housing crisis -

Marketing August 30, 2018 No Comments

Quarter of cities still below pre-crisis house prices

House prices in a quarter of the UK’s largest cities are still struggling to surpass pre-crisis levels, Hometrack figures have shown.

In its latest UK cities house price index released today (28 August), the property market analysts found prices in Belfast, Liverpool and Aberdeen were still lower than in July 2008.

Prices in Northern Ireland’s capital were 28 per cent lower than they were a decade ago, now at £129,629.

Compared with data from July 2008, Newcastle and Glasgow have seen weak growth – at 3 per cent and 1 per cent respectively.

In contrast, the average value of properties in Cambridge has increased by 70 per cent to £432,410 and London prices have grown by 65 per cent to an average of £483,792.

Meanwhile averages prices in Oxford have grown by 55 per cent to £411,900 and in Bristol they have grown by 53 per cent to £280,200.

Richard Donnell, insight director at Hometrack, said while 2008 was the year house prices fell at their fastest rate, they continued to fall for a further three to four years in weaker markets.

He said: “These past 10 years would have been difficult for many homeowners living in these cities, with low prices, weak growth making it difficult to move homes for work or to up-size to accommodate growing families.”

Mr Donnell said stronger performance in Cambridge, London, Bristol and Oxford have been driven by stronger economic growth, a broader base of demand for housing and limited availability of homes for sale.

He added: “However, these cities are now registering the weakest annual rate of growth as tax changes impacting investor and affordability pressures impact demand and the level of house price growth.”

Hometrack’s index reported UK house prices had risen by 4.2 per cent in the past year, mainly driven by growth in medium-sized cities such as Nottingham and Leicester.

In fact Nottingham saw the highest level of year-on-year increase to July 2018, with average house prices rising by 7.5 per cent to £152,000.

In the 12 months to July 2018 average house prices in London fell by 0.1 per cent while in Aberdeen they fell by 4 per cent.

Steve Seal, director of sales and marketing at Bluestone Mortgages, said figures from the past decade showed the vast regional differences in the UK housing market and suggested the only real solution was to increase the UK’s housing supply.

He recognised that in the meantime schemes like Help to Buy continued to provide much-needed support for first-time buyers hoping to step onto the property ladder.

Mr Seal said: “There is, however, another group of borrowers we need to consider; those with irregular incomes or a weak credit history, as these customers are often unable to obtain mainstream financial support.

“Real life is full of unforeseen bumps and a one-off event should not have a permanent bearing on someone’s ability to borrow – instead, lenders need to take the time to recognise the underlying circumstances and offer solutions accordingly.”

FT Adviser

Marketing August 15, 2018 No Comments

U.K. House Prices Are on the Longest Losing Streak Since Crisis

U.K. house prices fell for a fifth month in a row in July, the longest stretch of declines since the financial crisis.

Values fell 0.2 percent from June, bringing the average price for a home to 302,251 pounds ($386,000), Acadata said in a report Monday. London remains a “mixed picture,” with the number of sales in the second quarter falling by 7 percent from a year earlier and prices declining in almost two-thirds of the capital’s boroughs.

The British housing market is weakening after a three-decade boom amid slower economic growth, uncertainty created by Brexit and inflation outpacing wage growth over much of the past year. London, where the average house price is more than double the national average, has been hit harder than the rest of the country.

At the national level, annual price growth has slowed to 1.6 percent, the least in six years, and sales have declined by 6 percent on a seasonally adjusted basis, Acadata said. The Bank of England’s interest-rate increase in August is expected “to result in a further reduction in housing market activity,” the report said.

BOE Hike

The central bank hiked rates for only the second time since the financial crisis this month, and said that London’s property market is seeing weakness due to the U.K.’s decision to leave the European Union and changes in migration. Policy maker Ian McCafferty said last week that the capital is seeing “significant change as a result of uncertainty around Brexit,” weighing on home prices and rents.

Looking at regions on a three-month growth average, there’s evidence to support that BOE view, the report said. The West Midlands region is seeing the fastest growth, while the Southeast and East of England are seeing the slowest.

A separate report from Visa and IHS Markit showed that consumer spending fell 0.9 percent in July from a year earlier. While hot weather helped boost spending on food, drink and days away, surveys show that retailers are concerned rate hikes will hit already-fragile consumer confidence.

