asset finance
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Asset finance new business grew by 12% in April 2023

New figures released by the Finance & Leasing Association (FLA) show that total asset finance new business (primarily leasing and hire purchase) grew in April 2023 by 12% compared with the same month in 2022. In the first four months of 2023, new business was 13% higher than in the same period in 2022.

The business new car finance and business equipment finance sectors reported new business up in April by 48% and 13% respectively, compared with the same month in 2022. The commercial vehicle finance and plant and machinery finance sectors reported falls in new business of 2% and 6% respectively, over the same period.

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Commenting on the figures, Geraldine Kilkelly, Director of Research and Chief Economist at the FLA, said: “The asset finance market reported a year of sustained monthly new business growth in April supported by continued strong growth in the business new car finance sector. Annual new business in April at £35.3 billion was only 1% lower than the pre-pandemic peak in 2019.

“Asset finance supports business investment across all major industry sectors and business size. New business provided to larger businesses grew by 27% in April, to the manufacturing sector increased by 30%, and to the services sector grew by 11%, compared with April 2022.”

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By Lisa Laverick

Source: Asset Finance International

Short-term lets
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Short-term lets and holiday homes surpass buy-to-let income

Short-term lets – and specifically furnished holiday lets – are now generating greater profits for owners than the traditional long-term buy-to-let model, but there are downsides.

In the aftermath of the pandemic, short-term lets surged in popularity, when staycations became the only way – or the preferred way – to take a holiday compared with overseas travel. Even after Covid restrictions were largely lifted, more people still opted to holiday in the UK than pre-pandemic.

But the property type had already been rising through the ranks as a property investment option for a number of reasons, including recent buy-to-let tax changes that meant some landlords paid lower levels of tax on holiday lets than buy-to-lets.

Some recent research conducted by Hamptons, using official data from HM Revenue and Customs, has revealed that in the 2020-21 tax year, income for short-term lets in the UK hit £15,600, while traditional buy-to-let income generated £13,400. This is the first time income has been higher for holiday lets.

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Long-term landlords moving to short-term lets?

However, while there have been many reports over the past three years indicating that some landlords have ditched the long-term for the short-term rental option, the data reveals that in fact only 1.5% of all landlords are holiday let owners.

Therefore, the vast majority of landlords still see the highest value from their long-term rentals, putting paid to rumours of large numbers of landlords ditching the traditional buy-to-let model.

When looking at how the furnished holiday let industry has grown over the years, the study showed that 63,000 people made an income from 65,000 lets in 2020/21, up from 46,000 individuals who owned 50,000 holiday lets in 2011/12.

The report notes that there are two main reasons that the short-term lets sector has grown so much, the first being that the majority of such properties are used for both personal and commercial purposes. The commercial side in particular has grown in recent years, adding to the figures.

The other reason, as touched upon earlier, is the ‘staycation boom’ that boosted demand in the sector to a significant level, leading to more landlords and homeowners taking the opportunity to let out suitable properties to fill the need.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

More income, same profit

Interestingly, while the report demonstrates the overall increase in income generated from short-term holiday lets, it also notes that due to rising running costs, owners of both property types end up with “a similar amount of cash in their pocket”.

According to Hamptons, running costs for a holiday let consume around 43% of the total income, while costs for a buy-to-let are around 31% of the total rental income, not taking financing costs into account. Furthermore, incomes are also currently forecast to fall back to pre-pandemic levels.

The maintenance costs that come with a furnished holiday let can include regular cleaning services, more frequent replacement of equipment and appliances due to the higher number of different guests, and more general wear and tear to carpets, fixtures and fittings.

Often, landlords with holiday lets will employ an agency to deal with the general management of the property, including listings and comings and goings, which further adds to the costs of short-term lets.

On the plus side, aside from the higher income you could receive – particularly for a well-located, well-turned out property – you could also benefit from its use as a holiday home. The property must be furnished and available for at least 210 days per year to legally count as a holiday let, but the rest of the time you could you it yourself.

From a tax perspective, there can also be certain benefits to short-term lets, which you can read more about here. This article will also tell you more about the rules and regulations that apply to running a short-term let.

