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UK house prices are back on the drop

June 23rd, 2009 by admin | 0 Comments | Filed in Daily News, Employment, Mortgages, Recession, Saving, UK Banks

financial newsHouse prices in the U.K. appear to have fallen in June for the first time in five months. The reason was attributed to banks scaling back their lending whilst requiring buyers to put down higher percentage deposits.

Figures now show that the average house cost slipped by 0.4 percent to 226,436 pounds from May, when it rose by 2.4 percent.

Governor of the Bank of England Mervyn King announced that whilst the housing market has shown signs of stabilizing, the squeeze on lending may slow the economy’s recovery.

According to a company spokesman, the “essential” value line at Waitrose, the first ever line to be launched by the supermarket chain, is achieving sales at levels well ahead of the group’s projections, with the initial 800 products launched now accounting for 13 per cent of sales.

It has been announced that less than ten per cent of the projects that are part of the more than six hundred billion pound worldwide private infrastructure refurbishments will be ready to commence before the end of 2010, calling into question whether spending on major public projects can provide the ready stimulus that was hoped would push the recession hit economies of the West into life.

Many large projects dependant on private financing, have dried up in recent months, particularly in the UK, where London’s Crossrail line is a particular example.

Not encouraging news especially backed up with the predictions that the U.K.’s business services sector will lose more than three hundred thousand jobs up to 2013. The sectors likely to be hardest hot are construction and real estate.

Bonuses and the Royal Bank of Scotland never seem to be far from the headlines. The bank is expected to announce this week their £9. 6 million pay package for chief executive Stephen Hester. Hester’s salary package has gained support from shareholders as part of a long-term incentive plan put up at a recent meeting chaired by Sir Philip Hampton, chairman of the RBS. As if by coincidence, Hester’s package was approved just a day after his predecessor Sir Fred Goodwin agreed to hand back a third of his self negotiated £16. 6 million pension package

Oil prices were under pressure yesterday with shares in Shell, Europe’s largest oil producer, declining by 4.7 percent to 1,516 pence. The second largest, BP, saw their shares sink 3.8 percent to 478 pence. Crude oil prices have taken a major backward step in the last few days as concern mounts that both Chinese and U.S. gasoline stockpiles are raising due to a reduction in demand during the recession.

Switzerland based Xstrata, the largest exporter of coal used by power plants, proposed a “merger of equals” with the world’s biggest platinum producer Anglo American. The merger, if successful, could trigger fresh consolidation in the mining industry. UK-based Anglo American continued to appear to be less enthousiastic about the deal, whilst warning that talks remained “at a very preliminary stage, placing pressure on Xstrata to add cash to its offer. Shares in Anglo American added 4.6 percent to 1,698 pence.

The 46 games in next season’s English Premier League up for grabs after Setanta went under, will now be broadcast by ESPN. Disney-owned ESPN has bought the rights to two packages of games shown on Saturday teatimes and Monday evenings. Both will be sold to customers through BSkyB.
ESPN will also be showing the 23 games per season that Setanta was due to broadcast from seasons 2010-13 inclusive.

With the oil majors applying overall pressure as crude futures lost the $70 mark, London’s FTSE 100 fell 111.88 points to close on 4234.05, the lowest since April 29. The gauge has still rallied 21 percent from this year’s low on March 3 and is now trading at 30.1 times its companies’ earnings, compared with 17 times profits in the week the rally began in March

The FTSE 250 also continued its downward spiral closing down 159.50 points on 7174.84

Sterling fell back against the major currencies on a difficult day for trading.

Pound/US dollar 1.627
Pound/Euro 1.1759
Pound/Japanese Yen 154.8584
Pound/Swiss Franc 1.7687

On Wall Street, share values fell dramatically with the Dow Jones down 200.72 points on 8339.01, while the NASDAQ lost the bulk of its recent gains down 61.28 points to close on 1766.19

Investigators handling the huge global swindle organised by Bernard Madoff’s have asked for more time to reach a final figure of the amount of money lost as well as the number of investors defrauded. Madoff is due to be sentenced on June 29th.
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Mortgage safety net for struggling homeowners

December 4th, 2008 by jamie | 0 Comments | Filed in Daily News, Money Management, Mortgages, Recession

Homeowners who fall behind with their mortgage repayments after losing their jobs or suffer a drop in income can take up to a two-year repayment holiday under a new Government backed scheme.

Announced in the Queen’s Speech, banks and building societies making up 70% of the mortgage sector have signed up to the scheme.

The Government and lenders still need to iron out the final detail but the outline of the plan is:

·      Mortgage payers who are made redundant or face a significant income loss will qualify

·      Loans up to £400,000 are covered by the scheme

·      Lenders will manage the scheme and make decisions based on common guidelines about granting repayment holidays

The scheme comes in to force in the New Year.

By then the details should be clearer, like exactly what a ‘significant loss of income’ amounts to and whether the self-employed are also covered.

The objective is to reignite confidence in the housing market and reduce the number of repossessions.

The Council of Mortgage Lenders, that represents the UK’s bank and building society lenders, speculated that repossessions could rise to 75,000 next year. The CML estimates that repossessions will end up at about 45,000 properties for 2008.

The CML has welcomed the government’s safety net scheme, and promises that ‘won’t pay’ borrowers will not be able to avoid their responsibilities.

“Instead, it will provide welcome reassurance to the vast majority of borrowers that the government and lenders are doing all they can to help keep people in their homes,” said a spokesman.

British house prices tumbled at a record 16.1% in November, according to figures released by the Halifax showing that prices fell 2.6% in November compared to October, and are now 16.1% lower than in November 2007.

