Inflation and poor growth see Bank of England ditch rate rise plans

Interest rates could stay low for as long as another two years, as falling inflation and weak economic growth force the Bank of England to scrap plans to push up rates in the coming months.

Mark Carney is expected to hold rates at 0.5pc at Thursday’s Monetary Policy Committee meeting, postponing a highly-anticipated rate rise for at least three months. The freeze will disappoint savers who have laboured under historically low rates for almost a decade – and a boon to borrowers who get extra time with cheap money.

But economists now suspect that inflation will keep falling quickly towards the Bank’s 2pc target, making it harder for policymakers to raise the rate.

Poor GDP growth at the start of this year and signs of a slowing global economy could also dent the Bank’s longer-term inflation estimates.

If that forces it to cut back its inflation forecast then the case for higher rates could evaporate altogether.

“They are stuck. The Bank can’t raise rates now, the economic numbers have been too weak recently,” said Martin Beck at Oxford Economics. “They should not have raised rates in November, closed the term funding scheme or worried that credit growth was too strong – those three things have contributed to the economy slowing.”

Markets are currently pricing in only two rate rises by August 2019, but George Buckley, an economist at Nomura, thinks even this may be too many if inflation is slowing sharply.

“Should the Bank publish a forecast with inflation below target based on market rates that would be quite a statement, as it would imply that even limited market pricing for rate hikes might prove too much,” he said.

UniCredit’s Daniel Vernazza believes it will be at least another year before rates rise to 0.75pc.

Kallum Pickering at Berenberg Bank fears the Bank has missed its chance. “They should have hiked by this stage of the economic    cycle, but they cannot do it now because of the soft data,” he said.

One Third of Millennials Will Continue to Rent in Their Retirement

The number of families with children living in rented property tripled between 2003-2016…

The Resolution Foundation has proposed a series of reforms aimed at protecting tenants and landlords in the private rented sector.

According to the think-tank’s research, half of all millennials – people born between 1980 and 1996 – will be living in rented property up to their 40s, whilst a third are likely to be renting beyond retirement.

Furthermore, four out of ten millennials aged 30 are already renting, double the rate of the previous generation and four times that of baby boomers, whilst the number of families with children lived in the private rented sector has grown substantially, from 0.6m in 2003 to 1.8m in 2016.

Although they acknowledge the policies the government has introduced to make housing more accessible for first time buyers, the Resolution Foundation argues that more needs to be done to provide greater security for those that rely on renting.

This includes short-term measures such as proposals for indeterminate tenancies, which are essentially open-ended leases. Such tenancies are already in use in parts of Europe, including Scotland.

A new tribunal system could also be created, in order to resolve disputes in a timely and cost-effective manner.

Lindsay Judge, a senior analyst at the Resolution Foundation, notes that support needs to be available across all areas of the housing market: “While there have been some steps recently to support housebuilding and first-time buyers, up to a third of millennial still face the prospect of renting from cradle to grave.

“If we want to tackle Britain’s ‘here and now’ housing crisis we have to improve conditions for the millions of families living in private rented accommodation.”

North West set to Lead House Price Growth in the UK

House prices set to surge in the north, while the south falls behind

The North West of England is set to see the strongest house price growth over the next 5 years, according to a report by leading estate agent Savills, with prices projected to rise by 18.1% between 2018 and 2022.

The region is followed by the North East and Yorkshire & Humberside, where prices are expected to increase by 17.6% in both areas – surpassing the UK average of 14.2%.

On the other end of the spectrum, southern regions are likely to see a more modest growth, as affordability continues to be squeezed in these areas.

The East of England and the South East are both projected to see a rise of 11.5%, while London will only see a small increase of 7.1% by 2022.

According to the company, the next five years is expected to follow the typical market cycle, where a more modest growth in London often leads to a surge in momentum for the North West and the North East.

With these areas being more affordable than the capital, they are more likely to attract first time buyers looking to put down a smaller deposit and avoid a large stamp duty bill.

Rents are generally also more affordable in these areas, compared to the south, which increases the possibility of retaining more graduates in the regions and, in turn, the demand for rental properties.

Commenting on the report, Lawrence Bowles, Associate at Savills, said:

‘Affordability in the capital is already more stretched than the rest of the UK, putting a brake on growth. But areas beyond the Home Counties have potential for growth: incomes have grown more in line with house prices, aiding affordability.’

Empire Property Holdings 3 – Empire Property launch a third loan note

Following on from the success of the first two Loan Notes.

Business Strategy

The Company intends to use the funds raised, to acquire suitable commercial properties, and strategically renovate and manage these assets to achieve the guaranteed returns.

