Homeowners housing crisis
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Resolution to the housing crisis in Ireland

There has been much focus on the UK property market and whether house prices are rising or falling and whether this may or may not be due to Brexit.

What we hear less about is what is happening with property prices with our closest neighbor, The Republic of Ireland.

Ireland is most often quoted these days purely in relation to the potential backstop. What few papers report on is the current housing crisis in Ireland.

Just a few years ago Ireland had one of the world’s highest rates of homeownership, but this ownership has dropped and both property prices and rents have risen dramatically.

In fact, in May of this year, research by Deutsche Bank declared Dublin in the ‘Top 10 most expensive places to rent in the world’.

The shortage of affordable homes is a huge issue, with Ireland’s Department of Housing, Planning and Local Government in August announcing €84m in funding for 25 local authorities providing 1,770 affordable homes nationally.

As a long-term solution, this is fine, but how does Ireland deal with this issue in the short-term?

It is estimated that 685,000 houses were built in Ireland in Celtic Tiger years, between 1997 and 2007. Where have all these houses gone?

Figures by the Department of Finance back in March of this year revealed that €24bn of loans, including many substantial buy-to-let portfolios have been sold to funds at an average discount of 52%.

Many of the sales were completed without the consent of mortgagees.

Most of these were non-performing loans and the purchasing fund often wastes no time in foreclosing on the loans.

This cycle still continues with Ulster Bank announcing the sale of 4,000 loans worth €900m as recent as July of this year.

How can short-term lenders relieve this pressure?

The answer is simple, they fill the gap where mainstream lending is simply not available.

For example, Fiduciam has provided numerous loans which have allowed borrowers to buy their old portfolios back from the funders.

The borrowers can negotiate with the funders directly, safe in the knowledge that they have a reliable funder supporting them through the process.

The properties are then brought back on the market and rented out or sold.

Loans such as these have also enabled borrowers to complete outstanding development works on “ghost estates” that have been sitting dormant since the collapse of the housing market.

This brings more properties into the market which, in turn, eases the property supply issues.

Borrowers can then refinance with a mainstream lender when their properties have been modernised and rents have been normalised.

Ireland’s businesses are also crying out for lenders to help them get out of a position where they might lose everything by restructuring their loans.

This affords borrowers an opportunity to re-establish their business with a viable exit via mainstream finance, or the sale of the assets on the open market.

Such short to medium-term loans provide the perfect ‘pit-stop’ for borrowers.

In essence, providing ‘mid-stream’ lending prior to the subsequent exit with a mainstream lender.

Loans for such purposes are relatively new in the Republic of Ireland, but they can be a positive life saver for borrowers whose loan has been sold and who are consequently at risk of repossession.

By Kenneth Duffy

Source: Mortgage Introducer

Scotland's commercial property market
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Scotland’s commercial property market outgunning rest of UK

Scotland’s commercial property market is holding up better than the rest of the UK despite being buffeted by Brexit uncertainty, new research suggests.

Total investment volume for the first nine months of 2019 was down by 12 per cent year-on-year in Scotland, according to new figures from Colliers International, the property adviser. That compares with a fall of 26 per cent for the whole of the UK.

Property experts from the firm said the cooling economy and uncertainty over Brexit and the global outlook had caused investors to adopt a more cautious approach.

Douglas McPhail, head of Colliers International in Scotland, said that investment in Scottish property totalled some £717 million in the third quarter, marking an 18-month high and compared with £347m in Q1 and £619m in Q2.

He noted: “Although investment volumes during the first nine months of the year are down by 12 per cent compared to the same period in 2018, it is very likely that activity will break through the £2 billion mark for the sixth year running.”

Middle East

McPhail added that the proportion of international money flowing into Scottish property saw an upturn in the third quarter, with particularly strong interest from Middle Eastern (£182m) and US (£160m) investors.

Scotland’s relative outperformance comes despite a greater reliance on overseas investors, who account for around 55 per cent of Scottish investment and 43 per cent of UK investment.

Patrick Ford, director of Capital Markets at Colliers International in Glasgow, said: “By city, Glasgow was the star performer, attracting £278m of capital, closely followed by Edinburgh at £226m.

“The largest deal of the quarter was Hines Global Income Trust’s purchase of the ‘true Glasgow West End’, a 607-bed operational student asset, traded for £72m. This was followed by Ashby Capital’s acquisition of Abbotsinch Retail Park in Paisley for £67m. Completing the top three deals is Arbah Capital’s purchase of Glasgow’s Sauchiehall Building – a leisure and retail mixed-use asset – for £55m.”

