Massive Drop in London House prices

LONDON — Estate agents are selling less than one property a week as a lack of mortgage finance hits the number of people moving house, fuelling plummeting prices, a surveyors’ body said on Tuesday.

The Royal Institution of Chartered Surveyors (RICS) said its members sold an average of 11.5 homes during the three months to the end of September — the lowest level since its surveys began in 1978. Last month, the figure was 12.7.

Surveyors are hopeful the situation will pick up after Prime Minister Gordon Brown unveiled a bank nationalisation programme on Monday, saying that as part of it, he expected banks to restore customer lending to 2007 levels.

RICS spokesman Jeremy Leaf said the announcement “raises the possibility that the lack of mortgage finance that has so damaged the housing market might be eased” after the recent turmoil.

“The housing market continues to hold its breath and unless mortgage liquidity improves, the market is likely to remain a dormant beast for some time to come,” he added.

New mortgage lending fell 95 percent in August to 143 million pounds according to the Bank of England — the lowest level since records began.

Meanwhile, house prices slumped 12.4 percent in September compared with the same time last year, the sharpest fall in 25 years, home loans provider Halifax said this month.

The RCIS’s findings are based on a survey of 300 member firms.

 

One flat in Folkestone, Kent, went on the market on January 28 this year at £125,000, and has now been reduced to £75,000.

The one bedroom lower ground floor property lies in an upmarket area of the coastal town, and is in need of refurbishment.

When Sky News Online posed as cash buyers, the estate agent Fell Reynolds confirmed the flat had been slashed from £125,000 to £99,950 and then to £75,000 because of the housing slump.

“We felt that because of the lack of interest and the market conditions, £75,000 would be a realistic price,” the agent added. “It’s a nice little flat in a good area.”

Other properties in the UK have fallen even more sharply, according to Propertysnake, a website which measures price reductions.

One two bedroom house near Worthing, West Sussex, was first advertised last October at £319,950 – but is now down a staggering 53% to £149,995.

 

 

A similar home in Cardiff, Wales, has been slashed by 45% from £184,950 to £100,000 in less than a year.

The news comes as new figures out this morning show estate agents are selling only one house a week.

The Royal Institution of Chartered Surveyors (RICS) said its members sold an average of just 11.5 homes during the three months to the end of September – the lowest level since its survey first began in 1978.

The situation is even worse in London, where estate agents have made an average of just eight sales during the period.

Some London homes on the market are down 20% from original asking prices, taking them back to levels seen in 2005 and 2006.

And completion prices are even lower because of ‘gazundering’ in the capital, where buyers cut their offer at the last minute.

A five-bedroom house in Herne Hill has been cut by 37% from £1,275,000 to £795,000 as the number of homes sold in London falls to its lowest level since records began 30 years ago.

One London agent said: “We’re 20% down. There are some very, very keen sellers out there.”

In other figures out today, the number of first-time buyers getting on to the property ladder slumped to a record low during August.

An RICS spokesman said he hoped this week’s bail-out of three high street banks would help the housing market and restore buyer confidence.

Owning Property in London

Key property deals in the City of London are falling through as funding dries up due to the worldwide credit crunch.Sellers are struggling to complete deals as liquidity in the banking sector has virtually dried up. Values are also falling.

German fund manager SEB has pulled out of buying ING Real Estate’s 88 Wood Street development. It had agreed to buy the scheme last month for around £180 million but has been unable to secure the necessary funding in the current poor economic climate.

It is the second time a sale has fallen through on the building. Atlantic Property Partners had offered £190 million but that deal also fell through.The 17 floor iconic building, designed by leading architect Lord Rogers, was bought by ING for over £230 million in 2006.

Do cheer up. There is no such thing as all bad news. Every cloud has a silver lining. Most Britons are still in work and a third of them are on secure state incomes. In the words of Rudy Giuliani, the New York mayor, after 9/11, take the kids to the park, buy a pizza, see a show.

Nor is that all. Some good things are happening. The price of oil has tumbled 40% since July. House prices are down 13% from last year. Whatever the papers imply, this is good news far more than it is bad. Those with strong nerves and some money can even buy shares that are unbelievably cheap.

Restaurants are emptying, air travel is easing and I noticed last week that central London traffic jams were strangely diminished. Soon hotels will be discounting heavily and plumbers will not cost an arm and a leg.

that the best things in life are free.

The collapse of the buy-to-let market should lead to rents plummeting and people spending realistically on housing. The end of the home-ownership boom should encourage existing owners to sublet and reduce the underoccupancy that has long inflated British house prices. This is a good thing for all.

The impact of recession on government should be even more benign. Only now do we see how casually the rampant growth in revenue has led ministers to behave. There should be no more extravagant pay settlements for doctors; no more thoughtless purchase of NHS and ID-card computers; no more of the £70 billion that Labour has spent on “advice” . The death of spurious consultancy and the reassertion of civil service morale should be another gain of the recession.

