When a respected source of information such as Price Waterhouse Coopers high lights the growing distress in the Uk property market caused by tenants that are suffering in the current downturn in the market, we have to sit up and take notice.
We seem to read in the press each day of someone trying to talk up the market quoting examples of prices going up when the market is still falling and predicted to continue to fall until the end of the year. As much as we would all like to see property prices on the upward turn because we are all aware of what a positive property market will do to the economy.
It is not until we have a downturn in the market that you fully appreciate how much the overall economy relies on a healthy property market, because of all the linked trades and businesses that rely on the property market.
The housing market we hope will bottom out by the end of 2009 and start to make a recovery in 2010 having bounced along the bottom for a bit before going positive. The commercial property market has always lagged behind the residential market in recovery, and the banks will have to open the lending door to let some daylight in, rather than the glimpse that we see at present.
The intention to lend on commercial mortgages and business loans has to be more than a whispered promise we have to see touch and feel it before we can accept that the good times may just be returning, and it will be a long a and slow recovery to get back to anything like normal.
Michael J Alexander acommercialmortgage4you.co.uk
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( 2.9 / 102 )Despite all the rain that we have seen in the last two or three weeks I am still failing to find those green shoots of recovery that Alistair Darling had predicted were there and about to break through the soil of decline and negativity.
If the banks have noticed any change in the market then have not passed on this knowledge and current lending appears to be hard or harder than previously. Most of the lending that we are doing is to clients that the banks cannot find any reason to say no to, or we are looking at short term arrangements that will need to be reviewed when the commercial property market comes back into a positive position.
How long will that be, when can we expect to see commercial property and commercial rents starting to rise, not until late summer 2010 if the market and history tells us is correct. The commercial property market has always been behind the residential market both in terms of going into and getting out of recession.
We are spoilt for enquiries from willing clients who want to move into bigger and better premises, start up a new business or purchase an existing one. The one single thing that is holding up the dam from bursting is not little Tommie’s finger it is the lack of lenders willing to lend.
If we are going to get out of the downturn anytime soon we need the banks to open the doors and lend, anything else is a complete waste of time, confidence will not return to the market and Jo Public will not spend his money until such time as we feel confident about employment and being able to borrow money to change our car take a couple of holidays, have a new kitchen or buy a bigger house. Confidence the one factor that can change so much in our everyday lives.
Michael J Alexander acommercialmortgage4you.co.uk
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( 3 / 103 )Why when the banks are saying no no no to most customers are we seeing such terrible levels of service from our lenders, when with the current levels of lending we should have the most incredible levels of service ever.
Are the banks making the same mistakes as they made back in the early nineties when they got rid of staff by the bucket load and when business started to take a turn for the better they could not cope.
Why is that you may ask, well the highest paid went first to cut down on the expenses, and these employees had all the experience, and when you take that away what are you left with, a bunch of people with little or no experience being asked to take on responsibilities that they are not qualified to deal with, and no one to turn to for advice, will they never learn.
You can get rid of the worker bees, and replace them with more worker bees as long as the Queen bee is in place with her trusted Lieutenants the hive will function and run smoothly, and the quality will not suffer.
We have a lot to learn from our Bees, but try telling your bank official that, you may just get stung. Is it getting any better in arranging a COMMERCIAL MORTGAGES, BUSINESS LOANS, OR COMMERCIAL FINANCE. In short the answer is no, that one vital ingredient is missing its called confidence and there does not seem to be too much of it about.
The commercial and residential property markets are still falling, and opinions of how much and when it may stop are very much divided, but the fact is the market is still falling despite bits in the press that may suggest otherwise, and until this changes, confidence will not return.
It’s good when people try to talk up the market, but just because the estate agent wants to up the price it does not mean that the market has moved. We will have a long hard job trying to convince the surveyors that the market has moved, as they have long memories of being sued for advice given prior to the last recession, and that advice given in good faith put a lot of surveyors out of business, when the advice was questioned and comparables could not be found to back up the decision.
We are all wiser after the event and people in the industry keep records and files that would have been shredded in a previous life, PI cover is very expensive, and a claim would have a very hard impact on future premiums.
We have been down for a long time now and it is a long slog to get back to where we once belong, who said that ?. The market tells us to expect the residential market to recover first and we expect to bottom out by the end of this year and bounce along in the early part of 2010 before those much talked about green shoots of a positive recovery start to show in the spring/summer.
