housing market
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Overseas Property Investor Numbers Fall

The number of UK buy to let property investments let out by investors based overseas has more than halved in the last eight years.

The latest data released by Hamptons International has revealed that the percentage of overseas based landlords letting buy to let properties in the UK fell from 14.4 per cent in 2010 to just 5.8 per cent in the first 11 months of 2018 – the lowest level on record.

Every region in the UK has seen a fall in the proportion of homes let by an overseas landlord since 2010.

The largest drop has been seen in London which has gone from one in four (26 per cent) of homes let in London owned by an overseas based landlord in 2010, to just 10.5 per cent this year. A fall of 15.5 per cent.

In other parts of the UK, the proportion of overseas based landlords has fallen by 10 per cent in the South East since 2010, followed by the North East and East Midlands, both experiencing a drop of 6 per cent.

Outside the capital, Yorkshire & the Humber has the highest proportion of homes let by an overseas based landlord (6.7 per cent), but this region has only seen a 4 per cent fall in overseas based landlords since 2010.

Western Europeans make up the biggest group of overseas based landlords at 34 per cent, followed by Asian (20 per cent) and North American (13 per cent).

However, since 2010 the proportion of Western European based landlords has fallen by 2.1 per cent, compensated for by a pickup in Asian landlords (+2.1 per cent). Middle Eastern based landlords have also risen by 1.4 per cent since 2010 and now account for 11 per cent of overseas based landlords.

Head of Research at Hamptons International, Aneisha Beveridge, said: ‘The proportion of homes let by an overseas based landlord has more than halved since 2010. Sterling’s depreciation since 2016 undoubtedly makes it cheaper for international buyers to purchase property in Great Britain. However, the conversion of pounds back into local currency means additional costs which cut into an overseas landlords’ monthly income. This combined with a harsher tax regime for overseas investors is dissuading some international investors from entering the rental market.

‘Throughout this year rental growth has been sluggish averaging 1.5 per cent and only passing 2.0 per cent on two occasions. Affordability is not just an issue for those looking to buy a home, but impacts tenants paying rent too. And these affordability barriers will continue to keep a cap on rental growth in the future.’

Source: Residential Landlord

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UK economy set for slowest growth since 2009 as Brexit nears

British economic growth this year and in 2019 looks set to be the weakest since the country’s last recession, due to a freeze in business investment and weak consumer demand ahead of Brexit, the British Chambers of Commerce forecast on Tuesday.

The business lobby said growth in 2018 was likely to slow to 1.2 percent before inching up to 1.3 percent in 2019, which would be the two weakest years since Britain emerged from recession in 2009 after the global financial crisis.

“While Brexit isn’t the only factor affecting businesses and trade, it is hugely important — and the lack of certainty over the UK’s future relationship with the EU has led to many firms hitting the pause button on their growth plans,” BCC director Adam Marshall said.

Britain’s economy has slowed since the Brexit referendum in 2016 and there is no guarantee that businesses and consumers will retain tariff-free access to European goods when Britain leaves the European Union which is scheduled for March 29.

The BCC said sterling’s weakness against the dollar and the euro was likely to continue to drive inflation, eating into consumers’ disposable income, while business investment was due to contract by 0.6 percent this year and barely grow the next.

Separately, the Royal Institution of Chartered Surveyors predicted that house prices would be flat next year, the first year with no growth since 2012, due to Brexit uncertainty and the inability of many buyers to afford higher prices.

“On the back of this, house price growth at a UK level seems set to lose further momentum, although the lack of supply and a still solid labour market backdrop will likely prevent negative trends,” RICS’s head of policy, Hew Edgar, said.

The number of houses being sold was likely to fall around 5 percent next year, RICS added.

Source: UK Reuters

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House sales to continue declining in 2019 as Brexit uncertainty and lack of supply hinder activity

House sales are to continue stagnating next year amid Brexit uncertainty and lack of supply, according to the Royal Institution of Chartered Surveyors (RICS).

In its forecast for the year, the trade body said the UK housing market is unlikely to see much change in 2019, with sales volumes to weaken by around five per cent and house price growth to reach a standstill.

The report said 2019 would be the third straight year of decline, with annual completed transactions staying significantly below the 1.7m high in 2006.

