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November Property Investor Factsheet

November 4th, 2010

November 2010 Property Investors Factsheet (free membership required)

The base interest rate remained at a record low of 0.5 percent (the longest period since World War 2), with one dissenter – Andrew Sentence – continuing to vote for a marginal rate rise to control inflationary pressures (no further quantitative easing will take place for the time being). The UK´s gross domestic product rose by 0.8 percent in the third quarter and former Bank of England official Deanne Julius stated that chances of a further recessionary dip occurring were ´10 percent or less.´ However, Chancellor George Osborne stated the economy still faced a ‘choppy’ outlook and, whilst several have stated the case against the £81 billion of public spending cuts, he remained firm on the plan insisting that the Coalition would reduce inflation via the means of robust fiscal and monetary policy.

House prices, as predicted by many, have witnessed monthly drops apart from a reported 3.10 percent increase stated by Rightmove (based on asking prices). According to the Land Registry, the biggest drops in the last month have been in the West Midlands by 1.4 per cent, followed closely by a 1 per cent fall in the East Midlands pushing the regions average prices to £128,646. The index also indicated that London average values had fallen by 0.6 percent to £340,344. Property portal Zoopla stated that the number of properties for sale in the UK that have seen at least one house price reduction has climbed by more than 13% over the past three months – with Manchester seeing an average of a 7.15 percent reduction in prices; Newcastle with 7.13 percent and Milton Keynes with 7.04 percent. The general sentiment remains that house prices look set to drop further due to lower demand and a larger amount of properties hitting the market. Such drops are not expected to be rapid due to both the low bank base rate and an increased amount of competitive product availability.

A financial adviser confidence tracker report by Paragon Mortgages illustrated that the availability of buy to let mortgages in the UK has improved. 43 percent of surveyed mortgage brokers said that the number of available deals Q3 2010 has risen. Another 38 percent said they have not noticed any changes in the number of mortgage deals for property investors / landlords, and 19 percent of respondents said the number of available loans fell. The survey also found that 58 percent expect the situation not to change as 2010 draws to a close, whereas 35% expect it to get better. The remaining 7% think the availability of buy to let mortgages will decline. In terms of notable products, the Mortgage Works are the only lender offering 80 percent loan to value (with a 5.89 pay rate fixed until the end of 2013) and the Bank of China are offering a one year variable with a very competitive pay rate of 3.88 percent (1 year variable with a 75 percent loan to value).

In other landlord related news, as figures published the Office of National Statistics reported the one in eight Brits are living in a workless household entirely reliant on benefits – the British Property Federation (BPF) requested the Conservative peer and former investment banker Lord Freud to retract a claim that property owners increasing their rents was the main factor in creating a higher welfare bill for the taxpayer. Its analysis of figures from the Department for Work and Pensions (DWP) shows rising average payments in the private sector accounted for around 13.2 per cent of the growth in housing benefit costs. According to the BPF, by comparison, 70 percent of the rise was attributed to new claimants coming into the system, mainly because of unemployment linked to the recession. Lord Freud also recently responded to critics of housing benefit reforms as “scaremongering” insisting the cuts would not lead to a substantial increase in homelessness, stating: “it’s immensely unhelpful when people and commentators stir up fears using somewhat arbitrary figures about potential homelessness because it frightens people. We are not expecting any significant increase in homelessness as a result of these changes and are expecting a large number of people who see less housing benefit to be able to negotiate their rents downwards.”

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October Property Investor Factsheet

October 7th, 2010

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October 2010 Property Investors Factsheet (free membership required)

As it was decided that the UK bank base rate will remain at 0.5 percent, further disagreement was seen amongst Monetary Policy Committee members – not only from Andrew Sentance (who has called for a 0.25 percent increase for some time) but also Adam Posen, an internationally respected expert on Japan’s ‘lost decade’, suggested that more, not less, monetary stimulus was needed: “it is right for both long-term stability and short-term performance for central banks to do more now…”

Halifax’s September report of a 3.6 percent monthly drop as a ‘beginning of a sustained period of declining house prices’ was described by Howard Archer of Global insight as ’shocking’: “while a drop in house prices always seemed probable in September after Halifax had reported price rises in August and July that conflicted with other surveys, a plunge of of this size was off everybody’s radar.” The RICS Housing Survey this month also showed only 7 percent of surveyors seeing a rise in prices (compared to last months 11 percent) and 38 percent seeing falls (compared to 25 percent last month). A survey by Zoopla reported that homeowner confidence had fallen amid concerns over the availability of mortgage finance: 63 percent of homeowners now expect property prices to rise over the next six months, compared to 78 percent of homeowners in June. However, positive news for property investors was announced by ARLA (Association of Residential Lettings Agents) that the number of tenants seeking rental properties has reached an eight year high – demand is highest in the south east of England where 81 percent of agents reported that there are more tenants than properties compared to 67 percent in the rest of the UK and 73 percent in Central London. A Markit / CIPS survey of construction industry purchasing managers showed an unexpected pick in the level of activity – although doubts remained as to how demand will fare in the next few months.

The lending markets have also seen some encouraging signs with Legal & General (in its third quarter adviser confidence index) reporting that 85 percent of advisers predicting that business will improve or at least stay the same over the next 3 months despite the current undertone of negativity. Buy to let product wise, the Mortgage Works (TMW) have positively revised their product range – sending us the following information:

New one and two-year tracker mortgages at 70 percent LTV, with rates starting at 3.39 percent;
A two-year fixed rate option with 0 percent arrangement fee now available at up to 70 percent LTV;
The expansion of the longer term product range with the introduction of a four-year fixed rate (up to 75 percent LTV) and a five-year fixed rate (up to 80 percent LTV);
The introduction of a £1,000 cashback option for HMO applications;

… as well as some enhancements to the buy to let range including:

One-year fixed and tracker remortgages options at 70 percent LTV, now available at 3.99 percent, with free standard valuation and standard legal fees;
Tracker rates improved by up to 0.15 percent across the range;
A free standard valuation option available for house purchase customers when they select: TMW’s two-year fixed rate mortgage at 60 percent LTV with a 0 percent arrangement fee;
Significant rate improvements across all HMO and Limited Company products.

The Bank of China have continued to seek a wider share of the UK buy-to-let market with a 1 year 75 percent LTV product with a 4.1 percent payrate. Cuts have also been seen in the broader residential lending – for example by HSBC (with a reduction of 0.4 percent on all its 80 percent LTV mortgage products) and Lloyds TSB (with the introduction of a 70 percent LTV fixed rate with interest at 3.39 percent).

In related news, despite marginal growth last month, a survey of 400 agencies by the Recruitment and Employment Confederation (REC) and KPMG pointed to an increased risk of a ‘double dip’. Kevin Green, the REC’s chief executive, stated to the FT: “I think the labour market is in for a real bumpy ride – unemployment, currently 2.47m or 7.8 percent of the workforce, could rise again to 2.7m by the middle of next year.”

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September 2010 Property Investor Factsheet

September 9th, 2010

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September 2010 Property Investor Factsheet

Please click on the link above to access this months property investor’s news and information factsheet (note you will have to be a member of the Property Investor Hub which can be done quickly and easily here).

