It will not – surprise, surprise - be paying a final dividend to shareholders.

Elsewhere, Smallbone – it makes £40,000 plus kitchens - is up for sale. You’d have to be a brain-dead so-called celeb ( aren’t most of them?) to install a star kitchen in the middle of the Great Crash.

A downturn in Smallbone’s business has meant that a recent refinancing package of £6million will not provide sufficient working capital to see it through the recession.

Meanwhile the vultures circle Britain’s economy. They’re picking off juicy opportunities. But hey ho! That’s the free market for you.

Luke Johnson who knows about pizzas and TV – he’s the boss of Channel 4 – has managed to raise £75 million for an investment fund.

Johnson is quoted in The Times newspaper saying he was excited by opportunities from the crunch. He was seeing “ two or three times as many opportunities as we would normally.”

Well, that should really give solace to the growing ocean of bankrupts. His fund has so far bought a posh bakery chain. Would a soup kitchen have been more appropriate?

Scouser Steve Morgan of builders Redrow is becoming known as the come-back-kid as the leader of a boardroom coup. Football fanatic Morgan – he owns Wolverhampton Wanderers and has tried to buy Liverpool FC – founded Redrow and owns 30 per cent of it. He’s now tipped as the next executive chairman. He was the chairman until 2000.

Redrow has taken a bashing. Its shares have fallen about 80 per cent in the last two years. It has said that the number of homes it sold in the last six months of 2008 had halved and its revenues had collapsed by 60 per cent. It made a loss of £46 million in the second half of 2008 compared with a £36 million profit during the same period in 2007. Redrow has halved its workforce and has taken a £24 million write down on its land values.

Time will tell whether today’s interest rate cut will help the property industry and if it will finally fire up the economy. The omens are unhelpful. There have been massive cuts in the past few weeks and they have not, as yet, hugely stimulated the economy. It is, however, still early days.

In terms of whether the lenders will pass on the half per cent cut to existing mortgagees – or whether the cut will be reflected in the range and cost of loans and mortgages available – is still unknown.

Savers will once again take another hit and meanwhile the rate at which businesses are going under is alarming. Something in the order of three people a day are losing their jobs in the UK.

Printing money is regarded by most economists as a last resort and it most definitely would not have been either Darling or Brown’s first choice. The implementation of QE is yet a further indication – if any is needed – of the depth and seriousness of the down turn.

Mortgage drought continues

Bank of England rates are likely to be cut to an all-time record low of half a per cent on Thursday. Mervyn King the governor is keeping his fingers crossed that this latest reduction will fire up the property market. With interest rates already at rock bottom levels the latest figures about the state of the mortgage market make gloomy reading.

According to BoE figures mortgage lending has contracted by 90 per cent over the past year. Estate agents are reporting an increase in interest from would-be buyers. But mortgages are still difficult to get because of the chunky deposits which lenders are demanding and because the range and scope of available mortgages has been slashed.

Those estate agents who have good contacts in the world of mortgage broking are proving themselves of immense value to putative buyers.

If the estate agents can put their buyers in touch with reliable brokers who are keeping an eagle eye on the mortgage market they are worth their weight in gold. Like everything else the mortgage market has taken a major hit. It is not as big as it was – but buyers still need mortgage brokers who can ferret out the best possible deals.

If Thursday’s expected cut fails to do the trick it’s likely that Chancellor Alistair Darling will resort to even more extreme measures. The measure that is the most hotly tipped is already being referred to by its an acronymn of QE. That means quantitative easing.

In real English QE means PMM. It stands for printing more money which can then be injected into the economy. It’s another high-risk strategy – ask any average Zimbabwean. Brown, Darling and King might have to keep their toes as well as their fingers crossed.

TV out in the Cold

There is more evidence that life is slowly coming back to the property market. Last week figures from the British Bankers’ Association – we haven’t heard much from them lately, now why should that be? – showed a second monthly increase in the number of home loan approvals.

There was a four per cent gain in January taking the total number of new mortgages being approved to more than 23,000. It’s good news but it is still more than 40 per cent down for the same period last year.

