Source: http://www.guardian.co.uk A report out today from the Construction Products Association (CPA) and Ernst & Young reveals there have been just 135,000 housing starts this year, compared to 203,500 in 2007. This figure is the lowest since 1924, when there were 87,000 housing starts during a period of severe deflation. There are fears that homebuilding will grind to a virtual standstill in the new year - leading to tens of thousands of job losses in the building trades. Demand for new houses has plunged over the past year as would-be buyers have been unable to obtain mortgages from struggling banks and building societies despite falling interest rates.  The Bank of England said mortgage approvals hit a record low in October, despite a fall in interest rates at the start of the month. Lenders approved 32,000 home loans for buyers during the month, equalling the record low hit in August and down 27% from the 2007 peak. There is now considerable doubt whether the government can fulfil its target of building 3m homes by 2020. The prime minister, Gordon Brown, and housing minister Margaret Beckett held a crisis meeting with several industry bodies, including the Home Builders Federation and the Council of Mortgage Lenders, last month to try to come up with ideas to revive the flagging sector. The consensus of the meeting attended by Construction Skills and HBOS was that not much can be done until banks start lending again.  House prices have continued to fall in the midst of the credit crunch.  The downturn in the housing market will result in huge job losses. Thousands of builders, electricians, plumbers, removal people and carpenters are likely to lose their jobs. Accountants BDO Stoy Hayward said this month that 6,400 construction businesses could fail by mid-2009. Roger Humber, strategic policy adviser to the House Builders Association, said earlier this year that 250,000 people whose jobs are linked to the building industry could be put out of work if the housing downturn persists.  "Many more thousands of self-employed tradesmen and sub-contractors, building materials producers, manufacturers of white goods, carpets, curtains, DIY, estate agents and solicitors would be affected. If this continues to unwind, ultimately there's no reason why it couldn't affect a quarter of a million jobs," he said. In 1924 ...The last time housing starts fell this low, Britain's economy was reeling from the cost of the first world war and about to face a decade of global economic turmoil. Labour prime minster Ramsay MacDonald was in power until November when he was succeed by Conservative Stanley Baldwin. Winston Churchill became chancellor and the next year oversaw Britain's formal return to the Gold Standard, which led to mass unemployment and the miners' strike. The late 20s and 30s was a period of intensive house-building. In 1919, there were 8m homes, but by 1939 there were 12m.

Source: http://www.findaproperty.com According to research from moneyfacts.co.uk, fixed-rate products currently make up 69 per cent of the mortgage market, compared to just 51 per cent at the same time last year.  This is because, despite the series of interest rate cuts, the gap between swap rates - the borrowing rate between banks - and the rates they offer to customers is widening, says moneyfacts. Last December, the difference was 1.12 percentage points; this December, it has increased to 2.92 points. Michelle Slade, analyst at Moneyfacts, says: "By not reintroducing cheaper tracker mortgages to the market, the lenders are leaving borrowers with little option but to go on to more expensive fixed rate mortgages. "It is evident that lenders are continuing to increase their margins, despite a fall in the cost of funding."Affordability is a key issue for borrowers, who prefer fixed rate mortgages as a way of stabilising their monthly outgoings and could be a secure option to weather the storm of the imminent recession. "Borrowers expect to pay a slightly increased price to fix their mortgage repayments compared to tracker deals.  "However, today the gap between the average two-year fixed and tracker mortgage stands at 1.16 per cent, compared to just 0.14 per cent this time last year. "It would appear that all lenders are adopting a similar approach, despite calls from the Government to pass on cuts to borrowers."

Source: http://www.independent.co.uk A month ago, the Chancellor said growth would resume in the second half of 2009 after contracting for four successive three-month periods. But other ministers fear the banking crisis and "terrible" jobless figures will make the recession last longer than Mr Darling forecast in his pre-Budget report (PBR). Some ministers believe he will have to paint a bleaker picture of the nation's prospects for 2009 when he delivers his Budget in March or April.  Treasury sources said it was "premature" to speculate about the growth forecast for next year so soon after the PBR. Officials insisted there was no reason to think that last month's predictions would be proved wrong but said the Chancellor would provide an update in his Budget. Fears that he will issue a more gloomy forecast increased when the Office of National Statistics (ONS) announced that the economy shrank faster than it previously thought between July and September. It said it contracted by 0.6 per cent, the biggest fall for 18 years, rather than 0.5 per cent as it originally estimated.However, there was relief at the Treasury that the ONS did not revise its zero growth figure for the previous three months. If it had done so, Britain would now be officially in recession, which is defined as two successive quarters of negative growth. A recession will be formally confirmed in January when the figures for the final quarter of 2008 are released. There was more gloom as the number of mortgage approvals fell to a new record low of 17,773 last month, down 14 per cent on the previous month and 61 per cent down on November last year, according to the British Bankers Association. There was also a prediction that the property market collapse still had two years to run and that house prices would eventually drop by 35 per cent. Opposition parties seized on the revised figure for the third quarter of this year, which was affected by a slide in the services sector and manufacturing. George Osborne, the shadow Chancellor, said: "Here is further evidence that Labour is bankrupting Britain again. Not only have we been in recession for six months but it is now deeper than we thought." Vince Cable, the Liberal Democrats' Treasury spokesman, warned that the coming recession "will be deeper and steeper" than the Government believed.  Stephen Timms, a Treasury minister, admitted the revised output figure was "poor" but said it was not surprising. "What we need to do at this difficult time is to support the economy. Every country is affected by what is happening in the world economy, no one is immune," he said. Olivier Blanchard, chief economist at the International Monetary Fund, said the Government's temporary cut in VAT was "not a good idea" as it did not give consumers a "real incentive to spend". However, he urged Germany to adopt a bigger fiscal stimulus to boost Europe's economy as a whole. The Treasury replied: "The VAT cut will not only put an additional £12.5bn into the economy at a time when it's needed most, it will benefit consumers and businesses through lower prices and increased sales. A household spending £900 a month on VAT-able goods will find that they've got £20 more left in their pocket at the end of the month, and for many people that's a significant difference."

