The Royal Institute of Chartered Surveyors (RICS) has reported that transactions fall further as price balance worsens with new buyer enquiries and newly agreed sales remain negative in September 2008.

The number of properties being sold across the UK was at its lowest level since the RICS survey began in 1978, as estate agents across the UK are selling on average just one home per week. The number of properties being sold presently is 52% lower than in September of last year.

Commercial property
As the economy slows tenant demand for commercial property has also declined. The RICS has indicated that since its started it’s surveys in 1998 the pace of decline in “tenant demand is at its fastest pace in the second quarter, as did enquiries to occupy commercial premises. Demand and enquiries were weakest in the retail sector and fell back to a lesser degree in the industrial and office markets, as the economic slowdown reduced business expansion.”

According to the Council of Mortgage Lenders (CML) we are also seeing that the number and value of home loans are at their lowest levels since current records began. In August there were 42,200 house purchase loans, of which 15,600 of them were to first-time buyers. House purchase lending was 63% lower than in August 2007 and the value of the loans in August 2008 was £6 billion.

“Fixed rates were higher than tracker rates and rose by more from July to August. Expectations of base rate reductions have also increased, so it is unsurprising to see consumers moving in favour of variable rates. The package of measures announced yesterday will have a positive effect, but it will take time for it to feed through to the mortgage market.” CML director general, Michael Coogan

Bellway profits are hit by the slowdown

Bellway has trimmed its workforce, as have other UK housebuilders, as they have reported a 30% drop in annual profits. Bellway Homes which is a Newcastle-based company says that orders are down by almost a 50%. Their profits before one-off items were £165.7m, which is down from £234.8m a year earlier, whilst orders were 49% lower at £342m. However, these figures do not include a £130.9m write-down in the value of its land stocks, so if this is included their profits fell to just £34.8m.

Bellway has said that the deterioration of the housing market and availability of mortgages had been “unprecedented”!

Job cuts

Bellway Homes sold 6,556 houses during the year to 31 July, which is down 14% over the same period last year with the average sale price dropping from £173,300 to £169,700. As a result of the slow down the company has cut its workforce by a stagering 35%!

The Conservatives are urging ministers to suspend Home Information Packs to help boost the housing market.

They say they are deterring speculative sellers, reducing sales, and stopping people from switching estate agents.

A clause in the legislation, introduced as a concession to the House of Lords, could be used to suspend them immediately, the Conservatives say.

The government said it had no plans to suspend Hips and said global pressures were behind problems with the market.

Last month estate agents called for a review of the packs, which are compulsory in England and Wales and were designed to stop sales falling through.

‘Unnecessary red tape’

The Conservatives say they can be suspended immediately – and say the government could still require homes to have energy performance certificates – included in the Hips – to meet EU requirements.

Housing spokesman Grant Shapps said: “If Gordon Brown genuinely wanted to help the beleaguered housing market, he would use his powers to suspend this harmful regulation and save homebuyers’ money.

“We have absolutely no plans to suspend HIPs” Department for Communities and Local Government

“These little-known provisions to suspend Hips were introduced for a reason – to undo the regulations quickly if it all went wrong. The next Conservative government will scrap this unnecessary red tape completely, but a suspension now would deliver those benefits sooner rather than later.”

The Halifax reported this month that UK house prices recorded an annual fall of 10.9% in August – the first double digit drop since 1983. Research by property website Globrix suggested 53% properties up for sale in August had been on the market for 90 days, without finding a buyer.

But a spokesman for the Department for Communities and Local Government said other factors were widely acknowledged to be behind the slump in the housing market.

He said: “We have absolutely no plans to suspend HIPs.”

They included important information to help families cut fuel bills and carbon emissions, reduced the cost of property searches and made the house-buying process more transparent, he argued.

“First-time buyers are also receiving the information in the HIP for free, helping to reduce costs for households looking to get on to the property ladder,” he said.

“It is widely acknowledged by experts that the current challenges are a result of global economic pressures also being experienced in the USA and other parts of Europe.”

Last week the government announced a package of measures aimed at boosting the housing market and to head off an increase in property repossessions, among them a 12-month stamp duty holiday for properties costing £175,000 or less.

