Monthly Archives: May 2012

Property developer delivers solid results as site valuations stabilise?

Land Securities which is the market leader for property development has announced solid results for 2011 to 2012. Although the company has a land bank for London office developments it has been a net seller of land and sites so it holds cash. It has a number of flag ship developments but has yet to secure suitable tenants for some of its developments. The company carries a reassuringly low level of debt with loan to value of less than forty percent. As with many similar companies and property investment companies they have suffered from reduced portfolio valuations seeing £0.3 billion wiped off the value of their commercial property portfolio. Site values have suffered for this very reason because property investment companies and property developers companies who are holding land banks. They are looking more to maintaining or improving their balance sheets than they are to acquisitions. This has lead to a moribund market in some sectors of the land and site market. With potential commercial property development sites harder to shift as potential developers have greater concerns over the medium term availability of suitable commercial tenants. With property portfolio valuations having suffered falls commercial property companies are mindful of building or developing commercial properties only to see them languishing on their balance sheets as non income generating units. That is potentially tying up valuable cash reserves or even worse carrying expensive development finance or bridging finance loans and charges.

Property market experts follow rise in higher loan to value funding

The number of mortgages offering home buyers with only five percent loan to value mortgages has more than doubled in the last twelve months. Experts in the property market know that mortgage availability is the key to a more buoyant property market. With mortgage offerings at this increased level, first time buyers, property investors and property developers are circling barging properties with their minds on increasing capital values. It has been many years now since property prices have increased and there are many years of pent up demand from first time buyers and those looking for new build properties. The restraining factor for many home buyers is simply the size of their deposit. With just a five percent increase in loan to value it can open up the market to many more potential home buyers. It is now possible to obtain a ninety percent five year fixed deal for less than six percent. Property developers and house builders are also carefully following the availability of larger loan to value mortgages. It makes new build properties more saleable and can assist in driving up GDV’s and giving primary and secondary development funders more confidence to lend. With architects, development funding brokers and planning consultants reporting increased activity it is a sign that those in the know at the top end of the development sector are more confident of short term market conditions. With most developments taking between one and two years to complete depending on the site and there complexity those who are lining up site now will be ideally positioned to maximise profits in a more active market. Those who hold back for more definite signs of improvement and stability will be faced with more robust land values and less motivated site vendors.

North South divide widens in property market

The north of England has suffered more in the down turn of the property market with the reduction in property capital values and negativity in the job market key factors. With a down turn in construction, manufacturing and government cuts hitting jobs in the North hard couple this with reduced property values. This has lead to thirty percent more property owners falling behind with mortgage payments in the north compared with their counterparts in the south of the country. The last eighteen months has seen more than fifty percent of mortgage arrears attributed to home owners in the north of England. The spectre of rising unemployment and increases in real term mortgage interest is forcing some property owners into mortgage arrears. The last ten years has seen job creation in London and the south east ten times that of other areas and this has increase property demand in London and the south east while decreasing it in the rest of England. It is estimated that eight and a half percent of all mortgagees are in negative equity in the north compared with only three point three in the south. This means that more buyers will be trapped in properties in the north that they can neither sell nor keep up mortgage payments if they have suffered a reduction in household income. With forty percent of all UK mortgages being interest only loans some in the mortgage sector have described the current situation of negative equity, rising unemployment and the mortgage funding drought a potential time bomb for some home owners.

Green building renovation companies fear start of green deal

Large energy providers have been amongst the growing number of organisations raising concerns over the government’s readiness to launch the new flagship green deal. Many in the industry fear that the complicated nature of the green deal will overwhelm many consumers and that may affect their willingness to buy into the scheme. The governments impact assessment has showed that it may well reduce loft installation by over 90% and have a huge impact on cavity wall insulation. The impact assessment is nearly three hundred pages in total and highlights the complexity of the green deal scheme. The government has set impressive targets for the scheme with a goal of upgrading 3.6 million homes by 2022. This would mean that a thousand green deal backed installation teams would need to carry out home upgrades every day. It has taken a full time team of 70 civil servants to prepare the scheme and many argue there has been little input from consumers and industry. There is a great deal of people and building contractors who are passionate about green building techniques and green renovations. With full green renovations introducing air source heat pumps and mechanical heat recovery systems as well as insulating and other energy efficient measures, they take a more holistic approach. The increase in air tightness needs to be matched with adequate ventilation and air quality, using positive input ventilation units and other methods they do not just focus on the thermal efficiency of the building envelope. This is often a big issue for private and social landlords who find tenants are less likely to vent windows or dry washing out side for reasons of either security of their busy lifestyles. This organisation that polices the domestic ventilation industry is BPEC.

UK’s largest house builder reports strongest spring sales for five years

Barrett Developments is Britain’s largest homebuilder by build volume and has announced not only its strongest sales for five years. It has also showed an incredible increase of over 25percent of private reservations. Barrett developments have embraced recent government backed schemes directed at the home building and development sector. The company has used both the NewBuy scheme which uses indemnities to back 95% loan to values mortgage funding and the FirstBuy scheme that focuses on shared equity purchase. There are also indications that the company will be able to push twenty developments through the Get Britain Building scheme. The lack of new build developments has kept new build properties in relatively short supply in comparison with demand. This has helped to maintain and stabilise prices for new build houses particularly in the south east. Barrett developments has also benefited from its social housing builds that will account for over twenty percent of all the new builds that are due for completion by Barrett Developments this year. Like many of the other large house builders Barrett developments has been active in site and land acquisitions, which are a key indicator of future performance and margins. Like many house builders and property developers they keep a watchful eye on the mortgage markets. Many in the industry believe this is the largest restraining factor on the development and property industry and that the market will ramp up towards average annual build rates as the end buyer’s credit availability improves.

