Consumer protection Code of Practice for rent-back market

Permalink: Consumer protection Code of Practice for rent-back market
by Lin Freestone

The Office of Fair Trading (OFT) is conducting a market study into sale and rent-back and is expected to publish it in the next ten days. One of the possible outcomes following the OFT market study could be to point towards a consumer code of practice.

The National Landlords’ Association (NLA) has revealed that its Code of Practice will include enforceable legal sanctions and financial penalties for those who fail to comply.

The NLA published its draft Code for consultation in August 2008. Responses have been received from a wide range of stakeholders including Crisis, Shelter, Citizens Advice, Council of Mortgage Lenders, National Federation of Property Professionals, Royal Institute of Chartered Surveyors, British Property Federation and the Chartered Institute of Housing.

There were also a number of responses welcoming the Code from private landlords and larger companies already operating within the sale and rent-back market.

The majority of responses have indicated that the Code of Practice could provide an effective framework and a firm foundation on which to build a robust system. This would help ensure consumer protection by shedding light on sale and rent-back transactions.

The chairman of NLA, David Salusbury, has said that whether the association’s voluntary Code of Practice is a staging post en route to regulation for sale and rent-back or is an end in itself, the critical factor is that vulnerable consumers are protected as soon as possible.

The NLA believes in market-led solutions where possible, and the work it is undertaking reinforces its commitment to removing so-called cowboys from the entire private-rented sector.

He commented that sale and rent-back is not appropriate in all situations. However, for some families who can no longer afford the costs of home ownership, ethical sale and rent-back should certainly be explored.

The association is under no illusions that some property investors have seen the chance to make a quick buck. However, it firmly believes gambling with people’s homes is unacceptable. Changes to the sale and rent-back market must begin now.

600 mortgage products withdrawn in just one week

Permalink: 600 mortgage products withdrawn in just one week
by Lin Freestone

According to research carried out by Moneyfacts, the personal finance researcher, almost 600 mortgage products were withdrawn from the market last week, making borrowing even more difficult for potential homeowners.

Banks and building societies pulled their deals rapidly following the nationalisation of Bradford & Bingley at the beginning of the week.

At the start of the week there were 3,983 home loans available on the market, but this had fallen to 3,402 by the end of business on Friday, the lowest number ever recorded by Moneyfacts.

In addition, mortgage rates increased during the week. Moneyfacts reported that the average two-year fixed rate deal has increased from 6.26% to 6.33%.

Moneyfacts reported that for the last couple of months rates have been slowly improving and more lenders have returned to the market. It is considered quite alarming how quickly the market has deteriorated once again.

Speculation is that there is further pressure on the Bank of England to cut interest rates, with some leading economists predicting the bank could take the radical step of slashing rates from 5% to 4.5%.

University towns provide strong returns for landlords

Permalink: University towns provide strong returns for landlords
by Gill Montia

Halifax has published its latest University Town House Price Review, a survey that tracks house price movements across the UK’s university towns.

The research suggests that parents who bought properties for their student children and buy-to-let landlords who built portfolios in university towns have seen strong returns over the past five years.

The research found that in 35 of the 64 towns surveyed, house prices were on average £20,335 more costly than in the surrounding areas.

The premium was at its highest in Winchester: the city’s average house price was 50%, or £114,489, above the average for Hampshire.

Other university towns to have an average house price premium in excess of £20,000 include Bath (£98,562, or 43%), Cambridge (£90,699, or 44%), Warwick (£75,454, or 46%), Oxford (£39,797, or 14%), Newcastle (£25,005, or 16%) and Stirling (£20,296, or 13%).

According to the survey, the average weekly rent paid by students in private accommodation stood at £96. Regionally costs ranged from £64 in Northern Ireland to £116 in Greater London.

In Manchester, the city with the largest student population, average house prices increased by 63% in the past five years, compared with a national average of 44%.

