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More bad news for the property market.
Everyone’s fretting about the news that Home Information Packs are going to be extended to all homes from December 14th. The extra hassle and expense of preparing these things (which may seem like a good idea on paper, but in reality appear to be a massive waste of time and money) could well put off many would-be sellers, pundits say.
The Royal Institution of Chartered Surveyors reckons the housing market will “grind to a halt”, making life even tougher for first-time buyers as supply dries up.
But another, less widely reported announcement, makes us suspect that house prices will be falling pretty soon anyway – so maybe first-time buyers shouldn’t worry too much…
The introduction of Hips across the housing market has pundits worrying that supply will dry up at a time when the market is slowing already. The packs, which include legal documents and an energy efficiency certificate, will cost up to £500. The worry is that this will put more speculative sellers off.
Of course, this may be what the government had intended all along. A collapse in transactions is bad news for estate agents and surveyors – as we saw last week, Countrywide is already looking at closing branches. But a collapse in supply can help to prop up prices, at least temporarily. And it’s falling house prices, not falling transactions, that generate those nasty voter-scaring headlines in the press.
So if you wanted to slow the market up, you might do things like making it harder for people to sell, by extending Hips across the entire market. And you might also promise to drop capital gains tax on second properties – if you just hold onto them until April.
A cynic might even go so far as to suggest that the government might announce a re-think or a U-turn on CGT just before April, to avoid a glut of buy-to-let properties hitting the market. Perhaps Alistair Darling (or whoever’s Chancellor by then – it’s all up to Gordon Brown anyway) will say that the government needs more time to consult with the business world, putting off the changes for another year or so in an attempt to persuade cash-haemorrhaging buy-to-letters to keep clinging to their property empires for a little longer.
All idle speculation of course, but you’ve got to think sneaky when there’s someone as mendacious as Mr Brown in charge.
Anyway, as I was saying earlier on, a more worrying announcement for the housing market was the fact that Kensington, the UK’s original sub-prime mortgage lender, has stopped dishing out loans to people with bad credit histories.
As Melanie Bien of Savills tells Myra Butterworth in this morning’s Telegraph: “If Kensington can see no opportunities in sub-prime, what chance have other lenders with less experience got?”
So now the housing market is pretty much closed to those with poor credit histories, and it’s going to get harder for the self-employed and all those who can’t prove their income too. Meanwhile, Paragon (PAG) has had to cut back sharply on the amount of buy-to-let lending it offers, and Bradford & Bingley (BB) has indicated that it’s getting more cautious too.
Hips might hit supply, but the credit crunch is already demolishing demand. We suspect that all the delaying tactics in the world won’t stop prices from falling.
Turning to the wider markets…
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In London, a rally in the pharmaceutical sector – prompted by an upgrade from broker Citigroup – saw the FTSE 100 close yesterday 84 points higher, at 6,155. Utilities stock Kelda topped the mid-cap risers on news of a bid approach. For a full market report, see: London market close
Elsewhere in Europe, Air France-KLM led the Paris CAC-40 index to a close of 5,416, a 34-point gain. And pharma Sanofi-Aventis was also given a boost by Citigroup’s upgrade of the sector. Over in Frankfurt, pharmas Bayer and Merck led gains as the DAX-30 added 43 points to end the day at 7,562.
On Wall Street, the market was closed for Thanksgiving yesterday.
In Asia, the Japanese market was also closed today. In Hong Kong, the Hang Seng added 536 points to close at 26,541 as investors looked for bargains following the recent sell-off.
Crude oil futures were trading at $97.22 a barrel this morning and Brent spot was at $95.06 in London.
Spot gold added $6 today to touch a high of $809.70 before falling back to $808.70. And silver was at $14.66.
Turning to the forex market, the pound was at 2.0634 against the dollar and 1.3907 against the euro this morning. And the dollar was at 0.6738 against the euro and 108.31 against the Japanese yen.
And in London this morning, GCap Media, owner of radio stations including 95.8 Capital FM and Classic FM, announced that it had narrowed half-year losses to £689,000 for the six months up to September. This is compared to a loss of £9.4m over the same period last year. GCAp also announced that its CEO, Ralph Bernard, is to step down.
Finally, our recommended articles for today…
The South Sea Bubble and Northern Rock
– When the Bank of England attempted to honour the South Sea Company’s promises back in 1720, it was nearly brought to its knees. Our Government should bear that in mind when considering what to do about Northern Rock, says Adrian Ash. To find out why a more sophisticated ruse will be required this time than the one the Bank used back then, read: The South Sea Bubble and Northern Rock bust
Three reasons why the commodity boom will continue
– In his new book, commodities expert Jim Rogers argues that, the odd correction aside, the asset class should remain strong for some time. But there’s one more point he hasn’t included, says Stefan Karlsson: the impact of monetary policy on commodity prices. For more on the wealth of reasons why this bull market will continue for some time, click here: Three reasons why the commodity boom will continue