https://soundcloud.com/user-633998792/uk-commercial-property-investment-forecast

You can read the IPF’s recent Consensus Forecast here and contact Pam Craddock to take part in future forecasts.

Rory O’Hagan, director of Assael Architecture and Ed Fowkes, development director of Prosperity Capital Partners discuss building trust in the build to rent sector, with the podcast hosted by Andrew Teacher. Listen below and don’t forget to follow us on Soundcloud for more podcasts.

https://soundcloud.com/user-633998792/building-trust-in-btr

Read the CRE Lending Report here.

Join us for this year’s RESI Convention, the largest residential property event in the UK, on September 12-14 to learn about all the latest developments from the UK housing sector. Buy tickets at www.resiconf.com

https://soundcloud.com/user-633998792/resicast-changing-the-way-with-live-with-build-to-rent

Join us for this year’s RESI Convention, the largest residential property event in the UK, on September 12–14 to learn about all the latest developments from the UK housing sector. Buy tickets at www.resiconf.com

https://soundcloud.com/user-633998792/resicast-mixed-use-the-changing-face-of-britains-town-centres

https://soundcloud.com/user-633998792/disruption-in-property-finance

Ten years on from the collapse of Lehman Brothers, banks and regulators have reined in their behaviour but as part of their drive to reduce their risk are now funding less property projects by smaller developers, potentially exacerbating the housing crisis.

Banks are still prepared to lend to the big, listed builders and developers but, with their new reduced risk appetite, are more reluctant to lend to small and medium-sized firms due to the perceived risk.

“Banks have learnt their lesson but have probably over-corrected, especially in terms of investing in riskier activities such as property development, which has led to a void in developments,” says Parul Scampion, co-founder of new online property investment platform propio.com. “We want to unblock some of those lending streams that have closed, which have meant that small developers haven’t been able to build as much as they could have.”

“There were a lot of lessons for everyone to learn after ,” said Peter Cosmetatos, the CEO of Commercial Real Estate Finance Council Europe (CREFCE). He added that “property is highly cyclical, which mean you need to be careful how you manage leverage as a borrower and as a lender you need to be careful as to when you are lending during the cycle. During the last cycle everybody got this wrong. Lenders lent a great deal into the peak and were left licking wounds and dealing with legacy books for many years after the peak. It wasn’t just lenders who went off the rails, regulators fell asleep at the wheel.”

This overcompensation has led to a funding blockage which could have implications for the ongoing UK housing crisis and the government’s ambitious housing targets of building 300,000 new homes a year.

“Finance is a utility and we need to build houses in this country. There might be risk associated with development, but as long as the reward is appropriate it’s a good thing. Otherwise, we will not be able to address the acute shortage of housing,” said Parul Scampion, co-founder of Propio.

In the past smaller developers would have picked one of the many high street banks as their lender for a project but today – in response to tighter lending by most banks – a number of challenger banks, bridging finance firms and crowdfunding platforms have emerged to fill the gap and disrupt the lending industry.

“It’s a difficult world to navigate because now there are hundreds of lenders that you might go to. But now there is a real role technology can play in terms of connecting people looking for debt and those who could provide it,” Peter Cosmetatos, the CEO of Commercial Real Estate Finance Council Europe (CREFCE). “There is an opportunity for online platforms that can aggregate and show what offers are available, while such platforms can also be used by capital providers to find out what is available and where they can put their money.”

Scampion and Cosmetatos both agree on the need for further development within the UK market and that alternative lenders are vital for filling the development void created by the conservative lending regimes currently in place. Peter Cosmetatos noted that “the most useful thing the property industry does is building new stock for which there is an economic need. That is more important and more valuable than simple transactional activity when existing buildings get traded. That doesn’t generate value for the wider economy but new construction absolutely does.”

Alternative lenders are vital for filling the development void created by the conservative lending regimes currently in place.

Listen to the full episode of PropCast, and all out other episodes HERE.