It is beginning to look as if the old adage about property still being better than most other investments remains true. The stock market has been a blood bath, sticking it in the bank now looks risky and even if the bank doesn’t go bust it pays less than peanuts on deposit accounts, and the whole range of bonds and trusts et al are all looking distinctly dodgy.

Property has taken an almighty swipe – but pity the poor devils who have seen their pensions wiped out and their stock market holdings vaporise. You can stick a pin almost anywhere in the stock market and the simple guide of highs and lows will tell a sorry tale.

Take ITV as just one example. It was launched at about £1.14 a share and Michael Grade arrived with cigar and red braces and was hailed as a Messiah. Some hope. Grade’s being paid a reported – and some would argue obscene - £2 million a year.

ITV shares are currently around 23 pence apiece. So if you’d bought £50,000 worth at its launch – your holding would be worth about a fifth or £10,000. If you’d had your money in banks or building or any other sector the damage might have been even worse.

ITV advertising is down 20 per cent for the first quarter. Most of it’s either disappeared entirely or vamooshed to the Net or one of the digital channels which relatively speaking few people watch. Like the one with the forgettable name which Richard and Judy are now on. The figures for their show slumped to 8,000. That’s less than the circulation of most weekly newspapers sell.

But back to ITV. A twenty per cent drop in advertising for the first three months? That’s just a fifth of its usual take. If it kept falling at that rate for four quarters – a year’s worth – advertising revenue would be down by 80 per cent. So ITV would have to try and get by on 20 per cent of what it’s been used to. Basically, that would be curtains.

Grade’s planning to make yet more redundancies – ITV’s now been vomiting people for months. It’s going to flog of some of its businesses such as Friends United. And it will only get a fraction of what its previous boss Charles Allen – big-time caterer turned media mogul – paid for it when he ran ITV.

And guess what? This is highly original – it’s likely to launch a rights issue to boost its finances. That will dilute still further the existing holdings. And it’s what so many other companies are planning to do now. So putative shareholders and existing ones will have quite a choice as to where they choose to invest their money. Given its appalling track record it’s unlikely most would risk their money in ITV.

There’s another stupendously original plan in mind. ITV is going to cut again its programme budget. It makes you wonder .. er, as far as the programme budget goes, isn’t that part of the reason the rot set in in the first place? It stopped making programmes anybody wanted to watch apart from downmarket gameshows and talent contests.

As anybody knows in business, or should do, it’s the easiest thing in the world to go downmarket. But it’s almost impossible to go up again.

If ITV was not wildly overpaying its bosses, if it was making proper programming such as original dramas and documentaries which would sell around the world and would give it more of an ABC1 advertising share which even in these times is better than a CDE advertising profile, and if it got rid of the massive white-elephant studios entirely which are still scattered around the country, it might fare better.

The other big problem which is like a noose around ITV’s neck is its pension fund. This is what is blighting so many different companies. In ITV’s case it’s got £800m worth of debt and in two years time it faces a red alert when a £450m bank loan has to be repaid. How’s that going to be repaid if revenue has dwindled to virtually nothing?

So bricks and mortar might have gone through a tricky time. But just think .. you could be an ITV shareholder waiting with beating heart to see what new horrors Grade is going to drop on you anytime now.

No wonder there’s a cry to see ITV merge with Channel Five ( or Five as it now ludicrously styles itself) and Channel 4. But it doesn’t sound like much of a solution to TV professionals. Three lame dogs tied together hand and foot. That would be merely tripling the problem rather than finding a solution.

And what would it lead to? More cost-cutting, redundancies, programme budgets slashed. No doubt the boss of three combined companies would earn £6 million a year, three times what Grade gets for running just one outfit. With a nice fat pension of course. But haven’t these ‘solutions’ been tried before? One could have sworn it’s what ITV’s been doing.

Why is it that all these highly paid bosses cannot come up with anything more original than endless slash and burn? Whatever happened to entrepreneurial spirit, of fighting, of growing businesses and demonstrating innovation and originality no matter how tough the climate? After all, isn’t that why they’re paid so much money? Let’s face it, you could get any old Joe off the street to come up with the blindingly obvious solutions that are being mooted at the moment. And you wouldn’t have to pay him millions of pounds either. He’d do it for a modest wage and be grateful just to have a job.

