Darling promises to spend his way out of a recession

In the midst of the global credit crisis, Alistair Darling has turned to the lessons of the Great Depression by promising to spend his way out of a recession.

Citing John Maynard Keynes, the ‘greatest economist of the last century’, the chancellor said he wanted to bring forward multi-billion-pound projects to create jobs now as recession looms.

According to the Sunday Telegraph, Darling said: ‘This is a time when you have to support the economy. You will see us switching our spending priorities to areas which make a difference. What I want to avoid is getting ourselves in a position governments have done in the past where you face an immediate problem and cut back on the things the country will need in the future.’

Among the projects that Darling signalled could be brought forward are the £16bn Crossrail project, the Trident nuclear missile replacement, investment in social housing, and the potentially £45bn upgrade of all secondary schools. Doing so could create about 500,000 jobs at a time when the private sector is laying off staff.

Gloomiest report yet on how recession will hit householders

Britain’s economy is not expected to fully recover from the current financial crisis for three years, according to Ernst and Young Item Club which said that the UK economy is already in recession after it ‘deteriorated dramatically’ in the past three months.

It forecast it will shrink by a further -1% next year before starting to recover. Its latest report warned that widespread cuts in investment and employment are ‘inevitable’. It predicted another 500,000 people will lose their jobs and that unemployment claims would hit 5% by the end of 2009, which is double last year’s rate.

Consumer expenditure on everything from food, clothes, holidays, household bills, home improvements and entertainment was expected to fall 1.2% next year and increase by just 0.2% in 2010 before growing by 1.9% in 2011. In addition, the forecast on house prices was that they would fall by an average of 14% by the end of 2008 and drop a further 10% next year.

The report, which is the most gloomiest assessment yet of how the impending recession will hit householders, was not seen as good news for Prime Minister Gordon Brown, who has to call a general election by May 2010 at the latest.

Gross mortgage lending down by -42% from September 2007

Gross mortgage lending reached an estimated £17.7bn in September, a decline of -10% from August and -42% from September last year, according to the Council of Mortgage Lenders (CML).

Gross lending for the third quarter is estimated at £62bn, down -16% from the second quarter of 2008 and -37% from the third quarter of last year.

A seasonal fall is typically experienced between August and September. However, £17.7bn is the lowest gross lending figure since January 2005 and the lowest September figure since 2001.

Michael Coogan, CML director general, said: “The mortgage market is open for business. But weakening consumer demand and ongoing funding constraints will dampen monthly lending figures for the rest of this year and into the first quarter of 2009. We estimate gross lending in 2008 will be around £255bn (£363bn in 2007) and net lending of around £40bn (£108bn in 2007).”

Savills profits decrease due to deteriorating conditions

Savills has warned that profits will be below the consensus forecast as conditions in both the commercial and residential property markets have deteriorated in the past few weeks.

Analysts had expected underlying full-year profits of about £48m but recently Savills warned that ‘in light of weaker economic conditions we expect underlying profit before tax to be below the current range of analyst forecasts’.

Revised estimates suggest that profits could be down as much as 20%, at about £40m for the full year. The company reported a first-half pre-tax profit of £19m and analysts expect the second half to deliver similar returns. Traditionally transactions-based estate agencies such as Savills make most of their money in the latter half of the year. RBS Hoare Govett recently predicted a further fall in profits to £34m in 2009.

Jeremy Helsby, Savills’ chief executive, warned that the events of the past few weeks had led to a weakening of the commercial property market in particular. Investor confidence has been severely impaired by the turmoil in financial markets, he said, and there had been a sharp reduction in transaction volumes.

NLA and ARLA unite to condemn agents ridiculing tenants

The National Landlords Association (NLA) and the Association of Residential Letting Agents (ARLA) have joined together to roundly condemn any practices which ridicule and humiliate tenants.

Recent media coverage of a letting agent who has started erecting signs on the properties of tenants who have failed to pay their rent has shocked many property professionals and attracted much criticism. There have also been questions raised about the legality of this practice.

Ian Potter, head of operations for ARLA, said: “This is almost certainly an illegal activity, contravening data protection and planning laws. Apart from that, what do the agent and landlord expect to achieve, and how do they think they will appear to the majority of people in the street? Taking the law into your own hands is dangerous in many more ways than one.”

David Salusbury, agrees, adding: “However, there are legal channels available for landlords to gain possession if absolutely necessary. The law is on the side of landlords in this situation but the courts can be slow to deliver, with delays of six months not uncommon. Despite these frustrations, we strongly advise landlords against supporting this kind of behaviour. It is fundamentally a flawed idea.”