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Moody’s issue grim warning for mortgage market post-2010

[ Posted July 31st, 2010 ]

One of the UK’s major investment services has issued a stark warning to Britain’s mortgage market, stating that mortgage lenders in the UK are likely to suffer continuing periods of difficulty as a result of house price uncertainty, unemployment fears and interest rate issues.

Moody’s Investor Service also stated that banks and building societies are also likely to face more and more stringent liquidity and capital requirements, two factors that could well diminish their ability to raise lending levels. The lack of wholesale funding is likely to continue the squeeze for many, heaping more and more pressure on them to scale back on loans – not only for this year, but also beyond. As well as this, current arrears on mortgages have, until now, been softened by the continuing very low interest rate levels as well as the relatively small climb in unemployment. The agency also stated that any rise in either interest rates or unemployment ‘would have a significant impact’ on loan performances.

"Moody’s believes that the next few quarters will be characterised by a number of key credit themes that will culminate in sustained pressure on the sector’s profitability," stated Marjan Riggi, VP-senior credit officer. "We expect to see continued consolidation of weaker lenders into larger and stronger entities, thereby strengthening the system in the long run."

Moody’s categorised UL lenders based upon its analysis of their franchises’ strength. The larger market firms, such as Nationwide, Santander and the Co-operative Bank, which all benefit from economies of scale and also provide a wider range of products, were seen as better placed. Conversely, the opposite end of the market was occupied by the more fragile lenders such as building societies like Newcastle and West Bromwich, largely due to their lack of scale, as well as the fact that some in the group were also held back by poorer quality assets following their fast growth.

Building societies have been especially hard hit following the credit crunch due principally to the fact that they are competing against the much larger state-supported banks that are more often perceived as safer by many customers.

Societies have been particularly hard hit since the credit crunch as they are competing for customers’ deposits against larger state-backed banks, often seen as safer by consumers such as those looking for secure fixed-rate deals.

Time running out for Britons to reclaim Spanish CGT charges

[ Posted July 30th, 2010 ]

There remains now very little time for British people who sold a property in Spain between 1997 and 2006 to instigate the process of getting back the Capital Gains Tax that was illegally charged on the back of their property sales.

The potential  cases date back to the years between 1997 and 2006 when the Spanish government illegally charged British sellers more than double the amount of Capital Gains Tax (CGT) than that paid by Spanish sellers on the sale of properties. As Spanish nationals paid only 15% of any capital gains, British people, by comparison, due to the fact that they were considered liable for the so-called ‘non-residents income tax’ paid a rate of 35% on residential and commercial property sales. The European Court of Justice ruled last year that the tax rate paid by British nationals was in contravention of the European Community Treaty rules against discrimination and also that any UK or EU citizen that sold any property in Spain between January 1st, 1997 and December 31st, 2006 would be able to claim back all of their excess charge as a result of the tax.

The ruling also stated, however, that all claims must be settled by the end of October, 2010. Due to the fact that the entire month of August is a holiday period in Spain, sellers now have very little time to instigate the claims process. The process itself, from beginning to end, lasts for anywhere up to three months. More than 500 British nationals have so far made claims, and have been refunded an average of roughly £14,980 each from the Spanish Tax Office.

The tax, which is estimated to have earned the Spanish government around the sum of £350 million, was originally unearthed and publicised by the Spanish lawyers, Costa, Alvarez, Manglano and Associates and currency specialists, HiFX.
Mark Bodega, the director of HiFX, urged those Britons who believe they might be eligible for a refund to step forward now:

 “As a currency specialist, we help hundreds of people move to Spain every year. We were contacted by Costa, Alvarez, Manglano & Associates about this illegal charge in 2008, and have worked with them to publicise the ECJ ruling as much as we can.

“We estimate that there are still thousands of Brits who sold Spanish properties in the eligible time period who haven’t come forward. We’d advise anyone who thinks they might be eligible for a claim to go to the specialized website, which was set up specifically to deal with the problem.”

