* seasonally adjusted

Commenting on the figures Martin Gahbauer, Nationwide’s Chief Economist, said:

The price of a typical UK property rose by a seasonally adjusted 1.0% month-on-month (m/m) in April, leaving house prices 10.5% higher than a year earlier. Over the lifetime of the last Parliament (May 2005 to April 2010), house prices have risen by 6.7%. This compares to a 13.5% increase in the consumer price index, the official target measure of inflation.

April’s figures show the first double-digit annual growth in UK house prices since June 2007. The year-on-year rate in this month’s figures, however, received an additional boost from the fact that April 2009 was one of the weaker months last year. Given the very strong performance of house prices from May 2009 onwards, it will take monthly increases in excess of 1% for the annual rate of inflation to be maintained in double digits going forward. The smoother three month on three month rate of inflation edged down further from 1.5% in March to 1.1% in April, which primarily reflects the impact of February’s 1.0% decline in house prices. April’s figures leave UK house prices exactly 10% below the October 2007 peak.

For further information please see  April 2010 report (PDF 64KB).

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CAMBRIDGE, ENGLAND, November,  2009 

Andrew thinks more business incubators are needed for start-up and fledgling companies rather than traditional office space. He warns that Cambridge will have to diversify in the future, and reduce its reliance on the R&D and professional services sectors.

Andrew said that the digital and media sectors are far more relevant, and they are going to require a different focus in terms of property. He feels that the market needs to develop its technology centres so that business can function successfully in the 21st Century.

Difficulties arise when smaller traditional office units are occupied by companies that experience rapid growth. It is these fast-growing companies that need flexibility rather than to be restricted by traditional lease structures. A solution needs to be found to enable such businesses to develop and change quickly.

Andrew said:
“Old fashioned lease structures, where tenants take on a lease for a lengthy period of time, have disappeared for good. It is now important to look at new flexible lease structures. However, this will present difficulties for developers and investors resulting from a lack of certainty of income.

“From my experience, most occupiers will pay more for flexibility and operational efficiency which will result in higher rents per square foot. It is a question of changing the mindset of landlords.”

Andrew sees diversity as the key to future economic growth, and believes there is now a pressing need for a new type of building to meet demand.

The next stage is to consider how to invest in property offering flexible terms, as many companies don’t wish to occupy traditional buildings. Fast growing companies need buildings that will evolve with product development, and following ongoing investment present a better whole life cost.

Andrew goes on to say:
“Developers have provided bespoke buildings in the past, but in these turbulent times investment and funding markets are going to have to get their heads around the implications before they appreciate the opportunities. That said, I don’t believe speculative building will return for at least 12 months. We will need to demonstrate that occupier demand has returned before that happens!

“The banks haven’t been doing any major lending in the commercial property sector recently, and, going forward, they will be looking for developers to take more risk and put more money into projects. A traditional approach, but one that is unlikely to facilitate the changing face of commercial property.”

Andrew Gordon
Director
Lambert Smith Hampton
Cambridge Office
Tel: 01223 276336
Email: agordon@lsh.co.uk

Lambert Smith Hampton (LSH)

LSH is a leading commercial property consultancy with an unrivalled national network focused on the UK and Ireland property markets. Its expert teams deliver a full spectrum of transactional and consultancy services and business-driven solutions for clients. LSH is the ‘UK’s most active national agent’ and ‘Top National Office and Industrial Agent’ (Estates Gazette’s ‘EGi Deals Competition’).

Lambert Smith Hampton’s (LSH) Cambridge office is a commercial property consultancy providing property services and advice in Cambridge, the surrounding area and nationally. With LSH clients have the added advantage of each office being backed by the strength of a national office network. For clients, this means 10 key divisions and over 850 professional staff working together to address the commercial property difficulties you may face, anywhere in the UK.

Lambert Smith Hampton is a founder member of the Elite Cambridge Business Circle.

6 Wellbrook Court
Girton Road
Cambridge
CB3 0NA
UK

Tel: + 44 (0) 122 327 6336
Fax: + 44 (0) 122 327 6226

http://www.lsh.co.uk

For more information contact:
Andrew McGahey
Director, Head of Cambridge Office
Lambert Smith Hampton

Tel: 01223 276336
Email: amcgahey@lsh.co.uk

Issued by:

Murdoch MacDonald
Fame Publicity Services
E-mail FamePublicity@gmail.com
Web: http://www.famepublicity.co.uk

http://www.CambridgeshireBusinessNews.com

Telephone: 01292 281498
Mobile: 07833 667322

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The annual change stands at minus 3.4 per cent. This is the sixth month in a row in which the fall in annual change has decreased. The average house price in England and Wales is now £159,546.

