The latest survey from the National Association of Estate Agents (NAEA) has revealed a slow October housing market as the number of buyers on books, houses available and sales agreed took a tumble.
The number of house buyers on estate agents’ books was at its lowest for the last four years, with agents reporting an average of 282 buyers registered in comparison to the 326 recorded in September. The second lowest figure recorded was in December 2005 with an average of 302 buyers reported, which indicates that the market is experiencing the type of slowdown often experienced in the festive period.
With a downturn in the number of house buyers, the properties on agents’ books saw a slight reduction as NAEA members reported an average of 65 properties per agent for sale in October, compared to 80 properties in September. However, when compared to the same time last year, the figure is slightly up as 64 properties per agent were recorded in October 2006.
Also, the number of sales agreed per agent was down in October with on average 10 sales reported, compared with 11 in September 2007. This is a significant drop from the same time last year when a figure of 14 sales was reported for October 2006, but reflects the current caution in the housing market.
In addition, the percentage difference between asking price and sales price widened in October to 4.2%, which is an increase on September’s figure of 3.9%, and October 2006’s figure of 3.1%. This widening gap reflects that it is fast becoming a ‘buyers market’ again.
House prices down for second consecutive month
Residential house prices fell slightly for the second consecutive month, according to Hometrack. Average values fell by 0.2% in November following a 0.1% fall in October with the annual rate of growth falling back to +3.6%, the lowest rate of growth since July 2006.
Prices fell across 20% of the country with half these falls concentrated in southern England where demand has decreased the most over the last few months. Since July, buyer registrations in London, South West and the East were down by over a third, while in the South East they were down by closer to 40% over the same period.
The downward pressure on prices is greatest in these southern regions where the market is slowing off a high base after very strong market conditions seen over the first half of 2007. Prices were down by 0.2% in London, the South East and South West with above average falls in the Central London and City area (-0.5%) and South West London (-0.4%).
Richard Donnell, Hometrack’s director of research, said: “As a result the Christmas slowdown looks to have started early but the underlying market conditions remain weak with new buyer registrations down by 26% over the last five months.
“While the downward pressure on prices is coming from the demand side, values are being supported by a continued tightening in supply, with levels of housing for sale contracting by a further 2.9% over November. Most people are now waiting to see if there will be an improvement in market sentiment in the New Year. While the economic fundamentals remain strong, it is hard to see the catalyst for any short term turnaround in market confidence other than interest rate cuts early in the New Year.”
Reduced city bonuses affects prime London residential property
According to Savills research, reduced city bonus expectations have led to a noticeable shift in the profile of buyers of prime London residential property.
Lucian Cook, director of Savills research, said: “The biggest impact has been in the £2-£4m price bracket where the proportion of buyers employed in the financial and business sectors has reduced by just over 25% since August this year.”
There has not been any significant impact below £1m because city buyers are less active in this market or above £4m where overseas money is dominant.
However the impact is also being felt in the £1-£2m category. In this price band the proportion of city buyers is down by 20%.
Cook again, “The beneficiaries of reduced city demand have been buyers previously unable to compete with big bonus buyers who nonetheless have accumulated significant wealth from the likes of the property, IT and media industries”.
Cheap fixed rate deals are harder to come by
Borrowers struggling to find a cheap fixed rate deal are turning to tracker mortgages as speculation mounts that the Bank of England will cut interest rates.
Mortgage lender GMAC-RFC believes that in the current economic environment it makes financial sense to switch to a mortgage which tracks the bank’s base rate.
GMAC-RFC believes more people will turn to tracker mortgages next year, particularly buy-to-let investors looking to meet rental demands.
The Council of Mortgage Lenders (CML) is warning that as many as 1.4m homeowners could face increases in their mortgage repayments of up to 60% when their current fixed rate deals, which they acquired when rates were much lower, expire.
HIPs extended
Home Information Packs (HIPs) will be extended to one and two-bed homes from 14 th December 2007.
This news has been welcomed by the Association of Home Information Pack Providers (AHIPP), which has been calling on the Government to extend the rollout of packs across the market, since the required number of energy assessors was achieved back in September.
Paul Broadhead, deputy director general of AHIPP, said: “The final phase of the rollout will be gratefully received by our members who were beginning to feel the pressure following the Government’s delay. This vital step has now clearly reinforced the Government’s commitment to the successful implementation of HIPs and we look forward to seeing the positive impact.”
Property overvalued by 30% said HSBC
House prices in Britain are overvalued by about 30%, said the HSBC bank.
The report from the bank’s chief UK economist, which warned that the incoming property downturn would cause the sterling to plummet and force the Bank of England to slash interest rates, came as official data revealed the fastest fall in London house prices for more than two years.
