CML Warns of Further Mortgage Squeeze

The Council of Mortgage Lenders says buyers will find it even more difficult to get a mortgage in the next few months.

The warning came as it released figures showing mortgage lending had dropped almost 30 per cent to the lowest July figure since 2002.

Bob Pannell, CML head of research, said: "In the absence of fresh interventions from the authorities, mortgage lending activity is set to worsen in the second half of 2008."

While gross mortgage lending is down 27 per cent from July last year, it actually increased by five per cent the previous month to £24.8 billion in July. But Mr Pannell added: "While there was a small month-on-month increase in activity, it represented a notable decline from a year ago.

Repossessions Hit 15-year High

The latest figures show those at risk of losing their home reached a 15-year high – rocketing by nearly a quarter in just one year. A total of 28,658 mortgage repossession orders were made in England and Wales during the three months to June, according to the Ministry of Justice. This is a rise of 24 per cent from the same period a year ago.

Persimmon’s Profits Plunge

Persimmon has seen profits crash in the first six months of the year. The company saw profits plummet to £36.9 million in the six months to June from £281.1 million in the same period in 2007. However, despite such figures the housebuilder believes market conditions are at least stabilising.

Persimmon has been driving down costs and closed three offices in February, and has made 1,100 redundancies at its offices and axed 900 jobs based on its sites.

These measures, along with a £40m write-down on its landbank, has left it with a £64m charge in the first half.

Chairman John White said: “The business has performed well in very difficult conditions. We are confident that our business, having been restructured, is in a strong position to move forward whenever the market improves.”

Sales tumbled to 5,501 from 8,002 in the first half of 2007.

As Short-sellers Stake £325 million on Falling Share Price

Short-sellers staked more than £325 million on Persimmon's stock falling ahead of its half-year results.

Hedge funds and other investors borrowed up to 28 per cent of the company's shares, betting that the results will heap further gloom on Britain's property sector.

Short-sellers profit from a fall in a company's share price. While short-sellers claim that price movements reflect only the fundamentals of the business and sentiment towards the companies, many chief executives have privately blamed the scale of the moves on the bearish investors.

And Get Their Fingers Burned!

Despite many leading housebuilders seeing their share prices hit last week after unemployment recorded its sharpest increase in almost 16 years and analysts advised investors to sell stocks following their recent rally, the surge has continued. Persimmon jumped 30¼p or more than ten per cent to 328¾p. Other housebuilders also rose as the sector benefited from the change in sentiment.

Barratt rose 7¾p or nearly seven per cent to 120½p and Taylor Wimpey gained 1¼p or three per cent to 42½p. Berkeley rose 22p or nearly three per cent to 777p.

Bellway Suffers “Avalanche” of Cancelled Sales

Bellway said the number of property sales agreed over June and July plunged 45 per cent and may continue to fall at the same rate for the rest of the year.

In a trading update, the group revealed that sales actually completed fell 14 per cent in the year to the end of July, down from 7,638 last year to 6,556.

Alistair Leitch, finance director, said: "Since Easter we've had an avalanche of cancellations – particularly in the last two months."

He said that the number of deals falling through had risen by 125 per cent over June and July, and would have been worse had the company not "thrown money at the situation" in the form of incentives.

“People want to wriggle out of deals because of the testing times we are in. The government's dithering over stamp duty – with their woolly statement – hasn't helped the feel bad factor."

The group's order book of future sales at the end of July was £370 million, down from £594 million, of which 62 per cent is currently contracted. But it expects social housing to continue to boost sales in the coming year, providing a "buffer" for the company as about 20 per cent of sales are to RSLs.

Mr Leitch said: "There is no hint that there will be any improvement on the current trading. Consumers have had a torrent of bad news and it would take something extraordinary to improve sentiment."

The average selling price of a Bellway home has now fallen from £173,300 to around £169,000.

House sold for $1 in sign of US property crisis

In a sign of how desperate the property crisis has become in parts of the US, a foreclosed house in Detroit has sold for just one dollar. Even then, the two-storey, lawn-fringed house on the city's impoverished east side took 19 days to sell.
 
The house, a few blocks from Detroit City Airport, was "the nicest on the block" when it sold for $65,000 in November 2006. The house was put on the market in January for $1,100 but attracted no interest other than the occasional squatter.

The bank that owned it faced thousands of dollars in back taxes and unpaid bills so decided to slash the price. Eventually a woman put in an offer but only finalised the deal after the bank agreed to pay all her costs, the sales commission and back taxes, together totalling $10,000.

Eco-towns Timetable Delayed

Gordon Brown’s eco-towns scheme has been further delayed. A shortlist of applicants due to be published in October will not come out until next year and it looks like ministers may be starting to row back from their target of ten towns.

Of the list of 16 applicants drawn up in April, three have already dropped out but the FT believes three others – in Norfolk, north Yorkshire and near Cambridge – are facing difficulties. One more – in Rossington, south Yorkshire – has been reduced from 15,000 homes to just 5,000. In Coltishall, Norfolk, the government has just won permission to build a prison on the same site as the proposed eco-town.

At Hanley Grange, near Cambridge, a partner in the proposed scheme has withdrawn. In Selby, north Yorkshire, developers have been blocked by local authorities.

Housing Minister, Caroline Flint, has recently begun to talk about “up to ten eco-towns” and the government admitted it was being forced to delay the announcement of its shortlist in a little-noticed line in a recent statement on green transport plans for eco-towns. The DCLG said ministers needed more time to reconsider submissions whose details had been revised.

Land Values Falling Sharper Than Housing Market

Residential land values are falling at a steeper rate than the housing market, a Savills survey has revealed. According to its research, greenfield values dropped 22.5 per cent in the first half of 2008, with brownfield sites down 19.8 per cent.

