Rents down as supply increases

Rents dropped across the residential lettings sector during the last quarter due to the increase in unsellable properties put onto the rental market.

The latest RICS Lettings Survey reports that the net balances of surveyors reporting new instructions to let both flats and houses (an indicator of supply) are now at historical highs.

50% and 68% more Chartered Surveyors reported a rise than a fall in new instructions to let flats and houses respectively.

The influx of supply onto the market has forced downward pressure on rents. The net balance of Chartered Surveyors reporting rises or falls in rents fell from a positive 31% in Q2 to a negative -12% in Q3, the lowest level in the survey’s history.

London and the South East have been hardest hit with the net balance of surveyors reporting rises or falls in rents for London houses falling from a stable 0% in the second quarter to negative -53% in the third quarter, while flats fell from a positive 5% to a negative -33%. However the biggest turn around was in the South East, with the net balance of surveyors reporting rises or falls in rents for houses plummeting from 53% to -33%. Equally, expectations for future rises in rents turned pessimistic for the first time since July 2002.

Demand for rental property remained positive in Q3. Housing transactions are at the lowest level since records began as banks continue to limit the availability of finance to the vast majority of buyers. 27% more Chartered Surveyors reported a rise than a fall in rental demand compared to 36% in the previous quarter.

RICS says the falling pace of demand can be attributed to the fact that many have now accepted their lot in the current climate and are sitting tight until the housing market picks up.

RICS spokesperson James Scott-Lee said: “The lettings sector has witnessed a boom in 2008 as sales in the housing market continued to slow. Many have been able to take advantage of rising rents to secure good returns. However, the market place has become more and more competitive as many vendors have been forced to become amateur landlords, creating an inevitable downward pressure on rents where supply has matched demand. With national average house prices set to weaken in 2009, yields may increase for those investors who can provide the right product for the right market place.”

Look out for novice letting agents

A number of estate agents are putting landlords and tenants at risk by turning into letting agents overnight, according to Robinson & Hall. This is largely because some predict around 100,000 estate agents could lose their jobs by the end of 2008.

Plummeting house sales could force one-third of all estate agencies to close, and this is driving some to diversify into letting which is often outside their core expertise. To avoid being caught out by the risks that this rapid switch from sales to letting is causing, Robinson & Hall says landlords need to take note of the fundamental differences between estate and letting agents, or potentially face losing their hard-earned cash.

Kellie Marsh, lettings manager at Robinson & Hall, said: “Non-qualified letting agents do not have the protection of bonded clients’ accounts which means that the landlords they serve could lose their money. Letting agents should be members of the Royal Institution of Chartered Surveyors (RICS) or the Association of Residential Letting Agents (ARLA) which safeguard landlords and tenants by ensuring that rents and deposits are held in a separate protected account. We have heard of agents failing to hand over rent promptly, presumably because they are using their clients’ money to solve their cash-flow problems.”

She added: “Those using qualified letting agents with these protected client accounts are covered by the government compensation scheme. The serious state of market affairs means it has become absolutely necessary for landlords to restrict themselves to using established, reputable letting agents carrying ARLA or RICS membership.”

London house price falls slowing

Haart estate agents research has revealed that London house price falls are continuing to slow.

The average price fell by only 0.25% last month, from £248,155 in July to £247,524 in August. House prices have already fallen almost 15% since January but haart believes they are unlikely to drop much further in 2008.

It says the last three months has revealed a trend of vendors becoming increasingly realistic when setting their asking prices, improving the likelihood of a sale.

On average, vendors are achieving 95.5% of their asking price, up from 95% last month.

Russell Jervis, managing director of haart, comments: “Encouragingly, our branches are witnessing a definite trend of vendors insisting that their property is valued realistically, as opposed to earlier in the year, when many were still hoping to market their property at a slightly inflated price. This is undoubtedly a price led market, and vendors are much more likely to achieve a sale, possibly in a shorter space of time, at the right price.

“Lower prices are guaranteed to generate increased interest and may even bring some competition back to the market, enabling sellers to achieve a higher percentage of their asking price. At the same time, buyers are getting value for money and should be looking to purchase now while prices are low and stabilising.”

House prices plunge 10.5%

House prices are falling at their fastest rate since 1990, when Britain was in the grip of a major economic downturn. The Nationwide’s latest house price index has shown double digit falls for the first time a year after the onset of the credit crunch.

The value of the typical British home fell 1.9% between July and August to £164,654, and has dropped by 10.5% since August 2007.

Fionnuala Earley, chief economist at Nationwide, says subdued activity for both estate agents and house builders indicates the downturn is likely to continue.