Housing in North Belfast get huge 38m Euro injection

[ Posted July 29th, 2010 ]

Plans have been recently announced by the social development minister, Margaret Ritchie, to make an investment of 38 million Euros in brand new housing in North Belfast. The large investment will go towards ensuring that the majority of the old, inadequate and run-down housing currently in the area will be pulled down in order to make space for newly-built, fully modern family homes in the Parkside, Upper Long Streets and Queen Victoria Gardens areas.

Coming towards the end of her term in office, Margaret Ritchie spoke of her pleasure in fulfilling a promise she made earlier in her term as social development minister: “I have visited each of these areas and seen at first hand the poor housing people were living in. I made a promise to the residents in each community I visited that they would not be forgotten, and I am pleased that in my last days as Minister, I can now make good that promise,” she said.

In total, 276 old terraced houses will be pulled down in North Belfast, and all work will be carried out in full consultation with the local community.

The minister further added: “I made it clear when I launched the New Housing Agenda that I wanted to increase both the quantity and quality of our housing. When I launched the redevelopment of the Village I said North Belfast was the next priority. North Belfast is an area of high housing need and this investment will make a significant difference to the lives of so many people living in these communities.”

The Housing Executive will soon begin a period of consultation with each affected local community in order to discuss and then reach agreement on implementation plans for every area. Although the work will be gradually phased-in during the coming years, Minister Ritchie has made available the necessary funding for work to begin immediately on the new homes to support both existing home owners looking to downsize, encourage further overseas investment and at the same time allow greater opportunity for first-time buyers. She spoke further of her belief in the importance of the scheme and that it was the right decision to have ring-fenced the funding for the project after past disappointments. “Despite financial pressures, we are delivering on all aspects of the New Housing Agenda,” she concluded.

Budget measures set to precipitate house price crash by 2012

[ Posted July 28th, 2010 ]

According to one of the country’s foremost economic forecasters, house prices are set to drop by more than 20% during the course of the next two year, caused by a combination of imposed government spending cuts, a sharp spike in unemployment and tax rises.

Capital Economics, which is a consultancy firm headed by Roger Bootle, has anticipated that house prices will drop by 5% over the course of 2010, followed by falls of 10% in both 2011 and 2012. The group has predicted a total fall in house prices of 23% from the beginning of 2010, which represents a far more substantial fall than the crash of 19.3% experienced during the recession.  The numbers from Capital indicate that the second half of 2010 could see house prices coming in for a very difficult time as house prices are at the moment 3% higher than at the beginning of the year according to the Nationwide Building Society. The figures from the Nationwide map those from Capital Economics.

"Higher taxes, spending cuts and rising unemployment all point to fresh house price falls this year and next," the forecasters stated in a report. "The benefits of low interest rates for tracker, fixed-rate and even bad-credit mortgages will be undermined by a fresh tightening in mortgage lending criteria."

This comes as the second report in under a week that makes depressing reading for homeowners in the UK. Further to this, PriceWaterhouseCoopers issued a similarly portentious warning: "There is a 70pc chance that UK house prices will still be below peak 2007 levels in 2015 in real terms … and that real house prices [after inflation] may not regain their previous peak levels until around 2020".

Average house prices hit their peak of roughly £187,000 in October 2007, and then crashed for 16 consecutive months, according to figures from Nationwide. The recent recovery has left the average house price standing at £170,111, a figure 9% lower than at the apex of the boom period. Capital Economics underscored their rather gloomy outlook by indicating that the house price-to-earnings ratio still stands far higher than its 4% long-run average at 5.5%. They also stress that mortgage rates are only likely to get more expensive still. They anticipate that London will be “hardest hit by the second leg of the correction.” The firm also went on to caution, however, that the forecast for 2012 is “highly uncertain.”

