Hometrack’s latest National Housing Survey found that house prices continued to fall in June (-1%). There was also a significant increase in the size of the annual fall (-3.2%), which is the largest yearly fall since September 2005 (-3.5%).
As well as falling house prices the survey also looked at confidence in the market through the numbers of new buyers and the volumes of properties being put up for sale. The numbers of new buyers registered continued to slow (-5.7%) albeit at a slower rate than in May (-6.7%). The volume of properties listed for sale in June were still growing but slowed dramatically (+1.4%) from May’s figure (+3.5%). These figures represent a continued lack of confidence in the property market both by buyers and sellers. As mortgage finance remains difficult to obtain and house prices continue to fall, it appears that those people who would potentially enter the property market are instead watching and waiting to see where the market goes from here.
Hometrack’s figures regarding sales would not be much comfort for those waiting to sell. The survey found that the average amount of time a property is on the market has increased from 9.8 weeks in May to 10.3 weeks in June. When a property is sold the survey found that on average the seller is getting 91.6% of the asking price which is a fall of -0.7% from May.
Richard Donnell, director of research at Hometrack, said: “New buyer registrations were down 5.7% in June and have now fallen by 52% since the start of the credit crunch. This drop in volumes was always possible as around half of all transactions in recent years have been driven by non-needs based movers who are now sitting on their hands. The net result is a sizable drop in transaction volumes which look set to reach levels not seen since the 1970s.”
Mortgage finance greatest threat to property recovery
Colliers CRE (CCRE) has offered a bleak outlook for the property market as a whole in its Property Snapshot for June, forecasting mixed fortunes for the Capital.
Central London continued to perform well in the retail sector with steady consumer spending, an unchanged amount in the number of vacant units and a decreasing amount of vacant floorspace. Outside of London, larger stores are ‘downsizing’ and releasing floorspace to avoid an oversupply on the market.
In the office sector, central London is not performing as well as the Capital is facing an increase in supply as current developments are completing and of those due for completion in 2010, only 21% have been pre-let. Regionally the sector is holding up well but in some areas expansion is slowing due to a lack of supply.
In the residential market, CCRE found that lack of mortgage finance continued to be the major factor in the deterioration of the sector. Some auctioneers are continuing to find an increase in repossessed properties on their books. CCRE forecasts that house prices are set to fall by 10% by the end of the year.
Walter Boettcher from the CCRE Research and Forecasting Team told PIN: “The signs of slowing economic growth are still mixed, although confidence indicators continue to fall markedly. Bank lending constraints are still seen by most observers as the key impediment to property market recovery, both commercial and residential. Continued adverse bank lending conditions are a greater threat to property performance than potential oversupply issues whether it be City offices, regional shopping centres or logistic warehousing. Colliers CRE is penciling in a recovery in bank lending for mid-2009.”
First rights issue for housebuilding industry
Taylor Wimpey has become the first UK housebuilder to be forced into a rights issue to raise capital following a £660m loss on the value of its property.
The housebuilder said it will be writing down the value of its UK property by £550m. It also plans to cut the value of its US property and Spanish property portfolios by £70m and £40m respectively. In a statement Taylor Wimpey said: “It has become apparent that we have entered a significant downturn.”
Shareholders will be asked to help raise £500m in emergency capital to allow the board to put an ‘appropriate financial structure’ in place. Taylor Wimpey has struggled over the past year as the credit crunch has taken hold. The housebuilding industry has seen sales and prices fall and with no sign of increased mortgage availability, challenging times look set to continue over the rest of the year.
Taylor Wimpey is the first of the four big housebuilders to attempt to raise capital through a rights issue but it is also the first of these four to give a trading update. Trading updates from Persimmion, Redrow and Barratt are due in the coming weeks.
A spokesman for the Home Builders Federation told PIN: “The long term outlook for home builders is good, as there is a significant need for more housing to address the under delivery of recent years. However, the current climate for the whole industry is a challenging one, predominantly because of a lack of mortgage availability. The Government needs to take action to reverse the situation in the housing market, as the implications for the wider economy and its own long term housing targets are clear.”
Former chocolate factory to receive £185m regeneration
The site of the former Terry’s Chocolate Factory in York is to benefit from a £185m regeneration make-over.
