This month, Finance Monthly had the privilege to interview one of the most prominent thought leaders within the fields of architecture, urbanism and design today – Patrik Schumacher, who has been leading Zaha Hadid Architects since Zaha Hadid’s passing in March 2016. He joined Zaha Hadid in 1988 and was seminal in developing the firm to become a 400-strong global architecture and design brand.

 Patrik Schumacher studied philosophy, mathematics and architecture in Bonn, Stuttgart and London. He received his Diploma in architecture in 1990. He has been a partner at Zaha Hahdid Architects and a co-author on all projects since 2003. In 2010 Patrik Schumacher won the Royal Institute of British Architects’ Stirling Prize for excellence in architecture together with Zaha Hadid, for MAXXI, the National Italian Museum for Art and Architecture of the 21^st century in Rome. He is an academician of the Berlin Academy of Arts.

 In 1996 he founded the Design Research Laboratory at the Architectural Association in London, where he continues to teach. A few years later, in 1999, he completed his PHD at the Institute for Cultural Science, Klagenfurt University. Today Patrik Schumacher is lecturing worldwide and recently held the John Portman Chair in Architecture at Harvard’s GSD. Over the last 20 years, he has contributed over 100 articles to architectural journals and anthologies. In 2008 he coined the phrase ‘Parametricism’ and has since published a series of manifestos promoting Parametricism as the new epochal style for the 21^st century. In 2010/2012 he published his two-volume theoretical opus magnum, titles “The Autopoiesis of Architecture”.

What attracted you to the architecture sector?

 As a high-school boy, I encountered the work of Mies van der Rohe in my History of Art class. I was struck by its cool beauty. Images of Oscar Niemeyer’s Brasilia were another striking inspiration I saw in a movie with Jean-Paul Belmondo, called ‘L'homme de Rio’, 1964. These were my first mediated encounters with modern architecture. Later, I decided to study architecture after I had studied philosophy and mathematics, because it seemed to me to be a versatile field where creativity intersects with a future-oriented, transformative societal agenda.

How has technology changed the architecture sector in recent years?

We are living in a new technological era brought on by the convergence of computation and telecommunication. This technological empowerment is triggering a radical restructuring of the whole reproduction and life process of society. We are now living and working in what I would like to call the Postfordist Network Society, where the most advanced arenas of the world economy focus on R&D, finance, and marketing and where production is more and more automated, relegated to the periphery and subject to continuous reprogramming according to the innovations produced in the R&D hubs. These hubs are the mega cities like London, New York, Tokyo, Seoul, Shanghai etc., where urban concentration continues relentlessly. This has consequences for the complexity, dynamism and degree of integration of the built environment. Cities become intensely networked with urban webs garnering the productive synergies of co-location. These challenges can be met by an architectural design discipline that is upgrading its tools, methodologies and repertoires along the line of the new style I have called ‘Parametricism’.

What are some of the key issues that you and your clients frequently face in relation to UK regulations?

 Regulations are too prescriptive. There are rigid land use prescriptions, and density prescriptions. There are further far too many regulations prescribing the way buildings should be designed and prescriptions about occupation, i.e. the density of occupation in office environments. In the residential sector, the detailed prescriptions of unit mixes, unit sizes, room sizes, number of units per core, balconies, facilities etc. border on the absurd. Urban entrepreneurs and their architects have no room for innovation at all. It’s a scandal that makes all of our lives so much poorer by taking away vital choice and by killing the discovery process of the market.

What incentives are in place to encourage foreign participation in the construction sector in the UK? What else needs to be done?

Unfortunately, the overregulation in the UK comes along with too much discretion on the part of the planners. This introduces paralyzing uncertainty and delays the planning process as developers must engage in lengthy negotiations with planners to gain competitive advantage. Clear rules would be better than overburdening rules plus discretionary powers for planners. This implies that foreign developers have a hard time navigating the system and work in the UK, as intricate knowledge of the processes and personas is required to succeed competitively. This reduces competition and consumers lose out once more.

In your opinion, how could the London's housing crisis be resolved?

 The most important step here is to ease the political supply restrictions, both with respect to the overall quantum of development, and with respect to the programme types and typologies that can be developed. We must allow the housing market to work. In fact, I would hardly call the housing provision in the UK to be a proper market at all. Sadiq Khan seems intent on ramping up “affordable housing”, i.e. housing rationed according to political prerogatives, to 50% of all housing provision. With all the other restrictions mentioned above we can hardly speak of a proper market. In proper markets, we never witness supply crises. There is no car crisis, is there? Or a crisis in food provision. Housing must be de-politicized. Let the market work and affordability will return. Some in central government seem to understand this sometimes, but the forces of local political nimbyism seem to push us further and further in the opposite direction.