“It seems unlikely that expenditure trends will improve in the near term,” said Annabel Fiddes, principal economist at IHS Markit. “Expenditure trends have been relatively subdued in 2018 so far, which can be linked in part to disappointing growth in real earnings despite a tight labor market, while the recent interest-rate hike by the Bank of England is likely to add further pressure on households’ budgets.”

Source: Investing

Marketing August 7, 2018 No Comments

Buy-to-let landlords may face another stamp duty hike

The government is planning more stamp duty on homes purchased for rent in order to ease the housing crisis, according to reports. Buy-to-let landlords may face a hike on the additional 3% stamp duty rate they have to pay when buying a property, according to The Sun newspaper.

In his column, political writer James Forsyth revealed that one option being considered to raise money ahead of the Budget this autumn is a further increase in the stamp duty rate for buy-to-let properties.

“This would raise money for the Exchequer and help to keep house prices down. But if the Government is serious about helping more people on to the property ladder, as opposed to just raising yet more money from stamp duty, then what’s needed is changes to the planning laws to get far more homes built where people want to live,” he wrote.

In April 2016, a 3% stamp duty surcharge was introduced by then Chancellor George Osborne on additional homes – that is, both buy to lets and holiday homes. According to last week’s analysis of HMRC stamp duty statistics, receipts for the second quarter to June 2018 were 13.8% down to £317m, compared with the same period a year ago.

In last year’s Autumn Budget, stamp duty land tax (SDLT) on homes under £300,000 was abolished for first-time buyers from 22 November 2017.

This means that first-time buyers of homes worth between £300,000 and £500,000 do not pay stamp duty on the first £300,000. They pay the normal rates of stamp duty on the price above that, with no relief for those buying properties over £500,000.

Source: Your Money

Marketing July 13, 2018 No Comments

Britain must stop flipping housing ministers

Before Brexit took centre stage, the most urgent long-term problem facing the government was the housing crisis.

Whether we were to go down the socialist route of government building programmes or the free-market route of minimum intervention and letting prices fall in line with earnings, it badly needed addressing. Bold decisions needed to be made and firm action taken.

Theresa May’s solution? Four different housing ministers in two years.

Today we consider the housing market, some of the largest companies in the sector – and we talk philosophy.

We can’t blame the EU for the ridiculous state of our housing market

Having a philosophy is important. Your philosophy guides you. When you are confronted with a decision, the ramifications of which are beyond your knowledge or experience, your philosophy is what will help you make the right choice.

You’ll often hear investors talk about “having a system”. Whether that system is fundamental analysis and balance-sheet study or momentum trading and trend-following doesn’t really matter.

The important thing is to have a system. Then, when you’re confronted with a decision – and all investing is decision-making – then you have your system to be your guide.

When you look at other politicians, whether of the left or right – it might be Jeremy Corbyn at one extreme or it might be Jacob Rees-Mogg at another – for the most part there is a clear political philosophy which guides them. It might be a philosophy with which you disagree, but you can’t deny there is a philosophy. And thus their attitudes and decisions are, for the most part, predictable.

Which brings me to Theresa May. I’m not sure she has a philosophy. In fact, I’ll go as far as to say that she has got to where she has by not having a philosophy. She’s too “clever” to commit to any particular point of view, because that way it can’t be held against her at a later stage. Her decisions seem to be born out of political expediency more than anything else. She might be smart tactically, but she lacks an overall strategy.

And so we have this wishy-washy leader, who promised strength and stability and has delivered neither. “Brexit means Brexit”, she said to get elected, but, judging by the amount of resignations this week, Brexit means different things to different people.

Before Brexit took over, perhaps the greatest long-term issue facing the government was the housing crisis: an entire generation has been priced out of the housing market. The cure is lower prices, but house prices cannot be allowed to fall because another generation is dependent on their staying high.

All sorts of cheap fixes have been attempted – from help-to-buy, to fiddling with planning laws, to attacking buy-to-let through tax changes, through to extortionate stamp duty at the higher end of the market – but none of these deals with the fundamental problems.

