Marketing No Comments

UK house prices stall as moving costs and interest rate rise bite

Britain’s housing market has stalled, with fewer people looking to buy a new home and house prices barely rising across the country, according to a survey by the Royal Institution of Chartered Surveyors (Rics).

Rics expects the market to remain subdued in the coming months as newly agreed sales stay flat or fall in most regions of the UK.

Interest from buyers continued to drop in October, with 20% more surveyors reporting a fall in new buyer enquiries than an increase. The same proportion observed a decline in transactions over the month across the UK.

The north-south divide persists: Scotland, north-east England and Wales were the only areas where sales picked up, while in the rest of the country trends were either flat or negative. Sales are expected to flatline in the next three months, and to dip over 12 months.

Rics said a balance of just 1% of professionals saw prices go up nationally last month, down from 6% in September.

In London, nearly two-thirds of surveyors reported a drop in prices over the month – the poorest reading since the depth of the financial crisis in 2009.

In the Rics report, Neil Foster of Foster Maddison Property Consultants in Newcastle said: “Prolonged political uncertainty and weak direction from government is hampering sentiment among buyers and sellers. We are in for a long winter.”

Alan Fuller of the eponymous estate agents in Putney in south-west London, said: “We usually have buyers registering keen to move before Christmas. So far we are registering 80% less than normal during October.”

The Rics chief economist, Simon Rubinsohn, said: “The combination of the increased cost of moving, a lack of fresh stock coming to the market, uncertainty over the political climate and now an interest rate hike appears to be taking its toll on activity in the housing market.”

Rubinsohn said homeowners tended to stay put, while first-time buyers were focusing on the part of the market supported by the help to buy initiative.

“A stagnant secondhand market is bad news for the wider economy, not just in terms of spending but also because it restricts mobility,” he added.

The downturn in luxury housing is also continuing, the Rics report suggests: for homes valued at £1m or more, nearly three-quarters of surveyors are reporting that they change hands for less than the asking price. For homes listed at between £500,000 and £1m, nearly two-thirds of professionals noted that sales prices were coming in lower than asking prices.

In the lettings market there was little change in tenant demand in the three months to October. Rents are expected to rise by about 3.5% a year over the next five years. However, in London rents are set to fall over the next 12 months.

The surveys from major mortgage lenders Halifax and Nationwide have painted a more buoyant picture of the housing market. This week Halifax reported that house prices in the UK were rising at their fastest annual pace since February, up 4.5% to a record £225,826.

Nationwide’s house price index also showed prices picking up in October, to an annual rate of 2.5%, the highest reading recorded in three months.

Both lenders cautioned that the increase in prices was in large part caused by a shortage of homes on the market rather than a recovery in demand. In addition, low mortgage rates and high rates of employment have countered the squeeze on household incomes from stagnating wages and rising inflation. However, last week the Bank of England raised borrowing costs for the first time in a decade and hinted at gradual rate rises.

Brian Murphy, head of lending for mortgage broker Mortgage Advice Bureau, said: “What one can draw from the Rics report is that if consumers are seeking to sell within the next few months, then pricing realistically is going to be key, as clearly there are still buyers out there who are motivated and want to move, but the dynamic is shifting slightly in some areas.”

Source: The Guardian

 

Marketing No Comments

ASTL members up lending by 39% year-on-year

Association of Short Term Lenders firms (ASTL) increased the value of bridging lending by 38.9% in the third quarter of 2017 compared to the same quarter in 2016.

However lending saw a small fall of 2.7% from the second quarter of this year.

Benson Hersch (pictured), chief executive of the ASTL, said: “The figures from our members show that the bridging finance industry is in excellent shape.

“It shows that the industry has remained resilient despite the threat of Brexit and low growth in the economy.

“The figures also demonstrate that bridging loans remain an excellent alternative where traditional financing is not immediately available for customers.

“The bridging sector therefore continues to provide a vital role in the economy by offering customers access to the capital they need in a responsible and sustainable way.”

The value of their loan books stand at £3.5bn after rising by 27.7% from the end of Q3 2016 to Q3 2017.

Source: Mortgage Introducer

Marketing No Comments

Are Short-Term Loans Cheaper Than Overdraft Fees?

