Tag Archives: crisis
Fierce competition of rental properties continues despite supply increase
The level of supply in the private rental sector in the UK is showing signs of improvement but there is still fierce competition for rental property as the level of demand remains high. Available rental properties have increased by 10% since the last quarter, according to the latest report from the Association of Residential Letting Agents (ARLA), and this should help ease demand. The average number of buy to let properties managed by ARLA licensed members increased in the last three months from 135 properties in the third quarter to 148 properties this quarter, although two thirds of ARLA members say would be tenants still outweigh available properties Members believe the number of landlords increasing their investment in buy to let properties was driving the improved outlook for supply in the private rented sector, with the number of landlords purchasing properties now exceeding the number selling their investments, a reverse on figures reported three months ago. Those landlords increasing their investment in buy to let properties rose from 27% to 30% in the last three months. Meanwhile landlords looking to sell their current buy to let investments fell 9% from 32% to just 23%. Although the increase in available buy to let property is a step in the right direction for the private rental market and good news for renters, the bad news is that demand still strongly outweighs supply. Some 65% of ARLA Licensed member agents said there were still more would be tenants than properties available on their books, a decrease from 68% last quarter, suggesting that the market could be heading towards a more level playing field. ‘This quarter we’re seeing promising signs that the market is taking small steps towards achieving a better balance between supply and demand, or at least it is easing slightly,’ said David Cox, ARLA managing director. ‘With more landlords investing in their portfolios, ARLA licensed members have reported a growth in supply, while the level of demand witnessed last quarter has fallen slightly. Of course, the market has a fair way to go in terms of completely balancing out,’ he added. The report says that the increase in supply is down to more investment in buy to let property; however a number of ARLA Licensed members also reported an increase in rental property coming back onto the market following failed attempts to sell, rising for a second consecutive quarter, from 16% to 24%. It also points out that as supply and demand levels ease, tenants are taking advantage of the slightly less competitive market as the number of would-be tenants haggling with landlords over rents increased from 32% to 35% over the past six months. ‘It’s great to see an increase in consumers making an active play to agree on rent prices. Letting agents should be able to help tenants to get the fairest deal, and to ensure the process… Continue reading
UK asking prices down apart from in Scotland, latest index shows
Asking prices have fallen across the UK apart from Scotland, month on month, according to the latest data from the Home.co.uk index, but are expected to growth by 7% in 2015. Prices fell 0.7% overall in England and Wales during the last month and that means annual growth dropped to 7.6% while Scotland saw asking prices go up by 0.3%. Looking at annual asking price growth, most of it was in London and the South. Indeed, Greater London experienced growth of 15.9% over the last 12 months. The data also shows that supply in the capital region has risen considerably since last year, up by 39%, and according to Doug Shephard, the firm’s director this will serve to attenuate price rises in 2015. ‘Looking ahead, we anticipate that 2015 will be a more consistent year for UK property prices than 2014,’ he said but pointed out that with the prime central London market showing signs of slowing down average prices are likely to rise less quickly next year. ‘Record low mortgage rates will stoke demand whilst record prices in London and the South East will encourage more potential vendors to cash in. Hence, both supply and demand is expected to rise, thereby increasing the volume of the sales market towards more normal levels,’ he explained. Prices are predicted to rise 7% overall in 2015 and most pronounced in the South, especially the South East and East Anglia, although the northern markets will continue to improve, albeit slowly. The report also suggests that price rises will be less pronounced in London than they were in 2014, rising by around 10% and the supply of property for sale will increase by around 25% over the course of 2015. ‘East Anglia and the South East look set to be the leading regional markets next year owing to their much improved marketing times. Supply of property for sale remains low historically in these regions and this will keep prices on an upward trajectory, although we do anticipate market volume to steadily increase over the course of 2015,’ said Shephard. ‘The East Midlands also looks primed for a good year ahead. We expect above average price growth and lower marketing times in 2015. Looking further afield, the North of England property market, hampered by employment problems and austerity measures, will continue to improve slowly, as will Wales,’ he pointed out. ‘Across in the South West and West Midlands, further market improvements are to be expected, but growth there is likely to be slightly lower than the national average,’ he added. However he also pointed out that these predictions are based on there being no change in interest rates. ‘Should there be even a small rise in the Bank of England base rate, market sentiment would be severely dampened. A more dramatic hike of 1% would likely bring down price growth to zero for 2015,’ he concluded. Continue reading
Lenders offering more deals to UK residential property developers, new survey finds
Lenders to residential developers in the UK are taking on more risk as property markets stabilise after the financial crash, a survey of more than 50 major institutions has found. The respondents, which include a mix of banks, institutional investors and private equity funds, are increasingly funding schemes outside London, plan to grow their loan books over the next year and are more open to planning risks and higher loan to value lending. The findings of Knight Frank’s latest survey marks another step on the return to a more liquid lending environment following the financial crisis, when banks retreated from the sector. It points out that the UK economy is tentatively returning to health and the prospect of a normalised interest rate environment. In September, the Office for National Statistics said the country’s economy was 2.7% larger in the second quarter of the year compared to its pre-crisis peak. ‘This was reflected in the number of lenders who intend to grow their loan books over the next year, with the figure rising to 78% in the third quarter of 2014 against 75% in the third quarter of 2013. Furthermore, the amount of respondents that would consider a scheme with planning risk increased to 60% from 50% last year,’ the report says. ‘However, there is no sign banks are returning to the years of higher risk lending that preceded the financial crash and they are joined by other lenders including hedge funds and other institutions that are attracted by relatively high returns in a world of low yielding assets,’ it adds. It points out that this increased competition has forced down the cost of debt. Indeed, some 36% of respondents said they had reduced their pricing as a result of this increased competition while more than a quarter said they were prepared to take on more planning risk or boost the loan to gross development value ratio. However, as more lenders enter the market following the retreat of the banks, some are struggling to lend in sufficient quantity or at the returns of about 13% that they envisaged. As a result, many so-called alternative lenders, who planned to offer higher yielding mezzanine finance, have been forced to provide senior debt. As these lines blur, with High Street increasingly open to mezzanine finance and specialist funds providing senior debt, and Peter MacAllan at Knight Frank Finance warned the lending market could not become much more crowded after the transformation it underwent following the financial crisis that brought a range of new entrants. ‘I have a feeling we are reaching saturation point. There are too many lenders chasing the same deals,’ he explained. The report also points out that the sustainability of house price inflation is a concern for lenders, particularly in London, despite recent signs of moderation. Some 83% said they would consider schemes in zone 1 of London while 89% said they would consider zone 2 and beyond. That compares to 97% who would consider schemes… Continue reading