Tarrant Parsons, RICS economist, said Brexit uncertainty had caused “greater hesitancy”.

That said, the current political environment is far from the only obstacle hindering activity with a shortage of stock continuing to present buyers with limited choice, while stretched affordability is pricing many people out” he said.

“For the year ahead, this mixture of headwinds is unlikely to dissipate, meaning sales volumes may edge a little lower.

“On the back of this, house price growth at a UK level seems set to lose further momentum, although the lack of supply and a still solid labour market backdrop will likely prevent negative trends.”

Source: City A.M.

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Asking prices for UK homes show biggest two-month fall in six years: Rightmove

Asking prices for properties being put up for sale in Britain have suffered their biggest fall over a two-month period since 2012, property website Rightmove said, the latest sign of a slowdown in the housing market ahead of Brexit.

Average asking prices for new sellers were down by a monthly 1.5 percent in the four weeks to Dec. 8 after a fall of 1.7 percent in the previous month, Rightmove said on Monday.

On an annual basis, asking prices across the country rose by 0.7 percent but fell in London by 1.1 percent.

Before the Brexit referendum in June 2016, asking prices as measured by Rightmove were rising by around 7 percent a year.

Rightmove director Miles Shipside said sellers typically priced properties lower before Christmas to get buyers’ attention.

“However, these falls have been larger than usual, making this the largest fall over two months for six years, showing that there are more than just seasonal forces at play,” he said.

The weakness in Britain’s housing market has appeared in other measures of house prices, something surveyors say reflects the uncertainty about the country’s exit from the European Union in March.

Rightmove said a relatively small fall in the number of sales suggested the lower prices were tempting some buyers into the market at a time of year which usually sees few transactions.

Source: City A.M.

U.K. housing market
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No-Deal Brexit Fears Take Heavy Toll on U.K. Housing Market

The toll Brexit is taking on the U.K. housing market was laid bare in surveys published Monday.

Asking prices fell for a second month in December, recording the steepest back-to-back declines since 2012, Rightmove said. Acadata meanwhile reported that actual selling prices grew at their slowest annual pace in over 6 1/2 years in November.

“Overall the market is going nowhere very fast, with the main driver of this remaining Brexit-induced uncertainty,” Acadata Chairman Peter Williams (NYSE:WMB) and John Tindale, a housing analyst at the firm, said in a statement. “We are about to enter the seasonal lull generated by Christmas and the New Year, so we should certainly not expect a big bounce back.”

Average home prices rose just 0.9 percent to 305,522 pounds ($384,000) compared with November 2017, the smallest annual increase since April 2012, Acadata said.

Rightmove said the price of property put up for sale has fallen by 3.2 percent over the past two months, leaving asking prices almost 10,000 pounds lower on average than in October. In London, 19 percent fewer properties came to market this month than a year earlier.

Silver Lining

Fears that Britain could crash out of the EU without a deal in March have hit the housing market at a time when affordability was already stretched, particularly in London. Prime Minister Theresa May is struggling to get parliamentary backing for her deal and there little sign that the EU is prepared to offer sufficient concession to break the stalemate.

There were some silver linings amid the housing-market gloom. According to Rightmove, sales agreed by agents fell by “a relatively marginal” 2.1 percent annually, a sign bargain hunters are looking for deals. Acadata too reported renewed buyer interest, with transactions at the highest for any November in three years.

In another sign that Brexit is making Britons cautious, a separate report from Visa (NYSE:V) and IHS Markit showed household spending fell for a second consecutive month in November. Expenditure on food and beverages, as well as clothing and footwear, dropped.

Source: Investing

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More loans to first-time buyers while buy-to-let continues to slow

In the year to September the numbers of mortgage loans to first-time buyers was up 0.4% year-on-year, while buy-to-let mortgages fell by 13%.

The Your Move House Price Index for England and Wales found the biggest growth in transactions has been in the cheapest region in England, the North East, with transactions in the three months to October up 7% on the same period last year.

By contrast, the South East, the most expensive area outside London, saw transactions fall 4%.

Oliver Blake, managing director of Your Move and Reeds Rains estate agents, said: “Despite the current economic uncertainty it’s encouraging to see that there is still some increase in transaction levels and that, whilst house price growth is relatively flat, it means for first time buyers, for example, the news remains positive.”

