Sunday, 30 April 2017

Inside edge

All posts from: May 2009

Devil in the details

Fri, 29 May 2009

Now we know what people working in housing associations have in common with soldiers, sailors and teachers in public schools.

It’s not the low pay or even the dangers they face doing their job but the fact that all of them have been opened up to potential identity theft within the last six months after laptops containing their personal details were stolen.

As Inside Housing reports today, a laptop containing details of 50,000 members of the Social Housing Pension Scheme and 7,000 members of the Scottish Federation Housing Association Scheme was stolen from the offices of a software provider to the Pensions Trust, which administers the schemes. According to the BBC, another 52,000 people, including staff at independent schools, had their details on the same laptop.

As with a litany of other incidents involving stolen laptops over the last 12 months, the potentially compromised information includes bank accounts details, personal information such as names, addresses, dates of birth and salary details. The Pensions Trust has written to everyone affected.

According to the Pensions Trust, police believe that the laptop itself was the target of the thieves rather than the information on it, but that is hardly much reassurance to anyone whose personal details are now out there.

Nor is the fact that the laptop is password protected since the odds are that if the thieves are sophisticated enough to go in for identity theft they will know their way around a computer. 

And the theft comes at a time when housing associations and their staff were having to digest the news a month ago that the deficit on the Social Housing Pension Scheme has increased by almost £400m and that their contributions will have to rise.

It is astonishing that a laptop containing such sensitive information was not also encrypted but this is far from an isolated case. Unencrypted laptops with the personal details of serving soldiers and naval personnel and major private sector companies have been stolen recently - and it’s only 18 months since HM Revenue & Customs lost two computer discs containing the details of 25m people.

Before I get too morally superior about incompetence and lax procedures, the news made me realise that my own laptop probably contains more than enough of my personal details to fund a holiday for any thief out there. And, yes, it is password protected but not encrypted. But it probably doesn’t matter anyway - a laptop containing the bank details of all suppliers was stolen from a company I used to work for six months ago. 

 

Devil in the details

Fri, 29 May 2009

Now we know what people working in housing associations have in common with soldiers, sailors and teachers in public schools.

It’s not the low pay or even the dangers they face doing their job but the fact that all of them have been opened up to potential identity theft within the last six months after laptops containing their personal details were stolen.

As Inside Housing reports today, a laptop containing details of 50,000 members of the Social Housing Pension Scheme and 7,000 members of the Scottish Federation Housing Association Scheme was stolen from the offices of a software provider to the Pensions Trust, which administers the schemes. According to the BBC, another 52,000 people, including staff at independent schools, had their details on the same laptop.

As with a litany of other incidents involving stolen laptops over the last 12 months, the potentially compromised information includes bank accounts details, personal information such as names, addresses, dates of birth and salary details. The Pensions Trust has written to everyone affected.

According to the Pensions Trust, police believe that the laptop itself was the target of the thieves rather than the information on it, but that is hardly much reassurance to anyone whose personal details are now out there.

Nor is the fact that the laptop is password protected since the odds are that if the thieves are sophisticated enough to go in for identity theft they will know their way around a computer. 

And the theft comes at a time when housing associations and their staff were having to digest the news a month ago that the deficit on the Social Housing Pension Scheme has increased by almost £400m and that their contributions will have to rise.

It is astonishing that a laptop containing such sensitive information was not also encrypted but this is far from an isolated case. Unencrypted laptops with the personal details of serving soldiers and naval personnel and major private sector companies have been stolen recently - and it’s only 18 months since HM Revenue & Customs lost two computer discs containing the details of 25m people.

Before I get too morally superior about incompetence and lax procedures, the news made me realise that my own laptop probably contains more than enough of my personal details to fund a holiday for any thief out there. And, yes, it is password protected but not encrypted. But it probably doesn’t matter anyway - a laptop containing the bank details of all suppliers was stolen from a company I used to work for six months ago. 

 

Awaiting approval

Thu, 28 May 2009

On current trends mortgage approvals will pass a significant milestone next month: for the first time in three years they will be higher than 12 months before. Will this be a key turning point for lending?

Figures published yesterday by the British Bankers Association show that 27,685 loans were approved for house purchase in April. On a seasonally adjusted basis, that’s up 4% on March. Although the total is still down 15% on a year ago, the annual rate of decline is slowing and the monthly total for May will almost certainly exceed the 27,380 loans seen in May 2008. Approvals have now risen in four of the last five months.

Time to call the end of the downturn? Almost certainly not. Mortgage approvals are still 60% below the levels seen at the peak of the market in 2007 and 55% below the average since the BBA started releasing monthly totals in 1997. Approvals could rise for the rest of the year and still indicate that house prices are more likely to rise than fall.

The obvious explanation is that the banks will only lend where they can be certain that they will make rather than lose money and that this caution will last until house prices are clearly on an upward trend and unemployment stops rising.

There are other theories too. One goes that house sellers and buyers are living in dreamland. Sellers are refusing to adjust to reality by dropping their asking price and buyers are making offers higher than lenders think are unrealistic.

But another piece of news yesterday suggests another reason. The Spanish bank Santander announced that it will drop the brand names of the three British banks it owns: Abbey, Alliance & Leicester and Bradford & Bingley.