All regions in England and Wales experienced a decrease in their average property values over the last 12 months. The region with the most significant annual price fall was the West Midlands with a movement of  minus 6.3 per cent. The North West experienced the greatest monthly rise with a movement of 1.9 per cent. Wales was the region with the most significant monthly price fall with a movement of minus 2.3 per cent.

The most up-to-date figures available show that during August 2009 the number of completed house sales in England and Wales rose by 11 per cent to 53,236 from 48,109 in August 2008. Transaction volumes, while no longer falling at 2007 rates, remain relatively low.

For more information and to view the report in full, visit www1.landregistry.gov.uk/houseprices/

Notes

1. Since 2006, Land Registry’s House Price Index (HPI), which is available free at www1.landregistry.gov.uk/houseprices/ has gathered its own momentum to become a leading indicator of property movement within England and Wales. It is widely viewed as “the most accurate barometer of the housing market”.

2. The HPI is published on the twentieth working day of each month. The November index will be published at www1.landregistry.gov.uk/houseprices/ at 11:00 hours on Friday 30 December 2009.

3. The HPI uses a sample size that is larger than all other statistical measures available. It is calculated using Land Registry’s dataset of all residential property sales completed in England and Wales since January 1995.

4. Land Registry’s dataset contains details on 15 million residential transactions. Of these, over five million are identifiable matched pairs, providing the basis for the repeat sales regression analysis used to complete the index. This technique of quality adjustment ensures an “apples to apples” comparison between properties.

5. With the largest transactional database of its kind detailing over 22 million titles, Land Registry underpins the economy by safeguarding ownership of many billions of pounds worth of property.

6. As a government department established in 1862, executive agency and trading fund responsible to the Lord Chancellor and Secretary of State for Justice, Land Registry keeps and maintains the Land Register for England and Wales. The Land Register has been an open document since 1990.

7. For further information about Land Registry visit www.landregistry.gov.uk

Contacts

Marion Shelley 020 7166 4543

marion.shelley@landregistry.gsi.gov.uk
Esther McWatters 020 7166 4487

esther.mcwatters@landregistry.gsi.gov.uk
Press Office 020 7166 4215

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auctionmove.co.uk will provide estate agents with the opportunity to add an auction arm to their existing business, without impacting on commission.

Estate agents will also be able to have a branded presence on auctionmove.co.uk, generating valuable exposure for both the brand and for properties that are proving difficult to sell through the traditional estate agent route.

In the same way that a traditional auction works, auctionmove.co.uk will invite motivated purchasers to bid on a carefully chosen selection of residential and commercial properties, as well as land and development opportunities.

Buyers can bid anywhere, at anytime and at the end of the auction, if the reserve price is met, the highest bid wins the property.

auctionmove.co.uk’s experienced staff will always be on hand to help with any enquiries relating to the properties or the auctions.

Promising a competitive bidding process and sales that will be completed within 28 days, auctionmove.co.uk is a useful tool for buying and selling property online, whilst also being extremely helpful for estate agents.

Every property on auctionmove.co.uk is also advertised on rightmove.co.uk, the UK’s largest property website, which provides a steady throughput of traffic to the website.

Lisa Obertelli, Sales Director of auctionmove.co.uk, said: “We hope that by providing this service, estate agents will feel they can place their properties on our website. It allows an additional form of advertising for estate agents who are looking for new promotional avenues in a difficult market, with our property finder.

“We offer an auction service for estate agents, as well as offing any estate agent from anywhere in England the opportunity to advertise and promote through our website.

“We envisage this becoming an extremely useful tool for estate agents that will aid many stifled sales in the estate agency industry.”
For more information visit www.auctionmove.co.uk

Press Release Contact Details:

Andrew Barton Corby House, 38 Chorley New Road, Bolton BL1 4AP 01204 399440 auctionmove@inspia.co.uk www.auctionmove.co.uk

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The twice-yearly survey, conducted between 26 August and 16 September 2009, shows that while 12% of firms increased their occupied space in the last six months, 25% reduced it, giving a balance of -13%. This was slightly less negative than the expected balance of -25%.

The survey also reveals, however, that a similar fall is expected in the coming half-year period (a balance of -15%).

Financial services firms recorded the sharpest property contraction over the past six months, with the engineering sector and transport, warehousing and distribution companies seeing the next steepest falls. The sharpest decline in the next six months is expected to be in the financial services sector again.

Three sectors – leisure (including hotels, bars & restaurants), retail and construction – reported an increase in property holdings over the past six months and the same sectors anticipate a rise in the next six.

During the recession, cost reduction and cash flow remain the most important issues affecting companies’ property decisions.

Firms were again asked about the impact of the credit squeeze and the slowing economy on their business. Access to credit was having at least a noticeable effect on 68% of firms and the economy on 85%. These were up from 62% and 81% respectively last time.

