Commercial property debt in UK set to fall to 10 year low

Picture1Outstanding commercial property debt in the UK is on course to fall to a 10 year low during 2015, declining by 1% in the first half of 2015 to £163.7 billion, according to a new report.

However, strong levels of new loan origination in 2015 mean that the total amount outstanding may actually increase for the first time since the recession, the report from academics at De Montfort University also says.

The half year edition of the De Montfort Commercial Property Lending Report, the most comprehensive study of the UK’s commercial property lending market, concludes that the continuous decline in total real estate debt since 2008 appears to have almost halted and may subsequently be reversed by the end of the year.

The value of new loan originations in the first half of 2015 was £24.7 billion, the highest half year value reported to the research since £49.2 billion recorded for the first half of 2007. In a further sign of commercial property market health, the value of distressed loans fell from £23.2 billion at the end of 2014 to £15.7 billion by the middle of 2015.

The report also show that the proportion of loans with a loan to value (LTV) ratio of less than 70% has continued to grow in the first half of 2015, representing 80.5%, or £135.5 billion of outstanding debt of the traditional lenders and allocated to investment projects.

Outstanding debt with a LTV ratio of between 71% and 100% fell from 14.3% of the total of £20 billion at the end of 2014 to 12% or £16 billon by the middle of 2015.

The first half of the year also showed an encouraging pick-up in development finance, particularly for speculative or partly pre-let projects, where more non-traditional lenders now feel comfortable providing finance against such schemes.

At the same time, the research suggests that banking regulation may be having an adverse impact on development finance by the traditional lenders. At the middle of 2015, only 2.8% of debt was allocated to commercial development projects by these lenders.

Interest rate margins for senior debt continued their three-year long decline but the pace of decline has moderated considerably. By the middle of 2015, the average margin for senior loans secured by prime office property was recorded at 214bps, down from 218.7bps recorded at the end of 2014. The report suggests that that the floor in interest-rate margins may have been reached.

Following a surge in non-traditional lenders in 2014, Banks and Building Societies remained the dominant lenders in the market, holding 76% of all loan originations at the middle year point compared to 75% at the end of 2014. The level of new lending by UK Banks and Building Societies remained stable at 39% of all loan originations.

‘We seem to have reached a turning point in the amount of commercial property debt in the market, with the impact of post-crisis deleveraging almost totally cancelled out by new lending,’ said Ion Fletcher, director of policy (finance) at the British Property Federation.

‘While this suggests things are hotting up, a stabilising of senior debt margins and broadly level LTV ratios indicates lenders remain risk conscious. We are also encouraged to see increased lending to speculative commercial property development projects. These are crucial if we want SMEs to have room to grow their businesses,’ he added.

Source: Property Wire


Accord announce new short-term fixed rates for BTL

accord-BTLAccord Buy to Let has announced a range of short-term fixed rate mortgages for landlords looking to expand their portfolio, with the added incentive of £300 cashback on completion and free standard valuation.

The intermediary-only lender, which is part of the Yorkshire Building Society Group, is now offering a selection of competitive two-year fixes for landlords with a 25%, 35% and 40% deposit.

Highlights of the two-year fixed house purchase range include:

  • a 2.14% mortgage at 60% LTV with a £2,495 fee, £300 cashback on completion and free standard valuation.
  • a 2.29% mortgage at 65% LTV with a £2,495 fee, £300 cashback on completion and free standard valuation.
  • a 2.39% mortgage at 75% LTV with a £2,495 fee, £300 cashback on completion and free standard valuation.

In addition Accord is offering a three-year fixed rate mortgage at 75% loan-to-value (LTV) with a £2,495 fee, £300 cashback on completion and free standard valuation, which is available to landlords investing a new property.

Chris Maggs, Accord’s Buy to Let Commercial Manager, said: “Landlords have received a number of blows from government reforms this year, most recently an additional 3% of stamp duty levied on the purchase of second homes. We hope our new two and three-year fixes will prove popular with landlords looking to invest in a new property before some of the changes come into effect in April.

The added incentives of £300 cashback on completion and free standard valuation should help to reduce the upfront costs for landlords expanding their portfolio, and the competitive rates will help brokers looking for the best deal for their clients.”

Scotland announces extra tax on second homes

ScotlandFlag400x310Private rented sector landlords in Scotland and second home owners face an extra 3% stamp duty tax from next year which will bring them into line with changes in England and Wales.

It was only a matter of time before the change came about after the UK Chancellor George Osborne announced the additional tax for England and Wales in his recent Autumn Statement.