Combine that with the nationalisation of Northern Rock, the merger of HBOS and Lloyds, the swallowing up of several building societies by Nationwide and the disappearance of specialist lenders  and the market is now dominated by a few big banks.

The boom was led by small banks like Northern Rock and Bradford and Bingley that went for spectacular growth. The bust happened when everyone realised how spectacularly stupid that strategy was, including the wholesale markets they raised their money from.  The recovery will not happen until rising house prices offer the prospect of high enough returns to make lenders forget or ignore that. 

Awaiting approval

Thu, 28 May 2009

On current trends mortgage approvals will pass a significant milestone next month: for the first time in three years they will be higher than 12 months before. Will this be a key turning point for lending?

Figures published yesterday by the British Bankers Association show that 27,685 loans were approved for house purchase in April. On a seasonally adjusted basis, that’s up 4% on March. Although the total is still down 15% on a year ago, the annual rate of decline is slowing and the monthly total for May will almost certainly exceed the 27,380 loans seen in May 2008. Approvals have now risen in four of the last five months.

Time to call the end of the downturn? Almost certainly not. Mortgage approvals are still 60% below the levels seen at the peak of the market in 2007 and 55% below the average since the BBA started releasing monthly totals in 1997. Approvals could rise for the rest of the year and still indicate that house prices are more likely to rise than fall.

The obvious explanation is that the banks will only lend where they can be certain that they will make rather than lose money and that this caution will last until house prices are clearly on an upward trend and unemployment stops rising.

There are other theories too. One goes that house sellers and buyers are living in dreamland. Sellers are refusing to adjust to reality by dropping their asking price and buyers are making offers higher than lenders think are unrealistic.

But another piece of news yesterday suggests another reason. The Spanish bank Santander announced that it will drop the brand names of the three British banks it owns: Abbey, Alliance & Leicester and Bradford & Bingley.

Combine that with the nationalisation of Northern Rock, the merger of HBOS and Lloyds, the swallowing up of several building societies by Nationwide and the disappearance of specialist lenders  and the market is now dominated by a few big banks.

The boom was led by small banks like Northern Rock and Bradford and Bingley that went for spectacular growth. The bust happened when everyone realised how spectacularly stupid that strategy was, including the wholesale markets they raised their money from.  The recovery will not happen until rising house prices offer the prospect of high enough returns to make lenders forget or ignore that. 

Chickens and eggs

Wed, 27 May 2009

With housing starts plummeting and construction workload falling off a cliff, the British Property Federation’s regeneration manifesto could hardly be better timed.

The manifesto is supported not just from leading developers but also from major retailers, the Homes and Communities Agency and three big city councils and it proposes a range of reforms to kick-start major regeneration projects that have stalled around the country.

American-style tax increment financing should pay for infrastructure through local government-issued bonds, it says. Councils should be encouraged to donate land and take equity stakes in schemes. Funding for school and hospital building should be used to lever in more investment. EU procurement legislation should be reformed to cut red tape.

On housing in particular, the BPF wants measures to encourage a professional rented sector including cuts in stamp duty land tax on bulk purchases of property and reforms to real estate investment trusts (REITs) to attract greater institutional investment in the residential sector.

Taken in conjunction with the private rented sector initiative launched by the Homes and Communities Agency, which drew enthusiastic support from the BPF, and there is a very real sense that the stage could at last be set for that to happen.

But, as one observer put it, there are still several chickens and several eggs. The stock can’t be built without the investment but institutions won’t invest they have the vehicles to operate with but neither of those can happen without the stock to invest in. 

All that will take a change of heart at the Treasury, which has traditionally been suspicious that tax breaks for developers and investors today mean tax leaking out of the system tomorrow. That mindset still seems to be very much in place if last-minute changes to last month’s Budget that watered down the stimulus package and dropped changes to stamp duty were anything to go by. 

The surveys may show that the rate of decline in housebuilding and construction is slowing but, with public investment about to be slashed, it’s hard to see where else the revival is going to come from. 

Chickens and eggs

Wed, 27 May 2009

With housing starts plummeting and construction workload falling off a cliff, the British Property Federation’s regeneration manifesto could hardly be better timed.

The manifesto is supported not just from leading developers but also from major retailers, the Homes and Communities Agency and three big city councils and it proposes a range of reforms to kick-start major regeneration projects that have stalled around the country.

American-style tax increment financing should pay for infrastructure through local government-issued bonds, it says. Councils should be encouraged to donate land and take equity stakes in schemes. Funding for school and hospital building should be used to lever in more investment. EU procurement legislation should be reformed to cut red tape.

On housing in particular, the BPF wants measures to encourage a professional rented sector including cuts in stamp duty land tax on bulk purchases of property and reforms to real estate investment trusts (REITs) to attract greater institutional investment in the residential sector.

Taken in conjunction with the private rented sector initiative launched by the Homes and Communities Agency, which drew enthusiastic support from the BPF, and there is a very real sense that the stage could at last be set for that to happen.

But, as one observer put it, there are still several chickens and several eggs. The stock can’t be built without the investment but institutions won’t invest they have the vehicles to operate with but neither of those can happen without the stock to invest in. 