Don’t run away with the idea that ITV’s bust. It’s likely to turn in pre-tax profits of around £150 million. That would be down from £280 m in 2007. But £150m is still a lot of loot. If ITV bosses cannot get by on that they should try life in the small business sector where there is a real hardship and where thousands of thousands of people are on a knife-edge worried about a letter arriving from one of the greedy banks. Now that’s real pressure. And they’re not each on £2 million a year. You might have to sell the yacht Mr. Grade. Ah, shame.

Bouyant Renting Market

There are some curious things happening in the property market. Many youngsters until a few months ago would have secured a foothold by utilising such mechanisms as Northern Rock’s 125 per cent mortgage. That has now been stopped – as are 100 per cent mortgages. They have come to be seen as a symbol of everything which was wrong and cavalier and which have contributed to today’s financial melt down.

Though property prices have fallen they are still beyond the reach of many first-timers. Northern Rock’s recent announcement that it was re-entering the lending market was welcomed, albeit it that it was a move financed by the taxpayer to the tune of another £14bn. Its announcement that it is going to start offering 90 per cent mortgages – lately even 75 per cent mortgages have become thin on the ground – was also well received.

But even a ten per cent deposit is beyond many people. The result is a rise in the number of people choosing to rent instead of trying to buy. It could be that the UK is inching closer towards the continental model where renting rather than buying is the norm. Or it could be simply another side-effect of the volatile market. Only time will tell whether it’s a temporary blip or the start of a change in attitude in Britain towards buying.

It’s impossible to quantify how many people are holding off from buying or selling because they are nervous about prospects for property. There is increased demand – but changing that interest and demand into definite deals is still a hard slog. Auctioneers and some estate agents say they’re doing reasonably brisk business. It’s mainly from cash-rich buyers, some investors, and those who think the market is at the bottom or close to it.

Again, it’s difficult to estimate how many people who sold well in the boom are now living in rented property biding their time while looking for bargains and who out of that number will, eventually, re-enter the market and make their purchase.

More and more Mums and Dads are trying to stump up deposits to help their children. They are able to do so by utilising equity in their existing homes, although much of that has been imperilled by the drop in house values.

But 45 per cent of owner-occupiers in the UK have paid off their mortgages. That’s a sizeable figure. This group has real spending power. In the good times a proportion took out loans on their family home and bought a flat or three as buy-to-let properties.

Latest surveys suggest that a sizeable number of such investment properties are now being lived in by off-springs who are unable to find deposits to buy a property. If the off spring can be coerced into paying proper rent it’s a good wheeze. The tenant has a direct line to the landlord – it’s Mum or Dad. And Mum and Dad as the landlords are happy that their child will make a good and appreciative tenant ( they hope).

Going, going, gone

Property auctions have sprung into life in the last few weeks. A seven bed house in a near derelict state at Putney sold for £1.25 million – £400,000 more than the guide price.

The man who bought it said he had considered it last year when it was going for £2 million. But its condition had worsened since then and it was estimated that it would need another million pounds spending on it – including a new roof – to bring it up to scratch.

Another house in Fulham in London went for £702,000 - £177,000 over the guide price. Investors are buying in the hope that the market has either reached bottom or is within 10 or 15 per cent of its lowest point.

Life in the auction sector is a further indication of small shoots of recovery being spotted in the property market.

A big problem currently – as well as a continuing mortgage drought – is a shortage of house and flats to sell. A top property insider said: “ There’s a dearth of houses coming on to the market. People are hanging on in the hope that the market will improve and they’ll get a better price. But if they’re smart this is probably the time to get moving.

The recent good news that the government owned Northern Rock is again to offer 90 per cent mortgages was marred by a follow up announcement that it still intends to pay big bonuses to its bosses.

The latest news has caused more widespread dismay. The stricken bank was saved from collapse by a massive bail out with taxpayers money.

Without the money the bank would have collapsed. Its staff – and the bosses who are now getting fat bonuses – would have been out on the cobbles with the other 3,000 people who are losing their jobs each day in Britain.

