When the hypothetical family from number 28 parade the street in their new Mercedes GLE, doing somewhat of a victory lap, Google is just seconds away as we scout our next big purchase.

Driving the car of our dreams just isn’t a feasible option for many, due to the reality of things like family life and other important household costs. But, as John Paul Getty once remarked, “if it appreciates, buy it. If it depreciates, lease it.” Many throughout the UK have taken the once-oil tycoon’s advice and done just that.

It’s a well-known fact that the value of a new car is known to drop massively within the first year, and research from AA suggests that after three years, a car will have lost 60% of its original showroom price tag at an average of 10,000 miles per year. The first-year loss is definitely the worst, with a deduction of around 40% being made by the end of the first 365 days. Obviously, there are different ways of putting the brakes on depreciation. Keeping the car clean, regular servicing in accordance with manufacturer’s guidelines, and one eye on the mileage gauge, will all go a long way in reducing potential losses.

But could we be doing something different?

PCP

An impressive 78% of buyers nowadays opt for a personal contract purchase (PCP), proving itself as an increasingly popular finance option. Admittedly, it goes against everything our parents have told us to do, in regard to owning our own car, but if you can battle those initial demons, then we’re here to show you why this might be for you.

Cost

Some people take pride in saving up in advance to buy a new car, like the Mercedes A Class, but not all of us have the time (or or patience!). With PCP, the payment is broken down into three major chunks. Firstly, you’ve got the initial deposit which is usually 10% of the car’s showroom value. Secondly, the monthly payments which will include enough to cover the depreciation costs incurred throughout the contract. Finally — and this is where things change once the final payment of the contract has been made, you get the option to either return the car or take a new one on a new contract. Or, you can pay a balloon payment and then the car is yours.

The monthly repayments of a PCP contract are significantly less than the alternative finance deals available. The option then presents itself is to drive a car that you would initially have deemed to be significantly out of your price range. Therefore, if you don’t have a big deposit and want lower monthly repayments, then this might be exactly what you’re after.

Please check this for new and pre-owned cars in Dubai at https://exoticcars.ae.

Mileage

Heavy traffic, congestion charges and the worst culprit of all — parking. Three reasons many drivers in the UK have steered away from the daily commute in the car and opted for public transport. A decade ago, our decision when purchasing a car will have depended hugely on our day-to-day usage — but when that isn’t the same, why should the choice be?

On average the annual mileage of a car in the UK is 7,900. One drawback of renting your car through PCP is that is that when initially taking out the contract, you are given a mileage restriction and if you exceed this, you will be penalised. If, however, you would consider yourself to be one of those average UK drivers, then PCP offers no qualms. The opportunity to purchase a new contract once your current one is up means you aren’t going to have spent your days driving around in an old car with high mileage.

The freedom that comes with PCP means that if you wanted to, you could buy a weekend car — unless of course you are using it to commute every day. When purchasing a new car outright, you are restricted by the constant reminder that you will have this car for the foreseeable future. With PCP, you can buy the car that caters exactly to the needs of your evenings and weekends. For example, an SUV if you go camping with the kids most weekends throughout the summer, or a two-door roadster, if your Sundays are filled by coastal runs. And, if your circumstances do change, you can simply exchange the car.

PCP agreements have revitalised the UK car market, as budgets grow increasingly tighter and people are constantly on the lookout for a good deal. For the past three years, the number of new car sales in the UK has stayed above 2.5million units per year, in comparison to 2011 when it was only 1.9million.

Top tier brands such as Audi, Mercedes, BMW and Jaguar Land Rover have all performed well under the system. This is due to the fact these cars hold their value better, and therefore depreciation is less, ultimately benefiting both dealer and driver. Mercedes reported a 100% upturn in UK sales since 2010.

A typical customer could be paying anywhere in the region of £100 upwards for lifestyle costs such as their phone bill and gym membership, so if dealerships are able to offer a vehicle at £99 a month, then they are making the cost seem more realistic for their customers — it’s near enough a no brainer!

You can't compare rent to a mortgage payment. This way of thinking about the rent versus buy decision is extremely flawed. Comparing a mortgage payment to rent is not an apples to apples comparison. In order to properly assess the rent versus buy decision, we need to compare the total *unrecoverable costs* of renting to the total unrecoverable costs of owning.

That may sound like a complicated task, but I have boiled it down to a simple calculation.

In this guide, experts at ABC Finance help Finance Monthly break down what commercial mortgages are, how they work, how the application process works and how much you’re likely to pay.

What is a commercial mortgage?

Commercial mortgages are, much like residential mortgages, a long-term long which is used to purchase or refinance a property. As with residential mortgages, the lender takes security over the property or land in question and allows you to borrow money against it.

Commercial mortgages aren’t just used to raise money against commercial or semi-commercial property, usually almost any security can be considered. It’s common to see a commercial mortgage used to fund land or even predominantly residential security, such as large HMOs, large buy to let portfolios and holiday lets.

Commercial mortgage uses

Funding can be arranged for one of two main reasons:

• To purchase or refinance a property for your business to trade from;
• To purchase or refinance a property as an investment.

Although almost all applications will come down to one of these two reasons, each application will have its own intricacies and lenders will be flexible in understanding your circumstances.

As mentioned above, unlike residential mortgages, commercial mortgage lenders are generally quite flexible in the security offered. Commercial mortgages can be an ideal option for unusual properties, or even to raise finance against land.

