SIGNS OF RECOVERY IN THE NEW HOMES SECTOR?

Properties currently on the site include townhouses in Rusholme, South Manchester, apartments in Stockport, and holiday homes in Cornwall, Anglesey and the Yorkshire coast.

:: INFORMATION: Assetz is on 0845 400 9000 and www.assetz.co.uk.

ARE SHELL-SHOCKED HOMEOWNERS KEEN TO TRADE DOWN?

Was the surge in viewings of homes for sale reported by many agents across Britain in January triggered by the "reverse ladder" effect - people trying to trade down the market to cut their exposure to the financial crisis?

That's the theory of Trevor Kent, whose single office agency is based in Gerrards Cross, Buckinghamshire, the priciest housing which has the priciest homes in Britain outside London.

"Around 60% of viewings in recent weeks have been by people who want to sell their present home and buy something smaller to cut borrowings", he says.

"One property in this area which went on sale for £600,000 before Christmas attracted 28 viewings - and not a single offer.

"Most of the viewers were living in more expensive properties. They will only make offers when they get a firm offer on their home."

Kent fears that a "top end glut" of properties for sale by owners trading down may be nearly as big a danger to the market as the problem at the other end - first time buyers unable to get a mortgage.

He says other over-extended homeowners will rent out their more expensive homes - and rent another for a lower figure.

Some owners might get £4,500 a month for their home - to rent elsewhere for around £1,500 to unlock £3,000 cash each month.

However, other agents don't see a mass exodus - yet - from the top end of the market.

Peter Rollings, managing director of leading London agent Marsh & Parsons, says: "Some clients are downsizing. One vendor put his house on the market with us today and asked us to find something smaller.

"Another wants to sell a four bedroom house in Kensington to buy a flat close by, along with a place in the South of France. But that is not typical behaviour. Certainly people are selling to put money in the bank and cut mortgages."

But Marsh & Parsons also saw a one bedroom flat in Holland Park's desirable Norland Square sell after inviting sealed bids.

Peter Rollings says: "The flat was probably worth £650,000 this time last year and was on with another agent at £450,000 at the end of last year. We put it on at £495,000 and within two weeks we had five bids with the eventual price of £500,000 being achieved.

"Quality does not come cheap and many more buyers are showing interest," said Rollings.

James Hyman, residential partner at agents Cluttons, says: "The economic case for of selling up and buying a cheaper property straight away does not currently stack up.

"People are taking their own view of the market by selling now and going into rented accommodation with the intention of buying again later at a lower price," he adds.

"It is more advantageous to use the current market to trade up.

"Even taking into account a hit on the sale price and other costs such as stamp duty, clients are more willing to accept a loss if they see they are making a gain on their onward purchase.

"It may mean they can trade up to a larger property in a better area that 18 months to two years ago they could not afford to do."

Housing expert Henry Pryor says that an analysis of sale volumes in expensive areas does not indicate many owners at the top end of the market are trading down.

"In Central London, the latest month for which we have Land Registry figures - October 2008 - shows sales above £1m down 66% on the same month in 2007.

"People usually occupy expensive properties because they are canny. I do not expect them to panic and move rapidly back down the market in response to problems so far.

"Figures currently show around 12,500 sales recorded so far in December 2008, against 49,000-plus in December 2007.

"I would say most viewings in the market are by people not relying heavily on mortgages, and others leveraging to complete their move. They are looking to use capital which they have built up, and are buying because they are confident that they can afford to do so", says Henry Pryor.

INSURANCE BOND CAN REMOVE NEED FOR TENANT DEPOSIT

Repossessions are rising in both the private and public rented sectors as tenants run short of cash, mirroring the sharp rise in repossessions among owner occupiers. So landlords are increasingly looking for ways to secure their income as the credit crunch tightens.

Tenants are feeling the strain too when they try to find a property they can afford.

To ease the tensions, a new product has been devised - the tenant Performance Bond (TPB) intended to remove the need for a deposit altogether.

Simon Cutting, TPB managing director, says: "Some 2,500 new tenancies are agreed each day in the private rented sector - and in these uncertain times, tenants can find it difficult to raise both the first month's rent in advance, and another month usually required as deposit.

"Government statistics show the typical monthly rent in the UK is £800 - which could mean tenants stumping up £1,600 to move in. That's difficult for many tenants to find in grim economic times."

Cutting says the TPB will make landlords' income more secure - and remove the need for a deposit. He predicts that letting agents will use it to gain access to a wider range of potential tenants - because they no longer need to raise a four figure lump sum before they can move in.

Since Government introduced its Tenant Deposit Protection Scheme in 2007 - to prevent rogue landlords from grabbing it - many landlords have wanted to scrap deposits altogether.