>News reported by The BBC

The government needs to take “significant and decisive action” to help kick start the housing market, the main surveyors’ organisation has said.

The call from the Royal Institution of Chartered Surveyors (RICS) came as it said its research showed that housing sales were now at a 30-year low.

Claiming that government efforts had so far been limited, RICS has come up with its own set of suggested reforms.

The government is working on a package of measures to help the housing market.

No-one from the Department of Communities and Local Government was immediately available to comment on RICS’ recommendations.

The RICS report comes a week after the Nationwide said house prices fell 10.5% in August compared with the same month last year.

More mortgages

RICS is calling on the government to first help increase the number of available mortgages.

“The market needs decisive government action on a range of fronts if it is to pull itself out of the doldrums” Gillian Charlesworth RICS director of external affairs

To do this, RICS wants the government to allow the Bank of England to guarantee the issue of new mortgage-backed securities – home loans which are parcelled up and sold on to other investors.

RICS says such a move would help increase the number of new mortgage offers available.

The Bank of England currently does guarantee existing mortgage securities, under the Special Liquidity Scheme, but RICS wants it extended to new mortgage investments.

RICS also calls for the establishment of tax-free saving schemes to allow first-time buyers to more easily save for a deposit on their first property.

Among other recommendations, it wants to see is a short-term holiday on stamp duty, followed by a new lower rate.

RICS also called for government-backed mortgage rescue schemes to allow the current occupiers to continue to live in their property.

No silver bullet

“The market needs decisive government action on a range of fronts if it is to pull itself out of the doldrums and we call on government to listen to the market’s solutions to a whole set of problems,” said RICS director of external affairs Gillian Charlesworth.

“We know there is no silver bullet that will slay this monster, but we need a joined-up, comprehensive approach to bring back confidence and to give the public clarity about what is available.

“While we wait for the government to act on all the necessary fronts, many home owners are trapped in a market offering little or no mobility without any prospect of good cheer in the autumn.”

RICS also calls for regulatory reform to make it easier for social landlords to develop and rent affordable homes, and reduced VAT (Value Added Tax) on repair and maintenance costs.

It further wants to see changes to the Home Information Pack to make it less costly.

The Conservatives described the RICS proposals as “serious options” which the government should consider.

The Liberal Democrats last week called for the introduction of a mortgage rescue scheme, which would allow families struggling with repayments to sell all or part of their house to a housing association or private firm and then stay in the property as tenants.

News reported by The BBC

‘Rebajas’, ‘Gran Liquidacion’, ‘Descuentos’.

It’s hard to find a shop window in Madrid that isn’t littered with signs announcing big sales.

But despite the time of year, this is not a summer sale. This is a retail cool down.

There’s a cold front hitting Spanish shoppers.

With the housing market in a downturn, inflation continuing to rise and unemployment now at its highest rate since 1998, consumer confidence is taking a beating.

And while the Spaniards rein back on their spending, the retailers are battling to stay in business.

Luis Galeote owns a shop selling luggage and shoes in central Madrid. He has seen his sales fall by 25% in a year because people are cutting back on non-essentials.

“What happens is that people pull back on consumption of unimportant things, like in our case suitcases,” he explains.

“We stock shoes which are considered as a necessity but even they are affected.”

Retail sales across Spain have been falling rapidly since December.

First hit were shops selling consumer goods, such as flat-screen televisions and mobile phones. But since then the malaise has spread right across the retail sector to supermarkets and department stores.

Shutting up shop

Walking around Madrid it is not unusual to find streets dominated by boarded-up shops.

Shop owner Luis Galeote has seen sales fall

Wynn Williamson, a real estate analyst for Aguirre Newman, has seen many retailers close down in the neighbourhood where he lives in the city.

He thinks people are spending less because they’ve been hit hard by rising interest rates.

“Eighty percent of Spaniards are home owners and 97% of mortgages are variable rate mortgages. So where people were previously paying 500 euros (£402) a month, that rate could go up to 1000 euros.”

“Basically every person has less money to spend on luxury items, such as lunches and taxis, and that affects the economy all in all.”

