- Right to Manage – The Outcome (Part 5)
- IPD Residential Index – 10 years old
- Where is the Residential Investor Market?
- Goodbye MIPIM, Hello London
- See you at MIPIM
- MIPIM in the Online World
- Retail property vacancy rate up to 14.5%
- Swap Rates put Pressure on Cost of Borrowing
- Social Media and the Private Rented Sector
Early last year we started the Right to Manage process for a scheme where Young London manage all the privately rented units, with the remainder occupied by the owners. The freehold is owned by The Consensus Group (part of the Vincent Tchenguiz empire).
On completion in summer 2008, County Estates (one of the Peverel/Consensus Group companies) was appointed to be the managing agents. As we had a good relationship with the developer we tended to deal with the developer for a year of so post completion rather than County Estates when there were any issues to deal with.
However in late 2009 we felt that the block could be managed better, both in terms of service and cost. We spoke with the managing agent Chainbow and worked with them to set up a Right To Manage company. My earlier blogs show how we went about this – you can read parts one, two, three and four here. Then, in the summer of 2010 when we had a resounding level of support, we served the appropriate notices on the incumbent managing agent. The response from County Estates was to challenge the notice. However, following some further communications, it was agreed that Chainbow could take over the block management on 1st January 2011.
It is a case now of not expecting all the issues of the past to be solved overnight, or for the improvements we want to be in place immediately. It is a case of being able to work with a company (Chainbow) who we can plan with, and further enhance the quality of the scheme.
Along with the other owners, we are pleased we went through this process. Although it takes sometime, we feel this demonstrates how a good asset manager can add value for the owners, and enhance the development for the residents. Landlords in general also recognise the importance of good property management, something we noticed in the results of our quarterly Young Index survey towards the end of 2010.
Earlier in the month I presented at a conference entitled “Residential Money – Funding to unlock development 2011“.
There was a strong array of speakers from Savills, GVA, Investec, Council of Mortgage Lenders and Santander to name a few. The conference was attended by 150+ senior executives from Banks, Developers, etc.
The day ran through the current state of play in funding. In summary there are only about five lenders worth approaching for development funding according to a number of the speakers. They are Barclays, Close Brothers, HSBC, RBS and Investec. Others may entertain a conversation, however, the banks are looking at cashflow of the project and the track record of those involved. Where you would have an advantage is if you have dealt with one of the banks before.
My presentation was entitled “The Residential Investor Market”. I started by running through the current dominance of the private investor in the private rented sector (PRS), risk/returns of investing in the PRS and the demographic changes in the next 20 years which will have a huge impact on housing demand.
I then showed how investors in the PRS are looking at the asset class as a long term investment. I talked through the different investors in the market, and how Young Group are looking at raising money to buy land so we can build more stock for the PRS.
The slide below gives a summary of my presentation, and also an overview for the whole day.
Next up, I am on the panel on Wednesday (16th March) at the IPD Residential Index Launch. This will be the 10th year IPD have issued the index, and will be interesting information. Let me know if you wish to attend.
I am flying out early on Tuesday morning with our Director of Communications, staying in an apartment (well studio) on Rue d’Antibes for two nights, then returning to London on Thursday night.
As a company our focus is the private rented sector (PRS) in London. So why do we go to France, meet people who generally work within a few miles of our offices in the West End, talk about London business and then fly back to the place we have been talking about for 3 days in France?
I am sure this is a question many people ask. However, you could ask that of many conferences you attend. I presented at a conference last Thursday about investment in the PRS, and it is going to presentations that make MIPIM worthwhile for me. Attending sessions where for example the Mayor of London, Boris Johnson, will present why investors should be coming to London. This helps see how London is viewed from overseas (London is an international city and helping it retain such a global appeal is imperative).
It is also the networking opportunity where we share our views and learn from our peers. At an event such as MIPIM attendees are very focused and want to come away with a better perspective in a changing market. This year I have decided to generally not have individual meetings with people I know and could meet for a coffee locally, rather I will go to events where there will be a good mixture of senior executives. I also want to ensure I have time to go round the exhibition where there are quite literally hundreds of exhibitors; it is often fascinating to see how something operates in a city thousands of miles from London that uses some aspects of what we practice at Young Group or Young London.
The event in my diary I am most looking forward to this year is the British Property Federation / Real Service roundtable. The theme is to discuss where the property industry will be in the year 2020. The event is being covered in Property Week, and if you have any thoughts on this subject then please feel free to leave a comment below.
On top of this, Cannes is a lovely place to visit and there will be some enjoyable hospitality. This will be the fifth year I have attended and I always return to London having learnt a lot.
MIPIM used to be an event in Cannes that lasted three days. Its no longer quite as simple as that – there are unofficial events occuring beforehand, MIPIM-related talk on twitter and interactive resources appearing online . Below is a quick rundown of some of the best content and events happening now to get you in the mood for Cannes.
