Rents rise in all regions for first time

Source: Mortgage Strategy

Rents increased in all regions of England and Wales for the first time on record in September, the latest buy-to-let index from LSL Property Services reveals.

In September, the average rent rose by 0.7% to reach £718 in September, surpassing the previous record high of £713 in August.

This represents a 4.3% increase on September 2010’s average of £689.
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The research also shows the average yield rose from 5.2% in August to 5.3% in September.

Rents hit record highs in six regions: London, the South-East, Yorkshire and Humber, the East of England, Wales and the East Midlands.

Rents increased the fastest in the South-East and the East Midlands, where they rose by 1.8% and 1.1% respectively compared to August, while the smallest increases were in the West Midlands and the North East, where rents rose by 0.2% and 0.3%.

Over the past year, London’s rents have risen at a faster rate than any other region, increasing by 5.8%.

David Brown, commercial director at LSL Property Services says the index shows that rising rents is not just a regional phenomenon in London and the South-East.

He says: “In areas of the highest demand, such as the capital, competition is driving up rents at a faster rate than elsewhere, but no region has been immune to the growing demand for rental homes from frustrated buyers.

“In many cases, buying a home is now cheaper on a monthly basis – provided renters can get past the stumbling block of the substantial deposit requirements.”

Tenant arrears improved in September following August’s seasonal increase, dropping to their lowest level since April 2010.

8.6% of all UK rent was unpaid or late by the end of September – down from 10.7% in August. Unpaid rent totalled £243m in September, down from £300m the previous month.

Brown adds: “Shelter’s recent research shows rising rents are placing renting households under mounting financial pressure. But this has yet to manifest itself in rising tenant arrears, which have remained markedly low in 2011 – and even dropped last month as summer holidaymakers got their finances back in order following vacations.

“But over the longer term, landlords have become less forbearing, looking to replace tenants with payment issues quickly in the hope of higher rental income.”

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by nemeaproperty on October 21, 2011  •  Permalink
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B2L RMBS market improving, says Moody’s

Source: Mortgage Strategy

The UK buy-to-let residential mortgage-backed securities market continued to improve in August, according to Moody’s.

The ratings agency says that in the three months to August, the 90 days or more delinquency trend decreased from 1.85% to 1.77%.

During this period, outstanding repossessions remained stable at 0.14% and cumulative losses increased slightly from 0.40% to 0.45%.
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Moody’s says it expects the UK economy to grow by less than 2% in both 2011 and 2012, and the unemployment rate to not fall materially below the current level of 8% in 2012.

It adds that house prices will remain flat despite weak growth in household disposable incomes and tight credit supply, mainly due to the limited supply of housing.

It says stable house prices will help maintain the current recovery values on possessed properties, and that high tenant demand for rental properties has been having a credit positive impact on buy-to-let RMBS.

Furthermore, Moody’s believes borrowers will benefit from a stable interest rate environment over the next year as it does not expect the base rate to increase until the end of 2012.

Last week, Moody’s placed on review for downgrade the ratings of 34 tranches in 11 UK buy-to-let RMBS transactions, after downgrading Skipton Building Society from Baa1/P-2 to Ba1/NP earlier in the month.

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by nemeaproperty on October 19, 2011  •  Permalink
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Luxury retailers eye “bleak to chic” east London

(Reuters) – Shoreditch is set to be home to a “mini Bond Street” as luxury fashion houses Christian Louboutin, Ralph Lauren and Vivienne Westwood home in on London’s east end, setting the stage for a possible doubling of rents over five years.

The three fashion houses, which have sites in high-end areas of London’s traditional West End shopping district, are among luxury retailers targeting the once down-at-heel Shoreditch to capitalise on its edgy image, lower rents and increasingly affluent population, sources said.

“It is a bit like the Meatpacking District of New York,” John Lovell, a Shoreditch landlord of five properties, told Reuters, referring to the Manhattan neighbourhood transformed by an influx of high-end boutiques and restaurants in the 1990s.