The documents needed to apply for a commercial mortgage

When you apply for a commercial mortgage, the lender will usually want to see a number of supporting documents to help them assess your application. Although the exact documents required will vary from lender to lender, there are a number of documents that are commonly requested.

Firstly, the lender will want to check that the proposed mortgage is affordable. To do this, they will request a copy of the latest two years accounts for owner-occupied applications, or a copy of the lease, or leases for investment properties.

These documents are used to assess the proposed repayment against the money coming in.

In addition to the accounts or leases, the lender will also request 3-6 months bank statements, which will be used to check your account conduct. This gives the lender an understanding of how much of that income is left at the end of each month, and how well the account is managed.

For investment properties, only personal bank statements are required. For owner-occupied properties, the lender will also request your business bank statements.

The final document that is requested on almost every application is an assets, liability, income and expenditure summary. This gives the lender a breakdown of your personal cash flow and net worth positions.

This document provides a simple insight into your personal finances and alerts them to any potential future problems.

How are commercial mortgages assessed by lenders?

The processing of commercial mortgage applications is more of a manual process than residential mortgages, which are largely assessed by a computer.

Lenders will often take a common-sense approach to situations and will look at the bigger picture to fully understand the circumstances surrounding the application.

The other big difference between residential and commercial mortgages is that the valuation is undertaken later in the process. A surveyor is not usually instructed until after the mortgage offer is issued.

As a result, applications tend to take longer than standard mortgages, with applications usually taking 6-8 weeks to complete on average.

Commercial mortgage rates and terms

Commercial mortgage rates can vary widely between lenders. For an owner-occupied application, rates of between 2.75% and 3.75% are average for high street lenders.

Commercial investment rates range from 2.85% to 4% on average from the high street banks.

Challenger banks will usually charge a little bit more but will be more flexible in their lending criteria. Rates start from 4.29% and tend to hit around 7% for higher risk, higher loan to value applications.

In addition to the interest charged, lenders will usually charge an arrangement fee of between 1.5-2%. This is usually paid on completion and can be added to the loan in most cases.

Owning a home is one of the biggest dreams for many, yet the process of buying any property can be laborious and flooded with additional fees, delays and disappointments. Blockchain may just be able to chain that. Below Finance Monthly benefits from expert insight from Kai Peeters, the Founder and CEO of HiP, on the implementation of blockchain in the real estate sector.

We are now bearing witness to blockchain based technology coming out of its infancy, and showing how it can be applied to vastly improve multiple markets - including the archaic property market. With a few established businesses and technology giants warming to blockchain, we have to start asking more profound questions about/around how it could improve the situation for a buyer/ buyers and the real estate market as a whole.

The current housing market simply does not work for the majority of first-time buyers. Working exclusively with traditional financial institutions, real estate markets around the globe confine first-time buyers in long-term unmovable loans that put enormous pressure on young people looking to buy a home. This is why, despite interest rates being reasonably low, the number of new mortgages has been declining since the 1990s. Meanwhile, the minimum deposit is largely unaffordable for people who earn average wages, and without help from their family it is virtually impossible for them to get on the property ladder. Technology can transform the way we buy and sell real estate by eliminating additional costs and disorganization of our housing market, Smart contracts that can handle that aspect more efficiently.

Having a decentralized real estate platform addresses current market issues, and introduces the individual investors who can fill the void left by traditional financial institutions and inject more life into the market. This can also allow property to become a more valuable asset in itself, where each buyer is able to release equity without losing ownership, and raise money free of debt. Being able to turn equity into currency and have control over debt levels brings the choice back to the buyers, owners and investors.

The upcoming platform HiP was designed with all those benefits in mind, especially for first time buyers, who can use an inbuilt calculator to enter the price of the property they want to purchase as well as the down payment and monthly payments they can afford. HiP will then calculate the remaining amount needed to buy the property and this outstanding amount is offered out to investors. This means that the first-time buyer will own a percentage of the property whilst also being entitled to a proportional percentage of profit and capitals gains when sold. Investors on the HiP Exchange who have co-financed the property will also receive return on their percentage of the real estate equity they own.

This is a new world of opportunity for first time buyers who now have access to other financing options that were previously unattainable to them. With HiP focusing on the way we fund properties, and other innovative minds using blockchain based technology in other areas of the real estate sector, it is only a matter of time until the array of problems within the real estate markets becomes a thing of the past.

To hear about mortgage misconceptions and the challenges that potential homeowners face in California, Finance Monthly talks to broker and owner of Mortgage Express – Carole Ryan.

What are the key misconceptions among buyers in relation to mortgages?

Buying your first home should be an exciting and fun endeavour, but I think a lot of potential first-time homebuyers are held back by misconceptions of the loan approval process and the fear they may not qualify. Two of the biggest misconceptions are that they need 20% down and perfect credit. But not anymore - Fannie Mae’s, HomeReady mortgages, and Freddie Mac’s

Home Possible® and Home Possible Advantage® mortgages are new and innovative conventional programs that bring a whole new set of underwriting guidelines to help more low to moderate-income borrowers realize their dream of home ownership. Down payments of 3%, FICOs starting at 620 with most lenders, and higher debt-to-income ratio’s in some circumstances.

