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Prices Fall at New Record Rate: Halifax
House prices have seen the biggest fall ever recorded over the past year, wiping more than £26,000 from the value of the average home. The latest survey from Halifax reveals the average price of a home has dropped from £198,533 a year ago to £172,108 now – around the same level as January 2006.

It is the eighth consecutive monthly decline, surpassing the early 1990s slump when the longest run of house prices falls was seven months. And economists warned that house prices will fall even further, with the average price reaching £134,000 in 2010.

Seema Shah, a property economist at Capital Economics, said: "The bank recapitalisation plan and the cut in interest rates may help to ease the tensions in mortgage markets somewhat. Yet, with the economy set to continue deteriorating sharply and lending criteria likely to remain tight, we think the correction will continue full steam ahead."

Howard Archer, an economist at Global Insight, said: "Affordability ratios are still very stretched despite the double-digit fall in house prices seen so far. On top of this, faster rising unemployment, heightened concerns over the economic outlook and widespread expectations that house prices will continue to fall markedly seem set to depress housing market activity and prices for some considerable time to come."

Halifax said house prices had fallen 12.4 per cent year-on-year in the three months to September. The 13.4 per cent figure is reached by comparing the price in September 2007 with September 2008.

RBS Warns on Housebuilder Debt
RBS Corporate Finance Managing Director, Christopher Hill, said clearing debt would put housebuilders in a strong position once the market bottoms out.

"At the moment housebuilders will be wanting to allay shareholder concerns and stay within banking covenants,” he said.

But he added that cash flow was also of equal importance to housebuilders at the moment which would enable companies to repay the debt and shareholders. He said: "If you can't meet your funding objectives, your shares will not be worth much."

SH Note: Thanks for that!

Miles: Housing Slump Could be Over Next Year
The housing market slump could be over in six months if the cost of home loans falls by a further half-point, David Miles, Chief Economist at Morgan Stanley, told MPs this week.

But he said that if mortgage rates stayed at present levels, an educated guess from sophisticated economic estimates was that house prices would fall by another five to ten per cent and wipe a further £17,000 off the value of an average home before the market bottomed out next year.

“If the cost of funding to lenders were to move down half a point, then the five to ten per cent fall could turn into a much smaller number, or not much at all.”

However, he also sounded a note of caution over the uncertainty surrounding market predictions. “There are a lot of risks that it could play out worse than that,” he said.
His forecast is more optimistic than those of many other economists, who forecast that prices will slide by up to 35 per cent before reaching the bottom.

In a separate report, Andrew Clare, Professor of Asset Management at Cass Business School, gave an even more dismal prediction, saying that house prices would slide by 40 per cent and that property values would not rise to 2007 levels again until 2023.

The gloom over the state of the market was compounded when Bob Pannell, head of research at the CML, also appearing before the MPs, admitted that there was likely to be “further upward pressure” on repossessions from next year. Repossessions are set to rise by 50 per cent this year to 45,000, the CML says.

A further decline of ten per cent in house prices would knock a total of £45,000 off the value of an average home, according to Halifax house price figures, taking the average property price to about £155,000. The average house price peaked at close to £200,000 last August.

Other official figures, which are seen as a less timely measure of conditions in the housing market, showed a further 2.7per cent fall in house prices in August.

The DCLG said that values of flats had fallen by 5.1 per cent, while terraced properties had dipped by three per cent, taking the average house price down to £211,410, 3.4per cent lower than in August last year.

SH Note: It would be nice to think David Miles is right. But he’s a lone voice out there and just six months ago he told me unemployment was nothing to worry about. Hmmm…

Bank of Ireland Ditches B2L Mortgages for Borrowers With Less Than 25%
Bank of Ireland has withdrawn its buy-to-let mortgage deals for landlords with less than a 25 per cent deposit. The lender is only offering two fixed-rate buy-to-let deals from today worth up to 75 per cent of a property's value.

The three-year fixed-rate deal has a rate of 6.94 per cent with a two per cent fee. It follows a similar move by Bristol & West, the fourth-biggest buy-to-let lender, which reduced its buy-to-let range this week.

However, Bradford & Bingley confirmed that it was passing on the full half-point base rate cut to borrowers on a variable rate.
 

Bellway Profits hit After £130m Write-down
Bellway has slashed its dividend after a 85 per cent slump in full-year profits. A £130.9 million write down on the value of its land holdings led to a plunge in pre-tax profits from £234.8 million last year to £34.76 million, as sales of completed homes dropped from a record 7,638 to 6,556.

