There has been much debate about planning and the built environment recently after the release of the National Planning Framework document in late March. Many in the industry are dismayed at the negative attitude of many to any changes to the built environment. New development creates opportunities and often much needed jobs. There have also been discussions over the high costs of planning and infrastructure charges that can often cause border line developments to remain at design stage. With banks, lenders and private investors taking renewed interest in speculative property development funding the review of planning charges and infrastructure levy’s has proved very timely. One developer had reportedly paid planning fees of 2million pounds on an 8million pound scheme in London. With these figures it really illustrates the need for a sensible review of planning charges. These can be a barrier to many schemes and hold back desperately needed houses and other residential and commercial property development schemes.
London office space leads the property market recovery
April 18, 2012
The ever increasing demand for London office space coupled with a lack of new developments has continued to drive prices up. The increase in yields, rental income and ultimately capital values has seen investors rushing to the market as a safe place for investment funds. The London market has not really seen any new developments ready for occupation in the past few years, so the simple economics of supply and demand means investors are in a good position. Many people in the property industry follow the London commercial market as a good indicator of the performance of the rest of the property market in the future. With land values depressed but increasing interest from funders in speculative development finance could this lead to a fresh start in the speculative development of commercial property? There seems to be an increase in occupancy in many areas around the country as companies start to feel more confident about signing leases and making other business investment. Could this be the first signs of a confidence returning to the property markets?
New money for property funding as the 95% loan to value deals double
April 17, 2012
The banks and funding houses are quietly but steadily returning to the mortgage markets and the large increase in the 95% loan to value mortgage deals available will undoubtedly improve things for first time buyers. First time buyers are well known for being the life blood of the property market and are usually an essential part of many sales chains. The first time buyer may well still be mourning the end of the stamp duty holiday but for many it is the sizable deposits required for lower loan to value mortgages that have been a bigger obstacle to home ownership. The number of 95% percent loan to value deals has more than doubled in the past twelve months from 27 to 61. This response in the increase in higher loan to value deals is simply lenders responding to a huge pent up demand from property buyers.
Build to rent set to boom after demand from institutional investors?
April 14, 2012
The government backed Montague Review into Build to Rent has identified a significant interest from institutional investors in funding build to rent projects. Small changes to legislation could create a boom for the build to rent sector. With significant amounts of investment available from pension funds, insurance companies and property REITs. There is a great deal of examination being carried out into removing these investment barriers. Many institutional investors are attracted to this sector of residential property investment because there has been such a marked demand for these properties from tenants. The growth in demand has been described as rapid with input from big hitters in the property industry like, the British Property Federation, Association of Real Estate Funds and the Investment property Forum. The use of 106 agreements in conjunction with 10 year affordable rent covenants will make many developments stack up where in usual market conditions they have been unlikely to be built out. This also provides the government with a cost free method of boosting housing supply with the option to raise funds from the sale of publically owned land.
Royal Institute of Chartered Surveyors shows demand for property rising
April 11, 2012
The latest reports from the Royal Institute of Chartered Surveyors have showed a continuation in the upward trend of increasing buyer interest. The data showed the rise in interest from first time buyers has raised by nine percent a very healthy increase and the largest increase for two years. This was of course encouraged by the rush to beat the end of the stamp duty holiday. A spokes man for RIC’s suggested that although the figures were broadly positive changes to the budget could affect this positivity in the coming year. The familiar pattern continues across the country with London out performing all other areas, however there has been a marked increase in activity in the North West. Could this be the first signs of the London ripple effect?
Right to buy to kick start housing market revival?
April 10, 2012
Last week the government revealed details of its revamped right to buy scheme this will give two and a half social housing tenants the opportunity to purchase their homes. The scheme as before attracts interest from tenants wanting to buy as they receive heavy discounts from the properties current market value. The scheme allows discounts on the purchase price of the property dependant on the length of the tenant’s tenancy. Last year the old scheme was responsible for less than four thousand sales where previously at the height of the scheme it had seen over eighty thousand properties sold through the right to buy scheme. The government has pledged to build a new affordable rental property for each property sold through the scheme. The biggest change is the size of the discount available to council tenants looking to take advantage of the scheme, where certain tenants would have received a discount previously of around sixteen thousand they could now be eligible to up to seventy five thousand. This will also affect the affordability of these purchases both in real terms and for the mortgage lending to stack up on earnings multiples.
Stuck with a development site you can’t finance?
April 7, 2012
Obtaining development finance has never been easy but in recent times it has proved impossible for many potential development site owners. The two biggest obstacles that effects site owner’s attempts to obtain speculative development finance is either an existing charge or finance on the site. Many speculative development finance providers simple will not consider lending on a site that is not unencumbered and already has outstanding finance charged against it. The other thing that banks and development funding providers have increasingly looked at to minimise their risk is development experience. First time or novice developers are finding it very challenging to obtain suitable development funding without the correct development team in place. Those that are able to overcome these obstacles are finding that their development sites no longer stack up because the percentages that the banks will lend are so restricted. The best way to overcome these issues is by making sure you have the correct members on the development team or carrying out a joint venture property development. Having an experienced quantity surveyor will not only give the banks confidence it will also help control build costs, assist with drawdown valuations and increase the opportunities for improved finance structures and cash flow management. Another way around these challenges is to use a private investor to clear off bridging or other finance charged on the site. This can be expensive with private investors expecting returns between twenty and fifty percent dependant on financial input and their risk levels. These considerations can often be weighed against the interest charges on existing finance or funds that are tied up in sites that the owner or development team are unable to build out.
First time buyer mortgages jump by nearly 10 percent in first quarter of 2012
April 4, 2012
The HSBC has released figures showing that they have lent nine percent more money to first time buyers than for the same period last year. This takes their gross lending to first time buyers to the highest level for any quarter than ever before. They have approved mortgages in the first quarter of 4.9 billion with 1.2 billion going to first time home buyers. This gives an impressive figure of mortgage lending of £19 million pounds per day. The bank has reserved a further £15 billion for mortgage lending for the rest of 2012 and have ring fenced £3 billion of those funds for first time buyers.
City living hits cheapest level for a decade
April 2, 2012
A study by Lloyds TSB has revealed that affordability of city homes is at its best levels for ten years. The average city home now stands at £173,202 and that makes a multiple of 5.5 the average annual earnings. This makes city homes the most affordable since 2003 when the ratio was 5.3 times average earnings. With the most affordable city being Salford in the North West with an average house price of just over £102,000. Unsurprisingly Truro in the south west was one of the least affordable places with houses costing just under ten times average earnings. These figures reflect buyers uncertainly about their job prospects and their difficulty in raising deposits and mortgage funding. This has to be good news for many city dwellers having difficulty off loading city centre apartments although it will have a negative impact on the sales prices they achieve.