Shoreditch, best known for gloomy-looking industrial buildings and high crime rates, borders the City of London financial district. Its Old Street roundabout, where Google (GOOG.O) leased an office last month, has been targeted by the government for the development of a “Silicon Valley” style media hub .

Independent fashion labels, art galleries and niche bars have appeared in recent years to serve media, fashion and financial workers in the district.

Developer Hammerson (HMSO.L) is planning a 485 million pound project south of Shoreditch High Street with about 630,000 square feet of offices and shops as well as 299 homes. Derwent London (DLN.L), which owns 685,000 square feet of property in the Shoreditch and Old Street areas, wants more.

Paris-based designer Christian Louboutin, whose red-soled shoes sell for more than $1,000 per pair, is weeks from closing a deal for a store close to the Boundary Hotel on the most sought-after area of Redchurch Street — which already houses a handful of high-end brands, two sources told Reuters on condition of anonymity.

British designer Vivienne Westwood, famous for her role in shaping the punk movement in the 1970s, is looking for a 2,000 square foot shop, while American retailer Ralph Lauren (RL.N) has been scouting for a 4,000 sq ft unit for its second RRL-branded store in Britain, another source said.

Prada (1913.HK) is also looking for sites in Shoreditch, three property agents told Reuters.

Fine-dining Japanese restaurant Zuma is hunting a site to add to its other London eatery near Harrods, two sources said.

Unlike many mid-market British retailers, luxury brands have bounced back strongly from the 2008 downturn on the back of strong demand from emerging markets, allowing them to finance expansion plans and experiment with retailing concepts.

The spike in interest in Shoreditch comes as competition for stores on London’s traditional hot spots — Bond Street, Regent Street and Oxford Street — has become fiercer and more costly, forcing retailers to look elsewhere.

Several high-end clothing brands from China and Japan are looking to launch debut British stores in Shoreditch to capitalise on lower rents and its image, one source close to the situation told Reuters.

RENTS SPURT EXPECTED

Rents in Bishops Square, south of Shoreditch High Street, have risen to 135 pounds per square foot from 65-70 pounds since it was redeveloped in 2005.

Rents on Redchurch Street have the potential to do the same over the next five years, said Rob Fay, Colliers International head of central London retail agency.

Retail property values in some areas have more than doubled in 10 years to over 500 pounds per square foot, said Michael Newell, a property agent at local firm Dominion.

Even after doubling, rents would be far below those on New Bond Street and Oxford Street, which peak at 964 pounds and 715 pounds respectively, according to data from property consultancy Cushman & Wakefield.

The bulk of Shoreditch properties are owned by families or wealthy individuals mainly from Britain, compared with Bond Street and Oxford Street which are mostly foreign-owned.

Lovell, reconfiguring one of his properties to make it more suitable for retail, said others were doing the same.

The fragmented ownership means it may be more difficult for bigger developers to capitalise on any boom.

“We would love to find more opportunities there, but we do not, as a company, buy very small-scale sites,” said Simon Silver, head of regeneration at Derwent.

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FSA to issue warning on lease options

[http://mortgagestrategy.com 18/10/11]

he Financial Services Authority is to issue a warning on lease options, financially risky agreements whereby distressed sellers hand over the running of their property to an investor for a set period of time.

A report by 5 Live Investigates at the weekend exposed a growing trend for this type of deal, in which struggling mortgage borrowers agree to lease their property to an investor for a specified period before selling it to them at a price based on its current worth.

The investor pays the mortgage over this period, normally bringing in tenants to do so. At the end of the period, they purchase the house for the agreed price and hope to sell it for a profit if house prices have risen.
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But the programme revealed that the sellers can end up facing repossession and financial ruin if the investor fails to keep up the mortgage repayments, and brought the issue to the attention of the FSA, which says it will be publishing a warning to consumers on lease options in the next few days.

A spokesman for the FSA says: “The FSA is aware that some homeowners may be considering ‘lease options’ or ‘exchange with delayed completion’ deals as a way to help them reduce the strain on their finances.