Despite two of the major house price indices pointing to rises, the general consensus has been to expect a market slowdown in the coming months (Halifax’s house price index reported slower growth in August as compared to the month previous). 12 percent less of RICS surveyors are reporting an increase in prices compared to the previous month and the average discount at property auctions across the UK dropped by 1.6 percent. Data from the Homebuilders Federation showed that construction orders – a forward-looking measure – fell in the second quarter by the sharpest amount since 1974. National Housing Federation (NHF) estimations also pointed to negative equity remaining in the market until 2014 – especially for properties bought in 2007 prior to the onset of the credit crunch. The Survey of English Housing statistics showed that between 2003 and 2009 the proportion of owner-occupiers fell from 70.9% to 67.9%, representing the first decline in home-ownership for a century.

Whilst mortgage approvals increased by 1,079 (with totals reaching approximately half their pre-crisis levels), the Bank of England reported that lending to private non-financial companies fell in July for the 11th month in a row. Nevertheless, in the wider mortgage market, lenders have been offering increasingly competitive rates – including the Halifax’s announcement of the ‘Great Rate Cut’ (up until 3rd October), an intermediary fixed rate from the Abbey; Norwich & Peterborough Building Society offering a 4.49 five year fixed rate (80 percent LTV) amongst others. In the buy to let sector, whilst rates and LTV ratios remained broadly in line with last month – The Mortgage Works (TMW) introduced a one-year tracker with no ERCs, offering landlords more flexibility with the potential to repay early without any supplementary charges.

In related news, the employment market is currently growing at its slowest pace in 10 months (although the Recruitment and Employment Confederation reported shortages were emerging in certain sectors and increased demand looking likely for nurses, chefs and engineers to name a few); a survey by LSL Property Services reported fewer rental arrears with only 16% seeing an increase in unpaid rent in the last 12 months and the British Property Federation (BPF) publically announced that proposed cuts to Local Housing Allowance payments are a “recipe for destitution” that would hamper economic recovery across the country.

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Tags: auction property market, auction property statistics, bank base rate, bbr, buy investment property, consumer price index, CPI, credit, debt levels, economics property, Halifax house prices, house prices, how to invest in property, inflation, invest in property, Land Registry house prices, latest buy to let mortgages, Mervyn King, Monetary Policy Committee, mortgage approvals, National Institute of Economic and Social Research (NIESR), Nationwide house prices, property economist, property invest, property investment tips, Property Investor Factsheet, property statistics, repossessed houses, Repossession houses, repossession levels UK, repossessions, retail price index, RICS surveyor, Royal Institute of Chartered Surveyors (RICS), RPI, unemployment UK, value invest
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August 2010 Property Investor Factsheet

August 5th, 2010

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August 2010 Property Investors Factsheet

Please click on the link above to access the latest facts and figures relevant to UK property investors (note you will have to be a member of the Property Investor Hub which can be done quickly and easily here).

The majority of house price indices have pointed to small drops in prices (with the Halifax being the only exception, reporting a 0.6 % increase for July). Whilst Land Registry statistics have also indicated a slight increase in average house prices, this is widely viewed as a balancing out due to the 0.2 percent drop that was seen in May. Additionally, the number of RICS surveyors (who largely rely on Land Registry data) reporting a rise in house prices has decreased by 9 percent since last month which generally adheres to the professional consensus that house prices are set to continue to fall marginally in the coming months. The discount on auction properties has widened by 1.6 percent on the month representing a total of 17.6 percent, according to Fathom Consulting.

Mortgage products available have slightly lost their competitively when compared to previous months with TMW (The Mortgage Works) increasing the pay rate of their 80 percent loan to value product to 5.49 percent (previously 4.69) – attributed due to a rise a demand for what is currently a rare borrowing level. However, results from the banks quarterly reports showed some encouraging signs with Northern Rock demonstrating it is sitting on a cash pile of more than £7 billion; HSBC revealing that its profits for the first half of 2010 had more than doubled to £7 billion (the bank recently announced a fixed 3.95 percent rate for residential property, widely predicted as a result of increased pressure by the government to begin expanding its loan book) and Barclays announcing that their profits have risen by 44 percent to £3.95 billion (they have subsequently initiated rate cuts as a result).

Whilst the bank base rate remained at 0.5 percent, broad ranged predictions with regards to its increase continued to be debated with former Bank of England deputy-governor, Sir John Gieve, stating that it will have to rise earlier and more sharply than expected to keep inflation under control (to 2.5 percent by July 2011) whereas the Ernst & Young ITEM Club predicted that they would not rise at all until the end of 2013 (assuming impending spending cuts come to fruition). A poll by the Fair Investment Company illustrated that 67 percent of respondents thought the base rate would be higher than 0.5 percent by July 2011, with 30 percent predicting a half point increase to 1 percent and 29 percent believing it would hit 1.50 percent in 12 months time. The Bank of England’s inflation benchmark, the Consumer Prices Index, is slowing from the high periods reached earlier in the year – but concerns prompted as to the effects of the impending VAT increase in January 2011 when the British Retail Consortium (BRC) predicted upward pressure on prices in the months ahead looking more likely.

Some other interesting statistics include a daily average of £23.35 million of loan write offs being undertaken by UK banks and building societies; slight decreases in the level of personal and household debt levels as well as a drop in the amount of interest being paid daily (full lending statistics available on the factsheet). Whilst unemployment was reported to have dropped (to 7.8 percent), supplemetary statistics have shown that there are also approximately 5.87 million people who are on the dole in all but name (the Office of National Statistics figures only point to people who are looking for work).

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Tags: auction property market, auction property statistics, bank base rate, bbr, buy investment property, consumer price index, CPI, credit, debt levels, economics property, Halifax house prices, house prices, inflation, invest in property, Land Registry house prices, latest buy to let mortgages, Mervyn King, Monetary Policy Committee, mortgage approvals, National Institute of Economic and Social Research (NIESR), Nationwide house prices, property economist, property invest, property investment tips, Property Investor Factsheet, property statistics, repossessed houses, Repossession houses, repossession levels UK, repossessions, retail price index, RICS surveyor, Royal Institute of Chartered Surveyors (RICS), RPI, unemployment UK, value invest
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July 2010 Property Investor Factsheet

July 8th, 2010

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July 2010 Property Investor Factsheet

Please click on the link above to see the latest facts and statistics for property investors (note you will have to be a member of the Property Investor Hub which can be done in under a minute by clicking here).

Various house price movements were reported by the indices this month – with both the Halifax and the Land Registry reporting a monthly drop (0.6 percent and 0.2 percent respectively) and also the number of RICS surveyors reporting a rise in house prices dropping slightly by 1 percent. Whilst the Nationwide reported a rise of 0.10 percent in June, it was warned that prices could continue to fall during the rest of 2010 with Martin Gahbauer, Nationwides chief economist stating: “barring a significant pick-up in house prices over the next few months, the annual rate of inflation should continue to drift lower, in light of the very strong price increases recorded during the summer of 2009.” Other research from the Halifax found that the cost of owning and running a home in the UK had fallen by 6% over the past two years, driven by a decline in mortgage payments.

