BRITAIN'S RACIST AND RIP-OFF LANDLORDS

The Rachman era returns

Forget the market-rigging bankers, the phone-hacking journalists and the bribe-taking police. What about the rip-off landlords who bring shame on Britain? Yesterday, two shocking bits of news came to light.

First, the London borough of Brent announced its crackdown on “Beds in Sheds”. In the past three years the council has issued 84 planning enforcement notices against home-owners who rented out their garden sheds to desperate tenants, so now it wants to put a stop to this exploitation once and for all.

Second, it turns out many landlords are racists – a BBC investigation of London and Birmingham landlords has found some choose tenants on the basis of race. For example, their adverts say tenants “Must be Bangladeshi, Pakistani, Indian” or “Filipino only” or “Sri Lankan professional couples”. The BBC and Letting Agent Today ask whether these landlords are breaking the law? Well, if they aren't, then they darn well ought to be. Weren't the days of “No dogs, no blacks, no Irish” supposed to be long gone?

Britain's landlords are developing a shocking reputation. Increasingly the worst among them make headlines for the wrong reasons – intimidating tenants, operating dangerous boilers in rental properties, evicting tenants to replace them with higher paying Olympics visitors are some examples of their outrageous behaviour. No wonder the London Borough of Newham and the Welsh government want landlords licensed. That way the Rachmanesque among them can be weeded out.

Yes, many landlords are decent human beings who provide decent accommodation at a decent price. But the private lettings market is becoming so tainted by criminality, incompetence and greed, that it is time for decent landlords to stand up and take action against their corrupt peers. The National Landlords Association's Code of Practice whilst laudable is not enough. The body should support landlord licensing or, at least, a landlords register to professionalise the sector fully. Scotland has a landlords register and limited licensing system. Time to extend that across the rest of the United Kingdom.

POLLUTION WILL AFFECT HOUSING MARKETS

What price clean air?

In Rio the politicians are discussing how to save the planet. In Hong Kong a friend has posted a facebook status update which shows in graphic detail how our survival on this planet is threatened. It gives a link to a University of Hong Kong website http://hedleyindex.sph.hku.hk/home.php which shows smog in Hong Kong today (June 20^th) at levels the World Health Organisation considers “Very Dangerous” owing to northerly winds blowing China's industrial air pollutants southward. Four Hong Kong people will die today because of this pollution the university's School of Public Health forecasts. Air pollution in Hong Kong has exceeded safe levels for 139 out of 171 days so far this year.

What has all this got to do with property you may ask? Well, one of the reasons why I moved away from Hong Kong in the 1990s was because of its worsening air pollution. My departure has barely made a nano-dent in the territory's demography, because vast numbers of Chinse have moved into Hong Kong since I left, pushing up its population by about a million, so this means pollution has not stopped Hong Kong from continuing to expand and this has provided knock-on benefits for its economy and the value of its clearly much sought-after homes. However, many more individuals may leave Hong Kong in future and this could have an impact on its housing market.

As Hong Kong University's research shows, the cost of treating pollution-related diseases and the loss of productivity has drained HKD18 billion (GBP1.5 billion) from the Hong Kong economy so far this year. And the problem is worsening. As the costs to people's health and businesses mount up, so a tipping point will be reached where more non-Chinese leave Hong Kong for a place where they can breathe, and reduced numbers will want to move there. That will have a negative affect on the territory's economy and that, plus the direct affects of reduced housing demand, will have a negative affect on its property market, especially at the upper end which overseas corporates favour for accommodating expatriate staff.

Admittedly, we could be talking decades, certainly years, but if current trends continue then this will surely happen eventually. Another caveat, Chinese immigration, which forms the vast bulk of people moving into Hong Kong, is unlikely to be affected, because they come from a place that is no less polluted. And yes, Chinesification could fill the gap left by departing expatriates, but Hong Kong is a trading city that depends on its oversess links. What's more, many of those Chinese and Hong Kong residents who can afford to leave will do so.