Howard Cooke, Director at leading property consultant GVA Grimley, said:

“With little let-up in the impact of the recession, firms have continued to reduce property holdings in the past six months. Unfortunately, these cuts will continue as long as the poor economic climate persists.

“Yet again, most firms feel some impact from the recession, with slightly more blaming tighter credit conditions than six months ago.”

The survey shows an increase in the number of companies that would consider moving at least part of their business abroad. Almost a third (32%) said there were issues that would make them relocate away from the UK, a significant rise on 15% a year ago.

This time the two most important reasons given by firms for considering relocating are the tax system and the economic environment, with larger firms more likely to consider a move than smaller ones. Among the different sectors, financial services firms are the most likely to say there are issues that would make them relocate (73%), followed by engineering (68%) and manufacturing (42%).

The number of firms considering exercising a break clause in their lease, which gives one or both parties the right to terminate a lease before it has ended, has increased. In this survey, over a half (51%) of firms with leasehold property are considering exercising a break clause over the next two years, up from a third (35%) in the spring. Among companies with more than 5,000 staff, 90% are considering using breaks as a method of reducing property holdings.

Since empty property rate relief was reduced a year and a half ago, occupiers must pay full business rates on empty property after a very short period, and the CBI has lobbied for the relief to be re-instated.

Matthew Farrow, CBI Head of Infrastructure and Planning policy, said:

“In the recession, firms are looking to cut their property costs wherever possible, but the Government’s failure to restrict next year’s rate rises to 7.5%, as we had proposed, together with the ongoing loss of empty property rate relief risk is making a difficult situation even worse.

“As a start, the Government should use the Pre-Budget Report to restore the original level of empty property rate.”

November, 2009

Notes to Editors:

Attachments:

Media Contact:

Stephen Cooke in the CBI Press Office on 020 7395 8239 or out of hours pager on 07623 977854.
Edward Dewar in the GVA Grimley Press Office on 0207 911 2664 or email: edward.dewar@gvagrimley.co.uk

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Speech by Lesley Titcomb, Director of Small Firms and Contact Centre, FSA
Keynote address to the European Mortgage Federation’s annual conference
19 November 2009

Around the world the financial crisis has required interventions of unprecedented scale. The support of governments and central banks has been crucial and will remain a significant factor for the foreseeable future. The causes of the financial crisis can be traced back to fundamental issues with the development of the global financial system and macroeconomic imbalances.

But mortgage lending, and in particular the past quality of it, has found itself under the spotlight. The loss of market confidence in 2007 was a result of growing problems with US mortgage-backed securities. What the risis has not revealed is evidence of misselling and irresponsible lending in European mortgage markets on anything like the scale seen in the US. This only highlights that mortgage markets, at the retail level at least, remain largely national. The differences between these national markets are many.

While the retail market may remain decidedly national, funding is clearly global and so the effects of the crisis have been widely felt. Mortgage lenders across many countries had come to rely more on wholesale funding sources, which dried up overnight. With the securitisation and covered bond markets closed, and other forms of funding scarce, gross lending has fallen across Europe.

Given how closely mortgage and housing markets are intertwined, it is not surprising to see a similar story here, albeit with a few exceptions. But also interesting are the differences in some of the figures. While the decline in lending has been sizeable in countries like the UK and Ireland, in others it has been much less so. The same is true for house prices. Again this only goes to illustrate how national markets differ, which in turn means that EU Member States responding to the crisis will have different issues to address.

Addressing the problems

What is noticeable, however, is the degree of common cause on addressing the fundamental problems. The funding issues have been truly global and the challenge is being addressed at the international level. There is much to be done, for example, through the Basel Committee work on significantly strengthening the global capital regime. We are active contributors to this work, as well as taking a series of steps nationally to reform our prudential policy framework.

The EU has also grasped the nettle, recognising the need to improve on existing safeguards and introduce new controls. A key element will be clearly implementing in the EU the new standards agreed by the Basel Committee. The regulation of credit rating agencies aims to increase confidence and deliver ratings qualitatively better than under current standards. Of course, this is no substitute for firms doing their own due diligence on potential purchases, and so we support the principle of new requirements on investor due diligence and originator transparency.

Then there are the European proposals to constrain risk transfer arising from past developments in the securitisation markets. Changing it so that banks and other regulated financial institutions can only buy into securitisations where the originator retains a significant piece of the net economic interest should help correct a past failing.

It is not surprising that these policy developments are focused on wholesale and prudential matters; this is where the market is most international in character. The differences I previously mentioned in retail markets mean that the majority of consumer-facing actions are being taken at the national level. So, for example, the Dutch authorities are looking at strengthening affordability measures. Meanwhile several countries have been grappling with how best to address the potential for consumer detriment as a result of their markets featuring large volumes of foreign currency denominated lending.

