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Bank of England injects £1.9bn into UK companies via coronavirus scheme

The Bank of England has injected £1.9bn into UK companies since 23 March via its short-term lending programme, figures have shown, as it tries to shore up the economy amid the coronavirus outbreak.

The lending comes via the Bank’s covid corporate finance facility (CCFF), through which it buys companies’ short-term debt, known as commercial paper.

The CCFF is a key plank of the government’s £330bn coronavirus lending programme. It hopes the money will mitigate disaster for the economy during the coronavirus pandemic.

Threadneedle Street has unveiled a range of other measures to boost the economy. These include slashing interest rates to 0.1 per cent, a record low, and pledging to buy £200bn more government and corporate bonds.

Following the playbook from the 2008 crisis, the Bank has also reopened “swap lines” with the US Federal Reserve. UK banks claimed $6bn (£4.8bn) yesterday via this facility to help ease the pain on their balance sheets.

The uptake for the CCFF comes as warnings grow about the effect of coronavirus on the global and UK economies.

Ratings agency Fitch today predicted the UK economy will shrink by 3.9 per cent in 2020. And figures yesterday showed claims for benefits via Universal Credit soared to 950,000 in the last two weeks.

Worries over access to lending

The government and BoE have been criticised for some confusion about the lending schemes on offer, however.

Business groups such as the CBI have said some firms are “falling through the cracks”. They say some businesses do not have the “investment grade” credit rating needed to access the CCFF, but are too big for the other loan programmes on offer.

S&P Global Ratings told City A.M. that it had received around 30 enquiries by Monday from UK firms that hope to be rated investment grade – at low risk of default – so as to access the CCFF.

But S&P’s head of EMEA sales Lynn Maxwell said that “less than 25 per cent” of the firms expressing interest “have investment grade potential”. She added that it is “early days,” however.

Chancellor Rishi Sunak has promised to help broaden the reach of UK loan programmes. He has said the government is working on making sure all companies can get the help they need.

By Harry Robertson

Source: City AM

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The UK housing market and coronavirus: The chances of recovery in 2020

With stock markets crashing all over the world due to the coronavirus pandemic, there are fears that the UK housing market could also be badly hit. To understand the chance of this happening, we need to look at the current situation and what might happen next.

The situation before March

The country’s housing market was motoring along nicely before the coronavirus outbreak caused havoc. Figures from Nationwide Building Society show that British house prices increased by an annual growth rate of 3% in the month before the lockdown was imposed. This was the fastest rate in two years.

This was due to a monthly rise is 0.8%, which followed on from 0.3% in February. The annual growth rate in February was 2.3%. The average house price in the UK rose to £219,583 in March. The surge had been led by booming cities such as Manchester and Liverpool but most areas have seen good growth recently.

The different ways the market has been affected

The impact of the coronavirus can be put into different categories.

  • Lockdown measures mean that potential buyers are unable to view properties that they might be interested in.
  • The huge effect on the economy means that many people are unemployed or facing an uncertain future. Around 950,000 new welfare claimants applied in the second half of March, according to the Department for Work and Pensions.
  • Banks have made it more difficult for people to borrow on new mortgages. Some have withdrawn high loan to value deals and others don’t take overtime or bonuses into account as salary.
  • Official government advice is to avoid property transactions.
  • Many people have decided that buying a new home isn’t a priority.

These factors all add up to give us a UK housing market that is grinding to a standstill. To put it simply, the whole market has stopped and will remain that way until life gets back to normal.

The sort of price falls we can expect are unclear

There is no doubt that house prices will be affected by this period of uncertainty and economic gloom. The main issue is that it is extremely difficult to predict any figures. With virtually no transactions going through just now, there is a lack of data to base future estimates on.

The British economy is set for a deep recession. The last time this happened was in 2008, when housing prices crashed through the floor. In fact, it was so drastic that by 2017 property prices in a quarter of UK towns were still below their 2007 peak.

