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Archive for July, 2009

How surveyors have failed us

Friday, July 24th, 2009

Lenders, not buyers, are the true arbiters of how much your property is worth

What does a valuation surveyor actually do? Don't get me wrong, some of my best friends are surveyors. I'm not anti-surveyor, but ...

A report from the Bank of England this week said lenders are struggling to value homes in this market, leading to the break-up and collapse of chains.

How different from the halcyon days of two years ago when the job of a valuation surveyor was little more than establishing the "comparables". A tough task indeed; drop in for a chat at an estate agency and find out how much similar properties have gone for. If that was too strenuous, there was always the actual sold price at the online Land Registry. Indeed, why employ humans? Many lenders found it simpler and cheaper to use "automated valuation models" during the boom. Yet the home buyer still got an inflated bill for a valuation, around £350 on a £200,000 purchase.

With so few sales, it's now impossible to establish comparables. How much is a house worth on a street where nothing has sold for a year? Valuation surveyors are working twice as hard on half the business. Lenders want valuations pushed down, fearful of further price falls. Chains are falling apart after a low valuation prevents buyers obtaining a big-enough mortgage to go ahead.

The Royal Institution of Chartered Surveyors should be taking a long, hard look at itself. How truly professional is the work of its members? Who was valuing buy-to-let flats at such absurdly inflated prices? How does a valuation surveyor get it so wrong? And what sort of action should a professional body take against those members who have so discredited themselves?

The skills needed for the structural element of a home survey will always be essential. But the valuation bit? Clearly the profession was hypnotised into believing markets rise in a straight line.Valuers live by the maxim that the price of a property is the amount someone is willing to pay. This is nonsense: the true price is the amount someone is willing to lend you to buy it.

Value is not in the eye of the beholder, it lies in the spreadsheet of a lender.

Shoots first, ask questions later

It's one of Britain's few growth markets: the green shoots industry. June's figures from the Council of Mortgage Lenders were issued on Tuesday. Within minutes, I'd heard from propertyfinder.com: "Demand from movers and first-time buyers is growing fast; the National Association of Estate Agents: "There are plenty of prospective homebuyers out there"; LSL Property Services (who?): "Gloom is starting to lift"; Marsh & Parsons (again, who?): "Competition is fierce and reflected in rising asking prices". The list could go on and on, because so many people are paid to talk up the property market, come rain or shine.

However, tucked in between these comments was a somewhat more considered analysis from Neil Woodford, of Invesco Perpetual.

Green-shooters look away now. Woodford, who runs more money on behalf of small investors than anyone, says a recovery in the economy could be three to four years away. The consumer boom and the housing market bubble were built on easy access to credit, and created "massive imbalances", he says.

His conclusion? That just as they took a long time to build, they will take a long time to address.

Click on a crook

Last week, as part of a little experiment, this column advised readers to click on the Google "sponsored link" of a dodgy website, www.VFestival2009.org/Tickets, claiming to offer V Festival tickets. Fraud specialist Reg Walker said it cost the crooks running such sites an average of £2.50 each time someone clicks on a link. Our logic was that by constantly clicking on those Google links, we'd make it hideously expensive for fraudsters to fleece us.

It's clear a number of people did indeed click. And the good news is that, for now, this particular site is no more. Walker says it has been removed from the net "on suspicion of fraud". This brings the number of scam ticket sites removed by the Metropolitan Police to around 150 in the last 18 months.

The problem is the people behind these fraudulent sites often simply relaunch with slightly different names. I wonder if the VFestival2009.org people paid their Google bill before the plug was pulled? If Google has been left out of pocket, perhaps it will encourage the search engine not to accept the business of such people in the first place …

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How the surveying profession failed

Friday, July 24th, 2009

Life was easy for surveyors when properties were flying off estate agents' books, but the housing market downturn has raised questions about their role

Quite what does a valuation surveyor actually do? Don't get me wrong, some of my best friends are surveyors. I'm not anti-surveyor, but ...

A report from the Bank of England this week said lenders are struggling to value homes in the current market, causing delays which are leading to the break-up and collapse of chains.

How different from the halcyon days two years ago when the job of a valuation surveyor was little more than establishing the "comparables". A tough task indeed: dropping in for a chat at a local estate agency, and finding out what similar properties have gone for. If that was too strenuous, there was always the Land Registry's website, holdings details of actual sale prices. Indeed, why even employ humans? Many lenders found it was simpler and cheaper to use "automated valuation models" during the boom years.

Yet the homebuyer still got stiffed with an steep bill for a valuation, typically around £350 on a £200,000 purchase (although often waived for remortgages).

