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Vote on UK in the EU unlikely to have much impact on rental market
On the eve of the historic referendum in the UK on the future of the country in the European Union research shows that letting agents do not anticipate a major shift in the rental market. Whatever the outcome of the vote, lettings agents do not believe supply, demand, or rental costs will be significantly affected, according to the latest sector report from the Association of Residential Letting Agents (ARLA). Some 65% of ARLA agents expect supply to stay the same if the UK votes to leave the EU, compared to just a fifth 22% who predict it will fall as international landlords pull out of the market. The research also found that 31% see demand decreasing, as relocating to the UK becomes a less attractive prospect, but over half, 55%, think it will remain as high as it currently is. In London, however, almost half, 43%, of agents expect the number of prospective tenants per property to fall in the event of a ‘Brexit’, as international demand weakens. While 19% of agents expect a Brexit result will cause upward pressure on rent costs, the majority don’t imagine a massive change for tenants’ rents, should Britain leave the EU. ‘There is no avoiding the EU Referendum at the moment; and whatever the outcome, we are likely to feel the impact of the fallout of this debate in different ways,’ said David Cox, managing director of ARLA. ‘However, it’s important to put this into perspective and not get carried away in a zeitgeist. As outlined in our recent Brexit Report, the lettings market hosts a large number of non-UK born citizens and any change in migration policy is likely to have an impact down the line, especially in London. However, our monthly report clearly shows the sentiment amongst members is that the immediacy of this effect is likely to be minimal,’ he pointed out. The monthly report also looked at the issue of stamp duty reforms. Two months since the extra 3% was added to buy to let and second homes some 37% of agents reported a fall in supply of buy to let properties. This figures was much higher in Wales, where 80% of agents saw a dip in supply in May, as well as East Midlands and Yorkshire where 50% of ARLA agents have seen a decline. Looking forward, nearly half, 48%, of agents expect supply will continue to fall as more landlords walk away from the market as a result of the mortgage interest relief changes coming into force next year. The research shows that month on month supply is consistently lower than in 2015. The number of properties managed per branch dropped in May, with agents recording an average 171 properties on their books. Demand also fell marginally last month, as agents registered 33 prospective tenants per branch, compared to 34 in April. ‘The EU… Continue reading
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