The findings follow those of the International Monetary Fund (IPC) which last month calculated that homes in Britain were overpriced by up to 40%.
The credit squeeze would now prove the trigger for Britain’s housing slowdown, HSBC said. Higher mortgage costs would spark repossessions and make buy-to-let a poor investment. ‘A major source of demand in the past couple of years could then turn into a major source of supply’, the report said.
A slowdown in residential construction and consumer spending would then follow, causing growth to fall to its lowest level in a decade, the report said.
HSBC has predicted that interest rates will fall far lower than the market expects, from 5.75% at present to just 4.5% by the start of 2009, while sterling is tipped to tumble against the dollar to below $1.80.
Some mortgage firms in breach of FSA rules
The Financial Services Authority (FSA) has referred seven mortgage firms to enforcement and forced 65 firms to undertake costly reviews after a series of investigations found several mortgage brokers continue to operate well below standard.
The 65 firms will have to undertake costly past business reviews or employ specialists to resolve problems. A few firms have ceased business until they can rectify failings. The FSA said it will begin a further review in January 2008 of quality of advice for mortgage processes, and it is looking to report a considerable improvement when the work is concluded in June 2008.
The FSA is also currently carrying out a related project which is looking at the extent to which lenders are meeting the requirement to lend responsibly and expect to report the findings of this in spring 2008. The reviews examined the assessment of affordability, self-certification mortgages, training and competence standards, and the effectiveness of senior management controls.
The self-cert review targeted 48 brokers several of whom were suspected of breaching FSA rules. The investigation confirmed many serious failings, including readiness to proceed with arranging a mortgage despite doubting the accuracy of financial information customers were giving them.
Stephen Bland, FSA retail intermediary sector leader, said: “During the reviews we saw a number of good brokers who are meeting the required standards and they are being undermined by the negligence or willful non-compliance of others. However there are still an unacceptable number of firms unwilling to change and they are damaging the rest of the industry.
“We found some firms willing to offer mortgages they know to be unaffordable and to accept self-cert business even where they had concerns that the financial information provided by the customer was implausible. These practices are completely inconsistent with treating customers fairly - hence the large number of enforcement referrals and other regulatory actions.”
The Council of Mortgage Lenders (CML) urged the FSA to ensure that its guidance is as clear as possible. According to CML, the findings relate only to brokers and not lenders. The results of the FSA's review of the extent to which lenders are meeting their responsible lending requirements are due next spring.
Michael Coogan, CML director general, said: “After three years of regulation, the FSA is right to expect its regulatory standards to be in place across the whole market. These findings are a wake-up call to those brokers who are behind the pace.”
London houses prices falling the most, said Land Registry
According to Land Registry, London house prices experienced a greater fall than any other region in October.
October’s House Price Index showed that prices in London fell by 0.6%, while the market in England and Wales as a whole demonstrated a slight increase of 0.1%.
The average house price for England and Wales now stands at £184,346. In London, the figure is £351,039.
RTPI welcomed Planning Reform Bill
The Royal Town Planning Institute (RTPI) has welcomed the Planning Reform Bill.
The bill includes a right to be heard by any group that registers with the Independent Planning Commission (IPC) on a development. The Government has also stressed that the IPC will be autonomous and independent, except where the Minister think the National Policy Statement (NPS) is flawed or where it is urgent and in that case the Minister will make the decision. All NPS’s will be subject to parliamentary scrutiny.
In addition, there will be a change to the Town and Country Planning Act to speed up appeals.
Robert Upton, RTPI Secretary General, said: “The RTPI welcomed the Government’s commitment that National Policy Statements will be debated fully in Parliament before adoption. These are policy issues of great national importance, and they should be determined by MPs, ultimately accountable to their constituents.
“The introduction of the ‘right to be heard’ by an Independent Planning Commission is warmly welcomed. We agree with the Government not to include a right to cross-examination as the process needs to be manageable, and the IPC must be in control of it.”
Final proposals for CGT due in three weeks, said the Chancellor
The Government will publish its final proposals for Capital Gains Tax (CGT) in the next three weeks, and said it is still listening to business arguments against the plans.
Speaking at the Confederation of Business Industry (CBI) Conference, Chancellor Alistair Darling acknowledged his proposals to overhaul CGT had caused controversy within the business community but said the Government would press ahead with plans for a simplified tax system. He said simplification was not the easy option but was the right one to do wherever possible.
The Chancellor also defended his actions with regard to Northern Rock saying the consequences for the banking system and wider economy of not rescuing the lender would have been extremely damaging. He said: “I believe it was right to intervene; that it was right to put in place guarantee arrangements to savers. And it is right to see it through.”