Another change by Fannie and Freddie that took effect on 1 January 2018 will also help buyers buy more with less down. The conforming and high-balance loan limits were increased. Now buyers can put 3% down on loans of up to $453,100, whilst in high-balance areas, from $453,101 to $679,650, the minimum down is 5%. The bottom line here is that if you are seriously interested in buying a home, there are options out there to help your achieve your dream of homeownership. The only thing that you have to do is to take the first step - find a good lender and get preapproved.

What are the key challenges that your clients face before applying for a mortgage and how do you help them overcome them?

As a broker with over 25 years of experience in mortgage lending, I work with all types of buyers. I find that almost all of the clients that I advise face challenges revolving around what I call the BIG 3 - income, credit and funds to close. If we have a debt to income issue, we look at adding a co-signor, and/or paying off debt, or as a last resort - buying less. I help borrowers resolve minor credit issues that don’t keep them from getting a loan, those with major issues, I refer to a great credit restoration company I work with.

There are several solutions for funds to close. The easiest one being a “gift” from a family member, a lender credit, based on the interest rate chosen, a seller credit, a loan against or liquidation of a 401K, and of course a variety of down payment assistance programs.

What makes your company unique when compared to your competitors?

What makes me and my company unique is very simple - I’m able to provide incredible hands on service to my clients, built around their schedules and needs. Mortgage Express is my company and I handle all of the loans that I work on personally - from pre-approval to close of escrow. This allows me to oversee my files, keeping everyone involved in the transaction updated and being sure we’re always on track to meet the closing date. I meet with borrowers on-line in a unique screen share, based on the time of day, night or weekend that is convenient for them, whilst they can attend from the comfort of home. This allows me to show them, in real time, how their income, debt and assets affect the loan they can qualify for, as well as ways to restructure the loan in different ways, based on their needs. All of this as they watch, ask questions and request changes. It’s also a great opportunity for me to educate them about the processes we will be going through so they know exactly what to expect, including our time frame and the items I will need them to take care of. No screen share would be complete without an explanation of how lenders pricing works, showing them the different interest rates, and how pricing adjustments affect the options they will choose from. We wrap up with me preparing an estimate of funds needed for closing. The real magic starts when they get an accepted contract and escrow is opened. In a matter of a few days, I have the loan submitted, appraisal ordered and our initial loan approval. My average closing time is 21 days.

Like the digitisation of all things, challenges will be faced and there are benefits to reap, but often such progress doesn’t take place because the correlation between the two isn’t a positive or favourable one. Below Gemma Young, CEO and Co-Founder of Settled, discusses with Finance Monthly the future of digital in the property sector.

Property is our most important asset class, it's also our most emotional asset. Therefore, getting our home sale or purchase right is not just a big deal for consumers, it's a big deal for the wider UK economy.

Unlike other industries (travel, music, taxi services to name but a few), the real estate model has clung to its traditional roots. Even with the advent of “online” estate agents now in existence for the majority of this past decade, the industry has been slow to adopt the opportunities a digital revolution presents. It’s therefore unsurprising that we're still seeing the same issues; typical property transactions take over 3 months with 1 in 3 transactions breaking. This drives consumer losses in excess of £250m each year.

Looking forward, is 2018 going to be the year for true transformation? Will ‘proper’ property technology companies make a dent in the things that matter?

What drives transformation?

Technology

The emergence of truly disruptive technologies including artificial intelligence, virtual reality, blockchain and drones all hold their potential disruptive keys to a more progressive future. Not only are technologies proliferating, consumers also have easy access to them from their smartphones.

Empowered individuals

Tech-enabled consumers search for greater transparency, more control and ultimately more progressive solutions to age-old problems. Their quests for modern, digital solutions provide exciting opportunities for change.

Investment

2017 saw the most significant investment in ‘proper’ proptech to date, with a new and forward-focused collective attracting financial backing from VCs and traditional property players.

Regulation

Central and regulatory initiatives represent a particularly exciting shift. The latest Government call for evidence “Improving the home buying and selling process” and the HM Land Registry’s Digital Street scheme look towards a future where technology (including blockchain) will make the transfer of property ownership much more fluid. Such initiatives shine a light on the underlying problems apparent in the UK property market and signal a commitment to a more open and less guarded future.

How does this future look?

As we see this convergence in consumer, regulatory and technology worlds, this more futuristic property market is well within reach. So who wins? The opportunity to embrace and adopt new technology is open to all, however, historically, traditional incumbents have been slow to move in many sectors. They, therefore, get left behind or quite simply, left out. We don’t have to look far to see examples; Blockbuster and HMV are businesses which didn’t, in time, connect to the opportunities of the next generation. As a result, nimble and forward-focused entrants Netflix and Spotify won the respective leading positions in the new world. Much like in the movie and music sectors, forward-focused businesses tend to win in other worlds.

Settled.co.uk is one example of a real estate business that is connecting across these converging elements at quite a unique time in real estate history. Settled’s unique technology has significantly increased the likelihood of completing on a home and has cut the time it takes to sell and buy in half. It presents the hope that, in the future, its technology will enable people to buy and sell properties in moments, not months. This is the kind transformation this sector needs.

Cashless payments and the plight of cash in society has been something of a subject over the past few years, but a conversation many aren’t having is that of financial exclusion; something that has happened in the past is likely set to happen again. Below Jack Ehlers, Director of Payments Partnerships at PPRO Group, delves into the details.

