The latest Nationwide House Price Index found that house prices fell by -1.7% in July, which is more than double June’s fall of -0.8%.
This is the ninth consecutive month that the index has recorded a decrease. According to Nationwide the average house price now stands at £169,316 from £172,415 in June. House prices are now -8.1% less than they were 12 months ago, meaning that the average house has lost almost £15,000 over the last year.
Fionnuala Earley, chief economist at Nationwide, believes the lack of credit has played a major part in the slowing of housing market activity and therefore the fall in house prices. Earley is of the opinion that although there are no signs that the market will recover quickly there may be a glimmer of hope for borrowers. If oil prices continue to fall and the Monetary Policy Committee (MPC) believes there is control over inflation then they could reduce the base rate sooner than expected.
A spokeswoman for Nationwide told PIN: “A cut in the base rate could help to stimulate the mortgage market, but it is unlikely in the short term given the weaker economy. As the economy is slowing, it is difficult to see what would turn sentiment around rapidly in the housing market. However, falling fixed-rate mortgage deals may begin to stimulate some activity, and falling house prices will have improved affordability a little.”
Abbey takes greatest share of new mortgages
According to the Council of Mortgage Lenders (CML), HBOS has been surpassed by Abbey as the largest supplier of new mortgages in the market in Q2 2008, although HBOS retained its title throughout 2007.
The CML’s statistics found that in 2007 HBOS retained the number one spot for both outstanding mortgage balances and gross mortgage lending with approximately a 20% share of both markets. Unsurprisingly the other major lenders filled out the rest of the top ten, with Nationwide Building Society increasing their market share by the most for gross lending from approximately 7% in 2006 to 9.3% in 2007.
Abbey’s recently released Q2 2008 results showed that the lender is now selling 35% of all new mortgages. With a 15.9% market share in Q1 this puts its half-yearly total share for net lending at 26%. Abbey was closely followed by Lloyds TSB who announced a 24.4% share of the market. HBOS’s market share fell by 15% in H1 2008 to just 9%.
A spokeswoman for Abbey told PIN: “Since September 2006, we have been managing the profitability of our mortgage business, carefully maintaining a balance between the margin of new business, prudent lending criteria and our market share aspirations. We held back our market share during H1 2007 when margins were low or unprofitable. Since then, as others have withdrawn from the market, we have taken the opportunity to take higher-margin, low loan-to-value business and focused on retaining our existing customers .”
Shopping centre sales increase in Q2
Knight Frank and Savills have both recently released their quarterly evaluations of the shopping centre investment market. Both reports found that the ‘stand-off’ between vendors and purchasers over prices continues to affect an already subdued market.
Shopping centre sales in Q2 2008 totalled approximately £570m, which according to Savills was a £260m increase over the first quarter. The Q2 increase still leaves the market severely down when compared to Q1 2007 where the total sales reached approximately £2.8bn. Private property companies dominated the market in Q2 with The Carlyle Group’s £268m purchase of three shopping centres becoming what Knight Frank found to be the largest transaction since Q2 2007.
The reports differ in their outlook for the rest of the year. Knight Frank believes that if some equilibrium is restored to property values then it expects activity to return to the market by Q4 2008. Savills is more pessimistic in its outlook expecting activity to return in Q1 or Q2 of 2009 due to the lack of liquidity in the financial markets
Mark Garmon-Jones, director of Savills’ Shopping Centre investment team, told PIN: “Q2 2008 was characterised by a small number of very large deals. Deals have been taking longer to happen and so many of those completed in Q2 had been in the pipeline for some months. This stand-off between vendors and purchasers is still a problem and until vendors' pricing aspirations move more in line with purchasers’, we are unlikely to see the situation improve.”
“Housing market is beginning to stabilise”
Haart estate agent believes that the housing market is beginning to stabilise with prices expected to increase in the first half of 2009.
Haart, who spoke to 100 branches across London, found that property prices decreased by -0.2% in July and that the average house price in the Capital fell to £248,155 in July from £248,642 in June. The estate agent found that house prices have already fallen by -14.5% this year and it forecasts prices to fall by a further -5% by the end of 2008.
It also found that the level of enquiries by first-time buyers was the highest for 11 months as it increased for the third consecutive month by +20.5%. Haart believes that as prices have continued to fall across the Capital affordability has begun to increase, although strict lending criteria is still a major obstacle for first-time buyers.