It is feared that the 2020 slump could be even worse than what happened in 2008.On the other hand, the more optimistic predictions suggest that it may just be a short-term wobble, like the way that Brexit affected property prices. It has also been pointed out that the severe economic damage down by the swine flu in 2009 didn’t stop house prices from soaring in the following year.

The chances of recovery in 2020

Very few analysts want to make predictions in this situation, particularly since we don’t even know how badly UK house prices will be hit.

However, the main hope is that overall economic weakness doesn’t tend to depress the UK housing market for long. It is possible that it bounces straight back as soon as the lockdown ends and people get back to their normal lives again.

The fact that interest rates are so low is sure to be a factor. Anyone who has the cash and the stability to buy a house might see this as being a great time to do so. Therefore, it is unlikely that we see the market standing still for too long.

In the best case scenario, prices will fall in the short term and recover by the end of 2020, but there are still too many unknown factors to bet on this being the case.

By Robert Bell

Source: Invezz

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UK house prices growth ‘grinding to a halt’

UK house prices rose three per cent last month just before the coronavirus outbreak hit, according to Nationwide figures released today.

But the bank warned housing market activity is “grinding to a halt” as the coronavirus lockdown stops buyers and sellers from viewing properties.

Banks have also withdrawn mortgages or made it tougher to secure mortgages, also dampening UK house prices.

Coronavirus means outlook ‘highly uncertain’

“Housing market activity is now grinding to a halt as a result of the measures implemented to control the spread of the virus,” Nationwide’s chief economist Robert Gardner said.

“Indeed, a lack of transactions will make gauging house price trends difficult in the coming months.

“The medium-term outlook for the housing market is also highly uncertain, where much will depend on the performance of the wider economy.”

The UK is facing a severe economic retraction as a result of the coronavirus crisis. The government has closed all shops save supermarkets, pharmacies and banks.

And people are able to leave the house once per day to exercise, while maintaining two metres distant from others.

“Economic activity is set to contract significantly in the near term as a direct result of the necessary measures adopted to suppress the spread of the virus.,” Gardner added.

The value of British homes rose 0.8 per cent on a monthly basis in March, up from February’s 0.3 per cent change. And its three per cent annual growth rate outpaced February’s 2.3 per cent growth.

That left the average UK house price at £219,583 in March.

UK house prices growth ‘meaningless’

Jeremy Leaf, north London estate agent and a former RICS residential chairman, called today’s UK house prices figures “academic” in light of coronavirus.

“However, they do raise expectations that when restrictions begin to ease, hopefully relatively soon and without too much damage to the economy, there is every chance that activity will pick up nearly where it left off,” he added.

“We are finding that only those industries particularly badly affected by coronavirus are having to pull out of transactions, such as those working in the travel, hospitality or entertainment industries.”

But Lucy Pendleton, founder director of independent estate agents James Pendleton, painted a darker picture. She said UK house prices were now “irrelevant” with the coronavirus outbreak. Pendleton has put more than half its estate agents on furlough, and last week house sale numbers slumped 84 per cent.

“It wasn’t so long ago that commentators talked of Brexit uncertainty putting transactions on ice but that feels like ancient history now,” she said. “Covid-19 has brought brutal new meaning to a frozen market.”

Lenders back away from mortgages

Mark Harris, chief executive of mortgage broker SPF Private Clients, added that “lenders remain keen to lend”.

That is despite some having to pull back from high loan-to-value deals. Nationwide yesterday tightened measures on mortgage applications and no longer takes bonuses and overtime pay into account.

Nationwide also pulled its mortgage offering for low-deposit borrowers earlier this week.

Lloyds Banking Group, which owns includes Halifax and Scottish Widows and is the UK’s largest lender — has capped lending at 60 per cent of loan to value.

And Barclays has put a cap on how many mortgage applications it will accept from brokers. It has also limited high loan to value mortgages.