With the bank base rate remaining at 0.5 percent (for the 17th month straight), the issue of inflation continues to be debated within the Monetary Policy Committee (MPC) with one member – Andrew Sentence – voting for a raise to 0.75 percent to stem the effects of inflation (whilst June’s CPI has fallen back to 3.4 percent, it still remains well above the Bank of England’s 2 percent target). The British Chamber of Commerce stated that the biggest hits will come on to the economy in late 2010 and into 2011 when the fiscal measures begin to have an effect. The International Monetary Fund announced that it forecasts for UK growth this year and next have been revised down, and there has been fresh talk of a possible double dip recession amongst economists. Furthermore,the National Institute of Economic and Social Research (NIESR) also reported that the UK risked faltering growth for the rest of this year, stating: ”fiscal consolidation both in the UK and the euro area will restrict growth in the short-term and there is clearly a risk that this rate of growth will not be maintained through the rest of this year.” For these reasons several economists are doubting the possibility of rates rising again - Stephen Boyle, of RBS stated: “the stickiness of UK inflation remains a concern, but lower for longer is likely to remain the theme when it comes to interest rates. Fiscal austerity measures mean that monetary policy will have to do most of the heavy lifting if the recovery, already fragile, is to be kept on track.” Roger Bootle, economic adviser at Deloitte, agreed saying: “raising rates now, just when the fiscal squeeze is starting to hit and inflation is about to start falling, would be entirely the wrong thing to do. I can see why the MPC is getting nevous and there are signs that inflation expectations are rising in response. But there has also been plenty of comforting news on the inflation front … Mervyn King has already hinted that monetary policy could loosen further in order to compensate for the fiscal squeeze and I think that’s exactly what should happen. I expect to see the Bank’s quantitative easing programme started up again later this year.”

In other related news, the amount of UK personal debt remained in line with last month as with the amount of people seeking help from the Citizens Advice Bureau (CAB) and the amount of properties being repossessed. There has been a marginal rise in the level of both secured and unsecured lending as well as the amount of interest being paid on a daily basis. The government national debt is decreasing as did the level of unemployment (research by the Recruitment & Employment Confederation (REC) and KPMG showed staff appointments dropped to 60.7 in June, down from 61.3 in the month previous and just above January’s reading of 60.5).

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The Economy in 2009 for the Property Investor: Quarter 1

December 22nd, 2009

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The Economy in 2009 for the Property Investor: Quarter 1

January 2009

Bank Base Rate (BBR): 1.50%

Consumer Price Index (CPI): 3.00%

Retail Price Index (RPI): 0.1%

Several house prices indices pointed to the largest annual decline of house prices since

January 2001. According to Richard Donnell, Director of Research at Hometrack, at the time: “The market is at the mercy of the economy; the short-term prospects for the economy and levels of unemployment are at the forefront of most consumers’ minds and these will be key to the performance of the housing market over 2009.” According to Hometrack’s monthly survey of 5,800 estate agents, the average time that a property stayed on the market also grew to 12.3 weeks (a 45% increase from a year earlier). On a wider economic scale, reports in

January pointed to a 1.5% contraction at the close of 2008, prompted by the seizing up of credit markets and declines in the services, manufacturing and construction industries.

Statistics also pointed to joblessness rising to a ten year high. Gordon Brown promised use ’every weapon’ to cull the effects of the credit squeeze and pledged the second bailout

package for British banks in an attempt to spur lending as well as boosting its stake in the Royal Bank of Scotland Group Plc to 70%.

February 2009

Bank Base Rate (BBR): 1.00%

Consumer Price Index (CPI): 3.20%

Retail Price Index (RPI): 0.0%

Whilst the number of new buyers registering with estate agents and property companies

increased by 17% in the month; Hometrack (who monitor sold house prices via the Land

Registry) reported that three-fifths of the country had seen values falling with sellers

receiving 90 percent of their asking price. A median survey of 14 house price forecasts

pointed to a 17.7% drop from a year earlier. The average cost of a home in England and Wales had declined by 10 percent from the same period a year before (and dropped 0.8% from a month earlier) and, according to the Nationwide, consumer confidence held close to its lowest since at least 2004. Banks and lenders across the globe were hoarding up cash after racking up more than $1.2 trillion in losses. According to Martin Ellis, economist at the Halifax, at the time: “continuing pressures on incomes, rising unemployment and the negative impact of the dislocation of the financial markets on the availability of mortgage finance are likely to mean that 2009 will be another difficult year for the housing market.” Nevertheless, some positive news appeared with the fact that mortgage approvals rose to a nine-month high (over 38,000 new home loans were granted, up from a trough of 27,000 in November 2008).

March 2009

Bank Base Rate (BBR): 0.50%

Consumer Price Index (CPI): 2.90%

Retail Price Index (RPI): -0.4%

encouraging and likely to in part reflect the falling cost of borrowing.” The UK economy

contracted at its quickest pace since the 1980s prompting the Bank of England to bring the base rate to its lowest in three centuries at 0.5%. The UK central bank commenced a £75

billion spending strategy on corporate and government bonds to stimulate spending

(‘quantitative easing’). According to research published by the Halifax UK, homeowners at the time saw their spending power rise by over a tenth since the year previous. Between March 2008 and March 2009, the average monthly discretionary income of a households with

mortgages increased from £892 to £989. Private renters saw their discretionary income

remain generally flat rising by 0.3% between the same period (£801 to £804).

January 2009

Bank Base Rate (BBR): 1.50%
Consumer Price Index (CPI): 3.00%
Retail Price Index (RPI): 0.1%

Several house prices indices pointed to the largest annual decline of house prices since January 2001. According to Richard Donnell, Director of Research at Hometrack, at the time: “The market is at the mercy of the economy; the short-term prospects for the economy and levels of unemployment are at the forefront of most consumers’ minds and these will be key to the performance of the housing market over 2009.” According to Hometrack’s monthly survey of 5,800 estate agents, the average time that a property stayed on the market also grew to 12.3 weeks (a 45% increase from a year earlier). On a wider economic scale, reports in January pointed to a 1.5% contraction at the close of 2008, prompted by the seizing up of credit markets and declines in the services, manufacturing and construction industries. Statistics also pointed to joblessness rising to a ten year high. Gordon Brown promised use ‘every weapon’ to cull the effects of the credit squeeze and pledged the second bailout package for British banks in an attempt to spur lending as well as boosting its stake in the Royal Bank of Scotland Group Plc to 70%.

February 2009

Bank Base Rate (BBR): 1.00%
Consumer Price Index (CPI): 3.20%
Retail Price Index (RPI): 0.0%

Whilst the number of new buyers registering with estate agents and property companies increased by 17% in the month; Hometrack (who monitor sold house prices via the Land Registry) reported that three-fifths of the country had seen values falling with sellers receiving 90 percent of their asking price. A median survey of 14 house price forecasts pointed to a 17.7% drop from a year earlier. The average cost of a home in England and Wales had declined by 10 percent from the same period a year before (and dropped 0.8% from a month earlier) and, according to the Nationwide, consumer confidence held close to its lowest since at least 2004. Banks and lenders across the globe were hoarding up cash after racking up more than $1.2 trillion in losses. According to Martin Ellis, economist at the Halifax, at the time: “continuing pressures on incomes, rising unemployment and the negative impact of the dislocation of the financial markets on the availability of mortgage finance are likely to mean that 2009 will be another difficult year for the housing market.” Nevertheless, some positive news appeared with the fact that mortgage approvals rose to a nine-month high (over 38,000 new home loans were granted, up from a trough of 27,000 in November 2008).

