‘Worst is over’ for European property

The worst of the property crash in Europe could be over, according to Union Investment’s Climate Index.

Jennifer Rigby, Property Week - 3 July 2009

The index of attitudes towards property investment, calculated through responses to a survey from investors, rose for the first time since autumn 2006 in France and the UK.

The survey suggested this showed growing confidence among investors with regards their own business prospects as well as the wider property market.

The UK saw a particularly steep rise in the index, by 12 points to 65.5.

Olaf Janßen, head of property research at Union Investment, said: ‘The sharp rise in the UK by 12 points to 65.5 points – the biggest movement we have recorded over the past four years – suggests that the savage correction in London is beginning to tempt British investors back into the market.’

In Germany, the index remained the same at 62.1.

In France, there was a slight increase of 1.8 points to 63.4.

The ‘expectation’ factor was the major driver for the positive performance of the index, particularly in the UK, where it climbed 19.6 points to 57.7. 63% of UK investors were upbeat about their prospects, but only 36% felt the same in Germany and 30% in France.

87% of Brits expected a rise in investment from overseas in the UK market. A large number of investors were also returning to property as an investment class, the survey found. 42% planned to invest significantly more in property in the near future, compared to 21% in December 2008 in the UK. Both France and Germany also saw the percentage of people planning to invest rise, to 41% in both countries.

Janßen said: ‘This greater willingness to invest indicates that we will soon have turned the corner in terms of European transactions. Bit by bit, the brakes are coming off.’

There was also a new focus on generating returns rather than looking for safe havens, particularly in the UK.

68% of UK investors said they were focused on returns, with just 18% seeking safety. However in France and Germany only 28% and 29% were making decisions based on returns rather than safety.

Janßen said: ‘The greater emphasis on returns among British investors is a further indication that the UK turnaround represents a sustained trend. Germany and France lag the British market both here and in terms of investor expectations.’

Full Article

Housing crash is now past its worst

Bank of England’s property expert David Miles says housing crash is now past its worst

The worst of the housing market crash is now over, David Miles, the Bank of England’s new resident expert on the mortgage and property market, claimed yesterday.

Edmund Conway, Economics Editor, Telegraph.co.uk - 2 July 2009

David Miles says neither the housing market nor the UK economy could expect more than “anaemic” growth in the coming years.

Professor Miles, who wrote a Treasury report on mortgages five years ago, said that both the housing market and the broader economy had now endured the worst of the slump, and could recover soon.

His comments come amid growing signs that although the economy remains weak, the signs of recovery are now becoming increasingly convincing. According to Nationwide, house prices rose in June for the third time in four months.

Professor Miles, who was testifying at the Treasury Select Committee, said: “Expectations are crucial in the housing market and they look a bit better now than a few months ago. My hunch is that we have seen most of the overall aggregate house price falls.”

However, he warned that neither the housing market nor the UK economy could expect more than “anaemic” growth in the coming years due to the severity of the financial crisis that preceded.

“It may be the case that we get what looks like a very sharp rebound over the next few quarters: one might interpret that as a V-shape but that doesn’t really tell you an awful lot about what the likely path of GDP growth will be,” he said. “The prospect of a rapid return to growth doesn’t seem a highly probable outcome. But there are reasons for thinking the period of the most rapid declines in output are behind us.”

The comments coincided with a speech by fellow MPC member Tim Besley, who said it was still too early to tell whether the Bank’s decisions to slash interest rates to just above zero and pump £125bn into the economy through quantitative easing were working.

Prof Besley, who is standing down from the MPC in the autumn, said that the MPC “will need at some point to tighten policy through… raising nominal interest rates and ‘quantitative tightening,’ to make clear that upside risks to inflation can be headed off and to maintain a credible policy reaction function.”

But he added that it remains “difficult” to assess the success or otherwise of the operation.

Article

Househunters scour auctions for bargains

The number of homes sold at auction has risen by almost two thirds in the past month as buyers seek cheap deals.

Rebecca O’Connor, TimesOnline.co.uk - 2 July 2009

The number of homes sold at auction has risen by almost two thirds in the past month as buyers have packed salerooms in the hope of bargains.

In a further sign that homebuyers believe the housing market may be at or close to the bottom, Countrywide Property Auctions said that 79 per cent of all homes going under the hammer in the first two weeks of June had been sold, compared with 49 per cent in the same period last year.

However, those hoping to profit from a flood of cheap repossessed properties on the market may be disappointed: the number of repossessions for sale at auction has fallen by 43 per cent in the past year.

Separate figures from the Essential Information Group (EIG), the auction website, showed a decline in the number of repossessed lots to 954 in the second quarter of this year, down from 1,674 in the same period of 2008.

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Sale and Rent Back Regulated

After campaigning by Shelter to highlight the problems of the industry, regulation of the ‘sale and rent back’ sector by the Financial Services Authority (FSA) began yesterday on 1 July 2009.

Shelter.co.uk - 2 July 2009

‘Sale and rent back’ or ‘mortgage rescue’ companies offer struggling homeowners the chance to stay in their homes when they can no longer afford their mortgage. The property is bought and rented back to them by the company.