These deals mean that Glasgow’s strong office market is expected to bypass the five-year average of 700,000 square feet by the end of 2019.

Ford added: “Demand for space remains healthy and a lack of stock will continue to exert upward pressure on rents. In Edinburgh, the office market is characterised by lack of existing stock. A number of significant requirements cannot be met by existing supply and are likely to result in pre-lets.”

In Aberdeen, Q3 saw the largest office deal in three years with the letting of 51,356 sq ft at Aberdeen International Business Park to Oceaneering.

By SCOTT REID

Source: Scotsman

UK economy UK companies UK business leaders UK economic growth London commercial property market Post-Brexit trade deal
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UK economy dodges recession, but annual growth slowest since 2010

UK economy grew at its slowest annual pace in nearly a decade during the three months to September as the global slowdown and Brexit worries hit manufacturing and business investment, official figures showed on Monday.

While the economy dodged outright recession, the rebound in quarterly growth was smaller than expected.

Output fell in August and September – when Britain looked at risk of leaving the European Union without a transition deal.

A month before an early election, finance minister Sajid Javid hailed what he called “solid” growth figures, a view challenged by the opposition Labour Party.

“The fact that the government will be celebrating 0.1% growth in the last six months is a sign of how low their hopes and expectations for our economy are,” Labour’s top finance official John McDonnell said.

Economists said ongoing political uncertainty and a weak global backdrop could prompt the Bank of England to cut interest rates next year, even if Prime Minister Boris Johnson passes his Brexit deal before a new Jan. 31 deadline.

“Narrowly avoiding a recession is nothing to celebrate,” said Tej Parikh, economist at the Institute of Directors. “The UK economy has been in stop-start mode all year, with growth punctuated by the various Brexit deadlines.”

Annual gross domestic product growth fell to 1.0% in the third quarter from 1.3% in the April-June period, the Office for National Statistics said, its lowest since early 2010.

This was weaker than the euro zone, which grew by 1.1%.

The quarterly growth rate recovered to 0.3% after contracting 0.2% in the three months to June when businesses wrestled with an overhang of raw materials stockpiled before the original Brexit deadline in March.

But it was a weaker rebound than the 0.4% growth predicted by the BoE and private sector economists.

BOE RATE CUT?
Britain’s economy has lost momentum since the 2016 Brexit referendum, before which it typically grew more than 2% a year.

Last week the BoE nudged up its growth forecast for 2019 to 1.4% from 1.3%. This would be the same growth rate as last year and the weakest since the financial crisis. For 2020, the BoE expects a slowdown to 1.3%.

Two BoE policymakers voted to cut rates last week and others could follow if growth remains weak and uncertainty persists about the longer-term trade ties between Britain and the EU.

“The BoE forecasts an investment rebound if a Brexit deal removes no-deal risk but we think this is optimistic,” said Nancy Curtin, chief investment officer at Close Brothers.

Business investment held steady in the third quarter but dropped by 0.6% on the year, the ONS said.

Manufacturing output fell more than expected, down 0.4% on the quarter and 1.8% on the year.

Household spending, which has been more resilient than business investment, due to low unemployment and rising wages, rose by 0.4% on the quarter. Government spending grew by 0.3%.

Editing by William Schomberg and Ed Osmond

Source: UK Reuters

Mortgage
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Brexit and mortgages: how to protect your mortgage against interest fluctuations

What is happening with Brexit and mortgages, and is there a way you can safeguard yourself against the unpredictable effects of Brexit on your repayments? Moreover, given the latest projections of further interest rates cuts by the Bank of England, should you be looking at remortgaging to find the best mortgage deal?

For first-time buyers and those who are coming to the end of their fixed-term period, the announcement that interest rates are likely to remain low will come as a relief – a sudden hike in interest rates resulting in more expensive mortgages is highly unlikely at least in the next year. People remortgaging now are still going to enjoy historically record low interest rates on their mortgage repayments. However, do bear in mind that the rules for remortgaging still mean that you would have to be able to make the repayments if the interest rates were to rise.

The longer term prognosis for what’s going to happen to interest rates remains far less certain. There are two main scenarios you need to bear in mind as a mortgage holder: one is an economic recession, while the other is a strong economic recovery (following, for example, a successful Brexit deal negotiation or the UK revoking Article 50).

If the former were to happen, say as a result of the UK crashing out of the EU without a coherent deal (still a possibility despite the current delay), the pound could take a hit. While this would again mean low interest rates to try and stimulate the economy, it could also mean a loss of jobs – which, of course, would render low interest rates meaningless to someone who is unemployed.