What may happen in Hong Kong could be replicated in other locations across the world, wherever air pollution, rising water levels, extreme weather and other environmental disasters become overwhelming. And while those locations suffer population loss and economic decline, the safe havens where people move to will see increased pressure on housing stock. If not enough homes are built to keep up with the demand from incomers in these locations, then sales prices and rents will rise. Of course, if the world's environmental problems are sorted out then none of this may happen.....

IMPACT OF POLITICS ON PROPERTY MARKETS

...it grows bigger every day...

Not since the fall of the Berlin Wall have politicians had such a big impact on property markets. The end of state Socialism in eastern Europe in the late 1980s and early 90s allowed for the return of private property ownership there and in China, while in Britain and the United States this transformation coincided with conservative politicians striving to create "property owning democracies" in which tenants could become home-owners.

Today, politicians who reform housing markets do so more through pragmatism than idealism. By raising property taxes the Chinese government has ruthlessly engineered a downturn in its property market to squeeze out inefficient property companies. The Hong Kong, Taiwan and Singapore authorities have introduced taxes and buyer restrictions to cool overheated housing markets too.

In Europe, the Portuguese government will administer the economic equivalent of CPR to its recession-blighted construction sector this month (June) by allowing landlords to raise rents for the first time in 30 years, so they can fund building improvements. Politicians had been putting off this reform for 25 years, because they didn't want to be confronted by angry tenants.

Politicians are impacting on property markets in unintended ways too, sometimes far from home. Property prices in prime central London are higher now than they were during the previous market peak in 2007, because of a house price boom fuelled by an influx of Greeks escaping political meltdown in Athens, French avoiding newly elected President Hollande's planned tax rises, Russians fleeing arbitrary rule under re-elected President Putin, Chinese escaping corruption and autocracy in Beijing and Arabs leaving behind political turmoil in the Middle East.

This politically-driven flow of wealth across the world can have political repercussions in the safe havens where it is directed - in Switzerland, citizens have voted to limit foreign home ownership to 20% in tourist areas, because they are fed up with first-time buyers being priced out of the housing market by wealthy incomers.

The grand projects of politicians may even touch on London's safe-have reputation in two years' time. At the behest of the Scottish National Party, Scotland will have a referendum in 2014 on whether to become independent - although according to opinion polls only 40% of the country is currently in favour of full devolution. If the Scots do vote "yes", then there will be wrangles between Scotland and the remainder of the United Kingdom over who owns which North Sea oil fields and is responsible for the debts of Edinburgh registered banks like Lloyds and Royal Bank of Scotland. The arguments will create uncertainty, which housing markets don't like. Resolution of the arguments could see one or both newly separated countries less well-off or better-off than before, which will have a knock-on effect on their housing markets.

An understanding of economics has long been recognised as useful when analysing the world of property - all those GDP numbers, interest rate stats, construction data and other facts and figures have a bearing on which way a housing market may move. Now, with politicians having an increasingly big impact on property markets, intentional or otherwise, it pays to have an understanding of politics too.

I wrote this blog piece for property consultancy, Knight Frank's Global Briefing, published today.

http://globalbriefing.knightfrank.com/post/2012/06/07/The-growing-influence-of-politics-on-global-property-markets.aspx

BUILD MORE TSUNAMI-SAFER HOMES

....they save lives

Today's Tsunami warning in the Indian Ocean is a reminder that we need more flood resistant homes. The Japanese Tsunami in 2011 and the Boxing Day Tsunami of 2004 that swept across the Indian Ocean from Indonesia to Africa destroyed tens of thousands of homes and killed thousands of people. That most of the world's population lives on or near coastlines makes the problem more acute.

Fortunately, architects and engineers are designing homes that can resist powerful tsunami waves. The Prajnopaya Foundation charity is building 1000 tsunami-safe(r) houses in Sri Lanka to replace homes destroyed by the tsunami in 2004. Designed by scientists at the Massachusetts Institute of Technology and architects at Harvard Design School, they are intended to survive a ten meter-high tsunami like that which hit Japan last year.