But as the sector hasn’t been scrutinised, some companies have taken advantage of people’s desperate circumstances by buying properties at much less than their market value, putting up rents to unreasonable levels or even evicting tenants from their own home for no reason.

An interim regime, introduced by the FSA yesterday, addresses the most immediate problems for consumers, followed by a more comprehensive regime which will start on 30 June 2010.

Under the interim regime, companies will need to prove that they have adequate resources and are run by ‘fit and proper’ people. Companies will also have to abide by the FSA’s business rules.

Sam Younger, chief executive of Shelter said:

‘Shelter campaigned actively to highlight the problems of the industry, so we strongly welcome FSA regulation, which is long overdue.

‘With 65,000 homes predicted to be repossessed this year, more and more struggling homeowners will be tempted by sale and rentback schemes in the hope they can offer a lifeline. However many schemes are exploitative, leaving people financially worse off and vulnerable to homelessness.

‘It is vital that the FSA enforces the regulations fully and gets the whole industry signed up for regulation within a month. We will work diligently with the FSA to expose any company that fails to sign up by 31st July and ensure they are held to account and consumers are aware of their practices.’

Article

Property market: renting is all the rage

Familes are letting out their London home to live in the country, while young executives abandon buying altogether in favour of a more flexible lifestyle.

Caroline McGhie, Telegraph.co.uk - 2 July 2009

Renting is the new elastic in the market, as families such as the Godwin-Browns are finding.

Paul and Fiona Godwin-Brown and their two boys Tom and Charlie are living wild and free. They have given up pressured London life and moved into a rolling Devon valley, a mile from the sea. They let their house in London and are renting in Devon for the foreseeable future. “It has been the jammiest thing. The children think they have died and gone to heaven,” says Fiona.

Theirs may be the way forward for many. Renting is the new elastic in the market. It is no longer the preserve of the can’t-haves and students, but is being favoured by families, job movers and young executives. When house sales are hard to achieve and prices static, renting is perceived as the most effective way to get a new life and hit the start of school term for the children in a new area. “It is interesting being away from London and feeling that house prices are a bit irrelevant.”

How did it happen? Paul and Fiona put their London house, between Clapham and Wandsworth commons, on the market at the beginning of 2008 at around £1 million and were quickly becalmed by the recession. By May they decided to move anyway, let the house and get the boys into good local schools in or near Torquay. Fiona gave up her high-powered job as a business planner, and Paul began applying for jobs as a primary school teacher. It all happened very quickly. Good tenants were found for the London house and Paul and Fiona fell in love with the little village of Stokeinteignhead.

The house isn’t one of the many pretty thatched cottages but it has four bedrooms, an acre and a half of garden, a zip wire, tree-house, climbing frame and hen house. “It has exactly what we need,” says Fiona. “We realise that, surrounded by this wonderful countryside, people don’t need trophy houses in the same way. It is like having a property ownership hangover which you have to get over.”

They will probably sell the London house when the market recovers, then think again about buying. For now, however, renting is more than good.

Fiona is thrilled by the charms of village life. “Stokeinteignhead is in the most gorgeous valley and we can walk to the sea,” she says. Tom, 12, is at Torquay Grammar four miles away and Charlie, nine, is at a much prized village school a walk away. They have been there nearly a year and hope to stay another year or two. The four hens – Talulah, Dilly, Scramble and Rocky – produce four fresh eggs each morning which Fiona transforms into breakfasts, soufflés, meringues and cakes. For them, renting doesn’t mean living in a state of impermanence at all.

Full Article

Affordable housing is doublespeak for ‘overpriced’

The government cut its affordable housing targets earlier this week as the slump in construction made previous targets too ambitious.

Deborah Hyde, CityWire.co.uk - 02 July 2009

The government said an additional £1.5 billion would be spent over the next two years to deliver 20,000 new homes, part of the total of 110,000 affordable homes now being promised over the next two years.

Gordon Brown being Gordon Brown didn’t say that this was lower than the previous target to build 70,000 affordable homes per year by 2010.

‘You couldn’t make it up. We all knew that Building Britain’s Future contained a string of re-announced targets, but this is something else – to announce a lower target after you have failed and pretend its progress. It’s surreal. This is a real slap in the face to the 3 million people in desperate housing need on our council house waiting lists,’ said Lord Oakeshott, the Liberal Democrats’ Treasury spokesman.

But that is only half of the problem.

Anyone looking at house price to income ratios knows house prices are still not ‘affordable’.

Where once it was supposed to be optimal to spend no more than a fifth of your salary on your rent or mortgage, people buying a house this week are still stretching their budgets to snapping point to buy a pitiful, badly thrown up, badly laid out walk-in wardrobe on the wrong side of town.

More importantly for the millions of people across Britain living in substandard housing, affordable housing targets are no answer.

Construction groups have been winning licenses to build on the basis that they offer so-called affordable housing that few can actually afford and is often been bought by professional landlords.