What are the top 3 achievements in your career thus far that you are most proud of?

 I have been involved in the design and execution of some beautiful and innovative buildings, I helped to forge a great creative enterprise with a promising future, and I am proud to contribute to the discourse of my discipline via research, writing and teaching.

Your MAXXI Centre of Contemporary Art and Architecture project won the Sterling prize in 2010 – could you tell us a bit more about the project? What were some of the challenges that you were faced with?

MAXXI was our breakthrough project, and it remains one of my most cherished buildings. I am going back rather often and we recently opened our own exhibition within the building. The challenges here were first of all, winning an international competition with a formidable line up of competitors, then to translate the radical design intent into a feasible proposition without losing its power in the process. And then, there was the challenge of navigating the project through the unpredictable political waters of Italy; many governments came and went during the process. MAXXI is a national project.

Can you detail any current projects that you are working on?

 There are too many to list. There are about 25 projects on site, including e.g. a brand new Beijing airport, a large cultural complex in Changsha, an office tower in Beijing, a residential tower in Miami, a residential block in Manhattan, an opera house in Rabat, a mixed use block in Dubai, to name just a few. There are also many more new projects on our drawing boards: Corporate headquarters, railway stations, bridges, mixed-use complexes, and masterplans. We are a global design brand with an interior architecture department, corporate space planning department, and a furniture and product design department. We can deliver an all-round design service and are expanding our global reach with offices in Beijing, Hong Kong, New York, Mexico City and Dubai.

What would be your top three tips for young architects willing to ‘go the extra step’?

Divest yourself of all your nostalgic sensibilities, invest in computational skills, know the history of the field, including its contemporary scene, and read my books to gain an overview about architecture’s societal role.

“Let us all risk a bit more freedom to unleash the incredible potentials of our time.”

Website: http://www.zaha-hadid.com

Only 1 in 300 property purchases by overseas cash buyers are triggering red flags with the National Crime Agency (NCA) in a wakeup call for the UK property market, anti-money laundering (AML) specialists Fortytwo Data have warned.

In the US, a similar jurisdiction to the UK, 5% of home sales are to overseas buyers and 44% of them pay cash according to latest figures¹.

Transposing this trend data onto the UK property market means 26,400 homes are sold each year to overseas cash buyers in Britain, where 1.2m property transactions were the subject of only 355 Suspicious Activity Reports (SARs) in the year to March 2016².

SARs are red flags sent by financial institutions, law firms and estate agents to the National Crime Agency (NCA) when they detect suspicious activity. It comes against a backdrop of widespread fears that foreign criminals have been using the UK property market to store their ill-gotten gains.

Fortytwo Data’s knowledge of the anti-money laundering sector suggests direct overseas transactions are responsible for around a quarter of SARs raised in the UK. This means only 0.33% of cash purchases by overseas buyers are triggering alerts - 1 in every 300 sales.

Estate agents’ reporting responsibilities have been strengthened by the latest EU money laundering directive (4AMLD).

The NCA’s director of the economic crime command, Donald Toon, has offered insights in the past on the scale of the problem, revealing how he believes “the London property market has been skewed by laundered money”³.

The number of SARs submitted by estate agents to the NCA climbed dramatically in 2015/16, rising 98.3% in only a year albeit from a very low base. It was the highest rise of any sector, which suggests lack of awareness and training in the past has been a problem.

The second highest rise came in the gaming industry which saw the number of SARs submitted climb 52.4% to account for 0.37% (1,431) of the 381,882 SARs received by the NCA that year.

Julian Dixon, CEO of Fortytwo Data, said: “There is no doubt that 355 SARs generated by all estate agents is a tiny number. That figure seems to be on the right trajectory but the industry still has a long way to go.

“The residential property market is a golden opportunity for criminals, who are able to take advantage of a sector that, in the past, has not been subject to such stringent money laundering requirements as financial institutions.

“Bricks and mortar is as attractive as ever to organised crime. It’s an ideal way to deposit large sums of cash in a single transaction, allowing them to blend in with the thousands of legitimate cash buyers who purchase property each year.”

The US is a comparable jurisdiction to the UK. The US property market, like Britain’s, is a safe haven for illicit funds because of the rule of law, relatively stable markets and high prices which make money laundering more efficient. Their regulatory regimes are based on identical enforcement frameworks.

(Source: Fortytwo Data)

The Government estimates that between 225,000 and 275,000 homes need to be built per year to keep up with the rate of demand, however only 147,960 have been built for 2016/17 so far.

