Peter Atherton, mortgage consultant at Ashton FS
David Stringer, adviser at Threshold Finance
Gary Smale, mortgage consultant at Knight Knox
Philippe Fabri, financial adviser at The Key Associates
Jonathan Moore, director of Maxwell Moore
Cate Bauer, commercial director of NBC Property
Nikki Pope, consultant at Nikki Pope Limited
Wayne Kennedy, founder of Kennedy Mortgage Services
Neil Wyatt, head of intermediary distribution at Platform
Richard Harrison, senior product manager – mortgages at Platform
Richard Daibell, national account manager – intermediaries at Platform
David Winter, north region account manager – intermediaries at Platform
Mortgage Solutions team:
Victoria Hartley, group editor, Mortgage Solutions (chair)
Owain Thomas, features and contributing editor, Mortgage Solutions
Lisa Jayne Frankel, event coordinator, Mortgage Solutions
Private dining room, Malmaison Hotel, Manchester city centre
Manchester has long been a vibrant city, but in a determined effort to lessen the London-centricity of the UK it has become a focal point for development.
And while Manchester appears to be a hotspot, this wave of building and growth is spreading-out across the north.
Given this context, the evening’s debate started with a discussion of what each of our attendees was witnessing in their corner of the North West.
“The key factor for me has been the movement of people like the BBC and developments like Salford Quays because it’s taken the big peaks and troughs away,” revealed one participant.
“However, I’m a little concerned that in some areas of Manchester we’re suddenly noticing there’s more competition, and prices are going up ridiculously.”
Another noted that: “You don’t have to go far for it to be very affordable. Some of the really rough areas are beginning to smooth out. If you come from London, then Manchester would look affordable, but for many people it’s still not that affordable.”
New build needs
All this new development also means one other thing – a large focus on new build, with some brokers noting it could often be the overwhelming majority of their business.
But there were issues raised by this situation.
One of the bigger concerns was that properties were often sold before many would-be buyers even had a chance to view them, with a high onus on buyers who could access finance readily.
“The person with cash or quick finance or bridging, they’re winning, but my clients can’t afford it – so there are pockets in Manchester that are disproportionately over market price,” explained one broker.
“And by particularly focusing on say large corporations or landlord type purchasing, that’s changing the landscape completely. It’s all about the speed of finance, because sales are just mad.”
Another agreed: “Yes, selling has not been too much of a problem, but getting enough properties to put on the market has been.”
In many cases this trend appears to be in undeveloped or neglected areas of the city where long-time landlords are moving on. And as a result it seems a potential property bubble may not be limited to the South East.
“They’re going for dumb prices. By the time the finance has gone through on our side, the price has changed five times,” continued one participant.
This incidence of prices rising several times before completion is not limited to only the big city.
Another participant noted it was becoming widespread in surrounding smaller towns and suburban areas.
“There’s something called ghost gazundering,” the broker said.
“Basically, if your client is not quick enough the market is really moving. I had a client with a limited company buy-to-let, we had the mortgage offer, it was just problems on the legal side slowing it down. And then the vendor said they wanted another five grand.
“In recession times people would only complete if the price was reduced, now the market has turned so much that vendors are saying ‘It’s taken so long, the market has moved up’, that just in a matter of three months they want another few thousand pounds.”
And this is prompting a growing preference for other lending options.
“You’re seeing the emergence of bridging cash when that situation occurs,” another broker added.
“Obviously using bridging finance is quite prevalent as the vendor will try and increase the price and the client might be at peak affordability on loans already.”
One of the biggest concerns in the London housing market for the last few years has been the volume and power of overseas buyers and how they are distorting the capital’s market.
It appears this is moving up the M6 and now hitting hard on developments in Manchester, with brokers reporting high profile buildings where only a tiny minority of flats go to local buyers.
One broker explained: “The company I work for sells all over the world with probably only 2% of buyers being Mancunians, if that.
“The reality is the new build flats being put up in Manchester are sold off plan globally. So, from a mortgage standpoint there is almost no mortgage business there. They are being occupied in fairness, but the demand for rental flats far exceeds the supply.”
This lack of financing diversity in the development market is also putting lenders off even though flats are not sitting idle, as there is insufficient competition from new-build lenders willing to take on this density of risk exposure.
“I’ve already come across certain postcodes with lenders saying: ‘We’re not lending because we’re the only ones that will be lending on that development’,” said another attendee.
“So there’s however many flats but only one person wants to buy it to live in and lenders won’t lend on it because all the other flats are being sold in cash.”
This point prompted a discussion about whether Britain was still seen as a safe haven for foreign property investors and, if as appears so, should the government be intervening to ensure local residents are given priority for buying in new developments?
This is a policy already being enacted by London mayor Sadiq Khan, but would it be necessary and work across the rest of the country?
Said one broker: “It’s no good only doing it in London if the voice of the industry is saying that actually London is migrating north, whether that’s to Manchester, Birmingham, Leeds or wherever.
“Is that something that as a government, as an industry, we say that’s got to be across the piece?”
Another broker was firmly supportive of intervention: “That’s actually what’s happening. The buyers we’re seeing now are the ones that were buying in London that can’t get the yield.
“Instead they will buy a £150,000 flat in Salford Quays while the equivalent was £450,000 in Canary Wharf.”
This led on to the final subject of the night, the impact of buy to let reforms, specifically the portfolio rules entering in the autumn.
Brokers acknowledged that these changes would likely result in the creation of successful “juggernaut” portfolio landlords, as smaller operators pulled out.
This concerned several attendees, who noted that the changes had not been well researched by the Conservative government and could do more harm than good.
However, there was also the spectre of particular circumstances surrounding Manchester, that one broker warned could have severe knock-on effects.
“I’m already finding there’s a lot of interest up here from people based in the South because there’s a lot of them who like buy-to-let, who like renting property, but the maths doesn’t work down there.
“There’ll be a disproportionate amount of landlords coming to the North and one of the long-term paradoxes then is that one of the best ways to regenerate an area is to have owner-occupiers.
“So, you could systemically condemn parts of the North to being only attractive to landlords and push out the owner-occupiers – and we’ve seen that kind of pressure in local pockets of Manchester already.”