Investment will provide a double digit return on investment, and allow investors to benefit from opportunities in the real estate market without management commitment or concentration of investment in any one property.

Once converted, the properties would become a commercial asset, whose underlying value whilst linked would not be reliant on the variable housing market price index.

The Company plans to take full advantage of current market conditions and acquire assets through the following methods:

  • Initially acquire three commercial properties in prominent towns or Cities
  • The funds will be used to acquire & develop the property into residential accommodation.
  • The properties will be renovated using permitted development rights where possible, or the equivalent full planning requirements.
  • The Company will then liaise with known private, and council letting contacts, to speedily let and manage rooms.

The cost of every project and every future project can be standardised to provide a business plan for each property. The details of each potential project will be input into a feasibility spreadsheet and the viability can be quickly assessed.

The main factors affecting the project are the purchase price of the property and the cost of renovation. Each room is given an average cost to complete, which takes into account all aspects of the renovation, project management, administration, licensing, and liaison with councils.

The only other factor is the purchase price of the room and therefore in each case, we can identify the purchase price of each room that should not be exceeded.

For further information about our track record please see our Done Deals.

Tenant Demand Reached New Peak in September

Demand from tenants continued to increase in September, while new supply remained flat

The average number of new prospective tenants per lettings branch reached an average of 79 in September, according to the latest private rented sector report by the Association of Residential Lettings Agents (ARLA), the highest level of demand recorded for over two years.

While the number of new tenants has increased, the average number of properties managed by an ARLA member branch remained at 189, the same level as previous month.

Tenancy lengths also reported an upswing in September, averaging 19 months, which is one month longer than seen in August.

The number of lettings agents seeing rents rise has increased year-on-year, according to the organisation, with 27% of agents reporting a growth in rents in September 2017, compared to a year earlier, when just 24% reported increases.

Despite growing annually, September marks a slight decline from the 35% of agents who reported an increase in rents in August.

Commenting on the index, ARLA’s Chief Executive, David Cox, said:

‘As summer drew to a close in September, demand increased in line with our expectations, and while it’s too soon to see the effect of this on rent costs, we know that when supply and demand are conflicting, rent prices will just continue to rise.’

EPH2 Launched

Empire Property Holdings was incorporated as a special purpose vehicle, to acquire commercial properties for development into residential accommodation by the Developer, Empire Property Concepts.

Empire Property Holdings is born out of Empire Property Concepts. Empire Property Concepts was set up by Director, Paul Rothwell, in September 2009.

Having already completed his first property investment at University & developed a portfolio with his brother Adam, Paul wished to make his property development formal as a company but also seek investors to provide his services to.

Empire’s progress has been strong, even against the backdrop of difficult economic & property market conditions respectively. The company has continued to market itself well & attract new investors to aid its growth.

Since its inception Empire has grown the product offering to consultancy, Joint Ventures (JVs) and Loans for Property. The latter is used to facilitate the development of projects to be retained as an investment within a special purpose vehicle, and then refinanced to return investors funds.

Empire seeks to market to new investors, and deal with the administration & development cost collection only. Empire has also expanded its team in terms of management, build management, accounts & administration.

Empire is currently developing & managing properties for Paul, his family, DPIL & DPDL, & private consultancy clients. He currently has 600 units under management to include the various aforementioned portfolios & consultancy clients.

Empire has recently developed a 25 unit permitted development conversion called Britannia Inn in Balby, Doncaster, 12 months after acquisition.

EPH2 Investment Profile

0817 Halifax House Blackwall Halifax Cgi03
Halifax House

Development 2 – Halifax House

A commercial to residential conversion via full planning permission which will create 65 one bedroom & two bedroom apartments. The development will provide private letting accommodation in a prime location with parking.

  • £1,250,000 – Purchase
  • £2,275,000 – Development
  • £3,525,000 – Total Cost
  • £456,300 – Income (65 x £135 x 52)
  • £5,700,000 – Value based on 8% yield
0793 The Globe Works Bolton Exterior Cgi01 Rev Bprint1
Globe Works

Development 1 – Globe Works

A former mill to residential conversion via full planning permission, which will create 24 one bedroom, 90 two bedroom & 10 three bedroom apartments.

  • £1,700,000 – Purchase Price
  • £6,200,000 – Development Cost (124 x £50K)
  • £7,900,000 – Total Cost
  • £1,024,800 – Income (24 x £600 x 12) + (90 x £700 x 12) + (10 x £800 x 12)
  • £12,800,000 – Valuation based on 8% yield
  • £8,960,000 – Refinance exit (70% LTV)