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Bank of England holds interest rates at 0.5 per cent

Although the Bank of England’s Monetary Policy Committee (MPC) has voted to hold interest rates steady at 0.5 per cent, it has also given strong hints of a hike in May.

The Bank said there had been “few surprises” since its last set of quarterly forecast last month, although it noted that inflation fell by more than it expected to a seven-month low of 2.7% in February.

The BoE raised the base rate for the first time in a decade back in November, taking it up by 25 basis points to 0.50%, citing inflation of 3% and the need to return the consumer price index to the 2% target.

Carney cited a robust global economic recovery and high inflation as the reason for the sooner-than-expected increase.

The Bank of England kept rates steady today but two of its policymakers unexpectedly voted for an immediate rate rise, in a statement that will boost investors’ confidence that borrowing costs will rise in May.

In addition, official data this week showing that British wages growth is catching up with overall inflation has cemented expectations of an interest rate hike to 0.75 percent in May.

Comments from Vlieghe and talk on transition follow Thursday’s Bank of England monetary policy decision, which was seen as providing confirmation that it will raise interest rates for a second time in May but lacking any meaningful signals of what might come after that. Last month the BoE forecast growth of 1.8 percent this year and next – well below Britain’s historic average – and last week government forecasts were gloomier, with Brexit dragging on the outlook.

McCafferty and Saunders said there was “widespread evidence” that spare capacity in the economy was largely used up and that pay growth was on the increase, presenting upside risks to inflation. The firming of shorter-term measures of wage growth in recent quarters and a range of survey indicators suggest pay growth will rise further in response to the tightening labour market.

All this accumulated economic data points to some easing of inflationary pressures following the crushing impact of the Brexit vote and the consequent hammering of the pound, pushing shop food prices higher.

The Organization for Economic Cooperation and Development forecasts annual growth of just 1.3% for the United Kingdom this year-a much weaker pace of growth than that expected in the U.S., Germany, France and Italy. In its February projections, the Bank of England said it expects inflation to remain above target for another year or two, supporting predictions for at least one more rate hike this year.

Ben Brettell, senior economist at Hargreaves Lansdown, says keep the champagne on ice for the moment.

In such exceptional circumstances, the MPC’s remit specifies that the Committee must balance any significant trade-off between the speed at which it intends to return inflation sustainably to the target and the support that monetary policy provides to jobs and activity.

Source: Click Lancashire

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Edinburgh’s property market tops growth in UK

Edinburgh’s residential property market saw higher levels of growth than any other UK city last year, a report has claimed.

The average house price in Scotland’s capital increased by 10.2 per cent in December 2017 compared to the same time the previous year, while the value of the housing stock across the city grew by £7.5 billion over the same period – more than any other Local Authority district in the UK as a whole.

However, the £2 million-plus market was at its lowest level since 2004, Savills’s Residential Property Market Report found, hit by the Land and Buildings Transaction tax (LBTT), which would see £198,000 added on to the price of a transaction at this level.

Prime transactions for property above £400,000 reached a record 1,733 in Edinburgh, 15 per cent higher than 2016. Transactions above £750,000 increased from 247 in 2016 to 274 in 2017, driven by the southern hotspots of Grange, Morningside and Merchiston, which accounted for a total of 377 transactions last year, overtaking the traditional million pound hub of the New Town.

East Lothian, however, saw the number of residential transactions rocket by 17 per cent and the Borders by 12 per cent. Faisal Choudhry, head of residential research in Scotland for Savills, said: “Scotland has witnessed its strongest market since 2007, with price growth now outperforming London. Values will continue to rise due to a lack of supply and strong city economies.

“In particular, Edinburgh’s residential market profile continues to excel. The lack of supply and strong domestic and international demand for property in the Capital is one of the main reasons behind a rise in prime values in Edinburgh City.” The number of new build transactions in Edinburgh increased by 30 per cent last year.

Some of the highest sales volumes took place in the suburban locations of Liberton and South Queensferry. However, the strongest growth in transactions last year was witnessed closer to the city centre, where experts said the redevelopment of the St James centre had attracted people towards the city centre.