By Eleanor Harvey

Source: Buy Association

property
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Bristol and Manchester property markets ranked top for growth

What sets the Bristol and Manchester property sectors apart from other UK cities? A new study reveals why they are the top locations for future growth.

A new report from CBRE analysing various property markets across the UK’s towns and cities has revealed that the Bristol and Manchester property markets have the highest growth prospects over the next 10 years, making them top property investment locations right now.

All sectors of the property market were put under the microscope, including office, retail, senior living, hotels, student accommodation, and multi-family and single-family housing. The two cities regularly came out top when looking at factors such as population and household growth projections, GDP, affordability and more.

Other locations that scored highly in the analysis were Brighton, which ranked in the top 10 for more than half of the various sectors, along with Leeds, Birmingham, Edinburgh and Glasgow, which all scored highly in certain areas pushing them into the top 10.

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What’s driving Manchester property market growth?
Manchester is an extremely diverse economy in terms of the range of industries that thrive there, from advanced manufacturing to business, finance, life sciences, energy and environment. Such a wide scope of employment prospects has a direct impact on the Manchester property market across all sectors.

Its top three growth sectors, according to CBRE’s report, are student accommodation, multi-family housing (such as apartment blocks, build-to-rent, etc) and single family housing (which includes more traditional, standalone housing).

The retail, hospitality and leisure sectors also make up an important part of the Manchester property scene, with Manchester having one of the “biggest retail economies after London”. It also has one of Europe’s largest student populations, says the report, with 750,000 full-time students living and studying in the city.

All of this contributes to an exciting outlook for Manchester property investors looking for strong future growth prospects over the long term. The city is also expected to have the highest population growth over the next 10 years, of 5.92%, as well as the highest employment growth (10.4%).

CBRE’s projections show the area expects to see the second highest growth when it comes to consumer spending (24.7%), and the third highest growth in life sciences employment (18.5%).

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Honing in on Bristol
The other top-ranking city, Bristol, was hailed for its large and diverse young population, alongside world-class universities. Its strongest sectors in terms of property growth were in the office, urban logistics and multi-family housing sectors.

“Bristol’s tech ecosystem is particularly appealing to small businesses, with only Manchester and Birmingham being home to more tech SMEs than Bristol,” says CBRE.

The city expects to see a 12.97% increase in office employment over the next decade, with strong population growth of 3.6%. It does have one of the highest house prices across all of the cities analysed, of £360,000, which could be a barrier to some, while it expects employment levels to rise by 5.6% over the course of 10 years.

Bristol is often seen as a go-to city for London leavers, as it offers a similar city feel but on a more low-key level, and is obviously more affordable than the capital, while still being in the south of the country. However, many parts of the north of England are competing now when it comes to their appeal for those leaving London.

Bristol ranked top when looking specifically at affordable housing, though, with CBRE pointing out: “Cities experiencing strong demographic expansion will see the highest increase in demand for already constrained housing supply.

“And as this gets more challenging to access via the open market, either due to high rental and sales values, or lower average wages, the need for delivery and investment into affordable housing will increase.”

By Eleanor Harvey

Source: Buy Association

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Freshfields strengthens leveraged finance offering with London high yield partner

Global law firm Freshfields Bruckhaus Deringer (‘Freshfields’) has today announced that Haden Henderson, an experienced high yield bond lawyer, will join the firm’s Global Transactions practice as a partner in London, an appointment which will strengthen the firm’s high yield and leveraged finance offering.

Henderson joins from Baker McKenzie, where he has been a partner since 2018. He has extensive experience advising private equity funds, corporations, investment banks and credit funds on high yield bond offerings, committed leveraged finance transactions and bond restructurings. His move to Freshfields will further enhance the firm’s global high yield and leveraged finance offering to its clients and also enhance the firm’s wider European private capital practice.

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Freshfields’ London transactions head, Andrew Hutchings, said: “I am delighted to announce the appointment of Haden Henderson to our Global Transactions practice. This will enhance further our market-leading European private capital group and enable us to continue to deliver excellent service for our clients across all debt products.”

Global co-head of leveraged finance Alex Mitchell added: “We’re very pleased to welcome Haden to our growing team. His high yield experience strengthens our offering with bespoke legal advice at the forefront of the debt markets, helping our clients address their financing needs and reach their goals.”