Today the automated valuation models are close to breaking down. With so few sales, it's impossible to establish comparables. How much is a house worth on a street where there has not been a sale for a year? Valuation surveyors are having to work twice as hard on half the amount of business. Lenders want valuations pushed down, fearful of further falls in house prices. Buyers are in chains which fall apart after a low valuation prevents them from obtaining a big enough mortgage to go ahead.

The Royal Institution of Chartered Surveyors should be taking a long hard look at itself. How truly "professional" is the work of its members? Who was valuing buy-to-let flats at such absurdly inflated prices? How does a valuation surveyor get it so wrong? And what sort of action should a professional body take against members who have so discredited themselves?

The professional skills needed for the structural element of a home survey will always be essential. But the valuation bit? Clearly the profession failed, hypnotised like the rest of the country into believing markets rise in a straight line upwards.

Valuers live by the maxim that the price of a property is the amount that someone is willing to pay. But this has turned out to be nonsense. In truth, the price of a property is the amount someone is willing to lend you to buy it. Value is not in the eye of the beholder, it's in the spreadsheet of a lender.

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End of the dream for British expats in Spain

Friday, July 24th, 2009

Hundreds of thousands of Brits have headed to the sun seeking a Spanish idyll. But the economic crash has left many facing disaster

The British butcher has gone and the karaoke nights at Jack's and the Big Ben bar are all but dead. You can still get all-day British breakfasts and John Smiths on tap in San Fulgencio but a row of dusty, unkempt shop windows is all that remains of the internet cafe, the installer of pirated British TV channels and the Property Choice estate agent.

"It's like a ghost town," says Dennis Conway, 76, who is thinking of joining the exodus of Britons from this once bustling estate of bungalows and modest two-storey houses a few miles from Spain's eastern Mediterranean coast. "It's devastating. My pension is slowly disintegrating and there is nothing we can do about it. It is bloody frightening to think what might still happen."

Dennis has been here for 15 years. He has seen the La Marina estate in San Fulgencio go from a sleepy outpost of retired Brits to a boomtown of holidaymakers, second home-owners and young families trying to make a go of it in Spain, to the current bust. "I've never seen it this bad. I'm thinking of going back."

Britain's fevered obsession with the Spanish good life is over. Once, ex-pat bars up and down the Mediterranean coast heaved with happy talk about cheap beer, low council taxes and why it was so much better to be in Spain. Now the drinkers are more likely to curse the pitiful pound, discuss who missed the last outing of the British pensioners' club, and swap stories of friends who are moving home. There are whispered tales, too, of repossessions and of people packing up, dropping their keys at the bank and trusting easyJet to save them from Spanish creditors.

San Fulgencio is not alone. The removal trucks are busy in all the "urbanizaciones", the vast housing estates that Brits now call "urbanisations". They are places like La Marina, Ciudad Quesada, La Siesta, El Raso and all the others that line the dual carriageway inland from the beach town of Torrevieja, 35 miles south of Alicante. The trucks are also grinding their way up the narrow, twisting roads to the small hillside villages colonised by the last wave of Britons to catch Spain fever and come looking for sunshine, property and independence.

Removals companies confirm the tide has turned. "I'd say 70% of our work is now taking people back," says one of the many cash-in-hand British "white van men" working without licences outside the Spanish tax regime. He did not want to be named. "We've had retired people calling us and saying they are going to Bulgaria or places like that," explains Angie Russell, whose Union Jack company near Benidorm has been moving Brits – legally – for 22 years.

Television shows such as Channel 4's A Place in the Sun promised adventure, swimming pools and the good life. A collapsing pound and the credit crunch have brought a harsher reality: homesickness, financial hardship and something those who call themselves "expats" rarely take into account, that they are immigrants – often with all the problems of not understanding the language or the rules. Interestingly, a surprising number of them list immigration as one of the things they dislike about Britain. Few, indeed, come from Britain's own ethnic minorities.

For some, Spain has become a nightmare. Judy and Bill are going back to the West Country this month. Both served in the armed forces, then ran a fish-and-chip shop before coming to a rented villa with a swimming pool and views of the beautiful Jalón Valley in northern Alicante. That was two years ago. Frustration, boredom and their own naked prejudice are driving them home. Encounters with Spanish housing developers and their British estate agents – who scare them so much they do not want their real names used – have left them bitter. "This is a country with no law," proclaims Judy. "We in England abide by the rules but here they don't bother. Even the Brits here rip you off. I think most people would go back if they could. It'll be a relief to get home. It's not as cheap as people think."

"We're unsettled," admits Barbara Moseley, who is selling her house in San Fulgencio and moving to Lancashire. "I miss the grandchildren. I'm on the phone every day to them. I'll miss the easy pace of life here but the family comes before that." Her ex-policeman husband Terry does not want to go, but admits the winters now feel chillier and their unsteady pensions dwindled by up to 30% as the pound lost value dramatically last year. The rollercoaster exchange rates saw them losing €500 a month at one stage. The Moseleys will have to wait to go home. The market is flooded with unsold homes. "We've only had two people come to view it in 12 months."