House prices largely continue to flatline, and the rate of annual growth has fallen consistently since August. It now stands at just 0.9%, well below the rate of inflation, and the lowest since April 2012.

It leaves the average price in England and Wales at £305,522, up £2,724 on the same time last year. Despite weak price growth, transaction levels rose slightly in November, up 2.5% on a seasonally adjusted basis.

With an estimated 82,500 sales, they are at their highest for the month in three years.

The top three regions for price growth remain unchanged this month. The West Midlands still leads the way with annual growth of 3.7%, supported by strong performance in the West Midlands combined authority, which includes Birmingham.

With price up 5.3% annually it’s among 13 areas to set a new peak in the month. Neighbouring East Midlands, meanwhile, is also growing strongly, up 3.5% annually.

Rutland has seen growth of 10.8% over 12 months, while Derby (up 6.1% annually), Leicester (5.7%), Nottinghamshire (3.9%) and Nottingham (2.0%) all set new peak average prices.

Despite the performance of Rutland and others in the Midlands, it is Torfaen in Wales that has had the highest growth in prices over the last year, however, up 15.6% annually.

That is helped by the recent sale of the highest priced property in the area this year, for £620,000 in an area where the average property costs just £171,708.

It’s also supported by demand for properties from those working in the Bristol and Gloucestershire areas.

As well as Torfaen, Wales has seen strong growth in Caerphilly (up 8.8% annually), Carmarthenshire (7.2%) and Powys (6.4%), all of which set new peak average prices.

The big cities of Newport (up 6.2%) and Swansea (up 3.7%) also show above average growth for the region, although Cardiff prices are only up 2.2% annually. At the other end of the scale, prices in the East of England are now down on an annual basis for the first time since March 2012.

While Southend-on-Sea and Thurrock still show good growth (4.1% annually for both, with the latter recording a new peak), that’s more than offset by falls in Suffolk (down 0.8%), Luton (down 1.0%), Bedfordshire (1.3%) and, most significantly, Cambridgeshire (with prices down 4.6%).

It is, however, the only region to see prices falling on an annual basis, and the majority of unitary authorities continue to see growth, with prices up in 74 of the 108 of them in England and Wales outside London.

The average price in London rose 1.3% in October to remain 0.8% up on the same month last year – nominal growth but a real fall compared to inflation.

The average house in the capital was priced at £622,508. On an annual basis prices fell in 21 of the 33 London boroughs, with the City of London, up 7.8% leading those that bucked the trend.

Three of the top five priced boroughs recorded double digit falls: in Kensington and Chelsea, the most expensive borough, prices are down 16.5%; in the City of Westminster 24. 8%; and in Hammersmith and Fulham, 10.5%.

On the other hand, in both Merton and Lambeth, ninth and 10th place, respectively, prices continue to grow strongly, up 7.5% and 7.6%.

Source: Mortgage Introducer

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UK banks capable of surviving a “no-deal” Brexit

The Bank of England (BoE) insists the UK’s high street banks are capable of withstanding a disorderly “no-deal” Brexit, despite the fact that a no-deal situation could leave the UK economy worse off than the 2008 recession.

Following the BoE’s recent financial sector health check, it was confirmed that none of the mainstream lenders was encouraged to raise more capital to strengthen their finances in the midst of the Brexit uncertainty.

There is a growing belief that UK Prime Minister Theresa May will see her proposed Brexit deal with the European Union (EU) rejected by members of Parliament. This would leave the UK in a state of limbo, heading towards a no-deal Brexit scenario as it prepares to leave the EU at the end of March 2019.

Despite this confusion and unrest, seven of the UK’s leading high street lenders – Barclays, HSBC, Lloyds, RBS, Nationwide Building Society, Standard Chartered and Santander – were tested in a “crisis” scenario involving a 4.7% decline in UK GDP, a 33% fall in house prices and a 27% decline in the value of pound sterling. They all passed this stress test, with the Bank stating that the results showed the UK banking system was “resilient to deep simultaneous recessions in the UK and global economies”.

