Residential market finally levels off…but not for long
Figures released by The National Association of Estate Agents (NAEA) from its March 2007 housing market survey have revealed a levelling of activity in the residential housing market.
The number of houses for sale in March increased by 8.7% from figures reported in February 2007. NAEA members across the country reported an average of 62 properties for sale in March 2007, relatively level to the 61 recorded in March 2006. With the forthcoming Home Information Packs it is likely that those wishing to sell will accelerate their decision and put their homes on the market before 1 June.
In addition, demand continues to outstrip supply in the residential housing market throughout many parts of the UK, which in turn will continue to add an upward pressure on house prices. First time buyers are also up from 8.9% in March 2006 to 12.6% in March 2007, and it has increased slightly by 0.3% from February 2007.
Charles Smailes, NAEA president, said: “It appears that we are finally hitting a period of levelling in the residential housing market, although this is unlikely to last. There is a great deal of uncertainty in the market at the moment, the increase in interest rates and the implementation of home information packs are set to have a significant impact.
“Post 1 June, I expect new instructions to fall significantly as home sellers will have their right to speculatively test the market for free taken away from them. This will have a further impact on the already low levels of housing stock across many parts of the country”, he concluded.
Ashford is one of 4 major growth areas in Sustainable Communities Plan
Ashford is designated one of four major growth areas in the government’s Sustainable Communities Plan, alongside the Thames Gateway, Milton Keynes and Stansted/M11 corridor.
Ashford is expected to double in size by 2031, generating 28,000 new jobs and accommodating 31,000 new homes thanks to £650m investment plans. Several commercial developments are already underway in and around the town, which are likely to boost job figures further. A £65m extension to Ashford’s County Square shopping centre is underway as is the first phase development at Eureka Business Park. The Annual Business Inquiry suggests that the number of businesses in Ashford borough grew by 29% between 1998 and 2005, which is almost double the rate in the South East as a whole (at 16%). In addition, high speed trains will operate domestic services on the Channel Tunnel Rail Link in Kent from 2009.
Abigail Raymond, acting managing director for Ashford’s Future, said: “The introduction of high speed services will slash train journeys from Ashford to London by almost half to 37 minutes, which is a major selling point for Ashford as a business location. Coupled with good road links and office rents that are 70% lower than in London, Ashford is becoming an increasingly attractive prospect for investors.”
Landlord Mortgages says lenders are over-lending to novice landlords
Landlord Mortgages, a buy-to-let broker, has warned that lenders should adhere to stricter criteria when providing 100% residential mortgages to novice landlords as such inexperience is likely to increase the chance of arrears and repossession.
Lee Grandin, managing director of Landlord Mortgages, said: “Lenders are potentially setting financial traps for novice landlords with 100% mortgages, forcing them to handover their entire rental income to the lender each month, leaving them open to arrears if there are problems with rent collection. Landlords should always keep a 20% reserve up their sleeve, in case things go wrong.”
Landlord Mortgages also inferred that the Council of Mortgage Lenders were aware that lenders were over-lending to novice landlords by putting in place preparations to deal with the auctioning of repossessed properties that would not be covered by these mortgage deals. However, CML strenuously denies this.
Bernard Clarke of CML told PIN: “We are not a mortgage lender so would not have anything to do with the auctioning of properties. We won’t release buy-to-let lending figures until later in the year, but figures point to prudent lending in the buy-to-let sector.”
Block on UK regeneration funding challenged by Euro-MP
A block on regeneration funding in the UK is being challenged by European MP, Robert Sturdy, who is seeking to ensure that £1.2bn of Property Development Finance is paid out.
Sturdy maintains that regeneration funding is key to the economic and social prosperity of UK regions, urging the European Regional Policy Commissioner, Danuta Hubner, to reconsider her stance on the funding block.
Sturdy told the commission: “I represent the East of England region, one of six areas in the UK to be affected by the decision to suspend the £1.2bn still due to be paid out. By withholding the payments, the commission is completely undermining the purpose of the European Regional Development Fund, which aims to support development initiatives throughout the community.
