Blanchard Consultancy – the independent construction consultant

The Carsberg Review of Residential Property should be the basis for major reform of the residential property sector, says RICS (Royal Institution of Chartered Surveyors).

In particular RICS endorses the view that consumers should be central to any reform, with emphasis placed on providing better information and basic protections for any person buying, selling or letting property.

Sir Bryan’s review highlights three key issues that should be the foundations for reform:

1. The property transaction process and the provision of information for consumers need revision – Home Information Packs (HIPs), introduced in England and Wales, have not improved the process as intended.
2. Regulation and redress schemes need to be consistent with universal participation - the current regime of voluntary regulation and redress is insufficient.
3. Consumer interests need to be at the heart of all policy making

Citing research from Which?, the OFT and ComRes* - all of which confirm that significant levels of dissatisfaction exist amongst buyers and sellers of residential property - Sir Bryan concludes that the current transaction process is unsatisfactory for those who use it.

He also states that those who offer estate and letting agency services to the public, must be qualified and properly regulated.

Lack of knowledge of the systems and frustration with processes are driving dissatisfaction, says Sir Bryan, and both are areas RICS is keen to see addressed.

Speaking at the launch of the independent report, Gillian Charlesworth RICS Director of External Affairs emphasised the value of taking steps now.

"Sir Bryan’s review highlights a number of key areas where the current approach is clearly failing.

"The processes for regulation and redress do not go far enough to protect the consumer and we agree that participation in regulatory and redress schemes needs to be both consistent and universal.

"They should include all estate agents, letting agents, managing agents and landlords.

"The Industry itself is already coming together to tackle these issues, through the creation of the Industry Standards board, however there are limitations as to what this voluntary approach can achieve.

“It is important that we all take steps now to make the necessary improvements.

"We need action not words. Government needs to acknowledge this, deliver its support for Industry action and do more to protect the public."

RICS will now undertake an in-depth consultation with the aim of developing a formal response to Sir Bryan’s recommendations.

"We remain committed to building a coalition that can deliver property policy reform", concluded Charlesworth.

For more info visit RCIS

Labels: RCIS, Residential property, Sir Bryan

Homeowners have started to drop their asking prices as the reality of the downturn in the housing market hits home, a report out today shows.

The property website Rightmove said the average house price fell 1.2% to £239,564 in June, from £242,500 in May, and further reductions would be required to sell homes where there was an oversupply. It suggested what buyers could afford would continue to deteriorate because of rising living costs and higher mortgage rates due to the credit crunch.

Miles Shipside, commercial director of Rightmove, said: "For most sellers that will mean whatever they thought of asking for their property at the peak of the boom, they need to take at least 10% off. Otherwise their property will stagnate.

"In spite of the lowest housing transactions for 30 years, new sellers had been coming to the market asking record prices. It was a mad state of affairs that defied the laws of economics. Thankfully, new sellers are now taking some proactive steps to price more realistically from the outset to attract increasingly hard-pressed buyers."

The biggest drop in house prices was in the south-east, where they dropped 2.4% to £303,828 in June. In the south-west they decreased 2.2% to an average £258,696. Prices fell 1.6% to £225,565 in East Anglia and 1.4% to £399,010 in Greater London.

Although asking prices rose in the north, the West Midlands and Wales, these areas have seen some of the steepest price falls in previous months, with average asking prices 3% lower in the West Midlands than they were a year ago, and 2.6% lower in Wales.

The lack of buyers is widely blamed on tighter mortgage lending conditions.
The Council of Mortgage Lenders said that lending almost halved during the first quarter of 2008, resulting in 142,300 mortgages.

Halifax, Britain's biggest mortgage lender, announced last week that it would raise its fixed rates on loans by half a percentage point - the 20th time it has changed its rates since the start of the year.

Homeowners who have more than 25% equity in their houses face an increase on a two-year fixed-rate mortgage from 6.49% to 6.99%. On a £150,000 home loan, this adds £47 a month to repayments.

The increase follows similar moves from several rivals in the past week, including First Direct, which raised what had been the cheapest fixed rate on the market.

