House prices: Leading economist predicts further 10% fall

A leading economist has predicted that house prices are going to take a further dip of 10% before the market touched its bottom.

This was the warning issued by David Miles, a Visiting Professor of Finance of London’s Imperial College Business School, who was addressing an influential committee of MPs. He indicated that the property market would stabilise once house prices went down by 20% of their value from the market peak in summer.

Going by his prediction there would be a further fall of 5% to 10% in property prices. Professor Miles told the Treasury Select Committee that if this happened transactions should pick up again very sharply.

The belief that prices would come down has created stand-offs between those who intend to sell and people who are with mortgage credit. They are not agreeing on price.

Professor Miles is more optimistic in his assessment of the market than many other experts in the UK.

Professor Muellbauer of Nuffield College also addressed the Treasury Select Committee. According to him first-time buyers could be brought back into housing market only if prices dipped by 25% from their peak.

According to Halifax prices were falling at the fastest rate during last 25 years. The Council of Mortgage Lenders was predicting that there would upward pressure on repossessions in 2009. However Nationwide’s chief economist reassured that increases in repossessions would not spread beyond specialist market areas where borrowers were more stretched.

‘Down Valuing’ tactics by lenders posing problems for quality builders

Thousands of new homes are being down valued by the lenders, which may sound as great deal, but is posing serious problems for the borrowers and hitting quality builders hard.

Some lenders’ deplorable approach is stalling new purchases and causing potential distortions in house price indices.

The Royal Institute of Chartered Surveyors and the Council of Mortgage Lenders, the authors of guidelines for impartial estimates by valuers said that several lenders were now insisting that mortgage offers were automatically dropped to second-hand values of newly built houses and flats. This may sound good for buyers but is likely to sabotage other transactions.

According to Lee Holland of Town and Country Mortgages, buyers are left in the lurch since they agree a deal possibly considering a price cut, but on applying for a mortgage, lender is doing valuation at an automatically lower value. The deal collapses if buyer fails to make up the shortfall.

On September 1, CML and RICS issued guidelines on quantifying incentives like stamp duty payments and furniture packages but some lenders were disregarding new guidelines and down valuing new homes.

However RBS and HBOS are satisfied with new incentives-disclosure arrangements, and are making reasonable offers on basis of RICS-CML guidelines, said Halifax spokeswoman.

U.K. commercial property companies offloading assets

Virtually unobtainable credit, job cuts in the financial sectors and other industries, and tough economical conditions are forcing UK commercial-property companies to sell assets and put all developments on hold.

The country’s real-estate giants, including the biggest commercial developers British Land PLC and Land Securities PLC, have together sold £5 billion of assets throughout this year. There are many more that are following the same route to protect themselves from financial upheaval.

The sale of assets is aimed at reducing debts and positioning themselves against future market slumps. New developments of commercial properties are on hold since businesses are unable to obtain finances.

According to British Land’s Stephen Hester, the situation could take a few more months to improve. Industry experts believe that after 2010, developers will only be able to work on a few major projects, since obtaining finance for speculative development would still be difficult even if fund availability improved in 2009. The experts say that speculative developments only increase when commercial-estate markets are doing exceptionally well.

According to Jones Lang LaSalle, a real-estate investment consultant, delivery of high-cost office space to the market would fall to 2.66m square feet in 2009 and shrink by 50% to 1.52m square feet by end 2009.

Analysts are predicting additional fall of 10% in rents during next 12 to 18 months which would further discourage new development projects.

Less than one transaction per week pinches surveyors bitterly

According to the data from the Royal Institute of Chartered Surveyors (Rics), a surveyor could only manage an average of less than one transaction per week in the month of September.

The findings were published in Rics’ market survey of the UK properties. It highlighted that potential buyers were refraining from entering the market due to lack of mortgage deals. According to its spokesman Jeremy Leaf, a number of mortgage deals are expected to increase after the announcement of a rescue package by the government for the UK banks.

Leaf further added that the recent financial market turmoil has shattered buyers’ confidence but the government’s move to re-capitalise Banks would improve lending prospects for the house owners. This might ease mortgage financing which has been damaging the housing market severely.