To safeguard your mortgage against this case scenario, it’s a good idea to: 1) reduce your debt; 2) increase your savings; 3) consider income protection insurance that would give you a safety net for your mortgage repayments in case you were to be out of work or have to take on lower paid work.

In the case of an orderly Brexit (or no Brexit – who knows?) and the UK economy regaining confidence, we can expect wage growth. When that happens, inflation rises, which leads interest rates to rise too. Hopefully, in this case scenario, your salary will increase in line with interest rate rises, making mortgage repayments manageable. However, having a decent savings pot for this case scenario is still a good idea – as is being prepared to downsize in case you live in a property with a large mortgage.

BY ANNA COTTRELL

Source: Real Homes

UK rate cut Brexit Bank of England BoE Higher interest rates UK inflation
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Why the Bank of England should keep interest rates on hold

The Bank of England must leave interest rates on hold tomorrow and resist the urge to tinker until Britain’s economy is out of the General Election and Brexit fog, City A.M.’s panel of expert economists has said.

Much has changed in British politics since the BoE’s last monetary policy committee (MPC) decision in September. Prime Minister Boris Johnson failed to push his new deal quickly through parliament, leading him to request a Brexit extension and ultimately call a General Election, bringing yet more uncertainty to the economy.

City A.M.’s Shadow MPC today voted eight to one in favour of keeping the main interest rate on hold at 0.75 per cent. The consensus view was that with politics in flux, any move would be guess work and not grounded in any reliable expectations about the future.

Here’s what our Shadow MPC said:

Guest chair: Frances Haque – Santander

Hold: The bank rate should be kept flat. Inflation remains below the two per cent mark with economic growth data for the third quarter looking more positive than the previous quarter. And with real wage growth continuing, there is less of a rush required to create further stimulus. With the current political landscape now in General Election mode and further fiscal boosts on the cards, it seems prudent to wait and see the outcome of the election before making a change. However, if there is further Brexit delay leading to slower economic growth a cut may be required.

Jeavon Lolay – Lloyds Bank

Hold: There is a strong case for waiting for further news before any move. Brexit developments remain conditional on the upcoming election, adding another layer of uncertainty to the economic outlook.

Peter Dixon – Commerzbank

Hold: Economic conditions remain benign and inflation is contained. With the Brexit deadline merely having been postponed another three months, the prudent strategy is to keep the powder dry for now.

Vicky Pryce – CEBR

Hold: And be prepared to do more if needed. UK economy appears to be stagnating as world economy slows down, Brexit worries continue to dampen business and consumer sentiment and forthcoming general election is adding to uncertainty.

Mike Bell – JP Morgan Asset Management

Hold: With an election approaching that could potentially provide more clarity on what type of Brexit, if any, we are heading for, it makes sense to stay on hold for now.

Simon Ward – Janus Henderson

Cut: The case for easing is at least as strong as elsewhere. Inflation is below target and falling while economic weakness has spread to the labour market, with unemployment and redundancies picking up.

Ruth Gregory – Capital Economics

Hold: The chance of a Brexit deal in January suggests a cut would be premature. But unless the headwinds of weak global growth and Brexit uncertainty fade, the next move in rates may be down.

Tej Parikh – Institute of Directors

Hold: With the upcoming election largely making calculations about Brexit and the future path of the economy moot, it’s best to hold interest rates for now.

Joshua Mahony – IG

Hold: Carney had his hands burnt by the mistakenly cutting rates immediately after the referendum. With Brexit and election uncertainty looming, now is the time to wait for the dust to settle.

By Harry Robertson

Source: City AM

Brexit impasse
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Brexit impasse ‘impacting Scottish commercial property market’

THE Brexit impasse is contributing to perceptions that the commercial property market in Scotland is in the midst of a downturn.

The latest Royal Institution of Chartered Surveyors commercial property market survey has found anecdotal evidence suggesting that the process to leave the European Union is having an increasingly detrimental impact on market activity, with inquiries from potential investors in the third quarter lower than during the previous three months.

The latest results show that half of respondents in Scotland sense the overall market is in the downturn phase.

The highest proportion of respondents in Scotland since 2016 in the investment market said that inquiries from potential investors were lower than in the previous quarter.

The net balance for overall investment inquiries in Scotland during the period was -34%, meaning that 34% more respondents said that investment inquiries fell than said they rose.

The retail sector continues to drive the overall decline, with the weakest reading since 2008, showing a net balance of -70%, which is the weakest across the UK.

Demand for office and industrial space in Scotland was reported to be broadly flat.