A million Britons live for all or most of the year in Spain, according to the British embassy, although only 375,000 have registered formally at local town halls. Many would rather the Spanish authorities, especially those who collect taxes, did not know they were there. The one million figure makes them Spain's biggest immigrant group.

Brits in Spain are usually associated with the southern Costa del Sol, near Malaga. It has glitzy, corrupt Marbella and once boasted Sean Connery, Barbara Windsor and glamorous East End gangsters among its denizens. Even Princess Diana visited. The biggest population of Britons, however, lives in Alicante province, along the long stretch of coast from Denia to Torrevieja. There is little glamour – and no princesses – here. Incomes are low, and the black market, English-speaking economy has attracted a legion of ill-prepared chancers trying to live off their – sometimes invented – skills as plumbers, electricians, hairdressers, gardeners, pool cleaners or labourers. "It's the younger people who are moving back to Britain," says Barbara Chadwick, at the Home 2 Home removals firm near Javea. "They just can't make it here."

But even the true Spanish devotees are finding the going tough. Phyllis and Ron Hillman, both in their late sixties, have found two state pensions no longer fund the good life they once had in San Fulgencio."It sounds shocking, but we never had to budget before," says Phyllis. "We are down €300 a month. What do you do? You cancel your gym membership and you don't go out nearly as much. And we couldn't afford the British butcher any more."

Penny Lapenna is another of the genuine Spain-lovers. She and husband Joe sold their house in London's East End nine years ago, and bought a house outright in the charming inland village of Parcent. They learned Spanish, got jobs, put their three daughters into the local school and enjoyed life. "We swapped our grey clothes for bright clothes," says Linda. "I have loved living in Spain."

Then her husband's computer business folded and Linda lost her job on an English- language newspaper. Now she is applying for jobs in the UK. Her sister and at least three other British families from the village have already gone. "We've seen many families come and go in nine years. They fall into two groups: one lot with crazy notions and no command of the language who ended up having an extended holiday; and the other lot who made quite a go of it and set up businesses. But, like any immigrant, if your business struggles you have no fall-back."

A Spanish bank manager in San Fulgencio confirms that people are dropping off their keys. "They are wrong to do that," she says. "That does not cancel a mortgage in Spain." Already banks are hiring lawyers in Britain to track debtors down. "I'm getting calls from people who are having houses repossessed almost twice a week," says Michael Wroot, at the second-hand furniture store he has run in Javea for 26 years. "It's probably the worst it has ever been."

While the young move home, the old have few options. "Some people are having real problems paying the bills," explains the owner of a private old people's home for expats in Alicante. Even the dead try to save money. Seventy percent of the corpses donated for science to Alicante's Miguel Hernández University belong to Britons – in some cases simply to avoid the expense of a funeral. "Some of those who have approached me don't have much money," admits Lionel Sharpe, who helps the university recruit future corpses.

In contrast, Helen and Len Prior actually found the kind of Mediterranean paradise promised in the glossy brochures. Orchards of lemon trees line the road to their home at Vera, inland from the spectacular, volcanic coastline of Almeria. A garden, built up over six years, contains an acre and a half of palm trees and exotic plants. There is a heated swimming pool and a workshop-cum-garage area. There is, however, no house. That was bulldozed 17 months ago by the local authority, five years after they had moved in.

Where there was once a two-storey, £300,000 home – built with money from the sale of their old home in Wokingham – there is now just a large slab of concrete. "We'd be standing in the hall now," says Len, beside the workman's metal shed that now serves as their outside loo. Their dog Bonzo, traumatised by the men in big yellow machines, cowers from strangers.

The Priors, both 64, live in their garage while Spanish courts argue whether the local authority was right to declare their home illegal and knock it down. They won the most recent case, but will not get compensation any time soon. The glory days of gardening, swimming and relaxing in the sun have given way to worry and ill-health. Unlike others who bought illegally built homes without asking questions, the Priors did their homework and got their licences. "It was a dream," says Helen. "We were really happy here."

What they did not count on, however, was different levels of the Spanish administration, run by opposing parties, using them to wage a political war. The Priors admit that their Spanish is "awful" and so depend completely on their lawyer. To them the regional government is not socialist but "communist".

Their case has sent shivers through the British community, where fear of the demolition man is spreading. The letters pages of the Benidorm-based Costa Blanca News bubble with angry rants against Spanish tax authorities, police officers, town halls and, occasionally, Spaniards as a whole. For everyone who moans, though, another one leaps to defend the country they have all chosen to live in.