The appointment of Henderson to Freshfields’ London office follows that of partners Carol Van der Vorst, Rebecca Ward and Lisa Stevens, who joined the firm’s leveraged finance, financial sponsors, and restructuring capital solutions teams respectively in 2022.

Source: Freshfields.com

property market
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UK property market lacks spring bounce but a crash is unlikely

April is supposed to herald the start of a British ritual: the house-buying season. Traditionally, it is the time when demand for homes picks up and the property supplements in the weekend papers are full of suggestions for sellers bidding to attract the interest of buyers.

But not this year. According to the latest bulletin from the Bank of England, repayments on existing mortgages in April were £1.4bn higher than new loans. This is unusual. Apart from during lockdown, it was the lowest figure since records began in 1993. The number of new mortgage approvals – loans agreed but not yet advanced – fell in April and were well below the average in the five years leading up to the pandemic.

There are a number of reasons for the lack of spring bounce in the property market. The availability of mortgages at ultra-low rates meant prices soared in the two years after the start of the pandemic, making it harder for new buyers to afford their first home. The inevitable pause for breath then happened to coincide with rising interest rates and a slowdown in the economy.

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These two factors – rising borrowing costs and sluggish growth – will continue to affect the market over the coming months. The Bank has raised interest rates from 0.1% to 4.5% in the space of 18 months – and looks certain to raise them further given the failure of inflation to fall as quickly as expected. Financial markets are pricing in three more quarter-point increases from Threadneedle Street by the end of the year. Mortgage lenders have responded to higher rates by raising mortgage rates and pulling some of their more attractive products.

So far, falls in house prices have been modest, with the average cost of a home down 3.4% on a year ago, according to the Nationwide building society. Even so, this was the biggest annual decline recorded since 2009, during the global financial crisis – and there is more to come. Activity in the housing market is likely to remain subdued for at least the rest of this year, and perhaps longer if – as seems probable – the first cuts in interest rates from the Bank don’t materialise until well into 2024.

A full-blown housing market crash of the sort seen in the early 1990s looks unlikely, though. Net migration stood at more than 600,000 last year, and that will underpin demand. What’s more, the low level of unemployment means there are few forced sellers. The five-year slump in the first half of the 90s was caused by the dovetailing of 15% interest rates and a jobless total in excess of 3 million. The economy may still fall into recession this year as a result of interest rates staying higher for longer than previously envisaged, but there is no immediate prospect of a wave of newly unemployed owner-occupiers having to sell up.

All that said, it would be reasonable to expect a peak-to-trough fall in nominal house prices of at least 10%, which would amount to a real terms fall of more than 20% once inflation is accounted for. That’s a chunky fall. It’s also a welcome one.

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Even though it’s been said before, it’s worth repeating that the UK is a country wrongly convinced that inflation-busting increases in house prices are a good thing. They are not. The flip side to over-investment in bricks and mortar is under-investment in other more productive uses of capital. The regular booms in the economy driven by consumers extracting and spending equity from the rising value of their homes are invariably followed by busts.

Those who benefit from rising prices tend to be better off people in older age groups. Those who lose out tend to be two over-lapping categories: renters and the young. Anybody under 35 who is saving up for a deposit on a flat will be glad of a drop in house prices.

Housing is likely to be a central issue at the next general election, with the two main parties each backing a different side. The Conservatives – who have all but dropped housebuilding targets – are lining up behind existing owner-occupiers. Labour has said it would impose targets and be prepared to build on parts of the green belt. It is also drawing up plans that would force landowners to sell plots of land for less than their potential market price in an attempt to stop land hoarding and so increase the supply of new homes.

Even if Labour actually goes ahead with its plan, it looks certain to be challenged in the courts. Currently, if a council wants to compulsory purchase a piece of farmland for housing development it has to pay a “hope” value. That’s the value not of the farmland but of the value of the farmland adjusted for planning permission, which is substantially higher.

By Larry Elliott

Source: The Guardian

mortgage
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First-time buyer mortgage applications hit six-month high in March – First Direct

The value of mortgage applications submitted by first-time buyers reached £8bn in March, the highest amount in six months, data from a bank has shown.