However, uncertainty remains in Italian politics which could yet have a major impact on the ongoing Eurozone debt crisis. The new Italian government has been at loggerheads with EU officials regarding spending proposals and any further decline in Italy’s financial outlook could spill over into the EUR/USD rates.It has been a difficult last month or so for the pound. It has fallen from £1.15 to the euro to £1.12 to the euro since the UK’s MPs have taken such a dim view of Theresa May’s Brexit agreement with the EU. The pound has also steadily weakened against the US dollar in recent weeks, with President Trump questioning the UK’s ability to arrange a future trade deal with America based on the Prime Minister’s draft agreement. The euro has managed to hold firm against the dollar in light of the recent G20 summit in Argentina, which proved fairly positive for all concerned.

The EU recently conducted its own stress tests of banks within the EU member states. Lloyds and Barclays were some of the worst performers across the 48 European lenders assessed based on declining GDP, a no-deal Brexit and a sell-off of government bonds. Both Barclays and Lloyds actually came close to failing the BoE’s recent stress tests based on core capital levels alone. However, the fact that some of the banks’ assets could be easily converted into equity in such dire straits meant that they would have more headroom.

Aside from the continued financial risks related to Brexit, the BoE reiterated that risks at a domestic level “remain at a standard level overall”. It added that risk appetite between the leading banks was strong, but that borrowing levels had fallen somewhat amid the Brexit uncertainty and the fallout from the UK/EU divorce.

Source: Banking Tech

2019 property forecast
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2019 Property Forecast: Here’s what the experts are predicting will happen to house prices next year

It’s that time of year again, when people guess what’s happening next year. Only, it’s particularly entertaining this year because no one really knows what’s going to happen next week.

Still, most of the UK’s big estate agencies have had a go, looking at house price growth in the UK and abroad, what effect Brexit will have, new trends in the market and how things like interest rates and buy-to-let restrictions will affect the market in 2019 and the next five to 10 years. We picked out some of the highlights so you can get an overall picture of what property industry experts think is going to happen to the value of your flat.

House Prices

Unbelievably, considering the currrent Brexit chaos, house prices are still growing in the UK. Not by much, though; only 0.3 per cent in November, up 1.4 per cent from the start of the year according to Nationwide.

Next year, JLL says they expect an initial slump at the beginning of next year, showing 1 per cent growth in the first six months, then picking up in the second half to make 1.5 per cent growth by the end of the year. This should grow to 11 per cent in the next five years, says Adam Challis, head of UK Residential Research. “With UK earnings growth set to return to a more normal rate of 4 per cent per annum by 2021, real wage growth and more modest property price increases will unlock transactions that have been hampered by a lack of affordability.”

Strutt & Parker is even more optimistic, forecasting 2.5 per cent growth for 2019 and five year growth of 18 per cent, though they caveat this heavily. “Beyond 2019, it is extremely difficult to forecast the market with any certainty and we would expect some bounce back once more stability has returned. The fundamentals of the UK economy remain broadly positive, with sentiment remaining cautious,” says Stephanie McMahon, head of research at Strutt & Parker. Its best case scenario for London in 2019 is 2 per cent, rising to 20 per cent in five years, with a downside risk of minus 5 per cent.

Savills is more cautious, sticking to 1.5 per cent in 2019, rising to 14.8 per cent in five years. Should Brexit be miraculously solved, London and the south east will be the first to reap rewards from the new sense of certainty.

Interest rates could be another spanner in the works. Following the increase from 0.5 per cent to 0.75 per cent in August, Strutt & Parker’s forecast says it expects interest rates to rise gradually in the next few years, reaching 2 per cent by 2021, increasing the cost of mortgages to many households.

“Assuming that – as most economic forecasters are suggesting – we avoid a full-blown recession, then interest rates are probably the bigger of the two variables,” says Lucan Cook, director of research at Savills, the other variable being Brexit, of course.

Places to invest

In the London, this is fairly straightforward. CBRE’s Hot 100 report using Land Registry and Rightmove data shows that Islington was London’s top performing borough for house price growth last year, recording a 7 per cent increase. Redbridge and Richmond come in joint second with growth of 5.7 per cent. Not far behind are suburban, more ‘affordable’ boroughs like Newham, Ealing and Merton.

