Blanchard Consultancy – the independent construction consultant

Homeowners will have to wait a decade before property prices return to 2007 levels, a leading estate agent said yesterday.

Average house prices are tumbling at a rate of £78 a day and are set to fall in total by 16 per cent this year and 11 per cent by the end of 2009, according to a forecast from Savills. This will bring the average value down from £182,080 in December 2007 to £136,123.

The London-based agent does not expect the market to show signs of recovery for another two years, with a full rebound to 2007 levels not likely until at least 2018.

It cautioned that only buyers with adequate cash will be able to take advantage of cheaper prices in the meantime, because of the lack of availability of mortgage deals.

Read more at Times online

Labels: Housing market, property prices, UK recession, uk repossesions

The Government's dithering over its position on stamp duty prompted a drop in the number of homes sold last month, according to the National Association of Estate Agents.

Sales per estate agent fell to just five on average in August, down from six the previous month and half the number of that in August last year.

Estate agents said the slump was due to buyers stalling before clinching the deal, as they held out to see what would happen with stamp duty.

More than nine out of 10 agents polled by the NAEA said government dithering had led to greater uncertainty.

Chris Brown, NAEA president, said: "August was...a month of indecision and this evidently has had a profound effect on the market, as many consumers adopted a 'wait and see' attitude while waiting for a decision from the government on stamp duty."

Reports last month that the Government was planning a temporary suspension of stamp duty on all house purchases were neither confirmed nor denied by officials.

Read more at Telegraph property news

Labels: Housing market, National association of estate agents, Stamp duty changes

A UK recession could leave up to 1.3 million households in negative equity, analysts predicted yesterday. House prices will fall by 25-35 per cent from peak to trough, compared with just 12 per cent from 1990 to 1995, the Bernstein analysts said. In the "recession case" of a 35 per cent drop, 1.3 million households, or nearly 20 per cent of mortgages, would be in negative equity and banks would lose £38bn over several years, they added.

A slowdown that sees growth of 0.5 per cent next year would result in 400,000 households suffering negative equity. The effect of the far bigger than expected fall in house prices would be offset by lower loan-to-value ratios, less activity near the peak of the market, and higher repayment rates than in the last crash.

On Thursday, Halifax's parent HBOS reported property prices down 12.7 per cent in August from a year earlier. Bernstein said the UK housing market now had strong downward momentum, with mortgage approvals collapsing, estate agents unable to shift stock and industry sentiment gloomy. "With house prices down 12 per cent so far this year on the HBOS index, and significant further falls expected, the fear of negative equity is again stalking the land," the analysts wrote.

Read the full article at The Independent Online

Labels: global recession, Halifax, Housing market, HSBOS, property analysis, property prices, uk housing

Crest Nicholson, the house-builder taken private last year by HBOS and Scottish tycoon Sir Tom Hunter, has conceded that it could breach its banking covenants if the housing market continues to deteriorate.

In Crest's first set of accounts since de-listing from the stock exchange, which it filed last week, the company warned that its financial structure was highly leveraged.

'Financial forecasts, which take account of current market conditions, do not show any breaches of financial covenants,' Crest said.

'However, if the 2008 housing market proves to be significantly weaker than we expect, there is a risk that financial covenants will be breached. Contingency plans are in place to mitigate this risk.'

Although there has been speculation about the group's financial health, it is the first time it has formally stated there is a chance this could happen. The accounts also show the house-builder made a pre-tax loss of £10.1m in the 12 months to 31 October 2007. 'Finance expenses', including interest on loans, totalled £72.5m over the period.

But trading had remained strong last year, the company stated. Underlying pre-tax profits were £102.8m, up from £100m in 2006, and total housing completions rose by 11 per cent to 2,225. The average sale price was just under £198,000, down fractionally from the average of £199,000 recorded in 2006.

Article continues at Guardian Property

Labels: Crest Nicholson, Housebuilders, Housing market, HSBOS, property development, Sir Tom Hunter, Taylor Wimpey, uk housing

House prices collapsed last month at their fastest rate since the Thirties; only 42,000 mortgage deals were agreed in the most recent figures - the lowest since records began; and housebuilders are laying off thousands of workers.