Across Scotland, the million pound market was described in the report as having made “a remarkable recovery last year”, following a slow start to 2017. The high-end property market has been hit by the introduction of the LBTT in April 2015, however, Savills said the impact was beginning to lessen.

There were a total of 173 transactions of £1m-plus homes for the year as a whole with 117 taking place in second half of 2017. This compares to 167 in 2016 and 289 at the peak of the market in 2007.

Source: Scotsman

 

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Changing face of the real estate market

The market in real estate is in a state of evolution, with the rapid growth of quasi operational assets such as data centres and logistics centres, as well as the occupation of more conventional assets, such as offices, on more flexible terms. The varying nature of those business models means that a bespoke approach to underwriting a loan on those assets is often required. New structures are emerging which are a hybrid between “classic” real estate finance and leveraged loans.

Evolution of the real estate market

Technology and disruption have affected a number of industries in recent years. However, it is only very recently that they are having a marked impact on the real estate sector (and, by extension, the financing of real estate).

The ever-increasing need for data centres and logistics centres are the most obvious tip of the technological iceberg, but are only part of the story. Demand for real estate is increasingly moving to a shorter-term, more flexible and adaptive model in other areas. Mixed-use developments are on the rise. In the residential space, the WeLive model provides accommodation with communal mailrooms and laundry rooms that double as bars and event spaces, as well as communal kitchens, roof decks, and hot tubs. The turnover of tenants is far quicker than the industry is used to, with the flexibility to stay for just a few nights (the Airbnb model), or a much longer period.

Equally, the lines between residential and commercial space are becoming more blurred. The exponential growth of wireless connectivity continues to result in an increase in flexible working, and serviced office providers; this is now also feeding into developments combining living and working sectors. One example is the Barratt London and SEGRO collaboration on the former Nestlé factory at Hayes in West London, which envisages a two-fold development of the site; urban logistics warehouses and modern industrial space on one hand, and homes and communal spaces on the other.

In all cases, the demand is for more flexible spaces, both in terms of the need to accommodate mixed use, and more versatile (often shorter) tenancies which typically results in less predictable income flows. All parties investing in, or funding the acquisition of, real estate, will need to adapt to this new model.

Impact on market participants

The systemic change in the real estate market gives rise to some key issues for borrowers, in optimising the debt component of the capital structures used to finance such businesses. For lenders, the key is ensuring adequate protection when advancing funds into a non-traditional business model. The change also impacts on sponsors, who need to consider differing approaches, to fund their acquisition of real estate assets.

We have set out below some of the key issues that we have seen arising in recent deals, that all parties should be considering at an early stage, to ensure that the acquisition and financing of these non-traditional assets, can proceed quickly and efficiently.

Key issues – and some potential solutions

Rental income

As explained above, one of the main changes arising from the current market trends is the requirement for flexibility. The knock-on effect of that flexibility is, of course, the lack of reliable long term rental income.

The absence of a long term contracted income flow has a consequential impact on the underwriting value that can be attributed to these assets. In order to ascribe value, lenders will need to look to the track record of a business and consider covenants based on its historic EBITDA; an approach which is more common in hotel deals. Additionally, lenders will need to consider whether there is any value outside of the contracts the business currently has with its tenants/users. For instance, a lender may need to take into account whether it can have some degree of confidence that alternate tenants could be easily found (for example, based on the asset’s location) or whether there are viable, alternative uses for the space.

Owner and operator

One of the other key themes to emerge is the rise in the range of real estate assets which require active management and are owned and managed by the same entity. Historically, owned assets were managed by an independent 3rd party operator, giving the lender comfort that a reputable, qualified and economically stable external party was managing the asset which the lender was financing. However, the growth of logistics businesses, serviced office providers and similar market participants results in a more complex business model. As such, the health of the assets is increasingly dependent on the quality of the operator.

