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.

Job Worries Affect Property Recovery

As well as the mortgage drought it is the fear that people have about losing their jobs which is badly affecting the property market in the UK.

With two million people unemployed –official figures always drag behind the reality – and three million certain by the end of the year – such concerns are understandable.

Home buying is at its lowest figure since 1975. Almost 50 per cent fewer mortgages were taken out in 2008 compared with 2007. Figures from the Council of Mortgage Lenders show that net lending plummeted from £108bn in 2007 to £39bn in 2008.

Other surveys show a lack of mortgages deterred 56 per cent of would be property buyers. There are now fewer lenders in the market and there are fewer mortgages. The diversity and range of mortgages available has also narrowed. Lenders who still remain generally demand that the applicant is a safe bet and able to put down a big deposit.

Another 40 per cent of putative property buyers are frightened that property prices will still continue to drop. But 58 per cent of people say job security is the major factor which stops them taking a mortgage. They are worried about being made redundant.

Estate agents report that demand for property has grown considerably since December but the above factors have acted as a serious brake on the market.

Interest rates have dropped severely – although a lot of the cuts have not been passed on by the lenders. Surveys indicate that peoples’ worries about paying off a mortgage are now less than before the Bank of England introduced its programme of swingeing cuts.

There is a body of opinion which says lowering interest rates anymore – many predict that they could go to zero – might further delay the resuscitation of the property market.

The arguments for this view are intriguing. Each time there is a cut in interest rates savers take a hit. Most savers are getting little or nothing in interest on their accounts. In simple terms this means lenders have less money coming in and thus they have less to lend out.

In truth this is far from a simple premise and is something of a technical perception which tends to excite City types and economists. For millions of people who are trying to get a mortgage and are already angered by bankers and bonuses and fat profits which are still being made by some lenders it is an argument more likely to enrage than assuage.

Posh Property Plummets

The property slide is touching everybody. There won’t be much sympathy for them but even the very rich are feeling a nip, if not quite the pinch, of the Great Crash. Top end blight has begun to grip monied enclaves which were once thought to be insulated from the buffeting from which millions of people lower down the property chain have suffered.

Toff estate agents Knight Frank (KF) said house sellers in some of Britain’s most rarefied corners are withdrawing their properties from the market because of the downturn. It is thought that many would-be sellers have decided to hang on for as long as they can in the hope that the uber-rich end of the market will eventually begin to pick up.

KF reckons the number of £10 million plus houses for sale has fallen by 34 per cent in the past year. Savills, another agent generally regarded as being at the grander end of the market, were reported as saying sales of properties in the upper echelons had dived.

It was once thought seriously expensive houses might have been immune to the blight that has contaminated the rest of the market. But it has not been so. Even a great influx of super-rich foreigners into the UK – especially the Russians – has failed to stop the rot.

The tsunami which has swept through property has begun to affect the type of residential housing which has traditionally been the preserve of buyers who are global billionaires.

A reason for the fall in the price of top end properties – and the hasty retrieval of their ‘For Sale’ notices – is that there has been far less City and Canary Wharf bonus money sloshing around in London’s smartest corners: Mayfair, Belgravia and Knightsbridge.

An estimated £600 million from bonuses went into ‘prime’ London properties in 2008.
It equated to seventeen per cent of a total bonus pot worth about £3.5 million. That was a massive drop from 2007. According to the Centre for Economics and Business Research high-rollers in the City ploughed £3.19 billion in bonuses into top property in 2007. It equated to 40 per cent of the £8.5 billion paid out in bonuses in 2007.

Prices for prime properties were at their highest in March 2008. KF says since then top London prices have fallen more than 21 per cent and are expected to drop by 30 per cent.

At the top end it is cash – as it is lower down the property pecking order – which remains king. The mortgage drought, fewer lenders and the demand for big deposits which are hampering sales, generally pose no problems for the super wealthy. They can afford to sit out the bad times. Their properties might tumble in value but they don’t have to worry about repossessions or Northern Rock or a squadron of bailiffs hammering on their door.

