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New Report Reveals Liverpool is One of The Top Hotspots for Growth

The UK’s 24 leading urban economies have been scrutinised and Liverpool city region has been rated as one of the top four hotspots in the UK for economic growth potential.
The potential of all 24 cities have been measured analysed and brought together in a report carried out by global design and infrastructure consultancy, Arcadis. The data was measured against six key areas: workforce and skills, infrastructure, business environment, place, city brand and housing.
In the final league table of the report, Liverpool was fourth behind Edinburgh, Oxford and Cambridge, but ahead of London. The city’s main strengths were its brand, infrastructure, positive business environment and the quality and affordability of housing supply.
A large part of the city’s attraction is its strong global brand. Due to Liverpool’s rich history, its music, the diverse cultural make up, along with the open-for-business environment radiated from the city. This helps to signal to the rest of the world the huge opportunities here and what potential exists within the city and wider city region. Liverpool attracts investors, both in the commercial and property market, from across the UK and overseas. It creates an attractive package adding more to Liverpool future long-term prosperity.

Not a new phenomenon

This isn’t a new phenomenon. Merseyside’s economy grew faster than London, Manchester and any other major British city in 2015 according to figures by the Office for National Statistics (ONS). Less than three years ago Merseyside enjoyed an economic growth rate of 3.1% in the year, faster than any similar major city region in the country. In fact, major cities across the North West performed strongly during that year according to statistics by the ONS.
Liverpool city region continues its process of improving its performance, catching up with other places that used to perform better in the past. It has recorded a strong economic performance over recent years, demonstrating the progress made. In order to continue its fantastic growth, Liverpool is a city that cannot be complacent. The city region is narrowing the gap in terms of GVA (gross value added) per head but the push must continue if the city region is to achieve its full economic potential.

Regeneration helps city to rank

Undergoing several regeneration schemes and large-scale work across the city has certainly helped Liverpool reach its number four ranking. And through this, pricing across Liverpool is expected to rise. The L1 postcode is a good example of this and has seen house prices risen by a 41.2 per cent according to property website Rightmove. You can find out more information and view properties in Liverpool here at RWinvest.
The student population also means that a combination of low house prices and high rental values has given the city some of the highest rental yields in the UK, making it an appealing possibility for property investors keen to create a portfolio in the student rental market.

Source: FINSMES

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May UK rate rise still likely but Brexit obscures next moves

British interest rates are still expected to rise in May following a barrage of hawkish signals from Bank of England policymakers, but most economists polled by Reuters don’t see a follow-up move for another year.

Part of the hesitation stems from the fact that Britain’s economy has moved from leading to lagging all of its industrialised peers, and is facing its most far-reaching change since the Second World War: leaving the European Union.

Indeed, the latest Reuters poll found no upgrades to economists’ already modest inflation and growth forecasts.

The consensus view also showed the likelihood of a disorderly exit from the EU has held at 20 percent, where it has been all year, with but several saying that it had increased in the past week. The range was 5-60 percent.

The highest median probability was 30 percent reached in July 2017, and again last October.

All but one of the respondents in the poll, taken March 5-7, expected a transition deal will be struck. Nearly every respondent said the most likely eventual outcome from talks between London and Brussels would be a free trade agreement.

However, as has been the case for the last three polls in which that question was asked, the second most likely option was no deal, and Britain to trade with the EU, which takes almost half of the UK’s exports, under World Trade Organization rules.

Remaining in the European Economic Area, which would mean staying in the EU’s single market, was the third most likely option, trailed by cancelling Brexit altogether.

More than 90 percent of this same panel of economists said before the June 23, 2016 referendum that leaving the EU would damage Britain’s economy, trigger a fall in sterling, which in turn would push up inflation, all of which have taken place.

For now, the BoE remains set on tackling inflation, 1 percentage point above the 2 percent target, which it argues is stemming from an economy that has less capacity to grow, as well as historically very low unemployment.

“One of the main arguments supporting the case is that there are signs of demand strengthening while there are no signs of supply picking up,” note Barclays economists Sreekala Kochugovindan and Fabrice Montagne.

“While our central scenario remains a hike in August, this suggests that the risk that the Bank looks through soft data and delivers in May regardless is material.”

And it is by no means a done deal the BoE raises rates in May. Only a slight majority, 36 of 63 economists or 57 percent of the sample, are expecting a May rise to 0.75 percent. That proportion is roughly the same as February.

