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Bridging lending in the UK reached new record in 2015
Gross annual bridging lending in the UK broke through the £3.5 billion barrier in 2015, equating to £13.9 million worth of transactions every working day, new research shows. The data from the latest West One Bridging index also shows that the bridging sector is now expanding significantly faster than the mainstream mortgage market, which only grew 8% in the whole of last year according to the Council of Mortgage Lenders. But despite the growth, the bridging sector is still only worth approximately 1.5% of the traditional mortgage sector which was valued at £220 billion in 2015, meaning there is plenty of scope for further expansion. The index report suggests that the growth in short term finance is part of a five year trend, which began with economic recovery, post-recession. The current housing crisis has led to demand for properties easily outstripping supply, with house prices rising 6.7% in 2015, according to the ONS. A significant component of the housing crisis has been the shortage of land available for development especially in London and the South East due to current greenfield restrictions. This has driven redevelopment and conversions of any available properties in the capital with permitted development rights. These projects often require short term financing during conversion. However high street mortgage lenders have been reluctant to increase their short-term and commercial lending after the recession. While commercial property prices have increased 21% since their trough in 2013, bank lending to property firms is still only around £135 billion, just over half its value in 2009 according to MSCI. The bridging sector has been able to grow due to flexible underwriting that considers cases on an individual basis and a greater appetite for lending on commercial projects than that exhibited by the high street banks, the report says. There has also been a significant growth in the number of properties sold at auction in 2015, supporting the upswing in bridging. In the last two years alone, the total value of properties sold at auction has risen by approximately £800 million. Buyers will typically turn to bridging if they need to raise capital for their purchase as high street banks are unwilling to lend for auction purchases. The report points out that incoming regulation from the European Union’s Mortgage Credit Directive (MCD) should help lift future growth. The new rules mean that some bridging loans will now be regulated by the Financial Conduct Authority, namely those which are secured on an individual’s home or are not predominantly for business purposes. It explains that these will fall under the new MCD led rules, as will certain buy to let related finance particularly the new category of consumer buy to let loans. As more bridging products become regulated, the sector’s reputation will be enhanced, with more demand from FCA regulated brokers. Also, the new rules should encourage lenders to remain responsible, while also… Continue reading
Bristol and Cardiff set to see largest rises in office rents in UK
A lack of supply of Grade A space in the UK’s regional cities is currently driving significant demand for value-add office refurbishment opportunities, according to new research. With average take-up across the UK’s regions at 4.6 million square feet, with availability currently down 18% on 2007 levels, there is under a year’s supply of Grade A space coming to the market in the next three years says the outlook report from real estate firm Savills. It explains that speculative development in the regions has risen 129% on the same time last year to approximately 3.5 million square feet, but with 28% pre-let it is expected that this will largely be absorbed in the first and second quarters of 2016. Savills says that the lack of available space has driven demand for value-add office opportunities to help plug the gap, with January 2016 marking the 41st consecutive month of refurbishment activity. With competition for space outstripping supply, the gap between the rents on new build space and the best quality refurbished stock has narrowed, although it is likely to widen once more as new developments are completed later on in the year. New build office rents in Bristol, for instance, currently stand at £28.50 per square foot compared to £27 per square foot for refurbished office space, whilst in Leeds new build rents of £27 per square foot are only £1 higher than those for refurbished space at £26 per square foot. Savills forecasts that Bristol will see the highest growth in rents of 12% by the end of 2016, followed by Cardiff at 9%. The lack of supply has also forced some occupiers to look outside CBD’s at business park locations. Savills gives Birmingham Business Park as an example which has seen its vacancy rate drop from 75 to 15% over the last 12 months. ‘UK wide job creation is driving demand for good quality space in amenity-rich and well-connected regional cities, leading to a squeeze on space and rent rises. By the end of 2015 rents in the M25 office market had risen 10%, Manchester by 6% and Leeds 4%, and we’re set to see strong rental growth in many other regional markets before 2016 is out,’ said Claire Bailey, associate director, Savills commercial research. ‘While speculative development has picked up pace, a lot is already pre-let so we’re going to see a pinch on new build towards the end of 2016 and into early 2017 when occupiers are going to have little choice but to turn to refurbished stock or possibly even pre-letting to meet their requirements,’ she pointed out. Savills reports that in the past year regional offices prime equivalent yields have moved in by 50 bps to 4.75%. The proportion being invested in office markets outside London has also risen over the last two years, with regional volumes in 2015 standing at 31% of market share, compared to just 16% of total… Continue reading
UK house prices dipped in February but longer trend is still upward
House prices in the UK in the three months to February were 3% higher than in the previous three months whilst the annual rate remained unchanged at 9.7%, the latest index shows. But month on month prices fell by 1.4%, according to the data from the Halifax, taking the average price of a home to £209,495. Martin Ellis, Halifax housing economist pointed out that overall prices continue to rise at a robust pace driven by a significant imbalance between supply and demand. ‘Whilst this position is likely to continue over the coming months, there are some tentative signs that the supply situation may be beginning to improve,’ he explained. He also pointed out that instructions for second hand properties coming up for sale have increased in the past two months and the level of house building increased significantly in 2015. ‘Further ahead, increasing affordability issues, as house price increases continue to exceed wage growth, are likely to curb housing demand and cause price growth to ease,’ he added. An analysis of the Halifax figures shows that the quarterly rate of change was the highest since June 2015 when it was 3.3% and the annual rate remains within the 8% to 10% range where it has been for nearly the entire period since the start of 2015. The fall in values in February offset much of January’s 1.7% rise but Ellis explained that monthly house price changes can be volatile and the quarter on quarter change is a more reliable indicator of the underlying trend. The increase in average house prices has exceeded total average employee’s net earnings in 28% of local authority districts across the UK, some 108 out of 380, over the past two years, according to recent Halifax research. According to Russell Quirk, chief executive officer of eMoov, the monthly figures could be seen as a sign that the UK market is cooling but the longer term trend is still upward. ‘Demand is always an influential factor where an increase in house prices is concerned, so the impending stamp duty changes due in April have no doubt helped to keep the UK market buoyant,’ he said. ‘There has been a flurry of buyers keen to secure that second home or buy to let investment before the April deadline, as well as an increase in the stock available, due to savvy buyers looking to cash in and obtain a higher price than usual during this period of high demand,’ he pointed out. ‘We expect once the stamp duty dust has settled the market will cool slightly, but whilst UK and foreign buyers are still fuelling this increase, the issue of affordability will continue to take a back seat, rather than helping to restrain a continually inflating market,’ he added. Continue reading