Interest in investing in retail was the weakest according to respondents, but investment inquiries were also reported to have fallen in the industrial, where there wasa net balance of -14%, and office, where it was a net balance of -20%, sectors.

In the occupier market, tenant demand reportedly fell at the headline level in Scotland for the fourth consecutive quarter, with the net balance slipping to -22%, from -3% previously, RICS said.

Scottish surveyors are cautious looking ahead about rents in over the next quarter. The overall net balance for three-month rental expectations is its weakest since the second quarter in 2016 at -23%.

However, this is driven by pessimism regarding retail rents, with a net balance of -65%. Expectations for office and industrial rents are broadly flat.

RICS said Scottish respondents are more positive about the value of industrial and office property, with the balance of respondents pointing to modest growth in capital values in both sectors in the near term.

Richard Smith, of Allied Surveyors in Inverness, said: “The market over the last three months has been affected by political uncertainty. Clients tell us that they will invest when the uncertainty is removed, regardless of how that is achieved.”

David Castles, of Ian Philp Glasgow, said: “Office and industrial sector capital values will improve but supply of prime office developments is restricted, and more investment is required which hopefully will improve once market uncertainty is reduced.”

Tarrant Parsons, RICS economist, said: “Although half of respondents in Scotland now perceive the market to be in a downturn, the fact that capital value expectations are still positive suggests a relatively soft landing for the commercial real estate sector is anticipated overall.”

Meanwhile, research from Grant Property has shown investors from South East Asia are cashing in on the opportunities provided by a drop in the value of the British pound and increasing yields and rents in the UK buy-to-let market, especially with student flats.

The firm reported a surge of interest from Hong Kong and Singapore as new and existing investors are purchasing more buy-to-let properties to add to their portfolios. An increase in rents as high as 15% over the last 12 months alone, combined with steady long-term capital growth on average 7% per annum, are factors which are making UK property an appealing investment prospect, it said.

Peter Grant, founder of Grant Property, said: “In the last year we have sold over £38 million worth of properties to overseas investors and we are currently dealing with 25% more enquiries than this time last year.

“Investors see the uncertainty of Brexit as an advantage and are capitalising on the opportunity to snap up traditional flats in UK cities, particularly where there is a student population.”

By Brian Donnelly

Source: Herald Scotland

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Brexit and mortgages: what next for interest rates and repayments?

What’s next for Brexit and mortgages? Will mortgages become more expensive, and should you remortgage now?

What’s going to happen now with Brexit and mortgages, since the EU has agreed to grant Britain a three-month extension? How does this decision affect potential and current home owners, up to January and beyond? Will we see much of a fluctuation in the Bank of England’s base interest rate, and with it, cheaper or more expensive mortgages?

Martijn Van Der Heijden, Chief Strategy Officer at online mortgage brokerage Habito, comments on the implications of the Bank of England’s decision last month not to raise interest rates:

‘Interest rates remain relatively low which will be welcome news for those looking to get a good deal on their mortgage. This “wait and see” approach from the MPC (Monetary Policy Committee) is something we also see reflected in our own data with a surge in buyers choosing fixed deals for five years or more as they try to “Brexit-proof” their mortgage and lock in the same rate until 2024 and beyond.’

Basically, whether you are first-time buyer or remortgaging, now is the time to lock in a good fixed rate mortgage deal – if you don’t mind losing out somewhat in case the interest rates fall even lower than the current level. Why might that happen? It all depends on how the final Brexit deal is negotiated, and how smoothly it is executed. In the still possible event of Britain not securing a deal, the pound is likely to fall, and inflation will rise, which could lead the Bank to slash the interest rates even further. If this happens, and you are on a variable rate mortgage, you could see your repayments fall.

On the other hand, in the event of an orderly Brexit and a strengthening economy, interest rates could rise, which would be good news for your savings and wages, but not so good news for your variable rate mortgage repayments. A fixed rate deal would protect you from any significant interest rate spike, at least for a few years.

Which scenario is more likely? The truth is, nobody knows. We would say, though, that taking out a variable rate mortgage might not be worth the gamble under current uncertain circumstances – you could win a little, or lose big, so a good fixed rate deal will at least allow you to relax a little, for a while.

BY ANNA COTTRELL

Source: Real Homes

Rightmove asking prices property Mortgage Asking prices UK house prices Average house prices property prices
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UK house prices: Growth ‘subdued’ in wake of Brexit slowdown

House price growth remained below one per cent for the 11th consecutive month in October, as hopeful homeowners sat tight amid Brexit uncertainty.

House prices in the 12 months to October rose 0.4 per cent to £215,368, according to the new figures from Nationwide.

