Construction Sector Looks Grim

Construction sector activity slumped to a record low during July as conditions in the housing market continued to deteriorate, raising fears that Britain is edging closer to a recession.
 
According to the Construction Managers' Index, which measures trends in the housing, commercial and civil engineering sectors, activity in the industry fell for the fifth month in a row to a reading of 36.7 — the lowest figure since the series began in 1997.
 
The index first fell below 50, which indicates that the sector is contracting, rather than growing, in March. The housing sector was the worst affected with the index of activity in this area falling for the eighth month to a new low of 18.7 in July, down from 25.6 in June.

The general outlook for the coming months is set to worsen further, with new orders falling from 43.5 in June to a reading of 41.
 
Howard Archer, chief UK and European economist at Global Insight: "There can be little doubt that the construction sector is now firmly in recession.”

Halifax Piles More Misery on Market

House prices fell 1.7 per cent in July according to HBOS. The fall, which was sharper than the 1.5% drop the market had expected, brought the fall in the annual rate to 8.8 per cent, according to the Halifax house price index.

Property analysts had expected the annual rate to be at 8.5 per cent, stoking fears that the British property slump could be deeper than currently predicted.

But Good News as Banks Cut Mortgage Rates.

Abbey has announced another round of cuts in mortgage interest rates for new borrowers. The cost of two and three-year fixed and tracker rates are coming down by up to 0.1% after similar cuts last Friday.

The Halifax also this week cut the cost of many of its deals again, by up to 0.38% in the case of a two-year fixed rate. It reduced the rates on 30 different mortgages deals, with one two-year fixed rate deal coming down to 6.19%.

The Bank of Scotland, which is part of the HBOS group that also owns the Halifax, also cut rates on 36 deals by up to 0.7%.

Ray Boulger of John Charcol said this was good news for borrowers and a clear sign that competition was returning to the mortgage market.

"Two-year swap rates [the cost of lending between banks] are now 1% down from their peak in the middle of June. There are increased signs of competition in the market and the big lenders are starting to slug it out a bit.”

Dithering Darling Warned Over Stamp Duty Limbo

The Chancellor is under pressure to clarify whether he will suspend stamp duty for some buyers after house builders, estate agents and political opponents said that confusion could see thousands of buyers delaying their property purchases.

Darling said earlier this week that he was considering a “range of options” for the Government’s economic revival plan, and refused to deny that a stamp duty holiday would be a key component.

However critics have said that such an ambiguous signal could backfire, paralysing the market as would-be buyers wait for an official announcement.

The average buyer stands to save between £5,000 and £9,000 if stamp duty is suspended. The Tories have written to Darling, accusing him of playing “damaging short term games” with homebuyers and asking him to clarify whether the policy will indeed be introduced.

SH Note: Darling’s dithering probably stems from the fact that Stamp Duty breaks don’t fix the housing market as the Tories can testify when they tried it in the 90s. Buyers just see it as an indicator that prices will fall further and so they do. Procrastination doesn’t help either.

Mortgage Approvals Fall Further

The latest data from the Bank of England shows new mortgage approvals fell by 68 per cent in June to 38,000, the lowest level since the early 90s. The figures show there are fewer buyers than ever in the market place.

As Buyers Pile on the Pressure

Those buyers that remain are increasing undercutting asking prices, according to estate agents, in an attempt to grab a bargain. Lloyds TSB, which announced a 70 per cent fall in profits today, said it expects house prices to fall 15 per cent by the end of the year.
 
The Times has put together a list using the latest figures from Hometrack, showing average completion prices as a percentage of original asking prices for each county in the UK in July. They are as follows:

Dorset 88.9%; Teesside 88.9%; Berkshire 89.3%; West Sussex 89.6%; London - East 89.7%; London - North 89.7%; Wiltshire 89.7%; London - West 89.9%; North Wales 89.9%; Gloucestershire 90.1% London South East 90.1%; Cambridgeshire 90.2%; Cornwall 90.2%; Hampshire 90.2%; London - North West 90.3%; Avon 90.4%; South Wales 90.4%; London - South West 90.5%; Mid Wales 90.5%; Birmingham 90.6%; Norfolk 90.6% Northumberland 90.6%; South Lincolnshire 90.6%; Greater Manchester 90.7%; Buckinghamshire 90.8%; East Sussex 90.8%; Somerset 90.8%; Warwickshire 90.9%; Bedfordshire 91%; Merseyside 91%; Nottinghamshire 91% Shropshire 91%; Devon 91.1%; Lancashire 91.1%; Derbyshire 91.2%; Hertfordshire 91.2%; Northamptonshire 91.2%; Staffordshire 91.2%; Tyne and Wear 91.2%; Essex 91.3%; Leicestershire 91.4%; Suffolk 91.4%; Cheshire 91.5%; Hereford and Worcester 91.5%; South Yorkshire 91.5%; North Yorkshire 91.6%; County Durham 91.8%; North Lincolnshire 91.8%; Oxfordshire 91.9%; Central London & City 92.1%
Kent 92.1%; West Midlands 92.2%; Surrey 92.5%; West Yorkshire 92.7%; Cumbria 94%; East Riding of Yorkshire 94.7%.