“For many constituents these projects are the only evidence of a tangible benefit of the EU. This mismanagement not only reduces public confidence but will ultimately mean the most deprived areas, which rely on the economic benefits arising from regeneration projects, will suffer the most.”
Sturdy said the fact that the UK was the fourth member state to have funds frozen showed that current EU standards were too complicated. He said: “This needs to change to ensure the money gets to the projects which need it the most as quickly as possible.
“I urge the commission to take responsibility for this fiasco. Not just to the benefit of my region but in the interest of all member states attempting to access the funds they so rightfully deserve.”
Planning and energy white paper will reform delivering system
Regional development agencies welcome the government’s Planning White Paper, which places economic development and productivity at the forefront of the planning system.
The White Paper acknowledges that the planning system must pay greater heed to the needs of businesses and the wider economy as one of its most important objectives with a clear planning system which is an essential component in developing a successful and dynamic economy.
Tom Warburton, One North East head of environment and infrastructure, said: “We believe the planning system has the potential to deliver sustainable development which encompasses environmental, social and economic benefits. The changes to the planning system proposed in the White Paper will help ensure it is better able to help deliver this.”
Richard Lambert, CBI director general, believes the publication of the government’s white paper will help deliver major infrastructure that the UK needs.
He said: “The CBI is particularly supportive of the proposals for ‘statements of need’ for the most urgent and important projects, backed by an Independent Planning Commission, to ensure that timely and water tight decisions are made. Energy security is one of the most vital issues. One third of our electricity generation needs to be replaced by 2020, and it is not clear how we can meet both our energy needs and our climate change obligations without a continuing role for nuclear power, and also from renewable sources.”
FSA warns buy-to-let fraud is on the up
The Financial Services Authority (FSA) has warned that buy-to-let fraud may be on the increase as a rising number of rental sector investors lie to banks in order to secure the best deals.
According to reports in the Financial Times, prospective landlords are lying to lenders over such details as their income and buyer status, with some pretending to be first-time buyers. In some cases, professional landlords are believed to have said that they intend to live in their rental properties. Such behaviour, which is tantamount to fraud, is intended to secure bigger and cheaper loans.
In light of these findings, the FSA warns that banks could be facing a significant risk, putting the quality of their lending books under jeopardy. The FT highlights figures showing that a record of 330,000 new mortgages were taken out in 2006, up by 57% on the year previous.
Hamptons Mortgages recently reported that many buy-to-let mortgage products are cheaper than their residential counterparts.
HIPs to be delayed until August
The introduction of Home Information Packs (HIPs) is to be delayed until August 2007 - when they will be brought in for sales of four-bedroom properties only.
The packs were due to become compulsory for all home sales from 1 June.
But Communities Secretary Ruth Kelly told MPs the packs would now be phased in, starting with sales of large homes.
She also said that initially sellers would only have to have commissioned a pack, rather than have a completed one, before marketing their property.
The delay comes after a judge, ruling on a legal challenge from surveyors, said the energy performance certificates should be left out of the packs ‘for the time being’.
Kelly said the delay meant the packs would be able to include the energy element, which would help to cut carbon emissions by highlighting areas where energy efficiency in a property could be improved.
The legal challenge from the Royal Institution of Chartered Surveyors was based on what they said was a lack of proper consultation on the packs.
There have also been concerns that there are not enough people trained to carry out the environmental checks on properties.
Commenting on the announcement, CML director general, Michael Coogan said: “Today's hasty announcement marks the latest in a series of climb downs and pportunistic amendments. This cannot be an appropriate way to make policy.
“We support energy improvement measures. But, in our view, HIPs are not a prerequisite for delivering the green agenda. With the fundamental lack of confidence that now exists in them, we urge the government to ditch the gold-plating and concentrate on better ways of delivering its objectives.”
Property prices in Scotland dip by 2.2%
According to statistics from Registers of Scotland, the average price of a Scottish residential property has decreased by 2.2% over the last quarter.
While an average property in Scotland would set buyers back £143,055 during December 2006, the same residence would now only cost £139,836.
Regionally, property prices in Lothian are the most expensive with the average price recorded at £178,139, constituting a 1.5% decrease on the previous quarter but still 11.3% higher than for the same period last year. The Grampian region has seen the highest year-on-year growth with a 28.1% increase, boosting house prices to an average of £150,627.