About 60 percent of poll respondents see Bank Rate at 0.75 percent at year-end and a third say 1.25 percent at end-2019, with one rise each in the second and fourth quarters, although there are fewer people willing to look that far out.

Inflation is set to slip from 3 percent presently to 2.2 percent a year from now, averaging 2.5 percent this year and 2.1 percent next, unchanged from the poll taken in mid-February.

Alan Clarke, head of European fixed income strategy at Scotiabank, says he is sticking to a long-standing forecast for a May rate rise to 0.75 percent.

“Nonetheless, we fully expect that rate call to be challenged in the coming months if CPI inflation does slow sharply,” noted Clarke, who forecasts inflation to dip to 2.5 percent by March compared with the BoE’s 2.8 percent view.

“As long as core services inflation – i.e., domestically generated inflation – does not fall as well, then the May rate hike is still in play.”

A separate Reuters poll on Wednesday predicted sterling would trade higher in a year, near $1.41, and keep steady around 88-89 pence to the euro. If correct, that would also keep a lid on imported price pressures.

But it is very difficult to forecast the future using traditional economic models, parsing base effects and estimating spare capacity, when the biggest economic uncertainty by far is the political solution to how Britain will relate to the EU.

Some respondents highlighted a wide gap that remains between domestic political expectations and what is actually on offer from Brussels and the other 27 EU members.

“The British government’s position continually fails to understand the EU27 starting point. Regulatory harmonisation is not enough – it will have to give up significantly more control to the likes of the European Court of Justice than the Brexit ultras are happy with,” notes Commerzbank economist Peter Dixon, on what he sees as a 20 percent chance of a disorderly Brexit.

“This raises the prospect of a domestic political split and if (Prime Minister) Theresa May sides with those pushing for a hard Brexit, the risk of such an outcome occurring will clearly have risen.”

Source: UK Reuters

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UK house prices just had their first quarterly fall in nine months

House prices in the UK had their first quarterly fall for the first time in nine months, a closely-watched index has shown.

Prices fell 0.7 per cent in the three months between December and February, the Halifax house price index showed – the first time since May last year the figure has fallen into the red.

On an annual basis, prices rose 1.8 per cent in the year to February, while they edged 0.4 per cent higher between January and February. Average UK house prices hit £224,353 during the month.

However, Halifax suggested there was some hope for the market, after the number of homes sold in the UK reached 100,000 for the 13th month in a row, while mortgage approvals rose sharply in January.

But it added indicators of both demand and supply remain weak.

“[The] latest survey evidence largely points to still lacklustre housing market activity early on in 2018,” said Howard Archer, chief economic adviser to the EY Item Club.

“In particular, the Royal Institution of Chartered Surveyors’ influential survey for January reported that “New buyer enquiries, instructions and sales all continue to drift lower (in net balance terms), while near term expectations point to a flat outturn for activity in the coming months.

“Having said that, there is a little more optimism regarding the 12 month sales outlook which is now at least modestly positive in virtually all parts of the country. New buyer enquiries were down for a 10th month running while agreed sales fell for an 11th month.”

Source: City A.M.

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Planning Required For Budget Reforms On Buy To Let Investments

Buy to let property investors have been warned that they must plan for the budget reforms coming into play regarding mortgage tax relief.

The budget reforms announced in 2015 phase out tax relief on mortgage payments in three stages, the first of which came into force in April 2017, meaning landlords will only be able to claim back 75 per cent of finance costs when they file their returns ahead of January 2019. By April 2020, landlords will no longer be able to deduct any of their mortgage expenses from their rental income when calculating their tax obligations.

Research carried out for Kent Reliance, by BDRC Continental, suggests that one in five (19 per cent) landlords have already moved properties into a limited company, or transferred ownership to a spouse, to mitigate higher tax bills, while a further one in six (13 per cent) plan to do so in the future.

However, the research also shows that 15 per cent of landlords still don’t fully understand the implications of taking this action and could be in for a rude awakening when they file taxes for the year 2017/18.

The research also found that 53 per cent of landlords do not think they would benefit from changing to a limited company or transferring ownership. However, this varied greatly between smaller and larger scale landlords, with 58 per cent of those investors holding up to five properties not seeing a benefit, compared to just 27 per cent for those with more than 20 properties in their portfolio.