All that will take a change of heart at the Treasury, which has traditionally been suspicious that tax breaks for developers and investors today mean tax leaking out of the system tomorrow. That mindset still seems to be very much in place if last-minute changes to last month’s Budget that watered down the stimulus package and dropped changes to stamp duty were anything to go by. 

The surveys may show that the rate of decline in housebuilding and construction is slowing but, with public investment about to be slashed, it’s hard to see where else the revival is going to come from. 

Flipping hell

Tue, 26 May 2009

As new revelations about second home flipping and unpaid capital gains tax engulf one of the frontrunners to become Speaker, the stench of hypocrisy surrounding the whole issue is growing by the day. 

Just like communities secretary Hazel Blears, Tory MP John Bercow has voluntarily agreed to pay tax on the profit from a property sale. According to the Telegraph, he sold two properties in 2003 but switched the designation of his second home between London and his constituency and did not pay tax on either. 

The first example of hypocrisy comes from the leaderships of the main parties. Labour and the Conservatives both agree that flipping should be banned in future but their attitude on how individual flippers should be treated seems rather more ambivalent. 

HM Revenue & Customs may have something to say about it, according to today’s Telegraph, and the FT says the scandal could prompt a tax clampdown on all second home owners. 

But neither of the main parties has addressed an even bigger issue: whether MPs should be banned from making any profit on property speculation at public expense. That’s exactly the restriction being introduced in the Scottish Parliament but only the Lib Dems seem to support it at Westminster. 

But an even stronger whiff of hypocrisy is coming from the national press. The Telegraph has of course played the leading role in exposing MPs expenses but the Mail reported almost a year ago that more than 100 MPs were dodging tax on second homes

Can this possibly be the same Telegraph that two years ago advised its readers that ‘with a little shrewd planning potentially sky-high capital gains tax bills can be cut drastically, thanks to a range of little-known tax breaks’? Its top two tips? Don’t forget to claim expenses and ‘become a butterfly and flit between homes’.

Or the same Mail whose personal finance section gives helpful advice to readers on how to cut their tax on buy to let and second homes? Use the two-year period to elect which of your homes is your principal residence, it says.

‘Many people do not realise that the two-year election period applies and fail to take advantage, however it is possible to revive it if a third property is purchased, or if the second home becomes your principle residence for a time. This involves transferring bank, postal and electoral details for the period to prove that you were resident and perhaps even renting out your main home. Moving into a second home will mean that a person’s other home becomes liable for capital gains tax for that period, however as this will later return to being their main residence issues should be minimal.’

 

Flipping hell

Tue, 26 May 2009

As new revelations about second home flipping and unpaid capital gains tax engulf one of the frontrunners to become Speaker, the stench of hypocrisy surrounding the whole issue is growing by the day. 

Just like communities secretary Hazel Blears, Tory MP John Bercow has voluntarily agreed to pay tax on the profit from a property sale. According to the Telegraph, he sold two properties in 2003 but switched the designation of his second home between London and his constituency and did not pay tax on either. 

The first example of hypocrisy comes from the leaderships of the main parties. Labour and the Conservatives both agree that flipping should be banned in future but their attitude on how individual flippers should be treated seems rather more ambivalent. 

HM Revenue & Customs may have something to say about it, according to today’s Telegraph, and the FT says the scandal could prompt a tax clampdown on all second home owners. 

But neither of the main parties has addressed an even bigger issue: whether MPs should be banned from making any profit on property speculation at public expense. That’s exactly the restriction being introduced in the Scottish Parliament but only the Lib Dems seem to support it at Westminster. 

But an even stronger whiff of hypocrisy is coming from the national press. The Telegraph has of course played the leading role in exposing MPs expenses but the Mail reported almost a year ago that more than 100 MPs were dodging tax on second homes

Can this possibly be the same Telegraph that two years ago advised its readers that ‘with a little shrewd planning potentially sky-high capital gains tax bills can be cut drastically, thanks to a range of little-known tax breaks’? Its top two tips? Don’t forget to claim expenses and ‘become a butterfly and flit between homes’.

Or the same Mail whose personal finance section gives helpful advice to readers on how to cut their tax on buy to let and second homes? Use the two-year period to elect which of your homes is your principal residence, it says.

‘Many people do not realise that the two-year election period applies and fail to take advantage, however it is possible to revive it if a third property is purchased, or if the second home becomes your principle residence for a time. This involves transferring bank, postal and electoral details for the period to prove that you were resident and perhaps even renting out your main home. Moving into a second home will mean that a person’s other home becomes liable for capital gains tax for that period, however as this will later return to being their main residence issues should be minimal.’

 

Fair shares

Fri, 22 May 2009

With neat irony the National Housing Federation (NHF) is complaining about prejudice against shared ownership by the banks just as one of the biggest launches a new mortgage offering the best rates to buyers who can get someone else to put up 20% of the cost of their home. 

Buyers who only have a 5% deposit can get a Lend a Hand Mortgage from Lloyds TSB with rates normally only available to someone with a 25% deposit provided they have the backing of someone willing to put up savings equal to 20% of the property value as additional security for the loan.

