Latest in LettingsIssue 13
Summer Review
'Events dear boy, events' said Harold Macmillan the Tory Prime Minister when asked what influenced politics'
Events have certainly influenced the sales market adversely while residential lettings is busier than at any time since 1997. Now a rush of reports and more Government proposals look set to trigger more events . or in some cases non events.
First the Reports:
- The Smith Report
- The Future of the Private Rented Section (published by the Smith Institute www.smith-institute.org.uk)
- Damned with faint praise and kicked into the long grass despite the eminence of many of the contributors.
- A plea for more regulation from Lord Best, formerly of the Rowntree Trust caused offence to key players in the PRS (Private Rented Sector).
- The Carsberg Review
- Commissioned by RICS, NAEA and ARLA
- The reviews considers whether or not active regulation of estate agents and other agents in the property field would improve the efficiency of transactions and promote consumers interests.
- A form of licensing and self regulation by an industry body under the watchful eye of the OFT is recommended.
- The review may form a basis for future legislation which combined with the work of the Law Commission could be used to regulate all residential services and service providers.
- Enforcement procedures are not thoroughly considered nor is the position of vendors and landlords who act for themselves outside the network of industry service providers, or those engaged in e-commerce.
- Objections have been raised that industry bodies who are not themselves wholly democratic may establish legalised cartels. The Latin phrase which translates as 'who guards the guardians' comes to mind.
- Legislation may be deferred . drafting any form of legislation or regulation will be a nightmare!
- The Rugg Review
- Review of the Private Rented Sector (PRS) Housing. Commissioned by the Minister of Housing & Planning (Yvette Cooper) in January 2008 due for delivery to Ministers now.
- The report is being written by Julie Rugg and David Rhodes both of the Centre for Housing Policy at York University.
- The review will have a major influence on government housing policy which is expected to be outlined in a Green Paper to be published December 2008.
- Housing policy may well feature in the Queens Speech during 2009 but there may not be time for legislation to reach the Statute Book before the next election in June 2010.
- The Crosby Report
- Commissioned by the Treasury and written by Sir John Crosby (formerly head of HBOS)
- The report reviewed the residential mortgage market but stopped short of recommending that the Bank of England accepted mortgage securities in exchange for government securities as planned by the Chancellor of the Exchequer.
- The review will have a major influence on government housing policy which is expected to be outlined in a Green Paper to be published December 2008.
- The report recommends that the bank releases further funds to banks in an endeavour to restart inter bank lending and allowing .market forces. to sort things out.
The Residential Sales Market
The sector is in a sorry state as sales continue to fall, prices are reduced and mortgages ever harder to find.
Builders, City Lofts, have put four developments and one site into administration. Many smaller developers are following the same route.
Larger players are almost all mothballing incomplete developments and even .sheeting down. part finished homes.
The vultures are out of course. Small funds, wealthy private/corporate landlords and housing associations are buying in over built town and city centres in the Midlands and northern counties as developers under pressure from bankers are selling at cost or below.
The Lenders
- Bradford and Bingley was courted by TPG - a US investor - but was left standing at the altar.
- Paragon, another B2L lender, is now being targeted by TPG who are quite shameless.
- Scotland and HBOS Rights Issues designed to shore up their balance sheets left the underwriters holding major amounts of unsold shares since existing shareholders saw no benefit of adding to their existing holdings.
LIn this torrid climate the inter-bank market will remain frozen and the sale of mortgage backed securities as investment to institutions almost impossible. Mortgages will remain very hard to find.
Early suggestions that the Bank of England should exchange parcels of new mortgages for some form of government security may be discontinued in the light of the Crosby report.
The Developers
Banks with large loans outstanding to developers are discussing the formation of Joint Ventures (JVs) between lender and developer.
A simple idea that will be complex to put into practice:
- Unsold developments will be handed over to the JV and then let so that rental income will pay interest charges and letting and management fees.
The banks will drive hard bargains but developers will live to fight another day!
Latest In Lettings believes there will be no shortage of tenants.
If and when the sales market returns to anything like normal individual homes may be sold or form the basis of residential REITS as long term investments.
More Legislation! The Redress Scheme
The Order which will come into force on 1st October requiring all estate agents involved in residential sales agency work to join an approved redress scheme under the Estate Agents Act 1979 has been laid in Parliament , together with the Regulations setting the penalty charge payable for non-membership of approved schemes. Both Statutory Instruments will come into force on 1st October 2008.
Update on EPC's
EPC requirements in the private and social rented sector will only apply to self contained dwellings which are offered to let on or after 1st October 2008.