In 2016, according to a report just published by the European Central Bank (ECB), EU citizens made €123 billion worth of what the ECB calls ‘peer-to-peer’ cash payments. That’s just another way of describing the money grandparents tuck inside birthday cards, donations to charity, payments to street vendors and the hundreds of other small cash transactions people make all the time.

But even as cash remains central to the economy, cashless payment methods become more common with each year. The use of e-wallets such as Apple Pay and Samsung Pay is predicted to double to more than 16 million users by 2020. Overwhelmingly, the rise of the cashless society is a good thing. It promises greater convenience, lower risk, and improvements in the state’s ability to clamp down on practices such as tax avoidance and money laundering.

But what about those micro-payments? And even more importantly, what happens to the estimated 40 million Europeans who are outside the banking mainstream? These are the EU’s most vulnerable citizens and they have little or no access to digital payment methods.

If we don’t plan properly, the transition to a largely cashless future could see the re-emergence of financial exclusion, which we thought had been vanquished. In Western societies. Ajay Banga, CEO of Mastercard, has talked of the danger that in the future we’ll see “islands” of the unbanked develop, in which those shut out of the now almost entirely digitised economy are left able to trade only with each other.

But are we really going cashless any time soon?

The ECB report quoted above, also found that cash is still used in almost 79% of transactions. So, do we really need to worry about what will happen when we finally ditch notes for digital payments? Yes and no.

Even though contact payments are on the rise, the demand for cash is also growing. A recent study found that the value of euro banknotes in circulation has increased by 4.9% over the last five years. Given the historically low rate of inflation over the past few years, this would seem to be largely due to a cultural preference for cash. Low interest rates could also be encouraging Europeans to spend rather than save. But whatever the reason, cash isn’t going away soon.

But that doesn’t mean we can relax. Some markets are already much closer to going cashless than the European average would suggest. In Sweden, consumers already pay for 80% of transactions using something other than cash. In the Netherlands, that figure is 55%, in Finland 46% and in Belgium 37% [1]. Today, Britons use digital payments in 60% of all transactions. By 2027, that number is expected to rise to 79%. Already, 33% of UK citizens rarely, if ever, use cash.

Unless we take this challenge seriously, we risk stumbling into a situation in which the majority in these countries use cash-free payments most of the time, even if they still use cash in minor transactions. In such cases, there is the danger of many shops and services no longer accepting cash, leaving those who still rely on it stuck in the economic slow lane.

For most people, cashless payments can offer easier and faster payments, greater security, and improved access to a wider range of goods and services. But to maximise the benefits and reduce the downside, including those for strong personal privacy, we need to start thinking now about how we can manage the transition in a way that minimises the risk of financial exclusion for already marginal groups in society.

Charities and mobile payments show the way

The rise of digital payments does not have to mean the growth of financial exclusion. It is possible to create an affordable payments-infrastructure for small traders, churches, and charity shops — and, even more importantly, for economically marginal consumers.

In the UK, charities are leading the way. After noticing that donations were tailing off, the NSPCC and Oxfam sent out one hundred volunteers with contactless point-of-sale devices, instead of charity collection tins. The rate of donations trebled. The success of the NSPCC trial shows that it is possible to roll out the supporting infrastructure for cashless payments even to individual charity collectors on the street.

But that’s only half the story. While charities and shops — even small independent retailers — may be able to afford and install point-of-sale systems to accept micro-payments, normal citizens cannot. Here, mobile payments may be the answer.

The example of the Kenyan M-Pesa, a system which allows payments to be made via SMS, shows that it is possible to create an accessible, widely available and used mobile payment system that does not rely on the consumer owning an expensive, latest-model smartphone. Already, 17.6 million Kenyans use M-Pesa to make payments of anything from $1 to almost $500 in a single transaction.

An inclusive cashless future—in which mobile e-wallets and other contactless forms of payment dominate—is possible. But it won’t happen by itself. As an industry and a society, we need to plan and work towards it: starting today. The stakes for many businesses and some of the most vulnerable people in our society couldn’t be higher.

Sources: 

The use of cash by households in the euro area, Henk Esselink, November 2017, Lola Hernández, European Central Bank
FinTech: mobile wallet POS payment users in the United Kingdom (UK) from 2014 to 2020, by age group, Statista.com.
Close to 40 million EU citizens outside banking mainstream, 5 April 2016, World Savings and Retail Banking Institute​
Insights into the future of cash, Speech given by Victoria Cleland, Chief Cashier and Director of Notes, Bank of England, 13 June 2017.
Why Europe still needs cash, 28 April 2017, Yves Mersch, European Central Bank.
Europe’s disappearing cash: Emptying the tills, 11 August 2016, The Economist
UK Payment Markets 2017, Payments UK.
The Global State of Financial Inclusion, 5 March 2015, Pymnts.com

This new year, there is one question on the lips of business men and women around the UK: “Is now the best time to purchase commercial property?” Thus, commercial property experts, Savoystewart.co.uk, have analysed how the market faired in 2017, and whether 2018 is the ‘peak time’ to buy.

The latest Property Data Report shows that since 2000, the value of the UK’s commercial property stock has grown, considerably, at an average of 3% each year – surprisingly, more than RPI inflation, which grows at an average rate of 2.8%.

