It concludes that the UK has the highest absolute debt funding gap of $35 billion, followed by Spain at $26 billion, while Ireland continues to have the highest funding gap relative to its invested stock at 16%. Europe’s total outstanding two-year property debt gap is $182 billion and although DTZ estimate an influx of $75 billion of new debt from non-traditional lenders over the period, and present a theoretical solution to the remaining funding gap, they conclude that the gap is highly unlikely to be filled.

The situation is exacerbated by the requirement for $500 billion of real estate re-financing required over the next two years.

It is hardly any surprise that investment activity in the UK is down 10% this year and, as DTZ conclude, there is a long way to go before the unwinding of property debt is completed.

The excellent research note can be found in the report titled Money into Property 2012

As the site is so close to the city’s main retail offering, it will benefit from the huge amount of car parking in the immediate vicinity, and is only a short walk from the Highcross centre.

A particularly interesting aspect of the deal is that the vendor requires the creation of a new ground lease linked to the open market rental value of the completed retail or mixed use units.  Not particularly interesting under normal circumstances but this does have the effect of keeping the site value at very reasonable levels and in our opinion creates an exciting opportunity for retail/mixed use developers.

For further information follow:  Vaughan Way Leicester Mixed Use development – expression of interest being sought now.

From a development viability standpoint, it is interesting to note that the delivery of a wide choice of high-quality homes is required, and where there is an identified need for affordable housing, the authority is required to set policies to meet that need.

Within the same paragraph the document states “such policies should be sufficiently flexible to take account of changing market conditions over time”.  Are affordable policies sufficiently flexible take into account the changing market conditions?  How can currently inflexible policies be made more flexible?  How can affordable provision reflect those market conditions?

No doubt Section 106 Viability assessments will continue to shape accepted practice as well as help all parties make practical decisions that are right for the local community.

We currently have schemes in the Midlands, the north East and the North West. Please contact Adam Burdett at Intali (adam@intali.com) if you would like further information.

Intali have been instructed to secure a retail tenant for a new mixed use development at Horsemarket in Kettering town centre.

Kettering is at the heart of North Northants, the U.K.’s biggest single growth area outside of London.  The town is perfectly placed to benefit from the significant growth opportunities in housing and employment that are being delivered in the area.

The Horsemarket area has recently undergone substantial public realm improvements including the installation of new bus stops to make this area a key drop-off and collection point for visitors to the town centre.

The retail unit to let comprises the ground floor of a mixed use scheme, and will provide  356m² (3,832 ft.²) of prominent ground floor retail space with the main frontage to Horsemarket and return frontage to Queen Street.

The site is now cleared in readiness for development and the unit can be completed to shell finish approximately 12 months from the date of agreement to lease.

The agents consider that the unit would be particularly suitable for convenience food retail or leisure uses and further information can be found here.

1. Consider fully the importance of national planning policies aimed at fostering economic growth and employment, given the need to ensure a return to robust growth after the recent recession;

2. Take into account the need to maintain a flexible and responsive supply of land for key sectors, including housing;

3. Consider the range of likely economic, environmental and social benefits of proposals; including long-term or indirect benefits such as increased consumer choice, more viable communities and   more robust local economies (which may, where relevant, include matters such as job creation and business productivity);

4. Be sensitive to the fact that local economies are subject to change and so take a positive approach to development where new economic data suggest that prior assessments of needs are no longer up-to-date; and

5. Ensure that they do not impose unnecessary burdens on development.

This puts development viability centre stage in the application process, a long overdue but nevertheless welcome change which we hope will give officers more support in emphasising the importance of viability to some of the less well informed members of the planning committee.

However the statement goes further in saying “that to further ensure that development can go ahead, all local authorities should reconsider, at developers’ request, existing section 106 agreements that currently render schemes unviable, and where possible modify those obligations to allow development to proceed; provided this continues to ensure that the development remains acceptable in planning terms.”

Laudable, but I am not sure members will be happy but if they don’t they could always read the statement

For the full report from the RICS click here

The Times recently reported on new difficulties that first-time buyers are likely to face under the planned restrictions being mooted by the city watchdog, the Financial Services Authority (FSA).  These proposals are intended to close, bolt and deadlock the stable door now that the horse has disappeared over the horizon, and if approved will introduce “affordability assessments” to demonstrate that borrowers have the ability to pay significantly more than the cost of the mortgage they want to take out.  There are also proposals to restrict the terms of mortgages to 25 years, to end to self certification loans and to review interest only mortgages.

The Council for Mortgage Lenders (CML) has calculated that 45% of first-time buyers granted mortgages in the first half of 2010 would have been rejected or allowed to borrow only a lesser amount if these proposals had been in force.

The housing industry is one of the most significant drivers of economic growth in this country.  Its prosperity is fuelled by new entrants into the market, otherwise known as first-time buyers.  Without them the remainder of the market stagnates.  However it appears that the FSA is intent on making life as difficult as possible for first-time buyers, and in doing so endangers the recovery of the housing market and the economy as a whole.