Property Demand Hampered by Mortgage Drought

The latest property market survey from the Royal Institute of Chartered Surveyors confirms other recent reports that there is a big interest from putative buyers but that a shortage of mortgages is still acting as a serious brake on sales.

The RICS said interest from potential buyers increased in January for the third consecutive month. But sales of residential properties fell to 9.9 per cent per agent in the three months to the end of January. In real terms it works out at a sales figure of around three properties per estate agent – which represents a record low for sales.

The blame for the poor sales is because of the continuing mortgage drought. There are property bargains in the market but the difficulties of acquiring a mortgage, with lenders demanding that a range of stringent conditions be met, has put a damper on proceedings.

Many mortgage offers have been withdrawn from the market and lenders who are still active are generally demanding hefty deposits.. The survey indicates that the number of unsold properties for each agent fell from 77.9 to 75.4 in January.

This is thought to be because would-be property sellers are putting off selling as a long as possible – in the hope that the property the market might improve – or because they are withdrawing properties for sale and trying to let them.

Resuscitating the property lending market has become an urgent priority for the government. But so far its endeavours appear to have had insufficient positive effect. The government has been damnatory about failed banks paying massive bonuses out of taxpayers money and it has urged institutions such as the nationalised Northern Rock to give priority to lending rather than extracting money from the market. But across the lending sector its exhortations appear in general to have fallen on deaf ears.

At Home with the Smiths

Hard pressed mortgagees and property owners in the west Midlands who with the rest of the country have seen the value of their homes dive – and trying to let or rent them out to tenants is far from easy - must look with envious eyes at the Home Secretary Jacqui Smith and think that she’s got it made.

The row over Smith’s expenses claims rumbles on with allegations that she has pocketed £116,000 of taxpayers money for a second home while she actually lodges with her sister.

The Daily Mail cracked the story. It has lambasted her as ‘ the Minister for Dodgy Expenses.’ Smith’s constituency is in Redditch as is her £300,000 family home where her husband lives and where her children go to school. But she has nominated her sister’s house in south London as her main residence. She says she pays her sister rent.

What she’s done is legal and within the rules. She’s taking full advantage of the ‘ second homes allowance.’ But in politics perception is everything and the whole unedifying business leaves a nasty taste. And there is now growing support for a radical shake-up and total transparency about such matters.

Several commentators and MPs have talked about the ethics of such behaviour – especially when the person at the centre of the row is the Home Secretary. Smith also pays her husband £40,000 a year as her parliamentary adviser.

There is a widespread view that people in high office should set a moral example. The Smith scandal follows revelations about Peers being paid by lobbyists and failed bankers in bailed out banks who are using taxpayers money to pay themselves big bonuses.

For Sale: One Dome

Residential and commercial property operators and estate agents have long looked covetously or in dismay at the vast peninsula site on which sits the once infamous Dome on the Thames in London’s north Greenwich.

In the past every type of development plan was put forward by property companies and estate agents. The Dome was such a disaster that the Blair government which had backed it became desperate to get shot of it. It was called everything from Mandelson’s madhouse to Blair’s Big Top. It was also called many other things which are unprintable.

Even the government’s Millenium night party at the new Dome turned into a laughing stock. Dignitaries done up in their finery were kept waiting for hours. Some failed to get boats to ferry them across the river. Others endured long queues. Those who finally navigated the obstacles said it was the most chaotic and cheesy junket held in Europe.

All ideas for putting the white elephant out of its misery were welcome. They ranged from a casino to a funfair, from a hotel to a holiday camp and a go-kart track.

Some said it should be a prison or a holding centre for illegal immigrants – which went down well with locals. Others said it was only fit for wild animals and should be a zoo until it was pointed out that it would not take a lion long to chew through a tent. Others wanted to turn it into a terminal for liners when it was still fashionable to go cruising.