March 2009

Bank Base Rate (BBR): 0.50%
Consumer Price Index (CPI): 2.90%
Retail Price Index (RPI): -0.4%

According to Nationwide, house prices rose by 0.9% (although it should be noted that this index is based on agreed sales prices and not actual sold data). Both Hometrack and RICS data (which is evidentially more accurate) pointed to house prices falling at their slowest pace in 10 months as well as more buyers registering with estate agents. The average cost of a 2 year fixed mortgage fell to 4.01 percent in March (the rate did not drop in line with the BBR but was still lower than the 6.08 percent average in August 2008). The index of construction activity, according to the Chartered Institute of Purchasing and Supply, also rose (although still showed a contraction in the industry). However, as Fionnuala Earley, chief economist at Nationwide, said in a statement at the time: “It is far too soon to see this as evidence that the trough of the market has been reached; the willingness of borrowers to return to the market is encouraging and likely to in part reflect the falling cost of borrowing.” The UK economy contracted at its quickest pace since the 1980s prompting the Bank of England to bring the base rate to its lowest in three centuries at 0.5%. The UK central bank commenced a £75 billion spending strategy on corporate and government bonds to stimulate spending (‘quantitative easing’). According to research published by the Halifax UK, homeowners at the time saw their spending power rise by over a tenth since the year previous. Between March 2008 and March 2009, the average monthly discretionary income of a households with mortgages increased from £892 to £989. Private renters saw their discretionary income remain generally flat rising by 0.3% between the same period (£801 to £804).

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In our full 2010 report, we look at what the all major house price indices / housing organisations are saying about the year ahead as well as some predictions for the economy in general (including relevant observations from the late 2009 Pre Budget Report). We then look at several investment property acquisition strategies (including lease options) followed, finally, by effective methods to conduct accurate due diligence in 2010. To access the report (you will need to be a member of the Property Investor Hub), please click on the link below:

The Property Investor Report 2010

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Tags: bank bailout, bank base rate, Bank of England, Chartered Institute of Purchasing and Supply, construction activity, consumer price index, february 2009, Gordon Brown, Halifax, Hometrack monthly survey, incomes, january 2009, joblessness, Land Registry, march 2009, median survey of 14 house price indices, Nationwide, retail price index, Royal Bank of Scotland Group Plc, Royal Institute of Chartered Surveyors (RICS)
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The Economy in 2009 for the Property Investor: Quarter 2

December 22nd, 2009

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April 2009

Bank Base Rate (BBR): 0.50%

Consumer Price Index (CPI): 2.30%

Retail Price Index (RPI): -1.2%

House prices declined less than what

many economists and house price

indicators had forecast and many pointed

to improved affordability (several banks

began to indicate that lending will

increase). However, A report produced

by Savills (the UK’s largest publicly traded

property broker) predicted that house prices may continue their decline until 2012 unless unemployment decreases and lending conditions improve. As at mid-April, according to the Council of Mortgage Lenders, 900,000 British homeowners had mortgages greater than the value of their homes (the total number of UK home loans is 11.7 million). As the effects of quantitative easing filtered through into the economy, the pound fell against both the euro and the dollar. Nevertheless, Nationwide reported that its data on consumer confidence saw

statistics rise by 8 points from March.

The annual survey published by Liverpool Victoria – ‘The Cost of a Child’ showed that parents could spend £193,772 on raising a child from birth until the age of 21. This equates to £9,227 a year, £769 per month or £25 per day.

May 2009

Bank Base Rate (BBR): 0.50%

Consumer Price Index (CPI): 2.20%

Retail Price Index (RPI): -1.1%

According to Hometrack, UK house prices stopped falling for the first time in 20 months with the average house prices in England and Wales held at £155,600. Six of the 10 regions

monitored in detailed survey pointed to no change in house prices (in the the East Midlands, the North West, the West Midlands and Yorkshire values declined 0.1 percent from April).

According to Director of Research, Richard Donnell: “The survey shows that pricing

expectations among vendors has finally re-aligned to a level that is more in line with what the current pool of purchasers are prepared to pay. However, the outlook for the economy

remains far from certain. It is too early to rule out future price falls.” The number of new buyers registering with estate agents rose 6% from April and the sales to asking prices were achieving, on average, 90.3% – a rise from 89.6% on the previous month.

The Government proposed to set up a national register of UK Landlords with the aim of

protecting tenants which, whilst having good intention, was criticised by a number of bodies. David Salisbury, Chairman of the National Landlords Association (NLA), stated: “We consider this to be overly intrusive and of no direct benefit to tenants or landlords. Landlords already face a heavy regulatory burden as it is.” It was also pointed out that a similar scheme was set up in Scotland which was proven not to work.

Despite falls the month before the value of the pound rose and consumer confidence

continued to rise. The Consumer Credit

Counselling Service (CCCS), whilst

reporting a significant drop in the amount

of people requesting for help, stated that

the average yearly income of a couple

contacting the organisation dropped 12%

between October 2006 and May 2009.

The report also stated that, whilst

essential living costs had broadly remained

the same, the amount of money people

had to repay their debts had dropped

from £197 to minus £114. In the second

quarter of 2009, over 30% of clients using the CCCS were advised that there was no

immediate solution to their debt problem (they neither would be able to fund a debt

repayment plan or IVA nor qualify for a bankruptcy or debt relief order) – the best hope was to increase their income. It was also reported that there were 5.84 million working age

benefit claimants – an increase of 694,000 in the year. By the end of May, there were 12.5 million people of state pension age claiming benefits from the Department of Work and

Pensions (DWP) – an increase of 221,000 since a year before.

The Financial Services Authority (FSA) undertook a ‘stress test’ of the UKs major banks based on a 50% drop of residential property; a 60% drop in commercial prices; an unemployment rate over 12% and a peak-to-trough drop in GDP of over 6%. The fact that full results were not made publically available sparked media debate with the FSA defending that the tests were designed to formulate a continuing review of regulatory decisions. Barclays Plc were the only bank who disclosed its results which proved to have more than enough capital in a variety of ‘stressed’ situations.

June 2009

Bank Base Rate (BBR): 0.50%

Consumer Price Index (CPI): 1.80%

Retail Price Index (RPI): -1.6%

Despite rising optimism in previous months, the Halifax (who arguably take a more ‘liberal’ view on house prices) reported a slide of 0.5% in average house prices. Martin Ellis, Housing Economist stated at the time that he expected to see: “continuing mixed pattern of monthly house price rises and falls over the remainder of 2009” and added, “whilst there have been encouraging recent signs of improvement, the outlook for the UK economy remains uncertain with unemployment set to continue rising for some time.” The percentage of households with no adults at work by the end of June was at 16.9% (40.4% in lone parent households).

According to Job Centre statistics, the number of working-age people in workless households reached 4.8 million and there were 5.5 million households where at least one person above the age of 16 was in employment and the other was unemployed or inactive.

going to be very difficult for the market to recover and grow at previous levels. There’s no doubt that the rate of falls has slowed down at the moment, but I can’t see prices taking off.” The Financial Services Authority estimated that there were 403,000 loan accounts in arrears representing a 30% on the same period a year before. Research from ‘Shelter’ and ‘Money Advice’ showed that 1.3 low-income households were struggling with their finances (four in ten of those surveyed felt their debts were harming their physical and mental well being).