For a number of others, thinking has been prompted by the need to implement the Consumer Credit Directive (or CCD). This, of course, only applies to unsecured credit and the risks and features of mortgages are very different. But understandably, countries that have not previously had specific mortgage rules will look at the CCD to see if there aren’t at least a few aspects that make some sense when applied to their mortgage market.

The UK, on the other hand, is one of those countries that already has in place specific mortgage regulation. This is far more extensive than the CCD, so the Directive hasn’t been the prompt for us to look again at our regulatory approach.

But we have, as many of you will know, been undertaking a fundamental review of the UK mortgage market, the causal drivers for poor outcomes and the most appropriate regulatory response to these. The result is our recently published Mortgage Market Review Discussion Paper. This marks a very significant shift in our strategic direction. The review is not a response to current market conditions. Rather, it looks across the economic cycle, the good times and the bad, with two broad aims in mind. The first of these is a mortgage market that is sustainable for all participants – consumers, lenders, intermediaries and investors. Secondly, we want to see a flexible mortgage market that works better for consumers.

Many consumers have benefited from a UK market that in large part has been competitive and has evolved to meet a range of borrowing needs. The vast majority of these consumers are continuing to meet their mortgage payments and see no increasing risk of losing their home. But the market has gone wrong for some and where it has it is a cause of major economic distress. Such cases highlight that UK regulation has been ineffective in constraining particularly risky lending, or unaffordable borrowing. We need to put this right and the Mortgage Market Review  says how we plan to go about this.

As you would expect, our review focuses on the UK market and the issues we see there. Just as we wouldn’t claim to be experts on other national mortgage markets, the review should not be seen as a response to matters that have arisen in other countries. So if you were to ask me what elements of our Mortgage Market Review might best translate to other markets, my answer wouldn’t be to highlight any particular policy conclusion of ours. Rather, I would stress the value of carrying out an evidence-based analytical review of the causes of detriment. As well as providing a clear base for national policy development, such reviews can help refresh the knowledge of a wide set of stakeholders. After all, market conditions have changed greatly since several of the Commission’s studies in support of their White Paper agenda.

While our focus has been the UK market, in thinking about how we might best achieve our objectives we have consciously sought out policy approaches from around the world. The issues may be different in each market, but the options available to regulators are not infinite, so it makes great sense for us to look at others’ experience in using various policy tools. We’ve learned a great deal from doing this, and in turn we hope our analysis will be of interest beyond the UK.

Take, for example, the question of banning sales of products above a set loan-to-value (LTV) or loan-to-income (LTI) ratio. Earlier in the year The Turner Review said we would specifically consider the case for using such tools in the mortgage market. We’ve looked at a number of countries who either ban high LTV mortgages or who make use of income affordability measures such as an LTI multiple or a maximum debt servicing ratio. Typically LTV ratios are used to limit credit growth, stabilise a volatile property market or enhance financial stability, while income multiples tend to be used to prevent borrowers defaulting.

The use of such measures makes instinctive sense. But having now analysed the performance of tens of thousands of UK mortgages, we don’t have overwhelming evidence for banning high LTV or LTI lending. While the UK saw a very rapid growth in mortgage credit, the fundamental driver for this was not a growth in high LTV lending. In fact, the average LTV for house purchase has been falling since 1997. Similarly, while the data suggests that higher LTVs can lead to higher default rates, the same analysis finds that other mortgage characteristics are stronger indicators of payment problems ahead. In particular, much more powerful predictors of default are if the borrower self-certifies their income or is credit impaired.

There is a much clearer link between high LTI lending and the UK’s rapid growth in mortgage credit. From the early 80s to the peak of the market in 2007, LTIs rose from less than twice the average income to more than three times. A high LTI might be thought to describe the kind of financial stretch that would increase the borrower’s chance of defaulting. But our analysis shows the LTI not to be a strong predictor of arrears, less reliable in fact than the LTV.

None of this means that we don’t think high LTV or LTI lending has contributed to issues in the UK market. What we are saying though is that from the available evidence neither form of lending has been a causal driver for the problems we’ve seen. Given this, our current view is that it would be overly blunt to simply cap lending at high LTV or LTI ratios. There are many consumers with such loans for whom affordability has never been an issue.

We think though that there may well be scope for a more targeted approach, curtailing lending where there are multiple risk factors. We are looking to see if there are toxic combinations of borrowing that put a consumer at greater risk. This means poring over the characteristics of loans that go into default to find out if, for example, there is a clear trend where a consumer with past credit impairment and an unstable income borrows at a high LTV. If we find that there are toxic combinations, we feel that prohibiting these would address the detriment from imprudent borrowing or lending much more directly, and proportionately, then simply preventing any lending above a set threshold. That said, there might be a case for such a threshold in support of a wider macro-prudential objective, and we would want to revisit this if future arrears data suggests a stronger link with the affordability of the loan.

