That was the week in property, by Mike Hoffa

22nd November 2010

Poor old Lord Young must be wondering what just happened over the last couple of weeks. If you haven’t heard about his recent remarks where he stated that most Britons “never had it so good” then you must have been on holiday…on the moon.

During a time when many people are worried about both the state of the UK economy and, closer to home, how secure their job is there is no doubt it was an ill considered remark. Keen to keep the masses on board as the government attempts to tackle the situation with some hard cuts, David Cameron took the predictable step of whisking Lord Young out of the way, spurred on by some helpfully timed averting media attention on a future King and his bride-to-be.

However, some are now starting to suggest that there may be a good deal of truth in Lord Young’s remarks and that for many homeowners the current situation is not that bad. Indeed, Paul Farrow presented a succinct perspective on this in the Telegraph last week, postulating that around 80% of the 10 million residential mortgage owners in the UK have already benefitted from lower rates. Of course, the rate you are paying for your mortgage is just one small factor in how happy you are, but from a financial perspective it’s quite a biggie, assuming you have managed to keep secure employment.

The main reason why people will probably disagree with this is down to the recent restrictions on credit that have come in, making mortgages difficult to secure where you don’t have a sizeable deposit. But you have to remember that the 90% and above mortgages that were available just a couple of years ago are a relatively recent invention (and as it turned out not a terribly clever one), so we’re really just going back to where we were historically.

And there’s signs that mortgage lending is not going to get any easier. The BBC ran with a story last week hinting at the increasing pressure new FSA regulations will put on the mortgage market, where it will demand much more stringent proof of the applicant’s ability to repay the loan. If you combine this with predictions that we could soon see a rise in interest rates it doesn’t make for a pretty picture in terms of the average person’s borrowing potential moving forwards. A report on thisismoney.co.uk points out that swap rates, often seen as an indicator of fixed-rate mortgage rates, took a leap up after the November Bank of England interest rates report, giving a hint of what’s coming.

Putting that all together means that for those looking to buy for the first time, or move up, it could be much harder to get the same amount of loan by early next year than it is now. Ah – but property prices will surely decline to counterbalance this, I hear you say? Well, overall it’s unlikely, with more speculators reporting stagnation or very modest falls over the next year.

So have we never had it so good? Well, it’s probably still too strong a statement for many, but I reckon by mid next-year would be house buyers will be looking back and thinking: we definitely had it better at the end of 2010.

My closing question to you: Are mortgages right now as cheap as they will get in the short-term?

* Assuming you are looking to buy or trade-up for residential purposes and are relatively secure in your employment.

That was the week in property, by Mike Hoffa

15th November 2010

Like him or loathe him, it’s hard to ignore the coalition government’s Community Secretary Eric Pickles. He can often be relied upon to come up with some catchy commentary on any number of issues and there is more than the slightest hint of Boris Johnson about him.

This week, he hit the headlines in the world of property by losing a high court battle over his decision to scrap regional housing targets back in May. The move was intended to be part of a process to decentralise power back to the local authorities and away from regional control, which the government had described as “undemocratic” according to the story on the BBC website.

However, the reality is that whilst the move was always intended to be an interim measure, this meant handing the targets back in the interim period to the very same groups who were tasked with meeting them. So they promptly scrapped them, leading to an estimated 180,000 planned new homes being stopped in their tracks, according to the National Housing Federation, a figure which it says could rise to 300,000 over the next 12 months.

Cue housing developer Cala Homes (South) Ltd, which decided to challenge old Eric on his stance, taking the battle to the courts, and on Friday the British legal system concluded that he had acted unlawfully, declaring that the argument from Cala Homes was “well founded”. In effect , what they’re saying is that such a change should have gone through the proper legislative process, allowing Ministers to vote on it.

In fact, Mr. Justice Sales, presiding over the case, is quoted as comparing Eric Pickles to Henry VIII by the Mirror in its report, as the former British king was well know for introducing his own clauses and overruling parliamentary law. Now there’s an image for you.

But apart from an amusing story, what does this mean for housing development in the UK in the future? Well, probably very little. The government is pushing ahead with is Localism Bill, which if approved will formally remove these targets. Instead the focus is to be on working with the local communities to build more homes.

It seems the government has decided that the old stick of regional targets hasn’t worked very well, so it’s time to try the carrot. No-one knows what that carrot will look like yet, but I’m sure some kind of tax will pay for its growth.

Still, if the Henry VIII costume doesn’t work, perhaps you can look forward to seeing Mr. Pickles on a building site near you soon, helping the local community build more homes.