Fixed to firm foundations, the tsunami-safe(r) house stands on stilts and its doors and windows are arranged in a line, so water can run straight through, under and over the building. The doors and windows get blown away, but the house remains. True, it would need to be redecorated and re-furnished after being hit by a wave, but that is easier than complete reconstruction. Moreover, survivors can continue to have a roof over their heads in the aftermath of a tsunami when flood waters have subsided.

In addition to protecting against tsunami we need to design homes to cope with storm floods and rising sea levels. Architects are coming up with many designs to protect against these dangers, including several already mentioned in this blog – see BUILD MORE FLOATING HOMES (14^th March 2012). Others include Flood House, a two storey land-based home designed by British architect, Pippa Nissen.

Flood House allows water to enter the ground floor while residents can continue to live on the upper floor. The kitchen, bathroom, living room and spare bedding would be on the upper floor where self-contained utilities, including electricity generator and water storage, would continue to function. The ground floor's one meter-high concrete dado wall makes it easier to clean after a flood. Flood waters would have to rise beyond two meters before the upper floor is inundated.

So, even if floods do become a growing problem across the world, an increasing number of flood and tsunami-resilient homes are being designed that would allow people to enjoy living by water, but without actually ending up in it. All that's needed is for planners, politicians and developers to help make these designs a reality. Many lives will be saved by doing this.

THE WEALTH REPORT - IMPLICATIONS

How safe are safe havens?

The rich are getting richer and the poor poorer, and the rich are retreating to the citadels leaving the wasteland to the poor - this could be a particularly dark interpretation of the findings revealed in The Wealth Report published by banker, Citi, and property consultancy, Knight Frank, yesterday, but in my opinion, summarises where the world is headed.


There are more centa-millionaires, HNWIs with more USD100 million or more in assets, living in Asia than in the West now, and the world's centre of economic gravity has shifted from the mid-Atlantic to somewhere over Turkey and Russia, and will be firmly in India and China by 2050, the report tells us. But it also reminds us that these Asian centa-millionaires, along with HNWIs from across the developing world are using much of their money to buy homes in London, New York and Paris, because they feel safer there - these cities are politically stable and enjoy the rule of law.


Economic growth in the developing world is not solving all of its problems, rather it is masking many of them, like poor governance and corruption, and worsening others, notably environmental degradation. The rich know that. That is why 60 per cent of Chinese millionaires (calculated in British Pounds) are either leaving China or considering doing so. Who feels safe living in a country where you can be arrested, tried and executed within three days?


As The Wealth Report shows, South American HNWIs are heading to Miami, the Chinese to Hong Kong and everyone to London. That's great news for estate agents and vendors in these and other recipient locations, including Monaco, Cote d'Azur, the French and Swiss Alps, Sydney and Auckland. The trouble is that with so many HNWIs arriving the natives are getting restless. Britain has increased stamp duty to 7 per cent for multi-million pound homes, which are mostly bought by foreigners, and the Swiss have voted in a referendum to limit the number of holiday homes in tourist areas to 20 per cent of housing stock, because locals are fed up with being priced-out of the housing market – great news by the way for owners of existing Swiss holiday homes, because their assets have suddenly attained rarity value.


These tax increases and construction caps are mild however, and in themselves little to worry about, except that they could be the start of something more ominous – growing resentment of wealthy foreigners. As any politics lecturer will tell us, when you have one line of division (nationality) compounded by another, (contrasts in wealth), then the potential for conflict becomes exponentially worse. The Occupy Movement has focused on banks, but it would not take a great leap of the imagination to see its supporters outside under-used and over-furnished, luxury flats at One Hyde Park. Squatting has been on the rise across the world for several years, another sign that we need to close the gap between rich and poor. Inward investment should always be welcomed, but it must benefit the locals. That is the only way to ensure real, lasting security for wealthy outsiders moving into “safe havens”.

BUILD MORE FLOATING HOMES

....they are getting prettier

We love living by water, but not on it. If we can overcome our primeval desire to live on dry land, then we could partly solve two big problems – the housing shortage in cities and the affects of flooding.