On a monthly basis, house prices climbed 0.2 per cent.

Robert Gardner, Nationwide’s chief economist, said: “Indicators of UK economic activity have been fairly volatile in recent quarters, but the underlying pace of growth appears to have slowed as a result of weaker global growth and an intensifying of Brexit uncertainty.

Gardner added: “To date, the slowdown has centred on business investment, while household spending has been more resilient.”

According to Nationwide, solid labour market conditions and low borrowing costs
seem to be offsetting the drag from the uncertain economic outlook.

“The question is whether this pattern will continue,” said Gardner.

No immediate recovery in sight

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said that there was “no immediate recovery in sight”.

A slowdown in hiring by companies, which has been primarily driven by uncertainty over Britain’s imminent departure from the EU, will “also likely ensure that demand remains week”, Tombs forecasted.

The latest modest rises underline concerns over a slowdown in activity in the UK’s housing market, particularly in London and the South, despite a recent improvement in earnings and employment.

“It’s hard to see the market emerging from this sub-one per cent annual growth rut until there is clarity on Brexit,” said David Westgate, chief executive of Andrews Property group.

“The sheer level of political uncertainty has left the property market in a protracted limbo.”

Data released by Rightmove earlier this month found that the price of property coming to market has endured its weakest month-on-month rise at this time of year in over a decade.

Prospective home buyers have been undeterred by the approaching Brexit deadline, while sellers have been put off by ongoing uncertainty over UK house prices, according to to the real estate platform.

North London estate agent and former Rics residential chairman Jeremy Leaf said that the data confirms “that we are not seeing or expecting to see any fireworks in the market over the next few months or at least until the smoke from the political situation begins to clear.”

Guy Harrington, chief executive of property lender Glenhawk, said that the recent news of a potential general election has added to market jitters, creating “a near perform storm of unsupportive conditions for growth”.

By Sebastian McCarthy

Source: City AM

UK mortgage approvals
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UK mortgage approvals hit six-month low in September – UK Finance

The number of new mortgages approved by British banks hit a six-month low in September, according to a survey that adds to signs the housing market is slowing again ahead of the October Brexit deadline.

Industry body UK Finance said banks approved 42,310 loans for home purchase in September, compared with 42,527 in August, according to seasonally-adjusted data. However, the number of approvals for remortgaging rose to the highest level since November 2017 at 32,649.

UK Finance said annual growth in consumer credit rose to a 19-month high of 4.5%, driven by personal loans and overdrafts rather than credit card lending.

Reporting by Andy Bruce, editing by David Milliken

Source: UK Reuters

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Will house prices crash after Brexit?

Home owners and prospective buyers alike want to know: will house prices crash after Brexit? With the huge 20 per cent house price fall prediction continuing to circulate on the web, is it really true that there will be a property market crash once we’ve left the EU?

As we’ve reported in our in-depth analysis of Brexit and house prices, while Brexit undoubtedly has affected the property market, the effect has not been uniform across the UK, and Brexit is not the only factor affecting property prices. If we ignore some of the hype that has surrounded discussions of Brexit and house prices, we can start looking at the bigger picture, with more endemic problems surrounding property and the economy coming to the fore.

By far the biggest problem with the UK housing market right now (and for quite some time past) is one of insufficient supply and growing demand. This has been exacerbated by Brexit, with home owners anxiously holding on to properties, reducing the available number of properties further still.

The UK is still massively behind new build targets, which is deepening the housing crisis. For illustration’s sake, the UK has twice the population of Canada, but is building half the number of new homes. So, while house prices are unlikely to crash as such after Brexit, the reasons behind this are not a strong economy, but the economy of scarcity.

The other growing problem with housing is yet another growing borrowing bubble, with some economists already predicting a 2008-style recession in the near future. Property economist Andrew Burrell points to an overinflated property market which is at capacity in terms of growth: ‘It’s just a matter of 30 years’ of falling interest rates, people taking out bigger and bigger mortgages – you’ve now reached the size where it’s probably about as big as we can manage.’

A combination of high levels of debt at low interest rates with stagnant incomes sounds uncomfortably familiar. However, there is one important difference: the UK economy is not currently ‘booming’, as was the case prior to 2008, so any property market slump is unlikely to come in the form of a spectacular crash. What we’re most likely to see is a sluggish property market with slow growth in most areas of the country, and perhaps some further price falls in premium property segments (e.g. central London).

Are you planning on buying or selling a house? Don’t think about Brexit too much and stick to your plans.

BY ANNA COTTRELL

Source: Real Homes