 

 

 

 

 

 

 

TAX

A businessman whose family owns more than half a dozen houses, including a £50m mansion on Britain’s “Billionaires’ Row”, has disclosed how to avoid paying tax on multi-million-pound property deals.

Hossein Ghandehari bought Toprak Mansion on The Bishops Avenue in north London with his 75-year-old mother Hourieh Peramam and his wife Yassmin this year.

Ghandehari, a 43-year-old Iranian-born businessman whose family is said to be worth £1 billion, mainly from property, said transactions involving vast sums were being kept hidden from official records using legal methods.

“There are many, many ways in which what is registered on the Land Registry is different from what you end up paying,” he said.

The price declared to the tax office, and then recorded by the Land Registry, is used to calculate stamp duty. The top rate is 4%, implying a saving of £40,000 for every £1m lopped off the declared price.

Ghandehari said one method was a process known to property dealers as “flipping”, in which a buyer sells on a house before he is due to complete his own deal. He said: “One of the ways these things happen, and I’m not saying this is the case of what happened here [with Toprak], is you buy a property for £4m and [if] I am an offshore company, I buy it for £4m with a six-month completion, and then some other company comes along and I flip it for £6m.

“What the [tax office] ends up receiving is . . . the tax on £4m. But that ‘upside’ is just not there, the £2m. And that could go on indefinitely, it could go up to £20m, £50m if the market justifies it.”

Ghandehari insisted such dealings were “all legal”. He said: “The fact is you sell the company which owns the property, or you flip it and they all complete at a certain date.

“You just buy the company which owns it . . . everything takes place offshore, nothing takes place here, no tax, no nothing, so the property becomes the asset of that offshore company.”

Ghandehari, his wife and his mother are all tax registered outside the UK. He and his wife live at Toprak Mansion when they are in Britain, while other members of his family live permanently here, some of them in The Bishops Avenue.

Land Registry records state that the mansion, a neo-classical 30,000 sq ft building, was bought for just under £41m in January by an offshore company controlled by Peramam.

Ghandehari said his family actually paid nearly £9m more for the house, which was named after Halis Toprak, the Turkish businessman who built it, but has now been renamed Royal Mansion.

Other rich homeowners in the street include the steel magnate Lakshmi Mittal and members of the Saudi royal family.

Ghandehari, who said he first bought a house in the Hampstead street six years ago because he felt it was an “excellent place to live”, said his family intended to buy more houses there. “Once my mum said we should buy the entire Bishops Avenue, should it become available. If we have the money and they are good properties, yes we are buying.”

However, he said the poor state of the market meant purchases would be put on hold.

Ghandehari said he had recently been offered £80m by a Russian oligarch for Royal Mansion but refused to sell because he loved the house. “He managed to see it for about 10 minutes and [the agent] said, ‘What price would tempt you?’ and I said £100m, but I didn’t mean it, and he came back and said, ‘£80m and he wants to buy it there and then’, and I said no.”

There was gossip when the purchase of Toprak was announced in January, with some questioning how Peramam, who fled her native Kazakhstan at the age of 17, accumulated such wealth.

A Kazakh exile said the country’s president, Nursultan Nazarbayev, was indirectly involved in the purchase of Toprak Mansion. Ghandehari denied this, although he said he knew Nazarbayev’s family.

The Ghandeharis’ spending began in July 2002 when, according to the Land Registry, Ghandehari paid £4.2m for No 33.

In 2006 the family bought two neighbouring plots that became Wyldewood, where they lived until last year. The offshore firm that now owns Wyldewood is run by Yassmin Ghandehari.

Last November, £4.9m was paid for No 24, by another offshore trust also run by Yassmin. At the same time a plot of land behind No 31 was bought for about £900,000.

In January, a third offshore firm bought Toprak. Mortgage documents show the company is run by Peramam. Ghandehari said his family also owned a few more houses in the road.

Tax rates

Buying property costing more than £500,000 incurs a stamp duty of 4%, but if the property is owned by a company, anyone buying the firm pays duty on only 0.5% of the purchase price and then owns the property. Offshore companies are exempt from stamp duty entirely

 

Mortage Customers Relief After Repayment Cost Fell From 4-5%

          Mortgage customers breathed a sigh of relief today as the cost of their repayments fell following the Bank of England’s decision to cut interest rates from five to four-and-a-half per cent.

The news came as a pleasant surprise to UK property owners, many of whom weren’t expecting a decision until tomorrow.

The Bank Of England said in a statement: “Although inflation was likely to rise above five per cent in the coming months, it will then drop back towards the 2% target. Some easing of global monetary conditions is therefore warranted.”