Most cities are built by bays or rivers – these are a rich, mostly untapped source of residential “land”, ample space for floating homes. Unfortunately, few people are attracted to the idea of living like“sea gypsies”. The image of a floating home is bad – depending on what part of the world you come from, it might be a narrow boat too small to pirouette in, a trailer-trash home on a metal tray, a converted fishing boat or another piece of cramped, cough-and-cold-inducing residential flotsam or jetsam.

But times are changing– architects are designing warm, dry, spacious and exciting homes that float. Architects in the Netherlands are leading the way. Studios, like Aquatecture, have designed attractive floating homes, pictured here, for Dutch canal dwellers. And outside the country's ring of dikes, 46 floating homes were created at Maasbommel by the DuraVermeer Group in 2005 – securely attached to moorings they go up and down with rising and receding flood waters – they survived a nationwide flood in 2011.

British studio, Baca Architects, has designed Britain's first amphibious home next to the river Thames, which will be built by the end of 2012, and the country's first floating community at a Glasgow marina, scheduled for completion in 2020.

Over the coming decades, floods will become more frequent, because of rising sea levels and fiercer storms resulting from climate change. Meanwhile, housing will become increasingly sought-after and expensive in cities, because the production of new homes can't keep up with the reproduction of humans, and there is a finite amount of land available. Yes, we can keep building upwards, build on green fields or reclaim more land from the sea, but creating floating homes is quicker, less expensive and less environmentally damaging. They can also be fun to live in.

WILL CHINA BUY IRELAND?

Last week, China's vice president visited Ireland to discuss how it could become Beijing's "springboard" into Europe. Is fact following fiction? Last April Fool's Day I wrote something suitably stupid, but now it seems less so.....you decide......here it is again below.....



CHINA BUYS NORTHERN IRELAND

Following several months of secret negotiations, China has bought a 100 year lease on Northern Ireland from the British government. The GBP70 billion deal wipes out Britain's national debt and gives China trading and political benefits, including membership of the European Union.

The transfer of power is expected to take place on May 1st, 2011.

The Republic of Ireland has guaranteed not to challenge China's annexation of Northern Ireland in exchange for China agreeing to pay off the Irish national debt. All Ireland's nationalised and part nationalised banks will be transferred to the Bank of China as part of the deal. This will enable the Chinese to develop banking operations in Europe.

Sources close to Beijing say the Chinese will develop Northern Ireland into a low tax manufacturing, logistics and trading centre.

The Northern Ireland assembly will go into emergency session today to discuss the plans. In an unusual show of unity all of Northern Ireland's parties are said to be against the deal.

A spokesman for the British government said "this historic agreement will ensure Britain enjoys a bright economic future. There will be benefits for the people of Northern Ireland and for all of the people of the British Isles from having China invest its national surplus on our shores. It will secure jobs, bring peace and create economic growth for years to come."

A spokesman for Northern Ireland's biggest politcal party, the Democratic Unionists, described the deal as "utter foolishness".

(first published on April 1, 2011)

THE WORLD'S EMPTY HOMES

.....and how to fill them

The world is being taken over by ghosts. The other day a London estate agent spoke about “ghost areas” in Knightsbridge which were empty much of the time, because most property owners were foreigners who only spend a few weeks of the year in the British capital. China has “ghost districts”, entire neighbourhoods of brand new empty apartment blocks bought up by investors who refuse to let them out, because a lived-in home has less value than a “virgin” property.

These London and Chinese examples of ghost area are caused by people with wealth buying additional homes, sometimes three, four or more. There is another type of ghost area in the world caused by an opposite, but equally powerful force in housing markets – loss of wealth. An example of this can be found in Ireland, where “ghost estates”, completed or half-completed housing developments from the noughties housing boom, ring the capital, Dublin. These lie empty, because an insufficient number of people in Ireland can afford to buy one home, let alone two, three or more. There are examples of this in California, home of the original “ghost towns” that were once the boom-towns of nineteenth century westward expansion, and in Spain where one million homes lie empty, mainly because foreigners can't or won't buy property in a debt-laden, economic disaster zone.