Where the identity of the operator is considered critical, lenders may wish to deal with this issue by incorporating key man provisions or adapting the change of control provisions in their finance documents. In more conventional real estate financings, change of control provisions focus on the identity of the sponsor. In some parts of the market, sponsors are seeking to agree deals on the basis that a change of ownership will not trigger a mandatory prepayment as long as the incoming sponsor is deemed to be acceptable. Where the quality of the operator can have a material impact on the economics of a deal, change of control provisions may instead state that a change of ownership is permitted provided that the operator remains the same. Additionally, key man provisions requiring that particular individuals remain involved in the operation and management of the business are likely to become a feature of financings of these sorts of assets.

Flexibility

For assets where active management is crucial to performance, such as flexible workplaces and mixed use residential spaces, owners and operators will require finance arrangements that allow flexibility in relation to management of the asset. Operators will be keen to ensure greater scope than is available in more traditional real estate financings. This is relevant both to the types of actions that can be taken in relation to the underlying property and how cashflows are managed. Key issues for borrowers will include ensuring their ability to undertake a wide range of leasing activities or development works, to keep up with client demand and remain attractive in their markets. Borrowers will also need to focus on their ability to utilise a sufficient amount of their cash flows to meet the costs of such activities.

These types of businesses will therefore have a need for working capital expenditure in a way that is not required in relation to traditional real estate assets. Lenders will need to be cognisant of these working capital requirements, and the associated costs. They should therefore consider having provisions regarding the use of cashflow by an owner or operator, and the determination of excess cashflow amounts, which are less restrictive than would be expected in more traditional real estate financings.

Recourse

Another consideration for lenders will be whether or not loans advanced in relation to these quasi operational assets will be made on a non-recourse basis. Conventionally, real estate loans were advanced on a non-recourse basis because a lender is able to take a view on the value of the underlying real estate, as well as its ability to generate cash flows. However, loans made in relation to alternative assets such as data centres are often advanced on the basis of the credit of a corporate group and its business as a whole, rather than in relation to a single real estate asset. This approach is often taken because it enables lenders to mitigate their risks by lending against the wider performance and assets of a business and consequently, having claims against a greater pool of assets.

Access to funding

Securing debt facilities for the acquisition of more non-traditional real estate assets may prove challenging for private equity investors, because of a lack of lenders willing to fund against this newer asset class. In particular, it may be difficult where there is insufficient data or performance history to allow more conservative lenders to underwrite these loans. However, as a result, there are also opportunities for alternative capital providers to finance these assets, as they will have more flexibility to consider structures and assets which high street banks will be constrained from funding and for which investment banks may not have the appetite.

“Hybrid” financing structures

We are seeing a growing prevalence of “hybrid” loans, which take many of the asset value preservation features from a real estate loan, and combine them with the protection – and flexibility – afforded by a leveraged finance model.

In conventional real estate finance transactions, preservation of the value of the underlying asset is typically monitored by way of LTV and forward looking, lease contract based, financial covenants together with regulation of the maintenance of the property and conduct of business activities. Conversely, leveraged finance transactions focus on profit generating business activity and rely on covenants that measure a business’ earnings and cashflow, in order to provide adequate protection for lenders.

Market participants will need to carefully consider how their financing arrangements deal with issues such as appropriate methodology and thresholds for establishing financial covenants, what constitutes permitted distributions, the determination of excess cash flow and whether cash sweeps or cash traps will apply. Ultimately, these loans will need to strike a balance to give lenders the protection they require whilst allowing borrowers to access the money needed to finance acquisitions and ongoing working capital requirements, as well as the flexibility needed to operate their business model.

Our recent experience with “hybrid” loan agreements has seen a number of new trends emerging. Some features that have hitherto been seen less frequently in the European market, such as sponsor level guarantees, are being introduced to give comfort to a lender, where rental income generation is less predictable. Cashflow flexibility is crucial, with borrowers receiving far more control over accounts generally than would be the case in a more traditional real estate financing. Lender control over disposal of assets is also reduced, with borrowers more frequently having the ability to reinvest the proceeds rather than applying such proceeds in repayment of their loans. A more flexible approach to taking security (both in terms of timing and the proportion of assets to be secured) is also a trend that we have seen, again more typical of a leveraged finance transaction.