Government continues to push for development of brownfield sites

The housing minister Grant Shapps said that he has identified surplus public land with enough potential to build over 100,000 new build homes. This will be good news for David Cameron who set targets for brown filed sites to be redeveloped before 2015. Two of the sites identified as prime for residential redevelopment are the Old Princess Marina Hospital in Northampton and the former Ministry of Defence base in Foxhill in Bath. With the government being one of the UK’s largest landowners it makes sense that the government provides some of its unused land as redevelopment sites for brown field development. The minister was confident of hitting government targets and said that they had already indentified brown field sites that could be redeveloped to provide plots for over a hundred thousand new homes. It has also been rumoured that there are sites available for over three hundred and fifty thousand new builds to be built as affordable housing in the capital alone. It will be interesting to see how these developments are funded through a public private joint venture development or through straight sales of the plots both options will see the treasury coffers swelled with both land sales values and potentially planning gains or joint venture developer’s profits.

Commercial property landlords mourn the loss of the 25 year full repair and insure?

There are predictions that a report to be released next year will show the average lease period has now dropped to 4.8 years. The market has dropped into two tiers with primarily commercial property still able to command long lease periods. The secondary and tertiary commercial property owner forced to accept shorter lease period more in keeping with tenant and business requirements. With over three quarters of all leases signed in 2011 shorter than a five year period this shows a year shaved off lease periods since the prerecession times on 2007. The report draws from over 100,000 of three main commercial property sectors of retail, commercial and industrial properties. It also showed increases in rent free periods with nearly a third of all new retail leases including rent free periods. This is bad news for the speculative development sector that is looking to attract tenants to add favour with their development funders. It is not surprising that there are plenty of break causes available to add to your short lease and your rent free periods. One of the biggest losers in this market is not just the landlords but the investors and pension companies that often back commercial property investment. The uncertainty of short term lets and break causes make commercial property less attractive to property investment companies looking to purchase income security for their investors.

Tips for restoring period cottages

When you undertake the restoration or renovation of a period cottage you should look to embrace the simple nature of cottage architectural style. Cottages are usual small and simple properties and when you undertake a renovation you should consider the buildings original style and features. Cottage renovations can carry details externally or to original architectural features like fire places but alterations should be kept simple and contemporary. Many people do not realise that a lot of the detailed features that appear on cottages around the UK are often added in the late part of the 1800’s or early 1900’s. During the arts and crafts period of British architecture history even simple cottages may have been treated to a detailed timber and stone porch or some fancy detailed facia boarding. The key to a good cottage renovation is to use the correct original materials with great care to the craftsmanship of your conservation building specialists. It is no good matching up beautiful hand caved stone detail and then jointing it badly with thick mortar joints and mortar staining to the stone work. The details of the finish on lead work to canopies and porches can make or break a good period cottage renovation. Each trade or craftsmen have their own professional body. With period lead works guided by the sheet lead association guidelines, so do your home work and find out what questions you need to ask your contractor. The most important item that any contractor will need to bring to the project is a genuine passion and enthusiasm for period property. You will sense a contractor’s passion and love for their work and their opportunity to leave a legacy of beautiful craftsmanship behind them for future generations to enjoy.

Secondary commercial property, best value in 20 years?

A report from the Investment Property Databank (IDP) has show both a small drop in overall values and a large difference in primary and secondary commercial property capital values. The report showed that commercial property values are now more than 30 percent below their peak values in 2007. This gives canny investors some serious opportunities to snap up bargain properties as landlords struggle to refinance some five year deals. The sheer lack of equity in many commercial property portfolios makes renegotiating finance a challenge for many commercial landlords and property investment companies. With those that had the most aggressive expansion and acquisition policies struggling the most to agree fresh bank deals and covenants. The good news for the flagging new build development and construction sector is that more and more value sites and developments are becoming available. This is due to some properties no longer becoming commercially viable with site sales and redevelopment often the only option. Void commercial properties suffering from ever reducing capital values are prime pickings for creative development schemes. The redevelopment of many old pub sites is a prime example of this new wave of residential and commercial property developments. With speculative property development funding brokers reporting ever increasing interest and applications for speculative development funding. Although prime London commercial property values have recently risen by over thirty percent as the market understands it’s over correction. They are still 20 percent below their peak values in 2007, and the gap between prime and secondary commercial property values is now at its greatest level since the early 90’s. Those who know commercial property history will remember that those that expanded commercial property portfolios aggressively in the 90’s enjoyed stellar returns in the following decade.

Conservation building specialists contractors

When you are renovating a period building it is not just for your personal satisfaction you are restoring the past and also leaving your own mark on that buildings history. That is why people so often use the phrase sympathetic building renovations. It is important that you are sympathetic to the original architecture and features of the building as your alterations may remain for many years. It is equally important that your building contractor shares your passion for period building restoration and renovation. They not only need the skills of heritage building restorations they also need the passion and enthusiasm to complete a successful period building renovation. A good specialist building restoration expert will be both knowledgeable and a purists in their chosen field. Understanding what looks good and what does not, when extending existing buildings in conservation areas this passion is essential to create the best possible finish. Just allowing mortar joints to get a little too thick or window sections to lack the correct proportions can destroy the final finish. Even the untrained eye can differentiate between a quality building renovation project and one that has been completed with less care and attention to detail. It is the detail that is so critical to complete a successful development, even the same fittings or finishing’s can be added with very different effect. Good specialist conservation contractors really do take a great deal of pride in the satisfying work they complete, leaving a legacy of beautiful craftsmanship behind them for many generations to enjoy.