Scottish Finance Minister John Swinney said that he would bring forward legislation on the new second home charge soon so that it could be in force by April 2016. ‘I am conscious of the issue of second homes. We need to ensure that the opportunities for first time buyers to enter the market in Scotland are as strong as they possibly can be and we need to make certain that tax changes elsewhere in the UK do not make it harder for people to get on the property ladder,’ he explained.

It means that an extra 3% rate will apply to the purchase of additional properties, such as buy to let and second homes from 01 April 2016 and be levied on the total price of the property for all sales above £40,000 on top of the current LBTT rates.

The Scottish Government has forecast that it will raise overall LBTT receipts in 2016/2017 by between £17 million and £29 million, rising to a possible £66 million by 2020/2021. Overall the Government expects LBTT will raise £295 million in 2016/2017.

John Blackwood, chief executive of the Scottish Association of Landlords, said that landlords will be disappointed and frustrated by the decision which will effectively ‘punish’ those who choose to invest in the private rented sector (PRS) Scotland.

‘The supplementary tax on the purchase of second homes will have a huge impact on the buy to let market and exacerbate an already serious shortage of properties in many areas. We firmly believe that the biggest losers from today’s statement will be tenants who will now find it even harder to get the accommodation they want at a price they can afford,’ he added.

Oliver Knight, a senior analyst in Knight Frank’s residential research department, said that sales will be brought forward as landlords and others seek to minimise their property tax burden.

He added that buy to let property investors will also be able to continue offsetting all stamp duty against capital gains tax when they sell their property.

Bob Cherry, partner at property consultants CKD Galbraith, also believes that there will be a flurry of activity before the end of March 2016. ‘This new levy will have implications for current landlords looking to sell as well as act as yet  another deterrent to would be landlords thinking about the market as an investment opportunity,’ he said.

‘This measure, like the LBTT rises introduced earlier this year, is also a wealth tax on owners as buyers of buy to lets will seek to pass on the extra purchase costs by reducing the price they are prepared to pay,’ he added.

Source: Property Wire

Average house prices hit £300k

nationalstatslogoThe latest data to emerge from the Office for National Statistics (ONS) house price index has highlighted that over the year to October 2015, the average price of a house in the UK rose by 7% to £300,000 – a rise of 0.9% in the year to September 2015.

On a seasonally adjusted basis, average house prices increased by 0.8% between September and October 2015, compared with a decrease of 0.1% in average prices during the same period a year earlier.

During the year to October 2015, average house prices increased 7.4% in England (up from 6.4% in the year to September 2015), 1.0% in Wales (down from 1.1%), 0.9% in Scotland (down from 1.1%) and 10.3% in Northern Ireland (up from 10.2%).

In October 2015, prices paid by first-time buyers were 5.9% higher on average than in October 2014. For existing owners, prices increased by 7.4% for the same period.

Average mix-adjusted house prices in October reached £300,000 in England and stood at £174,000 in Wales, £196,000 in Scotland and £158,000 in Northern Ireland.

Annual house price increases in England were driven by an annual increase in the East (10.4%) and the South East (9.5%). The North East had the lowest annual growth of the 9 regions, with prices increasing 2.9% in the year to October 2015 (up from 1.8% in the year to September). London prices increased by 7.7% over the year to October 2015 (up from 7.2% in the year to September 2015).

Source: Property Reporter

House prices to rise by 25 per cent in next five years

rics_logo-300x150UK House prices are expected to rise by 4.5 per cent for each of the next five years – a cumulative increase of around 25 per cent according to the RICS.

The culprit over the long term – as it has been in the short term – is a shortage of stock. RICS says demand continues to considerably outpace supply and the number of new instructions decreased in October for the ninth month in succession.

In fact the institution says the supply of new stock to the UK market has been in decline since the middle of 2014, with the number of new instructions only increasing in one of the months since then.

Demand, meanwhile, is strong. Following a small pick-up in agreed sales in September, activity was little changed this month across the UK. This chimes with HMRC transactions data, which continues to see the number of sales rising consistently over the year.

“It’s hard to get away from the issue of supply when it comes to the current state of the housing market. The legacy of the drop in new build homes following the onset of the global financial crisis is now really hitting home, with both the sales and letting markets continuing to show demand outstripping supply on a month-by-month basis” says Simon Rubinsohn, RICS chief economist.

“If the five year projections regarding the outlook for both prices and rents is anything to go by, property is set to become even more unaffordable going forward making the Government’s focus of boosting the delivery of new-build homes absolutely critical.”

Source: Estate Agent Today

Property prices rise again, with London average reaching £500,000

House moneyProperty prices in England and Wales increased by 1% in September, taking the average house price to £186,553, according to the latest Land Registry data.