Northern Rock lost £1.4 bn in 2008 and it’s been estimated that the cost of saving it with taxpayers money is working out at £3.8 million a day.

It can only start lending again- including offering 90 per cent mortgages - because the government has just pumped another £14bn of taxpayers money into it.

Meanwhile, elsewhere on the bank gravy train, former Grand Prix ace Sir Jackie Stewart says he will not give up his £4million a year contract as a so-called global ambassador for one of Britain’s biggest white-elephant banks, the Royal Bank of Scotland. RBS is about to axe 30,000 jobs and announce £28bn losses – the biggest in UK corporate history. An RBS insider said: “ God knows what global ambassadors are supposed to do. Presumably it’s important in some way. At that price one certainly hopes so.”

Stewart is among a clutch of sports stars signed up by former RBS supremo, the shamed Sir Fred Goodwin. It’s reckoned Goodwin – named Fred the Shred for the number of staff he culled – went on what newspapers have called a ‘£200 million sponsorship binge.’ Other RBS sports beneficiaries include Zara Phillips the royal horsewoman.

The former director of Public Prosecutions Sir Ken Macdonald says bankers ‘ have done their best to steal our economy’ and must be properly punished for their crimes. He says the regulatory bodies vested with checking reckless behaviour are ‘completely broken.’

Northern Rock offers 90 per cent mortgages.

Northern Rock, the first of the stricken lenders to be bailed out by the taxpayer, is going back into the lending market with a vengeance – on the instructions of its new boss, the government. It’s been given £14 bn to get lending again.

It’s a total turn round from the position a few weeks ago. Northern Rock – which at the height of the boom was one of the most aggressive lenders offering big mortgages with minimum deposits – began turning away their existing mortgagees who were searching for better deals. It told them to take their business to some other company.

The new move is designed to help provide a touch more confidence to the lending market. But it is still a drop in the ocean. The range and rates of mortgages on offer has dwindled massively from that which was offered in the past.

The most striking aspect of Northern Rock’s move is that it will be offering loans of up to 90 per cent. Lately it’s become almost impossible to borrow more than 75 per cent.

With the emphasis on lending rather than trying to pay back the government in double-quick time and taking money out of the market Northern Rock is also expected to slow down its repossession rate which had become an embarrassment for the government.

It is hoped that other lenders will follow Northern Rock’s lead and will start offering 90 per cent mortgages. There is a belief in Whitehall that Northern Rock’s move will trigger competition in the lending market which until recently was gripped by torpor.

Finding a 10 per cent deposit – rather than twenty five percent – should make acquiring a property easier for many homeseekers.

But property has gone through a price boom – and even though prices have begun to fall – ten per cent of a big asking price is still beyond the means of many home finders.

Prime Minister Brown has implored lenders to be responsible about whom they lend to. He has said that 100 per cent mortgages should no longer be offered. At the height of the boom mortgages of 125 per cent had become common place.

French Property Hit

Anybody thinking of getting away from it all in France might find it prudent to think again given falling French property prices. British buyers are as rare as truffles. Many of those already living there wish to sell up. If they are older people their pensions which are paid in sterling have fallen in value. Sterling and the Euro are virtually at parity.

There have been a number of seriously hyped articles recently about people who bought cheaply in France years ago who had renovated properties and are now selling at a vast profit with the intention of returning to England to bag themselves a bargain.

But there are plenty of statistics which suggest such scenarios are the exception rather than the rule. The truth is that few people today are interested in a tarted up chateau with acres of bedrooms, a tumble-down pigeonnier and a collapsed north wing, stuck out in the middle of nowhere with impossible heating bills and a serious damp problem.

The Great Crash has spelled the kiss of death for such adventures. Many such properties were run as hotels or B&Bs. Or they offered vacations in gites converted from barns. Other owners set up internet based businesses. Some sourced wine. Others taught English. More earned a few Francs as handy-men and houses-sitters, gardeners or maintaining absentee owners’ pools. Some tried to sell property to visiting Brits. Such enterprise has taken a hammering. Recessionary winds are blowing hard through France.