The deal was hailed as a positive step in freeing up the market in loans of 90% of 95%, which had dried up in the wake of the credit crunch. It’s basically the Bank of Mum and Dad, except that the parents get interest on their savings rather than giving them to their son or daughter.

But on the same day the mortgage was launched, the NHF was complaining about prejudice against another group of buyers who can only afford a share of a home. It claimed that the banks are turning away more than £1bn of mortgage business by refusing to lend to people wanting to buy through shared ownership because they mistakenly view it as sub-prime. 

According to chief executive David Orr said: ‘Lenders are now reluctant to provide mortgages for shared ownership, because of a prejudiced assumption that its buyers – people on low and moderate incomes – are more likely to default on their mortgages.’

The NHF argues that the government should ensure that banks that have received public money - Northern Rock, Lloyds, RBS and Bradford & Bingley - should take on a social purpose and lend to people on low to moderate incomes who can afford shared ownership.

That point is particularly relevant to Lloyds since its HBOS subsidiary was the biggest lender on shared ownership before the credit crunch, providing up to half of mortgages around the country and all of them in some areas. The combined bank is also the biggest lender to housing associations. 

According to a Treasury select committee report on the banking crisis published in May, an agreement signed between Lloyds TSB and the Treasury set conditions for government support including support for shared equity and shared ownership initiatives tentatively set at £15m-£20m. But this is a drop in the ocean compared to what the NHF says is needed - £480m for 9,000 low-cost homes that are vacant and another £1bn for the 15,000 due to be built this year.

An insight into the attitude of the banks came in an article published by the Council of Mortgage Lenders published in March. It argued that the complexity of the schemes on offer, the small size of the market and of individual loans and lack of reliable information on the risk and customer profile and volume of transactions were all putting off lenders. 

Shared ownership was a particular problem because there was no clear process for dealing with borrowers who cannot keep up with payments. ‘That can lead to difficulties between the lender and the housing association in working out a solution if the borrower defaults,’ said the CML.

That suggests that it will take far more government arm-twisting to make the banks rethink their attitude. It seems that lending to buyers supported by their parents is one thing but lending to buyers supported by housing associations and the taxpayer is quite another - even for banks that are themselves supported by the taxpayer.

Fair shares

Fri, 22 May 2009

With neat irony the National Housing Federation (NHF) is complaining about prejudice against shared ownership by the banks just as one of the biggest launches a new mortgage offering the best rates to buyers who can get someone else to put up 20% of the cost of their home. 

Buyers who only have a 5% deposit can get a Lend a Hand Mortgage from Lloyds TSB with rates normally only available to someone with a 25% deposit provided they have the backing of someone willing to put up savings equal to 20% of the property value as additional security for the loan.

The deal was hailed as a positive step in freeing up the market in loans of 90% of 95%, which had dried up in the wake of the credit crunch. It’s basically the Bank of Mum and Dad, except that the parents get interest on their savings rather than giving them to their son or daughter.

But on the same day the mortgage was launched, the NHF was complaining about prejudice against another group of buyers who can only afford a share of a home. It claimed that the banks are turning away more than £1bn of mortgage business by refusing to lend to people wanting to buy through shared ownership because they mistakenly view it as sub-prime. 

According to chief executive David Orr said: ‘Lenders are now reluctant to provide mortgages for shared ownership, because of a prejudiced assumption that its buyers – people on low and moderate incomes – are more likely to default on their mortgages.’

The NHF argues that the government should ensure that banks that have received public money - Northern Rock, Lloyds, RBS and Bradford & Bingley - should take on a social purpose and lend to people on low to moderate incomes who can afford shared ownership.

That point is particularly relevant to Lloyds since its HBOS subsidiary was the biggest lender on shared ownership before the credit crunch, providing up to half of mortgages around the country and all of them in some areas. The combined bank is also the biggest lender to housing associations. 

According to a Treasury select committee report on the banking crisis published in May, an agreement signed between Lloyds TSB and the Treasury set conditions for government support including support for shared equity and shared ownership initiatives tentatively set at £15m-£20m. But this is a drop in the ocean compared to what the NHF says is needed - £480m for 9,000 low-cost homes that are vacant and another £1bn for the 15,000 due to be built this year.

An insight into the attitude of the banks came in an article published by the Council of Mortgage Lenders published in March. It argued that the complexity of the schemes on offer, the small size of the market and of individual loans and lack of reliable information on the risk and customer profile and volume of transactions were all putting off lenders. 

Shared ownership was a particular problem because there was no clear process for dealing with borrowers who cannot keep up with payments. ‘That can lead to difficulties between the lender and the housing association in working out a solution if the borrower defaults,’ said the CML.

That suggests that it will take far more government arm-twisting to make the banks rethink their attitude. It seems that lending to buyers supported by their parents is one thing but lending to buyers supported by housing associations and the taxpayer is quite another - even for banks that are themselves supported by the taxpayer.

Charge sheet

Thu, 21 May 2009

Politicians, journalists and traffic wardens eat your heart out. A new group of people are making a strong bid to steal your crown as the most hated in the country: letting agents.