Lots of easy money entered the market via loose lending. This pushed up prices. House prices were not included in inflation measures, and so their rise went unchecked by higher interest rates. As a result, owning property was the only means by which normal people could keep up with the rampant money supply growth which took place in the 1990s and 2000s, and so it turned into a speculative asset.

Newly created money was pouring into a market that couldn’t then expand, because planning laws restricted the amount of new supply. A house that might cost less than £50,000 to build cost over half a million, simply because the land had planning permission.

When 2008 came and there was the opportunity to let the market correct, both the Labour government and the coalition which followed decided to intervene and protect.

This is a huge and on-going problem that has badly needed addressing for many, many years. How can you hope to address it – to identify the cures and work towards the solutions – when you have eight different housing ministers in eight years?

This week brought us May’s fourth housing minister in two years! If ever there was an illustration of her lack of long-term strategy, it is the circus that this post has become. How can anything meaningful happen, if the man in charge keeps changing? We badly need some continuity.

Kit Malthouse looks like a very nice man and seems to be genuinely delighted at the opportunity. I wish him all the best. And many of the problems in the housing market – especially those relating to the money system – are beyond his control.

But, even so, I hope he has been appointed because he understands some of the problems and has an idea of how to fix them. If this is just another wheeze to put an ally in a key position, Lord help us.

The UK housing market looks ugly, but not catastrophic

Anyway, I set out to write this article about the state of the housing market. I got side-tracked. Here’s my tuppence worth.

Whereas once upon a time all boats floated with the tide – all you had to be was long housing – I would say now, this is a stock-pickers’ market.

The housing market is not dead; there are opportunities to be had if you pick the right property in the right place, for example (and I’m not advocating speculating in property by the way). London looks terrible, particularly with new-builds above £1.5m where higher stamp duty rates are taking their toll. But I’m more bullish about other British cities where there is genuine value: Manchester and Birmingham, for example.

Turning to the companies, estate agent Foxtons (LSE: FOXT) – effectively, a leveraged play on London – keeps on falling. It’s now at all-time lows of 50p. It won’t recover until transaction levels in London pick up, which won’t happen because of stamp duty and still excessively high prices.

Countrywide (LSE:CWD), which owns estate agency brands such as Hamptons, John D Wood and Gascoigne-Pees, is also close to all-time lows at 50p. It fell by 25% a week or so ago, after it announced a rights issue to raise £100m to cover some of its £190m debt pile. It soon had an offer from Emoov, I understand, to merge, so it’s had a minor rally since.

Even Purplebricks (LSE: PURP) is down by more than 20% this year, so the failure of Foxtons and Countrywide is not just a failure of the traditional estate agent model. New tech is suffering too.

The builders also look weak. While Persimmon (LSE: PSN), the best performer, is flat on the year, the likes of Barratt (LSE: BDEV), Taylor Wimpey (LSE: TW) and Berkeley Group (LSE: BKG) are all in bear markets, which are starting to look pretty entrenched.

It’s all symptomatic of a market that is not functioning properly. The builders benefitted from help-to-buy, but the agents didn’t – that’s why they’ve done worse. But now the whole market looks wobbly.

This is not a Brexit problem. We set our own housing policy, not the EU. We can’t blame Brussels. Investors are walking away. Who can blame them? With no coherent policy or direction, would you risk capital in such a strongly valued market?

Of course, these companies – the builders and the agents – are not the same as buying a house itself. House prices on the whole are holding up (London aside – although even there they are not in free fall). But the builders and the agents are proxies for the greater health of the market.

It’s worth noting that one other proxy – Rightmove (LSE: RMV) – is having a storming 2018, up by more than 10%. Apparently more people start looking at properties after England score. Bizarre, I know.

Anyway, let’s hope there’s plenty of that this evening. Good luck to England – and good luck to Kit Malthouse. Let’s hope both he and Gareth Southgate are in the job for many years to come. And let’s hope Malthouse does as good a job.

Source: Money Week

Marketing July 6, 2018 No Comments

More than 10,000 commercial properties lying empty amid homes shortage in the capital

Central and local government as well as the Mayor of London have all come under attack for the level of empty commercial properties in the capital amid the housing crisis.

Research by Live-in Guardians, which arranges for people to occupy empty properties at a reduced market rate to help keep them secure, found that the number of vacant commercial properties in central London and around the outskirts has reached more than 10,000.

