The markets react

The Markets have had a roller coaster trip today in reaction to a Hung Parliament. Gordon Brown's announcement that he had asked the civil service "to provide support on request" to parties in talks over forming a Government triggered a fresh sterling sell-off amid worries over political paralysis. The statement sent the pound below 1.45 dollars and 1.14 euro, but it recovered some ground minutes later as Liberal Democrat leader Nick Clegg said the party with the most votes and seats - the Conservatives - should have the first right to seek to govern. Fears over delays in tackling the UK's yawning deficit have punished sterling in a turbulent day as markets fear a Lib-Lab coalition in a hung Parliament. At one stage the pound fell more than 2% against the dollar to its lowest level since April 2009, while strong recent gains against the euro to above 1.18 were undone at a stroke as the pound slipped as low as 1.136.

Currency traders warned the political uncertainty sparked by an indecisive election result was likely to mean more volatility for sterling in the days ahead.

London's FTSE 100 Index also came under early pressure - it shed 100 points to hit a three-month low as trading began - although it recouped some losses later.

The pound's weakness and official figures showing factory gate prices rising at the fastest rate for 18 months also prompted concern over the return of inflation - leading to possible interest rate hikes from the Bank of England and jeopardising a fragile recovery.

The Bank's Monetary Policy Committee (MPC) is meeting today to make its latest policy decision, which will be announced on Monday.

The committee's inflation benchmark, the Consumer Prices Index, is well above the 2% target at 3.4% although it is currently forecasted to fall back below the target later this year.

It will be with intense interest that the world watches to see what will happen next. Undoubtedly, a strong united government is the best way for any country to move forward as it rears its head from a deep dark recession.

 

The results are in!

As many commentators have pointed out, the election result is about as bad as it could be from a market sentiment point of view – strong government of any colour being vastly more to international investors’ tastes than the uncertainty and vacillation of a hung parliament.

So what’s going to happen? Well, Cameron is sure to have a go at forming a government of some kind, whether in coalition or as a majority. He has already said as much, vowing to govern as best he can ‘in the national interest’. He is thus set to be the next PM one way or another.

But his only chance of majority rule – and of getting to occupy Downing Street for anything like the full five-year term – is to forge an alliance with the LibDems. A pretty tall order – a poll this morning by Conservative Home estimates that 94% of Tory grass roots supporters want nothing to do with Clegg. In his favour, Cameron can probably count on Clegg’s support – despite having said the opposite only a few days ago. Nick’s only way to salvage anything from the dismal LibDem performance is to hook up with Cameron in return for a promised referendum on electoral reform. But he won’t find it easy to persuade his party to swallow such a deal either.

The alternative is a minority Tory caretaker government and another election, probably next year. Hardly a glorious prospect, given the urgency of action required to tackle our debts and get economic growth back on the menu.

 

Hung Parliament

We have a hung parliament and it is not an ideal situation by any means.

More than any other time Britain needs a strong united government.

David Cameron is to set out plans to form a "stable" government, after the Tories won most votes but not an overall majority.

With results still coming in, the Tories have 294 seats in a hung parliament. He will say he plans to govern "in the national interest".

Nick Clegg, leader of the third biggest party the Lib Dems, said the Tories had the first right to seek to govern.

But Labour leader Gordon Brown is also hoping for a deal with the Lib Dems.

Under the rules of Britain's constitution, the sitting prime minister in a hung parliament has the right to make the first attempt at forming a ruling coalition.

As counting continues the Tories have gained 93 seats, Labour have lost 87 and the Lib Dems five, despite hopes of a breakthrough for the third party.

We will watch and wait with interest to see what the next few days will bring, both for the Country and for the housing market.

 

 

House Price Rise in April

House prices rose by 1 per cent in April, according to Nationwide, taking the annual rise to 10.7 per cent — the first time it has reached double digits since June 2007. The average cost of a home in the UK is now £167,802, compared with £184,070 in June 2007. However, the pace has slowed in the past three months and the building society expects sellers to start outnumbering buyers, pushing down prices, as the year goes on.

Martin Gahbauer, Nationwide’s chief economist, said: “While the recovery in new buyer inquiries at estate agent offices appears to have petered out, the past few months have seen an increase in the level of new instructions from sellers. This should lead to a gradual flattening out of the recent upward price momentum.”