A report from Citizens Advice today reveals a litany of abuse, greed and chicanery enough to make even an MP blush. The worst abuses by estate agents were tackled by legislation in 2007 but the government has only just proposed statutory regulation for letting agents (many firms do both) in a green paper last week. 

About two-thirds of private lettings are made through agents, who typically charge landlords 15% of the rent for their services and tenants a deposit and rent in advance yet do not have to have any professional qualifications. 

But Citizens Advice found that 94% of letting agents impose additional charges on top of that. There are non-returnable holding deposits, deposit administration charges, charges for reference checks, administration fees, charges for check-in inventories and check-out inventories and tenancy renewal fees. 

Tenants were paying average extra charges of £200 each. Some agents were charging tenants a modest £25 while others were raking in almost £700. The charge for a reference check ranged from £10 to £275 and for renewing a tenancy from £12 to £220. Less than a third of agents willingly provided full written details of their charges to CAB workers.

While some agents were providing a great service that was appreciated by tenants, others did nothing about repairs and unsafe appliances, refused to respond to complaints and failed to have any money protection arrangements. Tenants reported losing their deposit, their rent, their council tax when agents went bankrupt or simply disappeared.

Bear in mind that it’s not just tenants who are unhappy with agents and the case for statutory regulation is overwhelming. Landlords say agents in London and the South East typically charge them 11% of the annual rent just to renew a tenancy agreement - from their perspective that amounts to money for nothing. 

In fairness, trade organisations like the Association of Residential Letting Agents (ARLA) have launched their own bid to clean up the sector and have as much interest as anyone in driving the unscrupulous and unethical out of business.

The crucial question now is the form that statutory regulation will take. The licensing scheme that ARLA launched earlier this month included professional qualifications, client money protection, independent audits, professional indemnity insurance, an independent redress scheme and a strict code of practice. 

But Citizens Advice wants regulation to go further: no charges for functions that are part of routine letting and management like checking references and inventories; a requirement to ensure that properties meet basic safety standards; clear standards for getting repairs done speedily; an end to blanket restrictions on housing benefit complaints; an independent regulator with tools to enforce compliance; and a ban on threatening tenants who complain or try to enforce their rights with eviction. 

 

Charge sheet

Thu, 21 May 2009

Politicians, journalists and traffic wardens eat your heart out. A new group of people are making a strong bid to steal your crown as the most hated in the country: letting agents.

A report from Citizens Advice today reveals a litany of abuse, greed and chicanery enough to make even an MP blush. The worst abuses by estate agents were tackled by legislation in 2007 but the government has only just proposed statutory regulation for letting agents (many firms do both) in a green paper last week. 

About two-thirds of private lettings are made through agents, who typically charge landlords 15% of the rent for their services and tenants a deposit and rent in advance yet do not have to have any professional qualifications. 

But Citizens Advice found that 94% of letting agents impose additional charges on top of that. There are non-returnable holding deposits, deposit administration charges, charges for reference checks, administration fees, charges for check-in inventories and check-out inventories and tenancy renewal fees. 

Tenants were paying average extra charges of £200 each. Some agents were charging tenants a modest £25 while others were raking in almost £700. The charge for a reference check ranged from £10 to £275 and for renewing a tenancy from £12 to £220. Less than a third of agents willingly provided full written details of their charges to CAB workers.

While some agents were providing a great service that was appreciated by tenants, others did nothing about repairs and unsafe appliances, refused to respond to complaints and failed to have any money protection arrangements. Tenants reported losing their deposit, their rent, their council tax when agents went bankrupt or simply disappeared.

Bear in mind that it’s not just tenants who are unhappy with agents and the case for statutory regulation is overwhelming. Landlords say agents in London and the South East typically charge them 11% of the annual rent just to renew a tenancy agreement - from their perspective that amounts to money for nothing. 

In fairness, trade organisations like the Association of Residential Letting Agents (ARLA) have launched their own bid to clean up the sector and have as much interest as anyone in driving the unscrupulous and unethical out of business.

The crucial question now is the form that statutory regulation will take. The licensing scheme that ARLA launched earlier this month included professional qualifications, client money protection, independent audits, professional indemnity insurance, an independent redress scheme and a strict code of practice. 

But Citizens Advice wants regulation to go further: no charges for functions that are part of routine letting and management like checking references and inventories; a requirement to ensure that properties meet basic safety standards; clear standards for getting repairs done speedily; an end to blanket restrictions on housing benefit complaints; an independent regulator with tools to enforce compliance; and a ban on threatening tenants who complain or try to enforce their rights with eviction. 

 

Reality check

Wed, 20 May 2009

Three buckets of cold water this morning for hopes of a housing market upturn: downbeat results from Britain’s biggest private landlord; the lowest US housing starts for 50 years; and predictions of years of stagnation in a key regeneration area.

Grainger, the largest quoted residential property owner, posted a pre-tax loss of £143m in the six months to the end of March thanks to factors that are becoming familiar to some housing associations: mark to market adjustments on financial instruments, property valuation deficits and impairment provisions. It also deferred its half-year dividend but said it hoped to pay out at the end of the year

Acting chief executive Andrew Cunningham told Reuters: ‘If market conditions continue to improve, and they have improved somewhat over the last six weeks, then I think we will be pretty confident of announcing a dividend.’