“In most instances this is a temporary move while they get to grips with the inability to carry out valuations, plus redirect their staff to deal with mortgage payment holiday enquiries,” Harris said.

UK house prices ‘will recover quickly’

“The only silver lining to this situation is that political uncertainty and underlying economic weakness play no part in this chaos,” Pendleton added. “The housing market will come roaring back to life as soon as the lockdown ends, aided by interest rates that are significantly lower than when it began.”

However, it is unclear how long the coronavirus lockdown will weigh on UK house prices.

“This crisis has ripped staff and customers from our hands,” Pendleton added. “Coronavirus has broken the spirits of businesses on a scale not seen since the financial crisis. It is an incredibly testing time but we must come out the other side, and come out fighting.”

By Joe Curtis

Source: City AM

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Coronavirus and the London property market

As the coronavirus outbreak and UK lockdown continues, many are left asking what this will mean for the property market. It’s too early to tell exactly how it will fully impact the sector and economy moving forward. However, the UK property market is robust and has shown its resilience during uncertain times in recent years.

Many professionals in the property industry have stated they believe house price growth will slow down as fewer properties will be going on the market and less transactions will likely take place. However, a major crash in prices is not expected as many believe the market will pick up pace after a period of uncertainty, similar to after the Brexit referendum.

Most buyers and sellers are still proceeding with sales that started before the outbreak of coronavirus. The majority of people are investing in property for the long-term, which means buyers, landlords and investors will be less impacted by short-term fluctuation in property prices.

London property still seen as a safe haven

Even though the short-term future of the property market is uncertain, sales are continuing to be agreed. Property, especially in London, is still being viewed as a safe haven as shares and stock investments have taken a massive blow since the coronavirus outbreak and have shown to be extremely volatile investments.

Prior to the government response to coronavirus becoming more drastic, the UK property sector as a whole had the strongest start to the year for four years. The London property market was also the strongest it had been since prior to the vote on Brexit as asking prices reached the largest annual rise since May 2016, according to Homes & Property.

Rightmove’s House Price Index for March revealed the average price of a property in London reached £638,826, which is an impressive 5.1 per cent annual increase. This is likely due to supply still not keeping up with demand. Additionally, the index also revealed the number of sales agreed in the capital grew by 34.4 per cent, and it even took 15 fewer days for properties to sell once they were put up for sale.

The private rental sector is showing growth, too. RICS have predicted rents in the UK to rise by 2% this year – and up to 3% per annum by 2025. Other property experts state that the Coronavirus isn’t negatively affecting rent prices, which are only down 0.2 per cent on the previous month.

Rising demand from prospective tenants is keeping rents high as supply remains relatively low. A large number of private landlords who have empty rental properties are now scrambling to find longer-term tenants, and are still able to advertise on rightmove and zoopla, with online letting agents Portico making this available at an extremely attractive price.

In short, London’s market fundamentals are considered solid. Even though the fast-paced market will likely slow down due to the coronavirus outbreak and lockdown, the sector is expected to bounce back after a period of uncertainty.

Technology is keeping the property market moving

As physical viewings of properties have been banned following Prime Minister Boris Johnson’s lockdown announcement on 23 March, the market is naturally expected to slow down. However, more and more estate agents are adapting to the measures by offering virtual property viewings through “walk through” video tours and Facebook Live events.

With millions of people working from home, there has been a substantial increase in virtual viewings. Property portals, such as Rightmove and Zoopla, are also seeing surges in search numbers on par with the figures for Christmas and Boxing Day.

To keep the sector moving, the market as a whole is adapting quickly as many property professionals are using a range of technology and proptech to be able to continue transacting, despite the coronavirus lockdown. In addition to virtual viewings, appointments are still being done through video conferencing tools, FaceTime and WhatsApp and contracts are able to be signed electronically.