Whilst exploring the report, Savoy Stewart found that the commercial property market in the UK in 2016 was valued at a staggering £883 billion, representing 10% of the UK’s net wealth. Investors now own £486 billion worth of commercial property in the UK; with overseas investors owning 29%.

In central London alone, around £2.4 billion was invested in commercial property, resulting in the total turnover for the end of July reaching a substantial £11.5 billion – a 24% increase on the same point a year earlier, in 2016.

July was the strongest month recorded for the City of London since March 2007, owing to the sale of the “Walkie Talkie” building – the UK’s largest single office building deal – which accounted for a staggering 61% of turnover.

Is now the best time to purchase commercial property?

2017 was a much stronger year than many ever anticipated. The economy pleasantly surprised many businesses and forecasters, with unemployment falling to the lowest level since 1975, consumer spending robust, and occupier take-up healthy.

According to Knight Frank, London office take-up is on the rise, despite the impact of Brexit, with demand in the West End at its highest for more than a decade. Savoy Stewart concluded, from their analysis of the research, that the third quarter of 2017 recorded the highest level of office take-up.

A substantial 3.8 million square feet of office space in central London was under offer and was due to close by the end of the year – and it is predicted to be the strongest final quarter since 2014. Office take-up in the West End alone reached 1.65 million square feet.

Trends in 2018

The uncertainty over the UK’s relationship with the EU will continue to cast a shadow over economic growth throughout 2018, resulting in a more cautious outlook amongst investors across all commercial property sectors. As a result, activity may be subdued, but it doesn’t

mean investment will stop any time soon, as investment volumes in the UK commercial property market, this year, are expected to total around £55 billion, per a report by JLL.

Savoy Stewart considered Savills ‘Sector Outlook’ and summarised the six main trends for commercial property in 2018:

1. Non-domestic demand for UK commercial property to remain strong; Due to the weakening of the pound and commercial property yields looking high in comparison to prime European and Asian markets.
2. Now is the best time to add value, and for opportunistic investors; Less competition and falling prices means now is the best opportunity to value-add and for opportunistic investors looking to change short-term income into long-term.
3. Real earnings growth will improve for the retail market; In 2017, a perfect storm of negativity hit retail, but this year will better news. Watch out for good buys in some segments of the commercial property market – don’t just buy because it’s cheap.
4. Brexit: It will become clearer how much, where and when the risks will be. London’s office market shrugged off the worst of the pre-Brexit negativity last year; 2018 will see more balance.
5. 2018 will be the year of ‘alternatives’; The pace of recovery will be dictated predominantly by Brexit; investors this year will be exploring new opportunities in the market.
6. New-tech tools, such as AI, will emerge; Wellness and staff satisfaction will continue to be important for employers, but some businesses will start to look at offsetting the costs of delivering wellness by using artificial intelligence.

Managing Director of Savoystewart.co.uk, Darren Best, discusses his view on commercial property investment in 2018: “As the figures show, despite the uncertainty around Brexit, London is still a pre-eminent city and performing better than Europe in some sectors. The research suggests that now is the best time to purchase commercial property in the UK, now that business confidence is more stable than many expected, which speaks volumes.”

He added: “The performance of the market, last year, surprised many of us. Occupiers are continuing to commit to London commercial property to satisfy their needs, and with the increase in foreign investment in UK commercial property over the last decade and overseas investors now owning 29% of UK commercial properties, it is safe to say 2018 isn’t going to be all doom and gloom – there will be scope for optimism too.”

Here Charu Lahiri, Investment Manager at Heartwood Investment Management, discusses the current challenges at the heart of online retailing and the overall effect click to click has had on commercial property markets.

Online retailing is an evolving landscape that is leading to structural shifts in the commercial property market across the globe. Here in the UK, internet sales now make up 16% of total retail sales compared to less than 4% a decade ago, according to the Office of National Statistics. This trend is expected to grow further; indeed, the average weekly value of internet sales totalled more than £1 billion in September, a 14% increase year-on-year. In fact, the UK leads the rest of Europe in total online sales volume.

Inevitably as retail purchasing trends are changing, demand for traditional bricks-and-mortar retail is falling. Mid-market UK based retailers in the fashion industry are reported to be reducing the number of stores that they plan to open, as well as considering closures at lease expiry. Furniture retailers’ expansion plans have also been curtailed in the last couple of years, with High Street names such as John Lewis and Next having ceased their activity in acquiring stores in the pure homewares market.

Instead, retailers are adapting by restructuring supply chains and, in turn, requiring warehouse and logistics facilities for multi-level purposes. These include e-fulfilment warehouses to prepare and ship orders; picking and sorting; returns; and last mile delivery centres. According to Prologis, every €1 billion spent online requires an additional 775,000 square feet of warehouse space.

Supply constraints and pent-up demand

Supply constraints mean that the warehouse/logistics sector is struggling to keep up with demand, which reached a new peak at the start of 2017 [Source: JLL]. For example, between 2012 and 2016, when e-commerce was expanding, just 13.65m square feet of warehouses was delivered to the market, compared to 40.47m square feet between 2005 and 2009 [Source: Kevin Mofid, Savills].

