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The Office of Fair Trading (OFT) is to demand a crackdown on sale-and-rent-back deals in which hard-up home owners sell their property to specialist firms at a discount in return for tenancy rights. It wants the Financial Services Authority to regulate the fast-growing practice.

There are estimated to be more than 1,000 sale-and-rent-back firms, ranging from national organisations to one-person outfits, which advertise their services to homebuyers in financial problems through a mix of local newspaper adverts, flyers and door-to-door canvassing. They typically offer 20% to 30% less than the market price, promising to turn buyers or owners who have debts or other problems into tenants.

About 50,000 properties have been sold, but demand is expected to increase as the credit crisis and rising joblessness combine to put pressure on homebuyers. Buy-to-let investors often move into sale-and-rent-back as an investment in an unregulated source of property at below market value.

Read the full report at Guardian Property

Labels: credit crunch, Office of fair trading, sale and rent back deals, uk mortgage market

Bemused by the banking crisis and the stock market madness of recent weeks? The Independent's Business Editor Margareta Pagano answers the key questions

Is the worst of the worldwide crisis in banking now over?

Governments have committed a total of $2 trillion to be injected into the banking system. Here in the UK, for example, the Government is pumping £39bn into three of the our biggest banks – Royal Bank of Scotland, Lloyds TSB and HBOS – by buying shares in them to provide new capital.

The aim is to strengthen the banks' balance sheets so that they can start lending to each other again, and to their customers. But the most important objective is restoring confidence in the financial markets. It's too early to tell whether this has been achieved. But the way the world's leaders took such committed action last weekend to put together this co-ordinated action appears to have gone far to prevent a systemic collapse. Don't take too much notice of the volatile reaction of the stock markets last week after the news was announced. The markets are now looking forward to the next crises – the unwinding of the derivatives market and recession.

Who is to blame?

We all are, to some extent. Over the past decade the US and UK governments allowed people and companies to borrow too much and too cheaply. In the US, mortgage companies were offering "teaser" mortgages at only 1 per cent, so when interest rates were raised, many could not afford to meet the new mortgage payments – leading to the so-called sub-prime market. In the UK, banks were lending money to people to buy mortgages at 100 per cent. They were also encouraged to take on more credit. With house prices rising, everyone felt wealthy and so they replaced equity in their house for debt to fund the next holiday. Savings ratios crashed. But then last year Northern Rock collapsed, sending shivers through the financial system because it could not raise enough money to meet the demands of its depositors. So you could say governments were to blame for allowing the debt mountain to grow, the financial regulators for not keeping a tighter control over the banks who lent beyond their means too, and the public for indulging in their debt addiction.

Article continues at the Independent online

Labels: credit crunch, explanation, faq, financial crisis

A debt charity yesterday called on the Treasury to put pressure on Northern Rock to change its approach to repossessing properties.

Credit Action said that the nationalised bank was twice as likely as other lenders to repossess a home if borrowers fell behind with their mortgage repayments. Chris Tapp, director of the charity, said its eagerness to repay the government meant it was treating struggling customers harshly.

More than 19,000 homes were repossessed in the first half of this year, 4,000 of which were seized by Northern Rock.

The bank's chairman, Ron Sandler, said: "I would deny strenuously that we have been overly aggressive."

Since it was nationalised in February, Northern Rock has cut 1,500 jobs and reduced its lending to help repay the government. In the nine months to September 30 it had repaid £15.4bn of the £26bn it owes. However, the bank's mortgage arrears figures jumped by nearly 60% in the past three months.

Read more at Guardian Online

Labels: northern rock, uk mortgage market, uk repossesions

Across the UK, houses are selling at an average of nine percent below the asking price with sellers in some regions being forced to accept as much as 12.5 percent discount off their advertised price, says RICS research published today.

As economic fundamentals continue to worsen, the gap between selling and asking prices is widening. In the North vendors are accepting the lowest offers – averaging 12.5 percent below the marketed price.

Vendors in the North West, East Midlands, West Midlands and Wales are accepting offers averaging approximately 10 percent below but in London the figure stands at 8.5 percent.

London has remained firmer than most as its diverse economy and large job market offers sellers more room for optimism.

Read the full article at the RICS newsroom

Labels: House market, property prices, RICS

More than 75 per cent of UK estate agents are threatening to remove properties currently listed on the UK's biggest property website, according to an online poll.

The survey, by estateagenttoday.co.uk, found that more than three quarters of estate agents will not be renewing their annual subscription to the site because its fees, which can be as high as £500 a month per estate agent, are considered too expensive.