Things have changed. Liner operators are almost giving cruises away. Cruising has become a metaphor for downmarket excursions. Reports of ‘chavs’ running riot and being given cheap tickets to fill the ships have wrecked any notions about exclusivity.

But the once forlorn Dome is now called the 02 arena. Against all the odds the world’s ugliest duckling has transformed itself into a lustrous swan. It has become one of the most successful concert and exhibition venues on the globe. And it is now up for sale.

Leonard Cohen and Barbra Streisand have played there – as well as rock gods Led Zeppelin. The Tutankhamun exhibition was another success. O2 sold nearly two million tickets for shows in 2008 putting it well ahead of New York’s Madison Square Garden.

The 02 arena is owned by property groups Quintain Estates and Lend Lease. They have instructed Michael Elliott and Savills as advisers. The asking price is believed to be about £35 million. The 02 complex is operated by US entertainment group Anschutz.

Quintain and Lend Lease operate O2 through a company called Meridian Delta Dome. MDD has a 999 year lease. The government still owns the freehold of the property. If the site were redeveloped taxpayers would be entitled to a cut of profits.

Property Professionals Feel the Pinch

Difficulties in the property market are mirrored in figures from the National Statistics Office. They show that professional people who are connected with the property industry are joining the ranks of the unemployed at a faster rate proportionally than other workers.

The list is headed by quantity surveyors where there has been a 490 per cent rise in unemployment benefits. The number of quantity surveyors drawing benefits increased from 100 to 590 in 2008.

Architects are the second worst hit. There are now 1,490 architects claiming job-seekers’ allowance. It represents a rise of 432 per cent.

Construction managers are in third place with a 410 per cent rise. Chartered surveyors are fourth: a 270 per cent rise. Solicitors and lawyers are fifth worst hit: a 238 per cent rise. Many would have been involved with property in such areas as conveyancing.

But the cessation of so many mergers and acquisitions have hit senior people. Leading firms of solicitors and lawyers have been laying off largeumbers of people from juniors who were starting out on legal careers to partners in international companies.

Civil engineers and town planners have been hit. Estate agents have been badly affected with sizeable numbers being made redundant and firms closing down across the UK.

The smallest increase is registered by Personnel officers – often called Human Resources people. They had a rise in the number seeking benefits of 143 per cent. Personnel and HR workers are expert at finding their way around the back doubles of employment law. Consequently they are often the last to go, the ones who have to turn out the light.

Economists have predicted that the current recession will hit white collar professionals and middle-class jobs as well as blue collar occupations.

Previous downturns have been generally associated with affecting most severely blue-collar workers. This time round both groups are being decimated.

People who are vulnerable often have a hefty mortgage and an abundance of credit cards. They sometimes have second homes in the UK or overseas. They pay out of income for middle-class outgoings such as foreign holidays, gym or golf club membership.

They often have two children who are being privately educated. They favour private medicine and sometimes have two cars on hire purchase. Some are perks of the job – paid by their companies in full or at a reduced rate. Companies are now slicing back on perks.

Middle aged workers are badly affected. There was a jump of 30 per cent in those aged 50 in the last three months of 2008. Unemployment among those aged 25-49 rose by only five per cent. One in ten workers aged 50 say they have been subject to discrimination.

There are two million people unemployed in the UK. The figure will be three million by the end of 2009.

Property Price Rise

At last! Some heartening news for property owners. The Halifax reports that house prices rose at the rate of £100 a day last month. It is the biggest increase for two years and represents a 1.9% jump in house prices. Estate agents report a big leap in the number of people looking to buy a house. Many of them are first time buyers.

But most lenders are still demanding hefty deposits. Others are refusing to pass on Bank of England rate cuts to customers. Such factors are still acting as major brake on sales.

Nevertheless, with interest rates low and sellers chopping asking prices it is hoped that the first signs of recovery in the property market are beginning to reveal themselves.