Constrained supply has been attributed to the lack of developable land, given that the UK market is noted for having high barriers to entry. This has resulted in a shortage of ‘grade A’ prime property: in the fourth quarter of 2016, grade A available supply fell 23% and a further 3.3% during the first quarter of 2017. In addition, speculative completions during 2017 are expected to be lower than historical levels. In part, this decline is due to limited development finance post the Brexit vote, but importantly some occupiers are shifting to purpose-built facilities as much of the existing stock is considered insufficient for e-commerce needs.

Pressure on prime rents

These trends are resulting in high occupancy rates, low vacancy rates and rising pressure on prime rents. According to researchers Cushman & Wakefield, annual prime rental growth ranged from 3.1% in the West Midlands to 13% in Yorkshire in the first quarter of 2017. The South East, East and Yorkshire are seeing the strongest increase in e-commerce demand and rental growth in those areas is above 10% per annum. These supportive conditions offer stable and long-term income opportunities for investors, notwithstanding that the risk premium versus UK gilt yields is compressing.

Overall, the outlook remains constructive for rental growth prospects in the logistics and warehouse sector, due to the underpinnings of strong supply and demand dynamics. Total returns in the industrial and logistics sector should outperform those for office and retail over the next few years. That being said, the UK property cycle is maturing and investors may have to expect lower returns compared with recent history, despite strong fundamentals.

We have for some time advocated an investment approach that is targeted to sectoral trends, but also one that can seek income and return from specific regions. Over recent months we have chosen to invest in UK regions and cities outside of the South East and London, where capital values and yields potentially offer more attractive value. We believe that there are opportunities to be exploited in UK commercial property, but they are now appearing in more specific areas of the market which are undergoing structural change.

Property prices across the world are soaring, with figures in Sydney, Australia reaching new heights as the median house price hits an eye-watering $1.18 million. But, how much house could the average individual buy in different cities across the world?

The current climate in the property sector is a bleak one; house prices are climbing to the highest prices ever recorded, with Australian house price growth surging to a seven-year high. When calculating how much Australian’s can afford, the average salary of 80,278 AUD, a typical loan-to-income ratio of 4.5 times the salary and the average price per foot of property show that 509 sq ft is the biggest size of property average Aussie’s can afford in Sydney. But, with the opportunity to move to bigger and better properties in far-flung cities across the world, would you up-and-go for extra square footage?

Shuffle the interactive piece to view highest to lowest sq ft, lowest to high sq ft and all of the cities included sorted A-Z.

Top 10 biggest property locations

These are the cities where Aussie’s can buy the biggest properties:

1. Cairo, Egypt. 4,883 sq ft
2. Kingston, Jamaica. 2,882 sq ft
3. Marrakech, Morocco. 2,610 sq ft
4. Kuala Lumpur, Malaysia. 2,213 sq ft
5. Mexico City, Mexico. 2,186 sq ft
6. Trinidad, Trinidad. 1,734 sq ft
7. Budapest, Hungary. 1,261 sq ft
8. Lisbon, Portugal. 1,178 sq ft
9. Adelaide, Australia. 1,093 sq ft
10. Athens, Greece. 1,053 sq ft

Interestingly, Adelaide takes the 9th spot as the city where Aussie’s can afford the biggest properties with their salary. Other Australian cities featured on the ‘How much can you buy?’ list includes Perth, who take the 14th spot with 838 sq ft, Brisbane at 15th with 727 sq ft and Melbourne, just a few places behind at 18th with 608 sq ft.

Top 10 smallest (most expensive) property locations

These are the cities where the smallest properties are that the average Aussie salary, of 80,278 AUD, can afford to purchase:

1. Monaco, Monaco. 67 sq ft
2. London, UK. 117 sq ft
3. Hong Kong, Hong Kong. 154 sq ft
4. Paris, France. 234 sq ft
5. New York, US. 235 sq ft
6. Tokyo, Japan. 248 sq ft
7. Moscow, Russia. 252 sq ft
8. Mumbai, India. 261 sq ft
9. Vienna, Austria. 277 sq ft
10. Singapore, Singapore. 294 sq ft

Monaco is the most expensive city in the world for Australian’s to buy a home, with most only being able to afford a measly 67 sq ft of property. It may come as a surprise that London, UK takes the second spot as the most expensive city on the list to buy a property with the average Australian only being able to afford 117 sq ft of property in the English capital. Other heavily populated cities make up the rest of the top 5 list and include Hong Kong, Paris and New York.

Just how big are we talking?

To put square footage into perspective, a standard double bed is 28.1 sq ft. This means that in Monaco you can afford a property the equivalent size of 2.3 double beds on the average Australian salary, crazy right? If we apply the same logic to London, that’s just over four double-beds-worth of property on the same salary.

At the other end of the scale, to purchase a 4,883 sq ft property in Cairo, Egypt would be equivalent of 173.8 double beds.

(Source: Assured Removalists)

Recent reports indicate some of the biggest household brands have signed up to a new buying service, by which grocery bills could be cut up to 30%, and the need for supermarkets could be eliminated completely.

Companies such as Unilever, Mars, and Reckitt Benckiser have signed agreements to sell directly to their consumers via a new digital platform and tech company, INS. This could also have a direct impact on how brands are able to use customers’ data for loyalty scheme and rewards.