A rigorous assessment of affordability is central to what our Mortgage Market Review is looking to achieve. Like many other regulators, we had previously assumed that prudential self-interest would focus a lender’s mind on the question of affordability. We went beyond this when regulating, to explicitly require a firm to assess affordability from the consumer’s perspective, but we kept the requirement at a high-level because of the assumption that lenders already had their own reasons for wanting to lend only to those who could repay.

We now think that assumption is flawed. Developments in financial instruments have allowed some firms to sell off any risk resulting from originating poor quality business. More fundamentally, from a UK perspective at least, in a housing market showing strong and consistent year-on-year growth, lenders have less regard to individual affordability. Put plainly, increases in the asset value minimise the chance of any loss given default. So, we plan changes that will make it much more explicit that lenders bear ultimate responsibility for assessing affordability.

Placing the onus on lenders is an important principle for us. Unlike the great majority of Member States we have a mortgage market where intermediaries play a leading role. For many years intermediaries have been responsible for the majority of mortgages sold. This means, of course, that intermediaries must offer a professional service, but the bottom line is that they are not product designers and they do not make the decision to lend. So it makes sense, we think, to focus particular regulatory scrutiny on those that do – lenders.

One way of doing this, which the Mortgage Market Review flags, is through product regulation. We see this embracing a wide range of policy options. For example, it could mean prohibiting a particular product type or facility. The most obvious example for us is self-certification of income, which I appreciate has not been a common product feature in other markets. We’re proposing that in future lenders should verify all income. Another example, and a different form of product regulation, would be the work I mentioned earlier on toxic loan combinations.

In each case, product regulation allows us to address a specific risk. We don’t though see a role for ourselves as the designers of ‘plain vanilla’ mortgages. Even were you to create standardised mortgage products that were simple to understand, it’s difficult to see how they could ensure that the disparate borrowing needs of consumers are well met. To our way of thinking, interventions that significantly constrain sensible and sustainable product flexibility and diversity would be a poor outcome for the future.

The current poor outcomes for some UK mortgage borrowers have been a key driver for our review. The most extreme example of this is the loss of the home. Our concerns about the fair treatment of UK borrowers in payment difficulties have been well-publicised, and this continues to be an area to which we attach particular importance. Repossession must be the last resort for any lender and they should look at the full range of forbearance options they can use. Nor should lenders look at borrowers in arrears as an additional income stream. But we recognise that repossession has to remain a possibility, for example, where realistically the borrower is never going to be able to repay. In such circumstances the consumer’s own interest might not be best served by remaining in an unaffordable property while missed payments and arrears charges eat into any remaining equity.

Consumer protection and Commission intervention

The financial crisis is causing all policymakers to reassess their approach and reflect on the adequacy of consumer protection measures. We are no different in this regard, nor is the Commission. In the past, the Commission’s focus has been to remove obstacles to the internal market and improve the efficiency and the competitiveness of EU residential mortgage markets. Commissioner McCreevy continues to position the development of a more integrated market as the overriding driver for any action at EU level, but the desire to restore consumer confidence is inevitably leading to greater scrutiny of consumer protection measures.

The Commission set out its vision in its spring communication. In speaking of ‘delivering responsible and reliable markets for the future and restoring consumer confidence’ the Commission said it would come forward with measures at EU level on responsible lending and borrowing. Included within this was a call for a reliable framework on credit intermediation.

Concrete measures have been delayed until the new Commissioner is appointed, but policy development continues. The White Paper on mortgage credit kick-started a major work programme on measures that might support greater market integration. This includes a cost benefit analysis of possible policy options, as well as further research into areas such as credit intermediaries and non-banks. Much of this work is now completed or coming to a close. But as greater priority becomes attached to restoring consumer confidence, some re-focusing of the work programme is inevitable.

The clearest sign of this was the consultation on responsible lending and borrowing launched earlier in the year, and the public hearing that followed in September. The Commission continues to analyse the responses, which on this hot topic will surely be many in number. But what was clear from the public hearing, and it’s a view we strongly support, is that any consideration of responsible lending and borrowing needs to reflect the work already underway in response to the crisis. Changes in the wider prudential framework aim to significantly alter lending behaviours, as will actions planned or already taken by national governments or regulators. And it’s right to also recognise that the industry has taken its own steps, such as consolidating existing lending practices into the EMF Responsible Lending Standards for Home Loans.

This changing landscape presents a challenge for any policymaker. They must take account of the changing regulatory environment, understand the interaction between the various policy initiatives and identify where any intervention will genuinely add value.

