The alleged housing bubble gets a prick…

“The Mortgage Inquisition” Daily Mail Tuesday 22April 2014  This was the headline screaming from the pages of every newspaper, of every political hue alongside the world shattering news that David Moyes had been given the heave-ho.  (I don’t think that with a £10 million pound payoff the ‘mortgage inquisition’ is going to have much effect on his house-buying ability). For weeks, if not months, we have been assaulted on a daily basis by the tidings of woe and despair that the United Kingdom is being engulfed by a housing bubble that is akin in size and effect to the smog in China.  That’s all changed now.  Overnight, the woe and despair has been transposed to those trying to buy a house.  According to the media, we are as a nation facing a rapid slowdown in the growth of house prices.  Is that such a bad thing? Last week, the bubble growth was seemingly out of control and was going to push the property market off the edge of the cliff.  This week, the rapid growth now faces the likelihood of being under control.  I ask again, is this a bad thing?  Apparently, families could miss out on buying the house of their dreams as they wait for an interview with their lender.  To whom are they going to lose out? Another family who themselves are waiting for a mortgage interview?  Let us take a deep breath, calm down and look at the facts.  The so-called ‘stress test’ interview is there to determine whether if in the instance of an increase in mortgage rates, the borrower will still be able to afford their mortgage. So, when the family with high childcare costs, a 5-year car loan, a high council tax band, rates, gas and electric and no added fripperies apply for a mortgage, they need to be aware that if interest rates go up, there is no wriggle room.  When the next family comes in with all the same costs, plus three holidays a year to Dubai, a premium Sky package, a top of the range Mercedes, premium gym membership and a wife with great teeth and other assets who spends £300 a month at the salon, they do in the instance of an interest rate rise have the ability to find the increased mortgage payments.

I would suggest that it is far more preferable to endure the probing stress of the interview (that you may fail), as opposed to the abject misery of having one’s house repossessed having been unable to maintain the monthly mortgage payments.

How the other half live…

and think.  Today, which is for many the most holy of holy days – celebrating the resurrection of Jesus who gave his life for us – a parable may be drawn with life in general.  Whilst millions the world over celebrate the very essence of their faith, that of God sending a saviour to redeem mankind from Satan’s grip, many others see Easter merely as an extra few days off work; a pagan orgy of chocolate consumption and getting a great deal at the local DIY store before making a complete balls up of relaying the patio/refitting the downstairs loo/painting the garden furniture. Trust me; been there, done that, got the t-shirt, the bollocking from my wife and the exorbitant bill from the workman who came to salvage my DIY disaster.

This week rather fittingly gave two examples of mankind’s need to procreate. Firstly, the young lady who was actively encouraged by her mother to be with child in order to get a council flat and secondly the even younger, young lady (actually, make that child), who gave birth at the age of fourteen thereby making her twenty nine year old father the proud holder of the title, “UK’s youngest grandparent”.  Ye Gods  –  and any other deities that may be twiddling their thumbs today – what in the name of… is happening?  Just to add further fuel to my ire, the Jeremy Kyle’s sofa-destined family come from Wales.  Terrific.  How proud as a nation we all should be and a massive well done to the Welsh Assembly as their education system is obviously working to such great effect.

Speaking of cause and effect, this week saw two of Britain’s listed builders reporting huge increases in demand for new homes.  The FTSE 100 behemoth, Persimmon, the UK’s biggest housebuilder reported that sales per site in the first fifteen weeks of the year were up 25% from the same period in 2013.  A number of sales have resulted from the Coalition’s Help To Buy scheme.  That’s right, the same scheme that was being condemned last week for aiding and abetting the “housing bubble”.  Chief Executive Jeff Fairburn welcomed the Government’s decision to extend the scheme to 2020. “The lenders are supportive of it and it really does deliver affordability to the buyer” [sic] Daily Mail Thursday April 17, 2014  This was echoed by his counterpart at Telford Homes, Jon Di-Stefano who expects his company’s profits to double again by 2018. “Telford Homes is operating where customers both want to live and can afford to live”. ibid  There we have it folks; the most pertinent part of his comment is the last part about people living where they can actually afford to buy a property.  Many of us aspire to the Pimms and croquet abode or crenelated stately pile as pursued with a vengeance by Team Middleton, but ultimately we live where we can afford to keep the roof over our heads.

“Achmet, our janissary, calculating from the decay of their empire…

…have come to a conclusion that the end of the world is nigh at hand.” James Emerson Tennent’s Letters from the Aegean, 1829.  The Celtic theme is rather timely as this week we see Alex Salmond a hopping and a trotting at the SNP Spring Conference in Aberdeen.  Closer to home (for Mr Salmond at least), would be Private Frazer of Dad’s Army fame, whose line, “We’re all doomed, doomed I tell ye” had a particular relevance last week.  Not just in London, but throughout the country, house prices were reported last week to be on a stratospheric trajectory.  Just to confirm, this is throughout the country, with the exception of areas including parts of the North East, the North West, Wales and the outer suburbs of some of the largest cities in the country,  So, nationally. Sort of.  This is good news people.  Sort of.  If the media are to be believed, then some people will benefit dramatically and many will suffer because they will never, ever be able to afford their own property. Well we don’t need a journalist to tell us this.  It is called market forces, or more literally, life.  There are winners and there are losers.  Isn’t that right all you Arsenal supporters?  Glibness aside, it irks me immeasurably that the press can create such a maelstrom of emotional turmoil.  Always remember that the headlines of today are tomorrow’s fish and chip paper; just like the headlines of three years ago stating that we were faced with Armageddon as house prices were going to crash by 25-50% in the following months.  I may well be wrong (I often am, just ask Mrs Cheshire), but I would wager that the same soothsayers now are the same ones of yester year and if they really do have oracle-esque proclivities, why are they still journalists?

