The National Association of Estate Agents (NAEA) welcomed the Bank of England’s forecast that two interest rate cuts will be needed by next summer to help relieve the current economic slowdown.
Peter Bolton King, chief executive of the NAEA, said: “I’m delighted with the announcement made by the Bank of England. It is really encouraging to see that it has recognised the effects that the past interest rate rises have had on the market and indeed consumer confidence.
“The housing market has cooled and the past 12 months have left consumers looking for reassurance. A decrease in interest rates in 2008 will give consumers confidence and lead to a pick up in the housing market.”
Gross mortgage lending £32.4bn in October
Gross mortgage lending grew to an estimated £32.4bn in October, rising nearly 6% from £30.6bn in September 2007 and October 2006, according to the Council of Mortgage Lenders (CML).
While the increase is higher than the 3% seasonal rise that might typically be expected between September and October, the figure predominantly reflects applications and approvals from before the mortgage market became affected by wholesale funding problems.
CML expects mortgage advances to be somewhat lower over the rest of the fourth quarter, reflecting the Bank of England’s data that shows mortgage approvals have declined during the third quarter.
Michael Coogan, CML director general, said: “The next few months will be a testing time as ongoing pressures in financial markets feed through into the wider economy. Funding constraints will continue to restrict lending activity and make loans more expensive.”
One in three UK commercial buildings owned by foreign investors
According to commercial insurer, Royal and SunAlliance’s (R&SA) new report UK for Sale - Global Investment in UK Commercial Property, a third of the UK’s commercial building stock is owned by foreign investors.
Overseas-based investors directly own nearly a quarter (22%) of all commercial buildings in the UK and an additional 10% through investment funds. In contrast, overseas companies with a physical presence in the UK own just 1% of the UK’s commercial buildings. The report also found that investment in UK commercial property has grown by one third over the past seven years, with the market seen as offering a steady return on investment.
Between 2000-2006, the total value of commercial buildings increased by 23.6% to £741bn, while around £21.7bn of commercial stock is estimated to have been under construction between 2006 and 2007, reflecting continued confidence in the UK economy. New orders for commercial construction amounted to £16.6bn in 2006 alone.
Nigel Salisbury of R&SA said: “The robust nature of London’s market in particular has made it especially popular with investors, who have always seen the capital as a safe destination for their money, capable of generating steady returns.
“Over time, we expect to see increasing competition from emerging markets such as Eastern Europe and in due course, further afield in China and India, as people become increasingly confident about investing in these rapidly expanding economies. However, in the long run we believe the outlook for the UK remains healthy, so long as the economy also continues to stay in reasonable shape.”
Regeneration of Thames Gateway is a ‘calamity’
According to the Public Accounts Committee, the regeneration of Thames Gateway risks becoming a public spending ‘calamity’ because the Department for Communities and Local Government (DCLG) is unable to manage the project.
It said the DCLG risked failure over the ambitious project because of poor planning and a disjointed approach.
The Thames Gateway regeneration project is centred on the 40-mile area between Canary Wharf in London and the mouth of the River Thames. The Government is planning 160,000 new homes and hopes for 180,000 new jobs by 2016. If successful, it could add £12bn per annum to the economy.
However, Edward Leigh, the committee’s chairman, said: “It still amounts to little more than a group of disjointed projects which do not add up to a programme which is purposeful and moving forward. The department, at present, is manifestly not up to the job of managing the enormous ambitious enterprise of regenerating the Thames Gateway region.”
London best bet for buy-to-let
The latest house asking price index from Rightmove showed that London remains one of the most attractive areas of the UK for landlords with buy-to-let investors looking for strong returns on their investment.
The potential for capital appreciation is stronger in the capital than anywhere else, according to Rightmove, with house asking prices in London having risen by 2.3% in November.
This compares with an overall fall of 0.7% in England and Wales, with the firm suggesting that constricted supply is playing an important role in ensuring that London’s housing market remains healthy.