We are also seeing borrowers achieving greater flexibility in terms of what constitutes permitted activities. Provided that excess cash (after debt service) is used, lender consent may not be required for asset acquisition and capital expenditure, as long as certain financial metrics are satisfied. Occupational letting activity might also be permitted, provided leases are granted on arms’ length terms and subject to the effect on rental income.

The evolution of the real estate market continues apace, and we therefore expect to see an ever-increasing number of these “hybrid” real estate finance loans in the future.

Source: Lexology

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Mortgage Debt On the Up as House Prices Stagnate

According to the latest figures collated by the Money Charity, the UK’s total stock of outstanding mortgage debt was increased from £1.32 trillion to £1.37 trillion in the year to January.

If this is spread evenly amongst the 11.1 million homes across the UK that have outstanding mortgages, it means that typical outstanding mortgage debt per household currently sits at £123,292.

By the end of January, the average mortgage interest rate was 2.53%, or 2% for new loans. This meant that the average household should be accruing between £3,100 and £3,300 in interest each year.

Figures from the Financial Conduct Authority show that out of mortgage lending in the last quarter of 2017, 60.84% was lent to cover 75% or of the property’s value and only 4% of lending was to cover over 90%. January saw over 24,840 mortgages approved in total which is a decrease of 5% from January 2017. The value of loans being approved also fell with the figure of £188,500 being a 2% drop from the previous month.

Calculations from the building society Nationwide show that house prices dropped by 0.3% in February but were still up 2.2% from the same time last year. According to Halifax the average house depreciated in value by £522 in February, which was an improvement when compared with the drop seen the previous month. Halifax also reported that, over the quarter, house prices dropped by 0.7% but rose by 1.8% year-on-year.

According to the Office for National Statistics the typical price for first time buyers in December was £190,722. This shows a year-on-year increase of 4.7% – no change from the previous month. UK Finance said that, on average, first-time buyers were forking out around £32,493 for housing deposits. This is 17.1% of the cost of buying a typical home and 122% of the average annual income. On average, first-time buyers were being lent mortgages that were 3.65 times bigger than their salary, at £142,000.

Source: Money Expert

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BoE future rate hikes will have little impact on UK property

The Monetary Policy Committee kept the Bank of England base rate at 0.5 per cent for March, but previously warned that due to inflation and strong economic performance, rates are likely to rise faster than previously expected.

Some economists are predicting a 0.25 per cent rise as early as May, with potential for another increase later in the year.

Against this backdrop, is now a good time to invest in residential property?

Yes, for three key reasons.

First, we expect the impact on house prices of small interest rate rises will be concentrated in more expensive markets where people need very large deposits and higher incomes to support higher mortgage costs.

We’ve already seen house price falls in parts of London and the surrounding commuter belt, and affordability pressures and other economic uncertainties could lead to further reductions.

However, the Mortgage Market Review to stress test new mortgage offers against higher interest rates provides significant protection against default and, crucially for investors, house price falls are not a consistent story across the country.

In contrast to London, we’re seeing house price rises across the Midlands, south west and some of the northern regions. We expect house price growth in these areas to continue, albeit at a slower rate, regardless of Brexit uncertainty and interest rate rises, as average earnings have kept pace with house prices, aiding affordability.

Second, when investing in residential property, rental income is as important as capital growth, if not more so.

Private rental income, in contrast to commercial property, has proven to be extremely resilient across all economic cycles.

Fundamentally, we all need somewhere to live and the UK has a serious problem with undersupply of housing.

The government has said we should be building around 300,000 new houses a year, but in the last decade we have not even reached 200,000 a year.

Help to Buy and changes to stamp duty for first-time buyers have largely failed to stimulate growth in supply.

Brexit will not change this basic problem: even if immigration were to fall, with a growing domestic population and increasing longevity, the number of UK households will continue to rise.

And with uncertainty around interest rates, more people may choose the flexibility of renting rather than buying.

A significant minority of rented homes fail to meet Decent Homes Standards, meaning landlords of high quality, modern homes have an increased chance of attracting good tenants.

These factors all point to continued demand for well managed private rental accommodation and the outlook for residential rental income remains strong.

And finally, residential property offers an important diversification opportunity for both capital and income risk.

