TSI
Saudi Arabia set to see continued growth of its residential real estate market
Saudi Arabia has seen its residential property market expand rapidly over the last year due to increased demand caused by various government initiatives to boost the housing sector. Over the past year, residential prices in Riyadh have risen by 5% to 7% overall, according to the Riyadh residential research report from international real estate firm Knight Frank. However, it points out that there have been variable performances across the capital’s districts, with congestion issues in the south, for example, responsible for prices stagnating. Meanwhile, in the north, which has seen notable development activity, prices have seen a healthy uplift of around 9%, the report says. In the short to medium term, with new supply unlikely to be able to fully offset pent-up demand, the firm expects residential prices to continue to move in an upward direction. In recent years, Saudi Arabia’s residential construction sector has been expanding rapidly. Indeed, the latest available data from the Saudi Arabian Monetary Agency shows that the value of residential building construction across the kingdom rose for the ninth consecutive year in 2012, increasing by 11.4% year on year. Riyadh is an important driver of construction activity in Saudi Arabia and the capital city accounted for an average of 27% of all residential and commercial permits issued across the Kingdom between 2003 and 2013. Moreover, the number of permits issued in the capital rose by 319% over the 10 year period, outperforming Saudi Arabia as a whole, which experienced a 215% increase. The report points out that despite rising development activity demand for residential units continues to outstrip supply in Riyadh. Indeed, the capital has a requirement for around 50,000 housing units per annum over the next five years and has an estimated housing inventory of just 1.15 million units. However, due to construction delays and the lack of available land, developers have found it increasingly difficult to bridge the gap between supply and demand. What’s more, although there are a number of large housing schemes planned to be completed in the short term, there is unlikely to be enough capacity in the system to deliver the required number of units to satiate current levels of pent up demand. Figures from the Central Department of Statistics and Information (CDSI) show that just 60% of housing units in Saudi Arabia are owner occupied and in Riyadh this drops to 53%. By comparison, the levels of owner occupation in neighbouring countries is much higher at 75% in the United Arab Emirates, 80% in Qatar, 82% in Bahrain and 83% in Oman. The report explains that in order to address the housing undersupply issue, the government has launched a number of projects in recent years although not all of these have achieved the success that had been envisioned. For example, in 2011, the government announced a programme of works to build 500,000 homes across the kingdom.’ However, the scheme struggled to gain traction due to issues related to a lack of land availability, complexities in allocating aid and slow moving… Continue reading
Non standard UK home borrowers face lack of clarity on mortgages
Fears of a future clampdown by regulators are preventing mortgage lenders from offering loans that stretch into people’s retirement, according to a new report. The report from the Intermediary Mortgage Lenders Association examines the impact of post financial crisis mortgage regulation on the growing army of ‘non-standard’ customers who fall outside the traditional core of salaried borrowers with no credit blemishes who can pay off their loans before a set retirement date. IMLA argues that people seeking a loan which is likely to remain outstanding beyond their normal retirement age are suffering from a lack of clarity in the Mortgage Market Review (MMR) rules, which is resulting in older borrowers being frozen out. Most private sector employees now hold defined contribution (DC) pensions, which often prevent accurate predictions of their pension income making it hard for lenders to determine how affordable a loan may prove beyond the point of retirement. With the MMR requiring lenders to ensure mortgages are affordable for the lifetime of the loan in order to ‘protect borrowers from themselves’, the scope for interpretation has convinced many lenders that lending into retirement now carries extra risk if borrowers find at a later date that their retirement income disappoints. In response, many mortgage lenders have imposed lower maximum age limits rather than risk future accusations of breaching the rules where customers’ pensions prove insufficient to keep up their mortgage repayments after they retire. With house prices rising faster than incomes, many borrowers are not managing to purchase an appropriate family home until their forties or even fifties. But anyone over the age of 40 is seeking a loan with a standard term of 25 years will be borrowing beyond a normal retirement age of 65 and is liable to find their options restricted. IMLA argues the upcoming thematic review of the MMR by the Financial Conduct Authority, which is set to examine responsible lending in the first half of 2015, must provide extra clarity so that lenders can offer the flexibility required to meet borrowers’ changing needs without fear of future censure. ‘This issue goes beyond the transitional arrangements for existing borrowers, and means that efforts by the lending community to follow the spirit of MMR with new customers are being hampered by the very real concern that it may be cited against them in future,’ said Peter Williams, executive director of the IMLA. ‘Uncertain pension incomes make it difficult for lenders to assess mortgage affordability in later life, and this may become even harder when the new pension freedoms take effect next year. To avoid a situation where regulation brings about the extinction of mortgage terms that stretch into retirement, we need clarity and confirmation about where the boundaries of responsible lending truly lie,’ he explained. ‘MMR has been a big step forwards but having put a strong framework in place for the future, attention must now… Continue reading
UK property transactions up 3.2% month on month, HMRC provisional data shows
The number of seasonally adjusted property transactions in the UK increased by 3.2% in October and are up 4.3% compared to a year ago, according to the latest data published by HMRC. The pattern since the beginning of 2013/2014 has been of a general month on month increase in transactions for the seasonally adjusted data until February 2014, then a gradual decrease followed by a flattening out of transaction numbers. The data also shows that August 2014 saw a peak for recent non-seasonally adjusted transactions, the highest level since November 2007. In October 2014, the number of non-adjusted transactions has risen compared with September 2014, for residential properties. However, the rise was smaller than in previous years, so the seasonally adjusted figure for October 2014 is lower than in the previous month but higher than in October 2013. The seasonally adjusted estimate of the number of non-residential property transactions increased by 0.1% between September 2014 and October 2014. This month’s figure is also 8.0% higher compared to the same month last year. Seasonally adjusted transactions of non-residential property have been fairly stable over the last year. Non-seasonally adjusted transactions had a large drop in the first two months of 2014, but increased sharply in March. There were also dips in May and August, with month on month growth since then. Meanwhile, the latest transaction data from the Land Registry shows that it completed over 1.5 million applications from its customers in October. This includes 1,464,352 applications by account customers, of which 382,966 were applications in respect of registered land (dealings), 662,153 were applications to obtain an official copy of a register or title plan, 205,537 were searches and 102,912 were transactions for value. The South East topped the table of regional applications with 349,858 and Birmingham topped the table of local authority applications with 23,528. Continue reading
