Housing burdens

A BIG variation exists in the burden of mortgage debt across Europe, according to a report by Morgan Stanley. Switzerland has the biggest mortgage book relative to its GDP. Britain and Denmark, where house prices have risen rapidly in the past decade, have seen their stock of home loans rise sharply.

Economist.com - Sep 20th 2007

Indeed, mortgage debt is higher in these countries than in America. Ireland’s burden is lower but has doubled since 2002. Debt ratios in France and Germany are around half the level of Britain, reflecting lower rates of home ownership - full article

RSLs call for power to raise rents and construct more homes for private sale

Housing associations have said they are willing to increase their borrowing to fund the construction of new housing – providing they can raise rents faster and sell thousands of new homes on the open market.

PublicFinance.co.uk - 21 September 2007
In a long-awaited analysis of the borrowing capacity of registered social landlords, the National Housing Federation – as expected – dismissed Housing Corporation claims that the proportion of affordable housing funded through grants could be cut from 44% to 34%.

But according to the report Building neighbourhoods, published on September 19, it would be possible to reduce grant rates to 39%, leaving RSLs to fund the remainder from their own budgets, including private borrowing - full article

Students’ Reputation and Lack of Domestic Skills

Students’ bad reputation and their lack of domestic skills are to blame for the poor standard of private rental student accommodation, according to a new ICM poll.

71 percent of British people believe that the quality of student accommodation has such a poor public perception because of the lack of care shown by students.

Subsequently, landlords are then reluctant to reinvest in the properties before new tenants move in because they expect the upkeep of the accommodation to be neglected.

In the poll of 1000 people, which was commissioned by UK oven valeting company, Ovenu, 48 percent of people think students show no care for the properties they rent.

A key factor blamed for students’ lack of care is their poor knowledge of home hygiene. More than 40 percent of people questioned believe students do not understand the importance of hygiene and keeping their homes clean.

Continue reading Students’ Reputation and Lack of Domestic Skills…

Prepare for prolonged turmoil, says US Treasury Secretary

Investors should brace themselves for a prolonged period of market turmoil, Henry Paulson, the US Treasury Secretary, said yesterday as he held emergency meetings with the Chancellor and the French Finance Minister.

Suzy Jagger and Gabriel Rozenberg, The Times - 18 September 2007

Mr Paulson flew to London to discuss the financial crisis with Alistair Darling as markets remained in the grip of anxieties over the continuing toll from the global credit squeeze.

Speaking after talks with his counterparts in France and Britain, Mr Paulson insisted that the global economy remained strong despite the seizures in interbank lending, but admitted that the American economy would take a knock from the turmoil.

After meeting Christine Lagarde, the French Finance Minister, Mr Paulson said: “It will take a while to work through the turbulence in capital markets.” - full article

Greenspan predicts falling house prices, rising inflation

Britain faces the prospect of falling house prices and rising inflation within a few years, according to Alan Greenspan, the former chairman of the Federal Reserve.

Graeme Wearden and Ashley Seager, The Guardian - Tuesday September 18, 2007

In a series of interviews to promote his memoirs, The Age of Turbulence, the respected US economist warned that the era of low inflation was over. He predicted that the Bank of England would struggle to keep the consumer prices index within one percentage point of the government’s 2% target - full article

Buy-to-let retirement warning

Buy-to-let investors are taking a massive risk by relying on property to fund their retirement. That is the claim of experts who say banking on one type of asset could be a recipe for disaster.

Jo Thornhill, Mail on Sunday, 30 April 2007

It is not hard to see why property has grown in popularity, with pensions dogged by mis-selling scandals, poor investment performance and company scheme closures.
In contrast, the property market is booming, driving many to use bricks and mortar as the cornerstone of their retirement planning.

But though property seems invincible - Halifax reported annual house price inflation of 11% last month - there are dangers for those relying on it totally - full article

“1-in-10″ chance of 1990s UK housing crash - RICS

There is a “one-in-10 chance” of a 1990s-style UK housing market crash, the Royal Institution of Chartered Surveyors (RICS) said on Tuesday, after scaling back its expectations for British house price inflation.

William Kemble-Diaz and Sinead Cruise - LONDON, Sept 18 (Reuters)

Simon Rubinsohn, RICS’s chief economist, said his base case was for flat house prices across Britain in the next 12 to 15 months, down from an earlier forecast of 3 percent growth.

He also said there was a “20 percent chance of a 10 percent” decline in London house prices over the next 12 months, and said talk of a looming “crash” was legitimate and not irresponsible.

But like other housing market experts he said homeowners were unlikely to see a repeat of Britain’s previous housing slump, when average prices fell by an inflation-adjusted 35 percent from their peak in 1989, according to data from property services firm CB Richard Ellis.

Peter Damesick, head of UK property research at CB Richard Ellis, said the chances of a housing market crash were still “pretty small” because there was no obvious trigger in the offing such as the economic downturn or sharp interest rate hikes seen in the early 1990s - full article.

Private landlords educated on deposit protection

Landlords are required by law to protect deposits Landlords and tenants in the Private Rented Sector have become substantially more aware of Tenancy Deposit Protection during the summer months.

Nearly two thirds of all landlords and approaching half of all tenants are now believed to understand the mandatory requirements to protect deposits and provide for dispute resolution. These requirements became law last April.

24dash.com - 18th September 2007

This improvement is demonstrated in results from separate surveys carried out among both letting agents and landlords during August and announced by the Tenancy Deposit Scheme today, Tuesday 18 September.

Letting agents believe there is still a long way to go to educate the private rented sector and that only two thirds of all landlords and less than half of all tenants understand it. Yet this is a substantial increase and it was gained during the holiday period. The agents survey showed that they believe that understanding among landlords rose from 54.5% to 63% and among tenants from a third to nearly a half - full article

House prices and earnings

A lot of people seem to think the house price-earnings ratio is 11 times salary, as Business Week claimed, rather than a still-high 6.5 - 7 times. Here, as reminder, is the calculation.

David Smith, EconomicsUK.com - Monday 17th September 2007

Here’s a link to the median earnings figures. As you’ll see, the median in 2006 was £447 a week, £23,244 a year. The median house price in England & Wales in 2006 was £166,000, according to Land Registry data. That gives a house price-earnings ratio of 7.1. To add a further complication house prices have been conventionally measured in relation to male earnings, £487 a week, £25,324 a year, which brings us down to 6.5 - full article

Falling house prices mark the end of the Great Stability

Governments’ boast that they had succeeded in taming both inflation and the business cycle was always a hollow one. The lie was given by rampant house prices and commodities, massive speculation in investment structures that barely existed a decade ago and record levels of debt on both governments’ and households’ balance sheets.

Stuart Fowler, nomenkeybusiness.org - 18th September 2007

Monetary authorities succeeded in cheating recession after 9/11, which coincided with an incipient downturn, but economic activity continued to expand only at the cost of unsustainable strains in financial balances between the key sectors making up the economy. Thanks to a feeding frenzy in the housing market, none was more extreme (in terms of flows as well as balances) than the US household sector - full article