                         

Glut forces cuts in London rentals

Rents across London have started to fall by as much as 20 per cent as a glut of supply forces landlords to cut prices. After a year of strong growth, rents on properties ranging from family houses in Kensington to two-bedroom apartments in Canary Wharf are now being slashed by hundreds of pounds a week, according to estate agents.

Riverside apartments that were being let for up to £1,500 a week this time last year were now going for about £1,200.

“We have noticed a huge increase in stock in the last three to four months, while inquiries have only increased marginally," said Tim Hyatt, Head of Lettings at Knight Frank.

Rents were coming down fastest on properties presented in less than immaculate condition, or located slightly further from the Tube. Average UK rents, which had been rising rapidly, have now stabilised just short of £1,000 a month, according to Paragon Mortgages.

SH Note: It’s rather difficult to know what to make of this as all previous claims and forecasts suggest strong growth in rents as potential buyers hold off. The only logical explanation is that City redundancies are a lot worse than publicised.

House Prices 'to fall 30% by 2011' as a Fifth of Northern Rock Mortgage Holders Face Negative Equity

Prices could fall by up to 30 per cent over the next three years with around £50,000 wiped off the value of the average home, investor behaviour indicates.

The leading indices of property price futures suggest the collapse in the housing market will be more serious than some forecasts, according to the FT.
Investors are increasingly looking to bet on the long-term value of property rather than the short-term because the value of their own homes is falling.

Residential price derivatives, which are commonly used by investors, also indicate a drop of between 25 to 35 per cent, according to Philip Ljubic of ABN Amro.

The dire forecast among investors contradicts predictions from the National Housing Federation that house prices are expected to start recovering in 2010 and could rise by as much as 25 per cent by 2012.

High-rise plans stalled as gloom grows

Up to half of all high-rise residential developments are being put on hold as a result of the downturn.
The forecast was made as one of the most high-profile developments to date last week fell victim to the weakening economy. ING Real Estate withdrew from a funding agreement for the £250m King Alfred residential complex in Brighton, a Frank Gehry-designed mixed-use scheme that comprised 751 flats across two towers and several smaller blocks. Karis Holdings, the project’s developer, is now seeking a new financial partner, but the scheme in its existing form is seen as dead in the water.

The problem is much more widespread than just the high-density towers in city centres, with mainstream house builders quietly admitting that development has all but halted as they wait out this market correction.

Savills estimates that up to 50 per cent of the high density residential schemes that it tracks in London have either been mothballed or are expected to be halted pending an improvement in the housing market. It says anecdotal reports suggest that at least the same proportion of schemes is under threat elsewhere in the UK.

SH Note: This might be news to the general public but it’s not news to us..

More Repossessions than Claimed, says Shelter

Thousands more homeowners are having their houses repossessed than official figures suggest, Shelter said that the number of repossessions could be a fifth higher than current figures suggest because of actions taken by “second charge” lenders.
 
Tens of thousands of people have taken out a “second charge” home loan on their property and are liable to repossession if they fall behind on payments. The second charge market is worth more than £11 billion. Council of Mortgage Lenders (CML) repossession data does not include any actions taken by second charge lenders.

The CML said that there were 27,100 repossessions last year, but Shelter said the figure could be closer to 32,000, once second-charge actions were taken into account. While the CML said that repossessions would increase by 50 per cent to 45,000 this year, Shelter said that the increase could be much greater, forecasting that an additional 9,000 borrowers will lose their homes at the hands of second-charge lenders.

                                   

And City Watchdog Slams Lenders for Quick Evictions

Mortgage lenders were criticised yesterday for rushing to evict families from their homes, as the number kicked out soared by 41 per cent in a year.
The FSA said some lenders are 'too ready' to repossess customers' homes and are not giving them enough of a chance to find the money when they fell behind with payments.

From January to March, 9,152 people lost their homes, compared to 6,471 in the same period last year.

The FSA also warns that 302,000 families are in 'the last-chance saloon', having not made repayments for at least three months.

Galliford Try Wins Four London Schemes Worth £84.5m

Galliford Try has won four regeneration projects worth £84.5m in London. It has been named preferred bidder on two housing developments for Circle Anglia Housing Association - a £34.5m scheme at Innova Park, Enfield - and a £11m scheme in Plaistow. In Hornsey, the firm has secured a £23m project to build 136 apartments for One Housing Group.

The fourth contract is a £16m scheme to provide affordable rented and shared-ownership accommodation in Plumstead for ASRA Greater London Housing Association.

Barratt Seals Refinancing Deal With Banks
 

Barratt says that the refinancing package agreed with its banks has now been signed and come into effect. The deal will see the banks relax lending covenants that the Barratt feared might be breached as a result of the market downturn. The company said: “Under this documentation, the interest cover covenant is replaced with a cash-flow covenant and the gearing and minimum tangible net worth covenants are relaxed.

“As anticipated, this final documentation also extends the maturity on Barratt's existing £400m revolving credit facility from February 2010 to July 2011.”

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