The French economy is inefficient. It has never gone through the pain of a Thatcher-style revolution. Sarkozy is doing his best but is meeting powerful resistance. He is trying to curb them but old evils still exist: over-manning, trade unions which are still too powerful, a lack of flexibility in the labour force, provincial rather than global economic thinking, a quickness to subsidise failing or uncompetitive industries and a tendency towards protectionism when trading circumstances become too aggressive.

It all seemed to be going so well in France. Property prices were holding up nicely when judged against falling prices in Britain and those in other favourite Brit countries such as Spain and Portugal. But France has now well and truly caught the price drop contagion.

There are numerous reports of property prices falling in areas that are traditional British favourites – Britanny to Bordeaux, the Languedoc to the Dordogne. Five or six years ago there were still bargains to be found. But then France had a price hike. Six years ago prices went up by almost thirty per cent in some areas.

In the face of all this government figures show that average house prices in France rose last year by more than 1.6 per cent. But statistics can be misleading. They include robust areas such as the French Riviera and major cities with established economies, including Paris. Legendary tourist and fashionable destinations such as those on the monied Cote d’Azur generally hold up better than many other places in the bad times.
When the statistics are studied more carefully major drops in different locations are revealed. Languedoc had a ten per cent price drop. Some of the lesser known and more remote regions are recording even steeper drops than that.

Trouble down on the farm

In the good old days – not last century but about a year ago – it was the done thing when you had bought your property portfolio in London and lorry loads of bubbly, a Ferrari and a ski chalet, to go Green in the country with your latest toy: a farm or three.

The fact that you didn’t know anything about matters-rural hardly mattered. There would be the Squire’s manor house where you could show off to your high-rolling chums, and that was the really important thing. Hedgies had become obsessed by the country. But what would they do with the real hedges?

Well, looking after their hedgerows and all the rest of their rolling acres didn’t really pose a problem. You didn’t have to worry about tilling or tending your land or having to cope with anything as boring as that. All you had to do was let out your land to a professional farming conglomerate who would pay you rent and look after it for you. If the conglomerate was generous it would sometimes cut you in on the profits too.

Naturally enough, as City boys became farmers’ boys, residential farm land prices started to rise. In fact, they rocketed. As the good times kicked off land soared from an average of £3000 an acre in the year 2000 to about £6500 an acre early in 2008 before most people had realised that the storm clouds were gathering.

But like everything else residential farm land has fallen back in value. The average price of an acre started to slip last year as the Great Crash began to kick in. It fell to about £5246 an acre and has dipped to around £4992 an acre. Will it keep falling? Yes, perhaps.

Professional farmers never had much time for the amateurs who had put prices up so much that the genuine Men of the Soil could never get a look in. There was always an underlying resentment by real farmers that so many of the City boys knew all about having their nose in the trough, but that was about as near as they got to farming habits.

But the real farmers’ time is coming. For all the moaning and groaning from traditional farmers about how they are poverty stricken (think about that; when did you last see a poor bookie or farmer?) many of them have got a lot of loot stashed away. Money and estates are usually passed down to farmers from previous generations. Most aren’t born with a silver tea spoon in their mouths. It’s more like an entire silver tea-service.

Real farmers are worried that they can’t get proper interest on their money. So, naturally enough, they are beginning to look at expanding their estates by buying more land. It’s estimated that the present yield on land is about 2.5 per cent. That’s not super-generous. But it’s more than they’d get if their money was rotting away in a deposit account.

And in fairness to some farmers, especially small hill farmers, they have had – and continue to have – an extremely difficult time for myriad reasons which range from European subsidised farming to the growth of continental imports and hard-eyed supermarket chains who continually tighten the screw on producers and suppliers.

Proper farmers – as opposed to make believe Sons of the Soil using their bonuses – are now giving the amateurs a run for their money. They are hoping for an increase in demand for food as population around the world continues to grow. Some of them, perhaps the more optimistic, also believe that food prices will have to rise. It must be said, though, that with revolutionary and controversial developments such as genetic modification over the horizon, higher food price arguments are not entirely convincing.

As bonuses disappear – and top City salaries are curbed – it will be interesting to see how many Johnny Come Lately farmers bought their rural spreads with borrowed money.
The highly geared – or those without jobs – might be forced into flogging off their farms.