The data, based on Freedom of Information requests to 22 local authorities in London zones 1-3, shows 10,666 commercial properties lying empty.

Arthur Duke, founder of Live-in Guardians, warned this figure could be higher as many councils are unable to record the data.

He lambasted the Ministry of Housing, Communities and Local Government, the Mayor of London and councils for not doing enough while there is a housing crisis in the capital.

The worst areas were the City of London with 3,409 empty buildings, Hammersmith & Fulham with 1,288 and Ealing with 1,147 vacant commercial properties.

Kensington & Chelsea, and Newham Councils did not respond to the request.

Duke said: “This is a reflection of extortionate property prices coupled with ferociously high business rates that push companies further away from the centre of town to the suburbs.

“Many of the buildings from our research include office buildings, retail premises, police stations, warehouses and factory buildings. We also have former law courts, restaurants, a former go-karting track and even a few banks.

“More should be done to make use of these empty spaces, which are, in fact viable temporary homes with a little imagination and effort – that benefit all parties.

“The Government should see these empty buildings as an alternative temporary form of living and has the added bonus of helping guardians save money they could potentially use to buy their own property in the future. Once guardians are living in commercial spaces, the owners are typically exempt from paying business rates and there’s no requirement for expensive security costs.”

Source: Property Industry Eye

Marketing May 20, 2018 No Comments

Housing crisis: England needs four million extra homes

England faces a shortfall of almost four million homes, as the housing crisis continues to rage across the country, according to research.

To meet the backlog and provide for future demand, the country needs to build 340,000 homes a year until 2031, the research carried out by Heriot-Watt University found.

And 145,000 of these new homes should be affordable, with 90,000 for social rent, 30,000 for intermediate affordable rent and 25,000 should be for shared ownership.

The government’s current target is to build 300,000 homes for first-time buyers a year.

Those in desperate need of accommodation include homeless people, private tenants spending huge amounts on rent, children unable to leave the family home, and couples delaying having children because they are stuck in unsuitable housing, the National Housing Federation (NHF) and charity Crisis said.

Government action

They have now called on the government to take action to tackle the problem, which is expected to publish a social housing green paper this summer.

David Orr, chief executive of the National Housing Federation, said: “The shortfall of homes can’t be met overnight – instead, we need an urgent effort from the government to meet this need, before it publishes its social housing green paper in the summer.

“The green paper will set out the government’s approach to tackling a number of key issues, like stigma of social housing tenants.

“However, it is clear that many of these stem from a chronic underinvestment in affordable housing.”

Terrie Alafat, chief executive of the Chartered Institute of Housing, added: “This report once again highlights the chronic housing shortage we face in the UK and it is clear that only a bold and ambitious plan to solve the housing crisis will prevent a decent, genuinely affordable home being out of reach for our children and their children.

“What the report also shows is that this isn’t just a numbers game and we have to make sure we build the right homes, in the right places and that people can afford them. For most people social rented housing is the only truly affordable option and the government must support the building of many more of these crucial homes.”

Source: Your Money

Marketing May 3, 2018 No Comments

James Brokenshire has no time to waste in fixing the capital’s housing crisis

As James Brokenshire takes up his new role as housing secretary, his top priority must be to fix the capital’s broken housing market.

It is no exaggeration to say that London is in the midst of a housing crisis. Demand far outstrips supply; while we have built 200,000 new homes over the last decade, London’s population has grown by approximately one million people. We need to be building 66,000 new homes every year if London is to keep up with demand. Last year, we completed 26,000.

The failure to build more homes is not just a social issue – it’s a threat to London’s global competitiveness. A staggering 70 per cent of Londoners aged 25-39 say that the cost of their rent or mortgage makes it difficult to work in the capital. That doesn’t help fill up the talent pool or plug our widening skills gaps.

It is no surprise, then, that almost three quarters of businesses think London’s housing supply and costs are a significant risk to the capital’s economic growth. London firms face an annual £5.4bn wage premium – equivalent to £1,750 per person – to compensate workers for high housing costs.

In the face of this deepening crisis, it is pretty unedifying to see everyone passing the buck. Some blame property developers for land-banking. Others point the finger at local authorities and City Hall for planning bureaucracy. Some politicians have even blamed foreign buyers so they don’t have to take difficult decisions that they believe will annoy some of their voters.