In this calamitous housing market, it is rare to find a building boss who has any good news, but Chris Chapman, chief executive of Cloud Nine, is one. Based in Redruth in Cornwall, the company has so many inquiries he is considering expansion - just about the only housebuilder to be doing so.

Cloud Nine's booming order book may have something to do with the heating costs of the homes it builds. One of its two-bedroom houses has a fuel bill of just £26 a year and annual running costs of £346. Cloud Nine is now producing some of the most advanced eco-homes in the world, at affordable prices. A basic two-bedroom house costs £88,000, plus land. For a four-bedroom detached home, you can expect to pay £167,000 plus land.

With landholders desperate to find buyers, Cloud Nine's moment has come. Its clients appear to have the cash to buy sites outright. 'We are getting a stream of people who want to buy our houses, many of whom have the finance,' said Chapman. 'We are looking to pair these up with developers who have plots, so we can create eco-hamlets, with customers buying off-plot. This is a major reduction of risk for all concerned.'

The firm has a production capacity of 250 homes a year. The houses are built in Poland on a production line, which dramatically cuts costs. Panels are pieced together on a modular basis - a bit like a sophisticated flat-pack.

Read the full article at Guardian Business Online

Labels: Cloud Nine, eco-homes, first time buyers, flat-pack homes, Housebuilders, Housing market, property prices

Kier Group, the construction, housebuilding and services group, reassured investors that it would meet full-year profit expectations this morning, despite the mounting woes afflicting the property market.

The company, which this month announced 350 job cuts in its residential division, said it continued to see "little evidence of a slowdown in the markets for construction and support services, both of which continue to perform strongly and have record order books".

The shares, which have fallen by almost 60 per cent over the past 12 months, rose by 35p to 945.5p, up almost 4 per cent.

Kier, which was involved in the construction of the Channel Tunnel rail link, said the mixed fortunes experienced by various parts of the company reinforced the benefit of having a range of businesses operating in different sectors of the market.

In a trading update covering the year to the end of the June, Kier said that the level of tender awards in construction had been "very high" and its strong order books reflected continued demand from both public and private sector clients.

It said the division continued to generate strong cashflows, contributing to a year-end net cash balance for the group of more than £140 million, not far short of the £148 miilion balance this time last year.

Article continues at Times Business Online

Labels: House market, Housebuilders, Housing market, Kier Group, property development, property prices

The Government is to benefit from the slump in the commercial property market, raking in £100m more than it expected from controversial changes to business rates.

The Government withdrew commercial property rate relief on empty buildings in April to encourage landlords not to leave buildings empty.

But rising vacancy levels in the sector mean landlords will have to pay millions of pounds more in rates on empty buildings than was forecast when the changes were introduced.

Figures from property agent NB Real Estate suggest that since the change in the law was first proposed, the number of vacant commercial buildings has jumped 15pc, resulting in a substantial increase in the rates payable on empty buildings.

Andrew Warde, director of rating at NB Real Estate, said: "This empty rates tax was conceived when the property market was performing strongly, but the downturn is heaping misery upon misery. The Government's belief that landlords keep buildings empty without good reason is just plain wrong and the blanket application of additional rates tax just doubles the pain."

Under the new legislation the 15pc increase in vacancy levels will result in landlords paying 15pc more business rates on their portfolio of empty buildings. For the Government this will result in a similar increase in its tax take on empty buildings. Original estimates ranged from £950m to £1.4bn.

Original article continues at Telegraph Business news

Labels: business rates change, commercial property rate relief, Housing market, NB real estate, property analysis, property development

Barratt Developments has won the fiercely contested takeover battle for its smaller rival Wilson Bowden with a £2.2bn agreed bid that will create the UK's biggest homebuilder.

The deal, a record for the sector, will mean a windfall of about £700m in cash and shares for Wilson Bowden's chairman and co-founder David Wilson and his family, who together own about 37% of the company.

The auction process was sparked by Mr Wilson's announcement in July that he was reviewing his family's stake. The combined group will have a 12% market share, ahead of Persimmon, and the deal is likely to catapult it into the FTSE 100.