Record low interest and mortgage rates make borrowing more affordable

The Bank of England lowered the base interest rate from 0.75 per cent to 0.25 per cent on 11 March, and then it was further lowered to 0.1 per cent on 19 March. This is lower than it’s ever been before and means it’s a great time to get a mortgage or remortgage your property as borrowing is likely to be more affordable.

Borrowers with tracker mortgages should be seeing their mortgage rates drop. If you’re looking for a mortgage, over a dozen lenders have promised to cut their standard variable rates by 0.5 per cent. More banks and building societies are expected to drop their rates in the coming weeks.

Which? found that the cheapest fixed-rate mortgages haven’t seen significant drops as they are already at historic lows. However, average mortgage rates are continuing to fall, and there are a significant number of products available.

Because of this, it could prove to be a great time to buy a property and lock in these record low rates. This means mortgage repayments will likely be more affordable and could provide you the opportunity to borrow more and get more for your money. Additionally, these low interest rates could also fuel property price growth once the crisis surrounding coronavirus is over.

To cut your interest costs further, it’s also recommended to get an up to date online property valuation on your property. Your lender will then need to recalculate your loan-to value ratio (LTV). A lower LTV usually means you’ll receive a better interest rate and have access to a wider selection of lenders.

Get ahead of the competition

The government has recently urged both buyers and renters to delay moving house if possible as it’s important for people to stay at home and away from others during the coronavirus outbreak. However, this could still be a smart time to get ahead of the competition if you’re interested in buying or investing in property.

The property buying process could take longer than normal, and you might need to delay completion depending on how long the coronavirus lockdown lasts. However, you can still get the ball rolling and invest in property with record low interest and mortgage rates. And as the UK, including London, is in a housing shortage, there is still expected to be strong demand for property and rental properties moving forward.

Source: London Loves Business

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Industry leaders call for emergency plan to save UK construction

The Construction Leadership Council has written to the prime minister setting out essential actions to secure the future of the sector.

Research last week showed that without further support nearly half of all companies in the sector face potential failure in the next three months.

Today, in a letter to the prime minister, the Construction Leadership Council has asked the government to implement measures to save cash-strapped companies in the construction supply chain:

Suspend PAYE and CIS tax due to HMRC in April and May for construction and consultancy firms and workers with no financial penalty;

Defer/cancel Apprenticeship Levy payments for the duration of the crisis;

Government to advise all public sector clients, regulated utilities, and firms in the private sector to expedite cash flow throughout the supply chain;

Support the directors of micro-businesses, who currently fall between the support provided by the Job Retention Scheme and assistance for the self-employed;

Direct all government bodies to release all retention monies;

Extend the £25k SME business continuity grants scheme to the construction sector.

In addition, the sector has asked for clear and visible encouragement that the production of building materials continues where possible, and that electrical, plumbing, and general builders’ merchants remain open so that the industry can function.

Andy Mitchell, co-chair of the Construction Leadership Council, said: “The construction industry is a key strategic sector of the UK economy and is playing a vital role in building and maintaining NHS estates, enabling the transport sector to function, and keeping the lights on in homes around the country.

“It is not an either/or question. The UK economy requires a functioning construction sector that can operate safely during this crisis and will rely upon construction workers and companies to get Britain building once we’ve won the war against Covid-19.

“We are calling on the government to take these steps not only to save jobs and companies in the long term, but to ensure our sector can continue to function throughout the weeks and months to come.

“The UK government’s response to this crisis has been bold and necessary. It is time now for it to roll out emergency measures to protect UK construction directly, which is a sector of national strategic importance in good times as well as bad.”

The letter was written by the Construction Leadership Council with support from National Federation of Builders, Civil Engineering Contractors, Build UK, Association for Consultancy & Engineering, Electrical Contractors Association (ECA), Home Builders Federations, Federation of Master Builders, British Property Federation, Construction Products Association, and Construction Industry Council (on behalf of 35 professional institutions and associations).

By Rob O’Connor

Source: Infrastructure Intelligence

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Government rules out rent breaks for tenants

The Government has ruled out introducing rent holidays during the coronavirus pandemic.