Professor Pedro Schwartz of San Pablo University in Madrid thinks that things are going to get worse before they get better.

“What is worrying is that the problems are spreading quickly because of a lack of confidence”.

“We haven’t fallen into negative growth rates yet, but we will have a recession and it’s coming very quickly.”

With the Spanish economy stalling the government has tried to put its foot on the accelerator.

It has introduced a package of measures, including greater investment in public infrastructure and a 6bn-euro programme of tax breaks to try to get people spending again.

Will it be enough to turn the tide?

That will all depend on how much shoppers tighten their belts as the summer turns to winter.

News reported by The BBC

A review of Home Information Packs (Hips) is needed given the housing market slowdown, estate agents say.

Local searches are a requirement in the packs, but the National Association of Estate Agents (NAEA) says they are out of date by the time a property is sold.

It wants a simpler pack, but the government says that the system is bringing benefits to consumers.

The packs – which are compulsory in England and Wales – are aimed at preventing sales falling through.

‘Wrong answer’

The NAEA wants a new slimline pack just to include a sellers’ questionnaire, an Energy Performance Certificate, and the Land Registry title and plan.

“With the economic situation worsening and the property market still suffering, we are calling on the government to take urgent action on Hips,” said Peter Bolton King, chief executive of the NAEA.

“We have long seen Hips as not fit for purpose and as the wrong answer to simplifying the house buying process.”

But a Department of Communities and Local Government spokesman said that the packs were bringing benefits to consumers by providing information to help families cut their fuel bills and carbon emissions, as well as cutting the price of property searches.

“First-time buyers are also receiving the information in the Hip for free, helping to reduce costs for households looking to get on to the property ladder,” he said.

The Conservatives say they will scrap the packs if they came to power.

“Independent analysis has repeatedly shown that Hips provide no benefit to a struggling housing market. They hamper, not help, just adding another layer of bureaucracy and another extra cost,” said shadow housing minister Grant Shapps.

News reported by The BBC

A mortgage rescue scheme, and local authorities being allowed to buy unused land are featured in a Liberal Democrat plan to revive the UK housing market.

Treasury spokesman Vince Cable said that changes were needed to stop the “downward spiral” of the market.

Among the proposals are plans for councils to buy empty properties and developers’ land-banks to increase the amount of social housing.

The Council of Mortgage lenders said any plan needs to be properly targeted.

Social housing

The housing market has seen annual price falls of more than 8%, a squeeze on the number of mortgages, especially for first-time buyers, and a slowdown in the number of homes being built.

Faced with these problems, Mr Cable told the BBC that there should not be an opportunity for easy repossessions by certain “trigger happy” lenders during a tough patch for borrowers.

Instead, he said that the housing trough offered opportunities for the social housing stock to be boosted.

Mr Cable has been outlining the Liberal Democrats housing plans

Mr Cable said that the Liberal Democrat plan would assist the struggling housebuilders who were looking for cash to stabilise their positions.

He said councils could buy unused land owned by developers at a discount rate for use as social housing.

Mr Cable also called for lenders to go through the full and proper court process to repossess homes.

A proposal for a new, regulated mortgage rescue plan would allow those who were unable to make repayments on their home loan to stay in their property as tenants. The rent would be paid to social landlords.

‘Rescue’

The Council of Mortgage Lenders said that mortgage rescue plans were being considered in Wales, Scotland and Northern Ireland, with a handful of local authorities in England offering schemes.

“Help should be available for those who can’t pay, not those who won’t pay” Council of Mortgage Lenders

Typically, a social landlord takes a share in the property, with the borrower paying a smaller mortgage for their share of the home and rent for the part of the property they no longer own.

But the CML wants a standardised scheme across the UK, leaving repossession as a final resort and reducing the numbers going to unregulated private offers of sale and lease back.

“It is important that mortgage rescue is properly targeted at borrowers in circumstances for whom it is appropriate. Help should be available for those who can’t pay, not those who won’t pay,” said a CML report.

But the lenders’ group said that if councils became more hands-on, even going as far as operating as mortgage lenders themselves, then they should be fully regulated in the same way as lenders in the private sector.