But deposits remain a useful cushion for landlords when lettings go wrong, or to repair damage at the end of a tenancy.

The TPB is issued only after after tenants have been vetted: it costs a minimum £75 for a six month Assured Shorthold Tenancy, and £100 for a 12-month agreement.

In most cases, says Cutting, the cost of the TPB can be passed onto tenants. Most will happily pay it, because it is better for personal cash flow than paying out two months' rental before they move in.

If a tenant loses his or her job and cannot pay the rent, the landlord is covered for up to three months of rent. The same cover applies if tenants damage the property.

The TPB is underwritten by Red Sands Insurance Co (Europe) Ltd, an FSA-registered insurer which is part of the Financial Services Compensation Scheme.

Maximum payout by the TPB is usually three months' rent. However, if the premium is increased, to around £105 on most tenancies, the limit rises to six months' rent.

So far as the problem of damage caused by animals is concerned - often a sore point between landlord and tenant - the TPB may cover for damage caused if a tenant moves in without mentioning their pet.

Cover is not available for animal damage where tenants declare a pet at the start, and the landlord accept it.

How does the TPB compare with other products available to landlords to secure their income?

In the past year Let Insurance Services (LIS) has offered standard cover for landlords which is usually paid for by letting agents within their commission charge; the cheapest LET policy covers five months of rent for a minimum £60 premium for a six month policy.

For a higher premium, LET offers a 12-month policy, and may also cover the rent for the two months after vacant possession has been regained.

According to a leading letting agent: "Courts are taking a more lenient line on tenants who stop paying rent, so it is taking 4-5 months to get some of these tenants out.

"It is also useful to guarantee the rent for those two months after problem tenants has left - because many areas have a surplus of homes to rent, and it can take time to find another tenant."

:: INFORMATION: Tenant Performance Bond (0845 094 5647 and www.TenantPerformanceBond.com); Let Insurance Services (0844 478 0202 and www.letinsurance.co.uk).

AGENTS WILL BE HIT BY FORCED SELL-OFF

Estate agents in towns and cities will soon face the task of selling off hundreds of properties confiscated by lenders from buy-to-let investors unable to meet the mortgage repayments, claims a leading insolvency expert.

Nick Hancock, corporate recovery partner at national accountancy group UHY Hacker Young, says: "Around 50% of property portfolios placed into receivership are owned by individual investors, while the other 50% are owned by property companies and syndicates of buy-to-let investors."

Hancock believes that the number of repossessions going on sale will massively outnumber the total seen so far. If he's right, this will impose more downward pressure on prices.

There is no official record of properties taken back from investors - because they are carried out under the Law of Property Act 1925 which has never subsequently been updated.

"The law is only valid in England and Wales," he says, "and means property can be taken back as soon as there is a breach of the repayment terms initially agreed.

"Some lenders use this power within a day or two of a payment default, but largest banks and building societies may leave it for two or three months, sometimes longer, in the hope that owners sort their problems out".

Nick Hancock estimates that hundreds of properties - a range of commercial premises, besides homes - are being repossessed under the 1925 Act each week.

"In many cases," he says, "investors have used rental income to maintain their lifestyle, not to maintain properties. Others in the financial world used bonuses to buy more property; as they lose their jobs, they can't hope to keep portfolios going."

One portfolio of 100 homes in North Manchester, let mostly to tenants living on Social Security payments, was collected by a British Gas service engineer who succeeded with his first two properties and decided to expand fast.

He could have borrowed as much as £8.5m - while his portfolio struggles to find a buyer at £6.5m!

Nick Hancock claims that Bradford & Bingley handed 600 properties to a leading agent in Halifax in December, to secure sales as rapidly as possible.

Although individual owners will be chased by banks if prices achieved by the sale fail to pay off their original loan, investors who bought properties through private companies may be much harder to chase - especially if they used offshore companies.

UHY Hacker ensures that all properties which it puts on sale are properly maintained. When repossessed homes are in a poor condition, the company restores them to a habitable condition before offering them for sale.

The choice is wide: pubs, flats, warehouses, offices, houses, cold and chill stores used by transport firms. Anything which could be easily sold to investors on the way up is back on the market as values crash.

Many receiverships handled by UHY Hacker are in the North-West, especially in and around Manchester: values have been particularly hard hit on the city's fringes where there is a prevalence of rented, often poorly maintained property, and where there aren't enough tenants to support interest payments which many investors have to make.

But Nick Hancock warns: "Many potential buyers still have cash out there, and want to get something for nothing. We are not prepared to sell at ridiculously low prices.

:: INFORMATION: UHY Hacker Young properties are mostly sold through landwood Group (0161 836 2109 and www.landwoodgroup.com).

Nick Hancock can be contacted by email to n.hancock@uhy-uk.com.

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