Tag Archives: real estate
Significant increase in new lending for UK commercial property markets
There was a significant rise in new lending to the UK commercial sector in the first half of 2014 but the recovery has been uneven across the country. Overall outstanding debt held against UK commercial property fell to £171 billion in the six months from £180.3 billion at the end of 2013 as lenders continued to reduce their loan books following the 2009 financial crisis, according to a report from academics at De Montfort University. The report, the most comprehensive analysis of the UK’s commercial property lending market, also found a significant drop in the volume of old loans that were distressed or in breach of financial covenants. However, it noted that organisations much more willing to lend against assets in London than elsewhere, and also more inclined to lend against investment properties rather than new development. New lending accelerated during the period with £19.6 billion of new lending, the highest total recorded by the study since 2008, compared with £13.4 billion in the first half of 2013 and £29.9 billion for the whole of 2013. However, the report points out that the increase in activity generally in the commercial property market was not debt fuelled to the same extent as occurred before the financial crisis when, for example, some £49.2 billion of loan originations were completed in the first half of 2007. It is initially, therefore, most probably equity driven, it explains. The report also found the lending market becoming more diverse, with UK Banks and Building Societies representing 36% of new origination at the mid year point compared with 43% of new lending in 2013, and a share of 54% of the existing stock of outstanding loans. It also outlined significant differences in lending activity and appetite remain across the country. For example, 80% of organisations active in the market reported that they would lend on prime investment projects in London, compared to 46% who would do so in Northern Ireland. While lenders’ appetite for development risk is also improving, it remains a preserve for the specialist, particularly where the project is speculative: 26% of lenders were prepared to provide senior debt to finance such projects at the mid point of 2014, compared to 12% at the middle of 2013. Liz Peace, chief executive of the British Property Federation, said that the outlook for debt finance to support the commercial property market is very positive. ‘The steady reduction of outstanding debt, and of loans with dangerously high loan to value ratios, is very encouraging,’ she explained. ‘Although new lending is growing at a significant rate, the fact that the market seems to be mainly equity driven means that we are unlikely to be living through another 2007. However, we are concerned about the potential implications of the lack of debt finance available for speculative development,’ she pointed out. ‘While lender caution in this area is totally understandable given events in the past few years, there are parts of the country where new, high-quality… Continue reading
Scottish prime property market set to be busy due to tax change in April
An increase in demand for prime property in Scotland between September and December ensured a strong end to 2014, both in terms of prices and sales, the latest index report shows. Overall prime Scottish country house values rose by 1% in the final quarter of 2014 following two quarters of no change and prices ended the year up 2.1%, after a 1.6% increase in 2013, according to the figures from Knight Frank. The index report points out that the rise in prices seen in the fourth quarter came amid a notable step up in buyer demand, attributed to the certainty provided by the result of the Referendum vote and the announcement of the proposed Land and Buildings Transaction Tax (LBTT) that replaces stamp duty in Scotland from April. ‘After months of doubt about the outcome of the referendum, buyers now feel more secure about making a decision to move house or purchase a property,’ the report says. ‘The proposed LBTT rates published in October clarified how purchase taxes would change in April. The higher upfront cost of moving when LBTT comes into force, especially in the prime market, has prompted some home buyers and vendors to make quick decisions,’ it explains. Under the rates proposed in the incoming LBTT system, any sales above £254,000 will incur a higher rate of tax compared with the current stamp duty structure, introduced in December in the Autumn Statement by George Osborne. For properties in the prime market, the cost will be significantly higher. The report also shows that the number of potential buyers registering their interest in purchasing a property with Knight Frank was 18% higher in quarter four than the same period a year ago, with a similar rise in viewings. Sales were over 50% higher during the same period. ‘We expect this trend will continue into the New Year, driven by a desire among vendors and homebuyers to move before the introduction of the new LBTT levy in four months’ time,’ said Ran Morgan, head of Scotland residential at Knight Frank. He pointed out that under the current system, a house costing £900,000 will incur a stamp duty payment of £35,000, whereas the upfront costs under the new LBTT system for the same property will be 92% higher at £67,300. As a result of the stamp duty reforms announced during the Autumn Statement, by the time LBTT is introduced, home buyers in Scotland will have had to adjust to three different tax systems within six months. ‘The announcement of the proposed Land and Buildings Transaction Tax rates in October has already encouraged vendors and homebuyers in the prime market to make quick decisions to avoid the increased tax burden. We expect this will continue and as a result are anticipating a busy start to 2015,’ said Morgan. ‘In the country estates market, details of Land Reform proposals and CAP reform continue to emerge. Until these are finalised we expect the activity to remain subdued,’ he added. Continue reading
Scottish residential tenants are generally happy with the PRS property mark
Over 35% of tenants in Scotland have lived in their current home for longer than a year with 10% living longer than three years, a new survey has found. The poll by Lettingweb, described as the largest ever undertaken in Scotland, shows that 88% of tenants believed they had been treated fairly during their current tenancy. It also found that 86% reported that there had been no increase in rent during their tenancy, with over 90% believing the frequency of rent reviews being reasonable in their experience. Almost 95% had never been asked to leave a tenancy for an unexplained or unreasonable reason but tenants are concerned by the lack of supply of properties to let with only 42% being confident of finding another suitable home if they had to. The firm says that the overall picture is in stark contrast to moves in the Scottish Parliament to control rents. It indicates that tenants welcome the flexibility of the private rented sector (PRS), whilst appreciating that they have considerable security of tenure and are generally able to stay as long as they want. That accords with a long term growth in the Scottish PRS, which has doubled in size over the past decade, with significant increases in the numbers of prospective tenants looking for affordable, high quality property to let. ‘This is a myth buster report as it destroys many preconceptions of the sector. The overwhelming picture is that rents are unlikely to rise during leases and that landlords treat their tenants well. The private rented sector can be proud of their ability to supply good property at a price tenants are willing to pay, and increases have been less than inflation for a period of over eight years,’ said Dan Cookson, head of research at Lettingweb. ‘The stand out figure for me is that only 42% of tenants are confident of finding alternative rented accommodation if they had to. That’s a consequence of limited supply, and more needs to be done to bring greater investment into the sector to meet that demand, and widen confidence that alternatives are available,’ he explained. ‘Our market reports indicate that the time taken to re-let properties at the end of each lease are very short indeed. The market is demanding an expansion of the private rented sector. Government needs to respond by creating conditions for increased supply to come forward,’ he added. According to Malcolm Warrack, chairman of Letscotland, it is a significant survey and as the Scottish Government moves towards legislating for a new type of tenancy agreement for use in the private rented sector, they must listen to the voices of tenants, who are overwhelmingly well served by landlords and letting agents. ‘The challenge must be to implement change in a way which increases the supply of rented accommodation reaching the market. Any reforms brought forward must not lead to reductions… Continue reading
