Rightmove: Prices Have Already Fallen 20%
Rightmove says prices have already fallen 20 per cent from their peak – of which three per cent was from the past four weeks alone.

Evidence suggests that prices will continue to fall sharply. The average home coming on to the market in England and Wales cost £222,979 during the four weeks to November 8 – a fall of 7.1 per cent compared with the same period last year.

Despite the falls, the company warned that new sellers were still failing to price their properties realistically. “Some sellers could avoid months of disillusionment and despair if they started marketing at an asking price a lot closer to where the evidence indicates they are likely to end up,” said Miles Shipside, Rightmove's commercial director.

“While average asking prices have fallen by 7.1 per cent over the past year, in most parts of the country you should look to at least double that discount to achieve a sale,” he added.

An average of just 20,000 people a week put their property up for sale during the period, the lowest level recorded by Rightmove since 2002, and well down on the level of around 35,000 a week 12 months ago.

But Sales Rise as Prices Come Down
Sales rose slightly in October according to the NAEA. The average agent sold seven homes during the month compared to just six in September. “Sellers are beginning to face up to the reality that their homes are not worth as much as they were 12 months ago,” said NAEA president, Chris Brown.

This belief seems to be borne out by the property website, Globetrix, which said almost 6,000 homes on its books had their prices cut by an average £16,800 last week.


Mortgage Lending Slightly Up
Mortgage lending rose slightly in October, according to the Council of Mortgage Lenders. Total lending rose to £18.7 billion, seven per cent up from September. However, last month’s lending was still 44 per cent lower than in October last year.

The CML said lending would remain weak in the next few months, despite the Bank of England’s cuts in interest rates in October and November.

“Consumer confidence is now being affected by the worsening economic outlook,” said the CML’s director general Michael Coogan. “However, any recovery in lending is also being held back by the continuing shortage of mortgage funding.”


Up to 40% of Buy-to-Let Borrowers Face Negative Equity…
Up to 40 per cent of buy-to-let borrowers face negative equity says Standard and Poor’s. Buy-to-let mortgages are already seeing a proportionally higher level of repossessions than normal owner-occupier loans and the credit agency is warning that the market is likely to deteriorate further because it is “more sensitive” to the difficult credit environment.

Based on an analysis of 200,000 securitised buy-to-let loans – about 20 per cent of the market – S&P said 3.7 per cent were in arrears at the end of June, compared to 2.9 per cent in a sample of owner-occupier mortgages.

This led to estimations that 20 to 40 per cent of the market could fall into negative equity by the middle of next year, significantly more than the 14 to 20 per cent predicted for the market as a whole.

Kate Livesey, a credit surveillance analyst at S&P, said: “We believe that the buy-to-let sector could suffer above average loss severities on repossession cases due to a concentration of certain property types that are witnessing above average price declines. In a downturn we believe that the current stock of buy-to-let loans will carry higher credit risk than the stock of loans to prime owner-occupiers.”

…And Buy-to-let Rents are Falling
Buy to let investors are seeing rents fall for the first time in five years, according to RICs – with the South East suffering most.

In the third quarter of 2008, 56 per cent more chartered surveyors reported a rise than a fall in new landlord instructions. London and the Southeast have been hardest hit. The net balance of surveyors reporting rises or falls in rents for London houses fall from a stable zero per cent in the second quarter to minus 53 per cent in the third quarter, while the figure for flats fell from plus five per cent to minus 33 per cent, the RICS said.

However, the biggest turnaround was in the South East, with the net balance of surveyors reporting rises or falls in rents for houses plummeting from plus 53 to minus 33 per cent.

James Scott-Lee of the RICS said: “The lettings sector has witnessed a boom in 2008 as sales in the housing market continued to slow. Many have been able to take advantage of rising rents to secure good returns.

“However, the marketplace has become more and more competitive as many vendors have been forced to become amateur landlords, creating an inevitable downward pressure on rents where supply has matched demand.”

Barratt Warns More Writedowns are Likely
Barratt has warned that more writedowns are likely by the year end. The company, which has already written down the value of its land by £208.4 million, said the housing market remained “extremely challenging” with confidence low, credit limited and prices continuing to be driven downwards.

It expects the average selling price of its homes to fall 15 to 20 per cent from the peak of the market in July 2007 to the end of this year.

Mark Clare, chief executive, said: “Conditions in the housing market are now as tough as anyone can remember with increasing pressure on prices and margins. Against this backdrop, Barratt’s focused sales effort has enabled us to deliver robust sales volumes, in line with management expectations.”

Barratt will review the value of its land before the end of the year and update the market in February. It is focusing on maximising sales revenues, reducing costs and generating cash to reduce debt levels. The company said it continued to operate within committed facilities and banking covenants.