“The reported numbers of sales have not been encouraging,” she says. “The ratio of sales to stocks has been a good predictor of movement in house prices.

“Current movements suggest that the increased supply of properties on agents’ books will continue to act as a dampener to house price growth in the short term.”

Nationwide’s data also shows consumers are moving back towards fixed rate mortgages, after the proportion opting for tracker deals reached almost 35% in early 2008 before falling back to around 20% this summer.

However, Earley says the Bank of England’s latest inflation report suggests interest rates may be cut in the near future, but does not expect this to cause a major recovery for the housing market.

“There is still a great deal of uncertainty, but the Bank of England’s forecasts of growth and inflation have been widely interpreted as opening the door to rate cuts. Market rates have reacted to this and as a consequence mortgage rates, particularly fixed rates, have continued to come down.

“We expect the next move in the Bank Rate to be down, but the extent to which this will revive the mortgage and housing market is likely to be limited while overall confidence in economic and housing market conditions is low.”

Halifax shuts 53 estate agent branches

Halifax Estate Agents (HEA) is to close 53 branches by the end of the year.

The closure of the 53 branches is likely to mean 100 people will leave the business, which the firm says it hopes will be achieved by “voluntary severance and normal turnover”.

Halifax says that the majority of staff working in branches that are closing will be offered a similar role in retail bank branches. In total, around 450 are expected by Halifax to transfer to a new role over the next four months.

HEA will focus on its core markets in the Midlands and the North and will operate 151 branches in these core regions.

Halifax says the move reflects “the significant decline in the level of housing transactions in the last 12 months” and will reduce costs.

ARLA welcomes Law Commission report

The Association of Residential Letting Agents, ARLA, has welcomed much of The Law Commission report, “Encouraging Responsible Renting.

However, the Association believes that the Commissioners expect more from local authorities for the implementation of their proposals than many will be able to deliver.

The Law Commissioners call for the regulation of letting agents, industry-wide standards and accreditation schemes for landlords, although a majority of mainstream lettings agents are already members of regulatory professional bodies.

These organisations have already implemented one of the most significant recommendations of the Carsberg Report and have set up the Industry Standards Board. This draws on the codes of practice of ARLA, NAEA, RICS and the Ombudsman for Estate Agents.

ARLA sees the Commissioners’ report as an opportunity to bring all lettings agencies under the provisions of the Consumer and Estate Agents Redress. This provides powers for compulsory redress, while the Estate Agents Act provides for the banning of unprofessional and dishonest Estate Agents from trading. This, ARLA has always said, should apply to all lettings agents.

ARLA has mandatory housing standards and codes of management practice for landlords, as called for in the report. These all relate to provisions currently existing within the Housing Act 2004 for the Housing, Health and Safety Rating System. Unfortunately the approach of many local authorities has not been uniform, due to lack of resources.

The Commissioners have suggested that the Office of Tenants and Social Landlords could operate for the private sector and proposed separate housing standards and monitors for housing standards in England and Wales. ARLA is concerned by this proposal because the level of expertise available for the PRS, as opposed to the Social Sector, is different. These are two completely separate issues.

“We must start with a single code and a single set of standards. Otherwise we will end up with different monitoring for different standards,” said Ian Potter, head of operations for ARLA. “That is why the professional bodies have already set up the Industry Standards Board.”

The same reservations over implementation and monitoring apply to landlords’ registration, where it will up to the local authorities to monitor accreditation and home conditions. ARLA sys that the lessons being learnt in Scotland from Mandatory Landlord Legislation must be used to ensure any system is capable of working equitably in practice.

“If we are not careful we will end up with each local authority setting and implementing its own rules, its own monitoring practices and its own cost structures,” said Potter. “We have seen this already with Housing, Health and Safety Standards. This legislation exists but in many areas has already failed due to lack of action by the local authorities.”

ARLA believes that the most practical method to improve standards where necessary is to treat the letting of residential property as a business and allow for capital allowances and for other fiscal incentives to bring about improvements in the rental stock.

ARLA sees this report, in conjunction with all the other reports on the PRS recently published or due to be published, as an opportunity to create an environment that will allow a well-regulated private rented sopector to expand and flourish, with a balance between the requirements of the providers and the consumers.

Promise reports HIP interest boost

Promise Homepacks has reported a 35% increase in new enquiries since the launch of its ‘No Sale No Fee’ option.

The Promise Homepacks No Sale No Fee or ‘HIP Expenses Guarantee’ facility enables the consumer to order a Home information pack on day one using the Promise Homepacks deferred payment option, providing the consumer with a nine month period where there is no cost incurred to the consumer. At the end of this period if the property is still on the market, the HIP expenses guarantee will cover the cost of the HIP, the deferred payment fee and the expenses guarantee fee.