Miles Shipside, commercial director at Rightmove, said: “Whilst bargain hunters will be paying less for these properties, prices will rise where demand continues to outstrip supply in quality areas close to major conurbations, especially London.”
Investment in Irish property is its second highest ever
Investment in Irish property is expected to hit its second highest level ever this year, according to Savills Hamilton Osborne King (acquired by Savills last year).
The company predicts that €45bn (£32bn) will be spent on both residential and commercial property by the end of 2007. Savills Hamilton Osborne King says that while that represents a 17% reduction on last year's record high, it is still a relatively strong performance.
The slowdown in the industry is quite noticeable in the new homes area, which seems set to fall from €29bn (£20bn) in 2006 to €23bn (£16bn) this year. However, it is anticipated that it will be a record year for the office sector, with take-up likely to exceed 250,000 sqm.
The uncertainty in the Irish market has led to an increase in overseas investment, with 22% of this year's total spend going abroad compared to 15% of last year's total.
Despite the slowdown in growth, Angus Potterton, managing director of Hamilton Osborne King, remains upbeat about the sector's prospects.
“While there have been plenty of predictions regarding the demise of the property market, the reality is that it's not all doom and gloom. We look forward to a busy 2008 and forecast a steady year ahead for most sectors”, he said.
FSA urged to crack down on BTL market
The Financial Services Authority (FSA) will need to crack down in the buy-to-let market next year, according to Landlord Mortgages.
Lee Grandin, managing director of Landlord Mortgages, said more advisers needed to include risk warnings when selling buy-to-let products to protect themselves from litigation. He said: “It is fair to say that novice buy-to-let investors are most at risk from inappropriate investment return claims made by mortgage brokers and investment advisers.
“I am surprised that the FSA has not given guidance to buy-to-let mortgage brokers and mortgage lenders on what it expects them to disclose in respect to likely investment returns.”
The buy-to-let market is beginning to come under scrutiny as pressure in financial markets continues.
£25m regeneration scheme set for Wales
A multi-million pound scheme to regenerate housing in Wales has been announced.
A total of £25m in grants will be given to communities across the country in housing renewal aid from the Welsh Assembly Government. Each council will have its own action plan to improve housing and amenities.
Jocelyn Davies, deputy minister for housing, said: “This programme will improve the quality of life for thousands of people across Wales, helping to restore confidence in towns and villages in need of regeneration.”
Third runway at Heathrow
Willie Walsh, the chief executive of British Airways, has warned that Britain faces a low-growth future if the Government fails to allow a third runway to be built at Heathrow.
In a strongly worded speech to the Guild of International Bankers, Walsh said building the runway would benefit the UK economy to the tune of £9bn a year.
Walsh argued Heathrow has lost its position as Europe's number one airport with the number of destinations served by the London hub falling to 180 from 227 in 1990 because of a ‘chronic shortage of runway capacity’.
Walsh said that a public consultation over a third runway at Heathrow is expected to be launched soon and added that building it would prove crucial to ending ‘the Heathrow hassle of queues and flight delays’. His comments followed the Civil Aviation Authority’s (CAA) warning to consumers that the cost of flying into Heathrow and Gatwick will rise over the next five years.
The Callcutt Review
The Callcutt Review, headed by John Callcutt, aimed to examine how the supply of new homes is influenced by the house building industry.
Ian Fletcher, director for residential policy, said: “We are particularly pleased that the review recognised the potentially important contribution that market rented and shared ownership property can make to sustainable communities and hope the Government will be ever more supportive of the professional rented sector, as it seeks to cement greater levels of housing supply.
“Callcutt recognised the challenges of mixed-use and commercial regeneration. The intention to examine obstacles to this process will therefore be welcomed. In a bid to avoid the 'doughnut effect’ - where activity migrates to the edge of our towns - the review is right to place a stress on local authorities delivering urban regeneration sites and the partnerships they should be seeking to foster with developers to develop these out.”