Year on year prices have increased by 5.3% but in London it is much higher at 9.6% year on year and 1.8% month on month and the average price in the capital city is now a record £499,997.

The North East saw the only annual price decrease of 0.3% and also saw the only monthly price decrease with a fall of 0.3% as well.

But sales are down. From April 2014 to July 2014 there was an average of 78,330 sales per month but in the same months a year later, the figure was 71,766.

The data also shows that the number of properties sold in England and Wales for over £1 million in July 2015 was down 9% year on year and in London it was down 16%.

More than 93,000 residential property sales were lodged for registration in September.

The most expensive sale recorded last month was in Knightsbridge, London, where a flat at One Hyde Park sold for £17.5m.

The cheapest sale was in Pendle, Lancashire, at £12,000.

Analysts at Capital Economics questioned whether London would maintain such strong growth rates, as buyers are priced out and stamp duty changes take their toll. Under new stamp duty legislation, homes costing between £925,001 and £1.5m are subject to an additional 10pc bill, and properties above £1.5m have been hit with an extra 12pc charge.

“The breakdown of transactions by price range is revealing, highlighting a fragmented market in London with higher value properties struggling to sell. There were 288 £2m-plus purchases in July 2015, compared with 370 in the same month last year,” said Jonathan Adams, director of central London estate agency Napier Watt.

London rental market bounces back

Continuing last quarter’s surprising turnaround, the London rental market has bounced back to see rental values rise by more than 4% across most of central and east London with healthy gains seen across most of the rest of the capital.

Analysts at Benham & Reeves Residential Lettings which conducted the independent research, cite the crippling effect of the new stamp duty rates on the sales market for the strong rental market as tenants eschew homeownership in favour of long term tenancies.

Prime Central London (PCL) saw strong gains last quarter after several quarters of stagnation, and continued to see strong growth this quarter. Many of the tenants are overseas professionals who are opting to rent long term as the cost of renting often represents a saving compared to purchasing a home in high value areas thanks to the 12% top rate of stamp duty.

The rental market in east London is also very strong but for different reasons. The tenant demographic is typically younger and more likely to be British.  However, many of these tenants are deliberately choosing to rent rather than own a property as a lifestyle choice. Many of the Millennial Generation do not view homeownership as a goal and recognise that they can often afford to rent a much better property than they can afford to buy.  Millennials are also a more mobile workforce who change jobs more frequently than previous generations.

North London was one of the few areas to see rental values fall. A number of new developments in north London have seen the property supply increase.  Locations on the Northern Underground Line have also fallen as the Central Line interchange at Tottenham Court Road has been suspended for several months while the station is rebuilt for Crossrail.

Marc von Grundherr, lettings director at Benham & Reeves Residential Lettings, said: “From an investors’ perspective, it is very interesting to observe demographic changes.  One of the reasons the rental market tends to remain so strong in areas such as east London is because these areas attract Millennials who are content to rent long term. They’re simply not willing to scrimp and save for years to afford a deposit but prefer to ‘live for the moment’. This concept even extends to where they choose to rent: they’d much rather live somewhere central close to good bars and restaurants than commute in from more affordable areas.  For as long as East London remains hip and trendy, it will continue to attract good quality tenants.”

Source: Property Reporter

Manchester predicted to boom in the next ten years

Axis Tower, Manchester

New research reveals the top 10 locations where property prices are likely to boom in the next decade, with Manchester taking pole position, while London fails to make the grade.

The research, conducted by online estate agents HouseSimple, reveals ten locations in the UK where property prices are likely to increase substantially – with Rotherham, Leicester and parts of Surrey making the top ten.

The locations – a mixture of cities and commuter towns – are all in England, and have a huge variation in house prices – from terraced homes selling for less than £90,000, to executive detached properties in excess of half a million.  The predictions for the hot spots were made using key indicators, including trendy eateries, good transport links, a young population – and the occasional celeb.

The Top Ten Hot Spots

1.   Manchester
2.   Rotherham
3.   Harborne, Birmingham
4.   Leicester
5.   Hythe, Kent
6.   Norwich
7.   Hove
8.   Ipswich
9.   Ilkley, Bradford
10.  Woking, Surrey

Peter Armistead of Armistead Property commented: “It’s no surprise that Manchester has come out on top thanks to the expansion of the MetroLink tram system, the trendy Northern Quarter and the BBC Media City.  Manchester has been voted, for a second year running, the best place in the UK to live.  It has an amazingly vibrant restaurant, bar, club and music scene, not to mention its galleries and museums.

We have an amazing student scene and our Universities and teaching/research facilities are truly world class.  Manchester is home to nearly 100,000 students, making it one of the largest student cities in Europe.  Oh and let’s not forget the amazing sporting scene here and the famously warm and friendly people.