Russell Jarvis, managing director of Haart, said: “Conflicting house price figures are being published all the time, but estate agency data shows what is actually happening on the ground in real-time and these are the numbers we should be paying attention to. There are clear indications that the market is over the worst now, as prices have dropped by over -14% so far this year. At most, we are expecting a further -5% fall in 2008.”
Glasgow Caledonian considering move to Clyde Gateway
Glasgow Caledonian University (GCU) is considering moving its entire campus to the east end of Glasgow as part of a proposed £1.5bn regeneration scheme.
The Clyde Gateway Project (CGP) plans to regenerate East Glasgow and South Lanarkshire, one of the poorest areas of the country, through a process of physical, social and economic change. The project plans to supply the area with 10,000 new homes, over 4.3m sq ft of commercial space and 20,000 new jobs.
Glasgow City Council has proposed that the Athlete’s Village for the 2014 Commonwealth Games will be developed in the heart of the Clyde Gateway and after the Games the site will become a residential community including 300 homes for rent, a 120-bed care home and following the removal of temporary facilities, further space for residential development. The proposed site for the move by GCU would be adjacent to the Athlete’s Village. If the move was to become a reality then it would give the east end of the city its first university and provide an educational focus for the forthcoming regeneration.
A spokesman for the CGP told PIN: “Clyde Gateway can confirm that we have held preliminary discussions with GCU.”
Ian Manson, chief executive for the CGP, added: “The Clyde Gateway used to be synonymous with successful industries but has now been in decline for 40 years. Our aim is to return to those ‘powerhouse’ days both through new developments and the reinvigorating of existing industries. We aim to improve the challenging conditions faced by the local communities.”
Revised spatial strategy unveiled for North East
The revised North East Regional Spatial Strategy (NERSS) has been unveiled, setting out a proposal to deliver new homes, jobs and infrastructure for the region by 2021.
The NERSS has identified the delivery of 128,900 new homes as being essential for the region. Equating to 7,600 new homes a year this is hoped to cover its forecasted increase in households of 6,647 per annum. The plan supports the goal of the creation of 73,000 new jobs by 2021, as set out in the Regional Economic Strategy. To achieve this goal the NERSS has identified 3,400 hectares of land which will be used for new business.
Jim Darlington, chief planner for One NorthEast, told PIN: “The current challenging economical conditions mean it has never been more important to focus on the long-term vision of the housing and infrastructure that will be needed to support future economic growth. In the short-term, the region clearly isn’t immune to the effects of the global slowdown and the current economic uncertainty. This means it is even more important for the region to focus on its priorities and to continue developing innovative methods of delivery and partnership to drive future growth.”
Buy-to-let interest rates continue to fall
According to buy-to-let broker Jeff Irvine, some normality has returned to the buy-to-let mortgage market as lenders’ interest rates continue to decrease.
For many months the buy-to-let mortgage market has suffered from a drought of new products and high interest rates on those that were still available. Over recent weeks the market has seen some lenders begin to lower their rates and cautiously introduce new buy-to-let products. Woolwich, the mortgage arm of Barclays, recently reduced some of its buy-to-let mortgages by up to -0.5% and over a two-week period The Bank of Ireland launched five new products. Brokers have now started to offer a more positive outlook.
Jeff Irvine, a director with Mortgages Inc, told PIN: “Normality seems to be returning to the buy-to-let market. Lenders are continuing to drop interest rates and they are now at the same level as they were four months ago. Lending criteria is still strict and I do not believe the requirement for high deposits is going to change in the foreseeable future. High risk first-time landlords are still being kept out of the market but this opens the door for experienced landlords with larger deposits.”
Yield gap between prime and secondary widens
According to the latest Jones Lang LaSalle’s UK Property Index, annual commercial total property returns were at its lowest figure since the index began in 1978 of -15.1%, as total returns continued to suffer in Q2 2008 with returns of -1.3%.
This was due to the rapid correction in pricing over the last 12 months with all property income yields increasing to 6.06%. Combined with the slowdown in rental growth, capital values fell -19.7% over the same period. The latest IPD Monthly Index to June 2008 recorded a similar fall of -19.3% in capital values.