Barratt beat stiff competition from other bidders, including a consortium led by the Scottish billionaire Sir Tom Hunter, which is thought to have been backed by the private equity arm of HBOS. George Wimpey, another builder, also made it to the final stages of the auction.

Barratt will pay 950p in cash and 1.0647 new Barratt shares for each Wilson Bowden share, valuing Wilson Bowden shares at £22.45 each.

Mark Clare, who took over as Barratt's chief executive in October, described the acquisition as "outstanding". He said: "It creates a powerhouse for organic growth going forward. This company will lead the sector."

Evolution Securities analyst Simon Brown said: "This is a coup for Mark Clare ... who has an ambition to drive Barratt to the forefront of UK housing, and with this deal he will succeed."

Barratt has secured irrevocable acceptances from investors holding 37.7% of the shares - Mr Wilson and his family, and Wilson Bowden's directors - and any counter-offer would have to be 10% higher than Barratt's agreed bid. Wilson Bowden shares fell 38p to £22.75 on news of the agreed bid.

The acquisition gives Barratt the David Wilson luxury homes brand, with an average sale price of £203,000, and while Barratt mainly operates in the north and south of England, Wilson Bowden focuses on the Midlands. Barratt has pencilled in synergies of at least £45m from removing overlap between the two businesses and increased purchasing power, while it estimates integrating the two companies will lead to one-off costs of £35m.

Mr Clare said there will "inevitably" be some job losses, but he refused to give details. He praised Wilson Bowden's management but said Barratt had not decided yet who would stay on. The two companies employ a total of 7,500 people.

Original story from Guardian Business.

Labels: Barratt Developments, Geroge Wimpey, Housing market, property prices, uk housing, Wilson Bowden

The Bank of England held interest rates steady at 5% yesterday as it decided inflationary risks were too great to allow it to cut borrowing costs to boost the flagging economy.

The monetary policy committee's decision followed a flurry of gloomy data about the state of the economy in the UK and beyond, and appeared to be backed by a senior figure at the International Monetary Fund, who suggested global inflation is back and policymakers should act aggressively if things start to get out of hand.

John Lipsky, the IMF's deputy managing director, said in New York: "Signs of more general inflation pressures would justify a decisive policy response, lest the impressive gains in global stability attained in recent years be sacrificed."

There had been calls for the Bank to match last month's quarter-point cut and bring some relief to the struggling property market. Nicholas Leeming, of propertyfinder.com, was unhappy at the lack of action: "The Bank can't afford to wait another month before it acts again. Mortgage lenders have all but withdrawn from the market, leaving many homebuyers unable to qualify for financing and many unable to get it at a price they can afford.

"The housing market has come to a standstill but there's no shortage of buyers, just a shortage of mortgages, which is now impacting the wider economy. Inflation remains a threat, but further immediate intervention, as well as future rate cuts, is now essential to stimulate lending, the housing market and the economy."

The decision had been widely expected in the City, though some economists had expected the MPC to cut rates after a run of weak data from the dominant services sector, the manufacturing sector, the housing market and the retail sector.

David Kern, economic adviser to the British Chambers of Commerce, said he was disappointed the MPC had not cut rates. "We believe this decision was a mistake given the serious threats to economic growth. The MPC has missed a valuable opportunity to underpin business and consumer confidence and to limit the potential damage to the economy."

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said that slowing economic activity was the most pressing issue for the authorities. "Housing transactions have collapsed, consumer confidence has sunk to its lowest level since 1992, the service sector appears close to stagnation according to the latest CIPS survey and the retail sector is under immense pressure."

With mortgage approvals down nearly to half what they were a year ago and housebuilders' reservations having tumbled by two-thirds, economists are concerned that falling house prices and tumbling consumer confidence could lead to a slump in consumer spending, which accounts for two thirds of the economy.

Latest estimates suggest the economy has slowed to well below its long-term average growth rate and is likely to slow further. However, the MPC is conscious that inflation is above its 2% target and likely to rise in the coming months.

Lipsky said inflation concerns have resurfaced even as global growth slows. "The effects of the slowdown are being felt most keenly in the US, but growth in all regions of the world is slowing," he said.

The IMF remains optimistic that the world will not experience a return to a 1970s-style inflation spiral, although the risk of such an outcome could not be dismissed, Lipsky added.