The company which saw average sale prices slip from £173,300 to £169,700, made around 800 staff redundant since May – 35 per cent of its workforce – leaving it with around 1,400 employees.

Beside the jobs cuts the company as also reduced its divisional structure from 18 to 13 to save £8 million in costs. Finance director Alistair Leitch said the firm would now look to conserve cash. He said: "The speed at which everything has changed in the world is incredible – consumer confidence has been shot. It's going to take a while before we see confidence returning to the housing market as people can see recession round the corner. These things prey on people's minds.

"There has to be confidence in the banking system before the economy picks up and the housing market improves. Until then, we're pleased to say that we are seeing 50 to 60 reservations a week, which we think is good in this climate.

"The only glimmer I can see at the moment, is that people might become hacked of with banks and stock markets and start to invest again in property again – that might just be me being hopeful though."

The company will pay a 6p final dividend on January 21 down from 26.67p, making a total dividend of 24.1p against 43.1p the year before.

SH Note: Bellway’s a lot better placed than most. And there’s some anecdotal evidence that Leitch is right about some people choosing to buy property after being burned by banks and the stockmarket. Too few of them though. And those that can are still picking up repossessions at lower prices than housebuilders can afford to let new stock go at.

Banks Ignore Government’s Call for More and Cheaper Mortgages…
Banks are turning the screw on the property market as the number of mortgages available become more expensive and increasingly harder to get hold of.

Northern Rock ignored last week's emergency interest rate cut by the Bank of England and the Nationwide has increased the cost of tracker deals by up to 0.3 per cent. So despite the base rate falling to 4.5 per cent, it has reduced its variable mortgage rate by just 0.15 per cent, to 7.34 per cent.

If the full benefit had been passed on, payments would fall by around £50 a month on an average £150,000 loan. In reality customers will only save £15.

The fear now is that the big three banks which were part-nationalised yesterday will follow its lead. Lloyds, HBOS and Royal Bank of Scotland have said they will hand out more loans in return for the government agreeing to bail them out. But although they pledged to “maintain the availability and active marketing of competitively priced mortgage lending” for the next three years, Lloyds has already increased its rates by 0.34 per cent for buyers with just a ten per cent deposit.

Meanwhile HSBC, which is not part of the bail-out, yesterday froze its standard variable rate at 6.25 per cent.

SH Note: Chances are the bailed-out banks will indeed maintain the availability of mortgage lending to honour their promises to the government – but only to those with hefty deposits. And who can blame them?

… And House Purchases are Expected to Plummet
As new mortgages approved by lenders dropped in July to 33,000 – the lowest level on record and a 71 per cent drop from last year – it is expected the new figures will see the number of house purchases drop even further.

Last month it was announced the number of first-time buyers entering the housing market had hit a record low as the size of deposits they needed reached the highest levels since the early 1980s.

The number of first-time buyers has halved in the past year, with only 17,300 people entering the housing market in July. It is the lowest level since the CML began collecting the data in January 2002. The CML also announced last week that there may be 45,000 repossessions this year, although experts have argued those figures are optimistic.

Ray Boulger, senior technical manager at mortgage broker John Charcol, said: "Even on conservative figures the second half of this year is likely to see the figure rise to 30,000 and I anticipate a 50 per cent increase in the total for 2009.''

On that basis there would be 105,000 repossessions before the end of 2009.

Britannia and Co-op to Merge?
The Britannia Building Society has begun negotiating with the Co-op over combining the two businesses to create an organisation with £75 billion in assets and more than six million members.

There is no suggestion that either the Britannia or the Co-op has run into financial difficulties. However, both are understood to believe that establishing a larger business makes sense at a time of chronic uncertainty across the global banking industry.
For the merger to go through, a Bill sponsored by the Conservative MP Sir John Butterfill, which will enable mutual and co-operative organisations to merge, will first need to become law.

The FSA is understood to be aware of the talks between the Britannia and the Co-op, but is not thought to be playing a significant role in them as it did in the run-up to the part-nationalisation of Bradford & Bingley.

A spokesman for Britannia confirmed that it was "in exploratory talks" about the merger.

Accordia Becomes First Housing Scheme to win RIBA Stirling Prize
Feilden Clegg Bradley's Accordia housing scheme has won the 2008 RIBA Stirling Prize.The Cambridge development, designed by FCB with Alison Brooks Architects and Macreanor Lavington, was awarded the prize on Saturday evening at a ceremony in Liverpool. Countryside Properties was the developer behind Accordia, and it was built by Japanese contractor Kajima.