There’s been a lot of news recently about overdraft fees — the fees charged by banks to their account holders after an account dips below a £0 balance, meaning the account holder has a loan balance, even if small, from the bank.

Earlier this year, The Telegraph published its “worst offender” index, listing banks that charged the highest overdraft fees for their customers.

Santander was one of the top offenders, with an unarranged overdraft fee of £6 per day capped at £95 per month. On arranged overdrafts of up to £2,000, Santander charged daily fees of one pound per day; rising to £3 per day for overdrafts of £3,000 and above.

Other banks were similarly expensive. Borrowing money on overdraft from Halifax could result in charges of up to £3 per day, according to the July 2017 article. Unarranged overdrafts incurred a whopping £5 per day fee, capped at a maximum of £100 in overdraft fees per month.

RBS and NatWest also charged heavy unarranged overdraft fees, with an £8 per day fee limited to a total of £80 per month.

With as much as £100 in monthly overdraft fees from many bank accounts, it’s been suggested that borrowing money through short-term loans could be a more affordable option for people in need of quick access to cash.

The numbers seem to agree. An August 2017 article in The Guardian calculated that many of the most widely used bank accounts in the UK charged APR rates of up to 52%, making them more expensive — in certain cases, depending on borrowing habits — than payday loans.

Banks, to their credit, appear to be changing their overdraft fee structures in an attempt to make borrowing less expensive for customers. However, many have admitted that as much as 10% of account holders could end up paying more for overdrafts under the new fees.

Despite public warnings about short-term loans, it turns out that overdrafts — even if used rarely and responsibly — could be a far bigger cost for many British bank account holders.

For example, a loan of £300 over 3 months from a short-term loan provider such as Mr Lender, results in a total repayable of £444.00 (£300 capital and £144.00 interest*) at an interest rate of 0.8% per day on outstanding capital.

The same amount borrowed via an unarranged overdraft could result in £300 in fees through a high street bank using many of the fee structures listed above.

Public perception of borrowing money — and the true costs of borrowing money — isn’t always in sync with financial reality. For years, borrowing from the bank has been viewed as a safe, cheap way to access finance; borrowing from a short-term lender has been viewed as the opposite.

The reality, however, is that the best loan for your personal circumstances may not come from the source that you first think of. Study and compare interest rates and fees and you could find that borrowing money via short-term loans is more cost effective than using your bank overdraft.

Source: News Anyway

Marketing No Comments

London house prices forecasts borough by borough

We recently covered a report by estate agent Savills which suggested that London house prices on the whole will not start to rise until 2020. They are expected to dip in 2017 and then be main relatively subdued until the rise in 2020. However, KPMG has issued another review of the London housing market looking at individual boroughs and what will impact the London housing market in the short to medium term.

UK ECONOMY

KPMG has a very deep understanding of the UK economy and suggestions that the UK economy will remain fairly subdued for the short to medium term are worth listening to. We know that there are a number of dark clouds hovering over the UK economy such as Brexit, political uncertainty and a recent change in interest rate policy by the Bank of England. While many believe Brexit offers good long-term opportunities to invest in the UK it is unlikely we will see widespread investment while uncertainty surrounds the talks with the European Union.

LONDON BOROUGHS

It is ironic but we will be listing some prominent figures from the KPMG report forecasting house price growth up to 2020. These single digit figures may surprise many people because we have become accustomed to larger annual rises than KPMG is forecasting up to 2020. Some of the more prominent figures include:

Hackney +5.31%
Westminister +4.27%
Lewisham +4.11%
Waltham Forest +4.03%

These are the only London borough housing markets expected to show growth above 4% up to 2020. If we now look at the bottom of the table there are some surprising entries:

Richmond upon Thames +1.65%
Harrow +1.93%
Hounslow +2.00%
Bromley +2.12%
Sutton +2.18%
Ealing +2.29%
Havering +2.40%
Croydon +2.43%
Bexley +2.43%
Enfield +2.46%
Kingston upon Thames +2.46%
Hillingdon +2.50%

The remainder of the London boroughs are expected to show increases between 2.5% and 4% which is minimal compared to recent performance.