The survey also revealed that 84.2% of chartered surveyors reported a fall in UK property prices as compared to 81.8% in August.

It is felt that mortgage seekers may not benefit immediately from the banks’ rescue operation due to reluctance on part of lenders in offering deals to those without good credit ratings or to first time buyers.

It is also reported that passing down of interest rate cuts to the customers might not happen in spite of the Bank of England’s decision to cut base rate by 0.5%

New rules effective October 2008, make it easier to improve homes

Effective October 1, house extensions under the new rules will be hassle free and free of expenses involved in getting permission for improvements and extension of properties from the councils.

Under the new rules, extensions of up to 4 metres in detached houses or 3 metres deep terraced homes would require no council planning permissions in most cases. The homeowners will also be able to convert lofts and garages into extra living space. Loft conversions in London are especially useful because space is minimal and every extra  room counts. The extra 10 feet could enhance the usefulness of living spaces and allow for better interior improvements.

The exemption for converting a garage into a living room would make existing properties work better for the owners under difficult economic conditions when property prices are going down sharply.

Jane Duncan, an architect and vice president of the Royal Institute of British Architects, warmly welcomed the changes to the rules, adding that old properties often had garages 8 foot wide where you could not even park a modern car. It was a better preposition to make them part of the house. He added that very few people kept cars in the garage anymore and suggested doing something contemporary and exciting in the conversion rather than just filling in with a floor to ceiling window.

It is advisable to check with council regarding applicable rules if you are living in a listed building or in conservation area.

Naming rent dodgers would damage landlords’ reputation, says NLA

The naming and shaming plan for rent dodgers by the Liverpool based Sutton Estate has been condemned by the National Landlords Association (NLA). It reacted sharply against the plan saying it would damage landlords’ reputation and was a ‘recipe for disaster’.

The Daily Post had earlier this week reported that Liverpool based Sutton Estate had put up ‘rent dodger’ signs on the houses of tenants in Merseyside who did not pay their rents for long. The displayed signs had ‘rent dodger lives here’ scripted on them and showed shadowy image of a running away person. These signs designed to deal with ‘serial non-payers’ have created controversies and invited condemnation from different quarters.

In spite of raging controversies Neil Heffey, a partner in Sutton Estate declared that he would continue with the approach. The purpose behind putting up signs on properties of rent defaulters is to pressurise tenants into either moving out or paying up. The legal experts opined that by resorting to this approach agents would be exposing themselves to possible legal action.

But Neil Haffey clarified that all cases would be treated individually and tenants with genuine reasons would be not be subjected to this tactics. Simon Gordon, NLA’s Communication Head while opposing the practice stated that it was illegal and would only alienate tenants. While acknowledging the hardships caused to landlords and agents by the failing tenants, he declared that this method of public humiliation was a recipe for disaster and would damage sector’s reputation.

The NLA advised landlords and letting agents to refrain from taking the law into their own hands and urged them to find a better way.

The new internet-only service makes tenancy deposit protection cheap

The UK’s Government-approved tenancy deposit protection scheme has introduced an internet-only service for the landlords for hassle free deposits.

The landlords would also benefit from reduced fees since the administrative costs of new service ‘mydeposits lite’ are comparatively much lower.

The landlords would not be required to hand over tenant’s deposit to a third party; instead they could pay just £17.50 fees including VAT and protect deposits up to £300 with ‘mydeposits.co.uk’ website. The website enables them to keep hold of their deposit amounts.

Since April 2007, it is mandatory for all landlords in Wales and England to protect their tenants’ deposits with a Government-approved scheme.

Chairman of the ‘mydeposits.co.uk’, David Salusbury, welcomed the launch of mydeposits lite saying that tenancy deposit protection is an essential part of a landlords’ legal responsibilities and the ‘mydeposits lite’ service will eliminate the need to hand over their deposits to a third party. He highlighted the fact that as it is an internet-only service, landlords would spend very little time in registering deposits. He also explained that low administrative costs of the service allowed mydeposits.co.uk to pass savings on to the landlords.