Many believe that this is because there is not enough money to buy the houses once they are built, as people cannot afford to get on the housing ladder due to the difficulty in saving enough deposit in order to get a mortgage, but this is not really the case as property priced at the more affordable end of the market, tends to be snapped up pretty quickly. In addition, the mortgage market has improved significantly and higher loan to value mortgages are once again available, although not at 100% loan to value as they were before the credit crunch.

There has been criticism over the government’s promise of a £2bn injection to help with funding to build social housing, as Downing Street aides have stated that this will only fund 5,000 of the 60,000 extra new houses needed to be built each year.  Funding is certainly not the major issue and we look at the main problems surrounding building more houses:

Loss of workers thanks to credit crunch and Brexit

When the credit crunch first hit in late 2007, 100% and high loan-to-value mortgages literally disappeared overnight. It happened so fast that even mortgage offers already in place were not honoured as lenders’ funds disappeared. The difficulty obtaining a mortgage made the desire of buying a house nearly impossible for a lot of people. Less people to buy houses impacted builders and property developers very quickly and left them with a lack of work. The demand for tradespeople such as carpenters, plumbers, electricians, bricklayers, etc. was decimated. It is important to realise that this was not a gradual decline over a number of years, it was a massive decline that happened over a matter of months.

The industry shrunk quickly and many people lost their jobs. As so many people skilled in the same trades lost their jobs and were unable to find more work doing the same thing, they were forced to find work outside the building industry and re-train in different sectors.

Over the last ten years, less people have entered the building industry due to lack of job prospects. Now the demand is back and prices are high again, more people will be needed in order to build more houses. Unemployment figures across the country are low so not many workers will be looking for jobs and to add to this problem, many European workers who filled lower paid roles have returned to their home countries due to the stronger Euro and concerns about Brexit. To get more workers, the roles offered will have to be more attractive which will push the cost of building the new houses up further.

Is there longevity in the building industry with the uncertainty of Brexit looming?

When demand for new houses disappeared and jobs were lost, the production of building materials slowed, and for some manufactures, ceased altogether. To build more houses we will need more materials – but the factories have not been waiting on standby for all of this time. To increase the supply of materials, manufactures will have to commit to more production, meaning costs of finding new premises and employing workers.

As specialist bridging loan brokers, many of our customers are business owners and property developers. They tell us that they are reluctant to commit to any new ventures that could be risky at the moment due to the uncertainty for the future, mainly caused by Brexit. Until the country faces a more stable future, many individuals responsible for making decisions needed in order for us to move forwards and build more houses will be remaining cautious and unlikely to spend huge sums of money opening factories or training new workers as they just do not know if it will be profitable, or indeed if it could actually prove very costly.

(Source: Key Loans and Mortgages Ltd)

With an ever-growing need for property, renting in the UK has become go-to game for many home seekers who can’t quite make it into the mortgage market. But what does this mean for the letting side of property? Fareed Nabir, CEO of PropTech platform LetBritain discusses for Finance Monthly.

Over recent weeks we have seen the UK’s two largest political forces host their party conferences. Along with inevitable, frequent mentions of Brexit and a fair amount of scrutiny for both the Labour and Conservative leaders, it also became clear that access to housing is at the top of Westminster’s agenda at present. In this respect, the private rental sector faces particular challenges in providing homes for a growing proportion of the country’s rising population. With the UK population projected to reach 70 million people by mid-2027, PWC estimates that an additional 1.8 million households will enter the UK’s private rental sector over the next eight years.

Central to the growing importance of the private lettings sector is the rising costs associated with purchasing a home. The average value of properties in London has risen by a whopping 78% in the ten years since the onset of the 2007 global financial crisis. Add to this further figures around rising prices for Manchester, the East Midlands and Scotland and a clear picture emerges. Whilst the UK property market may be a fruitful asset class for many investors, more and more UK residents are now coming to rely on the private rental sector as the bottom of the ladder rises out of their reach.

Recognising the value of renting

Reacting to the rising number of people moving out of homeownership, leading political figures have focused on addressing feelings of insecurity expressed by voters. Both the Conservative and Labour parties share a target of building one million new homes by the end of the parliament and are considering the possibility for longer tenancies to become the norm. Labour has taken this one step further and has embraced a policy pursued in cities including Berlin, Stockholm and New York, whereby the government intervenes in various ways to restrict rents.