Crossbench peer Lord Taylor of Warwick had posed a written parliamentary question asking the Government if there were any plans to issue a rent break for tenants affected by the coronavirus as part of its package of measures amid the virus outbreak.

But responding on the Government’s behalf in the House of Lords, Baroness Bloomfield of Hinton Waldrist, appeared to rule this out.

She said: “Emergency legislation has been taken forward as an urgent priority so that landlords will not be able to start proceedings to evict tenants for at least a three-month period.

“As a result of these measures, no renters in private or social accommodation need to be concerned about the threat of eviction.

“As such, the Government does not believe a ‘rent holiday’ is necessary at this stage.”

The National Residential Landlords Association (NRLA) has backed the Government’s stance, adding that the buy-to-let payment breaks on offer to landlords should also benefit tenants as it should only be used where renters are having trouble making payments.

Ben Beadle, chief executive of the NRLA, told EYE: “The Government has been clear.

“The buy-to-let mortgage holiday is not a green light to all tenants not to pay their rent.

“It enables landlords to provide flexibility where tenants are genuinely struggling to pay their rent as a direct result of the coronavirus outbreak.

“A comprehensive package of measures has been put in place to support incomes, including increasing the Local Housing Allowance and the Universal Credit standard allowance to support tenants to continue paying their rent.

“This should be accessed as much as possible before any talk of deferring rent payments.”


Source: Property Industry Eye

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Can you still invest in UK property during the coronavirus crisis?

Never in the history of the UK property market have we seen such a turnaround in sentiment. In January UK house prices were rising after the Conservative election victory and the expected resolution of the Brexit furore which had been dogging the country for the best part of four years.

Bank of England data has indicated that over 73,000 new mortgages were approved in February – a six year high which is now looking relatively meaningless as an indicator for UK property investment.

March will NOT be reflecting such positive sentiments: according to forecasts from Zoopla, we can expect a 60% decline in residential property sales in the months ahead as the entire UK residential sector goes into deep freeze. For those planning to buy UK property as an investment, especially overseas buyers watching the pound plummet against other currencies, the big question is how to get into this market while it is so cheap?

At the time of writing, the UK is in lockdown with the government advising buyers and sellers to avoid moving. It also means that it is extremely difficult if not impossible to arrange property viewings.

Housing stock still available for property investors

According to life tenancy specialist MacBeale, there is still housing stock available for investors who are looking at houses purely from an investment perspective. However, these are agreed deals which were negotiated prior to the coronavirus arriving in the UK.

Life tenancies are long term investments where the owner of the property is able to acquire it at a considerable discount, but is not able to actually live in it until the life tenant has died or gone into permanent care. They already have considerable discounts attached which are still larger than any discount that could be achieved from the current economic circumstances in the UK.

“All the existing stock price will remain unchanged as the formula for the discount is based on age against open market value,” explains Paul Beale, Director with MacBeale in the UK. “We are already looking to get new property via the secondary market from banks and insurance companies. These won’t be new life tenancies created from the open market, rather they will be existing stock which will be brought back to market.”

Beale thinks that UK house prices are currently holding steady as there are few forced sellers. This may change depending on how long the lockdown continues and its consequent negative impact on the British economy, with knock on impact felt in UK housing prices in Q3-4. With sterling now very weak, however, he reports increased interest in UK property again from overseas buyers, especially from East Asia. “We see this trend continuing,” he adds.

Overseas investors will also be aware that the latest UK budget has introduced a 2% surcharge for foreign buyers of UK property, which will take effect next year. This, coupled with a weaker pounds, is creating a fairly small window of opportunity for anyone living abroad looking at UK residential property as an asset class.

Source: The Armchair Trader

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Bank of England extends emergency liquidity measure

The Bank of England said today it would extend an emergency liquidity measure, the three-month Contingent Term Repo Facility (CTRF), to run until the end of April and it would also hold a one-month CTRF operation each week until 1 May.