Before Christmas estate agents were lucky if they sold one house a week. Now they sell two a week on average. Cash remains king. Cash buyers can strike hard bargains. And bargain hunters are out in force. Many estate agents report that buy-to-let landlords are back in the market with a vengeance. They are snapping up cheap properties and are welcomed with open arms by development companies hard hit by the credit squeeze.

Britain’s development companies and builders have seen their share prices plummet. Building sites across the UK have been put into wraps. Companies have been desperately trying to sell off their land banks at prices vastly less than their original book values.

The process of buying is changing. More and more house hunters want to view properties at weekends and in the evenings.

It could be because people are frightened of leaving their desks while giving employers flimsy excuses for their absence. This would be a sign of how unemployment haunts the work place. Unemployment is running at two million and will be three million by 2010.

Estate agents themselves have taken a huge hit. Swathes of agents have been laid off. Small operators who cashed in at the height of the boom have been swept away. Highly geared business – owing money and built on debt – have also disappeared. Blue-chip names have retrenched and taken a cleaver to the number of employees on their books.

With a lot of estate agency competition cleared out of the market the fittest and most able of agents are tipped to have a strong future when the market properly recovers.

Sadly, the first signs of an upturn should not be seen as news that the market has returned to health. A 1.9 per cent jump has to be seen against a backdrop in which there have been ten consecutive monthly falls which have wiped £33,000 off the average house price.

Banks Rush Through Bonuses

Following its scoop yesterday about bankers still being paid bonuses The Times newspaper followed it up today with a story claiming that there was going to be a ‘stampede’ by banks to beat the government’s plan to tighten up the rules.

Yesterday it emerged that the Royal Bank of Scotland which has the dubious honour of recording Britain’s biggest corporate loss and whose bosses had to quit in disgrace still intended to pay out huge amounts of money in bonuses. RBS was only saved by a vast bail out by the taxpayer and consequently is 70 per cent owned by the government.

Now it is reported that Barclays and Lloyds are going to give hundreds of millions of pounds away in bonuses. Lloyds was bailed out for £17bn by the taxpayer. Barclays, another recipient of government support in the form of hefty loans and guarantees, is said to be planning to give even bigger bonuses than Lloyds.

The banks intend to ‘get under the wire’ with their plans before the April budget when a White Paper is to be published which will strengthen supervision of the banks. The intended legislation will give the non-executive directors more powers over bank bosses.

Business secretary Peter Mandelson has said the behaviour of RBS could alienate ordinary people. Tory Shadow Chancellor George Osborne said it would insult taxpayers if banks owned totally or in part by the government paid out big bonuses.

“ To increase taxes on people earning £20,000 to pay the bonuses of someone earning £2million is totally unacceptable,” Osborne said.

More Banking Bonuses

Another cut in interest rates to just one per cent has been applauded by hard pressed mortgagees – though lenders have not said how much will be passed on to householders.

It seems astonishing that outfits such as Northern Rock – owned by the government and saved from by collapse by a massive injection of taxpayers money – can still be obdurate in passing on cuts in full.

This, then, in the face of government exhortations and finger-wagging at the banks. Northern Rock has been told bluntly by the Prime Minister to stop taking money out of the markets and to start lending again.

The brazeness of the banks is leaving people incredulous at their continued arrogance. The Times has a front page lead today in which its distinguished banking editor Patrick Hosking and Philip Webster its political editor say that the Royal Bank of Scotland is still going to persist in paying thousands of its traders and senior players big bonuses.

RBS – which is now nearly 70 per cent government owned - has been bailed out with more than £20 billion of public money. The Times suggests that the bonus payments are likely to reach tens of millions of pounds – and could even be hundreds of millions.

Yesterday President Obama spoke out against a culture which rewards US bankers for failure and which pays bonuses out of tax payers money. He has capped salaries and bonuses.

The pressure is on Gordon Brown to follow Obama’s lead. So far Brown has implored UK banks to act responsibly and to demonstrate sensitivity at a time when unemployment is rocketing.