IMPACT OF EU IMMIGRATION

A reduction in the number of immigrants arriving from the European Union will impact the London housing market as a whole. We know this, we also know that the financial sector is looking to rebase within the European Union if no side deal can be negotiated. So, it may surprise many to learn that the Royal Borough of Kensington and Chelsea has the highest proportion of EU born residents according to official government figures from 2016. This borough also has the highest house price to earnings ratio in London and while it is difficult to forecast with any real confidence what will happen post Brexit, this particular borough does seem to have a lot to lose.

As we have touched on in recent articles, there is the potential for the EU immigration shortfall to be made up to a certain extent by the likes of US investors. This is a side effect of the fall in the value of sterling against the dollar in light of last year’s Brexit vote. While sterling has recovered slightly of late, we were looking at a circa 20% fall against the dollar which obviously makes UK property more attractive.

Source: Property Forum

Marketing No Comments

Savills issues forecast for UK regional housing market

Estate agent Savills have released forecast for the UK housing market as a whole and regional variations over the next five years. While it is difficult to predict property prices 12 months in advance, it is brave to look five years in advance, but these figures do make for interesting reading. Whether they are revised upwards or downwards in light of Brexit remains to be seen but let us take a look at what Savills expects of the UK housing market.

UK HOUSING MARKET

Savills are forecasting an increase in the overall UK housing market of 2% in 2017, 1% in 2018, 2.5% in 2019, 5% in 2020, 2.5% in 2021 and 2.5% in 2022. This equates to a five-year return of 14.2% between 2018 and 2022. When you bear in mind the current economic difficulties in the UK perhaps this not such a bad return?

It will come as no surprise to learn there are some significant variations on house prices across the board with the best markets for 2017 expected to be the East Midlands, West Midlands and the South West of England all forecast to grow by 5%. Greater London is by far and away the most depressed market with Savills expecting prices to fall by 1.5% in 2017 with a the further fall of 2% in 2018. The performance of UK markets are expected to be subdued in 2018 with the North West, North East, Yorkshire and Humberside and Scotland forecast to top the league tables with growth of just 1.5%. The same four regions are expected to top the charts for 2019 with forecast growth of 3.5%.

The ongoing growth of house price in the North West of England will hit 6% in 2020 with East Anglia and South-East England the more subdued markets with growth of just 4%. In 2021 markets are expected to be a little more subdued with the North West, North East, Yorkshire and Humberside, Scotland and Wales topping the table at just 3% forecast house price growth with East Anglia, South East and Greater London bottom of the charts with growth of just 2%. Unsurprisingly, 2022 is also expected to show subdued growth with the North West, North East, Yorkshire and Humberside, Scotland and Wales yet again topping the table with growth of 3%. East Anglia, South East and Greater London are bottom of the table with just 2% growth in house prices.

FIVE-YEAR TRADING PERFORMANCE

It is dangerous take any figures in isolation therefore perhaps a more appropriate measurement would be the forecast five-year performance between 2018 and 2022. Top of the charts is the North-West of England and 18.1%, followed by the North-East and Yorkshire and Humberside at 17.6%, next we have Scotland at 17%, Wales at 15.9%, East Midlands and West Midlands and 14.8%, South West at 14.2%, East Anglia and South-East at 11.5% with Greater London bottom of the table with growth of just 7.1% forecast.

As we suggested above, it is difficult to predict house prices 12 months in advance let alone five years in advance so these figures should be taken with a pinch of salt. However, there is obviously a detailed analysis behind each of the performance forecasts and it does give an indication of the potential for each region going forward.

Source: Property Forum

Marketing No Comments

Bank of England increases interest rates for the first time in a decade

The Bank of England (BoE) made the decision to hike interest rates on Thursday in the first upward adjustment since the Global Financial Crisis (GFC). Policymakers voted 7-2 to increase rates, with Deputy Governors Sir Jon Cunliffe and Sir Dave Ramsden both opting to keep rates on hold. Policymakers had been forced to cut rates last year after the Brexit referendum, to help the economy cope.

However, despite rates moving higher, the central bank removed its previous warnings that rates might rise quicker than forecast, instead hinting at only gradual and limited adjustments in the next few years. The minutes read: ‘The MPC [Monetary Policy Committee] now judges it appropriate to tighten modestly the stance of monetary policy in order to return inflation sustainably to target. All members agree that any future increases in Bank Rate will be at a gradual pace and to a limited extent.’