The number of properties for sale in the UK now outweighs the number of buyers by over six to one. There are 25% more properties on the market than six months ago, which means that 1 million sellers are competing for just 150,000 buyers.

Average unsold stock per agency branch rose to a record 75 homes, up from 73 the previous month.

Rightmove used the asking prices of up to 200,000 properties for its figures.

Read more at Guardian Money

Labels: House market, House prices survey, property prices, Residential property, Rightmove

Shares in Barratt Developments soared yesterday after reports that the embattled housebuilder had reached a deal with banks to put its finances on a firmer footing.

The company's shares jumped more than 25 per cent after Building magazine reported that the housebuilder had reached an agreement with banks to waive a clause that would have put Barratt in breach of its banking covenants after a land valuation writedown later this year.

Analysts said the reported deal was a encouraging sign that banks would help not to allow housebuilders to break their covenants.

The agreement would make other refinancing options that have been mooted in recent weeks, such as a debt-equity swap or a share issue, much less likely for the sector's most indebted.
It was reported that the waiver would remain until Barratt had repaid the remaining £400million it borrowed to fund the £2.2billion acquisition of Wilson Bowden in February last year, and that it has until the 2011 to do so.

The banks - Royal Bank of Scotland, UBS, HSBC and Lloyds - joined Barratt in saying that they would not comment on the reports but the housebuilder confirmed that talks were continuing.

A Barratt spokesman said: “We continue to have constructive discussions with all of the banks and have nothing to add to our statement from last week.”

However, sources close to the talks played down the reports, saying no such deal had been made yet.

That did not stop the speculation sending shares in Barratt soaring, with other rivals such as Persimmon and Taylor Wimpey also seeing rises close to double digits on the back of the market rumours.

Shares in Barratt closed up 12 per cent, or 9.5p, to 87.75p.

The possible deal was first suggested last week when Mark Clare, the chief executive, said he believed “we could get some sort of waiver” from banks allowing limits to be breached temporarily while the company looked to secure funding from sales or from investors.

Despite the jump in price, Barratt's shares are currently worth a tenth of their value a year ago.

Original story from Times Business

Labels: Barratt Developments, Building Magazine, House market, Housebuilders, HSBC, LLoyds, RBS

A backbench Bill to let councils decide how much renewable energy developers should include in their schemes has won cross-party support when it was debated by the Lords for the first time today.

The Planning and Energy Bill cleared the Commons and gained an unopposed second reading after its introduction by Tory former minister Michael Fallon.

The legislation would allow councils in England and Wales to require a proportion of the energy used in developments come from renewable sources. They would also be able to set higher energy efficiency standards than current rules demand.

Tory Lord Hanningfield, who introduced the Bill, said it follows a pioneering initiative by the London Borough of Merton.

Merton requires at least 10 per cent of the energy needed for new housing developments to come from renewable or low carbon sources.

Lord Hanningfield told peers that the Bill was "permissive, localist and green" and "allows councils to act quickly without waiting years for other legislation to come into effect".

In the Commons ministers initially opposed the proposal, but later backed it after amendments were made to ensure councils did not take actions in conflict with national policies.

Read more.

Labels: Green housing, Planning and Energy Bill, property development

More and more households are hitting trouble with their debts, says Julian Knight, but there are better solutions than IVAs or sale and rent-back.

People feel the bills mounting up and then they are falling behind with their mortgage. Often they do not face up to it until they are being taken to court. Sadly in about one in five cases we advise on, we have to tell people they will lose their home."

These are the words of Frances Walker at debt charity the Consumer Credit Counselling Service (CCCS), which recently launched a helpline for people in mortgage trouble (0800 138 1111) as the rising cost of living drains their resources. Likewise, the National Debtline charity reports a 23 per cent rise over the past year in the number of people coming to it citing mortgage arrears.

Paul Mullins, chief executive at National Debtline, says some lenders, facing the new reality of falling house prices and tighter personal finances, are now giving people in mortgage difficulties a more sympathetic hearing: "Attitudes have changed from a couple of years ago. The lenders know that, in the current market, they won't get much for a property repossessed and then sold at auction."

