House repossessions rise in Q1
Nearly 13,000 Britons lost their homes to repossession in the first three months of this
year as the recession deepened, but there are tentative signs things could get better as the
year wears on.
The Council of Mortgage Lenders said on Friday the number of home repossessions soared by
half in the three months to March compared with the same period in 2008 to 12,800 and were
almost a quarter higher than the final three months of last year.
However, separate figures from the Ministry of Justice showed the number of mortgage
possession orders -- when courts grant an order for immediate repossession of a property --
fell 39% on the year to 17,054 in the three months to March.
Nearly half of the possession orders were suspended.
The CML said its forecast for a near doubling in repossessions to 75,000 this year looked
overly pessimistic and that it may need to lower its estimate.
However, analysts said home repossessions were likely to get worse with unemployment
estimated to hit 3 million by 2010, while house prices have plunged more than 20% from their
peak in mid-2007.
"The deep contraction seen since mid-2008, sharply higher unemployment, heightened debt
levels, substantially lower house prices and more and more people being trapped in negative
equity will all continue to impact," said Howard Archer, economist at IHS Global Insight.
Britain's economy shrank by 1.9% in the first three months of this year -- its sharpest
quarterly drop in 30 years -- and the Bank of England said this week that any recovery would
be slow and protracted.
Although many Britons have seen their monthly mortgage payments fall in line with the Bank's
rate cuts, large-scale lay-offs by firms across the UK have left many homeowners in
difficulty, especially those who bought at the market peak.
The number of loans with arrears of more than 2.5% of the mortgage balance rose by 62% on
the year to 205,300 in the first quarter, the CML said. That was a rise of 12% compared with
the last three months of 2008.
Rules introduced at the end of last year obliging lenders to repossess homes only as a last
resort should help prevent the widespread forced selling of homes that exacerbated the
housing market crash of the early 1990s, analysts said.
But it also risked making lenders more reluctant to lend in the first place and could delay
a housing market recovery.
"A lack of mortgage credit is going to be a continuing feature of the market, activity is
going to remain at historically low levels and prices are going to keep falling," said Ed
Stansfied, property economist at Capital Economics.
Another property veteran forms a vulture fund for commercial property and London residential
property
Paul Orchard-Lisle, the former chairman of Slough Estates and senior partner at Healey &
Baker (now Cushman & Wakefield), is the latest property veteran to launch new opportunity
funds.
Mr Orchard-Lisle's move means that £700million has been earmarked for ventures over the past
seven days. He plans to raise £200million and follows in the footsteps of Nick Leslau and
Leo Noe in seeking to take advantage of the bombed-out sector.
The proposals will confirm assessments that the troubled commercial property market is
close to bottoming out.
Values have fallen more than 40% in the UK from their peak in summer 2007 amid a lack of
available credit and tumbling demand for business space.
However, the decline has left some assets attractively priced. Mr Orchard-Lisle co-founded
Apache Capital Partners last year and the business is launching three funds targeting
infrastructure, commercial property and Central London residential property.
"At Apache Capital, we believe that the UK property market is nearing the perfect time for
the counter cyclical buying opportunity of a generation," he said.
Mr Orchard-Lisle added the group is in "no rush" to invest the capital but believes now is
the time to take advantage of the market and acquire assets at deeply-discounted prices. The
group, which is based in London also has an office in Bahrain.
Paul Orchard-Lisle has recently retired as Chairman of The Falcon Property Trust, a
commercial property unit trust which has run out of steam. Paul was a non-executive director
at Slough Estates, now the FTSE 250 property group Segro, including two years as chairman
prior to his departure in 2006. He is also a director at Standard Life Investments Property
Income, and a former president of the Royal Institution of Chartered Surveyors.
Unlike Mr Leslau and Mr Noe's ventures, the Apache funds will be managed internally
alongside partners Roxylight Group, Moorvale, Headlington AM and Hill Capital. They are
committing £5million in total.
Management will receive 2% of their committed equity as an annual asset management fee. They
will also receive a 20% performance fee on realised gains if a return of 12%-15% has been
delivered to investors.
Derwent London make progress despite market conditions by minimising voids
In its interim management statement for the six months to 31 March Derwent London said its
‘strong balance sheet, low vacancy rate, affordable passing rents, and diverse tenant base,
gives us confidence that we are well placed to take advantage of the value creating
opportunities which are starting to emerge.’
John Burns, chief executive of Derwent London, said: ‘With the challenging operating
conditions, our focus continues to be on minimising voids, capturing our reversion and
careful capital management. Our balance sheet is strong, and we are well positioned to
benefit from the value creating opportunities which are starting to emerge.’
Derwent London said lettings in the first quarter of the year totalled 80,100 sq ft,
generating an income of £3.2million a year. Of this, £2.9million was from space that was
vacant at the year end which included all the remaining office space at its Fitzrovia office
scheme, Qube. Overall, rental levels achieved on the lettings were about 7% below the
December estimated rental values.
Since 31 March, a further 68,000 sq ft of floor space has been either let or placed under
offer.
Derwent London said market conditions continue to be difficult, with central London office
take-up still in decline against the long-term average.
But it said: ‘Whilst demand generally has slowed, our affordable, well designed space has
remained attractive to occupiers. During the quarter, the group's portfolio, with its
limited development exposure and diverse tenant mix, continued to show its defensive
qualities and, with solid letting progress, maintained a low vacancy rate of 4.7%.’
The group has three developments underway which, overall, are 57% pre-let. These are the
263,000 sq ft Angel Building, Islington, Arup Phase III in Fitzrovia, and its16-19 Gresse
Street in Noho. It said at the end of March, the total cost to complete these schemes was
around £81million.
On its banking arrangements Derwent London said: ‘With £400million of uncharged property, a
high level of committed but unutilised bank facilities and flexibility in the management of
banking covenants, the group's financial position remains sound.’
Its net debt at 31 March was £840million, £25million lower than that reported at the
December 2008 year end due to the sale of The Astoria, 17 Oxford Street and 28 Dorset
Square.
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