Adrian Moloney, Sales and Marketing Director at OneSavings Bank who own Kent Reliance, said: ‘Landlords have had nearly three years to understand and prepare for the changes to the tax treatment of mortgage interest. Most have risen to the challenge, but a few might have quite the shock when they come to file this year’s tax return.

‘As the tax year draws to a close, brokers can use this opportunity to engage with their clients, make sure they’re aware of the potential impact on their finances. Many landlords have sought to move to a limited company structure or transferred ownership to a spouse but it’s not a one-size-fits-all solution so it’s vital that landlords affected seek professional tax advice.’

Source: Residential Landlord

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Preference for longer-term mortgage products overtakes two-year deals for the first time

The preference for longer-term mortgage products has overtaken 2-year deals for the first time, Paragon’s Financial Adviser Confidence Tracking Index report has found.

Some 48% of residential and buy-to-let applications were at 5-years or more in Q4 2017. That represents an increase of 7% on Q3 2017 and 15% on the same period 12 months earlier, as the preference for longer-term fixed products continues to grow in popularity.

Conversely, 2-year terms, which have been the overwhelming preference over the last five years, made up 40% of fixed and tracker cases in Q4 2017. This was down 7% on the previous quarter and 14% on its peak, achieved in Q3 2013 and Q3 2014.

John Heron, managing director of mortgages at Paragon, said: “The results of our latest intermediary research highlight the overwhelming preference that the market has for fixed rate products and increasingly for longer term fixed rate products.

“Much of this is driven by the understandable requirement that landlords have for payment stability into the future against an uncertain economic backdrop.”

The overall preference for fixed rate mortgage products hit another all-time high, the second in successive quarters and third in 12 months, up 2% to 91% of all cases. The preference for tracker products reached another all-time low in Q4 2017, down to 7% from 9% in Q3.

In buy-to-let, remortgaging continues to drive the market, with the proportion of buy-to-let remortgages back up to 52% in Q4 2017. This continues a steep rise in remortgaging, up from 28% following the global financial crisis.

Despite a marginal decline in Q4 2017, the principal reason for obtaining a buy-to-let remortgage is still for a better interest rate, making up 55% of all cases.

Some 35% of landlords, the lowest figure recorded, used a buy-to-let remortgage to raise capital in the same period, as the disparity widens between the two reasons that were level at 45% just two years ago.

Source: Mortgage Introducer

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The average first-time buyer is now seven years older than in 1960

The average first-time buyer is now seven years older than in 1960 and needs to save around £20,000 to be able to buy a home, a study has found.

Researchers who polled 2,000 adults found a huge difference in the profile of someone buying their first home through the generations.

Today, first-time buyers will be in their thirties before they get onto the property ladder and pay a deposit of £20,622.

In comparison, in 1960, the average first-time buyer was just 23 years old paying a deposit £595 on their first home – the equivalent of around £12,738 today.

James Thomson, CEO of Keepmoat Homes, which commissioned the research, said: “As the UK’s leading homebuilder for first-time buyers we understand better than anyone the challenges that come with getting onto the property ladder.

“In fact we sell 72 per cent of our homes to first-time buyers and so the results of the research were very interesting for us.

“It’s worrying to see just how much tougher things have become, particularly since 2000, with the research showing house prices have risen by over £55,000 and the average deposit has increased significantly from £12,988 in 2000 to £20,622 today.

“It isn’t surprising that the research revealed 69 per cent of people think it’s now harder than ever to buy a home.

“We are bucking that trend by providing high quality homes, predominantly to first-time buyers.

“Our average house price is £155,000, compared with £226,756 across the rest of the UK today and £193,008 in the regions outside London.”

Researchers found homebuyers in the 1960s spent just over two years saving a deposit of £595 – with an average household income of £2,854 at the time.

But those who have bought since 2011 spent more than five years saving a deposit of £20,622 – more than half the £35,634 average annual household income.

As a result, a staggering 48 per cent of people had help to the tune of £10,200 towards this cost from mum and dad.

In the 1990s the cost of a deposit was just over a quarter of the average household income of £20,591 and only 26 per cent of first-time buyers had financial help – an average of £3,881.

But while 84 per cent of first-time buyers were married in 1960, this has dropped to just 27 per cent in recent years.

In fact, first-time buyers are more likely to be in a relationship today rather than married to their partner.

One in five first-time buyers today are single – compared to just three per cent in the 1960s.

The study also found 31 per cent of people are still living in the first home they bought, including one in 10 of those who bought in the 1960s and 15 per cent who bought in the 1980s.