Furthermore, BoE Governor Mark Carney held a press conference after the announcement and defended the decision to move rates higher despite households undergoing a squeeze. Carney said: ‘To be clear, even after today’s rate increase, monetary policy will provide significant support to jobs and activity. And the MPC continues to expect that any future increases in interest rates would be at a gradual pace and to a limited extent.’ Carney also stated that Brexit was having a ‘noticeable’ effect on the economy.

The pound dropped against other currency majors yesterday, registering losses of around -2.0% versus the Aussie dollar at some points during trading. The Aussie also made advances against the US dollar (around +0.6%), the Japanese Yen (around +0.5%), the New Zealand dollar (around +0.2%), and the Japanese Yen (around +0.2%).

However, Friday brought with it news that Australian retail sales came in flat on the month. Retailers found shoppers subdued in September, with sales coming in at 0.0%, despite analysts expecting a rise to 0.4%. Annual retail sales are trailing along at 1.4% – the slowest pace of growth since the Global Financial Crisis (GFC).

Wetpac economists Matthew Hassan commented: ‘The picture from the report is an unambiguously bad one for retailers who are cutting prices but finding no tracton with volumes. The picture is not quite as bad for consumers who get some advantage from lower prices and do not look to be cutting back on consumption quite as sharply as feared.’

The pound to euro (GBP/EUR) exchange rate is currently trending in the region of 1.1201. The pound to Australian dollar (GBP/AUD) exchange rate resides around 1.7037.

Source: Thinking Australia

Marketing No Comments

How to fund your development project to maximise profits

There are many options when looking to fund your next property development project. The way in which you structure any borrowings will have a significant impact upon your long-term returns. We have covered some of the more common project development finance routes below with comments and observations.

BANK FUNDING

After the 2007/8 sub-prime mortgage collapse in the US, which spread throughout the world, it can be difficult to obtain affordable bank funding for property projects. Traditionally banks tend to work on a 70% loan to cost (LTC) ratio and may exceed this at a cost. Performance for larger loans is a real issue however. For some developers this can leave a significant shortfall which may need to be filled with relatively expensive additional forms of finance.

While interest rates on property development funding will vary from project to project, if the LTC ratio is less than 70% interest charged is usually sub 5%, 7% – 8% on loans from 70% to 80% LTC and between 10% and 12% on loans where a higher than 80% LTC has been secured.

MEZZANINE LOANS

As we touched on above, other forms of property development finance may need to be used in conjunction with traditional bank funding to fill any shortfall. One popular option is mezzanine finance which is traditionally in the region of between 10% and 15% of LTC. Mezzanine finance is less expensive than equity finance as it is normally a fixed rate and is ahead of equity in case of losses and allows the developer to retain their equity share.

The obvious problem with mezzanine finance will occur if a project incurs delays or is unfinished. Whatever the situation, the developer will still need to pay back the mezzanine finance and in situations of default this can be converted into an equity stake in the development. On the surface mezzanine finance is more affordable than equity-based finance but default terms can be prohibitive.

EQUITY FUNDING

There are pros and cons to equity funding with investors sharing both the risks and the rewards. Where little or no funding is required the equity returns can be relatively high for the developer. However, where an additional equity investment is required the profits may be split on a 50/50 or pro rata basis, depending upon the details of the agreement. This can have a significant impact upon the returns for a developer although, as we mentioned above, both parties will also share the risk.

In theory equity funding is one of the more expensive options but done correctly it can allow a developer to significantly leverage and increase the size and quality of schemes they undertake. Over the last few years we have seen crowdfunding become more popular and there are also various networks of high net worth individuals willing to invest in property developments. As ever, it is a case of balancing the risk/reward ratio against the profits which you are “giving away” to other equity investors.

Source: Property Forum

Marketing No Comments

UK house prices show annual growth of 2.5%

Figures from the Nationwide show that UK house prices increased by 0.2% in the month of October. The annual increase from 2.3% in September up to 2.5% in October is a three month high for the UK housing market which has been under pressure of late. It is proving extremely difficult to forecast in the short to medium term how UK house prices will perform having increased to an average value of £211,085. There are a number of factors coming into play which could actually see UK house prices supported in the foreseeable future.