But Ms Walker says that lenders – particularly in the sub-prime market – are still expecting too much of those in debt difficulty, applying pressure and loading late- payment penalty charges.

Under these circumstances, it's easy to see how the old maxim "desperate times call for desperate measures" might appeal to some borrowers. However, some of the radical solutions available to people in arrears can often backfire. In particular, critics have rounded on providers of individual voluntary arrangements (IVAs) and sale and rent-back schemes.

In recent years, more and more people have taken out an IVA – a type of insolvency where the debtor agrees with his creditors to repay a certain percentage of his borrowings over a set period. Sometimes, up to 75 per cent of the debt can be written off. However, IVAs are highly controversial because the firms that act as go-between often charge hefty fees and impose penalties for missed repayments. Some in the banking and debt charity sectors have also accused IVA providers of in effect mis-selling the products, persuading people to sign up when other options may be better.

All in all, says Mr Mullins, this is not a "magic bullet" solution. "If you can't pay your mortgage, an IVA won't help. Your lender has a secured charge against your property which an IVA can't get you out of. You may be able to reduce your outgoings through an IVA so you can better concentrate on the mortgage, but in reality it is unlikely to work like that."

Even greater problems can arise for those tempted by sale and rent-back. These schemes promise to pay a proportion of a home's value, normally around 70 per cent, so quick cash is obtained to pay off the mortgage company. At the same time, the seller is offered the chance to remain in the property as a tenant for at least 12 months. But Ms Walker says the CCCS does not recommend sale and rent-back to as it is "completely unregulated".

Even those in the industry acknowledge there are big pitfalls. "For starters, sellers are offered around 70 per cent of what is, in effect, the purchaser's own valuation of the property," says Dougie Lister, chief executive of sale and rent-back firm the UK Housing Alliance. "What's to stop the valuation being under the odds. In addition, most only offer a 12-month agreement, at the end of which they can chuck the tenant out." He adds that his firm offers 10- year tenancies and uses independent valuers.

So what can people in arrears do? The truth is that this is a long slog, and Mr Mullins offers the following tips: "First look at your income – are there any benefits or tax credits you're not claiming? If you have a spare room, rent it out. Then draw up an expenditure budget; you can show this to your lender and, as a last resort, you may want to ask it to extend your mortgage term." However, this will mean more interest will have to be paid. An alternative is to ask for a payment holiday. "This is a temporary halt designed to give the borrower some breathing space to sort out their finances," adds Mr Mullins. But it's completely at the lender's discretion whether they grant a holiday or not."

Unfortunately, no matter how proactive borrowers are, they are at the mercy of their lender. "Attitudes vary markedly," says Ms Walker. Some lenders expect arrears to be paid back – as well as the normal monthly repayments kept up – within a year. Others will allow longer."

And some lenders, she adds, are quicker than others to go for the nuclear option. "We hear of cases where people have only been in arrears for a short period and repossession proceedings are started. But as a rule, around three months is when lenders get very serious."

According to Mr Mullins, lenders that do rush for repossession are likely to get short shift, but only if the borrower acts. "Courts want people to stay in their homes and don't look kindly on lenders that want to repossess after a month or two of arrears. The problem is that fewer than half of people who face repossession turn up for the hearing. The courts allow 85 per cent of people who do turn up to remain in their homes."

Read more here.

Labels: CCCS, House market, IVAs, Mortgage lending, Mortgage rates, property prices

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 stream of bad news coming out of the housing market has grown into a torrent in recent weeks, with stories of falling house prices, withdrawn mortgage rates and warnings about payment shocks.

This week, even Prime Minister Gordon Brown felt he had to defend the state of the UK's housing market.

Halifax, the country's largest mortgage lender, announced that house prices fell by 2.5 per cent between February and March, which prompted the PM to concede that "there are difficulties in the housing market" but that a 2.5 per cent drop "is containable".

To help you separate fact from fiction, we reveal the truth behind the assumptions that could cost you money in a falling market.

All the best mortgage deals have vanished

Nationwide recently announced it was restricting its best rates to people with more than 20 per cent deposit but it is not true to say that there are no competitive deals available.