After all, if it’s a choice between having to sell your main home (ask the Home Secretary, she’s an expert) or your toy in the country, or pulling your children out of school because of the cost of the fees, most would plump for chopping-in the rural pad. When that happens real farmers, those with soil under their nails, will snap up the bargains.

And there’s another incentive for buying farms and land. The pressure to develop on Green Belt land, and agricultural land, is now greater than at any time since the War (perhaps even the Boer War). Land which has been sacrosanct is being looked at covetously by planning departments and Central government.

It hasn’t happened yet. And the Great Crash has slowed down any such possibility. But farmers can be shrewd birds. In the future who can say what might happen?

If you could buy agricultural land cheaply – from a hard-pressed Bonus Boy who had over-stretched himself – you could be sitting on a fortune in the future if you managed to get planning permission to build on it.

There is, of course, a counter argument. Though there is huge pressure to step-up Britain’s house building programme, which lags way behind targets, some of Britain’s biggest developers ( and supermarkets) are being forced into selling their land banks. It is likely that that would be utilised ahead of any development of ordinary agricultural land.

In conclusion, farming land still looks a good buy. It could turn, one day, into a pot of gold, though nobody can say when. And even if it doesn’t, you can still bury your head down on the farm if the Great Crash makes everything else just too awful to bear.

Property Investors on the Prowl

New figures from the Royal Institution of Chartered Surveyors confirm recent reports which could indicate that buy to let landlords and other people who want investment property are coming back into the market with a vengeance.

Thirty eight per cent of inquiries lately have come from people who are seeking an investment property. Seventy four per cent of inquiries came from people who already owned a home. The problems of finding a mortgage – and the necessary high deposit – continue to hit first time buyers. Less than 25 per cent of inquiries came from first timers.

One of the big drivers is that many people feel the property market is close to bottoming out and there are bargains – especially if the buyer has cash – waiting to be snapped up. The reports suggest that putative buyers wanted to view existing properties rather than new builds. There was also more interest in buying houses than flats.

On the mortgage front a range of new offers are beginning to filter through – in part due to the Bank of England’s continual slashing of the Bank rate. It’s now at a record low of one per cent and could well be cut again to half a per cent or even to zero.

The much battered Northern Rock – nationalised a year ago and whose parlous financial position provided a clue to the scale of the Great Crash to come – is reported to be getting back into the mortgage business.

Such a move would follow exhortations by the Chancellor Alistair Darling that the Newcastle based company should begin to emphasise its lending role. It was told that it could afford to slow down on the rate of its repayment of the government bail out which saved it from collapse. It was also told to slow down on its rate of repossessions.

When Northern Rock was engulfed by the crisis it virtually withdrew from the lending market and told its existing mortgagees who wanted improved deals to shop around with other lenders. It was also one of the lenders which was heavily criticised for not passing on in full the Bank of England rate cuts to its mortgagees.

One of its new competitive mortgages is being offered for a five year fixed rate term of 4.69 per cent. It is unclear what stipulations are being laid down about the size of the necessary deposit.

Property: New Dawn or a Ray of Sunshine

A property web site reckons estate agents are desperately trying to cope with a 108 per cent increase in inquiries from putative buyers.

If it’s true it paints a picture of the few estate agents who are left – droves having been laid off as casualties of the Crash – being rudely awoken from their torpor and now in a state of frenzy, like the handful of brave survivors who fought off the Zulu hordes at the battle of Rorke’s Drift in 1879 when eleven Victoria Cross medals were awarded.

One hundred and eight per cent? It’s one of those truly bizarre figures. Like saying the Empire State building is as tall as five hundred double-decker buses piled one on top of the other ( I’ve no idea how many it would take). It’s an old journalistic technique which is supposed to bring arid statistics to life. But more importantly is a 108% increase true?

Well, there’s no doubt that reports of an increase in interest have been coming in from across the UK for a few weeks. Look back on some of the recent property articles here on TheLettingsite and you’ll see numerous such references.