The Land Registry reported a 0.6 per cent fall in the average house price from February to March. The Land Registry figures, which are a lagging indicator of prices based on completed transactions, show that the average house price in March stood at £164,288. However, the figure could show a rise in April. A 38 per cent rise in the average number of monthly sales in the three months to January, compared with the same period last year, showed improved sentiment among homeowners.

Mortgage approvals in March also improved, the Bank of England said, increasing to 48,901, up from 46,882 in February. The figure is 17 per cent higher than in March last year, but the Bank’s figures still suggest that mortgage lending has had a sluggish start to the year. Approvals in the first three months were the lowest on record for the first quarter of any year, apart from 2009.

Lenders are also still demanding average deposits of 25 per cent from borrowers, while banks have warned that mortgage rationing may worsen next year when some of them are forced to repay the emergency government loans they accepted in 2008.

House prices may have regained some of their value, but the surveyors who valued them may still be in for a fall. Legal actions against estate agents and surveyors reached record levels last year, with 25 High Court cases alleging professional negligence over property valuations, according to Reynolds Porter Chamberlain, the law firm, compared with only one case in the previous five years. This comes after banks began to threaten surveyors with legal action for overvaluing properties before repossessing them and then selling them for a lower sum.

Recovery glitch?

Nationwide’s April index shows that house prices have risen by 10.5 per cent since last year. This finding suggests that the election has not, despite some forecasts, filled the thoughts of the nation to the exclusion of all else. It is possible to discuss the respective TQs (telegenic quotients) of Brown, Cameron and Clegg while checking online the performance of property values in your neighbourhood.

Although the figures are a confirmation of the continuing recovery, the upward trajectory could be slowed by the larger number of properties coming up for sale and the deteriorating job prospects of many potential buyers. The uncertain outlook for employment is, indeed, one factor supporting the market.

Martin Gahbauer, Nationwide’s chief economist, notes that landlords, who may have been thinking of leaving the business, are now earning such good rental income that they have no reason to sell. Their tenants include many workers too nervous about the future even to contemplate house purchase.

Shed culture Some call it a shed. Others prefer the term summer cabin. But whatever name you give to this structure, the increase in its sales appears to be one unexpected side-effect of the mortgage drought. B&Q, which is reporting strong demand for any garden edifice, considers that the trend is caused by the larger number of young adults compelled to return to the parental home because they cannot climb on the housing ladder.

First-time buyers remain the group most likely to be refused a mortgage, mostly because they do not have large enough deposits. The shed/summer cabin provides them with a personal retreat where they can contemplate the woes of their generation. Or perhaps mums and dads go there when overcome with irritation at the invasion of their grown-up offspring.

As the banks are determined to shun first-time buyers whose parents can provide only shelter, not finance, shed culture seems set to flourish. The status-symbol purchase could be the £11,995 summer cabin, pictured above — more a home from home than a lawnmower storage facility. This sum, by the way, is equivalent to the 20 per cent deposit needed to buy a share in a one-bedroom flat in a Leeds affordable housing scheme.

Tesco homes might help

Home is traditionally linked to food. But the move of a supermarket into housebuilding has provoked a mostly distasteful reaction. You could almost hear the nationwide “er, yeuch!” at the news that Tesco will be creating four mini-villages in London and the South East, each grouped around one of its stores, but also including parks and schools. Even those who rely on the store for most of what they eat — at home or at their office desks — are deploring the “Tesco-fication” of Britain that this diversification appears to threaten.

Some of these concerns are justified; the ubiquity of Tesco outlets has added to the oppressive uniformity of city centres and out-of-town malls. But Spen Hill, Tesco’s development arm, is doubtless aware that its residential products will not sell unless they meet the highest customer expectations on convenience, quality, price and looks.

The elegant recycling of existing buildings must be part of the offer, as must clever, contextual architecture. Maybe the process could even throw up some ideas to improve the identical Tesco Express shopfronts?