Indeed, in contrast to the CCCS decreasing enquiries figure in May, the Citizens Advice

Bureau reported dealing with 9,300 debt problems every day – a figure that shot up in the three months to the end of June. Despite this, mortgage approvals increased to over 47,000 – the highest in over a year according to the British Bankers Association. The Council of

Mortgage Lenders (CML) cut its forecast from 75,000 to 65,000 saying that low interest rates are helping homeowners keep up with their commitments. The British Retail Consortium

indicated that shop-price inflation was slowing which, in turn, was helping purchasing power (the annual rate of price gains in UK shops was 0.5% in June, its lowest in seven months).

According to NS&I’s Quartely Savings Survey, the monthly amount saved per head across the UK declined slightly from £92.41 in spring 2009 to £90.73 in the summer. The average amount saved as a percentage of income fell to 6.65% in the second quarter compared to the first quarter, despite an increase in the average monthly take-home income.

The Economy in 2009 for the Property Investor: Quarter 2

April 2009

Bank Base Rate (BBR): 0.50%
Consumer Price Index (CPI): 2.30%
Retail Price Index (RPI): -1.2%

House prices declined less than what many economists and house price indicators had forecast and many pointed to improved affordability (several banks began to indicate that lending will increase). However, A report produced by Savills (the UK’s largest publicly traded property broker) predicted that house prices may continue their decline until 2012 unless unemployment decreases and lending conditions improve.

As at mid-April, according to the Council of Mortgage Lenders, 900,000 British homeowners had mortgages greater than the value of their homes (the total number of UK home loans is 11.7 million). As the effects of quantitative easing filtered through into the economy, the pound fell against both the euro and the dollar. Nevertheless, Nationwide reported that its data on consumer confidence saw statistics rise by 8 points from March.

May 2009

Bank Base Rate (BBR): 0.50%
Consumer Price Index (CPI): 2.20%
Retail Price Index (RPI): -1.1%

According to Hometrack, UK house prices stopped falling for the first time in 20 months with the average house prices in England and Wales held at £155,600. Six of the 10 regions monitored in detailed survey pointed to no change in house prices (in the the East Midlands, the North West, the West Midlands and Yorkshire values declined 0.1 percent from April).

According to Director of Research, Richard Donnell: “The survey shows that pricing expectations among vendors has finally re-aligned to a level that is more in line with what the current pool of purchasers are prepared to pay. However, the outlook for the economy remains far from certain. It is too early to rule out future price falls.” The number of new buyers registering with estate agents rose 6% from April and the sales to asking prices were achieving, on average, 90.3% – a rise from 89.6% on the previous month.

The Government proposed to set up a national register of UK Landlords with the aim of protecting tenants which, whilst having good intention, was criticised by a number of bodies. David Salisbury, Chairman of the National Landlords Association (NLA), stated: “We consider this to be overly intrusive and of no direct benefit to tenants or landlords. Landlords already face a heavy regulatory burden as it is.” It was also pointed out that a similar scheme was set up in Scotland which was proven not to work.

Despite falls the month before the value of the pound rose and consumer confidence continued to rise. The Consumer Credit Counselling Service (CCCS), whilst reporting a significant drop in the amount of people requesting for help, stated that the average yearly income of a couple contacting the organisation dropped 12% between October 2006 and May 2009. The report also stated that, whilst essential living costs had broadly remained the same, the amount of money people had to repay their debts had dropped from £197 to minus £114. In the second quarter of 2009, over 30% of clients using the CCCS were advised that there was no immediate solution to their debt problem (they neither would be able to fund a debt repayment plan or IVA nor qualify for a bankruptcy or debt relief order) – the best hope was to increase their income. It was also reported that there were 5.84 million working age benefit claimants – an increase of 694,000 in the year. By the end of May, there were 12.5 million people of state pension age claiming benefits from the Department of Work and Pensions (DWP) – an increase of 221,000 since a year before.

June 2009

Bank Base Rate (BBR): 0.50%
Consumer Price Index (CPI): 1.80%
Retail Price Index (RPI): -1.6%

Concerns that insufficient bank lending will impede a full recovery were also becoming more and more apparent – Stephen Nickell, Chairman of the National Housing Planning and Advice Unit (and former Bank of England Monetary Committee member) commented at the time: “Mortgage rationing for first-time buyers is the fundamental factor; unless that eases, it’s going to be very difficult for the market to recover and grow at previous levels. There’s no doubt that the rate of falls has slowed down at the moment, but I can’t see prices taking off.” The Financial Services Authority estimated that there were 403,000 loan accounts in arrears representing a 30% on the same period a year before. Research from ‘Shelter’ and ‘Money Advice’ showed that 1.3 low-income households were struggling with their finances (four in ten of those surveyed felt their debts were harming their physical and mental well being).

Indeed, in contrast to the CCCS decreasing enquiries figure in May, the Citizens Advice Bureau reported dealing with 9,300 debt problems every day – a figure that shot up in the three months to the end of June. Despite this, mortgage approvals increased to over 47,000 – the highest in over a year according to the British Bankers Association. The Council of Mortgage Lenders (CML) cut its forecast from 75,000 to 65,000 saying that low interest rates are helping homeowners keep up with their commitments. The British Retail Consortium indicated that shop-price inflation was slowing which, in turn, was helping purchasing power (the annual rate of price gains in UK shops was 0.5% in June, its lowest in seven months).

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The Property Investor Report 2010

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The Economy in 2009 for the Property Investor: Quarter 3

December 22nd, 2009

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July 2009

Bank Base Rate (BBR) – 0.50%

Consumer Price Index (CPI): 1.80%

Retail Price Index (RPI): -1.4%

availability of mortgage finance.” With intense media reporting that the market was on the way to recovery, home sellers rasied asking prices; the average ‘shop window’ price rose by 0.6% to £227,864. However, many debated that house prices were set to fall further and the increases (such as those widely reported in June and August) were summer ‘blips’. Although mortgage approvals had increased (50,123), Bank of England data showed that banks had

approved less than half the amount of mortgages when compared to the same month two years before (as the property market was peaking). Property investors offering sell and rent back to homeowners were required to adhere to regulatory standards set up by the Financial Services Authority (FSA). The regulation was largely a result of unscrupulous property

investors taking advantage of vulnerable homeowners’ positions and a need to have an

‘adequate’ framework for the industry to operate in. There remain a few high profile sell and rent back companies operating in the UK.

M4, the broadest measure of UK money supply, rose more than forecast (at a rise of 1.5% on the month and 14.5% on the year). Other statistics revealed that the overall UK economy contracted by 0.8% in the second quarter of 2009 (over twice as much as economists had forecast) as the finance and manufacturing industries slumped. Net credit card lending fell to 92 million pounds (its lowest since December 2008) and the British Bankers Association

reported that 768,000 applications for consumer credit were rejected at month end.

August 2009

Bank Base Rate (BBR): 0.50%

Consumer Price Index (CPI): 1.60%

Retail Price Index (RPI): -1.3%

inflation was slowing, thereby improving purchasing power (the annual measure of price gains was 0.5% in June, is lowest in seven months). Unemployment figures continued to increase as the economy, overall, continued to shrink (reaching a 14 year high). After initially

considering whether to hold back, Bank of England policy makers extended their bond-

purchase program to £175 billion to ‘cement’ the recovery. The increasing popularity of using lease options to control property was gaining popularity amongst UK property investors and even appeared in the mainstream media as shown by this link from the Times.