As we know, the Commission has long been thinking about mortgage market interventions. This culminated previously in the 2007 White Paper, in which the Commission acknowledged that mortgage markets will remain principally national in character. The White Paper recognised that consumers predominantly shop locally for mortgage credit and that the majority will continue to do so for the foreseeable future.

The consequence for the Commission was the conclusion that any integration would be supply-driven, through establishment by lenders in the Member State of the consumer. But a lot has happened since the publication of the White Paper in 2007. The funding crisis means that firms have turned away from plans to enter new markets, and high-profile failures, such as those of Icelandic banks, are likely to further diminish consumer appetite for dealing with a firm that is not local.

Incidentally, we would agree with Commission’s conclusion on integration being supply-driven. We’ve been looking at UK consumer appetite for cross-border shopping in financial services. Our research highlights that while increasing numbers of consumers in the UK are looking outside their domestic market for low-cost, low-risk items, the appetite for shopping across borders for financial services is very limited. In fact, the evidence suggests that the vast majority of UK consumers are unlikely to take advantage of a more open market in financial services even if that market can be created.

Interestingly, the research found mortgages to be one of the products in theory most open to consumers switching to an overseas provider on the basis of a more competitive interest rate. UK mortgage borrowers have shown themselves to be very conscious of headline rates, sometimes to the exclusion of regard to wider product risks and features, so this finding is not surprising. But what was telling was that even these consumers needed there to be a significant price differential before they would consider buying cross-border. Given the global nature of the market for wholesale funding of mortgages it’s unlikely that lenders in other countries would be able to offer the price differential required to persuade consumers to switch. It’s also important to bear in mind that the research assumed that a level playing field exists in all other aspects of European mortgage markets. As we know, that is not the case.

Returning then to the possible grounds for European intervention in retail markets, current conditions are unlikely to foster greater integration. So this brings us back to possible consumer protection objectives for intervention.  Over the past year, the Commission have been carrying out consumer testing of the standardised product disclosure that is currently voluntary. The aim is to assess how to improve the usefulness and relevance of the European Standardised Information Sheet for home loans (ESIS).

In the past, disclosure has been the cornerstone of the FSA mortgage regime. But as part of the Mortgage Market Review, we have been re-examining its role. Our expectations for disclosure were that it would enable consumers to shop around and compare the services and products on offer from different firms. We also hoped it would help consumers make better informed choices. These are very similar objectives to those that the Commission has.

We now have five years’ experience with a prescriptive disclosure regime introduced at considerable cost to firms – costs inevitably reflected in product pricing. Our research shows that consumers rarely use standardised product disclosure to inform their decision-making. Consumers typically value disclosure as a record of their purchase – but a record doesn’t require standardisation of format and content. We think such evidence is an important aid to understanding the likely effectiveness and proportionality of disclosure as a regulatory tool.

There is now wide recognition of the importance of understanding consumer behaviour in developing effective policy. Not only do UK mortgage consumers not use standardised product information as intended, but the evidence collected for our Mortgage Market Review challenges our previous assumption that consumers were rational market participants. In practice, the misbuying we have seen in the UK mortgage market provides clear evidence that some consumers fail to properly engage or act in a way that would protect their own best interests.

This bears out a point made in The Turner Review regarding the limits on consumer behaviour. We think it is particularly important to recognise the behavioural limitations in the mortgage market where borrowers are too often motivated by an immediate want or need. In many cases the mortgage is simply the means by which the consumer can get the desired home, car or holiday. Consumers focus much more strongly on the end result. Understanding this limitation on rational market behaviour is leading us to take a much more interventionist approach. Through the Mortgage Market Review and our subsequent policy development, we believe we can put in place effective and proportionate measures to address issues seen in the UK market. We are committed to so doing.

Conclusion

In conclusion, we are all – the Commission, firms and regulators – aiming for the same thing. We want markets that are responsible and reliable in future, and we want to restore consumer confidence and choice.

This makes it understandable that the Commission is considering what action it might take on responsible lending and borrowing. But it is a time of great change to the regulatory landscape. It is vital that any policy thinking takes full account of the various initiatives going on internationally, at a European level and nationally. Indeed, I would go further. Given the extent of existing interventions, there are good grounds for assessing the effectiveness of these initiatives before deciding on what further action, if any, to take. This will provide the strongest evidence base for demonstrating the added value of further intervention.

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The number of million pound properties in the UK has shrunk by 35% over the past two years, despite the recent upturn in property values, according to Zoopla.co.uk, the UK’s leading house price resource. The sharp decline in house prices stemming from the credit crunch has hurt the ranks of property millionaires in the UK where, at the height of the market in late 2007, 1 in 97 properties was valued at over £1 million but today that figure stands at just 1 in 1500.