"For borrowers with either a large deposit or a good amount of equity in their home there are still competitive deals available," says Denise Harvey, a mortgage analyst with independent financial comparison service Moneyfacts

West Bromwich Building Society is currently offering 4.99 per cent fixed for two years, for loans up to 75 per cent of a property's value, although there is an arrangement fee of £1,999 to contend with. And Abbey is offering a one-year discounted variable rate of 5.24 per cent with a maximum loan to value of 75 per cent and a fee of £499.

And even for borrowers with less equity in their homes there are still some good deals available. For those with a 5 per cent deposit there are competitive deals available. The Cheshire Building Society is offering a three-year fixed rate of 5.49 per cent, with a fee of £899.

One thing that has changed, however, is the speed with which these rates are being withdrawn and to take advantage of the best rates borrowers have to be prepared to move quickly.

"If borrowers are looking to re-mortgage or move they should be in as good a position as possible. When they are in a position to submit an application they should have everything more or less 100 per cent perfect," says Harvey.

Don't buy now

For first-time buyers struggling to get on the housing ladder falling house prices are very welcome. However, unless prices start to fall at a consistently fast rate the decision to wait could be a false economy, warns Melanie Bien, of mortgage broker Savills Private Finance.

She says that unless you are living with parents, the amount that a prospective buyer pays out in rent, particularly in parts of the South-east, can offset any decrease in the purchase price of a house.

Someone paying £800-a-month rent, for example, would pay an extra £4,000 by delaying a purchase for five months.

"While you would have been paying a mortgage if you had bought instead of renting, you will still want to make sure you end up in front once the difference is deducted from the potential fall in property values," adds Bien. "First-time buyers would be better off making their decision based on affordability and finding a suitable property."

Andy Pratt, chief operating officer of mortgage broker Alexander Hall, says prospective buyers should talk to a mortgage broker and work out how their rent compares with the cost of buying. Buyers should also consider that buying a home is a long-term commitment and not a short-term speculation on house prices.

"Unless you believe house prices are going to correct by 20 per cent or more, it is a long-term investment and people should be out there looking. It is a buyers' market and there are some bargains to be picked up," says Pratt.

No deposit – no mortgage

Mortgage lenders have been keen to move out of higher risk areas of lending and, as many first time buyers are now finding, high loan to value mortgages are one of the areas they are avoiding.

First to go were those deals offering more than 100 per cent of a property's value, as a combination of a mortgage and personal loan, and the last two weeks have seen an increasing number of lenders move to withdraw loans offering up to 100 per cent of a property's value.

"In essence, all the 100 per cents have disappeared and there are fewer lenders offering 95 per cent. So there are some mortgages available but their criteria for 90 per cent or higher are far tighter than they were before," says Pratt.

To get around this, he suggests speaking to family to try to raise the deposit. "Be prepared to consider parents and family for deposits or look at finding some other funding, such as savings they have made for a rainy day, and use as much as they can for a deposit," Pratt adds.

Buy-to-let landlords are fleeing the market

Many commentators have predicted a deluge of buy-to-let property coming back on the market as landlords try to exit the market, encouraged by a combination of low rental yield, falling house prices and a change to the capital gains tax (CGT) rules – which means many owners of second homes will pay only 18 per cent instead of 40 per cent CGT on the profits of a sale.

Alexander Hall's Pratt says long term professional landlords are in the market for the long term and are not put off by market jitters. But part-time landlords, with only one or two properties, will be looking at the exit.

"The dynamics have fundamentally changed. A large proportion of those will consider selling and looking at other investments," says Pratt.

However, while the tax changes will encourage some "profit taking", demand for rental property is still high and the majority of landlords are in it for the long haul, adds Bien "Most landlords see property as a viable alternative to a pension, as a way of saving for retirement, so regard it as a long-term investment," she says.

Is there going to be a house price crash?

Prices are certainly coming down. The 2.5 per cent drop reported by the Halifax is the biggest single drop in house prices since the price crash of 1992.

