TSI
Commercial property lending market in UK seeing renewed confidence
Confidence has returned to the commercial property lending market in the UK as new loan originations hit a post crisis high, new figures shows. Indeed, the value of outstanding loan books saw its first increase since 2008, according to the most comprehensive study of the UK’s commercial property lending market from De Montfort. The total amount of outstanding debt at the year end in 2015 was £168.4 billion, representing a 1.9% increase from £165.2 billion at the year-end in 2014, and the first increase recorded since 2008. Overall some £53.7 billion of loan originations were recorded during the whole of 2015, compared to £45.2 billion in 2014 and while new lending volumes rose, the proportionate increase moderated to 18.8% in 2014/2015, compared to a post-crisis record of 51.2% in 2013/2014. The report says that further evidence that the market has recovered can be seen in the decline of almost 50% in the value of distressed loans, that is those in default and in breach of financial covenant. At the year-end in 2015, the value of distressed loans reported to the research was £12.1 billion, compared to £23.2 billion a year earlier and £47.6 billion at the end of 2009. Loan to value (LTV) ratios on existing loans continue to fall, reflecting the rise in commercial property values and banks continuing to lend on similar terms to recent years. At the year-end in 2015, some 87.5% or £123.5 billion of outstanding debt had a LTV ratio of 70% or less, compared to 77% or £107 billion at the year-end in 2014 and 63% or £99 billion at year end in 2013. Outstanding debt with a LTV between 71% and 100% represented 7.5% or £10.6 billion of the market, and just 5% or 6.9 billion had a LTV greater than 101%. Notably, average lending LTVs fell during the course of 2015 for all sub-sectors, suggesting good lender discipline despite the strength of the market. Although they still dominate the market, UK banks and building societies saw their market share continue to decline. They represented 34% of new loan originations at year end in 2015, the lowest level ever recorded by the research, compared to 39% the previous year. The proportion of outstanding debt held on their books also fell, from 49% of the total at year end in 2014 to 45.5% in 2015. For the first time, insurance companies were the second largest category of new loan originators, representing 16% or £8.57 billion of the total in 2015. The exposures of insurance companies now account for 15.1% or £25.4 billion of the market, compared to 12.7% or £21 billion in 2014. Regional distribution of outstanding loans showed a strong bias in favour of central London; 43% of the total outstanding debt is secured against real estate in the capital city, the highest result ever recorded by the research, and a dramatic increase from the 26% recorded in 2010. This indicates… Continue reading
Residential rents falling across much of Scotland, latest index shows
Scottish rents increased just 0.6% year on year and were down 0.4% month on month in April, marking the smallest annual rise seen since the start of 2013, the latest index shows. Across Scotland the average rent now stands at £542, but Edinburgh and the Lothians shun the wider slowdown with a record 10.5% jump in rents since last year. The data from the Your Move index also shows that tenant arrears are escalating as the level of late rent climbed for the second consecutive month, up to 11.6%. The annual rise represents a significant downturn in rates of year on year growth from 1.1% recorded in March, and 2.1% in February and average rents are at their lowest since April 2015. Brian Moran, lettings director at Your Move Scotland, pointed out that overall rents haven’t risen at such a leisurely place for three years but the market is seeing many price fluctuations and also isn’t uniform across the country. ‘The lettings market is always at the mercy of local supply and demand, and in Edinburgh and the surrounding areas we’re seeing extraordinarily fast rent rises, as tenant competition shines brightest around the glow of the jobs market. Supply and demand need to strike a lasting equilibrium to prevent rent growth taking off and leaving tenants by the wayside and that’s a tall order in today’s regulatory environment,’ he explained. He also pointed out that landlords are up against a considerable number of hurdles, including a higher rate of stamp duty on property purchases, reductions in tax relief, and the Private Tenancies Bill. ‘While levied at landlords, these measures could soon hurt thousands of tenants too if buy to let investment retreats as a result and there are less houses and flats to rent,’ he added. On a monthly basis, rents were cheaper in all but one region of Scotland in April. The Highlands and Islands had the fastest drop in average rents in April, falling 1.7% on March, reducing typical rents in the region to £537 per month, the lowest level seen since December 2014. Rents in Glasgow and Clyde fell on a monthly basis for the fourth consecutive month, down by 1% in April to £538 while in the East of Scotland rents were 0.6% lower in April than in March, while the South experienced the smallest month on month reduction, down by 0.1%. Edinburgh and the Lothians is the only region to experience an increase in rents since March, up a solid 0.8% month on month following on from rises of 0.2% in March and 0.3% in February. In the longer term, rents also fell across the majority of Scotland year on year in April. Of the three regions to see rents decrease on an annual basis, Glasgow and the Clyde had the steepest drop with average rents 3.9% lower than in April 2015. Rents… Continue reading
Equity release going from strength to strength in UK
Looming interest only mortgage due dates have driven a surge in sales of lump sum equity release plans to 40% of the market in the UK in the first quarter of 2016, according to a market monitor report. Some 40% of people are taking a single lump sum advance to reduce their debts, up from 30% for the same period in 2015, the data from the report from Key Retirement shows. The firm believes that the surge is largely being driven by customers who need the maximum cash available rather than drawdown as they are using the lump sum to pay off shortfalls in interest only mortgages. Average amounts released through equity release are now £76,000 and as high as £134,000 in London. The Market Monitor, which analyses data for Equity Release Council members and non-members, for the first three months of 2016 shows record growth with total property wealth released rising to nearly £415 million, up from £341 million last year. The detailed report by the over 55’s specialist shows rising numbers of retired home owners using their property wealth to pay down increasing debts including loans, credit cards and mortgages. Around 29% of customers used some or all of the money to pay off unsecured borrowing. Debt was primarily run up on credit cards or loans while 21% used some or all of their money to clear outstanding mortgages. 14% used the money to help with regular bills. ‘The record high number of equity release plans being taken out underlines how property wealth is an important part of retirement planning,’ said Dean Mirfin, technical director at Key Retirement. ‘Pensioners are making the most of successful property investment and rising house prices to substantially improve their retirement standard of living. However retiring in debt is still a major issue. It’s long been predicted that as the first large wave of interest only mortgages maturities begins more customers will turn to equity release to plug this gap,’ he added. The average amount released to boost retirement income increased 12% to £76,115 in the three months compared with £66,730. In London the average released was nearly £134,350 up from £129,991. Home and garden improvements remained the most popular way of using the money with 63% of those releasing equity from their home doing so for this purpose. Customers are also using the money to treat family and friends with 21% citing this as a main reason. A further 28% are using the money to pay for holidays. Across the country 10 out of 12 regions saw growth in the value of property wealth released with East Anglia recording an 80% rise, North West seeing a 48% increase and a 24% rise for London. The value released dropped 29% in the North and 16% in Northern Ireland. Growth continued in plan sales with 10 regions seeing increases and just two seeing decreases. The North saw plan sales decrease by 35% and Yorkshire and Humberside saw an 11%… Continue reading
