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Mike Goodman

July/August 2009

'Slowly but surely' as recovery looks on course

WE will have to wait until late August and September to find out how the present recovery in the market has fed through to the bottom lines of the major corporates.

Countrywide’s holding company Castle HoldCo4, promises some half year figures in late August, while Savills, LSL Property Services and Rightmove usually follow with figures in early September.

I still have not managed to work out the financial implications for Castle HoldCo4 bondholders of the financial reconstruction approved in May. But it will look good for the profit and loss figures.

I have yet to hear of any major acquisition by Connells, which was enriched earlier this year to the tune of £30 million through the sale of its Rightmove stake.

But Stephen Shipperley, Connells’ group chairman, said late last month: “Recovery is continuing and holding up through June. Our mid-June sales week was the third best sales week of the year.”

I am sure Connells’ competitors enjoy a similar experience. And there is even some good news from the Council of Mortgage Lenders which has revised some of its earlier, and gloomier, predictions. But it’s sticking to its prediction of 700,000 transactions this year, down from 905,000 in 2008 and 1.6 million in 2007.

Why is this good news? The answer is that the heads of some corporate estate agencies have predicted an even lower figure for this year, although I must admit some of these predictions were made earlier this year before the recovery became evident.

Other good news is that an earlier CML prediction that net mortgage lending would contract by £25 milion has been revised to £5 billion.

That still means homeowners are paying back to lenders more than they are borrowing, but it’s a sign the lending market is no longer as seized up as it was last year.

The other CML prediction, the one which grabbed the headlines, was the number of repossessions.

These are expected to total 65,000 compared with an earlier 75,000 prediction.

The new, lower forecast could prove wrong as higher unemployment takes its toll, while Stephen Shipperley makes a good point in forecasting the problem will drag on longer because lenders are showing more forebearance.

He said: “We agree with the CML forecast but the repossession problem will last longer as lenders do everything they can to make individual arrangements so as to avoid repossession.

“Our view is that in most cases this simply puts back the day of reckoning, meaning this year’s anticipated spike will not happen but 2010 and 2011 will be bigger than previously forecast.”
If that’s the scenario, then it might not be too harmful for the market.

A sudden deluge of repossessions creates panic among buyers and sellers, so if the process takes two or three years, the downward pressure on prices will be eased. The upturn will be delayed but it might prove smoother.

Finally, the British Bankers Association reported mortgage figures in late June which further reinforced the evidence of a recovery.

Mortgage approvals totalled 31,200 in May, a seven per cent rise on April and 16 per cent higher than May 2008.

However, net lending rose only £2.3 billion and re-mortgaging was weak, a sign existing owners are de-gearing. The RICS said the figures confirm their reports of increased buyer enquiries. Mortgage approval figures are a forward-looking statistic, as buyers only apply for mortgages and receive approval when they are about to move. This suggests June sales figures for estate agents will be good.

Chesterton Humberts flourish under new branding

IT’S only a year since the Humberts Group crashed and most of its residential offices sold to the owners of Chesterton.

Now, the Humberts name has been well and truly resurrected as the new owners are to brand most of their combined office network Chesterton Humberts.

There are 58 offices across the UK, including 27 in London. There is also a significant international presence with eight offices around the world, including St Tropez, Gibraltar, Mallorca, Lake Como, Singapore, Abu Dhabi, Sydney and Brisbane.

All Chesterton Humberts branches will be rebranded over the next few months, along with the three branches of Wellingtons in Fulham and Battersea, bringing the UK branch network within a single identity.

Only Farleys, in South Kensington, will remain an independent brand while the branch in Draycott Avenue, Chelsea, as reported (above right) will be known as Bodens.

The international offices in St Tropez, Gibraltar, Lake Como, Singapore, Australia and Abu Dhabi will remain Chesterton.

Robert Bartlett, Chesterton Humbert’s chief executive, said the success of the merger was evident. “Combining these two diverse but compatible companies has created a business which is truly greater than its previous parts, an enormous benefit when working through what have been historically difficult market conditions,” he said, adding that currently business was experiencing “a significant upturn”.

And on this upbeat comment I conclude this column. The next one will not be published until early September but in the meantime I hope to report any significant financial stores on our website, as they break.