Landlords in England and Wales have been cautioned that failure to comply with the legislation would bring restrictions on their right to seek possession and they would be forced to shed compensation to the tenant three times the deposit amount.

On a similar note, places like London have a high ratio of letters and a good way to ensure a deposit is returned is to leave the property as it was when you arrived. Take notes of any problems you see when you arrive and have your landlord sign to agree.  You should also ensure you clean the property, utilising a service for end of tenancy cleaning in London for example ensures everywhere is left spic and span.

Tenants losing thousands of pounds in deposits every month

Tenants in the UK continue to lose huge deposits each month by failing to adhere to the tenancy agreements as per the Government authorised tenancy deposit protection scheme. The loss is estimated to be £15k per month.

The average amount of tenancy deposits protected under the scheme is £771. Nearly 12% of all deposit related disputes in July 2008 went in the landlords or agents favour. This meant that tenants were losing more than £15,000 every month by flouting terms of agreements.

Tenancy Deposit Protection (TDP) rules were made mandatory with objective to resolve disputes between landlords and tenants amicably. Effective April 2007, landlords are required to explain reasons and furnish evidence for withholding entire deposit or part of it. Landlords are not allowed to withhold deposits if tenants discharged their responsibilities and adhered to terms of agreement.

1. A few tips on how to keep deposits must always be kept in mind by the tenants.
2. Keep property in reasonably clean condition. Cleaning bills normally account for 38% in all the deposit related disputes.
3. Avoid any damage to white goods, furniture (especially if there are any expensive items, such as antique chairs or electrical goods) and property since costs for repairing are deductible from deposit amount.
4. Pay rent on time. If you are unable to pay on time get prior consent of the landlord. Failure to pay rent arrears would make you lose deposit.
5. Read the contract document carefully before signing and stick to its terms. The contract is legally binding and enforceable through courts.
6. Ensure that your deposit is protected as per the law. Landlords are supposed to furnish proof of protection to the tenants within 14 days of receiving deposit.

Millions of homeowners to benefit from 0.5% cut in base rate

Realising the seriousness of wider economic conditions, a decision has been made by the Monetary Policy Committee of the Bank of England to cut the base rate in order to bring some relief to millions of homeowners in the UK.

The 0.5% cut will benefit those who are on tracker mortgages. The 50 basis point cut in the interest rates is estimated to save mortgage payers up to £800 a year, based on the average priced UK home.

Neil Young, who is CEO of Young Group which provides Property Portfolio Management services to investors, had his fingers crossed. He commented that time alone would tell if the half per cent cut would be reflected in standard variable rates charged by the lenders. He added that the Monetary Policy Committee had been historically making 25 basis point rate adjustments. The October 8 decision of 50 basis point reductions and announcement of £50bn bank rescue package was an attempt to jolt the economy.

Neil Young believes that there is a marked change in the wider economy conditions since setting of 5% rate in April. He thinks that at this stage of economy such a rate cut would be more meaningful without upsetting government’s inflation target.

Least concerned with what experts say, home-owners on a tracker mortgage will be happy to reap immediate benefits from 0.5% cut in the base rate.

Falling house prices are creating investment opportunities

The fall in the property prices in the UK has continued for more than a year now. This was revealed in the findings of the survey conducted by leading estate agency Chesterton.

Chesterton’s “Poll of Polls” pointed out that there was drop to £184,333 in the average residential price in England and Wales.

According to the firm, figures indicated that prices have been falling for 13 months consecutively and were going down across all regions. Bigger falls were being witnessed in London and the South West during this time.

Chesterton appointed the Centre for Economics and Business Research (CEBR) to conduct survey on its behalf.

According to CEBR chief executive Douglas Mc Williams, the cautious approach of the financial institutions towards lending has impacted all levels and falls in house prices were also taking pace at the top end of the housing market.

The chief executive of Chesterton, Robert Bartlett, informed that some highly placed property professionals are making the most of the drop in prices. He remarked that cash rich buyers had good opportunity to take full advantage of the situation. The firm reported that five deals of cash sales were made in Kensington, London last month.