“These products may not always put the homeowner in a better place than if they were to sell their house under normal circumstances, and to that end we will shortly be publishing information on our consumer information website to help explain how they work and what the risks are.”

Ray Boulger, senior technical manager at John Charcol, says many rogue individuals who were operating in the sale-and-rent-back market before it was regulated have now moved into lease options.

He says: “The government needs to look at whether lease options should be regulated; if regulation was right for sale-and-rent-back, it is probably right for lease options too.”

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by nemeaproperty on October 18, 2011  •  Permalink
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Nemea: First Charge Products Explained

Nemea: First Charge Products Explained

Nemea Property offers clients the opportunity to share profits from development projects they are purchasing (back and buy) and those that someone else is (loan book).

Whether the overall market goes up or down, it is possible to make short-term development profits from property by adding value in up to three ways:

a)       Refurbishment – The renovation of dilapidated or neglected property in to high quality, lettable assets

b)       Conversion – Changes in title of property, often from commercial premises back to residential

c)       Planning – Building out new property from planning or trading development sites through acquisition of new or changes in existing planning permission

Nemea locks in profit on projects by lining up the exit buyer for the finished property before any works begin. Once the exit is pre-determined, financing for the project is then raised from either commercial lenders or private clients.

If the project is being backed by a client, the client is paid a fixed rate of return on monies lent towards the development of a project in the following ways:

  1. Bridging loans – 12 – 14% annualised interest accrued on a daily rate. Capital secured against physical asset my means of a first legal charge. Funds used for acquisition of site on to the balance sheet of the developer.
  1. Combined bridge and development loan – Up to 18% annualised interest accrued on a daily rate. Money secured against physical asset by means of a first charge. Higher rate offered as client providing funds for both a) physical buy-in of property and b) refurbishment. Entire loan secured by first charge.

The client accrues interest on a daily rate, which is then paid upon redemption of the loan. The contract for the loan also contains a clause which entitles the lender to ‘call’ on the loan after 12- months, offering assurance that the project will not run longer than this without their consent.

A first legal charge is the same security that a mortgage-lender has on a property and is what gives them the right to repossess and then sell the asset to retrieve their capital in the event of default or a breach of contract.

Clients who choose to purchase the property they are financing (back and buy) can opt to have the benefit of the loan paid to them in the form of a lower net purchase price rather than paid as a coupon. This can drastically reduce the amount of capital tied up upon completion of the project, especially if the client is taking advantage of our innovative financing solutions.

These products enable our clients to gain access to development profits without having to become professional developers.

Ever thought of getting involved in development, but worried that you lack the expertise or the time to do so? Here’s food for thought: what’s your ISA likely to return this year?

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by nemeaproperty on October 13, 2011  •  Permalink
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News: Buy-to-let rates fall by almost 1% in a year

[10/10/11 – Mortgage Strategy]

Buy-to-let mortgage rates have fallen by up to 0.92% in the past year, according to research by Defaqto.

The average two-year fixed rate buy-to-let deal at 75% LTV has fallen from 5.78% in September 2010 to 4.86% in September 2011, while the average arrangement fee has also dropped, from £2,492 to £2,603. The average two-year base rate tracker has fallen from 5.01% with a £2,861 fee to 4.11% with a £2,300 fee over the same period. Furthermore, the average three-year fix has dropped from 6.03% with a £2,859 fee to 5.56% with a £2,559 fee, and the average five-year fix has gone from 5.94% with a £2,122 fee to 5.69% with a £1,956 fee.

But Defaqto points out that average interest rates and arrangement fees for buy-to-let mortgages remain significantly higher than for residential mortgages. David Black, insight analyst for banking at Defaqto, says: “For those looking to get into the buy to let market, the last year has seen some positive developments. “While interest rates and arrangement fees have reduced we have also seen a number of new lenders enter the market as well as existing lenders expanding their product ranges.”

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News: Barclays looking to quadruple B2L lending next year

[07/10/11 – Mortgage Strategy]

Speaking at the Mortgage Intelligence annual conference yesterday, David Finlay, head of intermediaries at Barclays, told delegates the lender is planning to significantly increase its buy-to-let lending next year.
He says: “We were a significant buy-to-let player in the past.
“We are now expecting to step back into that space and we are looking to quadruple our lending next year.”