The First Direct first-time buyer trends report based on data from CACI revealed that the value of applications in March was also 42 per cent up on February’s £8bn.

However, despite the application value reaching its highest level since September last year, the first quarter of 2023 was down by 26 per cent compared to the same period in 2022. In March last year, the first-time buyer application value reached £10.8bn, marking a two year high.

Activity was more subdued in April as the value totalled £6.2bn, however, this was the second highest amount in six months.

The mortgage market as a whole, including homemovers and remortgagors, reached a value of £26.6bn in March. This was the first time the value of applications passed £20bn since September last year, and it was also £8.9bn up on February.

Carl Watchorn, head of mortgages at First Direct, said: “Typically, March and April tend to be some of the busiest months of the year when it comes to first-time buyer activity. March usually sees a sharp spike in applications after what is often a quiet start to the year.

“It’s really encouraging to see the market recovering during March and April to a level of applications not seen since September 2022. A closer look at this data also reveals that the value of first-time buyer loans has doubled since Q4 last year; a segment fundamental for a vibrant housing market.”

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The average first-time buyer loan was £211,766 in April, which was an 8.8 per cent increase or more than £17,000 rise since the start of the year.

First Direct said it was also the highest figure since July 2022 when the average loan amount reached £212,153.

Loan sizes among first-time buyers saw the biggest jump, but average homemover loans also rose by 14,200 since January while there was a £9,500 increase in average remortgage loans.

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Watchorn added: “The news that average first-time buyer loans are increasing is likely indicative of increased confidence in the sector, although it does once again highlight the challenge faced by many young people trying to bridge the gap between average income and the average house price.

“It’s also important to consider that the average first-time buyer house deposit is now more than £60,000. Faced with higher rates than we’ve seen in a number of years, many buyers will be looking to save up as big a deposit as possible in order to secure a cheaper rate against a lower loan to value (LTV) product.”

By Shekina Tuahene

Source: Mortgage Solutions

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The surging popularity of invoice finance

With cash being crucial to business survival and growth, SMEs need to access cash through alternative funding solutions to continue to enable them to adapt, innovate and grow.

Invoice finance is one of the most effective ways for businesses to improve cash flow and sustain growth in today’s uncertain climate.

As SMEs face up to a deepening late payments crisis, invoice finance – borrowing against the value of unpaid invoices – has surged in popularity to provide crucial support in tough economic times.

By releasing up to 90% of the value of unpaid invoices, businesses can access additional working capital and use the funds to support day-to-day cashflow requirements or fuel future investment plans focusing on corporate social responsibility.

Invoice finance is not a new funding solution; it has been around for decades and has supported many thousands of businesses over the years, as it still does. By unlocking cash that could otherwise be trapped in unpaid invoices, invoice finance is a financial solution that can support the entire credit management process, protect against the risk of non-payment, and deliver funding when many other funding types are unable to.

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In the UK, invoice finance has become an increasingly popular alternative to traditional financing options like bank loans and overdrafts, as it offers a more flexible and accessible solution for businesses in need of cash flow support and caters to a wide range of industries, including manufacturing, wholesale, construction, recruitment, and professional services.

Recent data from alternative finance provider Time Finance has shown the growing popularity of invoice finance amongst the B2B community, with demand predicted to rise throughout 2023 as SMEs set out to stabilise their finances.

The new insight shows that invoice finance is ranked highest amongst alternative finance solutions, with 32% of financial intermediaries stating that invoice finance will be the most popular service to support cashflow this year.

Phil Chesham (pictured), Managing Director of Invoice Finance at Time Finance, commented: “We are seeing a real uplift in businesses that come to us for invoice finance, and this is definitely a trend we expect to see continue throughout 2023. At face value, this is an indicator of the cashflow challenges that businesses are experiencing, but looking at this more positively, we can take this as a sign that more businesses are discovering the real value of invoice finance.

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“Invoice Finance is a helpful tool to manage cashflow and when harnessed as a part of a long-term financial strategy, it can ensure that a business has an uninterrupted supply of working capital in the bank. As a result, invoice finance enables businesses to inject their own money into their investment plans, whether that’s recruitment, skills development, equipment or marketing.”