Their outlook is principally founded on a far worse economic outlook than has been postulated by the treasury. Capital Economics have forecast that the economy will grow by only 1% in 2010, 1.5% in 2011 and 2% in 2012, as opposed to the treasury’s figures of 1.2%, 2.3% and 2.8%, respectively.

Housing registration scheme extended

[ Posted July 27th, 2010 ]

In instances where three or more people are living together and are from different families, the flat or house where they live is called a House in Multiple Occupation (HMO) – not an uncommon occurrence for those seeking out a home of their own for the first time or simply wishing to consolidate funds after developing bad credit. The HMO scheme, which ensures the registration of all HMOs is under the management of the Housing Executive, and the scheme itself has recently been extended across Northern Ireland to apply to residential housing in the area.

Due to the fact that most of the HMOs in Northern Ireland are in the more concentrated areas of Belfast, a phased implementation programme is now taken place. Letting agents and landlords have been advised to get in touch with the Housing Executive to find out about the registration dates for Belfast.

The HMO scheme aims to ensure that all such HMOs are able to meet all required standards with respect to fire safety, toilet, kitchen and washing facilities. Until recently, the instigation of the HMO scheme has generally been gradually phased in across each District Council Area, and the recent implementation means that all council areas are now included.

Terry Waide, from the Housing Executive , made the following comment:

“The amended Scheme now specifies all qualifying HMOs for registration and this will ensure that these properties meet required standards. The vast majority of landlords have been working with us to achieve this, however I would remind others that failure to submit an application to register by the specified date is an offence, liable for court action resulting in a fine.

“Since the introduction of the Statutory Registration Scheme in May 2004 considerable progress has been made in having properties in identified HMO Action Areas registered. It is the responsibility of individual landlords and letting agents to ensure that applications to register are made in time. You should check our website or contact us for details of the registration deadlines for each Council area.

“HMO registration in Belfast is continuous and already underway. We would urge landlords and letting agents with property in Belfast to check the date for individual areas to ensure their properties are registered in the relevant time."



 

Government Dept indicates that UK house prices still rising

[ Posted July 24th, 2010 ]

According to the very latest property price index produced by the UK government, house price values continued to rise during May, which seems to suggest that the housing market, despite the fact that it is slowing, is still performing better than has been suggested in other market reports.

The UK House Price Index is published by the Department of Communities and Local Government, and it incorporates data which is based upon mortgage completions during May of this year, and the Index itself indicates that house prices rose by 0.7% during May, and are also 11% higher as compared to the same month last year – particularly good news for first-time buyers concerned over the sustainable value of a newly purchased property.

The latest government index seems to be rather out of step with other recently published reports, although this could be due to the fact that each report will be calculated on a different basis.

The latest index does, however, contribute to the mounting uncertainty as to the condition of both the commercial and residential property markets, and this view was espouses by Simon Rubinsohn, who is chief economist at the Royal Institution of Chartered Surveyors. Mr Rubinsohn stated that May’s 0.7% increase is certainly a stronger rise than was indicated by the Nationwide Building Society for the same month, and that the report also contradicts the falls shown in reports published by both the Halifax and the Land Registry.

 ‘This divergence in part reflects the fact that the indices are gathering price data at different points in the house purchase process. However, relatively low transaction volumes may also be adding to the volatility of the individual series,’ said Rubinsohn.
 
‘The regional dimension is likely to remain significant, however. Price expectations are still positive in London, the South East, Scotland and the East Midlands but strongly negative in Wales, East Anglia and much of Northern England,’ he concluded.

The average house price Index for the UK-which is mid-adjusted-reached £209,505 during May of this year, and the figures rose on a quarterly basis by 1.7% for the quarter, which compares with a 2.9% rise for the quarter that ended in February of this year.

