Tag Archives: real estate
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
LTV lending falls as demand ebbs from bottom end of UK house market
Lending to higher Loan To Value borrowers in the UK has fallen 12% year on year with November seeing the smallest number since October 2013. Despite this the wider lending market is stabilising as house purchase approvals rise 2.8% in November, according to the latest Mortgage Monitor report from chartered surveyor firm e.surv. On a monthly basis, higher LTV approvals fell 6.8% from 8,854 in October. The November dip has compounded monthly falls in October of 18.3% and 5% in September meaning lending to higher LTV borrowers has dropped by 30.1% over the last three months. As a proportion of the market, higher LTV borrowers, typically first time buyers, continue to shrink from a five year peak of 17.8% in August 2014. Their share of total house purchase approvals also dropped in September by 17.7% and by 14.9% in October to hit a 10 month low in November of 13.5%. This comes as the number of first time buyer transactions shrank by 12.3% over the last three months according to the most recent First Time Buyer Opinion Barometer from Your Move and Reeds Rains. ‘Demand has ebbed from the bottom end of the market. After the summer flood of first time buyers, LTI caps introduced in October stemmed the flow of new borrowers into the mortgage market. The Bank introduced these caps against a backdrop of speculation about the market overheating. Now, this wintry cooling is a sign of their pre-emptive action taking effect,’ said Richard Sexton, director of e.surv chartered surveyors. ‘The Chancellor’s changes to stamp duty will make homes cheaper for first time buyers. This was clearly needed. It means that those first time buyers left high and dry by the old system are able to buy at last. Now that the cumbersome slab system has been replaced with a series of graduated rates, the goalposts have shifted for higher LTV home buyers. Whatever twists and turns the New Year takes, first time buyers can rest assured that more properties are now within their reach thanks to this long awaited reform,’ he explained. He also pointed out that in 2014 Help to Buy put capable home buyers in a stronger position to borrow. ‘This increased demand, but putting a finger on just one end of the scale simply inflamed the chronic issue of home shortages,’ he said. ‘The slowdown in higher LTV lending is due in part to the depletion of the UK’s stock of affordable housing. Suggestions in the Autumn Statement that the government will take direct charge of home provision, from the release of land to the building of new properties, will hopefully even the odds for stifled first time buyers,’ he added. Despite the slowdown in lending to higher LTV borrowers, total house purchase approvals grew to 61,108 in November, up 2.8% month on month from 59,426 in October. This uptick comes after a series of decreases, down 1.1% in July, a fall of 2.9% in… Continue reading
Number of Scottish households facing higher moving costs set to rise
More households in Scotland could potentially see the upfront cost of moving rise when the new Land and Building Transaction Tax rates come into force in April 2015, a new analysis suggests. In October, during the draft Scottish Budget, John Swinney, the finance secretary, announced that from April next year Scotland would be scrapping the current stamp duty system and replacing it with a LBTT. At the time the Scottish government said that up to 90% of home buyers would be better off under the new regime but this was before Chancellor George Osborne announced stamp duty reforms last week. Following the LBTT announcement real estate firm Knight Frank looked at the numbers and found that, based on the rates announced and compared to the stamp duty system that was in place across the UK at that time, the new LBTT would favour buyers of properties at £325,000 or less, where less tax would be payable. Sales above £325,000 would incur a higher rate of tax. However, the firm has now re-done the calculations based on the stamp duty changes which will apply in Scotland until the change and the point at which it now becomes more expensive to buy a property under the new LBTT system has fallen from £325,000 to £254,000. Knight Frank says that this means that a lot more households could potentially see the upfront cost of moving rise when the LBTT rates come into force in April. According to figures from the Registers of Scotland, the average price of a detached property is higher than £254,000 in nearly a third of all the local authorities in the country. Under the current system, a house costing £390,000 will incur a stamp duty payment of £9,500, whereas the upfront costs under the new LBTT system for the same property will be 72% higher at £16,300. ‘Prior to the introduction of the new levy in four months’ time, we expect to see an increase in the number of prime sales and homes coming to the market as both buyers and vendors look to move before costs rise,’ said Oliver Knight. ‘Homes worth £250,000 plus accounted for 72% of the total £215 million stamp duty take in Scotland last year. The new regime could hit receipts at this end of the market if there is a slowdown in transactions, and perhaps raise questions among policy makers about the rate structure,’ he added. Continue reading