Time Finance’s plans to double their invoice finances sales team in 2023, with the recent appointments of Thomas Ludden, Tariq Bourdouane, Neil Fullbrook and Casey Baldwin, shows the rising popularity of invoice finance witnessed by alternative finance providers.

There are a number of reasons for the rapid expansion of invoice finance in the UK, but a key driver is an increase in the number of late-paying companies. In their research, Time Finance found that B2B businesses are owed an average of £250,000 in unpaid invoices and some wait up to 120 days for payments to come through.

Access to liquidity is more critical than ever for SMEs who are the backbone of the UK economy, with many traditional financing providers increasingly rejecting applications for cash. Reducing the funding available to SME businesses during tough economic periods only hurts it more at a time when demand for liquidity needs to be expanded and not reduced.

Rising inflation and interest rates, along with increasing energy costs, are also challenging small businesses this year, with many facing closure. Providing SMEs with a path to secure lending will play an integral part in the economy’s resurgence.

Invoice finance provides SMEs with a variety of benefits including flexibility, faster turnaround, scalable funding, higher borrowing potential, and mitigating payment risks. Smaller independent funders also have more flexibility than traditional providers and can take advantage of value-creating opportunities.

By embracing alternative financing options such as invoice finance, SMEs can not only survive but also thrive in a post-pandemic world, despite the current economic challenges they face.

By Lisa Laverick

Source: Asset Finance International

Residential Purchase
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Average house prices hit record high in May as market shows signs of stability

According to Rightmove, the average asking price for homes coming to market is now £373,894 – nearly £7,000 more than the previous month.

The UK housing market continues to make waves as the average price tag on a home hit an all-time high in May, according to property website Rightmove. With a significant monthly jump of £6,647 or 1.8 per cent, the average asking price for a home coming to market now stands at £372,894.

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This substantial increase marks the largest month-on-month surge so far this year, hinting at growing confidence among sellers. However, while the market shows signs of recovery, it remains hyper-local and price-sensitive, with buyer affordability still stretched, as highlighted by Rightmove.

Tim Bannister, Director of Property Science at Rightmove, said: “This month’s strong jump in new seller asking prices looks like a belated reaction and a sign of increasing confidence from sellers, as we’d usually see such a big monthly increase earlier in the spring season. One reason for this increased confidence may be that the gloomy start of the year predictions for the market are looking increasingly unlikely.

According to him, the market will continue its transition towards a more normal level of activity this year, following the exceptional activity observed during the pandemic years. “Steadying mortgage rates and a generally more positive outlook for the economy are also contributing to more seller confidence, though there are likely to be more twists and turns to come, ” Tim said.

“The market is still very price sensitive and it is important that new sellers do not damage their prospects of a sale by overpricing initially and reducing later, with agents reporting that it’s the realistically priced new instructions that are selling best.”

While the market displays encouraging signs, Rightmove notes that the average discount from the final asking price to the agreed sale price has stabilised at around 3.1 per cent, aligning with pre-pandemic levels. Moreover, the number of potential buyers inquiring about homes for sale has increased by 3 per cent compared to 2019, particularly among those taking their first or second steps on the property ladder.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

However, there are signs of some over-optimism in the “top of the ladder” property sector, Rightmove said. While larger properties are still selling faster typically than in 2019, it is now taking an average of 67 days to agree a sale, nearly double the 35-day average at this time last year, the website added.

Tim added: “This month’s record price is a strong indication of sellers’ confidence, and we can see from activity levels and the still relatively limited choice of property for sale that this confidence is justified in some segments of the market.

“More discretionary sellers at the top end may be prepared to price high and wait for the right buyer, and whilst it is positive that they appear to feel no financial pressure to sell, the data suggests that some sellers in this sector will need to price more competitively if they want to find a buyer in the current market.”

By Vicky Shaw

Source: In Your Area

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Brokers poised for success in 2023, finds Time Finance roundtable

Market resilience and optimism continue to boost confidence amongst brokers and fuel plans for growth, finds Time Finance.

In a recent industry roundtable, the alternative finance provider invited a panel of leading Asset Finance brokers from across the country to discuss market predictions for 2023 and plans to assist recovery and growth of the UK SME market.