The Priors, who have more reason to complain than others, have not joined either the exodus or the anti-Spanish chorus. "People came and helped us who we had never seen before. We've had little old people hugging us and asking whether we have enough to eat," says Helen. "Spain is a wonderful country. We will still stay. We would never go back" •

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Ex-John Lewis chief to head Crown Estate

Thursday, July 23rd, 2009

The Crown Estate has appointed Sir Stuart Hampson as its chairman, making the former John Lewis Partnership boss one of the most powerful men in UK property.

His appointment comes at a delicate time for the Crown Estate whose huge collection of property assets in the year to March collapsed in value by 18% to £6bn, the first time the estate had lost value since 1993.

Despite the most challenging property markets for a generation, the Crown still managed to return £226.5m to the Treasury. Revenue from its sprawling portfolio of offices, shops, agricultural land and offshore marine assets has exploded from £187m in 1999 to £304m this year. Surpluses have increased from £132m to £226.5m during the same period.

Hampson's urgent task will be to ensure the Crown Estate holds its value as tenants increasingly go out of business. Property insiders believe a wave of tenant defaults could see rental income dry up across Britain, which would put the Crown Estate, like other big landowners, in jeopardy.

Hampson, 62, is well regarded in business circles, having overseen a resurgence in the John Lewis department store and Waitrose supermarket business, where he was chairman for 14 years. He left the firm in 2007 after the announcement of huge bonuses for the store's entire workforce.

Hampson is also a former senior civil servant and has a wealth of experience in farming and urban renewal. He recently stepped down as a non-executive at ITV and is a government adviser most recently helping the NHS on leadership issues.

A former leading member of London First, the business lobby group, he will be all too familiar with the challenges facing the Crown in reviving Regent Street, which it owns and where it has spent tens of millions refurbishing buildings behind their listed facades. With 14.8m sq ft of commercial property, the Crown also owns land and buildings in Kensington and around Regents Park as well as 2,000 residential properties and 146,000 hectares of agricultural land and forests.

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Credit crunch reaches world’s most expensive streets

Wednesday, July 22nd, 2009

The global financial crisis has squeezed property prices, but how has it affected those at the very top?

Avenue Princesse Grace in Monaco is the most expensive street in the world, with each square metre in an apartment setting you back £73,000 – or about the same as a 70-square-metre apartment on the seafront in Hastings, according to Dow Jones' Wealth Bulletin.

But the palm-lined street, named after the Hollywood star Grace Kelly and popular with Russian oligarchs, is suffering from "la crise du credit" like everywhere else. The bulletin shows top prices paid for apartments, are down by 37% from 2008's peak of £116,000 a square metre.

Overall, prices paid for prime residential property in the world's fanciest locations have fallen by 12% over the past year, although Europe fell less sharply than the US and Russia.

Via Suvretta in the Swiss ski resort of St Moritz was the only street on the list where prices for top properties have risen since 2008. Prices are up by 18% to around £27,500 a square metre.

The world's second priciest street, the Chemin de Saint-Hospice, is a 20-minute drive along the coast from Monaco, snaking through on Cap Ferrat. It numbers just 15 houses, commanding beautiful Mediterranean views.

According to Wealth Bulletin, local estate agents say there is one property for sale on the street, but it is being sold privately and its price a closely guarded secret. It estimates that property on the street goes for an average of £61,000 a square metre.

New York's Fifth Avenue pips London's Kensington Palace Gardens to third place in the survey, with apartments selling for around £44,000 a square metre. Although a 400 sq/m apartment overlooking Central Park on the Upper East Side of Fifth Avenue sold for $29m in June, local agents say the market has come off the boil, and remains affected by a lack of supply

Fourth-placed Kensington Palace Gardens is Britain's most exclusive address, best-known as London's embassy row, including the Russian delegation. Prices in the street are estimated to have fallen by 15%-20% over the past year.

The world's top 10

1. Avenue Princesse Grace, Monaco, £73,000 per sq/m

2. Chemin de Saint-Hospice, Cap Ferrat, South of France, £61,000 per sq/m

3. Fifth Avenue, New York, £44,000 per sq/m

4. Kensington Palace Gardens, London, £40,000 per sq/m

5. Avenue Montaigne, Paris, £33,000 per sq/m

6. Via Suvretta, St Moritz, Switzerland, £27,500 per sq/m

7. Via Romazzino, Porto Cervo, Sardinia, £26,000 per sq/m

8. Severn Road, The Peak, Hong Kong, £24,500 per sq/m

9. Ostozhenka Street, Moscow, £21,000 per sq/m

10. Wolseley Road, Point Piper, Australia, £17,000 per sq/m

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