TSI
Specialist lending set to see growth among UK home buyers
Specialist lending is predicted be one of the key battlegrounds in the mortgage market over the next two years in the UK with new lenders launching and High Street providers targeting the sector. A new survey has four the nearly two thirds of brokers expect new specialist lenders to open for business while another 13% of intermediaries believe High Street lenders will wake up to the potential for growth and offer specialist services. Around 60% of brokers believe specialists will take a bigger share of the mortgage market over the next two years. The scale of demand is underlined by brokers’ views as around half believe that 20% or more of their clients would benefit from applying to a specialist lender. In the past year two out of five brokers say 20% or more of their clients have had difficulties proving their income. However high rates in comparison to the ultra-low deals offered by High Street lenders are seen as the most significant barrier to the expansion of the specialist market and 52% of brokers highlighted rates as the major issue ahead of 47% who say regulation will be the main brake on growth in the specialist market. Indeed, some 32% say clients lack of understanding of the specialist market could also constrain growth. However, just 15% of brokers say their own lack of understanding of specialist options will hurt the market. ‘Industry figures show that intermediary market share is increasing and we expect the significance of the specialist market to grow,’ said Steve Griffiths, head of sales and distribution at Kensington. ‘Our experience over 20 years shows that homebuyers and remortgage clients do not all fit High Street criteria and while they will be entirely creditworthy may have issues with proving income which applies to the self employed and also those in full time jobs,’ he explained. ‘The focus on rates is important but there is also a real need for advice and individual underwriting which is why Kensington will be investing in providing support brokers to help them identify and place specialist cases,’ he added. The research also shows that around 37% of brokers believe the specialist lending market will be constrained by a lack of capacity to lend. However just 22% believe reputational issues will hit growth. Continue reading
Institutional investors being priced out of London market, index suggests
Yield compression, foreign investment and a lack of supply have led to institutional investors being priced out of the London market, according to the latest IPD UK Annual Residential Property Index. The UK as a whole saw a total return of 13.5% in 2014, putting extra strain on investors hoping to enter the market, particularly in London. The strongest districts for overall returns were to be found outside of prime central London, with returns in inner London and outer London the highest in the UK, driven largely by capital growth. The Index results show that the net yield in central London has fallen to 1.8%, its lowest level since the start of the index, and the first time that the figure has fallen below 2%. Across the UK the net income yield has fallen to 2.4% across all residential market lets. ‘If you invested in London residential at some point during the last 10 years, the chances are that you’re laughing all the way to the bank,’ said Mark Weedon, vice president and head of alternatives at MSCI. ‘However, if you are looking to put money into the sector now, our data shows that investors seeking income will find themselves’ priced out by foreign investors and owner occupiers when trying to buy existing stock in London,’ he explained. ‘There is now a de facto exclusion loan on central London for most institutional investors, at a time when concern over access to housing has seldom been higher,’ he added. Inner London delivered total returns of 24.4% in 2014 with a comparatively small rise in rental values of 3.1%, while outer London saw returns rise to 21.1% and rental growth of 3%. Central London (zone 1) returns slipped to 9.8% from 14.7% in 2013, while rents also increased by 4.8% in this area. Outside of the capital, the South West and Midlands performed the strongest, returning 9.7%. Northern England and Scotland also saw an improvement in returns to 3.5%, the first time returns have entered positive territory in those areas since 2007. This area also experienced a rise in rental growth from 1.5% to 2.4%, the only region outside of London to see this. Comparatively, commercial real estate returned 17.8% in 2014 according to the IPD UK Annual Property Index. Bonds and equities returned 11.8% and 0.5% respectively. ‘It is clear that market forces not related to the underlying rent generating capability of residential property are affecting values and that this is pricing large investors seeking long term stable income out of the London market,’ said Weedon. ‘It is no surprise that investors are now considering building to let which will enable them to achieve a decent percentage income return in areas of high employment and strong owner occupier demand,’ he added. The IPD UK Annual Residential Property Index is based upon properties let on modern residential leases, primarily assured short hold tenancies, the index now has 14 years of historical data. The index… Continue reading
US home builders using new data analysis to decide where and what to build
A proliferation of data and new data analysis methods are changing the way builders in the United States buy, sell and develop vacant land, according to experts. Builders are cautiously optimistic that easier credit and more flexibility will help the new homes market rebound in 2015, according to experts at a building and building products symposium in New York. The state of the land market, a key factor in determining what kinds of housing gets built, where and at what price, was a common theme throughout the various discussions. ‘The real opportunity of land goes beyond the land itself. Builders are looking at land as much more than a piece of dirt now,’ said Steve Benson, chief executive officer of Phoenix based land banking and advisory firm Community Development Capital Group. Landowners and buyers alike are using multiple data sources to examine what is being built in other areas, which designs work best for certain parcels and which builders are best suited to maximize certain features of a given piece of land, Benson explained. Rather than building a certain set of homes on a given piece of land, developers today may be more apt to sell their land to a different type of developer rather than undergo a project themselves, or choose to build a different type of home than they normally would, based on data, he pointed out. ‘Real estate has always been about location, location, location. But with land especially, it’s future location, future location, future location. Today, data helps inform that equation for builders much more than in the past,’ he added. High land costs, and perhaps unrealistic value assessments by landowners, are a big reason why developers are having difficulty developing more entry level, lower cost communities and homes, according to Greg Vogel, chief executive officer of the Land Advisors Organization, an Arizona based land brokerage. Developable tracts of land appreciated very quickly in value during 2012 and 2013 in anticipation of a building boom in 2014 that largely has yet to materialise, he explained, adding that strong recent years have convinced today’s land owners that their land may be worth more than it is. As a result, builders are increasingly forced to put higher prices homes on developments they do control in order to recoup their higher land acquisition costs. This will create challenges for larger builders looking to cater to lower end and first time buyers, who are expected to enter the market in higher numbers in coming years. ‘Most observers agreed that it’s just a question of time until we see millennial demand pick up. If the entry level buyer does come back, I’m not sure there will be a lot of opportunities to develop those kinds of communities right away,’ Vogel said. Beyond the kinds of large, multi acre sites on the edge of cities and towns favoured by big, publicly traded home building companies, smaller lots located in downtowns and established communities also represent… Continue reading