The Bank reactivated the facility last week as part of its attempts to keep financial markets running smoothly during the coronavirus crisis.

“The Bank will continue to monitor market conditions carefully and the operation of the CTRF remains under review,” it said in a statement today. “The Bank stands ready to take additional action if necessary.”

The Bank said the move was “a further precautionary step to provide additional flexibility in the Bank’s provision of liquidity insurance over the coming months”.

It said CTRF operations will run in addition to its regular liquidity insurance facilities including the Indexed Long-Term Repo and Discount Window Facility.

Other measures the Bank has taken to tackle the coronavirus-triggered economic crisis include cutting interest rates to a record low of 0.1 per cent to help pump liquidity into the economy.

It has also ramped up bond-buying, pledging to purchase £200bn more debt.

The Bank’s new governor Andrew Bailey took over the top job earlier this month at a time of economic turmoil across the globe.

The economic paralysis that has followed in the wake of the coronavirus outbreak has sent stock markets crashing and left many companies and their workers on the brink.

By James Booth

Source: City AM

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Commercial property rents predicted to slow with lease terms expanding

Latest research by various property consultants and experts indicate that rent levels are set to slow this year and lease terms on new deals will move out.

In the UK, the introduction of measures to restrict movement to try to slow the spread of coronavirus will cause significant disruption to activity in the short term and 2020 UK GDP forecasts have been slashed to -1.4% from +1% only a month ago. There is huge uncertainty around the duration and impact of current measures and a further worsening of the outbreak and financial stress could see GDP fall by 2.5% this year.

Research by Colliers International points to investors developers and landlords expecting that there will be little rental growth whilst lease term incentives will be moving out.

Gerald Eve notes: ‘Like all commercial property sectors, there is an expectation that industrial and logistics tenant defaults will increase through 2020 as cashflows are impacted, but this will also depend heavily on government intervention and the nature of industrial occupier activities.

“While all occupiers will experience short term impact, the scale and duration will vary greatly across industries.

“Many tenants are struggling with cost pressures and are already requesting monthly payment plans or rent payment holidays, and these are being looked at on a case-by-case basis to assess genuine need. Industrial and logistics occupiers have not benefitted from the recently announced relaxation of business rates liabilities and other tax credits, with the 12-month business rates suspension currently only for retail and leisure sectors.”

Property consultants and experts are lobbying for business rates cut across the board not just for retail and leisure.

However, once things return to ‘normal’ it is expected that rent levels and lease terms will bounce back.

Source: Logistics Manager

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Mortgages and coronavirus: UK property market grinds to a halt amid lockdown

Coronavirus has ground the UK property market to a halt, with most mortgage lenders suspending most new mortgages, and some even suspending remortgaging. Property transactions are becoming increasingly difficult with every link in the property selling chain affected, from estate agent appointments to property evaluations and viewings.

Property sales that are at contract exchange stage are legally allowed to go ahead to the completion stage, although everyone is being strongly advised to delay completion for up to three months. Channel Four’s Kirstie Allsopp advised in an interview with the BBC that ‘what is legal and what is compassionate’ are not necessarily the same thing under the circumstances, and urged everyone who is able to do so to speak to their seller and conveyancer and delay the move.

Where does that leave prospective home owners who were hoping to find the home of their dreams this year? All may not be lost: the first thing to do is to speak to your prospective lender or intermediary as soon as possible to gauge what options currently remain open. Lloyds and Barclays have both said that they still will lend to buyers with a deposit of 40 per cent or larger, and it’s possible other lenders will follow suit.

Some evaluations and viewings may be possible to carry out via video, so phone the estate agent that’s advertising the property to see what’s currently possible. Expect everything to take much, much longer, but remember: the restrictions are temporary and even if you’re not able to go ahead with a house purchase right now, it’s still worth speaking to the estate agent about the property market in your chosen area, and to a mortgage specialist.


Source: Real Homes