Join us for this year’s RESI Convention, the largest residential property event in the UK, on September 12-14 to learn about all the latest developments from the UK housing sector. Buy tickets at www.resiconf.com

https://soundcloud.com/user-633998792/resicast-joint-victories

Join us for this year’s RESI Convention, the largest residential property event in the UK, on September 12-14 to learn about all the latest developments from the UK housing sector. Buy tickets at www.resiconf.com

https://soundcloud.com/user-633998792/resicast-profiting-from-prop-tech

So we looked at what the potential hit would be to firms from RPJ and estimated conservatively it would be over £700m just for SMEs. For large firms, REITs and the like, it would be several billions. Blackstock’s research was featured in the Sunday Telegraph.

Hate Mail

Skip forward a bit, and in the last month, we’ve secured two front page Daily Mail stories, including this one, on this as part of our collaborative efforts with various trade bodies. Debbie Warwick, the Iron Lady at the helm of Daniel Watney’s ratings team, was interviewed on Sky News (watch here) when this all peaked two weeks back.

Budget

Now, in today’s budget, the government has unveiled a bundle of things but not fully addressed the concerns around RPJ. It’s laughably done nothing to ensure more frequent revaluations – other than promising something may be announced before the next one (in 2022!).

See our full analysis further down the page. The FT’s afternoon coverage included a response from Debbie Warwick here.

On RPJ, the government issued a tonne of small print that arrived too late for many of tomorrow’s newspapers. It was a u-turn of sorts on the idea of a set margin of error, which is in some respects welcome. However, all the government has done is shift the issue to tribunals who do not want it shifted to them.

The key statement was published here and reads:

In light of the concerns raised, the Government has decided to amend the proposed approach…..on appeal the VTE will be required to decide whether they consider the extant valuation to be a reasonable valuation. This will now replace the original proposal of “outside the bounds of reasonable professional judgement…

In short, the RPJ rule has been devolved: the valuations tribunal (VTE) will now apparently decide whether a proposed valuation is “reasonable”. This replaces an intolerable solid margin of error with an intolerable ambiguity. Ratepayers still do not know what a “reasonable” valuation is or what tribunals may consider to be an appropriate margin of error for that. It could yet still be the difference between a small business being able to claim small business rates relief or a small business paying nothing in rates at all.

Daniel Watney ratings expert John Elcox says: “As usual, the consultation has been widely ignored, but RPJ had been toned down although not cast out entirely.”

Further analysis by Blackstock’s head of research Tyron Wilson

Most of the main problems haven’t been resolved

The government is trying to pull the wool over people’s eyes on business rates with attractive headline measures in the Budget, such as rates discounts for pubs. But the main problems with rates that have been raised over the last month haven’t been addressed: most importantly the reasonable professional judgement clause in the government’s planned reforms.

The clause means if a ratepayer has been given an incorrect valuation within a margin of error, it could be thrown out and they could be forced to pay the higher level for 5 years. It’s the equivalent of being forced to pay an incorrect income tax bill if it was deemed “close enough”. Thirteen trade bodies have united to say the government should withdraw this part of their proposals. The government has come up with a fudge and said it will leave it to local tribunals to decide the margin of error. It needs to be withdrawn full stop.

There still isn’t help for those who are due the biggest reductions but won’t see them for years

While there is some welcome support, such as the help for companies losing small business rates relief, the transitional system means those seeing the biggest reductions in their rates bills won’t see them for years. Any larger property seeing a rates decrease of more than 25 percent won’t see that complete cut at all by the time of the next revaluation in 2022. Many of these firms have been waiting seven years for a cut, having been paying rates based on a valuation at the peak of the market in 2008. These companies ought to see their rates cuts straight away, or at the very least see them in full sooner.

The government has pledged another consultation and more regular revaluations again

The government has been pledging more regular revaluations for years, and we have yet to see any action or proper funding to make it happen. We’ll believe it when we see it. The government cannot expect to be able to fob ratepayers off by repeating a promise it has repeatedly failed to deliver.