Darren Beech of Promise Homepacks, said: “The phones have been red hot with enquiries this week from sellers, estate agents and solicitors. As well as the No Sale No Fee option sellers are also attracted to the fact that we only charge £255 plus VAT for our standard HIP. The BBC said HIPs can cost up to £400 so sellers were relieved that the actual figure is much lower.”

A disaster: Estate Agent verdict on HIPs anniversary

HIPs have been a disaster and a hindrance to the homebuyer market, according to the National Association of Estate Agents (NAEA) one year since their launch. Peter Bolton King, NAEA chief executive, says a debate still rages about whether the timing of the launch helped cripple an “already rocky” property industry.

However, he says housing minister Caroline Flint’s announcement she will be working with property professionals to analyse the content of HIPs is a good sign.

“Since the conception the packs have been surrounded by a catalogue of disasters and so far rather than helping to improve the home buying and selling process they have served as a hindrance and nothing more than a purposeless piece of red tape.

“The launch of HIPs onto the marketplace was far from smooth with delays and u-turns, together with a fundamental error on timing.

“Indeed the debate still rages whether the timing of the launch has had a crippling effect on what is already a rocky time for the property industry.

“Indeed, there is still no clarity on the long term plans for the abolition of ‘first day marketing’ scheduled initially for December 1st last year.

“At a time when the market place needs stabilisers, many of our members believe that this legislation, and the cack-handed way it has been introduced, has had a destabilising effect on market confidence.”

Bolton King says a common Hips complaint from NAEA members has been the additional time it takes to secure the supplementary information required for the pack.

“It seems that there is a major problem obtaining the details required for a HIP,” he says.

“They are hard to get hold of quickly and cheaply, particularly the leasehold information and searches from local authorities.”

However, he says there are good signs for 2008 and next year. “We have long opposed the imposition of HIPs and have always seen them as the wrong answer to simplifying the house buying process,” he says. “Quite simply, the government tried to force square pegs into round holes.

“However, I’m confident that by working with the minister together with all the other key bodies in the industry we shall be able to rectify the situation and come up with a system that works cohesively and efficiently for both buyers and sellers.

“Hopefully, this time next year will be a turning point for the ill-fated packs and we shall all have something to celebrate.”

NAEA says government should learn from US mistakes

The National Association of Estate Agents has urged the government to learn from the US government’s mistakes and act now over the UK housing market slump.

Peter Bolton King, chief executive of the NAEA, says the housing market is the pillar of the UK economy and that it will require creative thinking to ease pressures and ensure the downturn does not worsen.

Bolton King says: “The first thing the government could do is introduce a tax break, such as abolishing Stamp Duty for first -time buyers and moving the thresholds up to ease pressure throughout the whole housing market giving people a reason and incentive to come back.

“In addition, the Bank of England needs to pump more liquidity into the mortgage markets to ensure people are able to find funding for mortgages, together with the government supporting more pro-active initiatives, such as the blueprint recently drawn up by The Council of Mortgage Lenders, to address the funding problems in the mortgage market.”

Bolton King says these are just a few of the measures that will help consumers and begin to restore confidence in the market.

He adds: “If the government really wants to help the housing market we need to see action now from the government to ease pressure and give consumers hope for the future.”

Hamptons see 40% rise in capital’s rental stock

Residential agent Hamptons International is seeing a marked increase in available rental properties across the capital with a 40% rise in rental stock.

Areas such as Chelsea and Tower Bridge are seeing rental stock increase by up to three times as much as the levels experienced this time last year.

Hamptons says rental stock is soaring as a result of would-be buyers renting out their property while waiting for the sales market to pick up.

Kate Whotton, regional lettings director at Hamptons International, says: “The aftermath of the credit crunch has caused some interesting changes to the lettings market.

“Many potential vendors are letting out an existing property to finance something new or simply resorting to letting their property as they cannot sell. The abundance of stock has given potential tenants more choice and buying power.”

The agent also notes that prime commuter belt locations are growing in popularity given that housing allowances are falling below usual central London levels.

Whotton adds that the current trend for vendors struggling to sell their properties is to dual list with a view to selling or letting, whichever comes first.

She says: “Supply continues to outstrip demand, particularly in prime central London with demand continuing to fall and down 36% on a year-on-year basis.”

Given the choice available, many tenants are now taking longer to make decisions over which rental property to go for, with some placing offers on multiple homes in order to secure the best deal.