As an asset class, it shows low correlation with UK equities, fixed interest and cash over the medium- to long-term, through a combination of lower volatility and different underlying drivers and provides a diversified stream of income compared to traditional sources, such as bonds or dividends.

It also has a different risk return profile to commercial property and greater liquidity due to residential’s smaller average property sizes and larger volumes of transactions. As every property is different, investment at scale in the sector can be used to spread risk across a variety of locations and property types, and a large number of tenants.

Historically, residential property has provided attractive returns and low volatility over the longer term, regardless of the economic cycle, alongside low correlation to other mainstream asset classes.

Changes in interest rates will not change these fundamental investment benefits.

Alan Collett is chairman and fund manager at Hearthstone Investments

Source: FT Adviser

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Property sales bounce back in all but one UK region as first-time buyers replace investors

Residential property transactions rebounded in most UK regions during February, HMRC data shows.

The taxman’s UK Property Transaction Statistics for February 2018 shows 83,230 sales last month on a non-seasonally adjusted basis.

This is an improvement on the 81,580 recorded in January and reverses two consecutive months of falls.

England saw a 3% increase on a monthly basis to 72,140, while Wales was up 1.8% to 3,790.

Northern Ireland saw a 14% jump to 1,950, while Scotland was the only region to see a fall, down 14.2% to 5,350.

However, on a seasonally adjusted basis, HMRC says the transaction figures are down 0.3% on a monthly basis to 101,010, down 0.7% annually.

Brian Murphy, head of lending for Mortgage Advice Bureau, said: “What we can interpret from the statistics is that the housing market is continuing on a steady course, with transaction numbers broadly unchanged on the previous month and only very slightly reduced on the same time last year.

“This underscores industry forecasts that the market will continue to perform at the same level this year with a relatively steady number of transactions at a topline level, although the mix of buyers is changing as we see fewer investors, but the slack being picked up at entry level by first-time buyers.

“Having said that, as we continue to see a diverging regional picture with some areas experiencing a significant upturn in buyer activity, this overall trend masks the fact that some towns and cities have seen higher than anticipated levels of buyer activity in the first two months of this year.

“This ‘two tier’ market is therefore propping up the more subdued levels of activity in London and the south-east, a reversal of what we’ve seen in previous years, and potentially an indicator of what we may see over the course of the next few months.”

* However, haart’s monthly report found that transactions were down in February.

The agency said that buyer demand surged 20% last month and was up by 14% on February last year.

It also reported a rise in viewings and a 15% increase in transactions in London.

But transactions generally across England and Wales were down, however, by nearly 7% on the month and by 3% year on year.

Haart also says that house prices at exchange are down 2% on the year.

All the figures are from haart’s own network of some 100 branches in England and Wales.

Source: Property Industry Eye

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Interest rates set to be held, but May hike ‘in play’ despite falling inflation

Policymakers are expected to keep interest rates on hold at 0.5% after inflation fell to a seven-month low, but experts believe a hike may still be on the cards for May.

The rates decision comes after official figures showed inflation falling to 2.7% in February – its lowest level since July last year – as the squeeze on household finances finally begins to ease off.

While inflation cooled more than the Bank of England expected, economists predict the Monetary Policy Committee (MPC) will still be keen to bring rates up to more normal levels after more than 10 years of record low borrowing costs.

Howard Archer, chief economic adviser to the EY ITEM Club, said falling inflation “should make little difference to the monetary policy outlook and we expect this week’s meeting to prepare the ground for the MPC to hike rates again in May”.

James Smith, an economist at ING, added that improving wage growth may also spur the Bank into action.

Office for National Statistics figures on Wednesday showed that wage growth lifted to 2.8% in the year to January, a rise of 0.1% on the previous month, and the highest since September 2015.

But it still failed to outpace inflation, which was running at 3% in January.

Mr Smith said: “Policymakers are increasingly focusing on wage growth, which has been showing signs of life recently, potentially suggesting firms are increasingly having to lift pay more rapidly in a bid to retain and attract talent.

“This, combined with the latest Brexit progress – which bolsters the Bank’s argument that the move to the post-Brexit world will be smooth, makes a May rate hike increasingly likely.”

