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.