September 2009

Bank Base Rate (BBR): 0.50%

Consumer Price Index (CPI): 1.10%

Retail Price Index (RPI): -1.4%

combination of increased demand and a low level of properties available for sale has pushed up house prices in recent months. The marked improvement in affordability due to the

reduction in both property prices and interest rates since mid 2007 has been a key factor in stimulating higher demand.” Lenders granted 56,215 home loans in September, the most since March 2008, according to the Bank of England. The number of homeowners in arrears also decreased (194,600 mortgages at the end of September compared to 204,200 at the end of June). Nevertheless, several prominent economists and housing analysts pointed to the ‘irrational’ rally of property price increases to wane over the subsequent 18 months.

Evidence was illustrating more of a ‘W’ shaped cycle where the house price bounce would tail off and fall back in 2010 before recovering fully in 2012. According to CML statistics at the time, 195,000 people were in arrears of at least 2.5% of their outstanding mortgage at the end of September, the equivalent of 1.77% of all mortgage customers, which has decreased 204,200 or 1.86% at the end of June. According to the Department for Communities and

Local Government (DCLG), at the end of September, the average house price in the UK for first time buyers was at £147,517 – an annual decrease of -1.3%. The average first time buyer deposit stood at £37,225 (25%) with an earnings to mortgage ratio of 3:1.

education, employment or training (NEET) increased by 113,000 when comparing quarter 3 with the same period in 2008 (a total of 933,000). The proportion of 16 to 18 year olds

defined as being in the NEET category stood at 261,000. The total of 16 to 24 year olds

classified as NEETs stood at 1.082 million – the highest on record. By the end of

September, the unemployment rate for 18 to 24 year olds increased by 3.3% (24,000) from quarter 2 and 25.5% (165,000) when compared to quarter 3 of 2008 – the highest figures recorded since records began in 1992. As at the end of quarter 3, the number of people aged 50+ out of work was 367,000, increase of 37.7% from the year before. The number of people over the state pension age that were choosing to continue work also increased with a rise of over 76,000 when compared to quarter 3 of 2008. Scottish Widows figures pointed to the fact that one in six retired people still have an outstanding mortgage with an average debt of £50,100 and also that 34% are in the red on loans and credit cards (the average outstanding non-mortgage debt was reported to be £7,344). The Prudential stated that one in 10

workers who have state pension have reduced the amount they are contributing or have stopped altogether. Government statistics illustrated that there are more people of state

pension age then under 16s. Statistics compiled during ‘Financial Planning Week’ reported the following:

• more than a quarter of Brits are relying on winning the Lottery to help improve their financial situation;

• over half of Brits stated they were having difficulty keeping up with bills and other commitments - although 5% stated they were falling behind;

• 26% have a budget they strictly stick to;

• 31% have made a will.

The Economy in 2009 for the Property Investor: Quarter 3

July 2009

Bank Base Rate (BBR) – 0.50%
Consumer Price Index (CPI): 1.80%
Retail Price Index (RPI): -1.4%

Hometrack reported that the house prices in England and Wales held their value as the credit crunch and recession continued to stifle the property market from improving. The average cost of a property in England and Wales was £155,600, 7.7% lower than their estimation in July 2008. Eight out of the 10 regions monitored by Hometrack showed no changes, whilst London and East Anglia both had an increase of 0.1%. According to Richard Donnell, Director of Research at Hometrack: “The housing market remains in a fragile state. A sustainable and broad based recovery needs to be founded on both an improving economic outlook and availability of mortgage finance.” With intense media reporting that the market was on the way to recovery, home sellers raised asking prices: the average ‘shop window’ price rose by 0.6% to £227,864. However, many debated that house prices were set to fall further and the increases (such as those widely reported in June and August) were summer ‘blips’. Although mortgage approvals had increased (50,123), Bank of England data showed that banks had approved less than half the amount of mortgages when compared to the same month two years before (as the property market was peaking). Property investors offering sell and rent back to homeowners were required to adhere to regulatory standards set up by the Financial Services Authority (FSA). The regulation was largely a result of unscrupulous property investors taking advantage of vulnerable homeowners’ positions and a need to have an ‘adequate’ framework for the industry to operate in. There remain a few high profile sell and rent back companies operating in the UK.

August 2009

Bank Base Rate (BBR): 0.50%
Consumer Price Index (CPI): 1.60%
Retail Price Index (RPI): -1.3%

As the 2 year anniversary of the onset of the credit crunch passed, the Halifax reported that house prices have fallen 20% with almost £40,000 wiped off the average home since August 2007. According to the Land Registry, average house prices rose the most in five years and at their fastest pace in 2 ½ years. UK homebuilders Taylor Wimpey stated the market as being ‘significantly more stable’ and applications for new build homes increased 2.5% in the three months prior to August, according the National House Building Council. As a result of the marginal increase in house prices, the British Retail Consortium noted that shop-price inflation was slowing, thereby improving purchasing power (the annual measure of price gains was 0.5% in June, is lowest in seven months). Unemployment figures continued to increase as the economy, overall, continued to shrink (reaching a 14 year high). After initially considering whether to hold back, Bank of England policy makers extended their bond-purchase program to £175 billion to ‘cement’ the recovery. The increasing popularity of using lease options to control property was gaining popularity amongst UK property investors and even appeared in the mainstream media as shown by this link from the Times.

September 2009

Bank Base Rate (BBR): 0.50%
Consumer Price Index (CPI): 1.10%
Retail Price Index (RPI): -1.4%

According to an average of nine house price indices, house prices increased by 0.6% (the Halifax house price index pointed to average valuations climbing 1.6% to an average of £163,533). Housing Economist at the Halifax, Martin Ellis, at the time stated: “The combination of increased demand and a low level of properties available for sale has pushed up house prices in recent months. The marked improvement in affordability due to the reduction in both property prices and interest rates since mid 2007 has been a key factor in stimulating higher demand.” Lenders granted 56,215 home loans in September, the most since March 2008, according to the Bank of England. The number of homeowners in arrears also decreased (194,600 mortgages at the end of September compared to 204,200 at the end of June). Nevertheless, several prominent economists and housing analysts pointed to the ‘irrational’ rally of property price increases to wane over the subsequent 18 months. Evidence was illustrating more of a ‘W’ shaped cycle where the house price bounce would tail off and fall back in 2010 before recovering fully in 2012. According to CML statistics at the time, 195,000 people were in arrears of at least 2.5% of their outstanding mortgage at the end of September, the equivalent of 1.77% of all mortgage customers, which has decreased 204,200 or 1.86% at the end of June. According to the Department for Communities and Local Government (DCLG), at the end of September, the average house price in the UK for first time buyers was at £147,517 – an annual decrease of -1.3%. The average first time buyer deposit stood at £37,225 (25%) with an earnings to mortgage ratio of 3:1.

The service industry grew at its fastest pace with increased consumer confidence yet policy makers said that rising unemployment, persistent credit strains, impending tax increases and spending cuts (to rein in a record budget deficit) mean that the economy could take years to recover. Unemployment reached 2.46 million (7.8%): an increase of 30,000 from the previous three months – this was the highest quarterly figure since quarter one of 1995. 2,247 people a day at the time were declaring themselves redundant and government statistics noted a gap of 820,000 between the number of unemployed people and the number of people claim Jobseekers’ Allowance (1.64 million). The proportion of young people, aged 18-24, not in education, employment or training (NEET) increased by 113,000 when comparing quarter 3 with the same period in 2008 (a total of 933,000). The proportion of 16 to 18 year olds defined as being in the NEET category stood at 261,000. The total of 16 to 24 year olds classified as NEETs stood at 1.082 million – the highest on record. By the end of

more than a quarter of Brits are relying on winning the Lottery to help improve their financial situation;
over half of Brits stated they were having difficulty keeping up with bills and other commitments – although 5% stated they were falling behind;
26% have a budget they strictly stick to;
31% have made a will.