The 25-acre site of The Chocolate Works will be a mixed-use development comprising of 350,000 sq ft of office space, spread over two floors of the old factory and throughout eight new-build units, one of which will include a digital and creative technology centre. The site will also house 41,000 sq ft of retail and leisure space including two hotels and a plaza surrounded by cafes and restaurants.
Subject to planning permission being granted work is set to begin on site immediately and it is hoped that by completion the redevelopment will help to create 2,800 jobs. The development is set to expand in three to five years with plans including 225 homes, a medical centre and a 60 bedroom care home.
Jonathan Gale, partner at King Sturge, told PIN “The Chocolate Works will become the most prestigious commercial development in York. We are aiming for completion of the first phase in about a year’s time and we expect the quality of the development to help foster increased rental growth in the York market.”
Slough retail park bought for £92m
The Crown Estate has completed the purchase of Bath Road Retail Park in Slough for £92m from SEGRO plc. The deal has an initial yield of approximately 5.5%.
The 194,485 sq ft site is fully occupied and let to 10 national retail chains including Next, JJB Sports, Mothercare and Argos. Current rental levels provide an income of £5.3m per annum. The retail park is located on SEGRO’s Slough Trading Estate and also comprises of 626 car parking spaces.
Jim Yates, head of regional and residential portfolio at The Crown Estate, said: “We completed the purchase of Bath Road Retail Park in just three weeks, sending a clear signal to the market that we are a reliable purchaser to deal with in this difficult market. Along with our acquisition of a 50% share of Crown Point Shopping Park in Leeds, this demonstrates our commitment to actively managing our regional portfolio.”
Lending falls almost 90% in May
Figures released by the Building Societies Association (BSA) showed that net lending fell by almost 90% since May 2007.
The Building Society Statistics for May showed that net lending by building societies reached a historic low of £125m in May, which is an annual fall of £1,137m from May 2007 when net lending was £1,262m. However, the monthly figures were not quite so bleak. Net lending fell for the fourth consecutive month to May’s figure of £666m in May.
The figures also showed the number of approvals for building society lending. There were 2,337 approvals in May which was a significant fall from April with 848 less approvals. The number of approvals is now at its lowest point for the last two and half years as it is currently 55% lower than its peak of 5,243 in March 2007.
A spokesman for BSA told PIN: “We are looking at a very different housing market than what we have experienced over the last 10-15 years. The full impact of the credit crunch needs to be assessed before these figures can truly be interpreted. It is impossible to tell whether the fall in net lending is an anomaly. It will take a few more months to be able to see whether lending will remain this low.”
Fall in house prices slows
Latest figures from Nationwide found that the continued fall in house prices slowed in June to -0.9% from May’s figure of -2.5%, with the average house now being valued at £172,415.
Annually, house prices continued to decline at a faster rate in June (-6.3%) compared to May (-4.4%). But these figures need to be taken in the context of house prices reaching a peak last year and that when compared to two and three years ago prices still remain high at +4% and +9% respectively.
The report also looked at the regional picture and found that London’s market was the most active and its property prices fell the least over the last year (-2.3%). Scotland had the second most active market and was the only region to experience any annual growth in prices (+0.6%). At the other end of the spectrum was Northern Ireland which had the weakest market and has seen house prices fall nearly 20%, far beyond what any other region has experienced.
Fionnuala Earley, chief economist for Nationwide, said: “ Northern Ireland continued to show by far the steepest correction in house prices across the UK. The recent falls came on the back of unusually sharp increases in prices during 2006-7. These increases were clearly not sustainable and left the market in Northern Ireland particularly vulnerable to external shocks. We are now seeing the consequences of that excess vulnerability. However, even with the last two quarters of very large falls, the price of a typical property in Northern Ireland is still higher than at the end of 2006.”
Private residential construction falls at fastest rate for over 12 years
The Royal Institution of Charted Surveyors’ (RICS) UK Construction Market Survey found that construction in the private housing sector has fallen at its fastest ever rate (-19%) in the survey’s 14-year history, putting Government targets for 3 million new homes by 2020 at risk.
The survey found that 39% more surveyors reported a fall in construction. The Government announced that the country needs at least 240,000 new homes each year from 2016 to reach its 3 million target. With 175,700 new homes built in 2007, below the current target of 200,000, and levels of construction falling significantly in the first half of 2008, these targets are beginning to look increasingly out of reach.
