The Latest Property News

July 08

The value of the housing stock in the UK private rented sector now exceeds that of all privately-owned commercial property, a new report finds.

According to a study carried out by the National Association of Estate Agents (NAEA), the total value of rented property now in the market stands at some £500 billion.

This exceeds the total of value of all privately-owned commercial property, including offices, shops, hotels, factories, warehouses and leisure facilities, finds the NAEA.

The report - The Modern UK Housing Market - Origins and Prospects - also predicts the situation will only improve for property investors, despite the downturn in average property prices, as part of a wide-ranging review of the market.

House prices will "almost certainly" increase faster than commercial real estate over the longer term, argues the NAEA, as housing supply is less responsive to demand than commercial property but consumers demand more housing as living standards rise.

Real house prices rose by 4.2 per cent a year on average between 1981 and 2003, while capital values for commercial property fell by 1.2 per cent by the same measure.

Furthermore, rents are expected to rise in the private-rented sector by between ten and 15 per cent in both 2008 and 2009.

Despite this, he says that the modern private-rented sector is helping to stabilise housing because it accommodates those who, by this stage in the housing cycle, would be over-stretched borrowers with rising negative equity, argues the NAEA.

"It was as a result of the appalling effects on young owner occupiers last time that ARLA took the initiative and launched buy-to-let to re-build and re-finance the private rented sector and to mitigate the dreadful social consequences of housing boom and bust.

"It has proved to be remarkably successful."

However, affordability problems are likely to continue in the UK even if the housing supply increases. The current 56 per cent of 30-34-year-olds who are able to afford a purpose-built flat will fall to 45 per cent by 2016 and to 34 per cent by 2026.

These buyers will still require rented accommodation in some cases.

July 08

HMO alert

Local authorities are cracking down hard on landlords who own Houses in Multiple Occupation and who are ignoring the law on licensing.

The law, in force since April 2006, states that owners of houses of three or more storeys let out to five or more individuals forming at least two households, must obtain licences.

Now a Derby landlord faces prosecution for not having a licence, and 350 other suspected HMOs in the city are to be visited in a blitz by council officials.

Landlords of HMOs who let out their premises without licences face being fined up to £20,000, with Rent Repayment Orders taken out against them, which could mean losing up to 12 months of rent covering the time when the property was illegally let.

The precedent was set by the prosecution of a landlord in Leamington Spa, Warwickshire, who was fined £18,000 and forced to pay back thousands of pounds of rent to student tenants - who had not even complained about the property or its management.

Owners of HMOs are also warned that, without licences, they lose the right to terminate tenancies under the usual Section 21 procedures.

The licences have proved controversial, with councils having a widely varying scale of charges and with some authorities bringing in licences for other forms of HMO.

Property investors new to the HMO sector, which chiefly includes student lettings, are urged to take professional advice.

July 08

Fines threat

Landlords who do not produce Energy Performance Certificates could be fined £200.

The requirement becomes law on October 1 and places new responsibilities on landlords.

Communities and Local Government has just issued guidance for landlords on EPCs.

Landlords will have to produce the certificates once every ten years at their own expense and make them available to all prospective tenants, before any rental contract is signed.

The EPCs can be issued by Domestic Energy Assessors, Home Inspectors or by landlords themselves if they apply for accreditation.

There are some important points in the guidance.

EPCs will not be required for Houses in Multiple Occupation where there are shared facilities. But they will be mandatory on 'whole' or 'parts' of buildings where the 'parts' are self-contained units of accommodation.

EPCs will not be required where a tenant who is already in residence continues after October 1, even when a tenancy agreement is renewed. However, EPCs will be mandatory whenever there is a change of tenant.

The same EPC can be produced for up to ten years, even if the landlord updates the accommodation with improved insulation or other enhanced energy measures.

However, if the landlord decides to sell the rental property, the EPC will expire after one year of issue.

Other than HMOs, the only other exemption is for emergency accommodation provided by landlords for tenants needing to relocate urgently. Even so, EPCs must be provided as soon as possible.

Landlords who do not produce an EPC when asked, either by a tenant or local Trading Standards, will face fines of £200.

July 08

London falls

House prices in central London are continuing to fall - and at a faster rate.

The monthly fall accelerated in June, from a 1.5% decline in May to a 1.7% drop, according to estate agents Knight Frank, which says the downturn is slowly reversing last year's gains. However, prices still remain 7.5% higher than a year ago.

But the real story is that sales volumes have fallen off a cliff, and are down by 60% on June 2007.

Only the most expensive properties are selling, with prices down just 0.9% in June, and standing 22.7% higher than a year ago.

Liam Bailey, head of residential research at Knight Frank, said: "There can be no doubt that even property in prime central London has been hit by the double whammy of the credit crunch and wider concerns over the global economy.

"The headline price figures hide the marked slowdown in sales volumes. In some parts of the capital, the number of homes being sold has fallen by as much as 70% over the last twelve months - a result of the tightening market for mortgage finance and a crisis of confidence in the housing market."

However, he said that the market for properties worth over £10 million is relatively untouched by the gloom, driven by super-rich international buyers.