Here, Rob Meakin, Managing Director at Loyalty Pro, comments for Finance Monthly: “The move by brands to offer a more convenient, cheaper service to consumers and cut out supermarkets is a clear attempt to gain some of the market share – and power – of grocery leaders like Tesco and Sainsbury’s and now Amazon, of course. In being able to gather data from their customers more easily, brands are going to create recommendations, rewards and loyalty schemes based on consumer buying patterns. With consumers’ allegiance shifting more away from brands and towards service (same-day and even same-hour delivery), this is an opportunity for brands to reclaim customer loyalty and our advice to retailers is to watch this development very closely and make sure they are prepared to fight for their consumer.  

“As data becomes the fuel for any business, retailers need to be actively trying to grow their customer loyalty by utilising the customer data at their fingertips to offer rewards schemes in the same way brands are now likely to. Loyalty points and rewards are a currency themselves, and with household budgets squeezed, consumers will be looking for the best possible deal. They also want to feel valued wherever they shop, rewarded for their custom and loyalty through points, offers and even charitable donations. We live in a society where loyalty can appear dead, but the truth is that it’s simply changed. Consumers still value great service and that can absolutely be delivered by anyone – from a single store high street retailer to a multinational online service. The key is to use data to understand what they want and deliver an experience using personalised and relevant communications which will encourage customer loyalty.  With brands about to cut out the middle-man, no retailer can afford to rest on their laurels.”

According to L&G research, the ‘Bank of Mum & Dad’ is the 10^th biggest mortgage lender in the UK as buyers, and many fi5rts timers, rely heavily on their parents for support.

In the UK, the average mortgage deposit is around £26,000, the average age to lend is around 30, and the average borrowed money is at £132,100.

Finance Monthly set out to hear from a number of experts in the property, legal and banking fields, and heard Your Thoughts on the Bank of Mum & Dad.

Luke Somerset, Business Development Director, Contractor Mortgages Made Easy:

Generation Z is about to start working. Born just before the Millenium they are too young to remember 9/11 but have grown up in a world filled with political and financial turmoil. They are keen to look after their money and make the world a better place. Along with Generation Y these young people have an entrepreneurial spirit like no other generation before them and many of them are either shunning university to set up their own businesses or are going freelance when they graduate. Generation Y and Z are now joining the 2 million freelancers already working in the UK and we have already seen a 26% increase in the number of professionals aged 16-29 registering as self-employed over the last eight years. But these young people might think that they can never get on the property ladder and are destined to be forever known as ‘generation rent’.

However, the Bank of Mum and Dad might be an alternative option or even saving for a deposit. Let’s face it, saving a deposit is the single biggest hurdle between you and owning your own home. It’s not easy to save a substantial deposit when you’re establishing yourself, but thankfully help is at hand in the form of specialist savings accounts such as the Help to Buy ISA which will assist you in saving the 5% deposit you need to purchase your first home. And things have got better for the Bank of Mum and Dad too! Traditionally if your parents wanted to help you to get onto the property ladder, they would have had to write you a cheque and accept that they’d probably never see that money again.

But today there are a range of innovative products which allow your parents to lend you the money you need to buy your first home whilst ensuring that they’ll see their hard-earned savings back from the bank after an agreed period of time.

Mark Homer, Founding Partner, Progressive Property:

As government regulations controlling the type of borrowers which banks can lend to, and the size of the loan as a % of their income bites, many now find the simplest route is to take some of the cash/equity which the older generation sit on in their homes and pass it down to allow those onto the first rung of the ladder.

With the pendulum having swung far in favour of increased bank controls, many believe it has moved too far post the 2008 banking crisis as often happens immediately following periods of crisis. Indeed, there does seem to be a growing consensus that perhaps things could be loosened a little which would allow banks to lend more than 15% of their mortgage book at over 4.5 times income.

As buy to let lending reduces due to stamp duty, tightening lender criteria and the reduction of interest relief bite younger, purchasers are spotting the opportunity to marry family cash with some very cheap bank finance. Often able to secure mortgages at sub 2.5%, many residential purchasers are finding a purchase much cheaper in the long run versus renting.

Jonathan Daines, lettingaproperty.com:

We monitor both the housing and rental market closely and have watched the rise of Bank of Mum and Dad (bomad) steadily grow to where it is today – the ninth largest lender, which is set to fork out £6.5bn this year compared to £5bn in 2016.

But for those who aren’t able to tap into or even unlock the funds of bomad, renting remains the only affordable option which offers flexibility and the chance for tenants to move on as personal circumstances change.

A Which? survey has revealed that 49% of 18 to 34-year-olds regard buying a home as a greater concern than social care costs or energy prices, with some admitting to never wanting to have to tap into parental funds in order to own their own home.

Indeed, as a nation we have always strived to become home-owners, but with prices so high and the demand supply-ratio so out of balance, we have certainly noticed that generation rent is here to stay, with longer-term tenancy agreements more popular than ever in a bid to families in particular feel home from home within their rental property.

Gary Davison, Managing Director, QualitySolicitors Davisons:

As a property lawyer and also a deep-pocketed generous co-director of my very own ‘Bank of Mum and Dad’ (5 to support; I deserve some sympathy, as well as a cold flannel on the forehead at times), I feel suitably qualified to give some guidance on the topic in relation to property matters.

We are Birmingham’s leading conveyancer for residential property purchases according to official Land Registry data, and a significant number of these transactions are on behalf of buyers looking to take their first step onto the property ladder. In recent years a number of our younger clients have taken advantage (quite literally) of the Bank of Mum and Dad in order to secure a larger deposit that grants access to more favourable mortgage rates and cheaper monthly repayments.