Knight Frank’s Prime Global Forecast 2019 says that price growth in luxury locations is still relatively low, thanks to a cocktail of regulations, Brexit, the rising cost of finance, and even over-supply in some cities. Its ones to watch next year are Madrid, Berlin and Paris, all with predicted growth of 6 per cent. Prices in Hong Kong, where to loan-to-value ratios could be relaxed, are predicted to fall by 10 per cent, and Mumbai prices could fall by 5 per cent due to a developer tax on unsold inventory.

Its main advice, however, is to follow the tech-start ups and invest in non-traditional residential like retirement communities, student accommodation and build-to-rent, which are set to outperform the wider market.

Knight Frank also predicts 2019 will be the year San Francisco, Chicago, Dallas, Beijing and Shanghai join the ultra-prime cities club.

Source: City A.M

Small business
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Best Ways to Fund Small Business

Small businesses may need extra funds for various reasons. When a market is growing, the company will be in need of additional money.

Clients could be late on paying the invoice, or some clients may cancel collaboration with your business. Small business needs steady cash-flow to get ahead of the competition and grow on the expected rate. Small business financing is not a difficult task, but it includes lots of tools. Today we would love to compare different financial tools.

Traditional Bank loans

After a market crash in 2008, getting traditional bank loans became very hard. That’s a complicated process, especially for small businesses. Most of the small business has no huge credit history with financial institutions so that they will end up with a declined request.

Banks always ask you about lots of stuff. They will ask about the past relationships with the banking system, and you may also give them your business credit score. As for today, it’s a very tough task to get approved by the traditional bank loan system. Banks only accept up to 25% of applications. As for the quick cash, traditional banking loan is not an attractive financial tool.

Business Line of Credit

When financial institutions give you access to a certain amount of money, it’s called a line of credit. They give you a chance to access specific budget whenever your business needs.

That’s exciting tools for small businesses. The company can take any amount from that budget and replenish it anytime. As you recharge it, you can start the same cycle again. That’s a win-win position for both, small business and financial institutions.

Unlike the traditional banking loans, you don’t have to follow a specific monthly schedule to pay for credit. With a line of credit, you take the money and replenish it anytime your company can use the payback.

Keep in mind that a business line of credit is only for a certain amount of money, and you can’t use for big goals.

Invoice factoring

It’s a very easy and straightforward process. When a small business has unpaid invoices, owners can get in touch with “factoring” companies and sell unpaid invoices to them.

It’s not a traditional loan; your company gets paid for the work that’s already done. Well, it has some side effects you may face while using it.

The factoring company will need access to personal information of customers so that it may be a problem for small business. Most clients don’t want to give their personal information to third parties so that they will complain. Be ready for complaining from customers, if you choose invoice factoring as a financial tool.

As for today, there are different ways to fund your small business rather than traditional banking loans. You may need to hire new faces in the company or buy new equipment for efficient work. No matter what is your reason, as a small business owner, you’ll always be in need of extra funds. Steady cash flow means too much for companies, so choose a reliable and trusted financial tool wisely, before going for it.

Source: FinSMEs

evolving market
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New opportunities and risks in evolving market

It is widely accepted that we have reached a late stage of the property cycle. Some even argue that a downturn has already set in. However, our view is that while values feel pretty full, we certainly aren’t in bubble territory. It is reassuring to note that UK commercial property values have increased half as much as they did during the last cycle and the industry as a whole is nothing like as highly geared as it was in the run-up to the financial crisis a decade ago.

However, as lenders and investors, we can’t afford to be complacent. We remain alert to the risks of lending late in the cycle which today are as much, if not more, of a concern as structural changes in the market. Against this background, we have still been able to find value and we have invested more than £800m over the past 12 months, including our largest transactions to date in both our senior debt and partnership capital strategies, while we have been able to back some very interesting residential development opportunities in London and the South East.

The most obvious risk in today’s market is posed by changes to shopping habits. The inexorable rise of online shopping has already started to bite hard into the retail property market and undoubtedly, values and rents will continue to come under more pressure. We have therefore been reducing our exposure against retail property for some time but we are not turning our backs on the market completely.

”As lenders and investors, we can’t afford to be complacent. We remain alert to late-cycle risks”

While there is clearly trouble ahead for department stores and the centres they anchor, many retail centres will continue to attract shoppers, particularly those in densely populated areas that are focused on convenience shopping. We’ll continue to back borrowers and partners with deep retail experience in this part of the market.