Meanwhile, house prices fell five per cent over the same time period. And Savills predicted that the value of the housing market would decrease by a total of ten per cent by the end of the year, with values of new homes down further.“ We are now forecasting that the serious downward pressures in the first half of 2008 – all linked to the ongoing lack of available finance – will continue throughout 2009, driving values lower,” it said. “Development land values are anticipated to bottom out ahead of the housing market but should remain stable from 2010.”

SH Note: You would think this is good news. And it probably is for any builder with some spare cash. But anyone believing the housing market has only fallen five per cent needs their head examined.

Councils Want to Offer Mortgages

Council leaders are calling for extra powers to allow them to offer competitive mortgages in an attempt to rescue the housing market.

In a joint letter, they argue the public sector should be able to support first-time buyers and offer "new mortgage capacity" alongside private lenders, preventing a collapse in the market and restoring stability.

"The public purse should not just be used to mop up the problems caused by banking difficulties. The government should recognise that councils are well placed to take a judicious share of mortgage business – an opportunity that could yield a surplus for the council tax payer", they said.

In 1980, 600,000 mortgages with homeowners were held by local authorities. Since then, banks have almost universally taken on this role. The letter suggests the government should allow councils to offer targeted deals to the public and provisions specifying a blanket national interest rate for council mortgages should be reformed.

It adds that the government should ask the Public Works Loans Board to encourage councils to revive their public banking functions and the Chancellor should set aside public borrowing capacity for council mortgage provision and frame new guidelines in conjunction with local authorities.

The letter, published in The Times, was signed by Sir Richard Leese (leader of Manchester City Council), Helen Holland (leader of Bristol City Council); Gerald Vernon-Jackson (leader of Portsmouth City Council), Steve Reed (London Borough of Lambeth), Jules Pipe (London Borough of Hackney), Jamie Carswell (lead member for Housing, London Councils) and Chris Leslie (director, New Local Government Network).

NHMB Lobbies For FTB Savings Scheme

Homebuilders are lobbying the government to set up a tax-free savings scheme for first-time buyers as a way of improving liquidity in mortgage markets.

David Pretty, Chairman of the New Homes Marketing Board, has called on the Chancellor to introduce a national Home Deposit Savings Scheme offering tax breaks worth up to £5,000 to help buyers afford the rising costs of housing deposits.

Savers would be given up to five years to save a maximum of £20,000. To this would be added a 25 per cent tax-free bonus, pushing their savings to £25,000, which would be used to cover a deposit, stamp duty, legal fees and removal costs. The scheme would be administered by banks and building societies. 

The NHMB first proposed a scheme in March but Mr Pretty said the housing market downturn made the need for one “urgent and immediate”.

NAEA Wants Free Sales Website to Rival Rightmove

The National Association of Estate Agents is to create its own free advertising website, a move that threatens to wreck its quoted rival Rightmove.

It is planning to launch “Property Live”
– a free sales website in October with the support of its 10,000 members. The new website could prove devastating to sites such as Rightmove and Findaproperty.com, which charge a monthly subscription of up to £495 to advertise on their property portals.

The association’s chief executive, Peter Bolton King, said: “We are not trying to close down Rightmove. We are doing this on the back of demands from members who want a free portal because at the moment they are advertising on several different sites and it’s costing them thousands of pounds every month.”

SH Note: A clever move – unless you work for Rightmove. Maybe the new homes industry should join forces with NAEA on this one.

Buy-to-Let Investors Set to Pull Out of Market

Buy-to-let investors are set to pull £18 billion out of the property market in the coming years, according to new research. Residential investors will sell around two thirds of their properties in the face of falling prices, according to a new study by Skandia.

Skandia, a part of investment group Old Mutual, said it expected the value of buy-to-let mortgages outstanding may drop from their current level of £120 billion to just £44 billion at some point in the coming years. The fall in activity would have a significant knock-on effect for house prices.

Nick Poyntz-Wright, chief executive of Skandia UK, said: "Private investors have accumulated significant amounts of equity in buy-to-let properties after a long period of strong growth in home and flat values. Higher mortgage rates and falling property prices will cause investors to reconsider their exposure to residential property and many will choose a more diversified approach. With inflation rising, investors realise the need for strategies that preserve their wealth."

However, others expect the property rental market to remain a key - if not necessarily thriving - part of the market. A survey from the RICs shows that an unprecedented number of homeowners are being forced to rent their properties rather than sell them, as the appetite for homebuying hits its lowest-ever ebb.

SH Note: The trouble here is that the amount of lettings stock is increasing even faster than demand as frustrated vendors give up on trying to sell and rent out instead. The result is that rents are falling slightly. On a more positive note, Skandia is of course sounding this note of doom as it’s looking for property investors to switch to stocks. All in all, this “study” isn’t worth much.

Berkeley wins planning for 500-home Sevenoaks scheme

Berkeley Homes has won a planning appeal giving it the go-ahead for a 500-home mixed-use development next to a nature reserve on the edge of Sevenoaks, Kent.

The government agreed the recommendation of the planning inspector to approve the scheme in despite the council deciding it was too dense for the area and included too many one- and two-bedroom flats.

The council had also planned to refuse it on the basis it was over-development that was “harmful to the visual amenity and established character of the area.”

Vermont Developments Goes Bust

Liverpool-based, Vermont Developments, has been placed into administration after its £40m residential development in Salford was mothballed because of slowing house sales.

The firm was placed into administration last Friday by Downing Corporate Finance, in a move described by a source close to the property group, as coming “completely out of the blue”. Insolvency firm Wilkins Kennedy was appointed as administrator.

Vermont had initially been lent £4 million by Downing to part-finance the construction of the Foundry Wharf development at Salford, but the development was mothballed two months ago due to the credit crunch and the state of the residential market.

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