However, two thirds of respondents think people are now more likely to end up purchasing a flat or small home, which they will have to move from in order to start a family, to get on the ladder.

James Thomson from Keepmoat Homes added: “The situation for first-time buyers has become increasingly difficult but there are positive things happening too.

“This includes the Government’s Help to Buy scheme, which has already helped many people onto the property ladder, and the recent abolition of stamp duty for first-time buyers.

“At Keepmoat Homes we are dedicated to building a supply of quality new homes at prices that people can afford.

“By the end of March 2018 we will have built almost 4,000 homes this financial year. The results of the research show how important it is for us to continue this focus through 2018 and beyond.”

Profiles of the average first-time buyer through the decades: (not taking inflation into account)

1960s
Age: 23
Married (84%) In a relationship (13%)
Household income: £2,854
House purchase price: £16,364
Deposit: £595.26
Length of time to save deposit: Two years and one month
23 per cent had financial help – average of £746
Fees: £180.49

1970s
Age: 25
Married (74%) In a relationship (13%)
Household income: £7,307
House purchase price: £22,226
Deposit: £1,191
Length of time to save deposit: Two years and eight months
25 per cent had financial help – average of £1,774
Fees: £454.10

1980s
Age: 28
Married (49%) Single (24%)
Household income: £14,345
House purchase price: £47,488
Deposit: £2,955
Length of time to save deposit: Three years and one month
21 per cent had financial help – average of £4,052
Fees: £944

1990s
Age: 29
Married (29%) Single (29%)
Household income: £20,591
House purchase price: £78,225
Deposit: £5,210
Length of time to save deposit: Four years
26 per cent had financial help – average of £3,881
Fees: £1,422

2000s
Age: 29
Married (30%) In a relationship (30%)
Household income: £29,993
House purchase price: £123,822
Deposit: £12,988
Length of time to save deposit: Four years and four years
42 per cent had financial help – average of £8,408
Fees: £2,368

2011+
Age: 30
In a relationship (30%) Married (27%)
Household income: £35,634
House purchase price: £179,594
Deposit: £20,622
Length of time to save deposit: Five years and one month
48 per cent had financial help – average of £10,200
Fees: £2,623

The average first-time buyer is now seven years older than in 1960 Commercial Finance Network

Source: News Anyway

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Help for residential tenants is on the way

The pace of change for residential landlords and tenants shows no sign of abating. Several recent press announcements herald new changes to the law in England, which will benefit tenants.

Houses in multiple occupation (HMOs)

Mandatory licensing of HMOs came into force in 2006. Licensing is mandatory for properties of three storeys or more and lived in by at least five people in two or more separate households. It was introduced with the intention of driving up standards and making larger HMOs safer places to live.

In October 2016, following expansion of the HMO market, the government published consultation paper “Houses in Multiple Occupation and residential property licensing reforms” which sought views on a number of proposed measures. The issues these sought to tackle included overcrowding, poor management of tenant behaviour, failure to meet required health and safety standards, housing of illegal migrants and intimidation of tenants.

In January 2018, the government issued its response to the replies received to its consultation. It proposes to:

  • extend the scope of mandatory HMO licensing to cover certain HMOs occupied by five persons or more in two or more households, regardless of the number of storeys. This includes any HMO which is a building or a converted flat where the householders lack or share basic amenities such as a toilet, personal washing facilities or cooking facilities. It also applies to purpose-built flats where there are up to two flats in the block and one or both are occupied as an HMO;
  • introduce mandatory conditions to regulate the size and use of rooms as sleeping accommodation in licensed HMOs. The proposal is that this will done by prescribing the minimum sizes of rooms that may be used for sleeping and by introducing a mandatory licencing condition requiring local authorities to specify which rooms in an HMO are suitable for sleeping accommodation, and by how many adults and children;
  • introduce a mandatory condition requiring the licence holder to comply with their local authority scheme (if any) for the provision of facilities for the proper disposal and storage of domestic refuse.

The government intends to bring these new measures into force later this year.

The government will not at this time:

  • introduce legislation to mandate criminal record certificates to be provided in connection with applications for licences under the Housing Act 2004. It says local authorities already have discretion to do this should they so choose and the new powers on banning orders and a rogue landlord database will help strengthen this provision (see below); or
  • require local authorities to provide discounts for licences issued to certain private providers of purpose-built student housing.

However, these matters will be kept under review.