Should the planned defection go ahead, it would leave Rightmove, which boasts around 20,000 agents and developers, a less reliable source of information for homebuyers wanting to compare properties on the market.

The company, founded by Halifax, Countrywide & Connells estate agencies in 2001, saw estate agency membership fall by 3 per cent in the first six months of this year to 11,984. Its retention rate among estate agents was down to 84 per cent in the same period, which Rightmove attributed to the large number of estate agency businesses leaving the industry.

Article continues at Times Online

Labels: Halifax, National association of estate agents, Rightmove

Sharif Shafei, PR supremo for a leading Dubai-based developer, can certainly talk the talk. Words like brand, vision, iconic and ambition trip easily off his tongue – all to convince you that it's business as usual in the world's hottest real estate market.

Shafei, an engaging Egyptian-Canadian, works for a company behind huge construction projects in neighbouring Saudi Arabia, Qatar and Morocco, all cashing in on an oil-driven boom and Dubai's reputation for cutting-edge architecture, boundless imagination and high returns.

"I am telling people to continue to invest in real estate," he insisted. "There is no bubble that's going to burst."

In a week that saw panicky stock markets, falling oil prices and credit growth outstripping deposits, the brashest economy in the Middle East barely paused for breath. And with annual growth of nearly 18% since 2001, it's easy to see why. Indeed, across the Gulf, the overall real estate market has been valued at a whopping $1.3tr (£750bn).

Read the full article at Guardian online

Labels: Construction, middle east construction

House prices are going to rise again. That may seem a scenario far removed from today's headlines about falling prices and haemorrhaging values. But, according to an influential economics consultancy, prices have to go up for one simple reason - government targets for the minimum number of new homes are just not being met.

A year ago, 'targets' were the order of the day. Gordon Brown announced that in England alone there should be between 240,000 and 297,700 homes built annually until 2016, and that, in total, between 2.9 million and 3.5 million new homes should be built by 2020. In 2007 - before the downturn hit the new-build market - some 174,900 homes were completed: still below target but on an upward path from previous years.

Yet at the start of autumn 2008, figures for housing starts suggest that this year's total will be only about 110,000, according to the House Builders Association. It predicts 2009 and 2010 figures may well fall to a dismal 55,000. The consequence is that the new-homes industry is imploding. The fewer homes built, the fewer people work in the industry, making the downturn even worse. Similar targets, and shortfalls, exist in Scotland, Wales and Northern Ireland.

Read the full article at Guardian online

Labels: House market, House prices survey

Interest rates in Britain will drop to a new 50-year low in the coming months, economists say, as the Bank of England tries to head off a serious recession. The Bank’s monetary policy committee (MPC) is expected to start the process by cutting rates this week.

The predictions came as Gordon Brown, meeting European leaders in Paris, called for a new £12 billion fund to help small businesses through the crisis. The fund, an early drawing-down of the existing European Investment Bank budget, would “show how we can do more in Britain and across Europe to help small businesses, as well as households, through what is a difficult economic time,” he said.

Lady Vadera, the minister and former Brown adviser, is set to take on a more prominent small-business role under the new business secretary, Peter Mandelson.

Dominique Strauss-Kahn, managing director of the International Monetary Fund, said at the same meeting Europe had to do more to coordinate its response. “What counts above all is coordination and the will not to act each for himself,” he said. “The world economic situation is very worrying,” he added.

Read more at Times Online

Labels: Bank of England, UK Interest rates

One of Britain's best-known builders has slashed 43 per cent off the price of some new homes as the global financial crisis takes an ever-increasing toll on construction and manufacturing.

Barratt Developments offered the discount to buyers prepared to take five or more flats or houses off its hands in its Yorkshire East division, according to the investment bank Dresdner Kleinwort, which has seen documents sent to property professionals.

The bank also claimed that the six leading property agents in Leeds have between them sold just six new apartments in two months.

Demand for new homes has evaporated after the credit crunch led to a 95 per cent reduction in the value of home loans approved in the UK between July and August.

Alastair Stewart, an analyst with Dresdner Kleinwort, said: "Prices of urban apartments appear to have fallen in many cases by 40 per cent to 50 per cent, volumes have dried up to virtually zero, many developers have gone bust and land in many cases appears to be worthless."

Further evidence of an overall slump in the economy came with the news that many car manufacturers have been forced to bring in three and four day weeks as the motor industry faces its worst crisis in 30 years.

Article continues at Telegraph Online

Labels: Barratt Developments, House market, Housebuilders