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The Property Investor Report 2010

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Tags: august 2009, bank base rate, Bank of England, British Bankers Association, British Retail Consortium, consumer confidence, consumer credit, consumer price index, Financial Services Authority, Halifax, Hometrack, house prices, Housing analysts, Jobseekers' Allowance, july 2009, M4, mortgage finance, National House Building Council, NEET, new build homes, Prudential, Quantitative easing, rally of property prices, retail price index, Scottish Widows, september 2009, state pension, Taylor Wimpey
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The Economy in 2009 for the Property Investor: Quarter 4

December 22nd, 2009

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October 2009

Bank Base Rate (BBR): 0.50%

Consumer Price Index (CPI): 1.50%

Retail Price Index (RPI): -0.8%

Homeowners continued to receive optimistic news that house prices were up for another month (albeit marginally). However, as pointed out by Martin Gahbauer from Nationwide, several indices pointed to slowing growth rates: “I would not say the market is particularly healthy, but at the beginning of the year there were few economists predicting house prices would be at this level by October. The overall number of transactions is still low, however, and prices are still vulnerable to increases in supply.” Howard Archer, Chief Economist at IHS Global Insight, also warned that homeowners could be in for a tough 2010, with prices expected to fall: “While the Nationwide data indicates that house prices are still on an upward track from their February low, October’s significantly reduced month-on-month increase fuels our suspicion that the recent rally in house prices is unsustainable and will fizzle out before long. We believe house prices will be at least 5 per cent lower at the end of 2010 compared to now, and the slippage could very well be greater still.” Other news reported that mortgage lender GMAC were fined £2.8 million by the FSA for levying unfair charges on borrowers in arrears.

UK mortgage approvals climbed to their highest level in 1 ½ years. Yet, there was an increase in the amount of compulsory liquidations and creditors’ voluntary liquidations by 14.6% in quarter 3 of 2009 when comparing the same period the year before. In the same quarter, there was an increase of 9.3% on the same period in 2008 of receiverships (410), administrations (974) and company voluntary arrangements (194). The Insolvency Service reported there were 35,242 individual solvencies in England and Wales (equivalent to 1 every 3.72 minutes) in the third quarter on a seasonally adjusted basis. This was an increase of 6.6% on quarter 2 and a 28.2% increase when compared to the same period in 2008. Figures showed public sector net debt (PSND) increased to £829.7bn (59.2% of gross domestic product and £33,188 per household). The PSND increased by £135bn in 12 months (or £4,268 per second). The interest paid on the PSND by the Government from between April and October was £15.4bn (equivalent to £1,056 per household per annum). Another statistics released by the British Bankers Association pointed to total credit card debt in the UK was £54.5 billion (the UK collective credit card limit on credit cards is £158 billion).

The M4 measure that the Bank of England uses to monitor the effectiveness of quantitative easing fell 0.7% from September and was down an annualised 5.3% in the three months through to October (note that The gauge excludes financial companies that specialize in intermediating between banks, such as holding companies and non-bank credit grantors). The Centre for Economics and Business Research predicted that the Bank of England will key the base rate at 0.5% until 2011 at least, remaining below 2.0% to 2014 stating: “The forecasts are based on the assumption that the incoming government will need to take fiscal action of around 100 billion pounds in tax rises and spending cuts to correct the fiscal deficit. If — as the bookmakers expect — the new government is Conservative, the forecasts suggest tax rises of 20 billion pounds and spending cuts of 80 billion pounds.”

November 2009

Bank Base Rate (BBR): 0.50%

Consumer Price Index (CPI): 1.90%

Retail Price Index (RPI): -1.4%

Hometrack reported a fourth consecutive monthly rise as a ‘shortage of homes sustained the property market’. The UK’s largest residential housing developer – Barratt – pointed to an increase of reservations per site by over 30% compared to the same period in 2008. However, Hometrack also stated that the pick-up in prices has not been felt throughout the country and there are several parts that have been consistently falling. The number of active buyers which has propped up the market this year is drying up with new buyer registrations were up at just 0.1% in November, the lowest level since the start of the year. Rightmove also reported that average prices in November fell by 1.6% – according to Miles Shipside, Commercial Director: “In all but the most buoyant of markets, home moving comes second to Christmas festivities. While the market has recovered from some dreadful lows, this month’s price fall proves that it does not yet have the strength to buck seasonal trends.” The Bank of England stated that the outlook for the housing market “will depend, in part, on the supply of mortgage credit.”

Howard Archer, an economist at Global Insight, said: “House prices will probably keep rising in the next few months but are likely to suffer a relapse next year in the face of higher and still rising unemployment, muted earnings growth and the recent worsening in affordability due to house prices rising from their early-2009 lows.”

mortgages falling into arrears (a decrease of 1.7% when comparing quarter 2 with quarter 3). The Council of Mortgage Lenders cut its forecast for repossessions in 2009 to 48,000 pointing to strong indicators of increased lender forbearance, Government schemes to help people stay in their homes and the impact of low interest rates. For investors in Scotland, news pointed to a 20% rise in mortgage actions taken to court in 2008-09 and a 50% rise in decrees granted.

Mervyn King stated that the pace of economic growth may be ‘pretty buoyant’ in the short term even if the recovery is not ‘pretty strong’. A Gfk NOP report stated that Consumer confidence fell 4 points to minus 17 in November and gauge of whether people think this is a good time to make major purchases dropped seven points to minus 19. Policy makers expanded their bond-purchase plan up to £200 billion with the Governor also saying he had an ‘open mind’ on whether to increase it further to aid the economy. A report by the British Chamber of Commerce showed that UK companies have found it harder to obtain credit – with 64% saying it was their biggest obstacle to growth in the coming years.

December 2009

Bank Base Rate (BBR): 0.50%

Consumer Price Index (CPI): 1.5%

Retail Price Index (RPI): -0.8%

An end-of-year analysis of the top 10 cities by the ‘Local Data Company’ showed revealed 142 of 900 estate agents were closing down, with chain operations being the worse hit. Leeds was the worst hit and Bristol, Liverpool, London and Glasgow saw about a sixth of estate agencies closing in 2009. The same survey showed Halifax has closed a third of its branches; Bairstow Eves has become a dominant chain (despite reducing branch numbers by a fifth) and the upmarket estate agents have broadly remained resilient (Savills have only closed six out of its 80 branches). Proposals to invigorate the Residential Mortgage Backed Security (RMBS) market were announced in the form proposals of finding alternative finance to the UK. The Treasury stated: “Developing non-bank lending channels would help to improve the future resilience of the economy in the face of financial shocks.”

