The values of commercial property transactions have dropped from just short of 36 billion to just less than 33 and a half billion. In 2011 there were just over 1700 sold mainly by banks or the customers of banks under pressure to stay within their facility agreements. University research estimates that a quarter of all commercial property has 100% outstanding property loans. They estimate that a further 35% are at 70% or more, this mean that 60% of all commercial property will not be re-financeable at the end of their facility terms. This has the knock on effect that banks cannot clear property backed loans off their balance sheets. So they have little or no appetite for speculative property development and new commercial property loans.
£100,000 pounds lost in your garden?
January 22, 2012
Is your garden a potential development site? Could it be worth tens of thousands of pounds? If so how do you know? Well the answer to most people and even novice property developers is that they do not. So how do you liquidate that cash tied up in a side or rear garden the first step is to obtain the “planning gain”. This is the uplift in value of the site or property when planning permission is granted, the next pocket of cash is the developer’s profit. This is the profit obtained by the developer who takes the site to a saleable finished dwelling or other building. The planning gain can vary massively dependant on many variables. The developers profit can also vary greatly but most developers look to take profits between 12-18 percent dependant on the risk of the build and the saleability of the finished product. The profit is the gross development valve (GDV) minus the build costs, land value and soft costs. So how do you find the profit? You need to find a good planning consultant and a joint venture partner, they will take you through planning and offer you a profit share when the development is completed.
Construction industry sees 5,000 firms go to the wall since 2010
January 20, 2012
The construction industry has seen over 5,000 firms go into liquidation since 2010 and Pwc are expecting 2012 to be a similarly tough year. 2011 saw a 6% rise in insolvencies from 2010 with the final quarter seeing 656 construction firms fail. Many firms have been hit by a double whammy of a massively reduced speculative development and new build demand coupled with a huge slow down in public sector building projects. Interestingly as the market stalls and construction firms suffer from a lack of new tenders arriving at their offices. Other fragments of the construction and property market are seeing some increase in activity. With planning consultants and architects seeing a growth in those sat on land and disused buildings looking to maximise their value or prepare site for sale through value engineering.
HSBC pledges 15 billion to UK mortgages market
January 19, 2012
Last year the HSBC lent approximately 6.7billion to home owners so this represents a large increase, which could tempt other lenders to compete. The new money to the mortgage market is thought to be enough to help a further 150,000 home buyers. The new funding promise will defy economists who have remained pessimistic about the future of the UK property funding market. It is thought that at least 3billion of this property funding will be reserved for first time buyers. This come at a time when many mortgage brokers are expecting a sizable increase in interest from first time buyers.
Yorkshire capital home to housebuilding cash
January 12, 2012
The York based popular house builder and property developers Persimmon Homes have announced that 2011 matched the performance of 2010. The company has benefitted from improved conditions in the world of speculative development funding with this having a positive impact on margins and profits. While the business has reduced borrowings it has also enlarged its land bank. A very impressive performance considering market conditions and the troubles of many of its competitors. The company should be further bolstered this year as the whole of the property and construction industries look forward to the effects of 95% loan to value mortgages.
Property market welcomes £4 billion pledged by government to kick start developments
November 29, 2011
The property market has been desperate for new build housing stock and assistance for first time buyers. The governments announcement that it will back the proposed new-build mortgage indemnity scheme coupled with the 4 billion it plans to invest to kick start stalled developments means Christmas has come early for the property sector? Well it is good news but is it what they really want? Developers, house builders, main contractors and surveyors are all keen to see a sensible return to 95% loan to value mortgages. Once home buyers can easily secure their dream homes with a 5% deposit the housing market will open up. This will really assist the UK’s economic recovery as it will increase employment in the property and construction sectors.
Investment bankers look to lend to investment property mortgage specialists
November 20, 2011
The third quarter of 2011 has seen an increase in the number of loans to landlords by 16 percent. Interestingly this quarter has also seen investment banks looking to lend to the mortgage lenders who specialise in the buy to let market. The investment funds passed to these mortgage lenders has increased by 19 percent. This gives a clear indication that organisations and individuals that are best placed to predict the future of the buy to let property market are rapidly gaining confidence in the market. The 3.2 billion pounds that has been lent into the buy to let residential housing market is the highest level of investment funding hitting the market since the previous boom.
House builders and lenders make use of shared equity schemes for over 1 in 5 new builds
November 16, 2011
Figures from the website SmartNewHomes shows that nearly one quarter of all new homes are available with shared equity schemes. 23 percent of the properties offered offer the scheme the scheme offers matched funding for property deposits. In essence the first time buyer can apply for 50% of the required deposit as long as they can fund the remaining 50% themselves. The scheme is working partially well when the Governments FirstBuy scheme is utilised this allows for a 20% loan provided by the house builder and the government with 5% coming from the first time buyer. The remained is secured with a 75% loan to value mortgage which also has the advantage of better mortgage rates and fees. When you consider that the first half of this year had half the first time buyers of the same period in 2007, it shows how critical these schemes are to recovery in the housing market and ultimately the UK’s GDP.
One billion in London property loans sold for 20% discount by Bank of Ireland
October 26, 2011
The Bank of Ireland has off loaded a billion pounds worth of UK property loans both commercial and residential office, retail and apartments mainly placed on London property stock. These loan agreements are being traded and purchased by other financial institutions and canny investors. They look to profit by selecting the areas they specialise in and seeing the loan periods out. Banks looking to improve the look of their balance sheets and tidy up their books are motivated to make such discounted sales. Once the darlings of the development funding and more exotic end of the property backed loan market many of the Irish banks are now conspicuous in their absence from this sector.
Cash rich to make a killing on brownfield sites?
October 25, 2011
The capital values of many residential development sites has plummeted over the last few years as the banks appetite for lending on residential land and land banks has reduced. The prime residential sites are still selling well and for good prices where the demand and competition is high. The latest quarter’s figures show the first falls in residential land values since 2009. The impact has yet to be felt of the governments offer to carry out joint ventures on development land where they defer payment for the land until the final properties are sold. The supply of sites has risen sharply as many site owners have put off sales hoping the market will improve. Many are now looking to minimise their exposure to residential land prices and improve their liquidity by realising the capital tied up in their sites. Sites going to market are up 9percent where demand has only risen by 3percent. Many sites simply no longer stack up or are viable as their GDV (gross development values) have fallen in line with falls in UK house prices. The only positive is that predictions show that land values will remain stable for the next 12months. So many site owners are looking to construction companies for joint venture proposals.