But this is not an exact picture, as prices are still 1 per cent higher than they were last year and there are big regional variations. Prices in Greater London are up by a further 1.6 per cent this month, and in the East Midlands they are up by 2.2 per cent. But this is offset by some big falls, with prices in Wales and the West Midlands down almost 5 per cent.

Martin Ellis, chief economist at Halifax, says that a house price crash is unlikely. The crash of the early 1990s had a different economic profile with rapidly rising inflation and big increases in interest rates and unemployment.

"That's a long way from where we are at the moment," Mr Ellis says. "Yes, we're expecting to see the economy slow over the course of 2008, and that's likely to see some upward movement in unemployment but we don't expect this to be dramatic." His prediction is for "low, single-digit" house price falls this year.

But others estimates are not so optimistic. The International Monetary Fund suggests in a report published this week that the UK housing market will follow the US example, but on a two-year time lag. This would be very bad news for UK homeowners as the US house prices fell by more than 11 per cent in 2007.

For more info visit the original story here.

Labels: Alexander Hall, Halifax, House market, IMF, Mortgage lending, Mortgage rates, Nationwide, property prices, uk housing

Owners of poorly maintained homes or those in scruffy neighbourhoods must slash their prices by as much a fifth if they want to find a buyer. But, despite the downturn, grander properties in most upscale locations are still selling for more their original asking price, according to research from Savills conducted for The Times.

The only exception to this ‘the best sells, the rest sticks’ trend, is those properties between £1 million to £2 million in London’s smartest postcodes, favoured by City executives.

Job losses in the Square Mile and Canary Wharf mean that any owner who needs to move quickly must accept a price at least 6 per cent lower than at the height of the boom in 2007.

Simon Edwards of Savills, Hampstead said: “A year ago you could put a house on the market for £1 million and sell it for £1.05 million. Now it would probably make £950,000. That £100,000 difference effectively means a 10 per fall in prices.”

‘Blighted’ homes, those that are unmodernised, or in lower grade locations in all parts of England are changing hands at prices 6 per cent to 20 per cent lower than a year ago.

This would suggest that the market has fallen more sharply than the major property prices indices indicate. Halifax figures out yesterday reported a 3.8 per cent since May 2007.

However, some sectors are relatively immune, with what Savills terms ‘best in class’ homes in all price brackets still buoyant. If you want to dispose of a £2 million-plus property in the Midlands or the North, you should find a ready buyer and expect to pocket more cash than a year ago.

Original article here.

Labels: House market, House prices survey, property prices, Savills

The stock market value of British housebuilders has plunged by £11.34 billion in just 12 months and is set to fall further after two investment banks warned today the housing market downturn will descend to levels last seen in the early 1990s.

Barratt Developments emerged as the sector's hardest hit company for the second day, after its share slumped by 26 per cent.

Barratt, which is now worth just £300 million but has debts of £1.7 billion after its acquistion of Wilson Bowden last year, is expected to seek emergency funding, possibly through a debt-for-equity swap.

Barratt is now worth less than a tenth of its peak stock market value.
Taylor Wimpey, the UK's third largest builder by volume and the result of the combination of Taylor Woodrow and George Wimpey, also plummeted by 20 per cent.

The losses compounded heavy share price falls yesterday, which wiped £400 million of the market value of the builders. Since last June, the housebuilding sector, then worth £15 billion, has seen its shares plunge by 76 per cent.

Shares in Persimmon, the last remaining housebuilder in the FTSE 100, were also down 9 per cent in early trading to 353p, their lowest point for five years. Persimmon faces ejection from the FTSE later today.

Berkeley Group shares also slid 9 per cent to 666p after Goldman Sachs reduced its recommendation on the UK housebuilder to "sell" from "neutral" and dramatically slashed its target price from 819.9p to 582.3p.

Analysts at Merrill Lynch said: "The early 1990s housing market has increasing relevance as a comparator."

They added: "There is growing evidence of consumers how behaving in a manner similar to that seen in the early 1990s, in that concerns over job security and falling house prices are leading to a reluctance to make a house purchase."