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Students living in Riverside luxury

October 21st, 2008 by admin | 0 Comments | Filed in Daily News, Global Credit Crisis, Loans, Mortgages

Hill house, the luxury riverside development on the banks of the Thames at Thamesmead was sold out before it was completed at £250,000 for a 2 bedroom apartment and £400,000 for a penthouse suite. Today, the development lies largely abandoned, swarming with vermin and drug addicts.

Built by Persimmon 2 years ago, the development has become a pointed reminder of the ravages of the credit crunch. The once glistening balconies and marbles hallways are now run down as front doors have been barricaded by metal sheeting to stop squatters. The amazing thing about Hill House is that of the 84 separate units that were initially sold; an unbelievable 82 have been repossessed. Apartments that once sold for £250,000 are now changing hands for less than half that amount or £115,000. The penthouses are fetching barely $135k. Soaring mortgage rates and huge hikes in the cost of living have seen almost all the buyers pushed past their limits and hit by heart-breaking repossession orders. 
 
Taxi driver David Adaiat is one of the two original buyers hanging in there despite his home having lost more than HALF its value. He bought his third-floor river-view apartment for £269,995 at the height of the buying frenzy in June 2006 as a family home for his wife Esther, 38, and their teenage daughter Dami. 
 
Shattered David said: “I’ve just had the place valued after my mortgage deal came to an end. 
 
“They told me it’s now worth just £130,000. I nearly fell through the floor. It’s unbelievable. That’s so much lower than we paid. 
 
“This whole place has become like a ghost town.”

Most of the repossessed properties are standing empty with only a few souls brave enough to live among the cockroaches, rats and squatters.  The once pristine grounds are overgrown and the development itself is a complete mess since the maintenance fees are left unpaid. A far cry from their initially £250k price tag, now the units are being bought up by local housing associations and rented to grateful students for under £400 a month.  The students who live there can’t believe their luck. Thanks to the credit crunch, they have great pads…it’s just a pity the neighbours aren’t a bit more sociable!

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House price falls accelerate

October 21st, 2008 by admin | 0 Comments | Filed in Daily News, Global Credit Crisis, Money Management, Mortgages, The Markets, UK Bank Accounts

As if home owners needed any more bad news! British home asking prices posted their biggest annual decline in almost 6 years as the credit markets continued to remain tight and lenders ratchet up the pain on home owners while still not passing on the recent rate reductions to borrowers. The volume of new mortgage approvals was less than half of last year’s number. The British economy is now not merely staring into the abyss, it’s leaning over the edge….holding onto a shoelace for support.

Another guide, the Halifax’s, said that house prices are falling at their fastest rate in over 50 years in the growing economic tsunami. The Halifax survey put the decline in prices in the last 12 months at 13.4% and said more steep drops were likely to be felt as the crisis worked itself out. 

Asking prices fell in Septembers right move survey at an annualised rate of 4.9%, up from 3.3% according.

The bad news is that the fall out is now spreading firmly from the construction and financial sectors to other sectors of the real economy. With this, the rate of arrears and repossessions is likely to rise as unemployment is thought likely to reach 5% in 2010. When this is coupled with a deluge of people moving off cheap 2 and 3 year fixed rate deals, the spike in repossessions is likely to put further strong downward pressure on house prices in many areas.

GDP was also predicted by the ITEM club to fall to -1% in 2009 before recovering slightly to 1% in 2010. It looks like it’s time to baton down the hatches.

Will the last person to leave please turn off the lights!

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UK house price crisis

October 6th, 2008 by admin | 0 Comments | Filed in Daily News, Money Management, Mortgages, Recession

I remember attending a dinner party 3 years ago and being faced with horror and a few giggles as I sat (pretty confidently) and answered questions about why I had sold my house just outside London and moved into rented property and bought gold. The house had trebled in value in 7 years and I was basically called crazy for selling it…if it’s done this well…just think how much you are losing?  There were 2 property developers at that party (new property developers) who outlined all the reasons why I was making a mistake. “Houses only ever go up”, you can’t go wrong with bricks and mortar” etc. I could literally hear the words of their estate agents coming out of their mouths…it was other worldly. Ahhh, the fall back lines when logic deserts!

We talked about blackjack and the Martindale system of betting…which is what they were doing in the property market. The Martindale system is almost flawless. It states that all you have to do in a game of roulette is to double your bets every time you are wrong. You will win eventually. And this is statistically true. Almost flawless. The only flaw in the system is that you are much more likely to run out of money before the casino does if you hit a bad run, which is made more likely the longer you play. The same is true in the property market. Being able to withstand the losing sequences means that you must have the capital base to withstand the downswings…and few newer buy to letters have that capital base.

The origins of this housing crisis lie in a far from equilibrium position. The housing market at its fundamental level is governed by two things…wages and rents. When it’s cheaper to rent than it is to buy AND when average house prices have moved up and far from the historic earnings multiples, a crash is never far away. It has to be this way over a long period. The opposite is also true…when house prices are lower than historic earnings multiples and renting is more expensive than buying, as it was in the mid 1990s, then it’s time to buy. The earnings and the rental cost rules always pull the market back into position.

There are winners in this housing debacle and there are losers. The winners are people who sold early, first time buyers who looked at the housing market in utter frustration during the bubble and people who now have to upsize. The losers are those how bought too late in the cycle and find themselves in negative equity and those who have or will lose their jobs.

The amateur property investor is likely to lose his shirt as he doubled down during expanding prices…expecting the good time to last forever as they squeezed more and more first time buyers out of their dream. What they would give for a first time buyer right now.

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