You are here: Home - Specialist Lending - Bridging -

Slowdown in residential property prices an opportunity for specialist lending – Hersch

by:
  • 14/06/2018
  • 0
Slowdown in residential property prices an opportunity for specialist lending – Hersch
House prices saw the biggest dip since 2012 in April with May’s figures only slightly better, according to the Royal Institute of Chartered Surveyors (RICS) Residential Market Survey.

 

Although this is heavily influenced by London falls, the South East and South West of England are also negative.

There are modest gains in some parts, with the strongest levels shown by Northern Ireland and Scotland, however these are from a lower base.

Stock levels on estate agents’ books have remained flat and are not much up on the all-time low set in February. And rental growth expectations are subdued.

Likewise the Halifax house price index showed a drop of 3.1% in April, the biggest monthly fall since September 2010.

It was partially due to a reversal of the 1.6% gain in March, but also showed how uncertain the market is, even though there is still year-on-year growth of 2.2%.

 

Can’t sell properties

The combination of dampening price growth expectations and the lack of property on the market seems to have discouraged sellers, primarily those who are seeking to up or downsize.

Tightening of long-term mortgage availability is also having a negative effect.

A survey for The Times by Hamptons International Estate Agents indicated that the number of properties owned by buy-to-let landlords has dropped by 88,000 in the last two years.

This has been more than compensated by the fact that the number of accidental landlords has grown by more than 230,000, mainly due to the inability of these individuals to be able to sell their properties for acceptable amounts.

The problem up to now is that the government’s attempts to make individual property investment less attractive has not led to the availability of more affordable homes and in many localities, people who would like to own their homes simply cannot afford to do so.

 

Making improvements

Why is this an opportunity for alternative finance, including bridging? There are many reasons.

Rather than buying a new home, upscalers are making improvements to their current homes. Short-term finance, including second charge bridging loans can be used to fund this, with longer-term mortgages obtained when the work is completed.

Smaller property investment firms could use short-term funding to develop or renovate rental property.

Where a property is currently not habitable due to neglect or lack of facilities, bridging finance could be used to fund the cost of renovation.

This would enable owners to either sell or let the property once it was ready for habitation.

 

Bridging cover the cost

A survey by MTF found that 57% of 84 property investors struggled to find mainstream funding for buy-to-let property.

A large number of these were able to fill the funding gap with second charge loans or bridging finance.

Accidental landlords may consider transferring property to corporate entities to avoid the taxation issues which they face, rather than offload property at unacceptable prices.

This should only be done after obtaining professional tax advice, but if they do decide to do this, bridging finance could cover the immediate costs of following this route.

Longer-term finance could then be obtained once the transaction has been completed.

The demise of buy-to-let investments has been predicted since the significant tax changes were first mooted in 2015, but continuing low interest rates and predictions of a major stock exchange adjustment have reinforced investors’ faith in property.

 

There are 0 Comment(s)

You may also be interested in

Bridging

Keep up-to-date with all the breaking bridging and short-term lending news and analysis, from regulatory changes to product innovation and inside market knowledge. Take a look at our broker and lender case studies showing short-term finance in practice.

Commercial

Find all the news, opinion and analysis for property finance brokers specialising in commercial and semi-commercial mortgages, alternative and development finance for commercial investments in residential projects.

Second charge

Stay up-to-date with the latest news, analysis and opinion on the secured loan market as it evolves into a mainstream finance option following European regulation on 21 March 2016.

Complex buy-to-let

Whether it’s a complicated asset or a complex customer, you’ll find out all the breaking buy-to-let news in this section. From limited companies to portfolio landlords, student lets to a House in Multiple Occupation, we’ve got all bases covered with our up-to-the-minute news, analysis and opinion.

Mortgage Solutions

Find all the breaking news, analysis and industry comment on Specialist Lending Solutions' sister site, Mortgage Solutions
Read previous post:
A house surrounded by falling percentage symbols
Foundation ups loan limits as Kensington raises LTVs – buy-to-let roundup

Specialist lender Foundation Home Loans has increased borrowing limits across its buy-to-let range and Kensington Mortgages has increased its buy-to-let...

Close