The commercial markets have always followed the residential markets, but we do not expect the gap to be as large this time around and some recovery by next summer is on the cards. It will be a very strange experience for advisers and brokers in the commercial market place to ask the banks/lenders for assistance in arranging a commercial mortgage, business loans or commercial finance and get the right answer first time around. I think a few glasses of alcohol may just pass our lips in recognition of the changing times, please god.
And do we remember when the lenders were pestering us to use them rather than that nice person next door. I hope that we will use our long memories and help those who have helped us to survive in very difficult circumstances, we will come out wiser but the scars may remain for some years to come. We do of course always have our clients best interests at heart when we consider which lender to use, but some have pulled the plug on clients when a little may have helped them survive, we should always look back before we look forward, or as Churchill used to say,The farther backward you can look, the farther forward you can see, wise words from a very great man.
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( 3 / 103 )We seem to be in that horrible grey area where commercial mortgages, business loans and commercial finance lending terms are not clearly defined, the banks are saying that they want to lend, but experience tells that this is not so. It’s almost as if special training had been given in an over night course on how many ways you can say no with out actually saying it. There may be special schemes set up to help the SMEs but how many clients have actually been helped by these schemes, I think that you may struggle to find any, let alone many.
Most clients are realistic and do understand that we are not in a normal market as most of them would have approached their high street Bank to receive the good news that they are not open for business.
The demand is certainly there and when the brakes do come off we are going to be flooded with clients who want to get on the lending bus as soon as possible. In London the commercial market is still fairly active but London being the capital attracts clients from all over the globe who still see the capital as the place to be and with the current depressed market there are some very attractive bargains both in the commercial and residential markets.
If we give the wrong signals out to the client they start to get enthusiastic, when they should not, and then they have to come back down to earth with a bang having spent money that they could well have saved. It is our current position that we should make the client fully aware of the current state of the market and what the market will consider as a possible deal.
If we concentrate on the deals that stand a reasonable chance of going through Where London scores every time is that many of the buyers come from abroad and are cash rich and are in a position to purchase without the need to raise a mortgage..
The Banks are still trying to tell us, and failing very badly that they are there to lend, but current experience tells us that nothing could be further from the truth.
Anything that is very very low loan to value with excellent income or trading accounts might just get into the starting blocks, but anything that is seen as risk you can forget it.
It’s not what we want to hear but why beat yourself up trying to get a case through when you know from day one it will not fit in the current market.
Rather than having a go at every deal that comes across our desk we should be selective and give more time to the clients with whom we know that we stand a very good chance of success and give more of our time to where it can be best spent and be more effective.
Unfortunately this is not a mission impossible market place where we can get the unusual and fringe cases through. By being selective and cherry picking what we know we stand a reasonable chance of getting past the dreaded credit committee, we can build on our relationship with our lenders and when times are better we can test the temperature of the financial waters and with a fair wind get back to normal from abroad and have the cash to buy and do not need to borrow to assist the purchase.
Although around the City of London you will see many vacant office blocks there still seems to be Cranes across the skyline which tells its own story, London is still very much alive even in this credit crunch.
It will be very interesting to see what happens to property prices when the financial markets open up with funding for COMMERCIAL MORTGAGES BUSINESS LOANS AND COMMERCIAL FINANCE, They should go off like rocket for the first year and then start to level off but in those first twelve months some clients will make a great deal of money
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( 3 / 102 )29th June 2009
There was a modest improvement in most regions’ economic data last week. But activity indicators remain at
extremely weak levels and are still consistent with an economic contraction across the developed world, especially
in the euro area. In the UK, the process of households paying down debt is getting into gear. However, this will
have a long way to go.
Data released last week showed that households have
shaved 11% off their personal loan balances since
February 2008, taking balances below £60bn for the first
time since 2004. Mortgage debt has also fallen, but by just
0.15% since its peak of £1.26 trillion in November. Since
mortgages account for more than 80p in every £1 of
household debt, reducing the near £1.5 trillion of
household debt outstanding is not going to be a quick
process.
Deposits grew only marginally in the first five months
of this year, by £326m, a somewhat poor performance
compared to the £15bn in the five months to May 2008.
Given the lack of incentive to save from low interest rates
and the need to pay down debt, this is perhaps
unsurprising.
Low interest rates are helping to stabilise the housing
market a little. Data from the British Bankers Association
(BBA) showed that mortgage approvals for house
purchase rose again in May, reaching 31K, the highest
they have been in over a year. Approvals for remortgaging
fell though, as the decline in lenders’ Standard Variable
Rates (SVRs) has lowered the incentive for borrowers to
refinance when current deals expire. It is unclear how long
the decline in remortgaging will last. Market swap rates
(used to price fixed rate mortgages) have risen since their
April lows, pushing up the cost of fixed rate deals. Despite
the increased costs, if they anticipate further rate rises,
home owners may be encouraged to take out fixed rate
deals.
