Say it quietly but Q1 2013 has seen an increase in both Investors returning to the market and a continued increase in property prices.
I’m not here to talk of ‘green shoots’ but there has been a genuine positive movement in the property market, whether that be trading businesses looking to buy their premises or investors looking to expand on their existing portfolios.
Market statistics and general media coverage would still indicate that the UK economy has been somewhat flat and has been static for quite some time. However, according to the latest Halifax House Price Index, House prices were 1.2% higher in the first quarter of 2013 than in the final quarter of 2012. Home sales increased by 5% between January and February on a seasonally adjusted basis, and sales in February were 10% higher than in February 2012, according to the latest market figures.
Base Rate is still at a historic low, with many economists predicting this will remain unchanged for the foreseeable future, which coupled with quantitative easing strategies continuing to be upheld and inflation 0.8% above the 2% target, means that deposits held in the bank are not achieving the interest return once received and in some cases making a net loss.
Many people are now looking to alternative means to make their cash work for them, with the share market returning to pre-recession levels, but also returning to the property sector; refinancing existing assets or investing into residential and commercial property, using their funds to earn an on-going return from surplus rents, but more importantly benefit from capital growth that is still being seen in the property market.
Whilst the message is a positive one, it is important to note that accessing funding from lenders remains tricky, market information suggesting that the number of mortgage approvals for house purchases fell by 5% between January and February. This highlights the importance of speaking to the right lender for the right application. You often hear that you only get one chance to make a first impression, the same can be said when applying for a mortgage. It is important to initially identify the best lender for each and every case, but having identified that lender, ensure that the application is presented to them in the correct manner.
Persuading lenders to actually part with their money of course remains the challenge but, as this remains our core activity day in and day out, we maintain up to date knowledge of all commercial lenders’ policies and ensure our expertise in financial analysis and presentation remain both robust and current allowing us to sell the funding requirements to lenders. Our business volumes also overcome the issue of lender contacts, in fact several lenders spend time with us every week effectively pre-underwriting cases before formal submission where necessary.
Investment funding remains available up to 75% for the right properties, covenants and locations. Commercial and mixed investment properties remain popular, despite banks and other mainstream lenders remaining cautious in their outlook, especially where there are only short term tenancies. Following the emergence of new lenders to market it is now possible to obtain up to 30 years interest-only on mortgages for most investment property types.
Commercial mortgages to trading business are still possible to 80% without additional security. Purchase of offices, commercial/industrial units and retail outlets for occupation by clients’ own businesses continue to show good demand, 100% still available for the certain professions.
Commercial tenants buying the freehold of the property they are currently renting, and upon which they are receiving a genuine discount against value, can obtain up to 100% of purchase price on a long term commercial mortgage at a competitive margin over bank base rate, with no bridging finance required.
Commercial rates now start at just 3% over Bank of England base rate for the right applicant and the right property.
The leisure sector continues to be challenging but funding is still available for well-located profitable businesses having experienced operators, with up to 75% funding available.
Bridging finance remains popular for speed, for example purchases at auction, with the competitive market resulting in rates currently as low as 7.80% per annum. It is also commonly used for short term property refurbishment proposals where an exit-fee-free deal is needed – funding of this type up to 84% of value remains available in some areas.
Solutions and opportunities for you
Omega continues to offer ‘whole of market’ solutions for all types of commercial finance and ‘difficult’ residential investment cases, providing access to all 80+ active commercial lenders.
New and returning-to-market lenders continue to talk to us, we saw several new sources of commercial funding open their doors to us last year which not only gives more choice to borrowers but is also resulting in more competitive funding packages being available.
We remain committed to ensuring each and every funding package negotiated for our clients is always the best possible deal available to meet their specific needs.