ROOF Blog

Housing crisis, what crisis? It appears that Britons are sitting on nearly £2 trillion worth of equity in their homes. One in four households own their homes outright, amounting to £1.4 trillion, and a further one in three is paying off a home loan but still sitting on £580 billion in equity. Overall households have an average of £127,455 invested in bricks and mortar.

Housing minister, Caroline Flint, is expected today to announce that council tenants who do not work should seek employment or face losing their homes. In an interview with the Guardian Ms Flint indicated that new applicants for social housing would have to sign ‘commitment contracts’ that will eventually be extended to existing tenants. She said also that tenants who moved to take a job would be given priority in finding a home. Shadow housing minister Grant Shapps said Ms Flint was trying to ‘grab the headlines’ with proposals that could not be legally enforced.

Halifax has released its house price index for January, showing that prices were unchanged from the previous month, and the three-month trend was down 1 per cent. The annual rate of house price inflation is at 4.5 per cent, keeping the average price for a house just under £200,000. The bank says that it expects the Bank of England’s monetary policy committee, meeting later this week, to cut interest rates in support of the housing market, as Halifax sticks with a forecast of flat house prices nationally this year.

Moore Blatch, a law firm specialising in repossession proceedings has found that four out of five lenders believe home repossessions will soar this year, as heavily indebted first-time buyers and buy-to-let investors struggle to meet higher costs. The group found that 40 per cent of lenders believe repossessions will rise by between 10 and 15 per cent this year, while 8 per cent anticipate sharper rises. Almost 70 per cent of lenders thought first-time buyers would face the worst difficulties and half thought buy-to-let borrowers would run into problems.

And finally, a young couple in America were handed a blank cheque by a stranger in a cafe and told to fill it in for as much money as they needed. Assuming the gentleman was joking, they filled it in for $100,000. He demanded conditions – that neither their last names nor his were identified, and they were to use the money to buy a house – and then signed the cheque, saying, ‘I’m good for it’. The couple have since cashed it for the full amount.

The Bank of England (BoE) mortgage approval figures for December show that the numbers fell for the seventh consecutive month. Only 73,000 mortgages were approved last month, down from 81,000 in November. House price inflation in England and Wales also fell sharply in December, according to Land Registry figures. The average price fell 0.4 per cent, bringing the annual inflation rate down from 8.1 per cent to 6.7 per cent. The BoE monetary policy committee are meeting next week to determine whether further interest rate cuts are likely.

The Financial Services Authority (FSA) has warned that more than a million mortgages are a ‘cause for concern’. Nearly a third of new mortgages approved between 2005 and 2007 contained three high risk factors – a deposit of less than 10 per cent, a 25-year repayment schedule and borrowing that amounted to more than 3.5 times annual salary. The FSA fears that a million people could face having their homes repossessed.

Meanwhile, in America, homes sales fell at record levels in 2007. The number of new homes sold fell 26.4 per cent to 774,000. Many analysts have predicted that prices will continue to fall in 2008 as builders struggle to sell a glut of new-build properties. At current levels, it would take 9.6 months to clear the inventory of unsold homes.

An FBI investigation has also been launched in the States into 14 corporations allegedly involved in accounting fraud and insider trading in the sub-prime market. The unnamed companies are said to include developers, lenders, financiers as well as banks. Yesterday the House of Representatives passed a $146 billion economic package aimed at stimulating the housing market and enabling ‘homeowners with larger mortgages to refinance, lower their monthly payment and avoid foreclosure’. Currently one per cent of all households in America are in some stage of foreclosure.

In the UK, the government has come under criticism over its deal with Rightmove, the online property agents, to give Customs and Revenue staff access to its records. Rightmove keeps data on 16 million properties, including sale prices and modifications that may add value to the property. Shadow local government minister Eric Pickles says the public will be alarmed that detailed information on 9 out of 10 house sales and rentals are being passed from estate agent to ‘tax spies’ without the public’s knowledge, and believe the government is using this information to press ahead with council tax band changes.

And finally, a new playground has opened in Manchester, for the over-60s. In a bid to keep its ageing local population fit and healthy, a residents association and local housing firm have built a playground with six specially designed pieces of equipment to provide exercise. One local resident said: ‘When we first went in all the people in there were over 70 and I have never heard so much laughing before’.

UK household income has doubled in real terms during the past 50 years, and our spending patterns have changed. In 2006, basic necessities including food, accounted for a smaller proportion of the household budget, while more was spent on housing, leisure activities, travel and cars. In 1957 three items – food, fuel and rent, made up nearly half of all household expenditure. By 2006, the cost of housing including mortgage repayments, home improvements and rent had more than doubled and now take up 22 per cent of household spend, up from 9 per cent in 1957.

