Calls for insurance industry to review risk management
Baroness Young, chief executive of the Environment Agency, has called for the insurance industry to withdraw cover as a deterrent to developers who plan to build commercial property on flood plains, despite being refused planning permission.
Bill Gloyn, chairman of European Real Estate at Aon (a risk management and reinsurance company), believes this is a smokescreen to hide decades of the Government’s under-investment in flood defenses.
Gloyn said: “Insurers and brokers have always played a role in risk management, including advising the property sector about adequate loss prevention in the event of a flood. Obviously, any property owner or developer facing the removal of flood insurance will need to work closely with an insurance broker to research and secure a way of transferring the risk. It is likely that cover will remain available somewhere, as it did when terrorism cover was removed from the global market, but it will take specialist assistance to achieve.”
If flood insurance is removed then the implications, under the 2007 Commercial Lease Code, would mean that the property owner is responsible for all repairs. In the event of flood damage, these could be delayed because of lack of funds and owners could also face loss of rent which tenants are entitled not to pay if the building is unusable. This potential income shortfall will concern both owners and their financiers who rely upon the rent to pay the debt.
HIPs not to blame in property slowdown
Several reports have recently been published stating that Home Information Packs (HIPs), which came into force on 1 st August, have slowed the residential housing market down.
Jeff Smith, chief executive of HIP Payment Services, is keen to point out that HIPs were designed to improve the process, enabling faster and smoother transactions.
He said: “One of these reports is Rightmove’s latest index in which they attributed the reported fall in asking prices almost entirely to the launch of this new reform. Despite announcing the lowest number of sellers in September since 2004, we are also told that asking prices have in fact dropped. I fear that Rightmove can’t have it both ways – surely the laws of supply and demand are quite clear, a reduction in supply should have forces prices up, not down.”
The launch of HIPs was restricted to larger, typically more expensive homes with four or more bedrooms which makes up 17% of the entire market and HIPs has already been extended to homes with three bedrooms or more, with the rest of the housing stock soon to follow.
Smith adds: “If property prices have indeed fallen over the last month, instead of HIPs taking the blame, perhaps lenders should take into account the severe weather conditions, the three interest rate rises experienced this year and the current turmoil in the US which is threatening to filter through to the UK property market, and not the introduction of HIPs to 17% of the market.”
Buy-to-let investors cashing in on demand for rented housing
According to the Royal Institute of Chartered Surveyors (RICS), buy-to-let property owners in the UK are cashing in on increasing demand for rented housing.
RICS suggests that the current economic climate in the UK is ideal for buy-to-let investment. More and more would-be home owners are spending longer in rented housing before taking on a mortgage, and this has seen buy-to-let landlords increase their tenant numbers.
Jeremy Leaf, RICS’ spokesperson, said: “Current economic uncertainty has created an ideal platform for buy-to-let investors to cash in on rising rental levels. Many would-be buyers have decided to wait and see how the interest rate cycle will affect the market.”
Mandatory requirements of Tenancy Deposit Scheme are understood
Nearly two thirds of all landlords (63%) and nearly half of all tenants are now believed to understand the mandatory requirements to protect deposits and provide for dispute resolution, says the Tenancy Deposit Scheme.
The improvement is demonstrated in results from separate surveys carried out among both letting agents and landlords during August. 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. Previously 54.5% of landlords and only a third of tenants understood the requirements.
The results from the survey of landlords were more optimistic, suggesting that 90% are now fully aware of their mandatory obligations. These requirements became law last April.
Lawrence Greenberg, chief executive of the Tenancy Deposit Scheme, said: “Although many tenancies are arranged for an initial six-month period, industry figures show that the average length of tenancies is now 18 months. The outcome from this would be a more gradual build-up in demand for dispute resolutions.”
Plans to regenerate Aylesham have been submitted
The plans for the multi-million pound development of Aylesham have been submitted to Dover District Council (DDC) planners.
The 10-year project includes the development of up to 1,110 environmentally-efficient homes (of which 20% will be affordable), new and improved shopping facilities, job opportunities, community services and related infrastructure on approximately 46 hectares. Ward Homes and Hillreed Homes are the developers responsible for it.