In overall terms, average house prices climbed 11.7% in England, by 3.7% in Scotland and by 10.9% in Wales. Despite this overall trend, the figure dropped by 1.1% in Northern Ireland. As compared to a year ago, the average annual prices paid by first-time buyers in May 2010 stood 11.6% higher than at the same time last year; and average prices paid by former owner-occupiers stood 10.8% higher.

The report also indicated that average prices paid for new properties throughout May 2010 were 6.5% higher than at the same time last year, and the average prices for pre-owned houses were 11.3% higher.

UK sees dramatic growth of property millionaires

[ Posted July 23rd, 2010 ]

According to the results of a recent survey, the last decade has witnessed a five-fold increase in the number if real estate millionaires in the UK, and more than 100,000 new property millionaires have been created since 2000. The figures amount to an amazing 393% increase with the research also indicating that for the period during the global credit crunch, there has been a three-in-ten decrease in actual millionaire properties as the financial downturn really begins to take hold – unsettling news for some who may have been looking at getting into the market at that time by purchasing for the first time.

The research from Santander Mortgages also showed that there are also now almost 332,000 residential properties in the UK that are valued at more than £1 million, which represents an almost five-fold increase on the figure for 2000 which stood at 26,776. The vast majority of the million pound-valued properties (around 78%) are located in London.

Despite the fact that the credit crunch has resulted in more than 40,000 homes losing the coveted million-pound status (between 2008-9), which represents a value reduction of 29%, the market for million pound-plus houses has certainly recovered. During the course of just the last year, the number of million pound-plus houses has climbed to roughly 29,000, taking the market for such properties back close to its peak figure as it stood in early 2008.

Roughly 78% (103,168) of such properties are located in the Greater London area, and the capital’s south west postcode lays claim to almost 29% of the UK’s millionaire properties. In fact, the top ten places in the Santander Mortgages’ Property Millionaire League Table are occupied by postcodes in the Home Counties and London, including such towns as Kingston-upon-Thames, Hemel Hempstead and Guildford.

London’s south east area postcodes lay claim to an incredible 23-fold increase in its number of property millionaires during the past ten years.

‘For many of us our home is our castle and in recent years we’ve often viewed our home as a key investment, too. Whether you’re a property millionaire or not, prospective buyers and those re-mortgaging need to make sure that they get a fair deal on their house and mortgage,’ commented Phil Cliff, director of mortgages at Santander.

FSA issues ‘get tough’ message on UK mortgage lending

[ Posted July 22nd, 2010 ]

The financial watchdog in the UK is looking to ban both fast-track mortgages and self-certification as parts of its drive to ensure that lenders implement and undertake affordability checks on borrower before lending them money in order to buy properties. The steps are intended to ensure that borrowers will actually be able to pay back he money they borrow and their suitability for loans.

Fast-track mortgages and self-certification have long been the choices of self-employed property purchasers, however, under the new proposals released for consultation by the Financial Services Authority (FSA), they would be required to give proof of income that would need to come from an independent source as well as ensure that they will not fall under a bad credit category.

The FSA has proposed to introduce affordability tests for every mortgage in order to make sure that lenders return to what has been called “the basics of responsible lending.’ The authority did not illustrate precisely what criteria  should be used in order to gauge the mortgage affordability borrowers by the lenders. Instead, they stated that they might decide to undertake a ‘line-by-line’ assessment of each applicant’s outgoings. They could also decide to use either their own expenditure models or statistical data.

Affordability, however, should be based upon repayment mortgages instead of interest-only deals and should also factor in future interest rate rises based upon the term of a 25-year mortgage-even in the event that a loan has been taken out for a longer period of time.

The FSA also stated that those lenders lending to individuals with poor credit histories would need to implement stricter credibility tests and also to make certain that they had a buffer between income and outgoings. The FAS’s research indicates that borrowers with poor credit histories were much more likely to encounter repayment difficulties.

The research also shows that almost half of all mortgages instigated between 2007 and the initial quarter of 2010 were approved without the need for buyers to provide verification of their income. Also, it showed that some 46% of households taking out mortgages between 2005 and 2008 have either no money left or faced a financial  shortfall after making mortgage payments and meeting monthly living expenses.

