Halifax: Prices Dropping £1,000 a Month
According to the latest Halifax figures, nearly £1,000 is being wiped off the value of the average house each week, with average prices no more than they were three years ago. Its latest survey confirms the crash is gathering pace, with values falling at their fastest since the 1930s.

The bank says the average house is worth £168,176 – levels last seen in October 2005. The average home lost £4,000 in value in the past month – £923 a week. Prices are falling far faster than in the early 1990s, when the crash was relatively steady and spread over nearly three years. Economists say house prices have not fallen as sharply as the current 15 per cent a year since at least 1931. And most say it’s going to get worse for months to come.

Seema Shah, a property economist at Capital Economics, said: "Worryingly, the economic downturn has only just got going. We think that the recession will be deep and last at least two years, triggering a sharp rise in unemployment. This will only serve to intensify the downward pressure on house prices as demand weakens and forced sales rise."

Some 45,000 homes are expected to be repossessed this year, but this number is expected to rise in 2009.

SH Note: With figures like these, it’s difficult to have any optimism. However, the pace of the price falls might lend weight to those who believe the recession will be severe but brief – a more attractive proposition than a long drawn out decline.

Bank Bosses Ordered to Lower Rates
High Street bank chiefs have been summoned to the Treasury to explain when they are going to start lowering their mortgage rates. The meeting came a day after the Bank of England slashed rates to three per cent.

The Chancellor told them to pass on the interest rate cut to customers "as quickly as possible".

But apart from Abbey and the two lenders that are in hock to the government – Lloyds TSB and Bradford & Bingley – the rest refused to say when or by how much they might lower their rates.

Their average standard variable rate is 6.79 per cent, according to researchers at MoneyFacts and the gap between base rates and mortgage rates has not been so high since the end of the Second World War.

Most experts believe that banks will eventually pass on about half the cut in rates and keep some of the benefit for themselves, in an attempt to rebuild their shattered balance sheets.

The Council of Mortgage Lenders (CML) said lenders would cut their rates by between 0.5 and 1.5 percentage points in the coming weeks.

The worry, however, is that while lenders might make sure existing customers enjoy the benefit of some of the cut, they will make new deals increasingly expensive.

This will hit any potential first-time buyer hoping to take advantage of the lower house prices to get on the housing ladder. It will also hit the estimated 100,000 people due to re-finance their home loans before the start of next year.

SH Note: This was almost inevitable. We can probably expect average existing SVR rates to be cut by about half of whatever base rates are reduced to. However, that’s not going to be the case for new mortgages so we can expect the supply of FTBs – the “lifeblood” of the housing market – to dry up even further.

Council Homes for Life ‘to be Scrapped’
New council house tenants will no longer be entitled to their home for life under government proposals to address waiting lists.

New tenants would have fixed-term contracts under the plans, with regular reviews every few years. If a tenant’s financial position improved, they would be encouraged to take an equity share or to move to the private sector. If they refuse they could face higher rents. The right to a council home is also likely to be tied to a requirement to have or be actively looking for a job.

With nearly four million people, or 1.6 million households, on waiting lists for social housing, and only 170,000 coming available each year, the government is worried the problem will worsen in the next few months as more homeowners are repossessed.

Whitehall officials said that ministers were looking at proposals from the Chartered Institute for Housing, which proposed fixed-term tenancies in which anyone granted a council home would have it initially for three or four years before a review. A spokesman for the institute said that no one would be evicted under its plan, but that they could face higher rents. At present, social housing rents rise each year by the retail price index plus half a per cent. Under the new plan higher-tax payers could pay nearer the market rate.

Britain's City Centres Reeling
At an Allsop auction last week, a flat in an upmarket area of Leeds that was bought for £400,000 in July 2007 sold for just £159,000. Another flat in nearby Wakefield, bought for £189,000 on October 31 2007, sold for just £69,000. The auction was originally planned to run for two days but was extended to four because of the number of repossessions.

Andrew Wells, a partner at Allsop in Leeds, said the city centre and urban flats market has taken a pummelling and dismissed a survey by property website Mouseprice which said city centre prices had fallen by up to 17 per cent. He called this "absolute nonsense".

"I don't know how they did their data," he said. "City centre flats haven't fallen 17 per cent – it's much worse than that."

Leeds, Sheffield and Birmingham are also suffering more than headline figures suggest. "We've just got a situation at the moment where nobody is buying. You could talk to agents in this street where they have probably sold one dwelling per month each," Mr Wells said. Agents in Leeds reported falls in prices of new-build apartments of 30 to 40 per cent.

In Birmingham agents report discounts of 25 to 30 per cent off bulk purchases with up to 40 per cent off ten or more apartments. Owner-occupier purchases remain "negligible", according to Savills director Simon Horan.

SH Note: There’s not too much to cheer about here but it’s not all bad news. Agents insist that there does remain some demand for city centre accommodation because of continuing rise in rental values. In Manchester rents are increasing to such an extent that some landlords are insisting on six-month contracts – rather than a year – because they know they can increase the price after that period.

 Housebuilders Warn Downturn Will Extend Into 2010
The slump in private housebuilding is set to continue throughout next year when sharp falls in office and retail developments will add to the industry gloom according to an authoritative industry survey from the Construction Products Association and construction Confederation.

Growing worries about the health of the sector are being reflected in other key manufacturing areas with Corus, Britain's biggest steelmaker, slashing output by 30 per cent.