The survey also offered regional results which showed that all regions apart from the North showed considerable declines in the number of surveyors that reported a fall in levels of construction. The regions which suffered the fastest levels of decline were Wales, Scotland and Northern Ireland, with Scotland and Northern Ireland facing their fastest rate of decline for 12 years.
David Stubbs, senior economist for RICS, told PIN: “The Government currently needs to increase housing completions by 3.5% annually. In 2007 completions rose by 9.5% but there has been a massive fall back in housing starts since 2006 and this will affect the number of completions for the next two years. I think that Government targets are achievable but the Government will have a real mountain to climb as completions will have to rise by much more than 3.5%. It is too early to say how long this decline will continue but it would be premature for the Government to begin revising its targets. The industry will need to take stock in 2010 and see what shape it is left in.”
Wolverhampton to benefit from £1bn investment
The Wolverhampton Development Company (WDC) has announced its plan for at least £1bn of investment in regeneration projects around the city in the next 10 years.
WDC’s goal is to create 30,000 new jobs by 2031. The initial phases of development will cover over 26m sq ft of mixed-use floorspace across the city. The initial developments will include i54, a technology park which will create over 6,000 jobs; City Gate/Fordhouses, a £70m hotel and office development; Interchange, a £180m redevelopment of the city centre; the Goodyear redevelopment, a residential community which will include 650 new homes as well as Summer Row, a £300m new retail quarter which will include 600,000 sq ft of retail units and 140 apartments.
To support a regeneration project of this size the city’s transport network is also set to improve. Subject to planning permission, construction will begin on a new train station in spring 2009 which will be due for completion in 2010. This will be followed by a new bus station which will complete in 2011.
Stephen Catchpole, chief executive of WDC, told PIN: “With the scale of development in Wolverhampton there are opportunities across the board for investment, ranging from the £300m Summer Row retail quarter to opportunities for the smaller investor. We are keen for more residential investment within the city and this could benefit private investors.”
Derby’s largest ever office development announced
If plans for a 400,000 sq ft office development in Derby is approved it will become the largest ever office development in the city, claims Norseman Investments.
The £150m development, which is being proposed by Norseman Investments, will be developed over three-acres. It is hoped that the development will become the gateway to the Castleford area of the city and act as a catalyst for further regeneration in the surrounding area. The offices will form the heart of Derby’s central business district bringing up to 4,000 new jobs to the city.
Upon completion, the development is expected to house a wide variety of tenants ranging from government departments and major corporate occupiers to smaller regional and local businesses.
In addition, Derby city centre is currently undergoing a £2bn regeneration programme which is being led by Derby Cityscape. John Cadwallader, chief executive of Derby Cityscape, said: “Derby Cityscape identified this site in the masterplan process as being vital in delivering the scale of office development that Derby needs to attract ‘head office’ type uses to the city. One of the failures to attract such locations in the past has been the shortage of city centre sites of the right scale and quality this scheme deals with these issues.”
Mortgage News
In PIN’s latest weekly mortgage recap, Tim Warburton reports…
Moneyfacts has reported that the average interest rate for a two-year fixed-rate mortgage has broken the 7% barrier, now standing at 7.02%, and the average rate for a five-year fixed term deal has also increased to 6.82%. Darren Cook, mortgage expert at Moneyfacts, said: “As the rates on offer increase, so does the relative risk. More and more borrowers are likely to find the increased repayment too much to bear.”
Halifax has increased rates on all its fixed-rate products by 0.5%and First Direct has also increased the rate on its two-year fixed-rate deal by 0.16% to 6.15%.In addition, Bradford and Bingley’s residential fixed-rate products have gone up by 0.5% and 0.7%.
Following the news a fortnight ago that Abbey was to introduce a non-refundable booking fee, HBOS is introducing an ‘account fee’ of up to £275 for all of its mortgage products. The bank already charges up to £1,499 of fees for some of its products.
Abbey has cut fees on all of its offset products. Borrowers will now have to pay fees of £1,499, a saving of £1,000.It has also cut the rates on its tracker products with two, three and five-year products now starting with a rate of 6.04%.
TheCo-operative Bank has launched to new fee-free tracker mortgages. For those borrowers with a loan-to-value (LTV) of 75%, a three-year tracker will have a starting rate of 5.99% and the equivalent for those with a 90% LTV is 6.24%. These new products are only available for those borrowers who hold a current account with the bank. The bank has also increased the rates on its three and five-year fixed-rate deals by 0.7% and 0.9% respectively.
