Roma Finance reports on their views and experiences in the first half of 2015 and takes a look at the rest of the year and what it holds for the bridging finance sector.
It’s been a busy six months, with property and the building and financing of it taking centre stage both at the general election and in the media. For the first time I can remember, people got animated when talking about tax, politics, housing shortages and rent bubbles.
This is a good thing for the bridging sector as it highlights the speed and flexibility of short term lending for acquiring, renovating and renting out flats and houses. So let’s take a closer look at the first half of the year in these areas.
Scott Marshall, Operations Director at Roma Finance, comments below on the five key points that will determine the shape of bridging lending in the next six months.
1. The Election Factor – It’s over now, but the effects of that eventful night on 7th May are still being felt in the property market. We saw the housing market slow prior to the election as the property world waited with bated breath to see what would happen with tax and regulation depending on the outcome. It looks as if though, things are now bouncing back for bridging. However, the property auction market seems to have a little way to go to recover back to last year’s levels. According to EI Group, lots offered and sold fell by 20% in May compared to the same month in 2014, whilst total raised fell 10% to £422.8m. Lots sold was still a healthy 76.5% though, indicating there is still demand in the auction rooms and for bridging finance for landlords to acquire properties quickly.
2. Budget on 8th July – Not all good news for Landlords With buy to let mortgages accounting for 15% of all mortgage lending, George Osborne has looked closely at this market and introduced some measures that landlords will have raised their eyebrows at. Firstly, interest rate tax relief will be cut to basic rate tax in the next few years. He also slipped in an increase to Insurance Premium Tax from 6% to 9.5%, which will affect landlord property insurance premiums. But for those renting rooms then tax relief increases to £7,500. However, there was no mention of Permitted Development Rights, new house building or incentives to build new affordable houses. That was quite a surprise. There is a property planning announcement on Friday, so maybe some of these will be covered then. There was good news about inheritance tax thresholds which will increase to £500,000 per person, so a married couple will be able to pass on assets worth £1m, including their family home. Many have been concerned that the IHT rules haven’t kept pace with the property market, but these changes bring them back in line. Hopefully this will mean more liquidity in the property market and the specialist lending sector will have new opportunities as a result.
3. UK House Building – Certainly there is greater confidence in the construction industry since the election, but there is still a massive demand for a limited supply. There will be policies for greater use of public land and brown field sites for building, and many private land owners will see their asset value rise for potential house building programmes. Private developers will also benefit, providing they can get their hands on suitable land. This is where bridging finance can also help in the purchase and the development of the land.