Credit crunch

A spokesman for the Department of Communities and Local Government said that they were studying various options to support the housing market during the current climate.

“We are determined to do everything possible to promote long-term stability and fairness in the housing market. The international credit crunch has created significant challenges not just for the UK housing market, but in other parts of Europe and the United States,” he said.

He added that the government was providing cash for social landlords to buy unsold homes, as well as providing debt and repossession advice to struggling homeowners.

The Conservatives declined to comment on the Liberal Democrat proposals.

Housing charity Shelter said that the Liberal Democrat proposals included some good ideas, but more funding was required for them to work.

News reported by The BBC

The economic situation over the past year or so has been difficult and words such as “credit crunch” are now quite common.

This has badly affected the housing market with sales declining.

Some people still have to move as a result of job changes or family circumstances.

But if they rent out their home, rather than trying to sell it in a depressed market, they have some opportunities to save tax while waiting for the housing market and the availability of mortgages to improve.

That is because there are a number of tax breaks available to the home owner who moves away and lets his home, and either buys another property elsewhere in the UK or rents.

Capital Gains Tax

The basic rule is that if the house you are leaving has been your only or main residence throughout the period of ownership, any gain in the value when you sell is exempt from capital gains tax (CGT) under the principal private residence rule (PPR).

Where you have vacated the property for a number of years, any gain in the last 36 months is also treated as exempt from CGT.

Some people are now having to relocate and, being unable to sell, are letting the property they have vacated.

If the property is let to tenants, and was previously the owners’ main residence, the owners should also qualify for another relief from CGT – lettings relief.

This could be available in any period where the house was not the main residence and does not fall within the past 36 months.

These two reliefs can be substantial.

How they work

Broadly, lettings relief is worked out to be the smaller of:

£40,000 or
an amount equal to the exempt amount for the owner-occupied period.
To understand how this works, take the example of a house you own and have previously lived in, but which you have been letting for some years.

You sell it this year for a total capital gain of £80,000.

Of that gain, £36,000 accrued while you were living in it, and in the three years after you moved out.

So that sum is exempt from CGT under the PPR rule.

That leaves £44,000 potentially still liable to CGT.

However that gain is reduced by the lower of:

£40,000 or
£36,000 (under the rule shown above).
Thus, in this case, the gain of £44,000 is reduced by £36,000 leaving just £8,000 liable to capital gains tax.

However, the CGT annual exemption will also be available if not used against another sale in the same year.

The exemption is currently £9,600, which exceeds the net gain of £8,000 in this example – so the result is that no CGT is payable at all.

The lettings relief is available to spouses and civil partners in respect of jointly owned property, so it could be worth as much as £80,000 per couple.

Income Tax

Income tax can be reduced too.

House sales may be falling but there is still demand for rental properties

Where a loan is secured against a rental property – typically a traditional buy-to-let – the interest on that loan is allowable as a deduction against the rental income received.

This means that the interest paid on the loan reduces, for tax purposes, the net rental income, and hence reduces the amount of tax payable.

Where an individual leaves his home, and lets it as discussed above, he would often like to buy a property in the area he is relocating to.

Obtaining a mortgage may be a problem in the current climate as he already has one on the home he is now going to let.

But if he is a good borrower with a good credit rating he may be able to persuade his lender to give him access to further funds, secured against the old property the family are leaving.

This may be sufficient in some cases to purchase a property in a lower cost area or at least give him a healthy deposit to arrange finance for the new property.

The tax benefit of taking out this new mortgage, secured on the original property that is now being let, is that all the interest paid on this second loan will be available to set against the rental income received for that property.

This means that he can release equity from his rental property to use to buy his new family home, or indeed for any other purpose as there is no restriction on how he spends the money raised.

Example

The reasoning behind this is that the letting of property is consider to be a business for tax purposes.

“Tax saving opportunities are available for those having to relocate and letting their old property”

The Revenue agrees that relief is due and the following example is taken from their Business Income Manual to illustrate how it works.

Mr A owns a flat in central London, which he bought 10 years ago for £125,000.

He has a mortgage of £80,000 on the property.

He has been offered a job in Holland and is moving there to live and work.

He intends to come back to the UK at some time.

