The summer is traditionally a quieter time for the property market, as people focus on enjoying the weather, often putting off thoughts about moving house until the autumn.
The latest HMRC figures suggest this trend has been further impacted this year by the current political uncertainty as residential transactions fell by 9.6% between May and June this year, that’s 16.5% down on last June.
However, despite these issues, the bridging market remains strong with many landlords choosing this as the best route to fund refurbishment projects prior to taking out buy to let mortgage finance.
Interestingly an increasing number of landlords are planning to buy property as a limited company in the coming year. Research by specialist lender Precise has found that 55% of landlords plan to use a limited company for any future purchases, an increase from 44% in 2018. Even those with smaller portfolios and considering the same route, with 51% of those with 10 or less properties planning to purchase as a limited company.
Using a limited company has the attraction of being exempt from the phased reduction in mortgage interest tax relief. Landlords can also offset the interest charges against profits, which are then subject to Corporation tax at 19%, rather than being liable for income tax.
Clearly the buy to let market is still continuing to evolve and grow, despite measures to suppress it, and pressures elsewhere in the market.
Peer to peer funding provider Lendy has gone into administration after a number of issues left it unable to continue trading.
Lendy operated as a web based platform, facilitating crowd funding loans for property purchases and development. Problems first came to light last October, but despite restructuring in December the FCA has now appointed insolvency practitioners RSM as administrators.
Since its launch in 2012 Lendy has facilitated £400m in loans.
With over £160m outstanding with at least £90m in default, investors have currently been left in limbo waiting to hear about the recovery of their funds. The administrators are now seeking legal advice on the status of investors, which will determine whether they will see their funds returned.
The FCA are now investigating the circumstances that led up to Lendy’s collapse.
With Lendy being the largest peer to peer platform to fail, experts are warning that other peer to peer lenders may soon face similar problems, leaving investors questioning the safety of future investments in the sector.
Funding Circle PLC has posted record-breaking originations of £683 million for the final quarter of 2018. This figure is up by 31% year-on-year with £522 million reported in quarter four of 2017.
The SME lender also boasted their total originations for the year of 2018 which stood at £2.3 billion, 55% up from the previous year.
This news follows the announcement that Waterfall Asset Managements would be investing £1 billion through Funding Circle’s platform whilst they also secured a £150 million partnership with the British Business Bank.
Bluestone Mortgages conducted a study which revealed that 34% of respondents, all of which were mortgage brokers, agreed that the specialist lending market will grow significantly over the next 12 months. 52% believe that lending will grow by at least £1 billion over just the next 6 months.
This growth is expected due to an increasing number of customers being unable to fit the traditional lending criteria’s and need more specialist and adaptable loans. This is added to by the growing number of self-employed applicants so it is vital that the market is able to adapt to this.
In 2018, London-based specialist lender, Fiduciam, had their strongest year to date after granting bridging and development loans worth £139 million. This year, they have plans to double their lending facilities to £250 million.
To support their new lending growth and other expansion plans, Fiduciam plan to hire 25 additional employees over the coming months, including; loan servicers, loan underwriters and case managers.
Fiduciam specialise in lending to clients in other European countries and launched their business in Spain, France and opened a new office in the Netherlands during 2018. They plan to launch into two other countries and to open two new offices during the course of 2019.
Amicus Property Finance PLC, who entered the bridging market in 2010, had been showing signs of difficulties since September 2017 when they announced that they would not be progressing with their banking licence. They stated that they would begin to undergo strategies to lower costs and work towards securing an investor to grow the business.
However, in early December 2018, it was confirmed that Amicus Property Finance halted lending after the Association of Short Term Lenders announced the suspension of the lender’s membership with them. The company went into administration on 20th December 2018 with Mark Robert Fry, Jamie Taylor and Kirstie Jane Provan appointed as Joint Administrators.
Although they are not able to continue lending, Amicus have stated that they will continue to support any facilities they already have in place.
It is currently understood that this hasn’t affected the other group businesses, Amicus Asset Finance and Amicus Commercial Mortgages, and for now they will continue to trade as normal.
70% of brokers believe that the demand for bridging finance has grown in the last 12 months, according to a recent survey of 200 brokers by InterBay Commercial. The majority (62%) expect this trend to continue over the next year.
67.5% of those who responded to the survey stated that one reason for the growth in the sector has been the increasing variety of products that lenders now have to offer into the bridging market.
With Brexit related uncertainty impacting on the property market, investors and those needing to complete sales are looking for fast and flexible solutions, making bridging the “go-to” option for an increasing number of customers.
Together, who lend out more bridging finance than any other UK Lender, have reported strong growth in their quarterly results. The group’s loan book reached a record breaking level of £3.01bn across their range of activities, which include secured loans, commercial mortgages, buy-to-lets, residential mortgages and bridging loans.
With over 4 decades of experience in the market, Together have seen continued growth in the quarter compared to the same period last year, growing their loan book by 27% compared to September ’17. With average monthly new loans of £137.5m and profit before tax for the quarter of £30.1m, the business sits in a strong position in the market.
Despite the uncertainties of Brexit Together report strong demand in the market and are confident in their ability to deliver on their ambitious plans for growth.
New lender, Interbridge Loans has entered the bridging market for the first time, offering a range of non-regulated residential and commercial bridging products.
Offering loans from £200,000 to £5m, with up to 75% LTV available, this new funding source will be available via brokers and intermediaries only. Interbridge are promising speed and reliability along with an ability to handle non-conventional deals.
Shawbrook Bank have released new data that reveals where the best investment opportunities in the UK are to be found in the buy-to-let market.
The research, which was undertaken by the Centre for Economics and Business Research (CEBR), found that, despite the various tax changes which have affected the buy-to-let market, investors can still achieve an attractive rate of return.
With the growth in house prices in London slowing, other regions of the UK are becoming increasingly attractive to buy-to-let investors, with the North-West and Manchester in particular leading the way. With average property prices in Manchester 43% higher than the rest of the North West and a growing population of students and employees from around the country, rental yields are very attractive. With a predicted rental yield of 5.4%, the North West leads the way nationally, followed by Scotland with 5.3% and Yorkshire and the Humber with 4.9%. Therefore the buy-to-let market can still offer good opportunities for the savvy investor.
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Last updated: 08 August 2019 | © KIS Finance 2018