It was the first time the prestigious prize has been awarded to a housing scheme, and the judges were quick to say its success should be noted by housebuilders.

In a statement, they said: “This is high density housing at its very best, demonstrating that volume house builders can deliver high quality architecture – and that as a result they can improve their own bottom line.”

Alison Brooks said of Accordia: “It is an exemplar project of new volume housebuilding, and proof that new ideas can be incorporated into large housing projects. I think it sends the message too that good housing should be places to live, not just short-term investment.”

Grainger Growth Halted by Price Falls
Grainger, the UK's largest quoted residential landlord, says it does not expect to see a growth in annual trading profits this year. Total sales would increase 17.5 per cent to £143 million, the company said, but profits were likely to be in line with 2007 results because of the collapse in house prices and a greater proportion of investment sales, where a property is sold on with a tenant in place.

The trading profits do not include falls in the valuation of Grainger's properties, which are likely to be significant.

However, the company said it was "comfortably" within its covenants, with their next testing date being March 2009. Grainger added: "We have already sold sufficient properties in the first six months of the period to be confident that, in the absence of unforeseen circumstances, the covenant requirements will be met at that date also."

Grainger added that it was making "good progress" in its intention to reduce annual overheads by ten per cent. Shares in the company closed down 1.75 at 191.25.

SpeedyHire Cautious Over Future
SpeedyHire said this week that problems in the credit markets were "impacting on overall activity and reducing confidence" in the general construction market. Reduced activity in the residential, commercial, retail and mixed-use development "has become more pronounced in recent months", it said.

The company also warned that the overall construction market continues to contract, resulting in a "significant decline" in revenues from smaller to mid-tier customers.

The company said it was dealing with the challenging conditions by cutting capital expenditure and trimming costs. The workforce has already been reduced by four per cent and the gross spend for the financial year is now forecast as £75 million rather than up to £110 million initially planned.

Anthea Turner's Husband Grant Bovey Loses Buy-to-Let Empire
TV presenter Anthea Turner’s husband has handed over his buy-to-let empire to a bank, becoming the latest high-profile victim of the credit crunch.

Grant Bovey’s Imagine Homes, once Britain’s largest buy-to-let business, has been taken over by HBoS and Bovey, 47, is now just a consultant to a new company called Imagine Homes (UK), which is responsible only for selling and marketing the property empire he once commanded. He has been left without a financial stake in any part of the business.

A source said Mr Bovey had been hit hard by the “shattering” of everything he had built up. “Grant believed his company was arguably the biggest in his sector in the country and to see that shattered is upsetting.”

It wasn’t long ago that Bovey said: “I am sitting in our £5 million chateau in Megeve in the Alps. I will sue anyone who says that Imagine Homes is in financial difficulty. We are 20 per cent owned by HBoS and we have huge profits that have yet to materialise.”

But documents show it made a loss of £6,429,926, after a loss of £2,816,807 the previous year.

Unsold Shared-Ownership Homes Pass £1bn Mark
The value of unsold shared-ownership homes may be as high as £1 billion, the Housing Corporation has warned ministers.

It is understood the Corporation told junior housing minister Iain Wright that it was investigating estimates that the value of new housing association shared-ownership homes sitting empty had risen by 15 per cent since March.

Steve Douglas, the corporation’s chief executive, admitted it was looking at the issue as part of its quarterly review of housing association business models, but had not yet concluded the work. He said: “We will publish the review in the next weeks. We are working on options to manage unsold stock.”

The government is continuing to rely on the housing association sector to keep housing output up, despite the fact that many associations are reducing their development programmes because of exposure to the wider housing market downturn.

Major London housing associations are believed to have told Wright that the government’s affordable housebuilding targets would not be met unless there were changes to the way associations were funded. The news comes amid persistent rumours that a major housing association, Genesis, is in financial difficulty and may be looking to merge with rival Notting Hill Housing Group. Anu Vedi, Genesis chief executive, strenuously denied both rumours. He said: “This is all gossip and nonsense. We are well funded.”

Genesis has a large development programme of shared-ownership properties. Its latest accounts showed the value of property for sale on its books increased threefold in the past year to £158 million.

Kate Davies, chief executive of Notting Hill, denied it was in merger talks with Genesis.

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