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Gross mortgage lending slows in UK post Brexit
Gross mortgage lending in the UK held steady in July and was an estimated £21.4 billion, similar to June but 1% lower than July last year. The data from the Council of Mortgage Lenders (CML) is the first full month since the country voted to leave the European Union and it is too soon to see how much of an impact Brexit is having. CML chief economist Bob Pannell explained that the subdued nature of property transactions and mortgage lending in July are consistent with a less positive backdrop for house purchase activity post-referendum. ‘The Bank of England expects stronger economic headwinds to build as we move into 2017, and the Monetary Policy Committee’s package of monetary policy measures represents a spirited effort to lean against these on a timely basis. The MPC has pencilled in a further cut in Bank Rate later this year, but aims to avoid negative interest rate territory,’ he said. ‘The Term Funding Scheme should boost market sentiment a little, by engineering broader cuts to rates for existing mortgage borrowers than would have been the case, but it is not clear how well the Bank’s actions will underpin borrower demand in a more adverse economic climate,’ he added. Steve Bolton, founder of Platinum Property Partners, pointed out that the buy to let market was particularly impacted and purchase activity in June had almost halved compared to a year ago but the buy to let remortgage activity has picked up year on year. ‘Landlords are well positioned to benefit from falling mortgage rates as a result of the recent base rate cut. A mortgage can often be one of the greatest costs for landlords, so swapping to a more affordable deal is well worth the effort,’ he said. ‘Landlords are now operating in an uncertain political and economic environment, and further legislative changes which will phase out the ability to treat mortgage interest payments as a legitimate business cost could lead to many leaving the market or being deterred from expanding their portfolio,’ he explained. ‘This could lead to rising rents for many tenants and less affordable housing provision in the Private Rented Sector. It will therefore be interesting to see how this will have a knock-on effect on mortgage lending,’ he pointed out. ‘However, investing in property has proven to give strong returns when done effectively. It is now more important than ever that amateur landlords ensure they manage their properties professionally to build a profitable long term investment,’ he added. According to John Goodall, chief executive officer of peer to peer platform Landbay, despite some Brexit uncertainty it is clear that the property market, and in turn the mortgage market, is built on strong foundations, so the outlook is optimistic. ‘The UK’s housing shortage will remain a pivotal political and social issue, so we should expect buyer demand and lending levels to bounce back later in the year as the dust settles. In the meantime, it’s… Continue reading
Manchester becomes key focus for commercial property investment
Office transactions in the UK’s third largest city increased by 8% in the first half of 2016 compared to the same period last year with Manchester becoming a key focus for commercial property investors. Transaction volumes in Manchester’s office investment market totalled £304 million in the first six months of the year, some 3% higher than the five year first half average of £295 million, according to international real estate advisor Savills. The firm’s latest Manchester Office Market Report says that overseas investors showed particularly strong demand for the city’s office assets, accounting for 70% of all transactions with deals worth £212 million. This is well above the long term first half average of 37%, according to Savills. Examples include the £115 million acquisition of 3 and 4 Piccadilly Place by US based Ares Management and the £85 million purchase of XYZ in Spinningfields by Germany’s Union Investment Real Estate. ‘The outcome of the European Union referendum is now sinking in and some office transactions will be inevitably be delayed or renegotiated as investors take stock. However, we expect the increased depth of overseas interest in Manchester to help stabilise the market as foreign buyers take advantage of the weaker sterling and reduced competition,’ said Peter Mallinder, investment director at Savills. Despite the lack of trophy letting deals recorded in the first half of 2016, Savills reports that office take up reached 415,257 square feet, in line with Manchester’s long term average and the third quarter started positively with law firm Freshfields committing to around 80,000 square feet at One New Bailey. A number of other key leasing deals including to Swinton Insurance at 101 Embankment are expected to complete in the third quarter, with take up for the full year reaching one million square feet. This follows a total of 1.3 million square feet in 2015. Savills highlights the diverse nature of Manchester’s office occupier base, which does not overly rely on the public sector or banking and finance, as one its key strengths. The TMT sector has shown particular growth in Manchester and accounted for 21% of all take up in the first half of 2016 with deals totalling 85,307 square feet compared to 17% of deals in the full year of 2015. In terms of size, more than 51% of office space let in the first half of the year was through deals below 5,000 square feet compared to a long term average of 32%, driven in part by the abundance of TMT firms and start-ups moving to the city. ‘Office take up in Manchester has been significantly in excess of the long term average in recent years, which puts the city in a good position going forward and activity levels since the referendum result are encouraging,’ said Richard Lowe, office agency director at Savills. He added that headline Grade A rents have risen from £28.50 per square foot in… Continue reading
Low inventory levels in many parts of the US caused home sales to fall in July
Existing home sales in the United States lost momentum in July and decreased year on year for the first time since November 2015 with a fall of 3.2%, the latest index data shows. Total existing home sales fell to a seasonally adjusted annual rate of 5.39 million in July from 5.57 million in June and are now 1.6% below a year, only the second time in the last 21 months this has happened. The data from the National Association of Realtors (NAR) also shows that the median existing home price for all housing types increased by 5.3% in July to $244,100, the 53rd consecutive month of year on year gains. Lawrence Yun, NAR chief economist, said that existing sales fell off track in July after steadily climbing the last four months. ‘Severely restrained inventory and the tightening grip it’s putting on affordability is the primary culprit for the considerable sales slump throughout much of the country last month,’ he explained. He pointed out that real estate agents are reporting diminished buyer traffic because of the scarce number of affordable homes on the market, and the lack of supply is stifling the efforts of many prospective buyers attempting to purchase while mortgage rates hover at historical lows. ‘Furthermore, with new condo construction barely budging and currently making up only a small sliver of multi-family construction, sales suffered last month as condo buyers faced even stiffer supply constraints than those looking to purchase a single family home,’ he added. The report also shows that total housing inventory at the end of July inched 0.9% higher to 2.13 million existing homes available for sale, but is still 5.8% lower than a year ago and has now declined year on year for 14 months in a row. Unsold inventory is at a 4.7 month supply at the current sales pace, which is up from 4.5 months in June. ‘Although home sales are still expected to finish the year at their strongest pace since the downturn, thanks to a very strong spring, the housing market is undershooting its full potential because of inadequate existing inventory combined with new home construction failing to catch up with underlying demand,’ said Yun. ‘As a result, sales in all regions are now flat or below a year ago and price growth isn’t slowing to a healthier and sustainable pace,’ he added. The share of first time buyers was 32% in July which is below last month when it was 33% but up from 28% a year ago. First time buyers represented 30% of sales in all of 2015. All-cash sales were 21% of transactions in July, down from 22% in June, 23% a year ago and the lowest share since November 2009 when it was 19%. Individual investors, who account for many cash sales, purchased 11% of homes in July, unchanged from June and down from 13% a year ago while 70% of investors paid in cash in July. Coming in at the… Continue reading