South East regeneration programme angst
Plans to build 160,000 new homes as part of a massive regeneration programme in the South East may not got ahead, says the National Audit Office.
The office blames Ruth Kelly’s Communities Department for failing to produce a coherent plan for the Thames Gateway programme. The project, which has already cost £7bn, involves ‘ambitious transport’ and housing development from Canary Wharf to the mouth of the Thames Estuary.
The audit office claims that the government will miss its target of 160,000 new homes by 2016 unless it doubles the building rate. Only about 24,000 were built between 2001 and 2005.
Edward Leigh, chairman of the Commons Public Accounts Committee, said: “This ambitious vision is looking more and more like an expensive daydream.”
RICS pushes ahead with Judicial Review
The Royal Institute of Chartered Surveyors (RICS) has not withdrawn its Judicial Review concerning Home Information Packs (HIPs) following the announcement that the launch has been postponed from 1 June to 1 August 2007.
RICS believes that there are not enough energy assessors to carry out the Energy Performance Certificates on 1 June. Ruth Kelly, communities and local government secretary, said: “We are in discussion with RICS to ensure the swift and smooth introduction of HIPs and EPCs.”
Jeremy Leaf, RICS housing spokesperson, said: “The government’s decision of postponing the date shows our fears and concerns were justified. We support the introduction of EPCs; we always have. The additional time should be used constructively to iron out problems. The practical implementation of HIPs must serve the best interests of the consumer.
“However, RICS has not withdrawn the Judicial Review, it has been ‘stayed’ and can be reactivated if the government fails to deliver on its obligations. RICS has not agreed to what the Minister outlined in parliament today. We will be examining the new proposals in detail, and will continue to work in the public interest on home buying reform and climate change.”
In addition, the Honourable Justice Collins has taken a preliminary view and proposed that Energy Performance Certificates should be excluded from Home Information Packs for the time being. Teresa Graham, chair of RICS regulatory board, said: “RICS has made its final submission to the High Courts of Justice and awaits to be informed of a hearing date.”
Annual residential price growth at 11.1%
According to property firm Assetz, annual residential property price growth averaged out at 11.1% during April 2007, compared with 10.4% in March 2007.
This meant that the typical UK residential property price was £20,000 more expensive in April than April 2006. Assetz said that the asking price index had added much of the buoyancy to the averages due to sellers’ optimism, but the continued imbalance between real estate demand and supply was driving the market forward.
Stuart Law, managing director of Assetz, said: “The continued imbalance between supply and demand has been the driving force behind such positive growth in the UK, and there is little to suggest that this will be corrected any time in the near future.”
Manchester ’s buoyant commercial property market
According to JMW Solicitors, Manchester’s commercial property market is ‘extremely busy’ and has strong potential for growth.
Lower rents, good communications and a cheaper cost of living make Manchester beneficial for businesses looking to avoid the large expenses of London. Manchester is also well known internationally. Alan Burns of JMW Solicitors said that Manchester’s commercial property sector boom is smaller in terms of scale and value when compared to London but the North West city is the capital’s main rival.
Burns said: “There are always new developments coming along in Manchester. My impression is that Manchester has a very strong claim to being the second city as far as commercial property is concerned.”
Manchester was recently identified along with London and Birmingham as one of the world’s most expensive locations for prime property in a wealth report by Citi Private Bank and Knight Frank.
Rising house prices encourage home improvements
Rising residential house prices are encouraging many homeowners to improve their property to try to add value to their home, says moneysupermarket.
The price comparison site found that 42% of homeowners have recently carried out home improvements to their property and are planning on doing more in the future to increase the selling potential of their home. Around 45% of people said they believed home improvements are solely undertaken to increase the value of a property, a further 35% claimed they carry out home improvements to improve the look of their home, with any extra value added coming as a bonus.
Louise Cuming, head of mortgages at Moneysupermarket, said: “With house prices having escalated dramatically over the past five years, along with the cost of stamp duty and mortgage fees, (higher costs for moving home), many people are turning to home improvements to add value to their homes.”
