Property
Central bank to get new powers of direction over UK housing market
The UK government has confirmed that the Bank of England’s Financial Policy Committee will have new powers of direction over the country’s housing market. City Minister Andrea Leadsom confirmed that the FPC will be given new tools to ensure the ongoing stability of the housing market through setting limits on debt to income ratios and loan to value ratios for mortgages. The FPC recommended it be given these powers after the Chancellor announced his intention in his 2014 Mansion House speech to give the FPC the necessary powers to tackle future housing market risks. The government’s announcement follows separate Treasury consultations on granting the Bank of England additional powers to address any emerging risks to financial stability from the housing market. ‘The Bank of England will have further powers to safeguard the stability of Britain’s financial system from any future risks posed by our housing market or banks,’ said Chancellor George Osborne. ‘Curbing Britain’s age-old vulnerability to banking and housing booms is one of the goals I recently set for the next two decades of Britain’s economic policy, and this announcement of new powers for the Bank of England shows our determination to achieve this,’ he explained. The additional powers over the housing market are commonly held by the Bank’s counterparts in other countries. Loan to value limits are used extensively in countries including Canada, New Zealand and Norway. Several other countries, including the Netherlands, Switzerland and the US have already introduced leverage requirements for systemic firms. The legislation sets out the new powers of direction that the government will grant the FPC over loan to value limits and debt to income limits for owner occupied mortgages, as requested by the FPC in October 2014. The government intends to consult separately early in the new Parliament on the FPC’s recommendations for it to have new powers over the buy to let market, with a view to building an in depth evidence base on how the operation of the UK buy to let housing market may carry risks to financial stability. According to Andrew Tyrie MP, chairman of the Treasury Committee and former Chairman of the Parliamentary Commission on Banking Standards, said that the setting of limits on debt to income ratios and loan to value ratios for mortgages could help to tackle the economic and financial stability risks posed by an overheating housing market. ‘However, there are limits to what can be expected of regulators: the identification of the cycle is an inherently extremely tough task. It could turn out to be insuperable. These new powers will affect millions of taxpayers and households across the country. The FPC is still largely unknown to the public and it is therefore crucial that it is transparent about how it reaches its decisions,’ he pointed out. Peter Williams, executive director of the Intermediary Mortgage Lenders Association (IMLA), that the Bank must think very carefully before bringing its new powers of direction to bear on the… Continue reading
US and Chinese set to dominate London commercial property market in 2015
Chinese and US money is set to dominate London’s commercial property market in 2015 after Chinese investors accounted for more inward investment in 2014 than all European buyers collectively. Of the £21 billion spent in the London market, some £14.6 billion or 70% was attributed to foreign buyers. US investors spent £3.4 billion, Chinese £2.2 billion and Qatari investors £1.2 billion, according to a new analysis from international real estate advisor Savills. China Life was one of the biggest new entrants of the year with its deal at 10 Upper Bank Street. Chinese investors were the biggest buyer group from Asia, with developers such as Shanghai Greenland, Ping An Trust and China Overseas Land Investment purchasing properties. The Savills report also shows that these investors are not limited to single transactions, and anticipate more activity. US investors including Blackstone, Kennedy Wilson and Hines have secured some of the larger deals such as Alban Gate, 111 Buckingham Palace Road and 25 Cabot Square, with Northstar entering the UK for the first time purchasing a property in Woking before going on to purchase a 1.1 billion euro portfolio which included four assets in London. Other new entrants, who Savills is acting for, include parties from Taiwan, Turkey, Singapore, Israel and Yemen. ‘Debt is a significant factor in drawing in these international parties, falling swap rates and competition between lenders is making borrowing cheaper,’ said Rasheed Hassan, director of cross border investment at Savills. ‘Aside from that there is genuine confidence in the strength of the occupational market with rents steadily rising. These pull factors are further boosted by push factors such as the returns in the bond markets as compared to property and some economic instability across other geographies,’ he added. According to Eric Zhao, Savills Chinese Capital Markets Specialist, Chinese investors coming into the UK market are mainly developers and insurance companies. ‘The top Chinese developers are being driven by challenges in the domestic market and global branding needs,’ he said. ‘Insurance companies are beginning to diversify their huge capital outside of China after the restriction on overseas investment was lifted by the regulator. We have already seen the top Chinese firms make a statement in London and we are expecting more to follow,’ he added. The report reveals a rise in private investors entering the London markets and points out that appetite from these parties has not been restricted to smaller lot sizes, with the Savills sale of The Gherkin to the Safra family, as the most significant larger private investor transaction as well as others from China, Spain and Hong Kong. ‘Whilst further in-flight of capital will keep turnover levels high, very few of the international institutional type investors have demonstrated a willingness to go to the initial yield levels that have been seen on the UK prime assets,’ said Stephen Down, Savills head of Central London . ‘Whether they will go to these levels depends on further rental growth coming through… Continue reading
Rental redress scheme in UK sees increasing number of complaints
The UK’s Property Redress Scheme (PRS) is seeing an increasing number of consumer complaints being made against lettings, property management and estate agents who are members The PRS is one of three consumer redress schemes authorised by the government whose role it is to provide fair and reasonable resolutions to disputes between members of the public and property agents. By law, all agents must be a member of one of these three schemes. The number of complaints raised with the PRS is increasing month on month. Of the complaints raised so far, 44% were by landlords and 41% were by tenants, with the remaining 15% being raised by buyers and sellers of property. The complaints have varied widely in content, with the top three grievances being unfair or excessive fees at 21%, non return of holding deposit at 18%, and perceived poor service or lack of communication at 18%. Agents are also resolving complaints directly with consumers when they are notified of the issue proving that the PRS is having a positive effect on service offered and that some complaints can arise from simple miscommunication between parties. Grounds for non-acceptance of complaints have included consumers that had not yet attempted to raise a formal complaint with their agent but had instead gone direct to the PRS. Others were declined as the complaint involved on-going court action. An example is a landlord who served notice on her agent two months before the end of the tenancy. The agent acknowledged this notice but pointed out that a charge would be made for withdrawing from the agreement, as per the terms of their contract. The agent claimed that this charge was because they had found the tenant that rented the property. As the initial introduction of the tenant retains value, the agent believed they would be materially disadvantaged if the tenancy was renewed under a different agent and wished to seek compensation for this introduction. This information was supplied to the landlord via email but was only received weeks later when the landlord found in her junk email folder. Her lack of response was taken by the agent as tacit agreement and they proceeded by withholding this fee from the last month’s rent. The landlord contacted the agent to explain that she had in fact sold the property and therefore the tenant was not remaining in the property after the expiry of the tenancy. She debated this fee and made further claims that the terms of their agreement were contradictory. However, the agent maintained they would still be applying what they saw as legitimate charges for the cancellation of the agreement. This resulted in a breakdown of communication between the landlord and agent, with both seeking legal representation to try and resolve the issue. Following a thorough review of all the evidence provided,… Continue reading