But for millions of Londoners who rent, housing is the key electoral battleground, with 43 per cent agreeing it will help them decide how to vote in tomorrow’s local elections – just ahead of Brexit (42 per cent), and a candidate’s position on the NHS (37 per cent).

Over half of Londoners agree that more homes need to be built in their backyard, rising to nearly two thirds of people who live in inner London (63 per cent).

Londoners can’t find a place to call home because we are failing to build anywhere near the number of homes we need. So, as voters go to the polls on Thursday, let’s face up to what we need to do to tackle the housing crisis.

First, we need London’s councillors to back new homes, supporting the development that residents want, and thinking about better ways of building – everything from build-to-rent and micro-homes, to increasing the density of housing in the capital.

Second, we need the Greater London Authority to evolve from an organisation that sets policies and distributes limited government money into one that pushes (and, where necessary, intervenes) to drive the delivery of more homes.

Third, we need more land to build on, including public land, and a locally-led review of the green belt to ensure that what it’s protecting is truly green and pleasant.

None of this will be enough without more money from central government – to date, it has only put a down-payment on tackling the escalating housing crisis.

And finally, we need ministerial continuity. When the government appointed Alok Sharma in June 2017, that made him the fourteenth housing minister since 2000. Sajid Javid officially picked up the housing beat when his role expanded to cover housing, communities and local government in January 2018. Now he’s moved to the Home Office, leaving Brokenshire with the job.

The turnover of those responsible for housing outstrips the rate that the average Londoner moves home. Given how little time these ministers spend in office, it is no surprise that they are stuck tinkering around the edges of the problem, rather than building more homes.

To fix our housing crisis, we need more money, more land, and better ways of building.

But first, we need to jump off the ministerial merry-go-round.

Source: City A.M.

Marketing April 24, 2018 No Comments

The UK’s current housing crisis: Can your empty property portfolio provide a social dimension?

Vacant property expert, Stuart Woolgar, CEO of Global Guardians, discusses the country’s current housing crisis and the section of people who cannot buy, nor are they eligible for social housing

Housing in the UK is both in crisis and confusion, with arguments raging how best to solve the problem.

House purchase

The government says it is stimulating house purchase for first-time buyers by cuts to Stamp Duty and the Help to Buy scheme and pushing developers to build more affordable housing. However, the recent analysis by the Local Government Association (LGA) shows we are experiencing the biggest fall in home ownership in the last 20 years, with the key 25-34-year-old group dropping from 65% to just 27% on the property ladder. Why? Simply because house prices have risen around seven times faster in real terms than incomes.

At a recent housing conference, the Prime Minister said she wanted to break the ‘vicious circle’ where most young people can only get on the property ladder with their parents’ help; this was an unacceptable situation and the provision of more affordable housing was now a priority for the government to restore the dream of home ownership to millions across the country amid a lack of supply. However, house prices are unlikely to suddenly drop by a large amount so sizeable deposits for mortgages will still, somehow, have to be found.

The rental sector

In 2017 the Royal Institution of Chartered Surveyors (RICS) predicted that rents will increase by just over 25% in the coming years. With the already huge increase in the cost of renting a home over the past decade, combined with the above problem for house purchase, this means there is a large cohort of people who can neither afford to buy their own home because they don’t earn enough and don’t have enough disposable income to save for a deposit because their rents are so high, nor are they eligible for social or affordable rented housing because they earn too much.

Tackling the problem

Two years ago, a leading thinktank produced a report which suggested that allowing disused commercial land and buildings in London to be redeveloped could provide up to 420,000 additional homes for the capital by 2036. Figures compiled by the Policy Exchange found there were more than 500 hectares of empty or under-utilised industrial land across London alone, the equivalent to 750 football pitches, as well as a significant amount of vacant retail space in outer London.

They believed that if the government were to commit £3.1 billion a year to finance the purchase of this land or provide the finance to the local authority who owns it, maybe alongside a private sector investor partner/developer, in a PPP for example, around 21,000 homes could be built each year. Rental income from the homes and the sale of equity stakes could allow the government to recoup its money within 20 years and this scheme would be the largest government investment and delivery on housing since the 1970s.