Merrill Lynch downgraded six housebuilders in the sector - cutting Barratt Developments, Bellway, Berkeley, Galliford Try and Redrow from "neutral" to "underperform", while Persimmon was moved to "neutral" from "buy", traders said.

There are fears that many housebuilders will be forced to make dramatic writedowns. In the early 1990s, housebuilders wrote down 30 per cent of their value - about £1.3 billion - and many of them needed more than one writedown before their net asset value stabilised.

The sector has been squeezed by banks tightening up on mortgage lending following the credit crunch, hitting the housing market. Many builders have put projects on hold, as willing buyers have dried up, and are laying off staff, while concerns are mounting in the City that many will have to ask shareholders for cash to strengthen their finances.

Housebuilders have also become a target for “short-sellers” who hope to profit from falling share prices. According toresearch from Data Explorers, which monitors short positions in the market, more than 23 per cent of Bovis shares are on loan with “short” investors, followed by 19 per cent for Persimmon and almost 18 per cent for Redrow.

Latest figures from the Royal Institution of Chartered Surveyors, out yesterday, said agents sold an average of just 17.4 properties each during the three months to the end of May, the lowest figure since it began collecting data in 1978.

Merrill Lynch has turned its focus on unemployment levels saying that they will be critical to determining consumer confidence and housing transaction levels, as was the case in the early 1990s recession. The broker suspects that rising unemployment will put additional pressure on housing transaction volumes.

It believes that there will be 10 per cent fewer house sales than last year and that prices will fall by 10 per cent.

"We believe we have gone beyond the tipping point and are now clearly seeing a UK housing market being squeezed on opposing fronts - by a lack both of willing lenders, as well as willing purchasers," the bank wrote.

It suggests that housebuilders are entering a prolonged period of underperformance, with a downturn likely to persist over the next three years.

"We are inclined to believe that if 1988-89 corresponds to 2007-08, than 1990-91 would correspond to 2009-10," Merrill Lynch said.

After the early 1990s recession, house prices did not start to recover until 1994.

Original Story from Times Business Online.

Labels: Barratt Developments, Berkeley Group, House market, Housebuilders, Merill Lynch, Persimmon, property development, RCIS, Redrow, Taylor Wimpey, 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

Land and property developer switches focus to sites offering a mix of housing and commercial premises.

MacDonald Estates, the land and property developer, is predicting further growth this year despite tough market conditions after posting a profit of £5.1m for 2007.

The figure is an increase of 14.1% on the previous year and the ninth consecutive year of profit growth for Macdonald, started by entrepreneur Dan Macdonald in 1998.

But the Edinburgh-based company is planning to shift its long-term focus from purely commercial developments to building strategic new “mini-towns” including a 330-acre site it has identified in central Scotland. Other sites include Inverness and St Andrews.

Macdonald, chief executive of Macdonald Estates, said that by 2012, its focus will be almost exclusively fixed on community developments, with local power generation, sustainability and infrastructure as well as commercial premises.

“I am confident we will see the continuation of further profit growth through to 2009 as a number of our developments reach maturity,” he said.

The first site to be developed is a 260-acre site at Balloch Farm, Inverness, with a mix of housing and commercial. All the sites Macdonald has identified are in areas which are likely to be rezoned. Balloch is up for zoning in 2011.

“These new settlements are going to be the focus of the business and will allow us to use the expertise we have built in working with planners from the outset rather than just slapping an application in for consideration,” said Macdonald.

“Some will have gestation periods of 10-20 years although others might come through more quickly.

“These are not the eco-towns that Gordon Brown talked about but smaller mixed developments in areas where there is demand.”

Some of the other future developments for the company include a planned £100m hotel and office development at the SECC Glasgow and construction work on a £30m development at Falkirk Gateway, which starts later this year.

Macdonald also has plans to open an office in Dublin, furthering a commitment to business in the Irish republic. Plans are about to be submitted for a ¤40m (£31m) retail park at Portlaoise, an hour’s drive southwest of Dublin.

Macdonald appointed former Scottish Enterprise Fife chief executive Joe Noble as director of strategic development and infrastructure for the company last month.