More encouragingly, existing borrowers are benefiting
from lower interest rates. As a result, the Council of
Mortgage Lenders has reduced its forecast for
repossessions in 2009 from 75K to 65K. This is still more
than 50% higher than in 2008, but below the peak in the
last recession.
Signs of encouragement also came out of the US.
Durable goods orders jumped 1.8% m/m in May, after a
similar gain in April. Orders excluding aircraft and defence
are less volatile and give a better indication of companies
underlying investment intentions. This measure rose 4.8%
m/m, the strongest monthly gain since September 2004.
Investment is firming, but from an extremely low base. On
this measure, orders are still down 22% on last year.
Last week’s statement after the Federal Reserve’s rate
setting meeting was largely as expected. The Fed
confirmed that interest rates are likely to stay at their
exceptionally low levels “for an extended period", and that
it would continue with the asset purchase scheme in its
current form. In an effort to keep mortgage rates low, the
Federal Reserve is already committed to buying up to
$1.25 trillion of agency guaranteed mortgage debt and up
to $300bn of treasury bills. So far, the Fed is about half
way through this process.
The flash PMI for the euro area for June showed a
fractional improvement. The composite PMI, a good
early indicator of activity, rose marginally to 44.4 this
month, some way up from February's low of 36 but still
stubbornly below the 50-mark that would signal a return to
growth. The different pressures on the euro area mean the
performance of countries within the single currency area is
not identical. Germany is still reeling from the decline in
external demand that has knocked the wind out of its
export sector while countries like Ireland and Italy are
adjusting after large property bubble bursts and recent
sovereign credit rating downgrades.
Indeed, house prices in Ireland continued their downward
spiral in May matching the kind of declines we have seen
in the UK. Prices have dropped 21% since their peak in
February 2007 and now stand at the same level they were
in mid-2004. Low levels of demand and a supply overhang
suggest the market has some way to go before it reaches
a bottom. As prices have risen four-fold since 1996, while
incomes have not even doubled, affordability was
stretched. With a deep recession underway income growth
is unlikely, leaving prices to make most of the adjustment.
Finally, inflation in Japan hit a seven year low this
month. Consumer prices dropped 1.1% in June compared
to a year ago, in the fourth and steepest decline so far this
year. Deflation, a sustained period of falling prices, looks
like it has returned to Japan. And whilst it is not a pleasant
bed-fellow, it is a familiar one. In the last decade prices
have only increased in 29 months compared to a year
earlier, but have fallen in 85 monthS.
This data has been provided by kind consent of Alison Peacock of RBS Banking Group.
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( 2.9 / 101 )London at this moment in time is a very popular place to buy either in the residential or the commercial property markets, because as our friends on the continent have very clearly identified London is the hub of what is going on in the world and is a very good place to live or work.
The facilities in London are superb both for living and working with communication, travel, education and the social life, together with a very strong and attractive property market that although has been hit by the downturn is expected to make a very quick recovery before the other parts of the UK.
Buyers seem to be queueing up to find the bargins in the city as this is unlikely to be repeated in the forseeable future, and history tells us that this is every twenty years or so.Because so many of the buyers are from abroad who seem to be cash rich and the exchange rate is in their favour, mortgages are not on the shopping list, and they are able to exploit the buyers market while we just grin and bear it.
This activity will certainly help property prices to recover but until we can see the money tap turned on residential and commercial mortgages will remain in short supply, and the recovery will be that much slower as clients who are desperate to go forward, particulary in the commercial property market are unable to do so because the banks are not lending despite what they say, and the help from our government, commercial mortgages, finance, and business loans are in short supply, and until that changes we are all working with one hand behind our backs.
Michael J Alexander acommercialmortgage4you.co.uk
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( 3 / 123 )A swoosh shaped recession has been predicted by the MP for housing and planning, apparently the MP, John Healey said that a slow recovery from the very sharp downturn in the market, was the most likely outcome to the recovery of the UK economy.
It is also predicted that the global economy will shrink by 1% this year according to the International Monetary Fund, with the UK predicted to contract by four percent.
Well lets speak in our language, English, I have no idea what a swoosh is as I am sure most of the British public do not. Supply and demand is always the driving force behind the economy, and if the general are confident about employment and their general state of their finances they will spend money.