He decides to keep his flat and rent it out while he is away. His London flat now has a market value of £375,000.

He renegotiates his mortgage on the flat to convert it to a buy-to-let mortgage and borrows a further £125,000.

He withdraws the £125,000, which he then uses to buy a flat in Rotterdam.

Although he has withdrawn capital from the business the interest on the mortgage loan is allowable in full because it is funding the transfer of the property to the business at its open market value at the time the business started.

So, tax saving opportunities are available for those having to relocate and letting their old property and these can be very valuable.

If in doubt professional advice should be taken to structure this correctly as it is sometimes difficult to change arrangements after the event.

The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.

News reported by The BBC

Adecco, the Swiss recruitment company, has refused to rule out a hostile bid for Michael Page, despite last week’s rejection of a 400p-per-share indicative offer – sending the smaller UK group’s stock price up almost 8 per cent yesterday.

After three months of talks, Michael Page management rejected the bid as “materially undervaluing the company”, an argument bolstered by yesterday’s half-year results showing revenue up 26 per cent and profits up 22 per cent. But Adecco is undeterred. “At the request of the UK Takeover Panel, Adecco is clarifying its position,” the company said yesterday. “While it is focused on negotiating a recommended offer for Michael Page, Adecco is keeping all its options open at this stage.” Shares in Michael Page closed up 25p at 342.5p.

Recruitment companies have been having a hard time in the last year’s economic slowdown. With contractions in the housing market turning to redundancies, and massive headcount reductions in the financial services industry, headhunters’ shares have tumbled. Despite recent rises, Michael Page is still nowhere near prices touching 595p in mid-2007, and rival Hays has seen a similar fall.

The faltering UK economy is having an impact. Michael Page’s half-year figures to June this year show strong revenue growth to £500m and operating profits up to £84.9m. But in the UK, which represents a third of gross profits, operating profits were down by 0.7 per cent to £28.4m. Not only is recruitment activity slowing in banking and related sectors but companies are increasingly cautious across the board – resulting in a “conversion rate”, calculated using operating profit as a proportion of gross profit, down from 31.1 per cent in 2007 to 29.7 per cent this year.

Unsurprisingly, the company remains bullish, emphasising that 67 per cent of gross profits of £292.7m are now from outside the UK and half are from non-finance disciplines. “Our organic growth strategy of diversifying by both specialist discipline and geography has enabled us to achieve record results and be more robust and resilient, with an increasingly difficult economic environment in some markets being balanced by others that remain strong,” Steve Ingham, the chief executive of Michael Page, said.

The company will feel the pinch if the economy continues to decline, but so far the strategy is paying off, say analysts. “It is a late-cycle business so if unemployment levels pick up then the company will suffer further down the line,” Jonathan Jackson, at Killick Capital, said. “But at the moment, the fact that it is diversified by both sector and geography means Michael Page is a lot more defensive in respect of the UK economy than it was at the last downturn.”

When Michael Page first revealed Adecco’s unsolicited £1.3bn approach this month, its shares soared by nearly a third to 369.75p, despite the lukewarm management response.

The revised proposal, ultimately rejected as “unattractive to shareholders” last week, was for the Swiss group to take 50.1 per cent through a new share issue at 400p per share, with a 200p payout to compensate for the dilution.

News reported by The Independent

Consumer spending in the US fell by 0.1% in July compared with June, driven down by a large drop in car sales.

Vehicle and parts sales fell 2.4%, their biggest monthly drop since April and down 10.5% on July 2007.

Rising food and fuel prices are squeezing consumer spending and cutting demand for expensive items such as cars, whose running costs have risen.

However, according to the government estimates, retail sales were still 2.6% higher than in July 2007.

Economists said there were signs that tax rebates had encouraged some additional spending.

“In July we saw a rebound in furniture sales and electronics after a drop in June. So the tax rebates may have helped a little, but not every aspect of consumer spending,” said senior economist Gary Thayer, from Wachovia Securities.

The US government sent tax rebate checks for $168bn to most US taxpayers during the month of July to help stimulate the economy.

Mixed picture

The data showed a mixed picture across the retail sector.