You will also see – and this is the bit that really counts – that though there is more interest there is also a painful lack of lending which is acting as a brake on the property market. The situation has become both curious and painful.

There are some cheap mortgage deals around. But you’ll need to be credit worthy and to satisfy the lenders that you are in secure employment ( and who on earth is in this climate? ) and you must be able to stump up a hefty deposit.

After the Bank of England has consistently taken an axe to rates one would expect the mortgage offers to start flowing again. Interest rates for mortgages have fallen – though many insist that they would have fallen much further still if only the Scrooge banks and lenders had passed on the cuts in full. The freeing up of mortgages and cheaper interest rates is, after all, central to the government’s hugely ambitious recovery programme.

There are reports some sellers are actually increasing the asking price of their properties. They know that cash-rich bargain-hunters are gathering in force and that there has been a big cut back in the number of new properties being built and older ones being offered for sale. Is is smart thinking or false optimism? Are they are living in la la land?

Fewer properties are being built because developers have run out of cash. Banks won’t lend to them. So they have cancelled, postponed, or moth-balled projects. The reason there are so few properties for sale is because people who would like to sell are hanging on as long as possible hoping the market will improve and that prices will start to rise.

A rise in people wanting to get back into property is good news and should be applauded as a tiny signal that the property sector might, just might, be starting to stabilise a touch.

But without wishing to put a damper on the merriment, recessions are notorious for producing false dawns. People become so desperate to find any good news that there is a tendency to see the odd ray of sunshine as the beginning of a new dawn. In recessions, new dawns have a nasty habit of disappearing as quickly as they reveal themselves.

Forget property. Join the State Circus

Forget becoming a property mogul. Or building a buy to let business. Or working your tail off and worrying yourself sick seven days a week as an estate agent, surveyor or architect. Who wants to run risks and create businesses and employ people? It’s old hat.

The way to get rich now is to be a non-producer. Rollup! Rollup ! The State Circus is back in town. In fact, come to think of it, it never actually left.

Banks and crises may come and go. Unemployment might grow from two million and be heading for three million. Pensions have collapsed and savings accounts are a joke and the stock market’s a blood bath.

But hey! It’s your own fault. You were all Silly Billies and you should have chosen to work in local or central government .While all around is chaos and mayhem the state sector forges ahead through stormy waters like the Titanic amid a sea of ice floes.

The salaries in the State sector are still nice and juicy. Here are a just a few jobs on offer which the tax payer will be paying for ( as well banks and bankers and bonuses).

You could be on £70,000 a year as the Vice Principal Finance at Milton Keynes College. But that’s at the modest end of the market.

Become Service Delivery Director (don’t ask) of something called the Security Industry Authority and you’d be on £85k a year. As chief executive you’d be on £120,000 pa.

The SIA comes under the Home Office. They’re probably tough jobs because civil unrest is just around the corner. It will be triggered by bankers, bonuses, Peers on the make, Whitehall Mandarins and their perks, whistle-blowers being sacked for telling the truth and yes, you’ve guessed it, big wages for jobs in the public sector and regulatory bodies.

So what else is on offer? How about being Assistant Director Tenant Services in Manchester. It comes under the Tenant Services Authority, whatever that might be. You’re only the assistant but you should be able to scrape by on £95k pa.

In fact, you could be any of the following in Manchester or London with each job paying £95k a year: Assistant Director Tenant Services; Assistant Director Supply; Assistant Director Choice; Assistant Director Market Intelligence (you could do that in Cambridge too) Assistant Director Planning, Policy & QA (again, don’t ask; I don’t know either).

Why not jump on the Green gravy train? It’s an express. Get aboard in Newham, east London, as Executive Director Environment Olympic Games and you’ll be on £135k a year. You’ll need an ‘athletic mind .. a social entrepreneur who can catalyse change .. the strategic capacity to realise the ambitions of a broad place shaping agenda.’

One wonders how much Newham would pay somebody to write their advertisements in the Queen’s English?

Amid Scandal and Mayhem Property Clings on

Reports are coming in from across the UK that property bargain hunters are out in force. There are a number of reasons for this.