Since the Government Property Unit (GPU) is pushing on with its target to reduce the UK public sector’s estate from 800 to 200 by 2023, a real opportunity exists for the public sector to lead the way and kick-start some of the proposals now on the table to tackle the housing crisis.

However, there is a real opportunity being missed across the country, which has in fact been picked up by the Greater London Authority in their recent investigation to find one of several solutions to the capital’s chronic housing shortage. This is the use of property guardians in otherwise vacant buildings: buildings that are currently sitting, awaiting development, with or without planning permission, or simply up for sale.

The use of property guardians, who pay a far lower ‘licence fee’ to occupy an otherwise empty property, residential or commercial, than the market rate for the area, could give a whole section of people, the ‘squeezed middle’ in the property sector as described above, an opportunity to actually save money to put towards a deposit on a home of their own.

At Global Guardians, we have many examples of people who have done that, simply by being a property guardian for a few years. All our guardians live in accommodation that is safe, secure, clean and heated with utilities and domestic facilities far better than in a lot of rented accommodation, with the benefit of regular monthly inspections to ensure the property is maintained to rigorous standards.

It is such a simple and social solution for a whole section of the population who are currently frustrated with their accommodation lifestyle and it has the dual effect of lessening the financial burden that a property has for its owner, even if it is lying vacant or simply being gradually refurbished. As property owners, insurance and rates or council tax still must be paid, as well as security to keep it free from squatters, criminal damage or ASB of all types. This financial benefit is a key one, especially for local authorities or housing associations as well as government departments, where budgets are permanently under pressure.

With the public sector thinking outside the box like the GLA for more social solutions to the current housing crisis, hopefully, more of the ‘squeezed middle’ can be helped. It won’t solve the housing crisis, but it is certainly a contribution that should be actively considered.

Case study: The Excalibur Estate in Catford, south east London

A good example of putting out of date buildings to good social use while redevelopment is planned and executed is the old Excalibur Estate in Catford, south east London. This 12-acre site is home to 187 prefab bungalows built hurriedly at the end of WWII when there was an acute shortage of housing due to the Blitz. With an intended lifespan of 10 years, these homes remain decades on.

After years of consultation, in 2011 plans were finally approved to redevelop the site but still became bogged down in ongoing delays and objections by heritage groups and the new development is now scheduled for completion by 2021. However, while all the discussions have been ongoing, these old properties still have the potential to provide much needed low-cost housing for many people.

When Global Guardians gradually took over the vacated properties, they refurbished them to modern standards and they are providing inexpensive homes to an increasing number of local people while at the same time keeping the Estate secure and safe from squatters and ASB, as well as generating savings for the Estate owners in terms of security, insurance and maintenance costs and generating council tax income as well. It is proving a win-win situation for all parties.

Source: Open Access Government

Marketing April 20, 2018 No Comments

Time to think small if the government is serious about solving the UK’s housing crisis

You can forget trying to unravel our tangled planning regime. Forget improving access to land. And forget trying to ease the squeeze on skilled construction workers.

The government shouldn’t bother with any of the above if it won’t do more to help homebuilders secure funding to get projects off the ground in the first place.

This is a funding void that has drastically shrunk the number of small housebuilders in the UK.

In fact, if you hark to 1988 – which was the most productive housebuilding period in British history – there were 12,200 small builders in the UK. By 2014 (the latest figure available), the number dropped to 2,400, which is a decline of 80 per cent.

And when you look at the largest 10 housebuilders in the country, not a single one was founded after 1990.

Of course, the dire lack of housebuilders only serves to exacerbate the country’s supply crisis.

“Solving the nation’s housing crisis is as complex as it is urgent.” Those are the words of the UK’s former housing minister Mark Prisk in a yet unpublished report from LendInvest called Putting Finance First.

While Prisk says we can’t point blame for our dysfunctional housing market in one direction, it’s clear that finance is a major prong in this multifaceted problem.

Lack of funds is certainly a huge stumbling block for smaller players in the property market.

SME housebuilders, of course, can help develop affordable homes – whether that’s through mixed method property, modular homes, or fully-customisable residencies, says Jon Hall, managing director at challenger bank Masthaven.