The banks in the UK have been given everything by the government which they asked for. They have been quick to pocket taxpayers money but are still behaving in a way which puts shareholders and executives’interests above the national interest.

The cry for more punitive action against recalcitrant UK bankers is growing. As are the demands that executives and directors of failed banks who are leaving with bonuses and pensions should be tried as criminals and be stripped of their monies and pension pots.

A well-placed City source said: “ The bankers are behaving in a disreputable manner. They look as sleazy as spivs and they will never be forgiven by the public for putting their own interests above those of the nation. The British have long memories.”

For Sale

Two interesting residential properties have come on to the market. And they could not be more different. In Esher, Surrey, well-known City veteran Stephen Raven – who ran Bernie Madoff’s London trading operation – has put his five-bed home on the market.

In Scotland Eric Liddell’s former home is up for sale. Liddell was one of Britain’s legendary sporting heroes.

Madoff is alleged to have masterminded a £34 billion fraud. Raven lost his post as chief executive of Madoff Securities International when the business went into provisional liquidation.

Raven, 70, has lived at his Esher home for over 20 years. He has said he had no knowledge of Madoff’s alleged international scam in which celebrities, banks and corporations are said to have lost millions. Raven’s house is being sold for £1.75 million.

The Serious Fraud Office are looking into Madoff’s London business. People claiming they have been victims of Madoff’s operation are still turning up. The latest alleged victims include an Austrian bank and the actress Zsa Zsa Gabor, 91.

Liddell was a brilliant runner whose life was chronicled in the 80’s movie Chariots of Fire. He was known as the Flying Scot and spent some of his childhood at Ashbank, in Drymen, near Loch Lomond. The four bed house is for sale at £450,000.

Liddell was devoutly religious and refused to run on a Sunday in the 100 yards race in the Paris Olympics in 1924. Later he won a gold and a bronze in other events.

Eight Pence Mortgage by Thursday

Some property buyers are waiting with baited for Thursday to see if their mortgages fall to 8 pence a week. They will do so if the Bank of England cuts interest rates to 1 per cent. The mortgagees are those Cheltenham&Gloucester customers who took out a deal at 1.01 percentage points below the Bank’s base rate.

They will actually be paying no interest whatsoever – but for reasons of bureaucracy they will still have to make token payments of 8p on a £100,000 mortgage. The money will be subsequently refunded.

The freebie mortgages will apply only to those who took out interest-only tracker loans. People with repayment mortgages will pay about £333 a month on a £100,000 loan.

The majority of other tracker mortgages will fall but interest rates on new products which are on offer are, in the main, one and sometimes two percentage points above base rate. Some mortgagees have been dismayed by discovering in the small print that their mortgages have ‘collars’ which prevent them from falling below a certain level.

If the BoE cuts interest rates again it will be the fifth cut in five months. It’s good news for many mortgagees – even though some lenders are still ignoring the government’s insistence that the cuts must be passed on in full to their customers.

But another Bank cut will further alarm savers who have seen interest rates plummet on savings accounts. Some accounts are now paying a miserly 4p on deposits of £5000. It’s causing big problems for pensioners many of whom used to top up their pensions with the interest from money in savings accounts.

Dangerous Times

There is now a palpable sense of radical change in the air. The Total demonstrations have spread like wild fire and must be seen as an urgent reminder that if a government gets out of touch with the will of the people then three things can happen.

National security and stability can be imperilled. The government can be swept out of power. The ordinary processes of democracy can be subverted.

Britain has not seen this level of industrial anger since the 1970s. Trade union
leaders are admitting that the leaders of the demonstrations are by-passing official union guidelines. The new mobility of Britain’s working class is primarily down to the internet. The web is the most potent tool yet devised in mobilising workers.

Peter Mandelson talking utter gobbledygook about the niceties of European legislation and explaining that the government’s hands are tied because of laws which are made in Brussels will not assuage the anger. Nor will the Prime Minister talking about the illegality and indefensible nature of the protests. He promised British jobs for British workers and has now – for whatever reason – reneged on his pledge.