However, with the housing derivatives market still predicting a potential 20% fall in house prices by the end of 2010,  that remains an if rather than a when.   ‘It’s still too early to say that the market is on an upward trend because prices are still falling,’ he said. ‘We still need to see sustained growth and stability in the housing market, and a recovery in mortgage financing.’

The fall in US housing starts in April - the ninth fall in the last 10 months - was seen as particularly sobering news since analysts had expected them to rise. Prices of existing homes are also still falling across the Atlantic. 

Given that the world financial crisis started in the US housing market, a recovery would be seen as a strong indicator of recovery to come here. The fact that prices and starts are still falling suggests it will be a while yet. 

And, as Inside Housing reports, there was also a sobering message today about the prospects for regeneration in the Thames Gateway. Peter Andrews, chief executive of the development corporation, told an all-party group of MPs that its capacity to deliver would be ‘extremely limited for the next five to 10 years’. 

The reason, he said, was the planned volume of high-density housing, which was dependent on a business model relying on pre-agreed sales based on the assumption that property prices would rise that was ‘effectively broken with no hope of replacement’.

The worst may be over for the housing market thanks to emergency economic surgery from the Treasury and Bank of England but with mounting job losses yet to come that does not mean it will return to ‘normal’ any time soon. 

Reality check

Wed, 20 May 2009

Three buckets of cold water this morning for hopes of a housing market upturn: downbeat results from Britain’s biggest private landlord; the lowest US housing starts for 50 years; and predictions of years of stagnation in a key regeneration area.

Grainger, the largest quoted residential property owner, posted a pre-tax loss of £143m in the six months to the end of March thanks to factors that are becoming familiar to some housing associations: mark to market adjustments on financial instruments, property valuation deficits and impairment provisions. It also deferred its half-year dividend but said it hoped to pay out at the end of the year

Acting chief executive Andrew Cunningham told Reuters: ‘If market conditions continue to improve, and they have improved somewhat over the last six weeks, then I think we will be pretty confident of announcing a dividend.’

However, with the housing derivatives market still predicting a potential 20% fall in house prices by the end of 2010,  that remains an if rather than a when.   ‘It’s still too early to say that the market is on an upward trend because prices are still falling,’ he said. ‘We still need to see sustained growth and stability in the housing market, and a recovery in mortgage financing.’

The fall in US housing starts in April - the ninth fall in the last 10 months - was seen as particularly sobering news since analysts had expected them to rise. Prices of existing homes are also still falling across the Atlantic. 

Given that the world financial crisis started in the US housing market, a recovery would be seen as a strong indicator of recovery to come here. The fact that prices and starts are still falling suggests it will be a while yet. 

And, as Inside Housing reports, there was also a sobering message today about the prospects for regeneration in the Thames Gateway. Peter Andrews, chief executive of the development corporation, told an all-party group of MPs that its capacity to deliver would be ‘extremely limited for the next five to 10 years’. 

The reason, he said, was the planned volume of high-density housing, which was dependent on a business model relying on pre-agreed sales based on the assumption that property prices would rise that was ‘effectively broken with no hope of replacement’.

The worst may be over for the housing market thanks to emergency economic surgery from the Treasury and Bank of England but with mounting job losses yet to come that does not mean it will return to ‘normal’ any time soon. 

Ups and downs

Tue, 19 May 2009

Prices falling at their fastest pace since 1948 is good news for anyone with a mortgage but bad news for housing associations and anyone expecting a pay increase.

Retail price inflation (RPI) was -1.2% in the year to April - the lowest since records began in 1948 - thanks to falling mortgage interest payments plus strong downward pressure on house depreciation, council tax and dwelling insurance. It was -0.4% in March.

Consumer price inflation (CPI) fell to +2.3%, down more than expected from +2.9% in March. The 3.5% difference between the two - another record high - is almost all explained by the fact that the CPI does not include housing costs apart from rents.

The crazy situation that contributed to the housing bubble leaves us with record deflation on one measure, inflation that is still above the Bank of England’s 2% target on the other and interest rates that look set to stay very low well into 2010. 

That’s good news for people with mortgages. Mortgage interest payments fell 46.9% in the year to April and 7.7% in April alone and they do not look like going up any time soon.

But falling RPI is bad for anyone expecting an annual pay rise. It’s more likely to accelerate the number of firms imposing pay freezes or pay cuts.

And it is a major worry for housing associations. Their rents can only increase by a maximum of RPI in September plus 0.5% plus £2 per week. The Tenant Services Authority says that inflation would have to fall to -4% before actual rents would have to fall. 

That would have serious consequences for business plans and associations could face a double whammy of inflation and costs rising again in the following 12 months. It’s a scenario that is still some way off but it got a bit closer today. 

Ups and downs

Tue, 19 May 2009

Prices falling at their fastest pace since 1948 is good news for anyone with a mortgage but bad news for housing associations and anyone expecting a pay increase.

Retail price inflation (RPI) was -1.2% in the year to April - the lowest since records began in 1948 - thanks to falling mortgage interest payments plus strong downward pressure on house depreciation, council tax and dwelling insurance. It was -0.4% in March.