Oil prices hit a fresh high of $123.93 on Wednesday and the AA is releasing figures today showing the cost of motoring has risen 11.5% over the past year.

The government will announce measures today to help homeowners facing difficulties with repaying their mortgages.

The European Central Bank left eurozone interest rates at 4%. The ECB faces higher inflation than in Britain so is even more reluctant to cut borrowing costs.

Full story posted here.

Labels: Bank of England, ECB, Housing market, IMF, MPC, property prices, RICS, UK Interest rates

The rising costs of transport and raw materials and a shortage of tradesmen is pushing up the costs of home improvements, according to new figures by RICS’ Building Cost Information Service (BCIS).

BCIS’ updated Property Makeover Price Guide gives homeowners an accurate guide to what they should expect to pay for home improvements. It has found the average cost of improvement work has risen by 20% over the past two years for a number of reasons.

No longer can homeowners pick and choose from the glut of quality EU tradesmen as the number of central and eastern European nationals returning to their native countries is on the rise. With half of the estimated one million British based Poles having already left the UK,competition for labour is pushing up costs.

The upward trend in oil prices is continuing to fuel the rising cost of transport, with forecasters predicting oil to rise to $200 US (£100) per barrel in the next few years, some experts are predicting this to have more impact on economies than the credit crunch crisis.

Global demand for raw materials remains at an all time high, with emerging giants like China and India showing no signs of a slowdown, commodity prices will remain high for years to come. This is no more evident than in the various trades where the cost of materials have pushed up the overall costs. Roofing costs have risen by 26%, plumbing and electric work by 22% and painting has risen by 17%, all outstripping inflation over the past two years.

BCIS Executive Director, Joe Martin, said: “The downturn in housing is forcing some homeowners to become more creative in meeting their needs. Many are choosing to stay put and renovate or extend in order to upgrade their property. This can be a wise strategy as home improvements add value to a property, and people will be well placed to take advantage of this uplift in value when the market shrugs off the current slump.

"Given that the cost of home improvements rose by 20% over the past two years compared with only eight percent in average wage growth, many homeowners are opting to act now rather than paying more further down the track."

Relevant Links:
www.bcis.co.uk

Labels: BCIS, building costs, home improvement, House market, Housing market, uk housing

The Truth about Property is back for a second series and aims to make sense of the housing market turmoil. In this series presenters Andrew Verity and Jenny Scott travel around the UK to hear how households are coping.

Are you crash proof?

The ubiquitous credit crunch has led to a rough ride for home owners in recent months, causing higher mortgage costs and in some cases, negative equity and repossession.

In the first programme Andrew and Jenny find out how homeowners would cope in the event of a major property crash.

Andrew meets the Sawbridge family in Sheffield who are struggling to pay the mortgage and keep a roof over their heads.

While Jenny meets a property investor who is sure there is money to be made even when times are hard.

A solid investment?

In the second programme Andrew and Jenny find out how much we all invest in our houses and ask, is property a solid investment?

Andrew travels from John O'Groats to Lands End meeting people who face property dilemmas.

These include Tina and Simon who are first-time buyers and have just bought a home in Newton Aycliffe. The trouble is, falling prices have turned their dream into a potential trap. Now Tina wishes they had not bought.

Andrew also meets those who have found a creative solution to tough investment decisions such as Robin and Nicky who have invested in eco features. They believe a greener home will be easier to sell. Until then, they will enjoy lower utility bills.

Meanwhile Jenny jet sets with the property players.

Andreas Panayiotou used to work in his mum's laundrette. He bought his first property on Chapel Market in London 14 years ago. Today he owns assets in excess of half a billion pounds.

Andreas predicted the housing market slump and sold property worth £700m at the market peak. How did he know when to sell? And how far does he think property will fall?

Jenny also visits one of the most exclusive places to live in the world. Here an air of status has put a premium on prices. But how solid is an investment that is built partly on aspiration?

The Truth about Property will be broadcast on BBC Two on Monday 12 and Tuesday 13 May at 2000 BST

More details at BBC Business news.

Labels: BBC, Construction, Housing market, The Truth about Property