Macdonald said: “I am in no doubt that we will see recessionary times and hear more accounts of bank write-offs, a further slide in capital values, greater inflation, raised debt, high bank charges, fire sales and a restrictive residential market.

“We should not delude ourselves. The Scottish market will be affected to a great extent.”

Original story here.

Labels: Dan Mcdonald, Macdonald estates, property analysis, property development, property prices, Scottish property market

The property boss wants the government to encourage firms to focus on green issues.

Sitting in the boardroom of Grant Management’s head office in Edinburgh’s West End, the last thing that comes to mind is the plight of Cambodian fishermen.

But not for Peter Grant, who used redundancy money to found the property management and investment firm with his wife Collette more than a decade ago.

Grant Management has grown from owning a few properties bought for his pension to managing some 1,800 in the UK. Last year, it turned over £12m, generating more than £1m in profits.

Its fund management arm, Grant Fund Management, runs three institutional property funds with Bank of Scotland, Sir Tom Hunter’s West Coast Capital and Buccleuch Property. These have a combined value of more than £200m.

Recently, weightier matters have taken up some of his time. Inspired by Bill Clinton’s visit to Glasgow in 2006, when the former US president spoke of global warming as the “number one priority”, Grant set up Global Trees, an environmental charity.

It has now planted more than 300,000 trees worldwide. But Grant wants that figure to run into tens of millions. The charity has no paid staff and every pound donated goes towards the planting and maintenance of trees, as well as a programme to ensure they are not quickly cut down.

His company is itself now carbon neutral, either by reducing its impact on the environment or offsetting.

“You have to use energy to run a business but ensuring that light bulbs are low-energy or computers are switched off plays its part,” he said.

“A few years ago, it was simply a box to be ticked by business when talking about corporate governance but I detect there has been a major change. When a company the size of Wal-Mart says it wants to know the carbon footprint of its suppliers, then you have some idea of how this affects everyone.”

Clinton got to hear of Grant’s efforts and invited him to New York for dinner.

“It was fascinating and inspiring,” said Grant.

“We have now planted 300,000 trees in many places around the world. In Cambodia, for example, we planted mangrove trees which help the fishermen in the swamps by improving the storm barriers.

“In the UK a lot is being done too. It is great when you see a company such as Stagecoach going carbon neutral along its Fife to Edinburgh bus route by planting thousands of trees.”

The Global Trees website has a carbon calculator. “People are surprised at how much CO2 we generate individually,” said Grant. “Things like rising fuel prices have an effect because people have to use their energy more efficiently and it means clever ideas about generating energy from other sources become more cost-effective.”

Running Grant Management still takes up most of Grant’s time. His company buys, renovates, lets and manages residential property, mainly in university towns, for private and institutional clients. Is he worried about the property slowdown?

“It would be foolish to suggest anyone is immune but it does not fundamentally affect our business plan,” he said “If anything, it opens up opportunities. We are in places with demand. We are in university towns, we do not buy new-build, two-bedroom flats, of which there is a glut, and on top of that, if prices come down, we are in a strong position to take advantage.

“The tougher conditions will also shake out some of the competition. However, investors are becoming more wary. Some people are waiting to see what happens but, in some ways, there has never been a better time to invest.”

Economic conditions, though, have hit Grant’s plans to float the company. He had targeted this year, or 2009 for a listing but, while entering the stock market remains an aim, it has been put on hold.

Green concerns are not so easily put aside. He believes governments should do much more to encourage companies and people to focus on environmental issues.

“The prime minister spoke last week about the need to boost oil production and I understand why, but I would also like to see the UK government commit just £50m to planting trees in the Third World countries,” he said. “It is not a lot of money, would show we were committed and would make a substantial difference.”

Peter Grant is the key speaker at the first in this year’s series of Albion Dinners, hosted by the Marketing Society Scotland in conjunction with The Sunday Times, which takes place on June 5 at Lloyds TSB Scotland’s headquarters in Edinburgh. The topic for the evening is how business can embrace and profit from the challenges of global warming.

Original story here.

Labels: Global Trees, Grant management, Green housing, Peter Grant, zero carbon housing

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