Furniture stores, which have suffered from a slowdown in the housing market, rose by 1 percent in July after a 1.2% decline in June.

Department stores enjoyed a 0.3% rise in sales in July, but restaurants and bars suffered a 0.2% fall in sales.

Elsewhere, department store chain Macy’s said its same-store sales fell 2.1% in the three-month period to 2 August.

Its chairman Terry J. Lundgren, said the company “delivered strong second quarter earnings and cash flow, despite the poor economic environment”.

News reported by The BBC

David Cameron has attacked the government for a “completely reckless” briefing that stamp duty could be axed temporarily to boost house sales.

“Far from freeing up the housing market, they have actually frozen it,” the Conservative leader told reporters.

He is holding talks later with the National Association of Estate Agents (NAEA) – a body he claims the government has refused to meet.

It comes after Alistair Darling refused to rule out changes to stamp duty.

Estate agents have already warned that uncertainty over the government’s policy on the tax could cause people to delay buying houses.

Leak inquiry?

Speculation was fuelled by a report in last Tuesday’s Sun newspaper that the government planned to offer a holiday from stamp duty payments to revive the flagging sector.

When tackled about the story on Wednesday’s Today programme, the chancellor said a “number of measures” were being considered – but the government had come to no conclusions.

The Treasury later issued a statement saying: “Recent news stories suggesting the government has put forward a proposal on stamp duty are simply wrong. These stories are based on speculation.”

“Their decision to brief out the possibility of a stamp duty holiday was completely reckless” David Cameron Conservative leader

According to some reports, the original briefing came from Downing Street and was aimed at undermining Mr Darling – something firmly denied by Number 10.

Mr Cameron, who has returned to the political frontline, following a holiday in Cornwall, said the debacle showed the government was more interested in “press handling and headlines than what is in the best interests of the country”.

He urged the government to adopt the Conservatives’ plan to abolish stamp duty for nine out of 10 first time buyers.

“When it comes to the crisis in our housing market they seem intent on making things worse rather than better,” he said.

North East tour

“Their decision to brief out the possibility of a stamp duty holiday was completely reckless – far from freeing-up the housing market they’ve actually frozen it.

“Have they even got a leak inquiry to find out how this was briefed out? I think not. I think they know exactly where it came from.”

Mr Cameron, who will tour marginal constituencies in the North West of England before resuming his summer break with a holiday in Turkey next week, is set to meet with housing trusts, city economists, academics and house builders to discuss the property market.

The group will look at the mortgage market, repossessions and the housing supply, he said.

“We won’t be announcing any conclusions today. We won’t be briefing out thoughts today. This is a seminar to look at the issues – it’s to engage with the experts to help us develop our policies.”

‘Unacceptable’ behaviour

He refused to repeat a claim by shadow foreign secretary William Hague that the Conservatives were the “likely winners” of the next general election, stressing that there was no “complacency” in his team.

“I never use those words because the election is up to the members of the public to vote and you can’t make any presumptions about the way they are going to,” he said.

He also condemned the “completely unacceptable” behaviour of Ian Oakley, a Tory general election candidate for Watford, who admitted a campaign of harassment against his Lib Dem rivals.

The Liberal Democrats have urged him to investigate the “vile campaign” by Oakley, who quit the party following his arrest.

Oakley, 31, of Ryeland Close, West Drayton, north west London, appeared at St Albans Magistrates Court last week to admit five counts of criminal damage and two of harassment against Liberal Democrats.

He asked for 68 other offences to be taken into account. He is due to be sentenced in September.

Miliband praise

The monthly briefing comes as ex-local government minister Nick Raynsford accused Labour of being in a “deep hole” and warned that attempts to “buy” support would only invite contempt.

Writing on newstatesman.com, Mr Raynsford accused the government of a “frantic search” for vote-winning ideas.

He failed to mention Gordon Brown, but praised the call by Foreign Secretary David Miliband to “start winning the argument over our record”.

Mr Miliband fuelled speculation over the Labour leadership when he penned an article two weeks ago calling on colleagues to have the confidence to make their case afresh – but without making a reference to the prime minister once.

The prime minister, who is on holiday, is expected to launch a fightback in September.

News reported by The BBC