Bridging lending breaks new records in Q2 2019

Bridging loan books grew to a record £4.62bn at the end of the second quarter of this year, representing growth of 11.7% compared to Q1 2019 and an increase of 14.4% on the same quarter last year.

Bridging loan applications also hit a record total in the 12 months preceding the end of Q2 2019, with £22.13bn of applications representing a 9.7% increase on the same period the previous year.

This is according to figures compiled by auditors from data provided by members of the Association of Short-Term Lenders (ASTL), which confirmed that more than £1bn of bridging loans were written in the second quarter of this year, an increase of 11.8% on the previous quarter and a rise of 4.1% on the same period last year.

There were £5.69bn of bridging loan applications in Q2 2019, which is 4% lower than the first quarter of the year but 5.3% more than the same period in 2018.

Benson Hersch, CEO of the ASTL says: “The second quarter of this year has delivered some very strong results for bridging lending, with record values both for applications over a 12-month period and total outstanding loan books. In fact, nearly all measures were higher than last quarter and the same period in 2018. The wider political and economic environment remains uncertain and the challenge for the industry now is to continue this level of activity whilst maintaining high standards of underwriting and customer focus.”

The ASTL Data Survey: Q2 2019

These figures are taken from the responses from ASTL members, which include most of the key lenders in the bridging market.

 


Total Returns for Student Accommodation up 12.3% Year-on-Year

Capital values for student properties increased on an annual basis, according to the latest Student Accommodation Index by CBRE.

In the year to September 2018, capital values for student assets rose by 6.5%, surpassing last year’s growth of 4.5% in the same period.

Gross and net rents increased on an annual basis by 3.0% and 3.4% respectively, whilst total returns at a national level rose by 12.3%.

Separating the figures by region reveals that capital values in Central London were up 12.4% in the year to September 2018, bringing total returns to 17.5% compared to 14.2% last year.

Annual total returns for regional student accommodation for 2018 reached 10.5%, with a 4.5% increase in capital values.

The regional figures were additionally divided into Super Prime, Prime, and Secondary locations, which had capital growth of 11.1%, 6.0% and -9.0% respectively, whilst net rental value growth was positive in Super Prime (3.6%) and Prime (3.9%), compared to a 1.5% decline in Secondary locations.

Capital values increased for larger student accommodations of 500+ beds by 7.2%, bringing total returns to 12.9%.

Medium-sized properties (250-500 beds) reported a 6.2% growth in capital values and a 12.2% increase in total annual returns, whilst smaller properties of fewer than 250 beds had capital growth of 5.8% and total returns of 11.6%.

Commenting on the figures, CBRE’s Head of Student Accommodation Jo Winchester said, “This first published Student Accommodation Index demonstrates the continued strong performance of the sector which has outperformed the CBRE Monthly Index over the last 8 years.

“UK Student Accommodation is now firmly established as a mainstream investment sector. Investors will find the increasingly sophisticated raft of influences on performance highlighted by this index, including location, asset scale, university rankings, applications, and distance to university very informative.”


Space for 1 million new homes on derelict ‘brownfield’ land, analysis reveals

‘Building on brownfield land presents a fantastic opportunity to simultaneously remove local eyesores and breathe new life into areas crying out for regeneration.’

More than a million new homes could be built on land currently sitting unused across England, according to new analysis.

Brownfield land”, which has previously been built on but is now derelict, could be transformed into vast swathes of housing within the next few years.

The (CPRE) said such measures would regenerate run-down areas without destroying precious stretches of countryside to meet the UK’s housing needs.

As it stands, the government is committed to building 300,000 new homes each year in England to meet demand, and there have been warnings of severe backlogs.

Meanwhile, local groups and green campaigners are concerned about the impact projects such as the massive Oxford-Cambridge development will have on nature and communities. Analysis performed by CPRE using data from Brownfield Land Registers identified over 18,000 sites on which new houses could be built with minimal impact on the environment.

It said two-thirds of this land was ready to be transformed and could begin contributing to the country’s unmet housing needs within just five years.

However, the campaigners said they were concerned with current definitions of “previously developed land” were not comprehensive enough, meaning there could still be a large number of sites being overlooked.

“Building on brownfield land presents a fantastic opportunity to simultaneously remove local eyesores and breathe new life into areas crying out for regeneration,” said Rebecca Pullinger, planning campaigner at the CPRE.

“Councils have worked hard to identify space suitable for more than 1 million new homes.

“But until we have a brownfield-first approach to development, and all types of previously developed land are considered, a large number of sites that could be transformed into desperately needed new homes will continue to be overlooked.”

Research by the group in Enfield identified space for 37,000 homes on sites they identified as a brownfield, 17 times more than official estimates.

CPRE suggested areas including supermarket carparks and “poorly-used industrial or commercial sites” could be regenerated into housing areas with few repercussions.

“The government, local councils and housebuilders, must work hard to bring these sites forward for development and get building,” said Ms Pullinger.

Local Government Association housing spokesperson Martin Tett said: “Councils are committed to bringing forward appropriate sites and ensuring homes are built where they are needed, are affordable, of high quality and supported by adequate infrastructure and services.

“This timely report highlights the availability of sites across the country to deliver enough homes and infrastructure to begin to address the national housing shortage we face.”