Arguments about protectionism and the fact that British workers can seek jobs elsewhere in Europe – in the same way that the Italians are now working Britain – seem irrelevant and arcane if you are unemployed, or likely to be so, and are working and living in one of Britain’s industrial arm-pits which successive governments have ignored over decades.

If you have a family to support and a mortgage to pay it is not easy to up sticks and take off to another part of the world. Currently you will not be able to sell your house and you will not find another job in another country because this is a world slump.

And every time Mandy Mandelson appears – and with his iffy record he knows more than most about housing and getting a mortgage- it makes matter worse. Sleek, highly paid politicians and unelected peers – to say nothing of unelected Prime Ministers – must be getting frightened. They are supposed to be Labour politicians. But they are so removed from the British labour movement that they have become unrecognisable to it.

The British government is now trying to talk to Total, a French company in Britain, about employing Italians and Portuguese. There are lessons to be learned here. Britain has become a carrier for foreign companies who now control all the nation’s vital industries.

The use of foreign labour – and whether it’s cheaper or not is almost a side issue – could be the match which sparks the conflagration. Foreign companies must be taught that it is always – especially now – right and proper and ordinarily decent to forego a few extra pence on the balance sheet and to invest morally and ethically in their future in Britain.

If British workers are to be sacrificed in the interests of a few shareholders and foreign based company Boards then their continued presence in this country should be examined. If the European law needs amending then the government must get on and do it. If it means having a row with Brussels then so be it. The government must get its priorities right. And one of them – in these very difficult times – is looking after its own citizens.

On each occasion that there is a headline saying that bankers and ‘toffs’ are still getting bonuses which are obscene in this climate – two million unemployed and three million by the end of 2009 – it sends another terrible wave of anger rolling through the country.

Britain is now a dangerously fragmented nation. The divide grows each day between the have yachts and the have nothings or very little. It is crucial that the government gets a proper grip very quickly. Major civil unrest is just around the corner.

Brown has to speak to the nation and reassert his administration’s beliefs in a society that is moral and upright and – above all else – fair and ethical. It should commit itself to egalitarianism and equality. But words and promises are no longer sufficient. The nation wants and needs action. It no longer believes in empty promises and silken words.

Peers who are on the make or have criminal records should be thrown out. Bankers who have ruined their companies and wrecked the nation and have got away with massive pension pots and golden handshakes should be arrested and tried and jailed. Plutocrats who run companies in the UK while not paying a penny in tax should be tried and jailed. In some countries far worse than that would happen to both categories.

History is littered with the tragedies of governments who have got out of step with what the people are thinking. It usually results in violence or even catastrophe.

With rocketing unemployment – a spoiled and cosseted upper echelon which looks arrogant and incompetent and sometimes fraudulent – and a government which spouts promises but fails to act – the stage is ripe for tumult.

The Total affair could be a catalyst which triggers upheaval. There is disquiet on many fronts. The French-Italian-Portuguese dispute might easily act as the trigger.

These are menacing times. In such conditions hatred takes root. Prejudice and bigotry are unleashed. In Germany – where there was a weak government, high unemployment and a high crime rate – it spawned evil and the Jews were among the scapegoats.

The blame for Britain’s ills must not be pinned on immigrants and foreign workers. That would be exceedingly dangerous in Britain. There are too many areas now in the UK where the flames of a race war could be fanned by the glint-eyed, the cruel, the self-motivated and the politically inspired.

The government must act fairly and sympathetically and show an understanding of the fears and frustrations voiced by millions of workers across the UK in scores of industries.

To avoid apocalypse the government has to act decisively. Everybody knows right from wrong. Brown must underline the first principles of honesty and decency and propriety.

He must act in a way which shows he understands and will do something about the grievances of the men in Lincolnshire and elsewhere who could take the law into their own hands if the law is an ass or if it seems perpetually loaded in favour of an arrogant, uncaring upper crust.