For those parents looking to contribute to the deposit, it’s important to be clear whether the contribution is intended as a gift or a loan.

For many parents, their contribution to the deposit is meant entirely as a gift with no intention to claim a stake in the property or recoup the money at a later date. If this is the case, all mortgage lenders will require a deed of gift document signed by the persons gifting the money which confirms that they understand they have no interest in the property and no right to get their money back directly from the property. Gifted deposits will be free from inheritance tax if the donor lives for seven years after the payment is made.

For those parents who intend the money as a loan, one possible option is to take out a joint mortgage with your child. This may help increase their chances of a successful mortgage application, though you may also have to pay Capital Gains Tax when you come to sell the property as it is not your primary residence and if your share is over the annual CGT allowance.

Another option is to create a second mortgage against the property. This would be repaid out of the sale proceeds. However, you would need to gain permission from the mortgage lender first, which may be problematic.

The third option is less formal – a Deed of Trust – which is not registered against the property but sets out the proportions in which the property is held. Many of our clients will be buying with a partner, and whilst parents would happily give money to their own child they may not wish their partner to also benefit in the event of a separation or dispute.

Ultimately, if parents are intending to make any contribution towards a deposit then it is important that they take legal advice to agree on the most suitable course of action.

Shelley Chesworth, Partner and head of the family team, SAS Daniels:

We are increasingly seeing Generation Y turn to their parents to help them get a foot on the property ladder. However, we’re also seeing more frequently, situations that arise as a result of both parties not considering the long-term ramifications of gifting a substantial sum of money. Many are entering into this financial arrangement without giving consideration to inheritance tax consequences or the potential liability for beneficiaries.

Navigating this complex minefield can be tricky. Cohabitees in particular, acting as either a gift provider or beneficiary, need to consider putting certain agreements in place to ensure their gift is protected. For example, a Transfer Deed can protect an investment by expressing particular shares in the property while a Declaration of Trust can be used to set out the parties’ intentions at the time of purchase, so a property can be held in joint names but the trust details how the proceeds should be divided in the event of separation. A Cohabitation Agreement should also be considered as it sets out exactly what was intended as a gift or deposit.

Married couples should also take action. Imagine being gifted a substantial sum by your parents to invest in your marital home, only for the marriage to break down. In this situation the matrimonial assets as a whole will be taken into account and generally divided equally. A Declaration of Trust can be used in this situation but it won’t override the court’s ability to divide the couple’s assets in line with Matrimonial Causes Act. In order to protect parental deposits we’re seeing more people entering into pre or post nuptial agreements – they are no longer just for the rich and famous.

Charles Fletcher, Head of Analysis, Cogress:

The bank of mum and dad is now the ninth biggest lender in the UK with nearly one-third of first-time buyers seeking financial support from their parents. As property prices across the country continue to rise and outpace growth in average earnings, there is little reason to believe this trend will slow down anytime soon.

This year, UK parents are estimated to collectively lend £6.5bn to their children to help them buy their first homes. The bank of mum and dad already provided the funds for almost 300,000 mortgages in 2016, which represented 26 per cent of all property transactions.

Unsurprisingly, the London property market has the highest level of support for first-time buyers from their parents. 40% of homeowners in the nation’s capital have relied on parental finance support to buy their property. With an average house price of £610,418, prospective buyers in London are likely to continue depending on the bank of mum and dad to secure property.

Like any form of loan, lending from the bank of mum and dad is not a risk-free option. Not only can parents go bust like a bank, familial loans can also cause tension in the relationship between the lender and their parents. Problems can often arise due to miscommunication between the two parties, regarding any potential “strings attached” to family financial support such as interest rates, confusion over whether the money is a gift or a loan, and parental concerns about their child’s partner benefitting from their mortgage contributions.

The nation’s rising dependence on the older generation to access the property market highlights not just the current inequities in the market, but also opportunities for developers to create more affordable housing that addresses the needs of today’s first-time buyers across the country

Amy Nettleton, Assistant Development Director of sales and marketing, Aster Group:

The UK’s reliance on the bank of Mum and Dad is borne out of a serious affordability crisis. It’s an unsustainable solution that heavily favours those with parents that can afford to gift or loan them money.

The biggest challenge facing first-time buyers is saving for a deposit. The average house price in the UK currently stands at £218,000^[1] and setting aside cash for a £20,000 deposit is proving difficult for the millions of people facing high costs in the private rented sector.

In the absence of a drop in overall values of homes, we need more attainable deposit sizes. The shared ownership tenure has been offering this for over 30 years, with smaller deposits allowing home owners to scale up their equity over time. With affordability affecting a growing cross-section of first time buyers, shared ownership will have to become increasingly mainstream.

At Aster we have pledged to increase the number of homes available under this tenure, but making shared ownership work is about more than just building houses - it needs backing from lenders. Although there has been some progress in recent months, we are still to see many of the big players commit to offering products for the tenure.

While pressure is on the bank of Mum and Dad, we need increased mortgage provision for shared ownership. But there also needs to be a step-change in the way it is viewed – not just as an affordable tenure, but as a viable solution to a problem that affects society as a whole.

We would also love to hear more of Your Thoughts on this, so feel free to comment below and tell us what you think!