The most expensive university town in the UK is Guildford, where the average house costs £363,503; followed by Winchester (£343,332) and Bath (£326,403).

Hull is the least expensive university town; an average house costs £124,108, despite property prices in the city having risen 79% during the past five years.

Since 2003, three university towns have seen exceptionally strong house price rises: in Belfast the average cost of a property rose by 105%; Dundee 101% and Bangor 100%.

Equity release loses its appeal to homeowners

Permalink: Equity release loses its appeal to homeowners
by Kay Murchie

According to figures from the Bank of England, homeowners in the UK have stopped using their homes as a way of obtaining cash.

Equity release is a scheme designed to allow homeowners to release cash from the value of their property and according to the central Bank, equity withdrawals have been declining from a high since the last quarter of 2003.

For the first time in a decade, the Bank’s figures for housing equity withdrawal are negative, meaning homeowners have been reducing their debt on their homes rather than extracting cash.

During the second quarter of 2008, rather than withdrawing money, borrowers increased the equity they held in their homes by £2.8 billion - the biggest injection of cash since the Bank started gathering data in 1970.

Howard Archer at Global Insight explains that the tightening of lending criteria, falling house prices and higher mortgage rates have reduced the attractiveness of housing equity withdrawal.

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, adds that for the first time since the late 1990s, equity withdrawal is turning negative. This suggests that the downturn in the housing market is reducing access to equity built up in property over recent years.

£50m Norwich city centre development gains planning approval

Permalink: £50m Norwich city centre development gains planning approval
by Lin Freestone

Targetfollow, a commercial property investment and development company specialising in major opportunities in city centres, has received the backing of Norwich City Council for its plans to transform a neglected corner of Norwich.

A former electricity board site will be demolished to make way for a mix of offices, restaurants, cafes, shops and an art gallery. The £50m Duke’s Wharf scheme will also include a public courtyard and garden, and 16 homes.

The new buildings will achieve BREEAM excellence and a low carbon footprint. The residential will achieve sustainable code level 3 as a minimum.

The design team has proposed a radical new design for the residential element of the scheme in order to challenge city centre living aspirations. The 16 residential units will provide a mixture of flats and housing unique within Norwich.

The 200,000sq ft development, which will retain the 1910 Boardman Buildings, breaches the city’s local planning rules on housing numbers for the area, so the decision will need to be referred to the government’s regional office in Cambridge for approval.

Subject to final approval, Targetfollow hopes to commence enabling works next year, with the first occupants moving into the scheme within a few years. One of the first occupiers of the development will be Targetfollow itself, as Duke’s Wharf will become the company’s new UK office.

The company’s development and investment portfolio has a value of £3bn. Founded in 1992, the company has grown by acquiring and upgrading its city centre buildings and, with the help of affiliated companies RCP Parking and Targetspace, consistently adds value to the portfolio.

Energy costs high priority for tenants

Permalink: Energy costs high priority for tenants
by Gill Montia

Following the 1st October deadline for Energy Performance Certificates as a legal requirement for landlords marketing or letting a property, government research has revealed that 79% of renters are worried about the cost of their household bills.

According to the latest figures, tenants pay an average £1,360 on gas and electricity bills and with both the number of prospective tenants and properties to let rising, landlords need to keep abreast of concerns over fuel bills.

The research shows that after location, household bills are now the most important factor in choosing a property to rent.

Twenty-two per cent of tenants questioned said that the level of household bills had an “extreme effect” on their decision-making, while 27% said they regretted not asking their landlord for information about household bills before signing the lease.

Furthermore, confidence in landlords’ attitudes to energy efficiency appears to be very low because 77% of renters questioned said they did not believe that their landlords were concerned about energy efficiency in their properties.

Minster Law launches 24-hour access to legal advice

Permalink: Minster Law launches 24-hour access to legal advice
by Lin Freestone

A new initiative that could help potential home owners has been launched by Minster Law. The law firm, which operates from offices in York and Wakefield, is offering a 24-hour, seven days a week, contact centre providing access to its legal services.