Banning orders

The Housing and Planning Act 2016, introduced a power for the First-tier Tribunal to serve a banning order on a landlord or property agent. Where someone is convicted of a banning order offence, their details can be listed in a planned database of rogue landlords and property agents. Our previous article A ban on unfair letting fees: the draft Tenant Fees Bill 2017 explains how breaches of the draft Tenant Fees Bill 2017 can constitute offences and result in a landlord/letting agent being added to the database. This database will initially only be available to central government and local authorities to check for previous offences, but it is hoped that in due course it will be made available to the public to enable more informed decisions to be made about renting.

Following a consultation paper issued in 2016, the government has now announced that it will make regulations specifying that a range of existing criminal offences will constitute banning order as well as some other offences for the purposes of the act. The full list of offences is contained in the consultation response which can be found at:

Consultation on proposed banning order offences under the Housing and Planning Act 2016.

They include:

  • Unlawful eviction and harassment of occupiers;
  • Violence for securing entry;
  • Failing to comply with an improvement notice;
  • Offences in relation to licensing HMOs;
  • Fire safety and gas safety offences;
  • Offence of harassment and stalking;
  • Theft, burglary, blackmail and handling stolen goods;
  • Production, possession of supply of illegal drugs;
  • Violent and sexual offences.

Register of landlords

A Private Member’s Bill to require all private landlords in England to be registered was introduced to Parliament on Wednesday 17 January 2018 under the Ten Minute Rule. This bill is expected to have its second reading debate on Friday 27 April 2018. For further information and to access the bill documents click Parliamentary website.

The Bill was introduced as a precursor to greater regulation of private landlords, the intention being that more transparency about the identity of private landlords should help to tackle issues like long-term empty properties and absentee landlords which lead to increased crime and other social problems.

Homes fit for habitation

Another Private Member’s Bill is also making progress. Karen Buck’s Homes (Fitness for Human Habitation and Liability for Housing Standards) Bill 2017-19 seeks to amend the Landlord and Tenant Act 1985 by extending its obligations to cover almost all landlords and to modernise the fitness for habitation test.

The bill seeks to ensure that:

  • all landlords (both social and private sector) must ensure that their property is fit for human habitation at the beginning of and throughout the tenancy; and
  • where a landlord fails to do so, the tenant has the right to take legal action in the courts for breach of contract on the grounds that the property is unfit for human habitation.

The new section 8 of the Landlord and Tenant Act 1985 substituted by the bill will apply in England only. Relevant documents on the Bill can be found on the Parliament website.

On 14 January 2018 housing secretary Sajid Javid confirmed government support for the bill, saying that it wiould help to ensure rented homes are safe and give tenants the right to take legal action when landlords fail in their duties.

Introduced by the Housing Act 2004, the Housing Health and Safety Rating System is already used by local authorities to assess whether a property contains potentially serious risks to its occupants’ health and safety. However the new bill will give tenants an alternative remedy through court if these powers are not effective.

The current housing shortage leaves many tenants with limited housing options. Any measures to reduce the scope for exploitation are to be welcomed and if brought into effect, these proposed changes will be a welcome means of helping tenants live in properties that can properly be described as habitable and free from fear of errant landlord behaviour.

Source: Lexology

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Forget Brexit – here’s the real reason the UK property market is fragile

What’s ailing the UK property market?

House price growth across the country has slowed to just 2.2%, according to the most recent Nationwide release. That’s a drop in real (after-inflation) terms.

Meanwhile, transaction levels are falling – mortgage approvals dropped to their lowest level in three years in December.

What dread apparition has rattled Britain’s favourite asset class? Could it be possible that you can go wrong with bricks’n’mortar?

“Brexit” is the go-to excuse for those in the property business, much as “unseasonal weather” is the go-to excuse for troubled fashion retailers.

But the reality is that the problems in the UK housing market are a lot bigger than mere Brexit…

The increasing weakness of the UK property market

Last week, London estate agent Foxtons issued yet another set of grim results. The group halved its dividend as profits slid by nearly two-thirds to £6.5m last year. The big hit came from a near-25% drop in property sales activity (although lettings business revenue was down 3%, too).

London has been the hardest hit part of the UK housing market, for sure.  At the high end, discounts on asking prices are at their highest levels since the financial crisis, according to LonRes.

However, according to the most recent survey by the Royal Institution of Chartered Surveyors (Rics), activity is slowing across the country.