Nadeem Aziz, chief executive of DDC said: “ We are very pleased to receive the plans for the development of Aylesham, which will be given full consideration through the planning process. This is an exciting step in working to develop a quality future for Aylesham and the district.”
Building works are expected to commence mid-2008, with the first completions of new homes later that year.
One in ten chance of a housing market crash, says RICS
According to the Royal Institute of Chartered Surveyors (RICS), the chances of a 1990’s-style housing market crash is one in ten.
A crash would mean a drop in property prices of about 20%. Prices in the 1990s plummeted by 35% over six years allowing for inflation.
Simon Rubinsohn, chief economist at RICS, said: “It would be foolish to rule out the possibility of seeing one unfold. There’s a 90% chance things will stay the same and are not going to change unless a pretty horrible set of conditions falls into place.”
He also said there was a 20% chance of a 10% fall in London house prices over the next 12 months.
Bank of England will bring down LIBOR rate
The Council of Mortgage Lenders (CML) has welcomed the Bank of England’s decision to inject an initial £10bn of three-month maturity funds to banks against collateral including mortgages.
This should bring down the three-month LIBOR rate, against which some borrowers’ mortgage rates are linked, and which affects the price of other wholesale funding including mortgage backed securities.
LIBOR stands for London Inter Bank Offer Rate, which is the rate of interest at which banks offer to lend money to one another in the wholesale money markets in London.
CML believes this intervention will help to restore liquidity and confidence in the iterbank lending market, and shows that the Bank of England is serious about ensuring that banks have the liquidity they need.
Michael Coogan of CML said: “This support should enable three-month funding costs to decrease and get back to more normal levels. This is good news for lenders and for their customers, particularly those with mortgages linked to LIBOR for whom hefty increases in payments were looming.”
BPF welcomes Mayor of London’s housing strategy
The British Property Federation (BPF) is pleased with the Mayor of London’s new housing plan which calls for measures to encourage institutional investment to create a professionally managed and wide ranging private rented sector which the Government should then adopt country-wide.
BPF believes that encouraging more property companies to develop and invest in the private rented sector would boost supply, improve service and provide quality-run accommodation for those unable to get on the private housing ladder, and don’t quality for social housing.
Ian Fletcher, BPF’s director for residential policy, said: “The Mayor is to be commended for recognising the importance of the sector and integrating it into his strategy. This is a sharp contrast with the recent housing green paper, which was silent on the use and role of the private rented sector.”
CML says we’re not out of the woods yet
Gross mortgage lending by banks, building societies and specialist lenders fell by 6% in August 2007 (£32.2bn) compared with July 2007 (£34.1bn), according to the Council of Mortgage Lenders (CML).
This month, a number of lenders have withdrawn certain lending products, amended their lending criteria, or re-priced their deals. However, not all the re-pricing has had the effect of increasing the cost to the consumer as some lenders have reduced the rates on their fixed rate mortgage products. Initial indications suggest that September’s lending volumes remain robust.
Michael Coogan, CML director general, said: “Lending fell slightly in August, but was still at very high levels. We see no obvious decline in consumer demand, although some decrease in the supply of lending is being experienced in the short-term as a result of the problems lenders face in raising wholesale funding.
“The events of the past week have shown us how very quickly situations can change. Even after the good news on inflation falling back to 1.8%, the Fed’s rate cut and the Bank of England’s support for three-month funding, it is not a given that the Bank will follow suit on cutting rates. It makes sense for consumers to continue to plan for rates at or close to their current levels for the foreseeable future; we are not out of the woods yet.”
£390m regeneration scheme set for Nottingham
Nottingham’s city leaders have given outline planning permission for a £390m 28-acre regeneration scheme led by English Partnerships and ISIS Waterside Regeneration.
Outline planning has been granted for the Trent Basin scheme, located between Nottingham Canal to the west, and the racecourse to the east. The development is set to transform one of the city’s most rundown areas into a modern riverside community, with 2,200 flats and houses, offices, shops, bars, restaurants and waterside facilities. Work on phase one of Trent Basin is expected to begin next year, and should take two years to complete.
Mich Stevenson OBE, chair of Nottingham Waterside Ltd, said: “ Trent Basin is Nottingham’s most significant regeneration opportunity. The scheme will herald the next phase of the city’s massive regeneration plans and will inject real community life into this run-down area of Nottingham.”