Spring is just around the corner. It’s been coy – burying itself beneath snow drifts. But as the weather improves this is the time of the year when Brits usually become property-minded. Today, however, unusual conditions prevail and the property sector has been tossed by storms that were unimagined a year ago.

There is now a sense that the fall in property prices is beginning to bottom out. Anybody with cash will be horrified by the blood-bath in stocks and shares. Nobody trusts the banks. Bankers have become pariahs. There’s no point in sticking your loot in a bank account because it will just wilt away earning little or nothing in interest.

So if you are King Cash what do you do with your lolly? You can play safe and stick it in a hole in your garden. But it won’t grow.

There’s a saying which emanates from porters at Billingsgate. Cod goes off – property doesn’t. Though there has been plenty of stinking fish. Ask hard-pressed developers in places like Birmingham or Manchester. Or householders trapped by negative equity.

If you have the money property is still the best bet in a lousy range of choices. Latest reports from letting and renting agents suggest that contrary to much doom and gloom which is being bandied about rents are still robust to high – especially in London.

It’s true that some people cannot sell and are choosing to rent out their properties instead. So you could argue that with more properties available rents would fall. But the counter argument – just as credible - is that more people are choosing to rent rather than to buy. They are biding their time until the turbulence in the market subsides.

So who are these new renters? Some of those who are keeping rents robust are first time buyers. They are trying to save the hefty deposits which lenders now demand. Others are waiting to see if the market will fall further. Others who were shrewd sold their properties at the top of the boom. They then ran off with their winnings and are now sitting in rented accommodation on a mountain of cash while they try to call the bottom of the market.

The last group – the cash-squatters who are renting – have a problem on their hands. Calling the bottom of any market is always difficult. It requires strong nerves, a reserve of money, and a proper appreciation of the myriad factors which can spell volatility.

The professionals among them are taking the plunge or are about to. It is sufficient for them to think the sector is ten to twelve per cent off the absolute bottom of the market. They will have calculated that if they can snap up a bargain – a property in a reasonable area perhaps in need of refurbishment – even if its value slips by another12 per cent they will still be sitting pretty if they have done their sums properly and bought shrewdly.

They also know that if they dither and wait until what they think is the absolute bottom of the market they will almost certainly miss some of the cracking bargains on offer today.

This adds to the frustration of first time buyers. Professionals and cash buyers will pip first-timers in snaffling up the real bargains. Buy-to-let landlords encouraged by the way rents are holding up in London are coming back with a vengeance.

While the first-timers are busy saving up their chunky deposits the professionals are in and out like jack-rabbits and moving on to their next bargain.

It is high-time that the government forced – persuasion clearly has no effect – lenders into freeing up the mortgage market. The resuscitation of the property sector is vital if any sense of confidence is to come back into the economy.

But there are many other Feel-Bad-Reasons for instability in the property sector. People are terrified of losing their jobs. They are angered by the brazen bankers whose bacon has been saved by the tax payer. They are sickened by Peers who have their snouts in the trough. The perks scandal involving financial corporations and Whitehall mandarins has added to a sense that Britain has become diseased and vulgar at the highest level.

Revelations about politicians – even Cabinet Ministers – playing the expenses game for every brass farthing have sent out an extraordinarily depressing message to the UK.

One gives thanks for the Fourth Estate. At least the world’s oldest democracy still has nosy, inquiring, trouble-making, vigorous journalism. Without it none of the deeply unpleasant revelations would have come to light. Certain newspapers are taking the role of the Opposition. The real Opposition looks pale and neutered in comparison.

The numerous disclosures – which can give the distinct impression that Britain has become rotten with corruption from top to toe – do not, in fact, claim illegality. What they raise are questions about ethics, morality, the observance of ordinary decency and propriety. There is a brazenness about those who sit on the levers of power in the UK.

In politics and every aspect of public life perception is everything. And the perception has become one of rottenness, of leaders on the make, of people who bend the rules to their own advantage, people who are greedy and grasping and who will never, ever, resign, no matter how much they are shamed in the newspapers or on television.

It is only when such matters are properly addressed – and it’s no use the government saying that yet another committee is being set up to look into them – that sectors such as property which are vital to Britain’s economy will begin to come back into their own.