You can put it down to Brexit; you can put it down to political uncertainty. And both of those might be affecting the higher end of the market, in that the globally mobile super-rich are becoming less willing to buy luxury property in an era where populist governments might be tempted to tax non-portable assets.

But there’s a much more specific reason for house prices to be struggling, and it’s one that isn’t going to change any time soon. It’s the fact that one of the biggest and most powerful purchasing forces in the UK market of the past decade is being squeezed out of the market.

Between changes to buy-to-let taxation and higher levels of stamp duty, becoming a landlord is no longer seen as the sure route to riches it once was. And that is having a big impact on the UK property market.

Landlords are going to keep feeling the squeeze

The additional rate of stamp duty on those buying second homes is one factor putting off would-be landlords. But more important is that the ability for higher-rate taxpayers to offset their mortgage interest payments against their tax bills is being withdrawn in stages. The squeeze began last year, and it will be entirely withdrawn by April 2020.

The upshot is that it’ll be far harder for landlords to make the sums add up. It’s also become harder to secure a mortgage as a buy-to-let landlord, partly as a result of this and partly as a result of generally tighter mortgage lending rules. The figures make it clear that this is already having an effect.

Last year, according to estate agency Countrywide, landlords bought 12.5% of homes sold in the UK – a nine-year low – compared to 14.7% in 2016, and 16.3% in 2015. The biggest drop was in London. Meanwhile, the proportion of landlords buying in cash has been rising sharply.

The abolition of tax relief isn’t the only issue facing landlords. Buy-to-let mortgages are typically interest-only loans. That is great news when interest rates are this low – your monthly payments amount to buttons because you aren’t repaying any of the original capital.

However, it means you feel the pain of rising interest rates much more acutely than anyone with a repayment mortgage: because your entire payment is made up of interest, your bills will go up proportionately more when rates rise.

In short, if rates do rise – even a little – between now and 2020 (which seems very likely at the moment), then landlords are going to be squeezed even harder, between falling tax relief and rising rates.

While some landlords have already woken up to this, human nature means that many others will only realise just how much their property is costing them when they fill in their tax returns in years to come. For some, the resulting figures will come as a nasty shock. (The nice thing is that the government can expect a capital gains tax bonanza, according to accountancy group RSM, which may partly account for the current relative health of the public finances).

The only realistic conclusion is that we’ll see a bigger exodus from the sector and more than likely, the end of the era of the “accidental-turned-permanent landlord”. And the point is, this is not going to change any time soon. Soft Brexit, hard Brexit or no Brexit, this is a structural change.

A house-price crash seems unlikely – but a boom seems even less likely

The good news is that this leaves the field open to potential owner-occupiers. The tricky bit is getting from where we are now to a point where those first-time buyers can actually afford to buy the property.

You see, landlords always had more buying power than first-time buyers. Not only were they generally already property owners and both older and more established, they also enjoyed big tax advantages.

With that gone, competition on the demand side of the property market has fallen. Meanwhile, on the supply side, at the margins, some landlords will be squeezed out of the market – some may even be forced sellers.

What will happen to prices? As long as interest rates stay relatively low (and they could go up a bit from here and probably still not do too much damage), then the idea of a huge crash still seems unlikely.

But equally, there’s little reason to expect prices to rise. Whichever government runs the country for the next ten years or so, it’s clear that increasing housing supply is a major policy goal now. Interest rates can’t get any lower, so it’s hard to see how credit conditions can get any easier. And physical property is going to remain a tempting target for taxation.

In market terms, most of the risk is to the downside. And just to be clear, we’d heartily welcome lower house prices and a more sensible UK housing market. Let’s just hope the adjustment happens gently enough for our financial system to cope.

Source: Money Week

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Commercial Property Investors become increasingly Selective in 2018

After a strong year for UK commercial property in 2017, it looks like things may start to change in 2018. Although not as dramatic as the stock market pullback in January, the February auctions were certainly not plain sailing.

Whilst quality investments continued to sell like hotcakes, the less exciting lots left much to be desired. The success rates of the leading national auctioneers were below 2017 norms (when 100% sales rate were not uncommon): Allsop (80%), Acuitus (ca. 75%) and Barnett Ross (ca. 85%).

Jesal Patel, Director at The Prideview Group, comments “There is still a hell of a lot of cash sitting on the sidelines, ripe for investment. But in the context of rising inflation and interest rates, that cash wants either solid long-dated income or genuine value-add opportunities i.e. investments that permit the investor to ride through the uncertainty ahead.”

