Market Update

02 April 2020

Steven Oliver

 

We remain positive. Despite the seemingly relentless negativity, we are still placing deals in the market in the commercial arena as well as in the private residential space. 

We have all the necessary tools and skills to continue despite the obstacles and disruptions we have been faced with. As this short term situation plays out, we remain optimistic about the future of our industry.

We have the lowest interest rates in living memory, coupled with a chronic housing shortage, and we have institutional and well-funded lenders looking to place their funds in commercially viable schemes which they were holding back on in 2018/2019 with the political uncertainty.

 

    

Market view

Over the last few weeks, we’ve experienced unprecedented events due to the Coronavirus. Economic activity has been affected across all sectors of the market and internationally, trillions of pounds have been made available by Governments to shore up faltering economies. 

In Real Estate, transaction volumes have slowed materially, and lender activity is constantly evolving. Lenders are more cautious and certain asset classes such as pubs, restaurants and hotels (leisure sector) are affected more than others. Many lenders have lowered their Loan To Value (“LTV”) ratio’s, but there remains an appetite from well-capitalised lenders to fund viable and attractive developments and investments.

We are in daily contact numerous lenders and we are well placed to successfully align their requirements with our borrower’s needs.

 

Where we are now 

It seems the answer to this is that the market is constantly moving, with changes happening on a daily (and sometimes hourly) basis.

The Chancellor of the Exchequer, along with the Prime Minister, has thrown the kitchen sink at trying to mitigate damage to the economy, wherever possible. In the last 10 days over £300 billion has been pledged to stimulate the economy and protect the employed and self-employed, via grants, loans and other support measures.

The UK Base rate has been cut to a historic low of 0.1% from an already low 0.75% to help stimulate the economy. So far, this has had little effect on a stubbornly-falling stock market, both nationally and internationally.

 

What to expect

Unfortunately, the effects of COVID-19 are, sadly, more likely to get worse as it peaks over the coming weeks. The Government is also under pressure to explain why the construction industry is allowed to carry on trading as usual and this pressure may result in the closure of development sites for the short term at least. This will have cost and build programme implications especially for time-sensitive developments such as student housing.

On the valuation side, we have now seen almost all valuers use the ‘Market Disruption’ clause which means that valuers are placing a cautious caveat on all valuations from March of this year.

Despite this uncertainty, Peritus is continuing to provide a normal service in these anything-but-normal times. If you would like to speak to one of the team on any matter affecting your business, please don’t hesitate to call. 

 

Steven Oliver