British Property Federation sends open letter to PM urging relief on tax

The British Property Federation has sent an open letter to Gordon Brown calling for tax exemption on empty properties imposed by the Government, effective April 2008. The move is backed by some of the largest commercial property owners in the UK.

The letter urges full relief in tax for unoccupied properties for the first 3 months, followed by 50% exemption for shops and offices for 2 years and total exemption for industrial properties.

The signatories to the letter are estimated to make combined market capitalisation to the tune of £370bn. The campaign is intensified with the participation of major property development companies like Brixton, Land Securities and British Land. The changes to taxation are also demanded by other UK real estate companies like local councils and pension funds.

The legislation has led to deliberate demolition of vacant industrial units and warehouses by the owners to avoid payment of tax.

The legislation, enacted with the objective to generate £1bn in revenue, has caused upheaval in property sector and blocked speculative developments across the UK.

The British Property Federation is worried that many more firms would be led to bankruptcy under tax burden and adverse effects of economic downturn.

Credit crunch forces UK corporate tenants to consider moving out

A report by property services agency GVA Gimley and the Confederation of British Industry has presented a disturbing fact which illustrates how severely the gloomy economy and unparallel credit crunch had shattered even the mighty corporate world in the UK.

The report highlights that more than 50 per cent of corporate tenants, if given choice of alternate rented premises up to a quarter, would be first to move out, due to slowing economy and credit crunch. This also included 90 per cent of retailers who were worried over consumer downturn due to migration to cheaper brands and products.

The latent discomfort was very high among tenants from financial services sector, 83 per cent of these respondents were wishing if they could dispose off a quarter of their office space while another 17 per cent wished if half of their working area could be leased to somebody else.

The Confederation of British Industry and GVA Grimley survey, involving 152 respondents was conducted in August and September.

The survey report also revealed that 40 per cent of tenants were considering to take advantage of break clause in their tenancy contracts with landlords in next 2 years while one third, who appeared quite uncomfortable with the business conditions, said that they would not renew contracts which were about to expire in next few months.

Home sellers overestimating property value

Desperate cash strapped home sellers, in their attempt to extract more return from their property, were overestimating its value, claimed an industry expert.

According to the president of the National Association of Estate Agents (NAEA), the unrealistic approach of the home sellers over price was a problem, since they were overlooking the asking price of homes while trying to attract buyers.

The property market has experienced its biggest slump in prices since the onset of the credit crunch and is likely to suffer for a few more months. The drop in prices is over 12% as revealed by figures from lenders Nationwide and Halifax.

Analysts are predicting that the price fall is going to continue, with some experts even suggesting that it could drop to nearly 35%. At the same time the International Monetary Fund has claimed that the property market in the UK was 30% overvalued at its peak.

The NAEA president, Chris Brown commented that what somebody was ready to pay today was truth of the matter and not what somebody would have agreed to pay yesterday.

Brown added that professionals and estate agents were devoting more time to evaluation of property value to show what was then and what is now. He said the problem was that people were not going to get what they were expecting since they were not looking at the asking price.

Home Information Packs (Hips) still not fulfilling potential

Home Information Packs are still a subject of criticism. Joining the critics is the newly-appointed housing minister, Margaret Beckett, who acknowledged that Hips were yet not able to achieve what they were supposed to deliver.

Hips were developed to expedite selling and home buying process and to provide faster and cost effective service to consumers.

The cost of a Hip is £350 and it contains energy performance certificate, title deeds and searches.

Mrs. Beckett is probably the first housing minister who expressed concerns over Hip, while her predecessors were known supporters of the pack.

However, Mrs. Beckett is not in favour of abolishing Hips; she argued that it had some positive impact on the housing market and was successful to an extent, but she did admit that Hips were not up to their potential.

The Conservatives, who had been urging scrapping of pack since long, claimed that Hips made selling more expensive and involved excessive paperwork.

Those comments apart, estate agents had been appealing to the Government to review Hips in order to help badly bruised hosing market.

Hips are under severe criticism since their introduction in August 2007 and according to a YouGov survey they were branded a waste of time.

Government intervention facilitating re-emergence of first time buyers

The National Association of Estate Agents is encouraged by the re-emergence of first time buyers on to the sagging UK property market, welcoming it as a positive impact of the Government’s decision of increasing the stamp duty threshold to £175,000.

The association has conducted research on recent trends in the market which revealed that there was significant rise in the number of sales per agent from 5 sales in August to 6 in September for the first time since January 2008.

The British Bankers’ Association also revealed an increase in mortgage lending in September. NAEA chairman, Chris Brown, while commenting on findings of research, called for further action from the Government to encourage people to buy back into the property market. He added that in spite of some positive indications from the study, many potential buyers were still cautious and not ready to move unless necessary.

Chris Brown pointed out that property prices were continuously falling and drastic changes by the Government were needed to restore buyers’ confidence. He remarked that decision made on stamp duty last month was not enough.

According to HM Revenue & Customs data, property sales in the UK fell by 53% over last year, while some have predicted 35% fall in the UK property prices by 2010.

CBER predicts 25% fall in house prices from last summer’s peak

UK property owners and those aspiring to own one are flooded with different predictions everyday regarding the fall in housing prices, creating more confusion and panic.

Last week, estate agents Knight Frank reported that house prices may drop 30% from their peak of summer 2007 and reach levels of September 2003.