Sneering at Tesco homes may sound smart, but the supermarket will at least nibble away at the problem of the housing shortage. Lack of affordable and other homes is one issue on which political parties agree, though all will struggle to deliver an effective solution because the banks are disinclined to get involved. Lloyds and its peers are at present more preoccupied with extricating themselves from the consequences of their past ill-judged associations with developers. Yolande Barnes, residential research director at Savills, points out that Tesco is one of the few groups with pockets deep enough to finance new housing. The supermarket’s own bank could also be one of the few sources of funds for mortgage borrowers — it plans to sell home loans by Christmas. In Tesco, as in other supermarkets, we are spoilt and sometimes almost overwhelmed, by choice. But without Tesco, the shelves could look awfully bare for someone shopping for an affordable home next year, especially as government funding for this sector will be scarce, whoever is having his dinner at No 10 after May 6.

How to make your home pay its way

When times are tough we all have to look to alternative ways of making money. What could be simpler than utilising your own home.

For years, we have stripped those floorboards, dipped our doors and painstakingly restored those thickly painted banisters and dado rails. As a nation of home improvers, we plough hard earned cash into our homes, either, for our very own ‘restoration project’ or simply just paying off our mortgage. So perhaps it’s time to make our homes pay us back. Listed below are a few ways in which we can maximize some payback from the very property that we have so lovingly nurtured.

1. Rent out empty space

Have all the chicks flown the nest? Are you looking at an empty room or two? If so why not rent out those empty rooms. The key is obviously finding the right person to let into your home. If you live in London or another big city, you could let to a commuter who needs a room only during the week. This is a growing market; You should charge 60% of what the rent for the whole week would be. Either way, provided the room is furnished, the first £4,250 per year you make is exempt from income tax under the government’s Rent a Room scheme.

2. Use the basement or attic

Many Georgian or Victorian terraces have a basement, and creating a flat in this area and renting it out can be a real money-spinner. If you don’t have one, why not dig one out?

You’ll need planning permission to dig a new basement, but request it as an extension, rather than as a separate flat, or you could end up paying two lots of council tax. If things get really tough, you can live in the trendy new basement and rent out the rest of the house. If they get really tight, sell the basement flat.

3. House swap cloudy Britain for sunny anywhere!

Don’t pay to go on holiday – do a house swap instead. You may be pleasantly surprised by what you get in return, especially if you live in a pretty village or tourist city, or near a coast or national park. Once you’re in that Greek villa or Italian apartment, you won’t be worrying about what’s going on back home. Leave detailed instructions on how everything works and what is and isn’t included. You will need to look into additional insurance if this is what you fancy doing.

4. The home office

About three million people in the UK work from home. If you set up shop at home, Revenue & Customs will let you set all sorts of at-home expenses against tax, such as part of your phone, heating and electricity bills. But watch out, If you claim that your home is an office, you may no longer be exempt from Capital Gains Tax.

5. Do you live next to Glastonbury?

If you live near a festival, concert or other event venue, you could make money by turning your home into a temporary B&B. And this doesn’t apply only to those who live in obvious places such as Wimbledon, Cheltenham or Edinburgh. With the ever growing amount of mini-festivals across the country, some-thing is bound to be happening near you. The Ryder Cup for example near Newport, some already claim that their homes are being rented out for £20,000 per week… Can’t be bad.

6. Money from using the great outdoors

Do you have a pool or tennis court that others would pay to use? Do you have a nice garden, with room for tables and chairs? Organise sports days. For a fee, tennis and swimming could be on the agenda. If you live in a pretty village or along a walkers’ route, and can bake, running a tea garden in summer can bring in profit for minimal outlay.

7. Use your power

With the average household energy bill climbing to £1,200 a year, your house should be working harder to save you money. Install enough solar panels, wind turbines and the like, and you can not only supply your own needs, but sell power back to the grid.

8. Rent out a parking space

If you have off-street parking or a garage that is unused during the day, rent it out – for between £50 and £300 a month, depending on location.

9. Roll film, camera action!!

Is your house interesting and photogenic? Film companies, advertising agencies and magazines are always looking for new locations. Handing over your home to a photographer or film crew can net you £500-£3,000 a day. Large and open-plan spaces in and around London are most in demand, but scouts look for properties all over the country, including terraced houses and cottages.

10. If it becomes desperate…

If you are fortunate enough to have a large garden, and can bear to lose a part of it, why not parcel it off for development. Sell of that piece at the bottom of the garden, sit back and relax. Of course its not as simple as it sounds, but it may be an option.