Despite the decline in house prices, certain parts of the country remain awash with property millionaires, notably London and the South East, where four fifths (81%) of all million pound homes can be found. The capital is home to 57% of all property millionaires, with the largest share residing in Kensington (W8) where 48% of all properties are worth over £1 million. Outside the capital, Virginia Water in Surrey leads the property millionaire stakes, with 28% of homes in the area worth more than a million pounds, compared to a national average of just 0.88%.

Property millionaires in the North East have been hit the hardest over the past two years, with an 83% reduction in the number of those who can now claim to be property millionaires. Wales has also been hard hit, losing 56% of its property millionaires over the same period.

Alex Chesterman, CEO of Zoopla.co.uk, said: “The housing market downturn has taken its toll on the exclusive ‘property millionaires club’, reducing the number of those who can claim membership from 283,168 in November 2007 to only 183,630 today. London remains the property millionaire capital of Britain, whilst other parts of the country have seen their property millionaire ranks decimated over the past two years, with many of the former million pound pads sitting close to the threshold.”

Decline in number of property millionaires

Areas with highest proportion of property millionaires

- Ends -

For further information please contact Lawrence Hall on 020 7620 4618 / 07890 078 945 lawrence.hall@zoopla.co.uk.

Notes to editors

About Zoopla.co.uk

Zoopla.co.uk is a unique property website offering users information and tools to help them make better-informed property decisions. Our aim is to provide the most comprehensive source of residential property market information in the UK to help buyers, sellers, owners and estate agents alike and give them an advantage in the property market.

In 2007, following the success of bringing DVD rental to the web with LOVEFiLM.com, Zoopla! founders Alex Chesterman and Simon Kain realised that the UK property market had yet to fully enjoy the benefits of the internet in terms of its ability to deliver transparency and efficiency. They set out with the mission to transform the property market for both professionals and consumers by:

• offering users FREE access to instant value estimates, sold house prices and local information and trends
• enhancing estate agents’ marketing efficiency by providing exposure/leads on a pay-for-performance basis
• helping users find local agents and other property professionals to assist them in the transaction process
• letting buyers make offers on ANY UK home and owners test interest in their homes before choosing to sell
• creating an environment where anyone can ask/answer questions and share their knowledge about homes

By providing FREE value estimates for EVERY UK home, sold prices and local information as well as hundreds of thousands of property listings for sale/to rent, Zoopla.co.uk is fast-becoming the ultimate destination for users to both search for property and to do their market research. We continue to be the UK’s fastest growing property website and largest and most active property community, with over a million user contributions to our website in the past 12 months alone. We also offer unique features, like TemptMe!. and AskMe!., which allow consumers to gain an insight into the market and discover information they won’t find anywhere else. Our estate agent directory, FindAnAgent and our unique AskAnAgent feature also help guide users to local professionals directly for their expertise.

We launched our website in January 2008 and since then we’ve been on a non-stop path to transform the UK online property sector. Our user numbers continue to grow impressively and we have consistently been the UK’s fastest growing property website for the past 18 months, now attracting over 1.5 million visits per month to our website.

In July 2009 we acquired Thinkproperty.com from the Guardian Media Group and in August 2009 we added Propertyfinder.com, one of the UK’s largest property portals, which we purchased from News International.

Our value estimates are calculated using a proprietary algorithm (secret formula) that we have developed by analysing millions of data points relating to property sales and home characteristics throughout the UK. The algorithm works by comparing relationships between home prices, economic trends and property characteristics in given geographic areas. Our estimates are constantly refined, using the most recent data available and a variety of statistical methodologies, in order to provide the most current information on any home.

Zoopla Ltd is a privately held company with a highly experienced and proven management team, backed by well-respected angel investors and leading venture capital firms Atlas Venture (atlasventure.com) and Octopus Ventures (octopusventures.com).

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Real estate investment trusts (Reits) should be allowed to count stock dividends towards their 90 per cent income distribution requirements, say the country’s biggest developers.

The British Property Federation (BPF) has written to the Treasury calling for the amendment to be made in the upcoming pre-Budget report.

The trade body, which represents developers, investors and agents, believes the amendment would help real estate firms conserve cash during the recession and leave them better placed to expand over the coming year.

The federation’s director for finance policy, Peter Cosmetatos, has emphasised that the change would not cost anything to the Exchequer.

In its submission, the BPF says that allowing the amendments would help Reits conserve cash, strengthening their balance sheets and making it easier for them to invest in the current economic climate.

Reits are required to distribute 90% of their property income into the hands of the investors in return for not paying corporation tax. Currently, they can offer shareholders the alternative of taking stock in lieu of a cash dividend. But this does not count toward the 90 per cent distribution requirement, which must be in cash.

John Richards, vice-president of the BPF, said:

“Refinancing by the Reits over the last year has shown strong confidence in the sector and many are now assessing opportunities for new investment. Allowing Reits to have greater flexibility over how they manage their cash will benefit our economy as we begin to see improvements in occupier demand. Without the necessary government support, we could quite possibly see a more serious under-supply in new space, and increased upward pressure on rents, reducing new employment opportunities. This amendment, however, would be a win-win move for the government.”