Full Article

OFT v Foxtons - clarification

Update - Pain Smith Blog 21 May 2009

It is not normally the practice of this blog to comment on matters that are still before the Courts but we are becoming frustrated by the large amount of incorrect information about this matter that is floating around.

Currently the OFT has suggested that certain aspects of Foxtons terms of business may be unfair. They have particularly focused on the practice of seeking a fee on the sale of a property by a landlord to a tenant where the tenant was introduced by Foxtons and on the practice of seeking a fee where a tenancy which was carried out on a let only basis is renewed for a further period without any involvement by Foxtons.

The OFT has not said that all agents fees or even all renewal fees are unfair. They are particularly focused on those issues where the agent has not done any work to secure the renewal. They have also suggested that charging the same fee on a renenwal as on an initial rental may also be unfair as the amount of work done in the two situations is different.

At the current time (21 May 2009) none of these fees are unfair and they will not be so until the High Court rules on the point (probably mid to late June 2009). Even then there is a high chance of appeals to the Court of Appeal and possibly further.

In terms of outcomes there is a large range of possibilities. The Court could decide that the specific clauses used by Foxtons are unfair or that any similar clause used by Foxtons is unfair or that clauses of this type are generically unfair and can also choose whether to impose this view only going forwards or retroactively.

Finally it should be noted that the OFT case is based on a general challenge and is therefore focused on the idea of a ‘typical consumer’. This leaves open the option in any other case for an agent to show that their landlord was not a ‘typical consumer’ and that they should not be protected by the decision.

In any event there is still a long way to go.

http://painsmith.wordpress.com/

Patience is a virtue in the housing market

“Prediction is very difficult, especially if it’s about the future,” Niels Bohr, the Nobel-winning physicist, once pointed out. Britain’s economists and potential homebuyers alike were left with a sense of frustration on Tuesday as the housing market continued to behave with complete disregard for what forecasters have been predicting for this year. In short, house prices have risen again.

David Wighton: Business Editor’s Commentary, TimesOnline - 1 July 2009

According to the Nationwide Building Society, the average unadjusted UK house price rose by £2,400 to £156,400 in June. It has now risen each month for four months and has soared by almost £9,000 from the low point in February. Even after seasonal adjustment — which strips out the normal boost given to prices by frolicsome spring buyers — prices are up by an underlying 2.9 per cent since February.

These are significant rises over several months and are roughly echoed by similar figures from the Halifax. Some parts of the UK are showing price rises normally associated with boom times. Quarter-on-quarter prices in Wales are up by 7.7 per cent; East Anglia is up 5.2 per cent, while in Greater London prices have bounced 4.8 per cent higher.

Full Article

Changes in Home Ownership Attitudes

The Today Programme tells me that the Chartered Institute of Housing has published a new study which suggests that young people, in particular, are turning away from house ownership after being scared off by the economic downturn and the concomitant drop in house prices.

This leads to the immediate question about where these people are living. Presumably this will lead to an increase in renting. Inevitably much of this increase will be felt in the private sector. However, the private sector is not really geared towards the longer-term renter which is something that will be desirable to those seeking to stay in the sector. Indeed, the legislation tends to discourage longer term arrangements.

Contractual provisions can provide the long-term security that tenants will seek but few landlords are prepared to grant such long-term rights. In addition mortgage companies, freeholders, and insurers all tend to refuse consent for such long-term lettings. In addition there is no protection for tenants whose landlords fail to maintain their mortgage payments which inevitably erodes the security offered. Finally, the creaking Civil Court system is too slow to deal with possession claims and this pouts landlords off lettings where they cannot get rid of tenants easily.

The Law Commission proposed changes to the legislation which would help here. The creation of two tenancy types giving short-term and long-term rights would allow landlords and tenants to make a clear choice as to the nature of tenancy they were in the market for. However, without other legilative and structural changes the Law Commissions proposals will fall on barren ground.

The current government as well as its challengers are all keen to talk about housing and to make sweeping statements. However, much of this proposed action seems to get lost in a maze of reviews. Until these are backed by real legislative intent and proper incentives things are unlikely to change.

Article - David Smith Blog - Pain Smith Solicitors - 15 June 2009

Revolving door for housing ministers

Did you know that the new housing minister is the ninth since labour came to power in 1997? They are:

1997 – Hilary Armstrong
1999 – Nick Raynsford
2001 – Lorde Falconer
2002 – Lord Rooker
2003 – Keith Hill
2005 – Yvette Cooper
2006 – Ruth Kelly
2007 – Hazel Blears
2008 – Caroline Flint
2008 - Margaret Beckett
2009 – John Healey

How can the department hope to have a consistent policy with so many different ministers? Roof Magazine (the source of this information) is generally approving of Mr Healey’s appointment. However with a general election looming on the horizon, he is obviously not going to have that long in post.

From the press one rather gets the impression that ministerial posts are mere tokens of Prime Ministerial approval or disapproval (depending on the post). However they are also government departments that affect all our lives. It would be nice if after the election, the next housing minister (assuming he or she is effective) could stay with us a bit longer.

Article - Tessa Shepperson’s Landlord Law Blog - 30 June 2009