However, we must also remember that for many people, renting is an extremely attractive option. One of the most attractive aspects of renting is the greater flexibility offered by tenancies relative to ownership. For example, if you have to move to a new city for work, it’s nowhere near as difficult as having to list a property and wait for a sale to be processed. With the UK workforce now more globally and nationally mobile than ever before, we must remember the historic advantages of renting if we are to effectively adapt. The reasons that made renting an attractive option in the past haven’t gone away; in fact they are now truer for more people than ever.

To this end, the emergence of a rising number of tech platforms within the property sector holds significant promise. A property market that was once dependent on bricks and mortar agencies, endless reams of paperwork, lengthy phone calls and poor transparency is fast becoming more efficient; as a result both landlords and tenants are coming to expect more. It’s now possible to begin the process of securing a rental property from anywhere in the world and engage directly with a landlord or their instructed letting agent.

In short, tech has meant that the process of letting a property can be made quicker, cheaper and more transparent for all involved. Commonplace in other aspects of people professional and personal lives, people in the UK today expect tech – everything from bespoke software and apps to slick online platforms and web support – to make hitherto laborious processes far, far easier.

Delivering choice and security

Recent LetBritain research into this emerging development found that 31% of UK adults, the equivalent of 15.92 million people, now think that using high street letting agents to rent out a property is outdated and overburdened by paperwork. A further 25% were found to be relying upon unregulated online-only alternatives to source and secure a rental property. Whilst a number of challenges remain in managing this transition, the scale of public sentiment is resoundingly favourable towards harnessing the power of tech to more conveniently and efficiently facilitate property rentals.

The challenge remains for the sector to deliver choice and security across the letting market. Landlords should not feel the need to put their property at risk by renting to an unreferenced tenant just because they were sourced online, and tenants deserve to know that their legal rights will be observed. If this is achieved, the private rental sector should be able to manage the demand that it’s set to face in the years ahead, with landlords and tenants alike incentivised to be communicative, transparent and forthcoming with all necessary documentation.

As more of us move around or find it difficult to buy in our desired location, digital solutions that enhance and protect the interests of landlords and renters are vital. So while political leaders are focusing heavily on turning Generation Rent into Generation Buy, it is equally important that they promote more progressive approaches for serving all those in the rental market.

There are mixed thoughts across the UK on the current state of the property market and the prospects to come. In some regions economists believe it’s the best it’s been in the last ten years, while others are confident in the current slump, particularly in London. Here Paresh Raja, CEO of Market Financial Solutions (MFS), talks Finance Monthly through his thoughts on the future of the UK property market.

The UK has developed something of an obsession with homeownership. While our European neighbours are content with long-term leasing contracts, homeownership in the UK is as much of a personal milestone as it is a popular financial investment – a report by YouGov found that 80% of British adults are aspiring to buy a property within the next 10 years. As an investment, property is a resilient asset able to withstand periods of market volatility. At the same time, price appreciation as a consequence of demand positively contributes to home equity, increasing its resale value and potential to deliver long-term returns.

The allure of residential real estate has remained consistently high in the UK, and the Brexit announcement has done little to dampen investor appetite for property. The average house price has risen by an average of 0.37% per month since the referendum vote in June 2016. Should this trend continue, house prices could rise by as much as 50% over the next decade. While an impressive feat, the same YouGov report stated that 85% of respondents believes that owning a home is very difficult in today’s economic climate.

To ensure homeownership remains an attainable goal, the Government has pledged to increase the housing stock by promoting the construction of new homes across the UK. A housing white paper released earlier in the year has also set out the Government’s plan to reform the housing market and contribute to housing supply, though little has been done since then to demonstrate the Government’s commitment to supporting property investment. While this is a welcome measure, such a pledge needs to be informed by a long-term strategy that lays down the foundations for the ongoing support of the property market against any future economic and political shifts.

Of course, there are variety of different avenues for aspiring homeowners to jump on the property ladder should they struggle to acquire finance from traditional lenders. The Bank of Mum and Dad (BOMAD) has fast become a leading source of finance for millennials struggling to acquire a mortgage or buy a house in a desirable location. Parents are predicted to lend over £6.5 billion in 2017 to support the property aspirations of their children – a 30% increase on the amount loaned in 2016.

Considering the amount of property wealth that has been amassed by UK retirees and the Baby Boomer generation, the transfer of such wealth through inheritance constitutes a significant proportion of property transactions – a study by Royal London anticipated that over the coming decade, £400 billion worth of real estate would be passed on from older generations to those aged between 25 and 44. This transition will have profound impact on the wider property market.

Recent research commissioned by MFS found that that 36% of people across the country will be inheriting a property – equivalent to 18.64 million people. Interestingly, the research found that over half of people due to inherit a property will be looking to sell it as soon as possible so they can re-invest the money in a different asset or property of their choosing. A third would also look to take advantage of the long-term returns on offer by undertaking some form of refurbishment so that the house is in a better condition to sell or place on the rental market.