So what do you reckon, what’s the best way to encourage the right type and volume of new homes?

That was the week in property, by Mike Hoffa

8th November 2010

It’s been gnawing away at me for a few weeks now. A nagging feeling that either I’m getting old and turning into my Dad (which I’m assured we all do eventually) or, even worse, Victor Meldrew.

But actually I’ve decided that no, it’s not me – the world really has gone mad.

The trigger for this is the recent outcry, well covered by the BBC, over government plans to cap social housing benefit to £400 per week for the largest homes, £290 a week for 2-bed flats. Some people are kicking up a stink over this one, claiming that it’s going to force some social tenants out of where they are currently residing as the resultant benefits payments won’t cover the rent. The word “social cleansing” has even been used to describe the situation.

Hello? If you want to know what social cleansing is about try casting your mind back to the horrific situation observed in the war-torn former country of Yugoslavia. Telling people that they can’t live in their 6-bed mansion in Notting Hill due to capping social housing benefit is not social cleansing.

If you think I’m exaggerating to make a point, the BBC article refers to the one (true) case where an unemployed bus conductor decided that he didn’t like his social housing-funded home in Kensal Rise, so signed a tenancy agreement for a £2,000 a week Notting Hill townhouse, all at the taxpayers expense.

Of course, some private landlords would be unhappy if this came in too, because they’re quite pleased with the government suckering up this kind of money for social housing. However, the government is pretty good as “tenants” go and there is always a steady stream of people applying for and needing social housing. So private landlords can still help in this space even if the cap comes in, but they will just need to focus on more providing more properties at lower rents, which probably wouldn’t be a bad thing.

The other side effect of such a cap would of course be to free up some of these higher-value properties for wealthy individuals, which would some knock-on effect of making houses available lower down the chain and so on. And you all know by now what a big fan of property market fluidity I am.

But here’s the thing that really worries me about all this – the expectation by some people that they are entitled to occupy such high value homes, despite having no capability to pay for them themselves or, more importantly, intent to create that capability. You can argue the pros and cons of a capitalist society (probably too deep a question for this website!), but whatever happened to looking at something unaffordable and using it as motivation to work hard so you can one day afford it?

Actually, come to think of it, the baby boomer generation didn’t really have too many problems there because they grew up in generally good times. So no, I’ve not turned into my Dad – I must have skipped a generation and turned straight into my Grandad.

So, as Terry Wogan would say “is it me?” or does anyone else think the government proposal makes good sense?

That was the week in property, by Mike Hoffa

1st November 2010

Well, it’s all been a bit gloomy this week hasn’t it?

The nights are really starting to set in and, with the clocks having changed by the time you read this, there will be no doubt come 5pm that we’re heading for the depths of winter.

I’ve been assailed on all fronts by negative reports from the media as well this week. No-one can deny the reports of at best stable house prices, at worst falling again with Nationwide showing a 0.7% drop in September to take the average house price down from £166,757 to £164,381. A drop marking more than the typical salary, as the Telegraph reported with pessimistic glee.

Mortgage approvals are also at a seven month low, with less than 50,000 approvals in September reports the Independent. It also goes on to clarify that this is below the apparent magic number of 70,000 to 80,000 needed to sustain house prices and way below the average of 90,700 per month since 1993. Not quite sure how strong a correlation that is between number of mortgage approvals and house prices, but that’s what they’re saying.

But you know me by now – always one to look for the positives! There’s definitely a buzz of more properties coming onto the market, which would explain the slight drop in prices as buyers have more choice available to them. And as for the mortgage approval numbers, this should right itself once the fluidity starts to seep back into the market, which it seems to be doing.

So, enough about all that, here’s a much more exciting story from last week to fend off the winter blues, also found in the Telegraph – “Estate agent uses poetry to sell properties”!

That’s right folks – an agency in Brighton has sent its staff on a poetry course to brighten up their property descriptions.  Now, a seafront flat starts with the description “The first thing you see is the sea meeting the sky; like old comrades they share a warm embrace…” and a flat is labelled as an “autumn golden grove shading tidy city pad”.

Nice one, now that’s what I call spirit of the Blitz!

So in keeping with the spirit of the story, here’s my take on the week:

If property sales are getting you down,

Just try to smile; don’t wear a frown,

Come the Spring we’ll be bouncing right back,

As the economy finds that nice upward track,

So keep your eyes open for good deals now,

Those bargains sure to become a cash cow,

And if you’re not sure just where to look,

Pop back here for the old auction book.

Not bad huh?

That’s all for this week and no, I won’t be giving up the day job! See you next week.