Isn't it odd how boom and bust housing markets can share a common characteristic – empty homes? And isn't it interesting how we label all these empty homes, estates, areas, districts and towns with the word “ghost”? Irrespective of how and where these empty homes appear, a common desire among those concerned with homelessness, community-building and economics is to see them filled with people.

A rebalancing of the global economy, wealth and perspectives would seem to be the way to fill empty homes. There would be fewer “virgin” flats in China if owners let them out, because they needed income. There would be fewer absentee home-owners in London if they were taxed more heavily. There would be more occupied homes in Ireland and USA if people could afford to buy or rent them. There would be more occupied holiday homes in Spain if austerity wasn't eating into European budgets.

Of course, the march of time means a rebalancing of global trends would not be enough in some cases – the ghost towns of nineteenth century America became empty, because they became obsolete. Time will tell how many early twenty-first century ghost areas are obsolete. Knightsbridge is likely to survive for a long while yet, because it is at the heart of a global financial capital. The future looks less promising for some of those empty, Spanish housing estates however.

LONDON'S UNPOPULAR LANDLORDS

The city's private rented sector is a political battleground

News that some London landlords want to evict tenants, so they can re-let to Olympics visitors at many-times-the-usual rent, will surely feature in next May's London mayoral election. Several mayoral candidates are gunning for landlords.

Liberal Democrat candidate, Brian Paddick, says property investors have priced-out first-time-buyers from the sales market, and Labour's, Ken Livingstone, currently leading in the polls, has challenging policies for landlords - he wants rent controls introduced - no Londoner should pay more than one-third of their salary in rent he says. At the moment, it is 50 per cent in two-thirds of London boroughs. Even sitting Conservative mayor, Boris Johnson, wants reform – he supports an accreditation system for landlords that will distinguish the good from the bad.

The politicisation of London's private lettings market has been stoked by the London Assembly, the body that monitors the mayor and champions causes of concern to Londoners. Its report Bleak Houses states one-in-three landlords are "rogues" and that one-third of private rented housing is below standards considered acceptable in the social housing sector.

Conditions suffered by some private tenants are Dickensian – noise, overcrowding, insanitary conditions and landlord harassment. Piled on top of that are high rents - they remain close to the record high achieved in 2011, and yet incomes are being squeezed, jobs lost and taxes raised. Meanwhile, many landlords benefit from tax allowances and low mortgage rates. Such discrepancies fuel tenants' resentment and their desire for revenge or, at least, reform.

Some landlords play down the politics. Yes, a Parliamentary vote may be needed for Livingstone to introduce rent controls and he is unlikely to get that, but that is not the point. Landlords will not be let off the hook in May - one-quarter of Londoners are private tenants – that is a lot of voters, so politicians will want them on their side.

To help save landlords from being pilloried by Londoners, the National Landlords Association ought to take the initiative by calling for all landlords to be licensed (much stronger than accreditation), so only responsible investors are allowed to let-out property. Removing rogues from the scene has two advantages for competent landlords – less competition and an improved public image. A landlords licensing system is being piloted in Newham. The NLA ought to do more to help it succeed.

A TALE OF TWO SALES

Time for some home truths. Attempting to sell my flat and helping my mother sell her house has revealed some worrying aspects about the British property market.

Number one: My own sale. It took six weeks for my Home Information Pack (HIP) to be delivered, when it is supposed to take two weeks.

It has been illegal to put a home up for sale without a completed HIP since April, so theoretically my flat could not be marketed during that long wait. As it was, my estate agent was not too fussy and started marketing my flat without a HIP. Needless to say, not a single viewer asked to see a pack during those six weeks.

Such lax attitudes might be enough to worry some people, but there is a bigger issue which ought to concern everyone. HIPs were intended to speed up the sales process, but if it takes six weeks for a pack to be prepared, then the system is failing and actually slowing the process down.