The below blue-chip investments which The Prideview Group either bought or sold in February’s auctions are representative of the pricing for quality investments in the current market. If you are looking to invest in auction or privately in 2018, they have a number of opportunities available now. These include;

Lot 67 – McDonald’s, Leicester

Commercial Property Investors become increasingly Selective in 2018 Commercial Finance NetworkDescription: Freehold city centre restaurant investment

Tenancy: Let to McDonald’s Restaurants Ltd until 2036 (no breaks) for £109,000 FR&I

Location: Good location in pedestrianised town centre

Guide Price: £2m+ (5.5%)

Result: Sold Prior (ca. 4%)

Prideview Group’s comment: “A ‘trophy’ asset like this, let to the likes of McDonald’s for almost 20 years, is like a diamond in the rough. So it was our pleasure to be acting for the sellers on its disposal via auction, after having helped them negotiate a lease extension with McDonald’s. Interest was strong pre-auction but it needed to be a knock-out bid to prevent it from going to the room, and that bid did eventually come from a local entrepreneur.”

Lot 35 – Tesco Express & 2 Restaurants, Ickenham, Greater London

Commercial Property Investors become increasingly Selective in 2018 Commercial Finance Network

Description:Freehold convenience store, restaurant & residential ground rent investment

Tenancy:Convenience store let to Tesco until 2023, Restaurants for a further 10 years, total rent £89,365 p.a. FR&I

Location: On a busy commercial parade in an affluent north-west London suburb

Reserve Below: £1,250,000+ (7.1%)

Result: £1,405,000 (6.4%)

Prideview Group’s comment: “This investment caught our eye due to its attractively priced guide as well as its location in a part of London in which we are extremely active. With 2 more units let to independent tenants, it’s a nicely diversified lot. We successfully acquired it on behalf of a client who would not have bought at auction otherwise, within our pre-agreed limit.”

Lot 101 – Papa John’s, Newport

Commercial Property Investors become increasingly Selective in 2018 Commercial Finance Network

Description:Freehold takeaway & residential ground rent investment

Tenancy: Takeaway let to Papa John’s for 15 years from 10/02/2017 (TBO 10th year) for £12,000 p.a. and Flats sold off on long leases for £100 p.a. FR&I

Location: Arterial road in a residential suburb 1 mile from the city centre

Guide Price: £155k + (7.8%)

Result: £168k (7.2%)

Prideview Group’s comment: “It’s very hard to find a blue-chip investment with 9 years’ income under £200k, and when we booked this for sale in auction we expected it to fly. However buyers looking at this price point are typically novice, and could have been put off by either VAT (typically VAT properties do not appeal to those buying in their own names) or the legals (there were some outstanding certifications required for the newly built flats above). Whilst in the context of the wider market this looks (and is) a great buy, it’s always important to analyse each property on its merits.”

Source: Property Forum

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Five-year buy-to-let products back to record lows

The fixed rates on five-year buy-to-let mortgages have returned to record lows, with the average 3.43 per cent rate as low as it was in October 2017.

Figures from Moneyfacts showed rates have fallen back on these products, where average rates were as high as 3.77 per cent in March last year.

Charlotte Nelson, finance expert at Moneyfacts, said a substantial chunk of borrowers were likely to be remortgaging in the coming months because so many people rushed to buy in March 2016 ahead of the introduction of the buy-to-let stamp duty surcharge.

She said: “In anticipation of this, lenders have started to compete in the five-year fixed rate market to vie for these potential borrowers’ custom. This has seen the average five-year fixed rate fall to the joint lowest on moneyfacts.co.uk records.

“Five-year fixed rates are likely to be a popular choice among landlords, as the stress-test that is applied for two-year fixed rates does not apply to the five-year deals. This could well be one of the reasons why BTL lenders have focused competition within this market.”

Ms Nelson said property could still be an attractive investment buy urged landlords to seek financial advice.

In January the average five-year fixed rate for a buy-to-let mortgage was 3.45 per cent.

Andy Craddock, from Mortgageforce in Worcester, said five-year fixed rates were popular with buy-to-let customers.

He said: “They are worried about Brexit and want to fix for as long as possible.”

He added that Coventry Building Society had a very competitive ten-year rate, at 2.95 per cent for 65pc LTV. “If you have the loan-to-value then it’s fab,” he said, “especially with rate rises expected from March.”

Source: FT Adviser