“These small to medium sized businesses could well mark a turning point, if not the answer, to the UK’s housing woes,” he adds.

But more than half of small builders say the major hurdle is getting enough money together to get projects rolling, according to the Federation of Master Builders.

“The problem is that the loans available to these businesses often aren’t adequate enough to meet their needs,” says Hall. “At the same time, many of these companies are snubbed by high street lenders.”

As a result, he warns that many SMEs seek out other sources of finance, sometimes winding up with outdated products and high interest payments – or else companies turn to complex development finance loans.

Admittedly, there is a £2.5bn government initiative in place – known as the Home Building Fund – which offers finance to home building SMEs in England. But whether that money is being put to good use is another question entirely.

Research from LendInvest indicates that this initiative has financed 153 schemes, delivering 88,000 homes to date. But, 18 months since its launch, it’s not clear how much of this fund has actually been deployed to developers, with no data published from any authority on the performance of the loans either.

It’s a strange dichotomy – the government pledges to build more houses, but how does it expect this to happen without improving access to funding? As LendInvest points out, it cannot be left to the largest housebuilders to solve the housing shortage.

Chief executive Christian Faes says the only way to increase supply is by helping property entrepreneurs raise capital, leveraging both private and public sector investment.

SMEs are currently locked out of the housing market, but specialist lenders have the key to let them in

The big banks have been edging away from smaller businesses for years, so it’s not exactly news that SMEs across all sectors have been struggling to find finance. But the problem is arguably worse for property SMEs, which are held back by regulatory challenges, and are not eligible for the same tax breaks available to small businesses in other industries.

Also consider that the UK has the highest property taxes in the developed world, meaning many small builders are priced out of the market.

The good news is that specialist lenders can help solve the ongoing housing crisis. “If the government wants to hit its target of building one million new homes by 2022, SMEs will need to work with lenders that can provide a range of innovative loans,” says the Masthaven boss.

Hall points out that challenger banks can provide up to 100 per cent of build costs funded in arrears, and maximum loans to GDV at 60 per cent. “SMEs are currently locked out of the housing market, but specialist lenders have the key to let them in,” he adds.

Experienced lending businesses could even act as intermediaries to assess the creditworthiness of borrowers and allocate government funding, speeding up the process as a result.

This was actually a key recommendation in the 2016 Tailored Review of the Homes and Communities Agency – although LendInvest says this has not happened anywhere near as extensively as the industry would like to see.

To date, Homes England has only officially appointed one commercial partner, which suggests that the government body is failing to make use of the full scope of specialist lenders – companies which could go a long way to propping up thousands of SME housebuilders.

LendInvest questions why Homes England does not use a model similar to state-owned bodies like the British Business Bank (BBB) by making full use of the network of commercial partners.

The government has no hope of hitting its ambitious housebuilding targets unless it encourages a new generation of entrepreneurs in this sector

But what about getting local councils involved?

LendInvest suggests local authorities co-invest with alternative lenders in local developments, using a mechanism known as the Public Works Loan Board to offer discounted capital to small builders.

But the collaboration doesn’t end there, as LendInvest reckons more funding from the BBB could be allocated into the property sector.

“Until recently, the property market has been an untapped and overlooked market for BBB, which has focused on providing finance solutions for SMEs in almost all other markets across the UK economy,” the report reads.

It suggests that the BBB appoint more alternative lenders to underwrite property investment and development loans as part of its Enable Guarantee programme.

Essentially, the government has no hope of hitting its ambitious housebuilding targets unless it encourages a new generation of entrepreneurs in this sector. Finance is the biggest barrier preventing this, but specialist lenders cannot do this without collaboration from the state.

If the government is serious about solving the housing crisis, it’s got to think outside of the box, offering the alternative routes which our property market so desperately needs.

Source: City A.M.

Marketing April 14, 2018 No Comments

How will the stand-off in the UK property market be resolved?

The housing market slowdown continues.

According to the latest RICS survey, activity in the housing market has now been cooling off for 12 months in a row.

Fewer people are registering as buyers. Fewer homeowners are trying to sell their properties.

We’ve been here in the past. The question now is: which way does the market go?

The housing market slowdown is rippling out from London

Every month, the Royal Institution of Chartered Surveyors (RICS) asks its members for the views on the housing market.