This will be of particular interest to people working during traditional office hours who find it difficult to maintain contact with their solicitor when buying or selling property.

The new in-house built technology will help Minster Law to continue to support their reputation for offering simple, jargon-free legal services. These services are all also available on a new website launched this week which gives people access to advice at any time.

Built ground-up upon Microsoft .Net technologies including BizTalk and SQL Server, the new architecture covers data storage and messaging integration as well as the front-end user applications.

This approach allows Minster to be in total control of its systems and ensure that they adhere to the principles of a Service Orientated Architecture, as well as making sure that user requirements can be fully met.

The nationwide coverage of the case tracking service will enable clients to see exactly what is happening, at any time.

Third quarter deals 40% down in London’s commercial property market

Permalink: Third quarter deals 40% down in London’s commercial property market
by Lin Freestone

The central London property market continues to be depressed, with 80% of turnover being attributed to overseas investors.

During the third quarter of the year to the end of September, deals worth £1.24bn were completed in the commercial sector of the market. This is 40% lower than the completions in the second quarter of this year.

During the third quarter of 2007, there were transactions totalling £6.08bn. The figures for the last three months just revealed by Cushman & Wakefield are just 20% of the activity at the same time last year.

The market in the City of London remained fragile during the third quarter. Transactions were 50% lower in the second quarter and reached just 10% of 2007’s third quarter turnover.

A partner at Cushman & Wakefield reports that there has almost been a complete lack of transactional activity in the secondary market, especially for buildings with short-term income stream and those which require considerable capital expenditure on lease expiries.

The price correction on these properties continues, but generally there remains a stand-off between vendor and purchaser in terms of bid-offer spreads.

It is considered that recent market events in the US and in the City of London are likely to further exacerbate the current concern over supply and demand of office accommodation and the potential impact on rental levels. In addition, it will make the ability to raise finance for investors both extremely difficult and expensive.

Nationwide: House prices fall for eleventh consecutive month

Permalink: Nationwide: House prices fall for eleventh consecutive month
by Kay Murchie

According to the Nationwide, UK house prices fell 1.7% last month while an annual drop of 12.4% was recorded, which represents the largest annual fall since records began.

The building society said the cost of an average UK home is now £161,797, over £20,000 less compared with this time last year.

However, despite the sharp annual fall, there is evidence that the rate of decline is stabilising, said the Nationwide.

East Anglia and the South West recorded the largest annual falls at 11.4%, while the sharpest annual fall of 29.8% across the UK was noted in Northern Ireland.

Meanwhile, in Scotland where prices have bucked the trend, a fall of 5% was recorded between July and September compared with the previous three months.

Wales experienced the smallest fall in prices compared with other areas of the UK, with a three-month on three-month drop of 1.9% in July to September.

Fionnuala Earley, Nationwide’s chief economist, said house prices have now fallen for 11 months in a row, however the monthly rate of fall has been almost unchanged in the last three months.

Ms Early added that over the last 12 months, the housing and financial markets have experienced some astonishing and unpredictable developments.

In the long-term, Ms Earley does not see any reason why house prices would not continue to grow in real terms, despite the ‘sharp correction‘ now.

How long the correction lasts and how much more prices have to fall depends on consumer confidence and an end to the turmoil in the financial markets, adds Ms Earley.

Despite the recent house price falls, the average cost of a home is still 60% more than it was at the start of the decade, according to the Nationwide, while prices are now back to the same level as the third quarter of 2006.

Commenting on Nationwide’s figures, Simon Rubinsohn, chief economist of the Royal Institution of Chartered Surveyors, said they are not surprising given the turmoil in financial markets over the last few weeks.

The recent increase in some mortgage rates and the continuing squeeze on the supply of loans could lead to further price falls over the coming months, added Mr Rubinsohn.