The conversation covered the vital role of technology and data, the specific training required to support the next generation of brokers and confidence for the year ahead.

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The overriding outcome uncovered universal optimism from brokers as they told Time Finance of plans to expand their workforce and increase their headcount to keep up with the growing demand for finance from businesses. Upskilling existing employees through bespoke training packages and funder-led broker academies was deemed to be a key priority for the year ahead.

Across the board, investment plans were fuelled by a confidence in the recovery and strength of small-medium business community, who make up 99% of the UK economy. This included bringing in new systems, processes, and technology to quicken funding decisions and adopting a data-led strategy to uncover emerging trends and identify opportunities to offer additional support for clients.

Steve Nichols (pictured), Director Asset Finance at Time Finance, said: “We’re encouraged by the resilience and adaptability of the broker market as they set wheels in motion to invest, grow and bolster their support for SMEs in 2023.

“In the wake of rising costs, supply chain disruption and many other cashflow challenges hampering businesses right now, our roundtable comes at a crucial time and shines a light on the importance of helping businesses feel confident about their future. It’s fantastic to see such a remarkable ability from our brokers to pivot, adapt and innovate, which will only help to poise brokers and our collective clients for success in 2023.”

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Amongst the attendees were Tom Roberts from Moorgate Finance, Carl Johnson from Anglo Scottish, George Parker from Halo Finance, Jack Smith from Love Finance, Ryan Williams from Victor Finance, Tom Perkins from Charles & Dean, and Rob Dermody from PMD Business Finance.

Steve added: “We look forward to hosting many more roundtables and continuing to bring together our valued broker network to discuss the future of finance for SMEs and how best we can support their ever-changing needs. And, as we continue to invest in our own offering and increase our support for SMEs, we too remain optimistic about the opportunities that lie ahead.”

By Lisa Laverick

Source: Asset Finance International

house prices
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House prices surge at fastest pace this year to record £373k despite Bank of England rate hikes

Britain avoiding a much-forecasted recession has helped push house prices up by the greatest amount so far this year to a record high of £372,894, new figures out today reveal.

The average price of a home coming to market climbed 1.8 per cent over the last month, the strongest increase in 2023, according to property search site Rightmove.

Over the last year asking prices have jumped 1.5 per cent.

Britain’s housing market has defied a glut of gloomy predictions tabled at the turn of the year sparked by the country’s economic prospect at the time looking pretty bleak.

Households were forecast to suffer the worst squeeze on their living standards on record, the Bank of England expected the UK to be gripped by the longest recession in a century and unemployment was on course to rise.

However, a combination of international gas prices sliding and the government capping energy bills at £2,500 has put the UK on track to dodge a recession, convincing buyers to snap up a new home and sellers to cash in on their property.

Booming confidence in the housing market is down to the “gloomy start-of-the-year predictions for the market… looking increasingly unlikely,” Tim Bannister, director of property science at Rightmove, said.

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UK house prices are holding up well despite sustained pressure from higher rates

House prices surge at fastest pace this year to record £373k despite Bank of England rate hikes Commercial Finance Network
Source: Rightmove

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

“Steadying mortgage rates and a generally more positive outlook for the economy are also contributing to more seller confidence, though there are likely to be more twists and turns to come,” he added.

A paucity of homes coming to market has kept prices elevated, although supply could expand in response to increasing home fees.

Sellers on average had to chalk 3.1 per cent off of their initial asking price in order to source buyers in April, Rightmove said.

Last month’s rise illustrates that demand is still holding up well in the face of the Bank of England’s twelve successive interest rate hikes, taking them to a near 15 year high of 4.5 per cent.

Mortgage rates have surged over the last year due to lenders passing on Bank Governor Andrew Bailey and co’s moves, though they are below the sky high levels they reached after Liz Truss’s mini-budget jolted UK debt markets. The Bank is expected to raise borrowing costs at least one more time this year.

London house prices climbed faster than the national average on an annual basis, up 2.8 per cent to nearly £700,000. The only area in the UK which recorded a drop in asking fees was the north east.

Hackney house prices in east London rose the fastest in the capital, up 5.3 per cent over the last year to £724,000. Southwark came second, with prices up 4.3 per cent to £673,000.

By Jack Barnett

Source: City A.M.