Amidst all the hype, one key fact stood out to me. Hometrack reported that typically owners now moved every 22 years as opposed to the 1980’s when they moved on average every 8 years.  If this is correct, what does it matter that prices are soaring, as you aren’t planning to move for a considerable part of  your lifetime?  As with every generation in the annals of time, the first time home buyers need help in getting on the property ladder.  Hence the launch of Help to Buy.  Incidentally, the latter is now being blamed as contributing to the soaring prices.  As always it appears that Sir James and Private Frazer were right: it is angst-ridden headlines for all, whether prices go up or go down.

One of the questions that I invariably ask potential purchasers is what type of property they are looking for.  Buy-to-let is a clear indicator.  When they reply that they want somewhere for the children (they are planning to have more), the pet alligator, herd of wildebeest etc. I always try and determine what is the main thing that they have to have in their prospective home.  Note the use of the word, ‘home’.  That’s  right, the place where one lives permanently, usually as part of a house hold (unless one is a total misanthrope).  Even if you proclaim to be the misanthrope to beat all misanthropes you would still want somewhere to call your home.  We all our inundated with the adverts beseeching us to ‘buy this dream home’ or ‘come home to this’, never ‘buy your dream investment property’.  Fact; we all need somewhere to live.  In days of yore, people would buy a house and make it into a home, not the other way round, with the aim of getting out of it as soon as possible.  Just in case the world is about to end,  I shall now retire to a darkened room in my penthouse with Tatiana, Flavia and a Bacardi….


Panda watch, House of Fraser and bulk-buying in London…

Those of you who have followed the blog for a length of time will know that here at Cheshire and Co we have an avid interest in the possible pitter pattering of tiny panda feet.  If you are raising an eyebrow, look at some of last year’s blog posts. Giant panda Tian Tian, who resides at Edinburgh Zoo, would seem – according to the experts –  to be ready to get romantic with the zoo’s male panda, Yang Guang.  Fellow followers of  Ailuropoda melanoleuca will know that last year Yuang Guang just did not do it for her (I know how you feel big lad) and IVF was also unsuccessful.  This year, it is all systems go.  Well I have just looked at the ‘Panda Cam’ at Edinburgh Zoo – in between compiling Rightmove reports – and although I am no panda expert, I wouldn’t want to be wagering Mrs Cheshire’s collection of Louis Vuitton handbags on there being a need to buy a panda-sized babygro.

On matters more property minded, but still Chinese, there was yet another feverish report published at the weekend that the descendants of the Yan and Huang Emperors are contributing to the deepening UK housing shortage and bullying domestic homebuyers out of the market.  In the major cities, primarily the capital, developers are apparently increasingly selling direct to buyers in China at inflated prices, cutting out domestic purchasers altogether.  Michael Sacks of property development firm Sequre said, “New-build apartment blocks in Britain’s city centre are being bought en masse and then re-sold oversees, mostly to the Chinese, for significantly more than they are already worth.” Daily Mail Saturday 5 April 2014.  This then forces up the value of second-hand stock and according to Mr Sacks, “This is reminiscent of 2007…when people were buying property without doing their due diligence and simply believing the sales hype that the market is booming”.  Ok, let us look at this concern in its component parts.  Firstly, we are talking primarily about the capital city, one of the leading financial and cultural centres of the world.  We are not talking about Abertillery or a former pit village in County Durham. By definition of what it is, with the craving for international business that bolsters the economy as a whole, there is going to be a huge number of foreign investors.  Secondly, alluding to the first point about the economy, I can guarantee that the vendors of the said apartment blocks aren’t complaining.  If a phenomenally wealthy Chinese gentleman or woman, (for the ardent Germaine Greer supporters amongst you), wanted to buy a house or houses in Cwmbran, Ebbw Vale or anywhere this side of the bridge; if they could prove that they had the money and were prepared to pay what was being asked, then I don’t think that I, or any other estate agent  and certainly not our clients, the vendors would be wringing our hands about the possible housing shortage for domestic buyers.  We would be deciding what colour to have for our new Mercedes S-Class.  Thirdly, the value of something is determined not by what experts such as myself think, but what ultimately people are prepared to pay.  Simple.  Any professional in any market plae, housing or otherwise, should be able to give a true and accurate valuation of something.  This is based on comparable evidence, market changes et al.   Any agent should be trying to get the best possible price for a property within a realistic time frame and should advise their clients accordingly.  The due diligence of those buying should be met in equal measure by any agent who advises their client, the vendor that they should not always believe what they read in the papers.

Speaking of economies, the Chinese economy is under pressure and one of the only ways of getting money out of the country is to invest in foreign property.  Is this genuinely to be viewed here in the UK as a negative development?  Similarly, one of the UK’s High Street stalwarts, House of Fraser has been bought by a Chinese conglomerate who plan to spend around £80 million revamping the stores  throughout the country.  Is this perceived to be bad for British business?  Pull the other one.