KATE Barker is not just any old economist. She sits on the Bank of England’s
Monetary Policy Committee, which sets interest rates, and is also the author
of a compendious government review of the housing market. So when Ms Barker
talks about property prices, we should hang on her every word.
She believes the market is “somewhat vulnerable to a major change in
expectations about future prices”. But, as she outlined in a speech this
week, there seems “no firm evidence of a major slowing in house price rises”
– despite the gyrations of financial markets. Consumer confidence is strong
and unemployment is not expected to rise.
So far, so good. But Ms Barker has also been observing the behaviour of
buy-to-let investors who took out fewer loans to purchase properties in the
first half of 2007. In recent years, buy-to-let investors have been snapping
up the cheaper properties that were once the preserve of first-time buyers.
If the former opt to stay on the sidelines and the latter still cannot
afford to become owner-occupiers despite the weakening of prices, then this
would be bad news.
Ms Barker declines, however, to forecast how buy-to-let investors will react
next. This is not a cop-out, but an acknowledgement of human nature. Few
owners of any type of property respond in an entirely logical way, based on
an assessment of the direction of the market and interest rates. The
spreadsheet mentality has yet to permeate the relationship between amateur
landlords and their properties.
Next April, the tax on the profits from the sale of a rental flat could be
just 18 per cent. As Capital Economics points out, this would be an
incentive for buy-to-let investors, who are pessimistic about prices, to
make a swift exit. But there is no guarantee this proposed concession will
become law. Meanwhile, tenant demand remains good, although rents are
flattening out in some parts of London and elsewhere, following sharp
increases. Capital Economics also says that: “the strength of past gains
means many buy-to-let investors would be relaxed about some mild losses over
the next few years”. They are focused on the long-term, seeing the flat they
rent out as a pension pot.
What everyone would like to hear is whether Ms Barker thinks interest rates
should fall now. On this subject, she is silent, but others have read
between the lines. The message seems to be: no rate cut before Christmas.
February now appears to be the earliest date.
THE WAITROSE EFFECT
The right kind of food store increasingly adds to the appeal of a
neighbourhood. The recipe for such a retailer includes a sustainability
commitment, ready meals that aspire to a Michelin star and, as one blunt
estate agent put it: “no obese customers in the aisles”. Frequent sightings
of (slim) celebrities in those same aisles are a plus, but not essential.
Waitrose, more than any of its rivals, seems to embody these qualities and its
presence can be key to a location’s reassessment. Knight Frank reports that
US and other corporate tenants priced out of Chelsea are now happier to
settle instead in more challenging Wapping, in East London, thanks to the
“Waitrose effect”. This is the diametric opposite of the Tesco effect. The
British may be more than happy to spend in an existing Tesco, but view with
dismay plans for yet another in their locality.
Andie MacDowell, the film star and the face of L’Oréal, has been recently
spied in the Wapping Waitrose, formerly a morose Morrison’s. The more
regular shoppers include staff of The Times, for this is our local
supermarket.
The irresistible lure of the mixture of organic venison sausages (high in
omega3 fatty acids) and celebrity can be seen in the rise in property prices
in Daylesford, a village on the edge of the Cotswolds, and its surrounding
locations. The Daylesford Organic shop, with its decor of pale woods and
cheese from its own creamery, attracts a distinctly nonobese clientele, such
as Elizabeth Hurley.
All this probably means that a formal study correlating the level of property
prices in different areas, with obesity levels, density of Waitrose stores
and organic fare, is probably under way somewhere.
A MESSAGE FOR WHITEHALL
The Bricks and Mortar e-mail inbox usually contains only pictures of
immaculately maintained houses. But images of decay and dilapidation have
been appearing, after our report last week on the scandal of Britain’s
840,000 empty homes. Readers have sent us snaps of vacant and neglected
dwellings down their streets, properties that could be made viable if local
authorities would only assume proper responsibility for this issue.
One blogger from Croydon has set up a website (www.croydoniscrap.com) to
ensure that his borough’s empty homes do not remain blots on the townscape
but become part of the solution to the housing crisis. Whitehall has plans
for 3 million new homes by 2020, but it cannot afford to forget that a good
proportion of these homes are already standing. anne.ashworth@thetimes.co.uk
I think this is very dangerous ground. Coincidentally, I’ve lived in Croydon for the last 14 years, and I’m well aware of the negative effect of rundown vacant properties on a neighbourhood.
However, unoccupancy in itself should be no trigger for the government to stick their nose in. My parents-in-law, who are from Hong Kong, purchased a house next door to some ex-pat friends some years ago, for their daughters to live in while they went to college here. The kids have now flown the nest and it is a couple of years until the parents will retire and spend more time here in the UK. In the meantime, they prefer to keep the property empty (due to some bad experiences with tenants/lodgers) until they return.
HOW DARE anyone judge their decision or tell them what they should do? They bought the house, fair & square, it’s for them to do with as they damn well please.
If this sort of thing bothers you so much, become an MP.
Geoff, Croydon,
It does seem ridiculous that Government hasn't put 2 and 2 together on this. Owners of empty properties are morally wrong either to ignore their responsibilies of owning a property or to make a deliberate decision to keep it empty when there is a housing shortage of the kind we are experiencing in this country.
Our Open spaces are valuable to us as a necessity in itself - not just as somewhere to cover with yet more houses.
If property owners allow their property to become derelict, then, after due notice, those houses should be compulsorily purchased ( at a cheap rate so the Owners do not make massive financial gain from this), using the funds earmarked for housing construction.
I applaud the work being started by your blogger from Croydon; accountability is a by-word of today. Property owners (and I am a Landlord) should not expect to avoid their responsibilities of maintaining a house or houses they own.
Penny Cooper, Stamford, Lincolnshire