Obviously, in some ways, surveys are not as scientific as looking at house price data. On the other hand, these people are as close as you can get to the coal face. They can gauge the “feel” of the market and give you a better idea as to whether it’s heating up or cooling down.

They’ll always come at it from a somewhat self-interested perspective, but then you can say that for any industry body.

Anyway, in the latest report, which covers March, the short version is that things don’t look particularly promising for anyone who wants to sell their house for lots of money. On the other hand, that, presumably, is good news for anyone in the market for a house.

As ever, there’s a fair old gap when you look at the regional level. In London, where the market has been tough for a long time now, far more surveyors reported house prices as falling rather than rising. The same goes for most of the south of England, and also for the north east. However, prices are still rising in Northern Ireland, Wales and the East Midlands, for example.

As for the future, most surveyors expect prices to be higher in a year’s time, except in London, where the majority still expect prices to be lower a year hence than they are today.

The house price hopefuls might want to believe that the rest of the UK has it right, and London is just being London. But the rest of the figures suggest that the London slump merely hasn’t yet sunk in elsewhere.

Buyer enquiries have now been falling for 12 months in a row. They’re Sellers aren’t keen to market their houses in such a grim market, so sales instructions are down heavily. Meanwhile, agreed sales have fallen for the 13th month in a row, with sales down or flat across “virtually all parts of the UK”.

So what’s going on?

The deep freeze

We’ve talked about the various issues hurting the housing market right now – much higher taxes at the top end, tighter mortgage lending rules, and a general understanding that investing in property might not be a good idea when both left and right wing governments see rental or investment property as a juicy taxable asset.

All of these issues have had a particularly big impact on London, which is where the vast majority of the most expensive properties in the UK are, and which is also a big market for buy-to-let landlords. So if anywhere is going to suffer as a result of higher taxes on expensive properties, and higher taxes on mortgaged buy-to-let portfolios, then London is the obvious candidate.

In short, you don’t need Brexit – or even the threat of Jeremy Corbyn, for that matter – to explain the London slump. You just need to look at the shift in government policy towards rich foreigners and amateur landlords under the George Osborne chancellorship.

However, on top of that, you now have rising interest rates from the Bank of England. One way or another, the rising cost of credit or the perception that credit costs will rise will have an impact on the market. That said, this may be smaller than it would have been in the past simply because mortgage conditions have in general been tightened up.

All of these signs point to much lower house prices. Except that there’s just one problem.

House prices are very “sticky”. As Capital Economics points out, “buyers and sellers are currently locked in a stand-off”. As a buyer, you can be forgiven for being wary right now. Higher interest rates, relatively flat wages, hostile politicians – it’s not a promising market.

But sellers also don’t want to accept lower prices. They have a value for their home in mind, and they’re not going to budge. And while you can argue that this is stubborn and unrealistic, the truth is that most people don’t “need” to sell their home.

The main driver of the house price crash of the 1990s was the fact that soaring interest rates created a lot of forced sellers. In the absence of that sort of event, a house price crash is unlikely to come about. Instead you get a freeze of the sort we’re seeing now.

If this goes on for long enough, then it might lead to the ideal solution -–which is for house prices to be flat or every so slightly rising in nominal terms, while wage growth outstrips them. In other words, you erode away mortgage debt, houses become more affordable in “real” (after-inflation) terms, and everyone is, if not happy, then not distraught either.

Of course, this “happy medium” outcome is vulnerable on lots of levels. Interest rates could spike. I don’t really see it as a central scenario, but it’s possible. A political upset – a clumsy wealth tax for example – could also hammer house prices. So don’t take it for granted. But so far, the deep freeze and gradual thaw seems the most likely outcome.

It is bad news, however, for companies that rely on a decent level of housing transactions to keep business moving along. If people aren’t moving house, then turnover of items such as new carpets, new curtains, new bathrooms, new kitchens – that falls. The fact that Carpetright is having to shut down a quarter of its branches, for example, is not purely down to competition from the internet.

That said, if people aren’t spending money on home furnishings, they’ll be spending it on something else. So the impact is sectoral, rather than economy-wide.

In short, don’t expect soaring property prices any time soon. But hoping for a crash might be wishful thinking too.