Newsletter September 2007Buy-to-let sector remains buoyant
Borrowers took out 171,800 new buy-to-let mortgages, worth £21.2 billion, in the first half of 2007, according to CML data released today. By the end of June, the number of buy-to-let loans outstanding had reached a record 938,500. The value of outstanding loans totalled £108 billion - also a record and an increase of 14% on the second half of 2006. Buy-to-let lending now accounts for 10% of mortgage balances, compared to just 3% five years ago.
The number of loans taken out in the first half of this year was 3% lower than in the second half of 2006. But over the same period there was a modest 2% growth in the value of new buy-to-let lending, driven mainly by higher property values.
Although the rate of growth of the buy-to-let sector slowed in the first half of this year, it was stronger than in the wider mortgage market, in which the value of lending declined by 4%. As a result, buy-to-let lending accounted for 12% of all advances in the first half of this year, the highest proportion seen to date.
A strong rental market, in which landlords are reporting rising rents and shorter void periods, helped ensure that buy-to-let arrears remained lower than in the wider mortgage market. The number of buy-to-let mortgages in arrears of more than three months rose modestly to 0.63% from 0.58% in the second half of 2006. But the figure remains significantly lower than in the wider mortgage market (1.06%). Possessions of buy-to-let properties also nudged upwards to 0.08%, from 0.06% in the second half of 2006. Again, however, possessions were lower than in the mainstream mortgage market (0.12%).
The typical maximum aggregate loan that lenders were prepared to make to a single investor increased to £2.5 million, reflecting rising property prices and the continuing confidence of lenders in the sector.
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RICS UK Commercial Property Survey Q2 2007
Business demand for commercial property remained firm in the second quarter propelling rental expectations to a 6 and a half year high, while a geographical split has emerged in the retail sector, says RICS’ Commercial Property Survey.
13 percent more Chartered Surveyors reported a rise than a fall in overall demand, down slightly from 16 percent in the last quarter. Despite recent reports of an imminent retreat from the market as swap rates have risen, investor demand for commercial property assets is still strong and rising across all sectors.
A geographical split is emerging, however, in the retail market with investment and occupier demand in London picking up whilst declines were apparent across most other UK regions. The booming financial services economy has led to a break away of the London market as a confident labour market refuses to bow to rising interest rates in the Capital.
Strengthening demand conditions in both the office and industrial markets and a notable turn around in London retail have boosted surveyors optimism further with the outlook for future activity solid. A strong global economy and the ongoing recovery of the Euro zone are supporting the Industrial market with demand rising at the fastest pace in seven years.
The outlook for the market remains bright despite the negative gloom that has surrounded the sector in recent months. New enquiries to occupy commercial property rose at the fastest pace in over two years with the biggest step up in inquiries occurring in the industrial market.
Investor demand for commercial property is still rising, indicating that investors are not fleeing the sector in their droves due to yield differentials with other asset classes.
London in particular is showing a great deal of resilience as investors focus on strong rental growth prospects with near record highs recorded across all sectors in the second quarter.
RICS commercial property spokesperson, Ian McRae said: “Record rental expectations offer investors some comfort that continued growth will support returns. The global economy is supporting the commercial property sector and investor appetite for the asset class has not dried up.
“The London economy is pulling away from the rest of the market with commercial property dynamics showing a strong divergence in the capital, particularly in the retail market. Consumer spending in London remains strong but interest rates hikes have started to take affect elsewhere causing a slowdown in retail demand.”
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Mortgage lending hits a new July record, says CML
Gross mortgage lending reached a new record for the month of July, totalling £34.4 billion, according to new data from the Council of Mortgage Lenders. Although this is down by 1% on the £34,847 of lending achieved in June, it is 13% higher than the £30.6 billion lent in the same month last year.
Mortgage lending remains robust despite the five interest rate rises since last August. However, we have yet to see the full impact of higher rates. Lending is currently being fuelled by a large number of people remortgaging to better deals in case rates go any higher.
As we move into the autumn the cumulative effects of these rate rises will become more pronounced, and we expect this to feed through to lower levels of mortgage lending as the year progresses. We still believe, however, that we are on target to reach a record £360 billion of mortgage lending this year.
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