Tag Archives: middle-east
Commercial property debt in UK set to fall to 10 year low
Outstanding commercial property debt in the UK is on course to fall to a 10 year low during 2015, declining by 1% in the first half of 2015 to £163.7 billion, according to a new report. However, strong levels of new loan origination in 2015 mean that the total amount outstanding may actually increase for the first time since the recession, the report from academics at De Montfort University also says. The half year edition of the De Montfort Commercial Property Lending Report, the most comprehensive study of the UK’s commercial property lending market, concludes that the continuous decline in total real estate debt since 2008 appears to have almost halted and may subsequently be reversed by the end of the year. The value of new loan originations in the first half of 2015 was £24.7 billion, the highest half year value reported to the research since £49.2 billion recorded for the first half of 2007. In a further sign of commercial property market health, the value of distressed loans fell from £23.2 billion at the end of 2014 to £15.7 billion by the middle of 2015. The report also show that the proportion of loans with a loan to value (LTV) ratio of less than 70% has continued to grow in the first half of 2015, representing 80.5%, or £135.5 billion of outstanding debt of the traditional lenders and allocated to investment projects. Outstanding debt with a LTV ratio of between 71% and 100% fell from 14.3% of the total of £20 billion at the end of 2014 to 12% or £16 billon by the middle of 2015. The first half of the year also showed an encouraging pick-up in development finance, particularly for speculative or partly pre-let projects, where more non-traditional lenders now feel comfortable providing finance against such schemes. At the same time, the research suggests that banking regulation may be having an adverse impact on development finance by the traditional lenders. At the middle of 2015, only 2.8% of debt was allocated to commercial development projects by these lenders. Interest rate margins for senior debt continued their three-year long decline but the pace of decline has moderated considerably. By the middle of 2015, the average margin for senior loans secured by prime office property was recorded at 214bps, down from 218.7bps recorded at the end of 2014. The report suggests that that the floor in interest-rate margins may have been reached. Following a surge in non-traditional lenders in 2014, Banks and Building Societies remained the dominant lenders in the market, holding 76% of all loan originations at the middle year point compared to 75% at the end of 2014. The level of new lending by UK Banks and Building Societies remained stable at 39% of all loan originations. ‘We seem to have reached a turning point in the amount of commercial property debt in the market, with the impact of post-crisis deleveraging almost totally… Continue reading
Buy let stamp duty could make investment unviable for new entrants in UK
The extra 3% stamp duty tax being levied on buy to let and second home buyers in April 2016 means that it may no longer be financially viable for new entrants to the lower end of the private landlord market, it is claimed. And the new tax band will have a disproportionate impact on pensioners looking to generate revenue in retirement, according to Chestertons, one of London's largest estate agents. The announcement of the additional levy on second homes and buy to let purchases came as a surprise announcement in the Chancellor's Autumn Statement, and initially caused some confusion across the industry as pundits disagreed on how the additional 3% would be applied. Chestertons has now calculated that the extra duty will hit the lower end of the market more heavily in terms of a percentage increase than it will the higher end. A buy to let property acquired for £150,000 attracts stamp duty of £500, but under the new regime it rises to £5,000, a tenfold increase. By comparison, an investor buying a property for £1 million currently pays £43,750 in stamp duty, while the new rate will be £73,750, less than double the original duty, although of course a larger amount in cash terms. ‘The Chancellor claimed that this change to stamp duty would prevent wealthy investors and overseas buyers from pricing first time buyers out of the market, but as usual the devil's in the detail,’ said Nick Barnes, head of research at Chestertons. ‘What we can now see is that this change is likely to completely deter many first time landlords from getting into the private rental market in the first place, including pensioners looking to wisely reinvest their precious pension pot,’ he pointed out. ‘ The obvious effect of this will be that there may well be a significant number of smaller landlords deterred from entering the sector altogether. Those who remain will have their margins slashed and, on top of the increasing regulatory burden and the planned reduction in mortgage interest relief, they may have to raise the rent in order to make the numbers stack up. Either way, the already highly competitive private rental market is about to get a whole lot more so,’ he added. According to Robert Bartlett, chief executive officer of Chestertons, the industry had hoped that the Chancellor might have announced stamp duty change that would have helped the current negative impact on sales above £1 million. ‘We'd hoped he might consider capping rates, or reducing them by 3%, so you can imagine the dismay when this extra surcharge was announced. The buy to let sector has become an essential part of the UK housing landscape and we urge the Chancellor to think clearly around the rules for when this is being introduced,’ he said. He pointed out that a number of key questions still need to be answered, for example whether a buy to let investor who has contracted… Continue reading
Buying is still cheaper than renting in many US housing markets
Buying a home in the United States is still more affordable than renting in the majority of markets, according to the latest analysis from real estate data firm RealtyTrac. But the opposite is true in markets with the biggest increase in the millennial share of the population over the last six years, the research also shows. In the 473 counties covered by the research, the fair market rent for a three bedroom property in 2015 needed an average of 27% of median household income, while buying a median priced home required an average of 25% of median household income based on the median sales price in November. Buying a median priced home was more affordable than renting a three bedroom property in 68% of the counties analysed, representing 57% of the total population in those counties. But in the 25 counties with the biggest increase in millennials between 2007 and 2013, fair market rents for a three bedroom property in 2015 required 30% of the median household income on average while buying a median priced home required 36% of median household income on average. For the analysis millennials were defined as anyone born between 1977 and 1992. ‘First time buyers and potential boomerang home buyers are stuck between a rock and a hard place in today’s housing market. Many of the markets with the jobs and amenities they want have hard-to-afford rents and even harder to afford home prices while the more affordable markets have fewer well-paying jobs and tend to be off the beaten path,’ said Daren Blomquist, vice president at RealtyTrac. ‘Those emerging markets with the combination of good jobs, good affordability and a growing population of new renters and potential first time buyers represent the best opportunities for buy and hold real estate investors to buy low and benefit from rising rents in the years to come,’ he added. The top markets with the biggest increase in the percentage of millennials over the past seven years were counties in Washington D.C., San Francisco and Denver, all of which saw an increase of more than 50% in the share of the population that is millennials. Other markets in the top 25 for biggest increase in millennials included counties in New York, Nashville, Portland, St. Louis, Seattle, Charlotte, Minneapolis, Indianapolis, Atlanta, Orlando, Austin, Des Moines and Midland, Texas. The average 2015 fair market rent in these top 25 counties is $1,459, some 19% above the national average for all counties analysed, the data also shows. On average 2015 fair rents increased 3% from a year ago in these counties, with the standouts being Denver County and Midland County, Texas, both of which saw fair market rents increase more than 2%. Median home prices increased 8% from a year ago in these counties on average compared to an average 7% increase among all counties analysed nationwide while the average unemployment rate among these counties was 5.2% in October compared to an average of 5.5% for all… Continue reading