Peter Cosmetatos, BPF director for finance policy, said:

“This change would allow Reits to manage their way through difficult times while maintaining shareholder value by giving shareholders the option of accepting cash or a stock dividend. We are of course acutely aware of the state of the public finances – but as tax would still be collected when the distribution is made, the Exchequer would not lose out under these proposals.”

Chris Grigg, chief executive of British Land, said:

“Reits are obliged to pay out a higher proportion of profits in cash than other listed companies, so this straightforward amendment would level the playing field, have no downside to Government as tax paid would be the same, while giving REIT investors the choice of leaving cash efficiently in the business. Under the current set-up, Reits and their shareholders are disadvantaged by a legislative approach already deemed ‘unduly cautious’ by the House of Lords Select Committee on Economic Affairs.”

Francis Salway, chief executive of Land Securities and former BPF president, said:

“The Reit legislation has stood up well in the face of the extreme stress testing of recent market conditions, but it is clear that both companies and shareholders could benefit from the increased flexibility of being able to offer stock dividends.”

Ian Coull, chief executive of Segro, the UK’s largest industrial developer, said:

“There would be no loss to the Exchequer as stock issued is taxable in the same way as cash property income is. The benefits of Reits being able to strengthen their own balance sheets, conserve cash and maintain buoyancy, would have positive consequences for the property market and the wider economy.”

For more information, contact Andrew Teacher at the BPF on 07968 124545 / ateacher@bpf.org.uk

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The competitive house prices and rents seen over the past two years have opened up the prime property market to a wider variety of homebuyers and tenants, says email4property.co.uk, with many more now looking to make their move as the market shows signs of recovery.

While seasoned investors were quick off the mark to snap up prime property at bargain prices as the market showed the first signs of bottoming out earlier in the year, less experienced cash-rich buyers are now looking to act quickly amid signs of sustained price growth. Tenants have also benefitted from price falls in the rental market. Many are now hoping to trade up to better homes in more desirable locations and tie into a year-long contract before prices rise out of their reach.

Email4property.co.uk, the UK’s largest online network of estate agents, has seen a 20% increase in the use of its ‘Premier Property’ search option since August this year. It has some essential tips for those looking to capitalise on current market conditions and enter the prime market:

How much is a prime postcode worth to you?

Even if you can afford to buy or rent in a more upmarket location, it might not always be worth your while doing so. If you are stretching yourself financially to secure a particular street or district, you may not achieve the prestigious lifestyle you had hoped for. Consider how important the locality is to your living needs and whether you might be better off seeking more for your money elsewhere. A studio flat in Chelsea is still a studio flat, regardless of its postcode!

Premier property needs a premier agent

Different agents cover different sectors of the market. Those that focus on prime markets and list higher-end property will also be best placed to advise you. Not only will they have access to the best range of homes in your area, but they will also have the experience and expertise to be candid with you on your expectations and restrictions. Visit the ‘Premier Property’ function for your chosen location on email4property.co.uk. For example: www.email4property.co.uk/chelsea/premier-property

Make sure you are precise and accessible

Be upfront with your agent on exactly what it is you are looking for and how much you are willing to pay. Having opted to go for a prime property you may be unwilling to compromise, particularly if you are buying, but the agent will be able to advise on whether your criteria is realistic. Be as forthright as possible with them about the property you want to view, so that no time is wasted in your search. Rest assured you will not be the only person in your area on the look-out for a prime bargain, so ensure you are also readily available to receive updates from your agent.

Don’t neglect the home-searching basics

While the location and/or style of the property may be sufficient enough for you to make a decision, you should not neglect the standard home searching procedures. Judge the property on all the merits you would in normal circumstances – such as the local amenities, transport links, schools etc. Depending on how long-term the move is, consider how the home will suit your changing needs over time. And of course, do not neglect any assessment of the general state of repair! A bargain priced conversion property in a dream
location is likely to need as much work as any other – it could soon lose its bargain status if significant work needs to be done to make it liveable for the long-term.

Steven Lees, Head of Marketing for email4property.co.uk, comments:

“Those lucky enough to have had sufficient capital to secure a mortgage over the past two years have been in a strong position to capitalise on the low prices available across the market, and many have been able to secure homes that would previously been out of their reach.

“With strong signs of firming house prices and rents starting to improve across the sector, people are now realising that the prime market may not remain open to them for much longer. However, there are still options available and plenty of specialist agents across the
country who are well-equipped to advise buyers/renters on their options and help them source the best properties available.”

For a comprehensive list of estate agents in your area visit: www.email4property.co.uk

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