6 Days, 85 Riders, 1500 km. The Cycle2Cannes website provides more information about the history of the event and live tweets, commentary and photos as the riders cycle from London to the South of France. You can donate here.
MIPIM Preview magazine is 92 pages long, and provides a mix of interesting features about property across the globe and finance, including a piece about Nouriel Roubini, the economist who predicted the current financial state of play. There is also a rundown of some of the events happening in MIPIM itself next week.
This interactive MIPIM floorplan does exactly what it says on the tin. Search by either building or company name and receive very thorough results!
Estates Gazette have compiled an interactive MIPIM preview magazine. Featuring video content as well as text, its fun and informative. Main features include programme highlights and photos of real estate projects completed worldwide.
Stacey Meadwell, otherwise known as @EGStaceyM, is compiling a list of the best MIPIM tips. From suncream to flat shoes to travel kettles, its a MIPIM-related thread that’s fun to keep your eye on.
Property Week have created a special international edition looking at global real estate, in preparation for MIPIM. With news and analysis alongside several lengthy features, pages 99-101 display comparative infographics about property professional’s finances and happiness across the globe.
I arrive on Tuesday – looking forward to seeing you then!
Last week I was on the panel for a debate at Linklaters offices regarding the latest retail vacancy figures from the Local Data Company (LDC). It showed that vacancy rates in retail space had risen to 14.5%. The debate was entitled “Terminal Illness or Gradual Decline?”.Vodpod videos no longer available.
Retail Conference, posted with vodpod
The main summary was:
- Retail vacancy rates have risen 2.5% nationally since the last survey (12-14.5%)
- We are seeing a continuing separation of the south vs the north
- Large centres are suffering more than small ones (4.5% rise in vacancy rates for large centres)
- The retail market has reached the point of no return; the current levels of vacant units are here to stay
My role was to bring a residential perspective to the issue and specifically to see if residential could take up some of the empty space. The issue with residential taking up the space is both one of planning classification and surroundings – would you want to live in the middle of a parade of shops?
I am not a planning expert, however, to change from retail to residential is not straightforward. Clearly, where there is a parade of shops you could not put a residential unit in the middle of it. However, the upper parts could be converted to residential. This has occurred over the years more and more, especially as many shops have storage offsite or equipment centralised (eg Dry Cleaners have equipment away from the retail unit).
You also hear a lot about pubs that are converted into small blocks of flats – this does seem to be continuing. Also, the ‘local (corner) shop’ which often are unable to compete with the supermarkets are being converted.
However, the results are showing that it is the large centres that are experiencing the greatest vacancies – these I suspect will find it the most difficult to convert units to residential. Geographically, there is a North / South divide, with the North experiencing higher vacancies. Again, it is the South which seems to have the greater requirement for housing.
To see more details go to the LDC website, which also includes footage of the event.
A guest blog from Jane Reeves, Portfolio and Finance Consultant at Young Group
Over the past weeks, two noticeable trends have emerged in the mortgage market and we have seen that:
Higher Loan-to-Value (LTV) mortgages are returning to the market
For borrowers with limited deposits, it’s worth noting that the number of available mortgage products at 85% LTV has almost doubled over the past year to 560 (up from 310 in February 2010) and average rates for higher LTV loans have fallen, see below for a current example 80% LTV mortgage:
- 80% Loan-to-Value Fixed Rate Residential Product
- 2 year fixed rate of 3.98% (currently the lowest on the market)
- For residential purchases or remortgage
- Available up to 80% LTV (lower rate of 3.35% available at up to 65% LTV)
- £995 Arrangement Fee
- Free valuation and legal fees on purchases and remortgages
Fixed rate mortgages rates are increasing
Latest figures from Moneyfacts Group show that 2, 3 and 5 year fixed mortgage rates all reached a 6-month high this month. The cost to lenders of raising funding on the swap rate market has soared in recent months and they are passing on this cost to borrowers.
Recent reports also suggest that a base rate rise could happen sooner than previously thought and any rise in base rate would push mortgage rates higher, so borrowers looking to fix their repayments should act sooner rather than later. Indeed, borrowers who have delayed the decision to commit to a new deal will now find themselves having to pay higher monthly payments. On a mortgage of £150,000, a 0.50% increase in rate would add £42 per month to a borrower’s repayments, and with no signs of swap rates starting to fall, the likelihood is that mortgage rates will rise further.
In this light, the following current residential mortgage example looks extremely competitive:
- 65% Loan-to-Value Variable Rate Residential Product
- Variable mortgage rate, currently 2.99%
- For residential purchases or remortgage
- Available up to 65% LTV
- Booking fee of £199 (payable upon application)
- No arrangement Fee
- No valuation or legal fees on purchases or remortgages
- No early repayment charges
It may be Base Rate discussions that dominate the headlines, but Swap Rates are the ones to watch…