The Bank admitted that money markets had “deteriorated very markedly” over the last few weeks, and that lending for homeowners was hard to come by.

The decisions means that hundreds of thousands of homeowners on tracker mortgages will experience falls in their repayments. A London property owner with a typical £200,000 mortgage will see their monthly repayments reduce by £60. 

A woman from afghanistan is receiving more than £12,000 a month in housing benefits so she and her children can live in a seven-bedroom house in west London. She approached Ealing Council in July when she and her children became homeless. They were placed in a privately-owned seven-bedroom house off Horn Lane, Acton, as the council had no properties that size. The authority said it has a legal obligation to help them.

London Housing Prices Continues To Drop

Hidden among the national figures for house prices, which are showing falls of around 12% over the past year, there are huge regional differences.

With volumes low the sale of a few expensive properties at knock-down prices can seriously distort the figures.

In the last housing slump of the early 90s anyone who didn’t have to sell just sat tight – and that appears to be what is happening now, particularly in the London market, which acts as a barometer for the rest of the country.

But buyers are quick to sense opportunities as they feel that the bottom end of the market may have bottomed out.

Average London house prices have decreased by 15% so far this year compared with Nationwide’s national figure of 12%. But buyers are on the lookout for bargains and the number of potential buyers registering with estate agents has risen by 7% – in just one week – while the number of first time buyers has gone up too.

London house price drops are now stabilising, decreasing by only 0.10% in September, taking the average price to £247,271, down from £247,524 in August. ‘Prices have fallen 15% since January 2008 and may now have reached the bottom of the market. September started to show the first encouraging signs of green shoots, with a surge of buyers registering in order to take advantage of the more affordable prices and more attractive mortgage deals that lenders were offering,Despite the collapse of Lehman Brothers and Bradford & Bingley, the level of registered buyers in London actually jumped 7% the following week. The lower end of the market has felt less of the knock-on effects brought about by the recent financial turmoil and, in some areas, asking prices were met or even exceeded.’

There is also evidence that the amount of new rentals coming on the market may have peaked and analysts believe that prime central London rents should plateau and possibly rise in 2009.

The report from Knight Frank says that rents fell by 1.8% during the third quarter of the year. This fall outpaces the decline seen in the second quarter, when rents dropped by 0.5%, but rents are now 1.7% higher than a year ago.

Rents are also falling in outer London with prime property also falling by 1.8% over the last quarter, the report found.

Capital values are falling more rapidly than rents, consequently yields in central London are continuing to rise, now standing at 4.2%, compared to 3.9% a year ago.

Not all of the capital has been equally affected. Rents for houses in the most exclusive central areas have remained static over the past six months, a result of both scarcity and the demand from very highly paid financial specialists drafted in from overseas to manage the crisis in the City.However, the main cause of the falls in most markets is the number of forced landlords who have opted to rent out their primary residence – either because they cannot sell at the price they deem appropriate, or are waiting for the market to turn.

As a consequence, the quality and quantity of rental stock has noticeably increased over the past few months, increasing the choice for tenants and driving down rents. They have been joined by a number of developers who are choosing to let out their unsold properties.

However the unprecedented level of supply partly obscures the fact that tenant demand is also at historically high levels. The rental market is offering an ideal place for potential buyers who are deterred by falling prices in the sales market or difficulties with obtaining mortgages. Owning a property purely for rental income rather than house growth will become far more viable.

 

Drop in London Property Price

         The price of a home in the tax haven has leapt up an incredible 30 per cent in the last year which puts it ahead of London for the first time in five years.Prices in the capital have risen by less then two per cent as the effects of the economic downturn begin to be felt. This contrasts sharply with the final phase of the UK property boom when property prices rocketed by 50 per cent.Demand in property in monaco is high eventough short of suply, based on YourMonaco.comMonaco, traditionally an oasis for the rich and famous, is home to the world’s most expensive street, Avenue Princess Grace, where a four-bedroom apartment can cost £22 million.However, they predicted that the market would slow as the financial turmoil of the past few months begins to be felt more strongly.

 House prices are tumbling; it’s easier to get blood from a stone than borrow a mortgage at a decent rate; stock markets around the world are on a rollercoaster ride; and inflation is still expected to rise for another month or two yet.

The current economic situation is a nightmare scenario for many of us. But the extent of the impact of the credit crunch on your finances differs dramatically according to how old you are. If you are young, in a reasonably secure job and hoping to buy your first home sometime soon, the current turmoil could actually be a good thing. But if you are close to retirement, have student children who depend on you for funding and still have debts of your own to pay off, it is likely to be a disaster.

This week, we will examine the problems that the credit crisis can cause people in their twenties and thirties. Next week, our experts will tackle the difficulties facing those nearing retirement age, and those who have already stopped working.