Archive for June, 2010

Property prices in the UK plummeted during the month of the May. This fall, the first since April 2009, provided house owners and investors with a harsh reminder that markets were yet to regain its full glory. The information was compiled by the Land Registry which oversees finished transactions.

According to the report produced by the Land Registry, specific areas of the UK experienced price falls in the range of 3.6%. In England and Wales, the average property rates decreased from £165,596 to £165,314. Even in the face of such a reduction in rates, the property prices still stood well out of the reach of most newbie buyers. While the relevance of the data can be doubted, what goes without questioning is the fact that the UK property sector is still sluggish and nowhere closer to the high peaks it had once hit.

While this negativity maybe exclusive to the just the Land registry report, there is no denying the fact that a large percentage of the property surveys also points to a deceleration in property price growth.

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The Royal Institute of Chartered Surveyors (Rics) has hailed the government’s decision to not cut down on capital spending beyond the March budget reductions. Rics had previously hinted that any more reductions in capital spending could arrest the growth of the construction industry and affect the economic resurgence negatively.

Greater business investment will also be promoted, thanks to the cuts in corporate tax rates in the next four years. This move will in turn boost the commercial market.

Mark Goodwin, Director of External Affairs, Rics, added that the moderate increase on CGT will aid the supply of development land and provide encouragement to new investors in the private rented sector.

In the meantime, the numbers published by Scottish Widows Investment Partnership point to the fact that the long-term outlook for the UK commercial property market will stay positive. It is forecasted that in five years, commercial and asset class will bring in returns worth 8.5 per cent per annum, surpassing the performance of bond and equity classes.

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The Financial Services Authority (FSA) has published a report relating to the sale and rent back market. This market has been winning considerable ire over the last few years, owing to the general perception that it largely survives on the misery of those facing financial shortcomings. Despite the presence of many respectable companies, the sector is also replete with companies that are generally categorized as delinquents.

A number of regulations relating to mortgage advice and agreements were introduced recently. Such regulations aim to hold mortgage advisers more answerable for the advice that they impart. To help those who cannot afford to shell out their regular payments, the FSA will look to cut down on the additional costs that are imposed against such mortgage debtors. Efforts to discourage repossession of properties will also be launched.

These steps undertaken by the UK government and the FSA have been appreciated by those in financial difficulties. However, experts believe that for such a clean-up act to be truly successful, the efforts put in by the FSA should hold long-term validity.

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Following the European Union’s demand, the European Central Bank (ECB) too has now called for more stress tests for European financial institutions. With ECB joining the fray, the call for stress tests seems to be enjoying the support of all major financial regulators across Europe.

Critics of the stress tests, however, believe that if the results of such tests are publicized, it may increase discrimination between strong and weaker banks. This, in turn, may affect the investment decisions of investors. Also, chances are rife that banks which fare poorly in these tests may have to deal with the leech-like attitude of lenders, who might increase their lending rates for such banks. Hence, upholding the privacy of the results of these stress tests is being seen as an important consideration in the success of these tests.

In the past, the Bank of England and the UK government had both decided against the publication of such stress tests in the UK.

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