"It's loans!" moans Bovis

In November 2007 (Bovis Moans) we said that the house builders share performance suggested house prices were about to start moving south also. Unfortunately, we were right! So how has the housebuilder been doing in the meantime? According to the BBC over the first 6 months of 2008 its average new build sold for about £160k. Down about 18% from a peak of roughly £196k in 2007. What isn’t clear is if Bovis has been able to bolster the ticket price by offering sweeteners on part exchanges as well as cash back deals. Some builders have favoured these so as not to appear to be discounting too aggressively. The problem for most of us is that second hand stock has to compete with new builds. What about the future? Bovis says that depends on the availability of mortgages. Hmmm where have you heard that before?

Told you so!

Avid readers will recall that in July 2007 we wrote that cheap credit had driven house prices up to the levels seen that year. We pondered what would happen if it dried up. The rest of course is history. But what about the future? A recent Bank of England Credit Conditions Survey suggests that Mortgage Lenders believe access to credit will become easier over the coming months. Lenders report an increased appetite for risk including higher loan to value ratios (which means smaller deposits) and less stringent credit scoring. There may even be signs of life in the market for residential mortgage-backed securities. All this could mean that a floor will be put under house prices and that this year will see the stabilisation in price we talked about in our last piece. However, significant price increases seem unlikely given the general economic recession and the growing threat to jobs. Expect a return to more normal transaction levels late this year and early next albeit at more realistic prices.

Have House prices reached a sustainable level?

According to Land Registry statistics Houses sold recently in the Wolverhampton area have been achieving sale prices at levels last seen in late 2004 / early 2005. This equates to a fall of about 20% from the market peak in late 2007. Have we now reached a level that is sustainable going forward? Bank of England Governor Mervyn King and his colleagues on the MPC seem to be hoping that further significant falls will not occur. This is what the latest MPC minutes said on the topic:-
“A stabilisation of house prices at current levels would benefit homeowners, limiting the reduction in their net wealth and capping the scale of negative equity, and would provide support to the balance sheet position of banks”.
If the Bank’s sentiments are correct then both buyers and sellers will need to adjust their expectations. At present there is a stand off with many sellers who missed the boat unable to stomach the reality that the market will not bounce back any time soon and buyers reluctant to commit because they fear further sharp reductions. Only time will tell but with hindsight it may turn out that 2009 wasn’t a bad time to do a deal! We have certainly seen a greater willingness to strike deals in recent weeks but, after all, our Clients are a pretty “savvy” lot!

Why pile 'em high?

According to Rightmove in April Agents persisted in bringing over-priced property to the struggling housing market. Various explanations were suggested including stubbornness on the part of would-be sellers who won’t accept that they’re affected by falls in the market. But if an Agent is already listing 500-600 properties that they can’t sell why would they take on more? Why not say “sorry Mr and Mrs Seller I don’t think we can achieve what you’re looking for perhaps you should try someone else?” After all, that would allow the Agent to concentrate on those clients who are realistic on price and help bring in those sales fees. It’s also an honest and open approach! Hmm perhaps there’s more to this than meets the eye. Coincidentally, in May Channel 4 News ran a piece on kickbacks paid by HIP companies to Estate Agents. A hundred pounds or so isn’t uncommon. On top of this some agents charge for advertising (where they can make a margin), some get kick-backs on conveyancing referrals and others even get away with charging Sellers a “registration fee” of a couple of hundred quid before they will condescend to market their house (reverse psychology at its best!). So you see some Agents make money out of not selling houses! Now that is clever.

A miscellany of modern property terms

Changes in the world of Property have, in the past few years, seen the advent of a whole host of new initiatives most of which are known by obscure acronyms or jargon. In an attempt to shed some light upon the matter and advance the cause of Plain English there follows a list of definitions along with some back ground information which will hopefully assist you in getting to grips with what’s been going on and what the future may hold.

HIP – Home Information Pack – a ruse by which the Government acquires information about your home at your expense. It also helps line the pockets of its friends in big business. By law you must have one in order to market your home to the public. Often justified on the grounds that it helps would be purchasers make better informed decisions about house purchases. Regrettably, hardly anyone asks to see them other than “Conveyancers”. This is because the average purchaser doesn’t understand the contents and Estate Agents detest them.

EPC – Environmental Performance Certificate – a compulsory component of a HIP-
A ruse by which the Government finds out how energy inefficient your home is probably with a view to levying some sort of environmental footprint tax in the future (they’ve done it to cars so why not do it to our other “obsession” houses?) – it also helps line the pockets of government’s friends in big business. Here’s how it works – you let someone into your house who is nominally independent but really acting for the Government and you let them roam around freely. Unlike the police they do not need a warrant (MPs, Mr Speaker and the Sergeant at Arms please note). They then charge you for a report which tells you how unfriendly to the environment your home is. The money goes to the new HIP “industry” which is run by the Government’s friends in big business who helped them to set up the scheme in the first place. You then include details in your sales particulars so your intended purchaser can ask you to drop the price to cover one of those nice green boilers that a German sounding company started advertising on telly about the time HIPs became law.

PIQ – Property Information Questionnaire – a new compulsory HIP component. –its full of questions about your property and you have to fill it in before you can put it on the market. It duplicates in part another form your “Conveyancer”will ask you to complete later if your purchaser hasn’t been put off already. If you are having difficulty in filling in the form your Estate Agent probably won’t help because they are scared of being prosecuted under the Property Misdescriptions Act. However, your Estate Agent will be happy to get a HIP provider to sort things out because they will probably be paid a referral fee or“bung” for pointing you in their direction.