Governor Mark Carney has already warned borrowers that rates will need to rise “somewhat earlier and by a somewhat greater degree” to get inflation back on target after stronger-than-expected growth in the economy.

Experts believe the comments last month paved the way for two rate rises in 2018, and another in 2019, which would see rates climb to 1.25%.

The MPC is expected to raise rates alongside the next set of quarterly inflation forecasts in May, according to economists.

However, this month’s meeting comes amid signs that the economy is also struggling to pick up pace.

Official figures showed the economy grew by less than previously thought, up by 0.4% in the final quarter of 2017 against the 0.5% initial estimate.

This means it has remained in line with the 0.4% seen in the previous quarter, while experts are pencilling in 0.4% again in the first quarter of 2018 as construction and manufacturing sectors struggle.

The powerhouse services sector continues to be a bright spot, unexpectedly reaching a four-month high in February, according to the most recent purchasing managers’ index.

Chris Williamson, IHS Markit’s chief business economist, said the services sector boost keeps a May interest rate hike from the Bank of England “very much in play”.

But not all economists are convinced over the rates outlook, with Samuel Tombs at Pantheon Macroeconomics saying the latest inflation figures “give the MPC reason to doubt the case for raising interest rates again as soon as May”.

Source: BT.com

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Modular Homes – The Solution To The Housing Crisis?

We continue to face a growing housing crisis and industry experts are divided in their opinion of potential solutions. Modular Housing is one such potential solution. Modular Homes are built in “modules” off site at factories and then transported to and assembled on site. They are placed on existing on-site foundations and their assembly involves clipping the modules together, connection to pre-existing services and the practical completion of exterior and roof structures.

Arguably the biggest advantage with Modular Housing is the speed and efficiency in how it can be delivered. Modular Homes are much quicker to construct in comparison to traditional build homes with some developers offering practical completion on-site in as little as two weeks. The homes can be assembled with relative ease and do not face the same challenges as the traditional housing market such as the shortage of skilled workers (caused by an ageing workforce and an exodus due to Brexit) and the British weather! They are also considered much more cost efficient as the modules are assembled on a production line. Modular Homes are also considered to be much more energy efficient leaving a much smaller carbon footprint. Cheaper, greener homes assembled quickly- all good news, right?

Whether Modular Housing is the solution or part of the solution to the current housing crisis, remains to be seen and there are some challenges. Whilst designs on a production line may seem like a good idea many registered providers and developers have their own requirements and bespoke housing offering and this may require investment in an off-site production facility. Berkeley Homes, which currently builds 4,000 homes a year, is planning to create a factory in Kent where up to 1,000 houses and apartments will be produced annually which will then be craned on to sites. The regulatory position is also far from established. Modular Homes require Building Control sign off but inspectors have to take extra precautions when signing off. Building Regulations continue to change. The evolution and technology seems to be moving much faster than the regulation. This uncertainty poses an issue for the already risk averse finance industry. There is also a misconception that Modular Homes lack the quality of traditional homes due to the “cheap” build cost. It is also unclear whether all new home warranty providers will embrace Modular Housing. Some people have also argued that the UK is not equipped to deal with and deliver Modular Housing unlike some of our European counterparts and we lag behind in terms of production and delivery.

Despite the challenges, there is growing interest in Modular Housing and there is no doubt that prefabrication is undergoing a revival. As well as Berkeley, several other developers including Legal and General and Urban Splash have launched prefab’ homes divisions. Wolverhampton Homes, in partnership with Wolverhampton City Council will be delivering 23,000 Modular Homes as part of a pilot scheme. Also, recently, Tide Construction submitted a planning application for a 546 unit modular high rise in Croydon. Does this mean that the housing industry is changing? It is too early to say but whatever happens, industry professionals will be keeping a keen eye on such pilot schemes.

Source: Mondaq

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Mismatch between housing costs and earnings in Brighton and Hove highlighted by new report

The South East Home Truths 2017-18 report by the National Housing Federation estimates that the average home now costs almost £395,000 in the Brighton and Hove City Council area.