Jeremy Handley, a director in valuation advisory at Jones Lang LaSalle, said: “Following similar negative returns last quarter, the Style Index showed a divergence in returns between growth and value stocks over this quarter which reflects a bigger fall in capital values in value, or secondary assets. Over the 12 months to June 2008 value of properties recorded a -21.5% fall in capital values compared to -18.6% in growth properties. We anticipate the yield gap between prime and secondary stocks to continue to widen over the coming months reflecting the re-rating of value stock particularly given the risks amplified by a slowing economy.”
Rents to rise by 10 to 15% in both 2008 and 2009
According to The Modern UK Housing Market, a report commissioned by the National Federation of Property Professionals (NFPP), rents are predicted to rise by 10-15% in both 2008 and 2009.
The report expects these increases to occur as affordability problems continue and first-time buyers find that they are unable to make the first step onto the property ladder. Currently 56% of 30-34 year olds are able to afford a new-build flat. With the increase in desirable and well maintained property people are deciding to stay in the rented sector for longer as it offers them a flexibility that would not be available if they had a mortgage.
Malcolm Harrison, spokesman for the Association of Residential Letting Agents (ARLA), told PIN: “The report shows that rents are rising, aided and abetted by the credit crunch and the crisis in the mortgage market. There was already strong demand for rental properties and this is increasing all the time. Combined with this and the traditional counter cylindrical response to the credit crunch in the rental market, rents are now rising at a greater rate.”
MPC hold base rate at 5%
The Bank of England (BoE) has held the base rate at 5%, which is the fourth consecutive month that the Monetary Policy Committee (MPC) has left it unchanged.
The MPC continued to face a tough decision regarding the base rate as the need to curb inflation, which at 3.8% has increased above expectation, had to be measured against a cut in the interest rate which would hopefully stimulate activity in the property market.
The US Federal Reserve also recently left its interest rate unchanged at 2% and it faced the same challenge as the MPC in balancing the risk of rising inflation against attempts to manage the credit crisis.
Peter Bolton King, chief executive of the National Association of Estate Agents (NAEA), told PIN: “We are disappointed as we would have liked to have seen a reduction in rates in a bold attempt to re-start the housing market. A cut in rates would have helped to stimulate consumer confidence at a time when individuals’ self-assurance has taken a heavy hit. We know that a positive housing market is essential for the overall economy. Reducing the rate would have sent a clear signal to the market, encouraging lenders to reduce their rates and allowing the current mortgage shackles to be loosened giving the market the positive impetus it needs.”
Mortgage News
In PIN’s latest weekly mortgage recap, Tim Warburton reports…
The Bank of Ireland has introduced three three-year fixed-rate buy-to-let remortgage products. For those with a 75% loan-to-value (LTV) interest rates of 6.79% and 6.89% are available with fees of 2% of the advance or £1,299 respectively. For those with an 85% LTV the interest rate is 7.24% with a fee of £1,299. All three require 100% rental cover. It has also reduced the interest rates on some of its buy-to-let range. This includes its five-year fixed-rate which has been reduced by 0.25% to 6.74% with a 75% LTV, a fee calculated at 2% of the advance and 100% rental cover.
Bristol and West has introduced a three-year fixed-rate buy-to-let deal for remortgage only. It has an interest rate of 6.99%, 75% LTV and fees calculated at 2% of the advance. The product comes with free valuation and legal fees.
Principality Building Society has reduced interest rates on two of its tracker and fixed-rate products. A two-year tracker is now available for an initial rate of 5.99%, a reduction of 0.40%. A three-year fixed-rate is now available for 6.44%, a reduction of 0.15%. Both deals have a 60% LTV and a fee calculated at 2.5% of the advance.
Coventry Building Society has withdrawn its five-year fixed-rate buy-to-let mortgage and replaced it with two three-year fixed-rate deals. Both are available for those borrowers with a maximum 65% LTV. The interest rates on the products are 6.69% and 6.99% for arrangement fees of £1,999 and £999 respectively. These products are limited to a maximum of three properties in a portfolio. The deals are available for direct business only, and the intermediary equivalent is available through Godiva Mortgages.
Pierre-Jean Stracuzzi, director of Peter John Independent Mortgage Brokers, told PIN: “We have seen a few lenders announcing lower residential mortgage rates over the last few weeks. Hopefully this is a sign that things are improving as swap rates come down. We are starting to see some lenders offer better interest rates on their buy-to-let products. Although we are beginning to see a little improvement in buy-to-let, it is still going to take some time before the market picks up.”