Real cost of UK property set for seismic shift

[ Posted July 21st, 2010 ]

According to a new report from PriceWaterhouse Coopers, residential property prices in the UK will most likely not recover over the course of the next five years, and it is even likely that the real cost of properties will be lower in 2015 that in 2007.

The PwC report and analysis stems from real house prices-or the actual value of property when the impact of inflation is ignored-and their analysis indicates that property prices might stay below peak levels for the course of the next decade, which would directly impact on roughly 3.6 million people that have bought properties since property prices achieved their record levels back in 2007.

The analysis also serves as an indicator of the massive uncertainty surrounding the future of house price prospects, and that property is a somewhat risky asset that will not guarantee definite future returns.  It also indicates that the  trebling in house values between 1997 and 2007 might be reversed, which would seriously impact on home owners, speculators, buy-to-let investors as well as those investing in real estate as part of their pension plans.

Current indications in income growth, housing supply and interest rates result in the fact that property owners will be unable to rely on the fact of their homes climbing in value, the report indicates.

In the middle part of 2007, the average property was over-valued by roughly 25%, and despite the fact that this figure has now dropped to around 5-10%, prices continue to remain vulnerable to further market knocks, the Economic Outlook report states.

The reports gravest warning comes when it states that there exists a 70% possibility that the real cost of a property is likely to be less in 2015 than it was in 2007. It also indicates that the second half of this year will most likely witness falling house prices.

‘The possibility of a renewed fall in house prices over the next few years, particularly in real terms, cannot be ruled out as mortgage interest rates start to rise again,’ commented John Hawksworth, head of macroeconomics at PricewaterhouseCoopers.

‘While it can be argued in theory that house price changes have little effect on overall UK wealth, our econometric analysis suggests that an unanticipated future fall in house prices could have a significant impact in dampening the speed of the recovery in consumer spending in the medium term,’ Mr Hawksworth added.

Foreign buyers head south of the river

[ Posted July 14th, 2010 ]

According to the latest survey from property consultants Cluttons, parents who left London to live in the Home Counties a generation ago to bring up their children are now returning to the capital. As a result of the children having finally left home and with prices in certain areas of London now at their most affordable levels for a few years, Cluttons have noted a rise in the number of middle-aged and retired homebuyers eyeing a return to the bright lights and excitement of the London lifestyle.

It is widely held that London has undergone significant changes during the last five years or so both in terms of residential as well as commercial developments, having become mainly a cultural centre with new and improved public transportation links. Many middle-aged and retired homeowners are subsequently returning to the capital as they relinquish large home with time-consuming and high-maintenance gardens to take up residence in less demanding properties.

One particularly popular area is the South Bank, and the area’s constantly-changing river views and closeness to the city’s ever-growing cultural attractions-as well as the borough market, which is renowned for its local eateries and fresh produce, makes it especially attractive.

‘Traditionally, this stage of the cycle involves downsizing to release equity and relocating to a more rural or coastal setting. However, we have seen a growth among so called empty nesters, who are postponing their retirement dates and seizing the chance to return to London to rediscover a lifestyle they had at the beginning of their career,’ commented James Hyman, partner for residential sales at Cluttons.
  
‘Many are looking to trade in their large detached homes with substantial gardens for apartments with good internal amenities and security such as porterage and based in locations easily accessible to the cultural attractions London has to offer,’ Mr Hyman explained.

Such properties south of the river have also become increasingly attractive to foreign buyers-particularly those from the Middle East, and new developments have particularly caught the eye around Tower Bridge and London Bridge. Much improved transportation links giving access to the City and the West End along with the attractions of such cultural icons as the Globe Theatre, the Tate Modern and the South Bank Arts Arena being especially popular with such buyers.

 
 
 
 
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