The survey found little to relieve the gloom despite the cut in interest rates. Stephen Ratcliffe, chief executive of the Construction Confederation, says the dramatic downturn in the industry is being made more painful because contractors are caught in a pincer movement between falling demand and rising costs.

Taylor Wimpey, Expects no Recovery…
In a downbeat trading update, Taylor Wimpey revealed that the decline in the UK property market has worsened and it is now seeing 165 new homes reserved each week – 27 per cent less than the second half of 2007 and the first half of 2008 when the credit crisis had already begun.

The slump in sales comes despite Taylor Wimpey “pricing competitively in each local market” in an attempt to increase sales.

…And Considers Disposing Some of its Land Bank
Taylor Wimpey might have to dispose of some of its landbanks if it can’t get a re-financing deal from its bankers.

Chief executive Peter Redfern and finance director Christopher Rickard told analysts that debt discussions with the group's banks so far had been a "tad disappointing", causing the shares to tumble 19 per cent.

And they added that if the group doesn’t agree refinancing it would talk to providers of equity capital and may also consider selling parts of its UK land bank. They also revealed the company is to meet eurobond advisers later this week.

The downturn means that Taylor Wimpey is facing serious concerns over its levels of debt, now at £1.9 billion according to the trading update, However, the housebuilder maintained it is complying with existing covenants and that refinancing remains the "top priority".

Talks with its bankers and private placement noteholders are ongoing and Taylor Wimpey is in process of extending the negotiations to include certain eurobond holders.

"The objective of these discussions remains the achievement of a revised covenant package that is robust and delivers a stable medium-term financing solution for the group, taking into account the requirements of all relevant stakeholders," the company said. "The interests of these various stakeholder groups mean that these discussions are complex and it therefore remains likely that a revised covenant structure will only be concluded early next year."

With market conditions deteriorating, Taylor Wimpey revealed it has reduced the amount it plans to spend on land this year by £75 million. The building of new homes has slowed to about 40 per cent of "normal" levels as sales grind to a halt, it added.

Housebuilders Increase Use of Part Exchange Company
Housebuilders are turning to part exchange in increasing numbers according to the company New Homes Part Exchange which has doubled its business since the start of the year.

The company completed 71 resales on behalf of housebuilders in September alone, taking an average 4.2 weeks to find a buyer and just six weeks from reservation to exchange.

Gaynor Hookings, Marketing Director, said: Part exchange has come into its own as the market has stagnated, proving a lifeline to housebuilders who need to remove chains to secure sales.

"It is clear to us that customers do still want to move, and are able to press ahead once the sale of their existing home is no longer a concern. Elaine Dafaur, Sales Director of Gladedale Homes, which has been using the service for four years, agrees: “In a good market, part exchange can help make a customer’s life easier but in a difficult market, it can prove a lifeline.”

Hammerson Halts All New Development
Hammerson has halted all new developments. The FTSE 100 Real Estate Investment Trust, which has opened new shopping centres in Leicester and Bristol this year, will also cut jobs as part of a £3 million cost-cutting programme.

John Richards, chief executive, would not specify the number of potential job losses and said: "One of the key determinants of building a shopping centre is having your pre-lets done and having your plans developed. In both of those areas we have seen a slowdown. To put it simply, tenants have been very reluctant to make long-term commitments to space and without your anchor tenants in place you can't actually finalise the design of the centre. On top of that, construction costs have gone up quite a lot and the costs of finance have gone up a lot. Viability has become very stressed."

Ongoing developments in Aberdeen and London will continue because there is "no merit or advantage in slowing them down", he added.

In the third quarter of the year, Hammerson's occupancy rate decreased to 95.5 from 97.7 per cent as major retail schemes, including Cabot Circus in Bristol, were completed.

However, Mr Richards was bullish about the outlook for Hammerson, suggesting that despite many potential tenants taking a "cautious stance" there were many businesses who would be keen to take up space, especially in shopping centres.

Land Securities slumps to £1.7 billion loss
Land Securities, which made a profit of £365.2 million in the same six months last year, suffered writedowns of £1.74 billion amid an “unprecedented period of financial instability”.

The plan to demerge Land Securities will be stopped because of the economic conditions, the group said, although it is still working on the sale of outsourcing arm Trillium.

Halting the demerger plan was widely expected among analysts because of the downturn and the departure of chairman Paul Myners to become the government’s city minister. Land Securities announced today that Mr Myners will be replaced by Alison Carnwath, the present chairman of MF Global.

Francis Salway, the chief executive, said: “Our results reflect the fact that we are going through an unprecedented period of financial instability which has severely impacted investor confidence, the availability of credit and the pricing of property investments. Although we are by no means immune to the prevailing market conditions, the fundamentals of our business continue to be sound as a result of the resilience of our income streams.

“Our operational performance has been strong with our completed developments being almost fully let. Our short-term priorities are around leasing and on-going balance sheet management. For the medium-term, we are planning a development pipeline to capture a recovery in occupational markets.”

A key measure of Land Securities performance, adjusted net asset value per share, fell from 1956p at the end of the financial year in March to 1552p at the end of the six months to September 30.

However, without the writedowns, the company said underlying profits rose from £172.8 million to £195.8 million as rental values held relatively firm and key developments, such as Cabot Circus shopping centre in Bristol, were completed. Overall vacancy rates increased slightly to four from 3.4 per cent.

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