The company also said it had seen “good” visitor levels, down 5.8 per cent in the period, and sales volumes were in line with expectations – helped by increasing incentives for potential buyers and marketing initiatives.
But analysts expressed concern at the Barratt’s update, especially the predicted fall of average prices of up to 20 per cent.

Imran Akram at Collins Stewart said: “These price declines are greater than expected. In our view they confirm market rumours that Barratt has been in the vanguard of cutting prices and chasing volume, since it was the first housebuilder to renegotiate covenants. In our view pressure is now growing on the group’s competitors, who are now also obliged to chase volumes by cutting prices. This means that Barratt may find it more difficult in future to maintain volumes.”

 
HBF Calls for Rise in Homes Fund
The HBF has called for a tenfold increase in the £200 million fund set up by the government to buy unwanted homes from the private sector and turn them into social housing.

The fund – announced by Alistair Darling in his spring Budget – must be expanded to £2 billion in the pre-Budget report to have a significant impact, according to Stewart Baseley, HBF Executive Chairman.

The money already allocated for this “clearing house” of homes came from front-loading the budget of the new Homes and Communities Agency, which has £8.4 billion to spend over three years.

The HCA is likely in the near future to have huge amounts of unspent money because a large part of its budget is allocated for housing projects created through agreements between private developers and local authorities. With construction grinding to a halt, very few of these projects are going ahead. This makes it more likely that the chancellor could increase the size of the HCA’s fund for unwanted homes, even if it is not to the extent of the £2 billion requested by the HBF.

But at its current £200 million the impact of the fund appears likely to be limited. Sarah Teather, Liberal Democrat spokeswoman, described it as a “pitifully small amount of funding to deal with a major crisis”.

The clearing house has so far bought 1,531 homes, according to figures from the DCLG. But 16 of the 20 local authorities with the longest waiting lists for council housing – including Sheffield, Brent and Bradford – have not benefited from the fund.

Mr Baseley said that £2 billion could buy most of the approximately 15,000 completed homes languishing on the market.

However, housing associations have warned that many privately built homes do not meet their strict criteria for space, energy efficiency or environmental design. As a result, thousands of homes have been examined and rejected in recent months.

SH Note: Even if some unsold private stock doesn’t meet HA criteria, surely at the bargain prices they’re offered at, HAs could buy some and spend a little more if required to bring them up to their standards. This would benefit both the private and social housing sectors, especially as the HAs are warning of a “catastrophe” if social housing supply doesn’t increase rapidly.

 

Government stands by housing targets
Housing Minister Margaret Beckett says the government will stand by its housing targets despite the downturn. She said scrapping the targets would be a cheap and irresponsible move.

With an ageing population and low supply the government’s goals still essential, Beckett added that she wished to work with the industry in maintaining capacity so that it could respond when the market returned. On the issue of zero carbon, she commented that the question was not whether industry could afford to embrace the agenda, but whether it could afford not to do so.

But she added that the government must also adjust to changing circumstances. “It is in both our interests [government and industry’s] to work towards these objectives, but there is no sense in being dogmatic about how to get there. We have to be adaptable. There is something to be said about making a virtue out of necessity.”

SH Note: With tax revenues collapsing to the point where public finances were unexpectedly in the red by £1.8 billion last month, this isn’t going to be an easy target to achieve.

Housing Associations Warn of Catastrophe

There will be a “catastrophic” collapse in provision of new social housing at a time of record waiting lists without urgent intervention by the government, housing associations have warned.
Britain’s 1,900 social landlords, which own half the UK’s stock of four million council houses, are urging ministers to change the way they are funded to prevent the supply of new, affordable housing drying up completely.

The Housing Corporation has begun an urgent review of 258 associations. Of 39 examined so far, four have been given an “amber” warning, meaning there are serious fears about their future.
Meanwhile, the associations are lobbying the government to relax limits on how much central funding can be used for development schemes. At present, the grants from the Housing Corporation can provide only up to 40 per cent of a scheme’s funding, with the rest coming from borrowing or sales of private dwellings within the same projects.

The National Housing Federation is urging ministers to relax this rule to prevent a “catastrophic” drop in new social housing when there are a record 1.7 million households – or four million people – on waiting lists.

Associations have in recent years been encouraged to carry out development, with the help of bank debt, to subsidise their activities. Many borrowed heavily at the top of the market to buy land banks on which they planned to build vast numbers of new homes.

With debt costs rising and finance being withdrawn by banks, some associations have cut their payrolls, with the largest group, Places for People, expected to cut 100 staff. A survey by Baker Tilly, the advisers, shows that 75 per cent of housing association directors expect to see “significant financial difficulties” in the sector in the coming year.

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