AHIPP – Association of home information pack providers
“Founded in 2005 by a number of key players in the emerging market” – an exclusive little club of HIP providers whose members are mostly big business, friends of the Government and “bulk” Conveyancers. They have come up with their own code of conduct. Their members often seem to know about changes to HIPs before they are made public They seem a bit like a new professional body. However, with an annual membership fee of £12000.00p it’s a bit more expensive to join than your average professional body. So small businesses needn’t bother.

E-conveyancing – an opportunity for the Government to make more money out of the property market and to cement the position of its friends in big business. Central to this is something called the “Chain Matrix” which is a clever computer project which the Land Registry can no longer afford because of “The Credit Crunch”. This is despite hikes in Land Registry fees and the fact that for years the Land Registry returned big “Negative Deficits” (or “surpluses”) which seem to have been spent on other things. By “seeding the market with the prototype” and “developing good examples of technical functionality” the Registry (sorry… Government) has paved the way for its friends in big business to take up the baton in the wider interests of the public.

“Property owning democracy” and “Home ownership” – intrinsically very good according to the Government. Buying your own property means you have the chance to make a big contribution to the Treasury by paying an extortionate amount of Stamp Duty. When you die there is the opportunity to pay a further hefty slug of tax Also very good for Government’s friends in big business because Home Ownership is a vehicle for selling lots of credit (debt). In the US they had a target for home ownership and this helped promote the market in “Sub Prime” mortgages which was once considered very good but is now thought to have been very bad. Some would like to see the phrases “Debt Laden subject of a bankrupt State” and “On my way to owning my own home by the time I’m about 70 but will then need to sell it to pay for my Residential Care Home” replace the existing terms as they are not “Fit for purpose”

“Conveyancer / Conveyancing Industry”

Terms that are not recognised by my spell-check but are liked by “web-based” organisations that offer conveyancing services but employ very few if any “solicitors”. Perhaps they would prefer it if everyone forgot the word “solicitor”. They often extol the virtues of out-sourcing work to India and advertise their services to Estate Agents by poking fun at “solicitors”.

“Solicitor”

A Professional whose existence is still tolerated by big business and Estate Agents for the following reasons:-

They provide lenders with a free copper-bottomed form of title indemnity guarantee through their professional indemnity insurance.

They are prepared to pay Estate Agents a referral fee or “bung” for sending them work and at the same time allow the Agents to claim conveyancing services as part of their brand.

They are prepared to pay Mortgage Lenders a referral fee or “bung” for sending them standard conveyancing and re-mortgage work and at the same time allow them to claim conveyancing services as part of their brand.



“Government Review of Regulation & Redress in the UK Housing Market”

The latest initiative by Government to meddle in the UK housing market. Starting with a report by Colin Jones Professor of Estate Management at Heriot-Watt University in Edinburgh. Despite the fact that the good professor is based in Edinburgh he completely overlooked the fact that in Scottish cities most houses are sold by Solicitors rather than Estate Agents. Accordingly, Solicitors didn’t get a mention in his report. This probably suits big business and traditional Estate Agents as they would prefer not to have competition from local Solicitors offering Marketing, HIPs and Conveyancing all under one roof.




The author is a Partner at Rees Page Wolverhampton – a High Street firm of Solicitors which in addition to undertaking Conveyancing also produces its own HIP and provides Estate Agency Services …….all under one roof.

Landlords lose out if they don't look at the bigger picture

When choosing a Letting Agent it’s tempting for Landlords to look at the prices quoted by Agents and go with the cheapest. However, this can have unexpected pitfalls. The fact is that a lot of Letting Agents have other streams of income that they can discretely use to bulk up the money they make out of Letting a Property. They can then use the subsidy effect to produce what on the face of it are attractively low fees. Two areas spring to mind. First Milk the Tenants! Charge all would-be Tenants high fees for submitting applications to rent a property and then hit the successful ones with a big bill for the legal documentation that goes along with the process. “Fine” you may say “it’s simply transferring the cost from the Landlord to the Tenant” but the fact is fees vary. Ranging from as little as £35 to an eye watering £75 per Tenant application and £50 to £150 for documentation. In fact from reasonable to rip-off. If you’re a Landlord and your Letting Agent gets a reputation for ripping off Tenants then this is not good for your business. With plenty of property on the market Tenants can vote with their feet. The other area concerns referral fees or “bungs” to you and me. In reality Milking the Landlord without them knowing about it! In a largely unregulated sector there’s nothing to stop the unscrupulous from, for example, agreeing to source some improvement work for a Landlord and then trousering a kick-back from the supplier without disclosing it. Good business for the agent not so good for the Landlord who is unwittingly paying more than they need to.

Shooting Blanks !

Ex Tory Chancellor Norman Lamont, Labour’s Business Minister Baroness Vadera and Ben Bernanke of the US Federal Reserve have all at differing times met with cries of derision for mentioning “Green Shoots” of recovery. But with Spring in the air even broadsheets such as The Daily Telegraph have been casting around for evidence of new growth in the housing market. The market which was struck a hammer blow when the Credit storm rolled in from the US nigh on 18 months ago is said to be showing signs of life as mortgage lending trends are on their way up again. Well let’s look at the statistics from the Council of Mortgage Lenders shall we. According to them the estimated lending for the first quarter of 2009 is £33bn which sounds like a lot of money. However, the like for like figures for 2008/07 were £75bn and £84bn respectively. At the market peak in 2007 a staggering £360bn was lent out. The truth is we are back to lending levels that are more comparable with 2000 when the total for the whole year was £120bn. A time when a mere £71000 pounds would buy you an average semi in Brum. Sorry but anyone who truly thinks that a return to the mortgage madness that bust the banks is on the cards needs their head examining.