Despite all of its many advantages and attractions, Manchester is actually a very affordable place to live and many students chose to carry on living here after they graduate, as well as graduates from other areas moving to Manchester.  There’s a very important young professional scene in Manchester.  The cost of wages relative to property costs is a very important factor in attracting these people.  House prices in London are about five times what they are in Manchester, but salaries are only 30% higher.

An average residential property in Manchester is just £155,000, while a flat in a good area, costs as little as £120,000.  It’s not surprising that many investors, especially from the South, are targeting Manchester as a great place to invest.  A property in Manchester can provide a 5% minimum cash rental yield and a typical 12% total cash yield, including 7% capital appreciation.  Demand for rental accommodation is strong and by comparison with other regions, housing is cheaper.

Manchester is a great place for investors.  I have built a successful, mid-sized portfolio of buy-to-let properties in South Manchester.  Over the last 12 months I have enjoyed average rental yields of 6% per cent across my 80 properties.”

UKPI have access to some great residential investment deals in Manchester including the iconic Axis Tower with prices starting from just £165,000 and rental yields of between 6% to 8%. Contact us for details. 

Source: Property Reporter

UK property sales up to 16 month high, says RICS report

rics_logo-300x150Property sales in the UK have picked up across the country, reaching a 16 month high, according to the latest index report from the Royal Institution of Chartered Surveyors (RICS).

There were also further price increases nationwide in September, a modest improvement in mortgage availability but no improvement in the supply situation with new buyer demand continuing to outweigh instructions to sell.

Across the UK, agreed sales rose at the quickest pace since May 2014, with 14% more chartered surveyors seeing a rise. This is a 16 month high and the fifth consecutive month that sales have increased.

The North, East Anglia and Scotland posted the sharpest rises in activity over the month with the East Midlands the only region to see a material drop in sales albeit following an increase in the region in August.

The report says that the stronger sales trend in the UK is broadly reflective of an upturn in demand which has been visible in the data since the early spring. Indeed, the number of new buyer enquiries rose for a sixth consecutive month across the country with 18% more chartered surveyors reporting a rise in demand.

The pattern being seen by chartered surveyors echoes recent lending data including that highlighted by the Bank of England, showing mortgage approvals at an 18 month high and up 12% compared to a year ago.

As the availability of mortgage finance appears to be improving, the average ‘perceived’ LTV ratio captured by respondents to our survey edged up to 79.3% with first time buyers seeing credit conditions relax most noticeably over the month, the report also reveals.

Although activity is picking up, the ongoing lack of new instructions and the resulting limited stock on the market continue to be an issue for the sustainability of the market. The number of new instructions has fallen in 13 of the last 14 months.

RICS says that it is significant that 40% of respondents feel the biggest factor behind the negative trend in new instructions is the lack of stock already for sale which is deterring would be movers as they struggle to find a suitable property to move on to. The next most cited influence was economic uncertainty, followed by stretched affordability.

As a result of the persistent supply demand imbalance, the national house price indicator continues to rise strongly which is likely to be reflected in key house price indices over coming months and into the first half of 2016, according to the report.

In the lettings market, tenant demand increased once more continuing the pattern seen by respondents since December 2014, and while new landlord instructions increased slightly for the third month in a row, they were still significantly outstripped by tenant demand.

Indeed, over the next 12 months, chartered surveyors are forecasting rents to rise by 3% at the headline level.

Source: RICS


Price of flats rising faster than houses, says Halifax

halifax-logoOver the last decade the price of flats has risen much faster than the price of houses, according to research for the Halifax.

While flats have risen by 60% in value over that time period, the average house has only gone up by 34%, it said. Detached homes have seen the smallest price rise, at 21%.

At the same time the Halifax said the rise in UK house prices in the year to September slowed to 8.6%, from 9% previously. Between July and September, prices went up by 2% compared with the previous quarter.

On a monthly basis, the Halifax said prices in September dropped by 0.9% compared with August. As a result the value of the average house or flat in the UK has fallen to £202,859.


Last week, rival lender Nationwide said that house prices rose by just 3.8% in the year to September. It also said that the gap between prices in London and the rest of the UK had reached a record high.

The relative popularity of flats has fallen over the past decade, according to the Halifax research. In 2005, 20% of all property sales were flats. Ten years on, that figure has fallen to 17%. Price rises have therefore been driven by flats in the capital.

“The national increase in flat prices has been led by London where flats account for roughly one in two property sales; substantially higher than for the country as a whole,” said Martin Ellis, Halifax’s chief economist.

Source: BBC News