Nigel Stockton, financial services director at Countrywide, says if buy-to-let is to grow it needs big lenders.
“If buy-to-let is going to reach £20bn in four years then we need lenders like Royal Bank of Scotland, Barclays and Santander lending.”
Speaking at the Mortgage Intelligence annual conference yesterday, David Finlay, head of intermediaries at Barclays, told delegates the lender is planning to significantly increase its buy-to-let lending next year.
He says: “We were a significant buy-to-let player in the past.
“We are now expecting to step back into that space and we are looking to quadruple our lending next year.”
Nigel Stockton, financial services director at Countrywide, says if buy-to-let is to grow it needs big lenders.
“If buy-to-let is going to reach £20bn in four years then we need lenders like Royal Bank of Scotland, Barclays and Santander lending.”

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News: Terraced House Prices Have Risen Most of Last 10 Years

[ 27/09/11- Halifax ]

 

The average price of terraced homes in the UK has risen by more than any other type of property over the last 10 years, according to new Halifax research. Based on Halifax’s own data, owners of terraced properties have seen the value of their property rise by an average of £118 a week over the past decade with the typical price of a terraced home increasing by 68% (£61,489) from £89,843 in 2001 Quarter 2 to £151,332 in 2011 Quarter 2.

 

Over the past 10 years, the price of the average UK home has risen by 53% from £116,325 in 2001 Quarter 2 to £177,740 in 2011 Quarter 2.Bungalows recorded the second biggest increase (68%), followed by semi-detached properties (62%).

 

Despite terraced properties recording the strongest price growth over the past decade, they remain the most affordable property type. The price of an average terraced property is 15% below the average UK house price of £177,740 and 45% lower than the price of the average detached home of £273,173. In 2001, the typical terraced house price was 23% lower than the UK average house price for all properties.

 

Terraced homes also saw their share of all house sales rise by more than any other property type over the past decade, increasing from 31% in 2001 to 34% in 2011. In contrast, detached homes were the only property type to see a drop in their share of all sales since 2001, declining from 21% to 14%. This decline was driven by a large drop in the proportion of home movers buying detached homes (from 30% to 22%).

 

Semi-detached and terraced homes have remained the most popular types of property purchased over the last 10 years. These property types represent nearly two-thirds (63%) of all home sales in 2011; up from 59% in 2001. For first-time buyers, semi-detached homes have risen in popularity, accounting for 29% of purchases in 2011 compared with 26% in 2001.

Flats have been the worst price performer over the last 10 years

 

Flats recorded the smallest price growth over the decade to 2011 with the value of a typical flat rising by 49%. This relative underperformance largely reflected an over-supply of this type of property in some parts of the country. Flats more than doubled during the 2000s, as a proportion of all dwellings built in England, rising from 20% in 2000/2001 to a peak of 50% in 2008/09. This proportion has since dropped to 35% in 2010/11 during the marked downturn in the housing market.

 

Terraced homes account for the biggest price growth in most UK regions

Terraced properties recorded the largest price increases of any property type in eight of the eleven UK regions tracked1 over the last 10 years. In contrast, detached properties and flats witnessed the smallest percentage gains over the period across nine regions.

Yorkshire and Humber and Scotland accounted for the biggest price rises across all five property types since 2001, while London accounted for the smallest gains across all property types.

 

Those looking to trade down later in life have seen their potential cash windfall rise by over a third over the past ten years. Trading down from a detached home to a bungalow would have earned an average windfall of £86,006 in 2011; an increase of 35% (£22,413) since 2001.

 

Suren Thiru, Halifax housing economist, said:

 

“Although all property types have recorded significant price increases overall during the past decade, terraced homes have seen the biggest growth. Demand for such properties is likely to have been supported by their relatively favourable levels of affordability over the period. The rapid house price rises during much of the 2000s priced many potential home movers out of the upper end of the UK housing market.”

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