The industrial market presents very different challenges for us. The rise of ecommerce is driving growing occupier demand but this means competition between investors to buy assets and between lenders to fund them is high. We have been active in the industrial market for many years but, with investment yields contracting to record levels, we see better relative value in development than investment and have funded two speculative warehouse schemes in the South East in recent months. Having said that, one of our biggest loans this year, and the largest loan to date in the senior debt programme, was the £125m refinance of an industrial portfolio, predominantly located in the West Midlands.

‘Live-work-play’ situation

The office market is also going through a period of rapid change with TMT tenants driving demand in many parts of the country, not just London, which are often followed by co-working operators, with most looking for that millennial-friendly ‘live-work-play’ situation. We are keen to support borrowers targeting this market, as evidenced by our loan earlier this year to support FORE Partnership’s £51m acquisition of Tower Bridge Court on the South Bank. It was our first office deal in London since 2015 and we are on the lookout for others as pricing for value-add investments in the capital is looking increasingly attractive.

New opportunities and risks in evolving market Commercial Finance Network

Tower Bridge Court £51m acquisition and refurbishment whole loan

We also continue to target the other major UK cities, confident that despite the uncertainty around Brexit, there are good lending opportunities available. The fundamentals of the office market in large UK cities remain healthy. Demand for space is robust; this has been driven by strong employment growth; supply remains tight due to a lack of new development and a similar lack of conversion of secondary office space to residential under development law.

Alternatives also look more attractive than ever. In an environment where Brexit brings an uncertain economic outlook, it clearly makes sense to be lending and investing in sectors where demand isn’t tied to the economic cycle. One such example is data centres; demand for data is set to grow exponentially but there are a very limited number of locations that can meet data centres’ specific requirements for connectivity or power. As well as backing student accommodation and hotels, which have been our alternatives bread and butter since 2011, we have been providing finance for data centres as well as a number of other non-traditional assets this year.

Indeed, we made our biggest-ever loan across the business this year in the alternatives sector – a £200m whole loan to Royale, an operator of permanent park homes aimed at the over-50s. The loan was backed by 27 individual parks and 3,500 plots, providing a good level of granularity. We also like the fact that the number of over-50s is set to grow at twice the rate of the whole population.

This year, ICG-Longbow expanded its direct investment activities with the launch of our build-to-rent business, through the Wise Living joint venture with SDL Group, and a pan-European sale-and-leaseback strategy. Growing both will be a key focus for us in 2019. Increasing demand for private rented housing gives us confidence in the outlook for build-to-rent, particularly as our focus is on family housing, which is an undersupplied part of the market. The sale-and-leaseback business is also an exciting venture for us that brings together ICG-Longbow’s property expertise with ICG Group’s 29-year track record of investing in European corporate credit deals.

We also plan to expand our partnership capital lending and investing activity into continental Europe in due course. For us, it’s a natural progression for the business and doesn’t mean we’re any less interested in the UK. Although the UK market faces challenges, not least Brexit, we are still firm believers that there are plenty of good opportunities out there.

Healthy sign for the market

Looking at the supply of capital to the market, we see that banks remain cautious and have lowered their LTVs. However, we see this as a healthy sign for the market as a whole and they at least remain active. From our perspective, the fact they have pulled back somewhat is helpful for obvious reasons. When it comes to our senior lending, we used to compete with the banks mainly on our flexibility and speed, whereas now there is usually substantial clear water between our terms and the banks on leverage, while in the higher LTV whole loan market there are only a handful of lenders equipped to underwrite more complex property strategies, including value-add and development.

Finally, in the residential construction market, we have seen more activity from other non-bank lenders, but in our opinion this has been more than offset by a couple of UK banks pulling back from the market, while the volume of debt capital available still remains low relative to financing requirements.

With positive occupational fundamentals in all but retail, we look ahead to 2019 with confidence that there will be plenty of attractive lending opportunities, despite (or even potentially resulting from) the ongoing political uncertainty. Having raised nearly £900m across our senior debt, partnership capital and residential development strategies this year and with fundraising efforts still ongoing, we have plenty of firepower coming into the new year and we look forward to continuing to support our customers with our flexible capital and partnership approach going forward.

Source: Property Week