He added: "Elsewhere, there is some evidence that vendors are being more realistic. Achieved prices are now 4% lower than asking prices."

There are also fewer properties on the London market. New instructions fell by one-third in June. Knight Frank expects prices to continue falling this year and warned that "if the chaos continues" there could be double-digit deflation.

July 08

Lending falls

Mortgage lending from building societies slumped again last month.

Data from the Building Societies Association shows that net lending was down from £1,262 million in May to £125 million in June.

The statistics follow hot on the heels of Bank of England mortgage approval figures for May, when the number of new home loans fell to just 42,000 - a collapse of 63.8% since the same month a year ago, when there were 116,000 loan approvals.

The number of new home loans has now hit an all-time low.

Last year, there were just under one million housing transactions - well under the normal 1.4 million that is the long-term average. This year, it looks as though a new record low will be set as the credit crunch continues.

Meanwhile, the gloom continued with the latest Nationwide Building Society survey, which showed that house prices in June fell 7.3% from their peak in October, wiping an average of £13,500 off the average house price.

However, the rate at which house prices fell slowed; they tumbled 2.5% in May and 0.9% in June.

And there is more bad news from the bearish research consultancy Capital Economics, which warns that the UK economy is on the verge of a recession that could see up to a million jobs shed over the next 18 months.

Forecasting a severe recession next year, it predicts that average UK house prices will be 35% lower by the end of 2010.

July 08

City loss

City Lofts, the developer of trendy city centre apartments, has gone into administration days after it was forced to put 250 of its unsold units, plus an unstarted development site, in the hands of a receiver. It has blamed "extremely difficult market conditions" and had been trying without success to restructure its business.

Bank of Scotland Corporate, part of HBOS, which is City Lofts' biggest lender and has lent on most of its schemes, has appointed Jon Gershinson of Allsop as receiver of the unsold apartments. City Lofts itself has had Ernst & Young appointed as administrator.

The unsold properties include apartments at a scheme at Salford in Greater Manchester (203 units), the Springfield Mill complex in Nottingham (105), Roberts Wharf in Leeds (198), Prince's Dock in Liverpool (162) and Admiral House in Cardiff (167).

The development site that has gone into receivership is in Birmingham. City Lofts had been planning to build 295 apartments and 66,500 sq ft of commercial space on the site.

In Liverpool alone, the 20 unsold apartments have a reported market value of nearly £4 million. The development, which includes two linked 20- and 10-storey buildings, was completed in 2006, showing how long the apartments have remained on the shelf.

The City Lofts crisis shows how serious market conditions are, and how badly confidence in city centre apartment blocks has slipped.

City Lofts, based in Harrogate, Yorkshire, was formed in 1996. In its last set of published accounts, to December 2006, it recorded pre-tax profits of £4.6 million on a turnover of £67.2 million.

Meanwhile, Imagine Homes founder Grant Bovey is in talks with his lender, HBOS, about the restructuring of his property investment business.

July 08

Auctions hammered

Half of all residential property lots are failing to sell in the auction room, and half of vendors are being turned away because they have unrealistically high guide prices. But these are not the only hallmarks of today's salesrooms.

At Allsop's auction sales on May 29 and June 2, 38% of lots were repossessions, compared with 10-15% this time a year ago.

Transactions are also falling, from 74% a year ago to little over half now. However, that does not mean that sales are not taking place: savvy investors are waiting until a property fails to sell under the hammer and making their move the following day. In many cases, properties are changing hands for some10% less than the reserve price - which in itself is the rock bottom price that the vendor had been prepared to accept.

Tony Webber of Eddisons, property auctioneers in Leeds and Manchester, reported that at their May sale, just 14 of the 46 residential lots offered sold successfully. "There was very little appetite in the residential section of the sale, which has declined significantly over recent months," he said.

As for reserves, Gary Murphy, auctioneer at Allsop, the UK's largest auctioneers, said: "We only list lots that we can sell in this market. We need to prepare a catalogue that is not going to waste buyers' time. Auctions are there to create competition. There is no point setting reserves at a high level."

July 08

Gas safety

Investors who have residential property in their portfolio are urged to ensure that they stick to the letter of the law when it comes to their responsibilities under gas safety.

Even if the property in question is managed by an agent, it is the landlord who bears the legal onus for ensuring that all checks and maintenance work are carried out.

The reminder follows the death of a young girl from carbon monoxide poisoning and the subsequent conviction of the landlord.

A list of responsibilities can be found in the Gas Safety Regulations 1998. Landlords can also check out their duties under the Health and Safety at Work Act.

All maintenance checks, including annual safety checks, must be done by a competent CORGI-registered gas installer (www.trustcorgi.com or phone 0800 915 0485).

There is also an HSE gas safety advice line to call (0800 300 363).

The landlord's responsibilities include ensuring gas fittings and flues are maintained safely, and that gas safety checks are carried out annually on boilers and all other gas devices.

All tenants must be issued with a copy of the annual gas safety check certificate within 28 days of completion. Landlords should also keep their own records for at least two years.

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