The economic forecasting agency, Capital Economics, has predicted that the price fall would be 35% by next autumn, from its highest level of last summer. The agency had earlier forecasted a 35% fall by 2010, but reported that in the backdrop of economic downturn, it would fall much earlier than previously estimated.

However, forecasts by the Centre for Economics and Business Research (CEBR) indicated that the fall in value would be 25% from the peak. It believed that prices would not recover to the peak level of 2007 until 2013.

As a result of CEBR’s forecast, the properties of 2.5 million homeowners could slip into negative equity. According to the credit rating agency, Standard & Poor’s, 60,000 homeowners were being pushed into negative equity each month by the tumbling house prices. If these predictions proved true, the average value would fall to £157,058 by the end of 2009.

According to Ben Read of CEBR, the shortage of mortgages has dented confidence in the housing market and sellers were chasing fewer buyers. With the UK entering recession and household incomes falling due to an expected rise in unemployment, house prices could fall at a much faster pace.

Britain’s leading housebuilder to write-off £600m

Britain’s leading housebuilder Persimmon will be writing off £600 million, amounting to nearly 19% of its land value.

The York based company has warned that the housing market downturn was gathering momentum making it forecast a fall of 10% in the selling price of new houses during the second half of the current year, which is twice the estimation it made previously.

The house builder informed that 40% of buyers who had paid deposits on homes withdrew it due to a continuous fall in house prices and mortgage shortages which impacted the property market adversely. The company has been passing through worsening trading conditions.

Persimmon reported that uncertainty in the housing market as a result of turbulent outlook of financial markets impacted all its regions. However it reported positive results in social housing sales and claimed that a 25% growth target was well on track.

Meanwhile, the Centre for Economics and Business Research (CEBR) predicted a 25% fall in house prices by value from their peak. It believes that prices will not recover to the peak attained in 2007 until 2013.

The downturn is reported to have claimed another victim after the takeover of David McLean Holdings Ltd by administrators. The Flintshire-based company with offices in Shrewsbury and Cardiff employs 320 people.

75% of UK mortgage lenders delayed passing on 0.5% rate cut

According to information released by the financial information provider, Moneyfacts, 75% mortgage lenders have yet to pass on 0.5% rate cut in interest to the borrowers even after a month.

It was reported last week that further cuts in rates would be coming soon after admission from Prime Minister and Bank of England’s Governor that the UK was heading for a recession.

However, Darren Cook of Moneyfacts believes that there would be no impact of further rate cuts on the outgoings of a majority of households and it would ultimately lead to an increase in repossessions.

According to the data, less than 50% of 96 lenders have passed on rate cuts to homeowners, with the exception of some including Northern Bank and Halifax which reduced SVR for new borrowers by 0.5%

The spokesperson of consumer organisation Which? alleged that banks were having their cake and eating it too and urged Government to ask lenders to lower rates.

HSBC cut its rates after 8 days by 0.49% and has not yet reduced variable mortgage payments.

Skipton Building Society is keeping their SVR unchanged, although it reduced interest rates on savings accounts by 0.5%.

Other lenders including the Manchester Building Society, Ipswich Building Society, the Mansfield Building Society and West Bromwich Building Society would be adopting same method followed by Skipton.

Ray Boulger, broker at Charcol, believes things should change next month and advises consumers to wait for a few days before shopping around.

Judges in the UK being armed with new guidelines to curb property repossessions

The alarming increase in repossessions of properties in the UK due to non-payment of mortgages has prompted issuance of new guidelines to the judges by the Government to prevent deliberate seizure of properties by the lenders.

Under the new guidelines mortgage providers will be required to satisfy the court that they tried different alternatives, such as changing the type of mortgage, extending the length of mortgages and repayment holidays, but failed and repossession was the last alternative left for recovery of money.

If lenders and building societies failed in demonstrating that repossession was the final option and no other solution could be worked out, court judges are empowered to prevent or adjourn repossession as per new guidelines.

The measure has been welcomed by the Council of Mortgage Lenders which provides 98% of residential lending in the UK. According to Director General Michael Coogan, general public was deeply concerned about repossession.

The Council has asked its members, through new guidance, to reassure consumers that lenders were genuinely committed to use repossession option only as last resort and that measures to ensure protection of consumer interests were in place.

Citizen Advice Bureau has asked all people experiencing problems in making payments, to seek its advice at the earliest. Bureau’s director of Policy Teresa Perchard, while welcoming the guidance stated that it would be a good yardstick for practical treatment by lenders to their borrowers and money advisers.

House prices likely to fall 35% next autumn

Capital Economics, an economic forecasting agency, is predicting a 35% crash in house prices by next autumn from their last summer peak

The agency had previously forecasted a 35% fall in the prices by 2010, but the fall appeared to be much quicker in the wake of economic upheaval.

The prices are expected to remain stable for 18 months before recovering in 2011.

The fall would result in wiping off of nearly £65,000 from the average property, leading average home cost to fall to £120,000 level, which was £186,000 during property boom last summer.

The news is quite shocking for homeowners who are already facing threat of negative equity. Earlier in this week, estate agent Knight Frank had forecast that house prices would come down by 30% from high level of summer 2007and reach levels of September 2003.

According to the Standard & Poor’s credit ratings agency, 60,000 homeowners were being pushed into negative equity each month by the falling house prices.

HM Revenue & Customs (HMRC) informed that the sale of properties was down by 53% in the last 12 months. It reported only 59,000 homes were sold in September 2008 against 126,000 in September 2007.

According to Moneyfacts, repossessions were likely to increase since lenders were not prepared to reduce mortgage rates.