This raises another question: If HIP providers are failing to produce reports on time now, when there are so few sellers in the market, how will they cope when the market gets busy again? Will this added bureaucracy make the housing market even more inert?

Number two: My mother's sale. Two buyers made offers on my mother's home and both asked surveyors to value the house for them. Only 17 days separated publication of these surveyors' reports and yet their valuations differed by 25 per cent. There were no sudden shocks to the market in the days between these valuations and no secrets about the house revealed that might affect its price. So what could explain such wide variation in these valuations?

The lower of the two valuations could be explained by good, old-fashioned backside protecting. Some surveyors have been criticised for giving low valuations in recent months so they can avoid being sued by mortgage lenders if prices fall further.

In both cases, the prospective buyers paid these surveyors in excess of £1000 for these reports. Was that money well spent? Did these highly qualified, independent professionals know their job? Are they really better than anyone else when it comes to property valuation? Bluntly, are they useless?

The wide variation in those valuations reveals an unwelcome home truth. It shows that pricing a property is a guessing game. Yes, investors will use yields as a scientific way to determine a home's value, but for a great many owner-occupiers, emotional factors dominate: “Will that home make me happy” they ask themselves, which is absolutely the right question.

Estate agents valuations which, we all know, vary widely and surveyors valuations which do too, apparently, are merely rough guides, and are useless when it comes to putting a value on individual domestic happiness.

Put another way, the value of a home depends entirely on what it is worth to the person buying it and to the person selling it, it is entirely an individual matter. That is why my mother will pay over the odds, in many peoples' opinion, for her new home, a mansion block flat, because its location, lightness, airiness, spaciousness and working fireplace are worth so much more to her than others it seems.

We won't bother to have a surveyor value it. She doesn't need a mortgage and the money will be better spent on putting right small things and making it look nice. We haven't seen a HIP for it either. Chances are, it's not published yet. In any case, sometimes, intuition can be more useful than thousands of pounds worth of professional advice and a vendor's half-truthful answers on a HIP's Property Information Questionnaire (PIQ), and it's free. It's less of a bureaucratic mouthful too.

(All The World's a Home : Global Property News)

BOOM OR BUST?

Well, it's time to take stock. Prices are rising rapidly in a number of locations – they are up 20 per cent in Shanghai and Hong Kong since the start of this year. Up by half for some homes in Seoul, South Korea. They are up by a relatively modest 4 per cent in Switzerland, where the top end of the market is doing most well. In Britain, prices have been rising for several months, also mostly for multi-million pound luxury homes.

Is this the start of a sustained recovery in housing markets or just a mirage? Well, China and South Korea do seem to be enjoying something of an economic resurgence courtesy of their respective governments' financial stimulus packages. There is a danger they may overdo it and the resulting spirals of speculation, inflation and oversupply turn recently turned busts-to-booms back into busts again.

Hong Kong's economy is still in a dire state, so its property market upturn may be premature. However, when those Chinese exports start pouring through its port again, the economy may bounce back, and quickly. But first, the rest of the world must want China to make its cars, clothes and other stuff in vast quantities again.

In London, financiers are on course to make £4 million in bonuses this year. Traditionally, a large chunk of this bonus money goes into luxury houses, penthouses and manor houses. This year will be no exception. Indeed, property may be more popular than ever, because of its reputation for being a secure investment. Looming public sector cuts and tax rises after the next year's general election will suppress the mass market and may dampen the luxury market in the longer term.

Switzerland is a safe haven for the rich, so it shall continue to attract the wealthy from Britain and other countries where governments are looking for bankers, stockbrokers and others like them to pay a fairer share of tax. Possibly, Switzerland's boom is the most sustainable, because there are still plenty of rich in the world despite the economic downturn. All the Alpine state has to do is lure them in with the promise of shelter, a policy it has pursued with great success for decades. Markets may come and go, but there will always be people in the world who are rich.

You can read more about what is happening in the property markets mentioned here by reading recent entries on this blog.

(All The World's a Home : Global Property News)