Consumer price inflation (CPI) fell to +2.3%, down more than expected from +2.9% in March. The 3.5% difference between the two - another record high - is almost all explained by the fact that the CPI does not include housing costs apart from rents.

The crazy situation that contributed to the housing bubble leaves us with record deflation on one measure, inflation that is still above the Bank of England’s 2% target on the other and interest rates that look set to stay very low well into 2010. 

That’s good news for people with mortgages. Mortgage interest payments fell 46.9% in the year to April and 7.7% in April alone and they do not look like going up any time soon.

But falling RPI is bad for anyone expecting an annual pay rise. It’s more likely to accelerate the number of firms imposing pay freezes or pay cuts.

And it is a major worry for housing associations. Their rents can only increase by a maximum of RPI in September plus 0.5% plus £2 per week. The Tenant Services Authority says that inflation would have to fall to -4% before actual rents would have to fall. 

That would have serious consequences for business plans and associations could face a double whammy of inflation and costs rising again in the following 12 months. It’s a scenario that is still some way off but it got a bit closer today. 

Seconds out

Mon, 18 May 2009

How long before MPs are banned from having taxpayer-funded mortgages on their second homes and are forced to pay back the profits they make when they sell them?

Two weeks ago such a radical reform of parliamentary expenses would have seemed inconceivable. But bear in mind that two months ago the Communities and Local Government department rejected a a trial of new planning rules in national parks limiting the number of homes in part-time occupation on the grounds that it would interfere with the ‘legitimate rights of second home owners’

A statement like that now seems equally inconceivable after the flood of revelations about second home-flipping, tax avoiding, moat-cleaning, non-existent mortgage claiming MPs - and the decision by the boss of the CLG, communities secretary Hazel Blears, to pay £13,000 in capital gains tax on the sale of her London flat.  

The debate in the Scottish parliament is already way ahead of the one at Westminster. From 2011 mortgage claims by MSPs will be banned to stop them profiting from property speculation using public money. Only those with constituencies more than 90 miles from Edinburgh will be eligible to claim an accommodation allowance and they will have to use it to rent or get a hotel.

That seems squeakily clean by comparison with Westminster but it has not stopped a storm in the Scottish press about what will happen to the profits some MSPs have already made - and even about the level of rent they are claiming. 

The Sunday Herald reported yesterday that 29 MSPs including six SNP ministers have claimed for help with their mortgages on second homes under the existing rules in the last financial year. It estimated that they are sitting on £2m of profit between them. As things stand they will not have to repay it but the pressure is already mounting.

Translate that into a Westminster context and the potential profit will be astronomically higher. It’s not clear exactly how many MPs were claiming for a mortgage or how much but 139 claimed the maximum additional cost allowance of £23,083, another 229 claimed more than £20,000 and another 73 claimed more than £15,000. 

Any MP who bought a second home after the 2005 election is unlikely to have made much of a profit and may even be nursing a small loss. Those who bought earlier will be sitting on a huge profit - the Telegraph alleges that shadow climate change minister Greg Barker made £320,000 on a flat on which he had claimed £15,875 in purchase costs and £27,928 in mortgage costs - and it’s not hard to imagine the total running to tens of millions of pounds.  

So far only Liberal Democrats have called for Westminster to adopt the Scottish system and ban taxpayer-funded mortgages. Lib Dem leader Nick Clegg has also pledged that his MPs will repay any profits they make.

However reluctant the Conservative and Labour parties may be to follow suit, the alternative may be even more unpalatable for them: a fresh wave of front-page shame every time an MP sells a second home. 

 

Seconds out

Mon, 18 May 2009

How long before MPs are banned from having taxpayer-funded mortgages on their second homes and are forced to pay back the profits they make when they sell them?

Two weeks ago such a radical reform of parliamentary expenses would have seemed inconceivable. But bear in mind that two months ago the Communities and Local Government department rejected a a trial of new planning rules in national parks limiting the number of homes in part-time occupation on the grounds that it would interfere with the ‘legitimate rights of second home owners’

A statement like that now seems equally inconceivable after the flood of revelations about second home-flipping, tax avoiding, moat-cleaning, non-existent mortgage claiming MPs - and the decision by the boss of the CLG, communities secretary Hazel Blears, to pay £13,000 in capital gains tax on the sale of her London flat.  

The debate in the Scottish parliament is already way ahead of the one at Westminster. From 2011 mortgage claims by MSPs will be banned to stop them profiting from property speculation using public money. Only those with constituencies more than 90 miles from Edinburgh will be eligible to claim an accommodation allowance and they will have to use it to rent or get a hotel.

That seems squeakily clean by comparison with Westminster but it has not stopped a storm in the Scottish press about what will happen to the profits some MSPs have already made - and even about the level of rent they are claiming. 

The Sunday Herald reported yesterday that 29 MSPs including six SNP ministers have claimed for help with their mortgages on second homes under the existing rules in the last financial year. It estimated that they are sitting on £2m of profit between them. As things stand they will not have to repay it but the pressure is already mounting.