Research published by the National Landlords Association (NLA) pointed to almost three

quarters of landlords have experienced tenant rental arrears – 43% of which occurred in the last 12 months. The NLA also appealed to the government to make major changes to the administration of the Local Housing Allowance (LHA) – it is estimated that total arrears across the UK could be as high as £220 million as landlords are not being passed the rent. Vacant retail premises have also doubled from 7% at the start of the year to 15% in December with some town centres recording vacancy rates of over 40%.

burgeoning national public debt, the extent of the public sector pension debt remain hidden from view. This debt has grown as public sector workers have been promised pension

benefits often worth two thirds of final salary, index-linked for life. The debt now stands at 78% of GDP (£1.1 trillion) with debt servicing costing close to £45.2 billion.

Many households across the UK throughout the year have struggled with fuel debts and the Citizens Advice Bureau (CAB) reported a 46% rise of people seeking assistance. The most common reasons were low income, over-commitment, illness, disability and job loss. They also pointed to irresponsible lending and poor financial skills adding to peoples debt problems. According to late 2009 statistics by the life insurance brokers ‘Bright Grey’, 12m Brits (25%) are struggling to cope with their monthly bills and 39% of people have budgets so tight that they would be in trouble if they had to find an extra £50 each month. The report also stated that essential bills (rent/mortgage payments, utilities, food, household costs etc.) now account for 68% of the average Brits household income (equates to £1,378 on average each month per person and £2,001 for families).

population have become more aware of their finances as a result of the credit crunch and are, in turn, making a concerted effort to look after their affairs. 48% stated they knew how much they had and owed in all their accounts (although older age groups tended to be surer of their finances than younger). The survey also pointed out that 31% of savers do not think they would have enough money to cope in an emergency. The Financial Services Authority (FSA) published research indicating that the improvement of financial capability is directly

proportional to psychological well-being (moving to average levels of financial capability increases psychological wellbeing by over 5% and decreases anxiety and depression by 15%).

children do not have any savings or ‘nest egg’ investments for their children and a further 20% of these parents have less than £1,000 to fall back on. Their statistics did point out that the average saver is increasing the amount they put away 26% (£206 per month compared to £163 at the beginning of the year) but the number of people depositing into their savings

accounts has decreased by 6% since the start of 2009.

The Economy in 2009 for the Property Investor: Quarter 4

October 2009

Bank Base Rate (BBR): 0.50%
Consumer Price Index (CPI): 1.50%
Retail Price Index (RPI): -0.8%

The M4 measure that the Bank of England uses to monitor the effectiveness of quantitative easing fell 0.7% from September and was down an annualised 5.3% in the three months through to October (note that The gauge excludes financial companies that specialize in intermediating between banks, such as holding companies and non-bank credit grantors). The Centre for Economics and Business Research predicted that the Bank of England will leave the base rate at 0.5% until 2011 at least, remaining below 2.0% to 2014 stating: “The forecasts are based on the assumption that the incoming government will need to take fiscal action of around 100 billion pounds in tax rises and spending cuts to correct the fiscal deficit. If — as the bookmakers expect — the new government is Conservative, the forecasts suggest tax rises of 20 billion pounds and spending cuts of 80 billion pounds.”

November 2009

Bank Base Rate (BBR): 0.50%
Consumer Price Index (CPI): 1.90%
Retail Price Index (RPI): -1.4%

Despite a slight rise in actual quarter 2 – overall, there was positive news for UK repossessions with most areas reporting significant decreases in statistics when comparing quarter 3 of 2008 and 2009 (see our repossession statistics report). Note the number of buy to let properties taken into repossession in the third quarter compared to the second rose from 1,400 to 1,600 – however, for the third quarter in a row, there was a decline in the number of buy to let mortgages falling into arrears (a decrease of 1.7% when comparing quarter 2 with quarter 3). The Council of Mortgage Lenders cut its forecast for repossessions in 2009 to 48,000 pointing to strong indicators of increased lender forbearance, Government schemes to help people stay in their homes and the impact of low interest rates. For investors in Scotland, news pointed to a 20% rise in mortgage actions taken to court in 2008-09 and a 50% rise in decrees granted.

December 2009

Bank Base Rate (BBR): 0.50%
Consumer Price Index (CPI): 1.5%
Retail Price Index (RPI): -0.8%

Research published by the National Landlords Association (NLA) pointed to almost three quarters of landlords have experienced tenant rental arrears – 43% of which occurred in the last 12 months. The NLA also appealed to the government to make major changes to the administration of the Local Housing Allowance (LHA) – it is estimated that total arrears across the UK could be as high as £220 million as landlords are not being passed the rent. Vacant retail premises have also doubled from 7% at the start of the year to 15% in December with some town centres recording vacancy rates of over 40%.

GDP statistics demonstrated that the UK economy declined by 0.3% in quarter 3 of 2009 meaning that UK has been in recession for 18 months (the longest period since records began in 1955). The Policy Exchange pointed to the fact that, whilst most people realised the burgeoning national public debt, the extent of the public sector pension debt remain hidden from view. This debt has grown as public sector workers have been promised pension benefits often worth two thirds of final salary, index-linked for life. The debt now stands at 78% of GDP (£1.1 trillion) with debt servicing costing close to £45.2 billion.

By the end of the year, uSwitch estimated the 7.3 million consumers withdrew over 38 million cash withdrawals using a credit card and also pointed out that the interest applied has increased significantly by 41% from 21.22% APR in 2005 to just under 30% APR. The average interest rate on a credit card, at December 2009, is 18.04%. The British Banking Association also stated that the proportion of balances bearing interest from December 2008 had fallen marginally by 0.6% to 65.3%. A Price Waterhouse Coopers report estimated that, in 2009, the average borrowing per credit card has increased by 5% and surpassed £1,000 for the first time. Research based on a Brit survey published by NS&I revealed that 63% of the population have become more aware of their finances as a result of the credit crunch and are, in turn, making a concerted effort to look after their affairs. 48% stated they knew how much they had and owed in all their accounts (although older age groups tended to be surer of their finances than younger). The survey also pointed out that 31% of savers do not think they would have enough money to cope in an emergency. The Financial Services Authority (FSA) published research indicating that the improvement of financial capability is directly proportional to psychological well-being (moving to average levels of financial capability increases psychological wellbeing by over 5% and decreases anxiety and depression by 15%).

End of year statistics by moneysupermarket.com revealed that over 10 million people were overdrawn in the last 12 months since December 2008 (2.1 million have not come out) and people in employment wait for 27 days before dipping into their overdraft. Research published by Abbey Savings highlighted the over one in four (28%) of British parents with young children do not have any savings or ‘nest egg’ investments for their children and a further 20% of these parents have less than £1,000 to fall back on. Their statistics did point out that the average saver is increasing the amount they put away 26% (£206 per month compared to £163 at the beginning of the year) but the number of people depositing into their savings accounts has decreased by 6% since the start of 2009.

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The Property Investor Report 2010

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Tags: Bairstow eves, bank base rate, Bank of England, Barratt Homes, British Bankers Association, British Chamber of Commerce, consumer price index, december 2009, FSA, GMAC, Hometrack, house prices, IHS Global Insight, liquidations, Local Housing Allowance, mortgage approvals, Nationwide, november 2009, october 2009, PriceWaterhouseCoopers, repossessions, retail price index, Savills, The Insolvency Service, uSwitch
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November Property Investor Factsheet

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The Economy in 2009 for the Property Investor: Quarter 1

The Economy in 2009 for the Property Investor: Quarter 2

The Economy in 2009 for the Property Investor: Quarter 3

The Economy in 2009 for the Property Investor: Quarter 4

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