Roger Bootle of Capital Economics paints grim picture for the UK housing market

Roger Bootle, economist at forecasting agency, Capital Economics, has forecast gloom for the UK housing market in 2009. The former chief economist of HSBC was speaking at the Annual Conference and Exhibition, organised by the Chartered Institute of Housing South East in Brighton this week. He is predicting increase in number of owners entering negative equity and huge rise in repossessions.

His forecast indicates repossession to cross 90,000 figure in 2009, while around 3.5 million households are likely to fall into arrears, twice the number witnessed in the early 1990s downturn.  However, the forecast by the Council of Mortgage lenders indicates repossessions to touch figure of 75,000 for the current year.
Analysts and observers of the UK housing market are expecting a further peak-to-trough fall of 40 t0 45% in house prices.

According to a report by Halifax, house prices crashed by 2.3% in February, taking average UK home price to £160,327. With this fall the annual rate of decline for house prices has touched 17.8% level, informed Halifax.

Bootle believes that current economic downturn is the worst since 1945-48 economic slump which was the aftermath of fierce world war II.

Bovis Homes suffers huge losses

Housebuilder Bovis Homes joined other rivals in loss making as it suffered huge pre-tax loss of £78.7 million in 2008, after making an impressive profit of £123.6 million the previous year.

The value of Bovis Homes’ land bank had to be written off to the tune of £77.4 million, in addition to £10 million write off on account of expected benefits from Elite Homes’ acquisition in 2007.

The fall in company revenue is 49% to £282 million due to slump in sale of homes and continuous fall in house prices. Bovis Homes was to build 3,500 homes during 2008, but could build only 1,782 homes by the end of year.

Like many house builders, Bovis Homes also had to take a harsh step of reducing workforce due to slump in demand. According to company chief, David Ritchie, toughest economic conditions, insufficient mortgage finance and crashing house prices led to fall in revenue and profits.

Since beginning of year to date, company could secure only 772 reservations, down by 39% compared with same period in 2008. Story is not different from those of other big players in the housing industry. Persimmon made pre-tax loss of £780 million in 2008 compared with £583 million profit in 2007. Redrow reported £46.2 million pre-tax loss while Barratt suffered loss of £592.4 million.

Upturn in buy-to-let-market for Gladedale in North East England

There is at last some news of upturn in the buy-to-let market! Leading housebuilder Gladedale in North East England has reported significant increase in number of buy-to-let investors since beginning of year. Investors are lured by the major increase in yields from rented properties.

Sales Director, Richard Jones, of Gladedale, North East England, believes that people are once again looking to property as good investment for return on money. Low interest rates coupled with attractive deals on new homes are providing higher yield with some investors succeeding in getting yields up to 6%.

The existing bank rate at the Bank of England is just 0.5%. A large number of people who invested in shares lost big amount. Also under prevailing economic climate many people who are unable to buy new home are opting for rental property. As a result investors are turning to buy-to-let property which becomes not only a guaranteed source of regular rental income but also a long term asset for them.

Gladedale is offering no deposit homes at prices ranging from 52,496 pounds to 69,995 pounds across the region. This is an excellent value for money offer with wide choice of selection of beautiful homes.

Good news from British banks for buy-to-let loan seekers

Buy-to-let loan seekers who have been hearing negative news for last so many months can rejoice as several British banks are coming forward with offers of more easily available mortgages and other loans.

Northern Rock Bank has reversed its earlier decision and has allocated 14 billion ponds for mortgages and other loans during year 2009 and 2010. Following this announcement, the Bank of Scotland also has come forward with offer of total 1.7 billion pounds to mortgage seekers. The only condition, according to media, is that RBS mortgages and buy-to-let loans will be available only to its Scotland based clients. RBS intends to offer loans to first-time homebuyers up to 90% of property’s value and would also provide funds to buy-to-let businesses.

RBS chief executive, Paul Geddes, declared that RBS would be “more than ever, open for business.”

However, financial experts suggest that banks should focus more on helping those who had been struggling to get funds for last several months, particularly those prospective homeowners and buy-to-let investors who have steady income but very insignificant savings in banks.

Industry experts believe that if banks make funds more readily available to residential rental sector, Britain’s struggling housing market will get an early chance to revive once again.

10,000 privately rented home tenants face eviction

Nearly 10,000 tenants staying in privately rented homes would be asked to vacate premises since their landlords would be in arrears over mortgage payments, warned Conservatives.

The Housing spokesman, Grant Shapps urged the Government to introduce new measures to protect tenants from sudden eviction. He suggested that tenants who have been regular in their payments to landlords should be allowed minimum one fortnight’s time to enable them find another accommodation.