Translate that into a Westminster context and the potential profit will be astronomically higher. It’s not clear exactly how many MPs were claiming for a mortgage or how much but 139 claimed the maximum additional cost allowance of £23,083, another 229 claimed more than £20,000 and another 73 claimed more than £15,000. 

Any MP who bought a second home after the 2005 election is unlikely to have made much of a profit and may even be nursing a small loss. Those who bought earlier will be sitting on a huge profit - the Telegraph alleges that shadow climate change minister Greg Barker made £320,000 on a flat on which he had claimed £15,875 in purchase costs and £27,928 in mortgage costs - and it’s not hard to imagine the total running to tens of millions of pounds.  

So far only Liberal Democrats have called for Westminster to adopt the Scottish system and ban taxpayer-funded mortgages. Lib Dem leader Nick Clegg has also pledged that his MPs will repay any profits they make.

However reluctant the Conservative and Labour parties may be to follow suit, the alternative may be even more unpalatable for them: a fresh wave of front-page shame every time an MP sells a second home. 

 

Lost for words

Fri, 15 May 2009

What on earth were mortgage lenders and regulators thinking when they allowed the buy-to-let boom?

The greed of individual wannabe landlords was perhaps understandable when the media was full of stories of how easy it was to make a mint. The professionals should have known better.

The consequences of the boom are there for all to see in the latest statistics published by the Council of Mortgage Lenders. Amateur landlords saw 1,700 of their properties repossessed in the first quarter of the year - up 31% on the final quarter of 2008 and 89% on a year ago.

For the second quarter in a row the repossession rate among buy-to-let landlords was higher (0.15%) than in the mortgage market as a whole (0.11%). The arrears rate was also much higher - though the CML detected some signs that it was falling.

But the real picture is even worse than that. The arrears and repossessions stats do not include cases where the courts have appointed receivers of rent to collect tenants’ rent and pass it on to lenders. 

According to CML buy-to-let stats, in the first quarter of 2009 there were 2,400 buy-to-let mortgages more than three months in arrears with a newly appointed receiver of rent. That was up 50% on the end of last year and eight times the level seen a year ago.

Bear in mind that this increase happened at a time when falling interest rates will have taken the pressure off many landlords - and that neither of these totals includes borrowers who have rented out their property without telling their lender.

For an illustration of just how mind-bogglingly stupid some lenders were and just how heedless the regulators were, the story of one of the million amateur landlord in the third episode of the BBC’s Propertywatch says it all (start watching 15 minutes in). 

Six years ago, Amanda, a single mother of two from Gloucester was earning £22,000 a year working for a local authority. She re-mortgaged her house to buy her first buy-to-let property, then remortgaged them to buy five. ‘It was like a shopping addiction,’ she says. 

By the end of the boom she had borrowed an astonishing £7.5m to buy an empire of 50 properties from Manchester to Cornwall. 

Today 17 of them have receivers of rent appointed. She can’t sell the others to pay her debts because she is in negative equity and is at the mercy of a lender deciding to make her bankrupt. 

Dumb? Greedy? Bonkers? All three? But what about the banks that lent her the money and what about the regulators that let them? Words fail me. 

Lost for words

Fri, 15 May 2009

What on earth were mortgage lenders and regulators thinking when they allowed the buy-to-let boom?

The greed of individual wannabe landlords was perhaps understandable when the media was full of stories of how easy it was to make a mint. The professionals should have known better.

The consequences of the boom are there for all to see in the latest statistics published by the Council of Mortgage Lenders. Amateur landlords saw 1,700 of their properties repossessed in the first quarter of the year - up 31% on the final quarter of 2008 and 89% on a year ago.

For the second quarter in a row the repossession rate among buy-to-let landlords was higher (0.15%) than in the mortgage market as a whole (0.11%). The arrears rate was also much higher - though the CML detected some signs that it was falling.

But the real picture is even worse than that. The arrears and repossessions stats do not include cases where the courts have appointed receivers of rent to collect tenants’ rent and pass it on to lenders. 

According to CML buy-to-let stats, in the first quarter of 2009 there were 2,400 buy-to-let mortgages more than three months in arrears with a newly appointed receiver of rent. That was up 50% on the end of last year and eight times the level seen a year ago.

Bear in mind that this increase happened at a time when falling interest rates will have taken the pressure off many landlords - and that neither of these totals includes borrowers who have rented out their property without telling their lender.

For an illustration of just how mind-bogglingly stupid some lenders were and just how heedless the regulators were, the story of one of the million amateur landlord in the third episode of the BBC’s Propertywatch says it all (start watching 15 minutes in). 

Six years ago, Amanda, a single mother of two from Gloucester was earning £22,000 a year working for a local authority. She re-mortgaged her house to buy her first buy-to-let property, then remortgaged them to buy five. ‘It was like a shopping addiction,’ she says. 

By the end of the boom she had borrowed an astonishing £7.5m to buy an empire of 50 properties from Manchester to Cornwall. 

Today 17 of them have receivers of rent appointed. She can’t sell the others to pay her debts because she is in negative equity and is at the mercy of a lender deciding to make her bankrupt. 

Dumb? Greedy? Bonkers? All three? But what about the banks that lent her the money and what about the regulators that let them? Words fail me. 

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