SHORTAGE OF STOCK

A shortage of suitable stock has been a problem for the UK housing market from some time now. We have a lack of newbuilds and many homeowners are reluctant to upsize in the current economic environment instead deciding to stay put. This means that those who are brave enough to upsize are fighting with first-time buyers over a relatively small amount of housing stock. This increases competition which increases prices which drags the whole UK housing market higher. How long will this last? This is a question we have been asking for many years now.

LOW MORTGAGE RATES

UK mortgage rates have been historically low for some time now in light of the 2008 US led mortgage crisis. There is talk that the Bank of England may increase UK base rates for the first time in a decade at its meeting later this week. A potential increase of 0.25% would push UK base rates up to 0.5% which is in itself minuscule but could lead to an increase in UK mortgage rates.

Even the Nationwide has confirmed that an increase of 0.25% in the UK base rates would likely be passed on in full to variable rate mortgage holders. Looking at the wider picture this increase is relatively small but in the current environment, with household incomes being squeezed, more funding diverted towards mortgage payments will place pressure on other areas of household expenditure.

VARIABLE-RATE MORTGAGE HOLDERS

It was interesting to hear Nationwide executives discussing variable rate mortgage holders and the fact that in 2001 they represented 70% of outstanding mortgages. Slowly but surely this figure has fallen to a current record low of just 40% with many people looking to lock in fixed rate mortgages and take advantage of current low base rates. While this is obviously good news in the short to medium term some UK mortgage holders could see a significant increase in their payments when their fixed term ends and they either remortgage or switch to a variable rate.

It is difficult to guess whether the Bank of England will increase base rates this Thursday let alone in the weeks and months ahead but if we’re talking years ahead there is no way that UK base rates will be anywhere near their level today. You could argue there is pressure building across the UK housing sector, wages will struggle to maintain any equilibrium with mortgage rate increases and pressure on UK household incomes will mean a reduction in expenditure and a weaker economy. So, there could be trouble ahead?

Source: Property Forum

Marketing No Comments

28,000 homes plan could benefit Shropshire’s rural landowners, says expert

Paul Middleton said that although the housing figure would be quite a challenge to fulfil, it could prove to be a positive move for rural landowners.

The development forms part of Shropshire Council’s local plan review.

The council’s cabinet approved a consultation document last week, which will seek the views on the preferred scale and distribution of future developments across Shropshire.

The review includes building 28,750 homes across the county, while the consultation document also looks at employment growth.

The consultation period began last week and closes on December 22.

Mr Middleton, of rural surveyors and estate agents Roger Parry and Partners, said: “A housing figure of 28,750 across the county is quite a challenge to fulfil, that equates to a delivery rate of around 1,430 dwellings a year.

“It therefore follows there will need to be development in the rural areas to assist in meeting these targets, and this places great emphasis on the emerging Hierarchy of Settlements policy.”

The Hierarchy of Settlements document puts forward rural settlements that have gone through a screening process for size, population, service provision, internet links, transport links and employment opportunities.

Mr Middleton added: “If adopted, the Hierarchy of Settlements could provide opportunities for development that presently are not achievable, which is very positive indeed for rural landowners.

“We will of course be liaising closely with the council during the course of the consultation to ensure that our planning team are best placed to advise clients on the development opportunities, that will undoubtedly come to fruition in the future.”

The extra 10,347 houses are mostly planned for the towns in Shropshire, with 30 per cent planned for Shrewsbury, 24.5 per cent planned for the bigger towns such as Market Drayton, and Whitchurch, 18 per cent for smaller towns such as Much Wenlock and Bishop’s Castle, and 27.5 per cent for rural areas.

Ian Kilby, planning services manager, said: “In the recession there were about 800 houses built per year, and last year we had 1,910 delivered.

“It’s only a few years ago that next to no houses were being built.

“There was significantly more development last year than there was.”

But the council admitted that, as of this year, there were more than 11,000 cases where planning permission had been granted for homes where construction was yet to start.

Source: Shropshire Star