Meanwhile the strength of the housing market has been blamed for British households’ lack of savings. The proportion who save money has increased by only 6 per cent in the past 50 years – from 37 to 43 per cent. More than half do not put money aside regularly, and Capital Economics believes that the housing market has exerted a strong influence on the number of savers, as mortgages repayments absorb more of family budgets and savings are dismissed as a lesser priority.

A campaigning group, Splinta, wants sellers to keep the right to put their home on the market before their home information pack (Hip) is finalised. Currently, owners can market their properties as soon as they have commissioned a Hip, but from June this year, the Hip will be needed first. Splinta fears the move will be another blow to the ‘health of the housing market’.

According to fund manager Neil Woodford of Invesco, house prices will fall by up to a tenth this year, with the average home dropping by £18,500 or £50 per day. He warns that losses will be large for owners of new-build flats aimed at the buy-to-let investor, which he says are ‘almost unsellable’.

Repossessed homes are already ‘flooding the market’ according to Europe’s largest residential property auction house, Allsop. Almost 40 per cent of homes currently on their books are being sold by banks and building societies after repossessing them. This is double the proportion for the same time last year.

European governments and the European Commission are being urged to hasten the development of houses that produce no greenhouse gases and to better enforce green building codes as a report from the European Energy Network (ENR) is released today. The ENR says that national governments should prioritise the introduction of energy performance certificates that give a house an energy rating. Britain will be introducing certificates and have set a target of building zero-carbon homes, to start from 2016.

Beleaguered bank, Northern Rock, is expected to receive as many as eight offers – some priced ‘aggressively low’ – to buy all or some of it, as the deadline closes today. The company has suggested that even if the bank was bought outright, the Bank of England may still need to bail it out to the tune of £6 billion until 2010. Virgin Group and JC Flowers are expected to bid for the whole bank, and ‘one or two banks’ from Europe and Asia are also understood to be putting in proposals.

Barclays Bank yesterday confirmed that they have been hit with £1.3 billion worth of debt as a result of the subprime mortgage crisis in the States. After rumours circulated last week that the debt could reach as high as £10 billion, Barclays brought forward their announcement. The amount was less than expected, but still equated to a write off of £500 million each month during July, August and September, and £800 million in October. Banks in America have written down almost $50 billion in the past month alone.

It’s all about banks today – a judge in America has prevented Deutsche Bank from repossessing 14 homes because they could not prove who owned the mortgages, in a move that could have massive repercussions for mortgage industry. The issue of ownership is difficult as banks and mortgage lenders pool hundreds or thousands of mortgages, placing them in one unit and selling parts of that unit on to other lenders. The industry-wide practice has been going on for years without challenge, and is worth $6,500 billion.

Details of the new Housing and Regeneration Bill have been announced by Yvette Cooper today in a bid to introduce more affordable and greener housing and give social tenants a ‘better deal’. Measures include a new watchdog for social tenants, called Oftenant; a Home and Communities Agency to deliver new housing, community facilities and infrastructure; encouragement for developers to make new homes as green as possible; and an easing of restrictions on councils to build more social houses.

A new report from the Young Foundation – Good Neighbours – calls for Housing associations to work more closely with local authorities to give their residents a louder voice in local communities.

Today’s papers are full of yesterday’s increase in inflation and some are now predicting two more increases in interest rates.

According to The Guardian, Shaks Ghosh, the former head of Crisis, is to become chief executive of the Private Equity Foundation, a charity set up by the controversial private equity industry with £20m to invest in organisations tackling social exclusion.

Defend Council Housing has launched an online petition [628 signatures so far] on the Downing Street website demanding that the government implements the fourth option of direct investment in council housing.

MOST OF EUROPE saw house prices running well ahead of inflation last year and there are few signs of a slowdown this year, according to the European Housing Review 2007.

Germany and Portugal were the only major markets to see house price stagnation. The rate of increase fell back in France and Spain but the UK, Norway, Ireland and Greece all saw prices accelerate again in 2006. Prices also rose rapidly in several of the new EU member states, particularly in Poland.

The review, published by the Royal Institution of Chartered Surveyors, includes full country by country details.

A COMMITTEE OF MPs has backed government plans to levy a new planning gain supplement (PGS) on new development while retaining a scaled-back system of section 106 planning obligations for new homes.

A report (go here to download it as a pdf) from the communities and local government select committee also recommended that the government use planning guidance and target setting to ensure that the supply affordable housing is not jeopardised in favour of revenue raising. They also called for local authorities:

• to be given the power to require contributions to affordable housing from a much wider range of developments, not just residential ones
• to be able to use PGS money for affordable homes where appropriate.

The MPs also called for more research into the huge gap between the value of section 106 commitments agreed under planning approvals and the value actually delivered. In 2003/04 developers entered into obligations worth £1.2 billion but only delivered £600 million. One reason for this is a big variation in performance in different parts of the country.

The committee rejected calls for certain types of development to be exempt from the PGS, arguing that this would lead to market distortions. This will disappoint the National Housing Federation, which had argued that housing association schemes should be exempt.