Source: http://www.propertywire.com Knight Frank's latest index shows that rents have now fallen for three consecutive quarters taking them back to a level last seen in March 2007. They fell by 9.6% over the last three months and by a total of 12% over nine months. Capital values are falling even more rapidly and consequently rental yields are continuing to rise, now standing at 4.2%, compared to 3.9% a year ago 'Prime residential rents in central London have fallen dramatically over the past three months, by 9.6% which is by far the biggest fall ever recorded by our index which was created in 1995. To put the figures in perspective, the drop of 2.1% recorded in September 2003 was the previous largest biggest decline on record in prime central London,' said Liam Bailey, head of residential research at Knight Frank. He said there has been an increased demand for rental property, the result of many people choosing to delay house purchase, but this has been outweighed by the sheer amount of new stock coming onto the market, much of it from 'forced landlords' unable or unwilling to sell their property in the current market. 'This has combined with downward pressure on corporate and personal budgets, pessimism over the short-term future of the economy and mounting job losses in the key financial services sector to markedly drive down rents,' he explained. The research shows that there are three times as many properties on the market than this time last year. 'It is not easy to tell clients that they need to drop the price of their property by at least 15%, if not 20% to 25% for larger properties,' said Tim Hyatt, head of UK lettings, Knight Frank. But the analysts are upbeat about the letting business for 2009. 'We expect the lettings business to continue growing next year. Renting has become an acceptable medium-term option for many people and its flexibility will continue to appeal as the economic downturn continues,' he said. 'The changing climate will also make investment more appealing for rental returns alone. Landlords can be cautiously optimistic but need to be very flexible as they enter the New Year if they are to prosper in this difficult market,' added Hyatt.

24th Dec 2008House prices to fall by 10% in 2009 as lenders remain cautious, surveyors warnSource: http://www.guardian.co.uk The warning came as figures from the British Bankers' Association showed the number of mortgages approved for purchases fell to a record low in November, despite the 1.5% cut in interest rates.  The Royal Institution of Chartered Surveyors (RICS) said there were signs that activity in the market was recovering, with enquiries from would-be buyers recovering to levels last seen in October 2006. However, it warned the key to turning those enquiries into sales would be the availability of funding, and called on the government to ensure creditworthy borrowers get access to loans.  RICS's chief economist Simon Rubinsohn said: "Lenders are likely to remain cautious in the near term in the absence of any 'guarantees' on mortgage-backed securities. This, coupled with an increasingly gloomy economic picture, suggests house prices will continue to decline in 2009."  The group also warned that the number of new homes being built was likely to keep shrinking next year. It said there were likely to have been only around 110,000 new housing developments started in 2008, a figure far lower than those recorded in the 1990s recession.  BBA figures published this week showed just 17,773 mortgages were approved for homebuyers in November, down from 20,767 in October and 61% below last year's figure of 44,315.  This is the lowest level of approvals since records began in 1997, and the continued lack of demand for homes is likely to drive down house prices further in coming months. The value of home loans approved for buyers was down by almost 70% year-on-year, at £2.1bn. It was not just a lack of numbers that pushed down the overall value of lending for house purchases - the average value of mortgages has also fallen sharply since last year as house prices have tumbled and lenders have restricted maximum loan sizes. In November, the average loan for a house purchase was £116,700 - a drop of almost £12,000 since October and well below the average of £159,600 last June, when the market was near its peak. There was also a steep drop in the number of borrowers remortgaging, customers who would usually remortgage at the end of a special offer rate may have been persuaded to stay on their lenders' standard variable rate (SVR) after the banks were pressed to pass on the base rate cut to existing borrowers. After the 1.5 percentage-point reduction in rates, many SVRs are now more competitive than the short-term discount and fixed rates on offer to new customers.  The BBA said the shock interest rate cut to 3% had prompted November's slowdown in mortgage activity. The BBA's statistics director, David Dooks, said the cut had "caused lenders to reassess product ranges and borrowers to reconsider future borrowing costs".