If there is a feel good factor among the population then it will not just be about buying a house it will be about changing to a new car, nice holidays and clothes, with some evenings out to eat or be enterntained.Its not rocket science, we have to feel good about ourselves and have confidence in our future.
Very sadly we do not have any of the above ingredients to bake our UK economy, housing and commercial property cake, because without the life-blood of our economy being available to business and residential clients, ITS CALLED MONEY, we cannot go forward.
The demand from people who want to move or buy their first home is massive, and business clients who want to expand, purchase new premises, or start up a new business, again is massive. Bur until the Banks start lending again, instead of finding reasons to say no. we cannot go forward, as the money supply is being strangled at source.
We do not want to return to the days of anything goes, because we will back here again sooner than we realize, and this downturn came so quick and has been so damaging to the confidence of the country in general.
Clients will have to accept that if you want to buy a house or a commercial property, you have got to put in some of your own money, and if it all goes pear shaped, you will suffer as well as the lender. When clients have to use their own money it focuses the mindset and the attitude to losing that property or asset is so different.
When we see a return to normal lending both in the residential housing market and in the commercial mortgage market, the floodgates of demand will ensure that we see year of real growth after which it should level off slightly before we see a pattern of year on year sustainable growth.
Michael J Alexander acommercialmortgage4you.co.uk
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( 2.9 / 123 )When one of our leading SHORT TERM LENDERS comes out with a very innovative way of asking the people in the Industry their views on market trends, regulation, service standards and what potential clients are looking for in a lender providing short term and bridging finance.
Well done Tiuta, it will be an interesting survey with some of the usual answers pay us more money for less work. But Bridging Finance has been our salvation in the mortgage market both for residential and commercial mortgages and I hate to think how many deals have been saved by the speedy intervention of the bridging facility.
As the market becomes positive it will be very interesting to see in which direction the short term market evolves, because to survive it must move with the times and broaden its market share.
With most of the banks on a go slow, or even slower, a new partner is required to take the mortgage dance floor by storm, and teach us a few new steps to get our clients where they want to be. We have been doing the slow waltz for far too long and now we need to break into a mortgage quickstep, and get this market out of the doldrums, and as Mick Jagger sung, I see a red door and I want to paint it black.
Michael J Alexander acommercialmortgage4you.co.uk
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( 3 / 122 )When a company of the standing of Savills makes a statement about the possible recovery of the commercial property markets we have to look and listen. Although Savills are not making any wild predictions about the current commercial property market, the indications they have found is that the development activity fell at its lowest pace since the downturn began in the markets in 2007.
This does not mean that we can break open the vintage champagne and get out the party hats, but it does show how desperate we are to find any positive signs in a market that has become doom and gloom, as values are still falling placing surveyors in an almost impossible position.
You want to be positive and value the deal up, but if it goes pear shaped who will point the finger and at whom. Once we get to the bottom of the curve, and start the bouncing process before we get into positive territory, surveyors will then have the confidence to start valuing up, but that comes with the confidence that a positive market will bring to the valuation table, and we are not there yet.
As we are all looking for positive signs of growth or recovery, the indications from Savills provide a tiny pin prick of light in a very dark sky, we just need to see a few more pin pricks of light and we can all start believing that maybe recovery and access to commercial mortgages, finance, and business loans is not that far away.
Michael J Alexander acommercialmortgage4you.co.uk
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( 3 / 116 )Commercial Mortgage Brokers are still looking for any chink of light at the end of the Money Tunnel that would signal a slight change in the lending attitude of most of our high street banks, who still seem to be looking for ways to say no rather than how can we do this one or help the client.
All the old horror stories of the grim early nineties come back when you look at lenders calling in overdraft facilities without any real reason, and placing businesses in a very difficult position.
The will is certainly there for most companies who want to go forward, but feel in the current market that they are working with one hand behind their back as the banks still do not appear to want to help unless they are unable to find any reason to say no.
This hardly builds confidence at a time when confidence is crucial to recovery, without which we will remain in the dark ages for a great deal longer than we have to. When the banks are willing to start lending businesses have to have the confidence to know that by investing in their business they can go forward. There is so much vacant office space in London at present which indicates that this area will take a very long time to recover, as companies are not prepared to pay the high cost of renting office space in the capital unless they can see a tangible return.
The return to normal lending is crucial to our recovery, and that pebble must be dropped in the pool of London to allow the ripples of good news to float across the country. When we can get normal access to commercial mortgages, finance and business loans just watch the business community take off with a smile on its face once more.
Michael J Alexander acommercialmortgage4you.co.uk
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