Mr Tett said the government must provide councils with the power to speed up developments and set planning fees locally to ensure they are adequately resourced.

Responding to the new analysis, housing minister Kit Malthouse said: “This government is committed to building the homes our country needs while still leaving the environment in a better state than we found it.

“We’re encouraging planners to prioritise building on brownfield land and working with local authorities to ensure sensible decisions are made on where homes get built.”

 


Spring is in the air for the buy to let market in the UK

Spring is definitely in the air for the buy to let market in the UK with some new found optimism after a long period of backlash against Government tax and regulatory changes.
It seems as if many landlords are embracing a business like attitude and getting on with making their portfolios work for them. Indeed, London, Manchester and Liverpool are the most popular cities for buy to let investment in the UK going into 2019, according to new research.
And most landlords are planning to increase their portfolio, the survey commissioned by Experience Invest has found while Nottingham, Leeds, Birmingham and Newcastle are also regarded as good bets for buy to let going forward.
When looking at the types of property that investors were considering investing in this year, the survey also found that houses were top at 67%, followed by flats at 54%, new build residential for 39% and 24% student accommodation.
Overall, just 11% of those surveyed said that they plan to reduce their portfolios in 2019. Some 39% are planning on increasing the size of their portfolio over the coming 12 months, while 35% have no intention of buying or selling any property in 2019 and 15% will be selling some assets to then reinvest in new properties.
It comes at a time when rents are steady. Official figures from the Office for National Statistics (ONS) show that in the private rented sector rents increased by 1.1% in the 12 months to February 2019, up from 1% in January.
In England and Wales rents were up 1.1%, while in Scotland they increased by 0.7% and in London by 0.2%. But, overall, rental growth has generally slowed since the beginning of 2016, driven mainly by a slowdown in London over the same period.
Pressure will continue on landlords to raise rents in 2019, according to Kate Davies, executive director of the Intermediary Mortgage Lenders Association (IMLA). She believes that after filing their 2017/2018 tax returns at the end of January, landlords will be more aware that ongoing changes to mortgage interest tax relief are increasing the financial challenges ahead.
It may mean becoming more business-like or adopting new models. The industry is aware that this could mean offering longer tenancies or even shorter tenancies. In this respect a new study has found that short term rents could be worth considering.
The research from short term letting agency Portico Host found that short term let properties in Walton, Liverpool, are achieving the best yields in the North West at 30.68%, compared to landlords of longer term rentals, who can achieve a yield of 7.88%. The Airbnb yield figure is based on an occupancy rate of 60% of the year, which is typical for these types of properties due to seasonal demand.
While this is not the answer for every landlord it is a model that they might want to look at as they seek to improve and grow their business. They should also be buoyed by research showing that buy to let is still a good investment option beating investing in gold, cash and fine art in the last decade in terms of returns.
Investing in the FTSE 100 would have brought the biggest return when considering the annual capital gain and the percentage yield with an increase of 119%, whilst the value of classic cars is up 94% during the same time period.
However, for those that aren’t professional investors a buy to let property is a very good option, according to the research from lettings inventory and property compliance specialists VeriSmart.
The report says that when considering the annual gain in house prices along with the increase in rental yields, an investment in the sector a decade ago would have brought a 92% return today. This is much higher than the 60% return that investing in gold would have brought and a world away from the 16% increase in cash or the 4% drop in fine art.
It also says that the growth in the property market has been by far the most reliable option with the FTSE 100, gold or cash providing a far more volatile option that is also open to a larger degree of impact from political and economic factors as well as influence from other foreign countries.

Annual house price growth in the UK has stagnated, latest lender index shows

Annual house price growth in the UK has stagnated this month with a rise of just 0.1% to an average of £211,966, according to the latest lender index.

This follows a subdued December when price growth slowed to 0.5% and in January prices were up by 0.3% compared with the previous month, the figures from the Nationwide show.

Robert Gardner, Nationwide’s chief economist, pointed out that indicators of housing market activity, such as the number of sales and the number of mortgages approved for house purchase, have remained broadly stable in recent months.

But he warned that forward looking indicators have suggested some softening was likely. ‘In particular, measures of consumer confidence weakened in December and surveyors reported a further fall in new buyer enquiries towards the end of 2018,’ he explained.

‘While the number of properties coming onto the market also slowed, this doesn’t appear to have been enough to prevent a modest shift in the balance of demand and supply in favour of buyers in recent months,’ said Gardner.

He also pointed out that uncertainty is exerting a drag on the market. ‘It is likely that the recent slowdown is attributable to the impact of the uncertain economic outlook on buyer sentiment, given that it has occurred against a backdrop of solid employment growth, stronger wage growth and continued low borrowing costs,’ he added.

Looking ahead, near term prospects will be heavily dependent on how quickly the uncertainty lifts, but ultimately the outlook for the housing market and house prices will be determined by the performance of the wider economy, especially the labour market, according to Gardner.

‘The economic outlook remains unusually uncertain. However, if the economy continues to grow at a modest pace, with the unemployment rate and borrowing costs remaining close to current levels, we would expect UK house prices to rise at a low single digit pace in 2019,’ he concluded.