This is 14 times the typical local salary, the report said, making home ownership impossible for many.

The report also said

• The cost of renting privately has added to the pressure on people’s income. Average monthly rents now stand at £1,292 swallowing up around 55 per cent of private renters’ income.

• A significant number of housing benefit recipients are in work – 27 per cent – yet are still unable to afford their rent. This is higher than the England average. This shows rents across the region are increasingly unaffordable.

• One of the reasons for the growing crisis is down to a large shortfall of new housing. From 2012 to 2016, an estimated 5,700 too few homes were built in Brighton and Hove.

Housing associations in the south east built more than 6,000 homes in 2016-17 and started a further 8,700.

And more than 4,800 of these starts and completions were classed as being for “affordable” home ownership, including shared ownership.

National Housing Federation external affairs manager Dave Smith said: ‘The housing market has seen a relentless rise in the gap between house prices and people’s salaries.

“Brighton and Hove is no exception. Attaining a mortgage is increasingly unrealistic and private sector rents make saving up that bit more difficult.

“As this year’s Home Truths report shows, it is more important than ever for the sector to be able to deliver homes that are truly affordable.

“If we want to get serious about ending the housing crisis, we need to start looking at unlocking more land so we can build homes faster.”

Hyde Housing’s operations director Tom Shaw said: “The delivery of more homes of all types in Brighton and Hove is important to meet demand.

“Hyde has set up a partnership with Brighton and Hove City Council to significantly increase the supply of new affordable homes in the area.

“We are investing over £60 million to build 1,000 new low-cost homes for sale and rent specifically for local people earning the typical local wage.”

Councillor Anne Meadows, who chairs the council’s Housing and New Homes Committee, said: “Building affordable rented new homes for local people is a key priority for Brighton and Hove City Council.

“There is a huge demand for housing in the city and, with the supply of low-cost rented homes not keeping pace with demand, we’re having to look at innovative solutions to build much-needed new homes.

“The joint venture is the biggest commitment to affordable housing in the city for a generation.

“Alongside our New Homes for Neighbourhoods programme, building new council housing, it will deliver decent and genuinely affordable homes for local residents and create a significant number of jobs and apprenticeships.”

Source: Brighton and Hove News

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Bank of England’s BTL changes make it harder to get a mortgage

Six months after the Bank of England’s (BoE) latest attempt to cool the buy to let market, almost two thirds of landlords (63%) who are aware of the changes say it is now harder to get a mortgage.

The changes, which come from BoE’s Prudential Regulatory Authority (PRA), were introduced in two stages last year. The first stage in January 2017 required lenders to apply an interest cover ratio (ICR) of 5.5% to all products with terms of less than five years. More stringent stress tests were also introduced for all buy-to-let mortgages, with monthly rental income typically needing to cover 125 percent of mortgage repayments.

The second stage, introduced in September 2017, requires portfolio landlords, i.e. those with four or more buy to let mortgages, to undergo specialist underwriting processes when seeking new buy-to-let mortgages. This includes additional affordability tests with providing supporting documentation such as business plans. It also means that underwriters must look at the landlord’s entire portfolio when considering new applications, not just the property needing to be financed.

According to the National Landlords Association’s (NLA) latest research, 63% of landlords aware of the changes believe it makes obtaining new buy-to-let mortgages more difficult. This increases to 70% for portfolio landlords, i.e. those with four or more buy-to-let mortgages.

Similarly, almost half (48%) of landlords aware of the changes believe it has slowed down the finance process and 46 percent believe the changes reduce the range of mortgage products available.

Richard Lambert, CEO of the NLA said:

“These findings show that the PRA’s changes seem to be greatly affecting the ability of landlords to find new finance and increase their portfolios. Given that the private rented sector now makes up 20% of the housing market, it is vital that professional landlords are incentivised to continue providing good quality affordable housing to those who need it. This appears to be achieving quite the reverse.”

“Landlords looking to add new properties to their portfolios need to be conscious of the new requirements. We suggest talking to your mortgage broker or bank before committing to any new property.”

* NLA Quarterly Landlord Panel – Q4 2017 (814 respondents)

Source: Property 118