We have grown used to retrospective government legislation accurately solving the problems of the past without anticipating the needs of the present and future.  We can expect little else from politicians whose decision-making is ultimately based on winning votes.  It is therefore left to the industry to provide a solution within the restrictive legislative framework set out by government.  It is encouraging that the industry has always succeeded in the past.

But what is the solution this time?  The 1946 Frank Capra classic, “It’s a Wonderful Life”, is a reminder of what building societies used to do.  The “good old” Bailey Building and Loan was a local institution making independent decisions about the ability of borrowers to repay and genuinely helping people to get out of “Potter’s slums” and into their own home.  What would the FSA have thought about that?

But the lack of a regulatory-fettered lender is only part of the problem.  The government’s own statistics show that house prices are still at historically high levels relative to first-time buyers’ incomes.  The last survey was completed in February 2010 and demonstrated that the price to income ratio at that time was 4.47, close to historic high of 4.57 in 2004.  To get first-time buyers back into the market this ratio needs to be no higher than 3.5 and therefore incomes must increase (unlikely in the immediate future) or house prices must fall.

The Office for Budgetary Responsibility (OBR) predicted in its November report a decrease in house prices of 1.4%, but this is likely to make little impact in reducing the price/income ratio to levels that will encourage buyers to the market.  The OBR prediction is a consensus figure made up of independent city and non-city forecasts, and opinions for 2011 vary between +13.3% to -10%, and therefore the fall in house prices could be much more (or indeed much less).

The house building industry has little ability to influence either incomes or house prices, and therefore to make a positive contribution it needs to address both the cost of providing new homes and the method of sale.

Build costs are stable at the moment, but the majority of new homes are built the same way they were 100 years ago.  Surely there is a more efficient, cost-effective and sustainable solution.

The planning system also places huge costs on the provision of new homes.  Although the evidence is anecdotal, the costs of flood risk assessment, ecology surveys, Design and Access statements, and the other endless requirements of local authorities before they will even consider a planning application, all add to the cost of the final product.  New codes for sustainability (worthy but unaffordable), Section 106 contributions and the demand for private developers to provide affordable housing, all drive up the cost of new homes.

And then there is the issue of land values.  Landowners have become used to achieving spectacularly high prices for housing land, and history suggests that such values will probably return at some point in the future.  They are understandably reluctant to release land at today’s depressed prices, but if the industry is to provide housing that is affordable (as opposed to subsidised affordable housing) a way must be found to encourage the release of land at prices that offer a reasonable premium to existing use values whilst maintaining affordability.

Rick Moore is right that first time buyers need to be brought back into the market.  We cannot expect politicians to do anything more than chase votes and therefore it is down to the industry to provide the solution.

Ready when you are.

The Revised Estimate of the Fiscal Impact of Spending Review 2010, based on the OBR’s  November Economic and Fiscal Outlook is available to download at http://www.hm-treasury.gov.uk/data_obr_index.htm , but the relevant paragraphs are reproduced below.

4.2 2  We assume that residential property prices follow the median of independent forecasts for the next two calendar years, implying a 1.7% increase in the year to the fourth quarter of 2010 and 1.4% decline in the year to the fourth quarter of 2011.  The independent forecasts are weaker than in June.  This probably reflects recent weaknesses in the housing market and the continued risk that credit constraints could place downward pressure on prices during 2011.  From 2014 onwards, house price inflation is assumed to be broadly in line with the long-term average earnings growth.

4.23   We expect residential property transactions to return to their trend level in the medium term.  The trend level is informed by the long-term average duration of home ownership and the expansion of the housing stock.  In this forecast we have re-estimated the equilibrium duration so that the medium-term anchor better reflects recent trends.  Average duration is now 19 years rather than the 18 years estimated in the June budget.  This change has had the effect of reducing equilibrium transactions by around 130,000 per year by 2015 relative to the June budget forecast.

4.24   Leading indicators such as mortgage approvals and new buyer enquiries point to muted transactions growth in the very near term.  This is consistent with the independent forecasters’ revisions to house prices.  Over the next couple of years we expect the availability of credit and the house price outlook to continue to weigh on transactions before recovery takes hold and brings about a return to medium-term equilibrium.

The Forecasts for the UK Economy, a comparison of independent forecasts, is also available, and makes interesting reading with Medium-Term Forecasts for House Price Inflation (Table M6 – page 21) ranging between +13.3% (Beacon Economic Forecasting – hang your head in shame) and -4.2%.

Bearing in mind the majority of predictions are negative for next year with negative or very moderate growth the 2012, it seems the government will not be relying on any help from the housing sector in contributing towards increased GDP.

Although rental value growth figures for 2010 remain negative for all sectors, the slightly improved position as we approach the year end is based on less pessimistic forecasts for both rental and capital value.

However forecasts for performance in 2011 show a continuing fall in expected returns, with rental growth increasing by 6.7% (7.2% in 2010) and capital values falling by 1.5%(+6.4% in 2010). Total returns for 2011 are predicted to be 5.2%, rising to 9.2% in 2012.

The full report can be downloaded from the IPF website or if you would prefer to receive a pdf copy please call Adam Burdett at Intali.