The Council of Mortgage Lenders has predicted 75,000 repossessions in 2009 due to economic downturn. Majority of those likely to lose their property will be small landlords who have defaulted on their buy-to-let deals.

Under existing regulations, authorized tenants get just 14 days from the date of repossession order by the court to vacate property. If the landlord had not taken permission for letting, tenant could be evicted within days. Many times tenants do not get notice in time regarding repossession and are taken by surprise when asked to leave.

Shapps has urged the Government to protect tenants from inconvenience by introducing 5 to 7 weeks’ notice period and allowing tenants to be heard by courts and lenders during repossession hearings.

Shapps informed that the Government was being called to take actions to protect families from suddenly finding “roof being taken away from above their heads.”

London’s richest boroughs hit by housing slowdown

The UK housing market’s traditional barometer, London property, is shrinking in key commercial and residential areas, according to reports from leading estate agents. An average 1.5% slump in housing prices has been reported by estate agent Savills in prime locations like Chelsea, Holland Park, Knightsbridge, and Belgravia, during first 3 months of the year, following 2% fall in the 4th quarter of last year.

Regarding commercial property, Savills informed about sharp decline in demand in the City of London’s office market, while demand for retailer has subdued across the UK. High-end estate agent Knight Frank also confirmed downslide for the Capital, where only ‘super prime’ residential properties above £10 million could fetch more value last month.

According to Liam Bailey, residential research head at Knight Frank, month of April results in further weakening of property market with poor growth across the board. He adds that super prime market has remained the lone bright spot in the UK over last six months.

London homes which could fetch 102% of average asking price are now being sold at 96% of asking price, the lowest since 2004. Liam Bailey believes that even after making further cut in base rate, real impact housing market will come only when the Bank of England’s special equity scheme supports money market and makes lenders feel confident lending each other.

House sales at 31-year low despite increase in buyer enquiries

Despite increase in the buyer enquiries for the fourth consecutive month, house sales in the UK are down to 31-year low, reports the Royal Institution of Chartered Surveyors (Rics). The rise in enquiries is attributed to continuous fall in housing prices.

As per Rics’ data, property sales in 3 months to February touched the lowest level since it started data recording in 1978. Rics reveals that estate agents could make only average 9.5 sales in last 3 months, down from 9.8 in November 2008. This again is the record low average since 1978.

According to Jeremy Leaf at Rics, though potential buyers are flocking in large numbers to agents’ offices, lack of mortgage finance is causing transaction levels to remain at all time lows.
Rics is urging the Government to expedite implementation of its guarantee scheme  for new residential mortgage-backed securities to revive property market.

National Housing Federation (NHF) has also painted grim forecast about number of new homes being built in England during next financial year. According to NHF, this figure could fall by 50% to 70,000, lowest in last 88 years.

Meantime, Grant Shapps, spokesman for Conservative Housing, claimed that temporary suspension of Stamp Duty did not help in revival of housing market. Back in September 2008, the Government had had announced exemption of stamp duty for properties costing less than £175,000, for twelve months.

Foreign investors keenly interested in London property

Foreign investors are getting increasingly attracted to the UK commercial property market, courtesy sterling devaluation and tumbling prices of assets, say industry experts. As per the leading property index IPD, fall in capital values from the UK peak in June 2007, is 39.5%. This figure goes up to 60% in the US and Eurozone due to fall in pound’s value.

The investors are also attracted by lease period of 15 years in the UK as compared to just 6 to 9 years prevailing in the continental Europe. It provides them enhanced income security.
Fund managers, leading developers, bankers, agents and politicians who attended global property conference Mipim in Cannes, remained focussed in their discussion on foreign investment in the UK.
Experts believe that overseas buyers’ increased buying activity could help in revival of Europe’s worst affected UK property market.

Major part of foreign investment is expected to come from German, Middle Eastern and Far Eastern Groups as well as Spanish funds, which had previously taken advantage of falling values in 1990s recession.
Investors will be primarily eyeing prime property in London, considered to provide guaranteed income even during financial crises.

London had major representation at Mipim conference. Norway’s sovereign wealth fund has already shown keen interest in investing $20bn into the UK property market.

Security essential when letting a retail premises

Security is paramount in today’s society, and especially when you’re talking about your own business premises, as it’s your livelihood on the line. Those who let out retail outlets in the high street need to safeguard their premises, their stock and their business so that crime doesn’t ruin any of the good work they’ve managed to build up. Read the rest of this entry »