The challenge remains for the property sector to provide clear guidance around the options that exist for those seeking to maximise the potential gains of their real estate inheritance, while at the same time bringing new properties onto the market in improved conditions. Taking into account the full range of trends underpinning the property market, homeownership does not have to be an attainable goal for the few. The market is at a critical juncture, and with demand for property consistently high, there are likely to be significant opportunities arising over the coming year.

According to the statistics, Price Central London began to witness a recovery in Q2, both in sales volumes and prices. This follows 2 years of stagnation as buyers held back due to Brexit and residential tax headwinds. The increase in average prices, however, can largely be attributed to a surge of high value sales with buyers taking advantage of price discounting at the luxury end of the market. Underlying price appreciation for the rest of the market remains significantly less buoyant.

England and Wales and Greater London continue to see falling transactions and slower overall price growth, impacted by the introduction of mortgage caps, the instability in the domestic economy and the growing new build crisis.

Price Central London (PCL)

• Sales volumes have strengthened slightly, with an annual increase of 4.8% to 3,885
• Average prices reached £1,946,151 in Q2 2017, representing quarterly price growth of 7.9%
• Despite the statistical increase, this has been buoyed by a number of high value transactions and an increasing proportion of luxury sales
• Q2 2017 saw the most expensive sale ever to transact through Land Registry at £90m for a flat in 199 The Knightsbridge Apartments
• As a result, the top 10% of the market performed particularly strongly in Q2, seeing a 20% increase in average prices to £8m
• The most active sector this quarter was the £5m - £10m bracket, where the proportion of sales increased by 23% over Q1
• Excluding the top 10% of the market, average quarterly price growth was 4.5%
• Growth in the buy to let sector was the most sluggish with a 1.3% increase in average prices for property under £810,000

Average prices in Prime Central London reached £1,946,151 in Q2 2017, following quarterly price growth of 7.9%. Despite a slow down as the market adjusted to increased residential taxation and Brexit, this recovery is, in part, a result of buyers seeking safe havens in the face of increasing uncertainty as tensions mount in the USA, Middle East and worldwide, together with the attractions of weak sterling and low interest rates.

Transactions in PCL have strengthened marginally in Q2, following a prolonged period of falls from 6,044 in Q2 2013. According to LCP’s analysis, 3,885 sales have taken place over the last 12 months, representing a small increase in annual sales of 4.8%.

Notwithstanding the headline figures in Q2, a detailed analysis indicates that price increases have been buoyed by a number of significant high value sales, including £90m for a flat in 199 The Knightsbridge Apartments, the most expensive sale ever to transact through Land Registry. As a result, a particularly strong performance has been seen for the top 10% of the market with prices increasing 20% to average £8m. With this excluded, average growth falls from 7.9% to a more typical 4.5%.

However, whilst homebuyers have capitalised on luxury property discounts, a divergent dynamic is being seen in the lower value market. Price growth in the buy to let sector was the most sluggish, reflecting a 1.3% increase for properties under £810,000. The proportion of sales under £1m also decreased by 9%, compared with a 20% increase over £5m.

Naomi Heaton, CEO of LCP, comments: “The increase in average prices appears to reflect a greater proportion of high value properties being sold, rather than any significant underlying growth. Not only have we seen some very large individual sales but transaction data shows the £5m - £10m bracket was the most active in Q2 with a 23% increase over Q1. This can be attributed to international homebuyers taking advantage of notable price discounts, alongside beneficial currency exchange rates. The buy to let sector, on the other hand, is seeing a much slower picture as investors continue to adopt a wait and see attitude.”

“Looking at the monthly breakdown gives us a clearer picture of what is really happening in the market overall. Whilst bumper transactions boosted average prices to as high as £2.2m in April and May, which included the most expensive sale to register through Land Registry at £90m, June reflected a more sedate picture with average prices falling back to £1.65m.”

Greater London

• Average prices have shown quarterly price growth of 4% and now stand at £634,234
• However, annual transactions fell by 24% in Q2, resulting in a low of 88,545 sales, half those 10 years ago

Heaton comments: “Greater London is principally a domestic market and whilst prices continue to show growth, slowing sales volumes reflect the current state of the UK economy. Concerns around Brexit have impacted the ‘feel good’ factor which drives buyers’ decisions, whilst affordability issues resulting from caps on mortgage lending have hampered buyers ability to trade up or get onto the housing ladder. Falling sales volumes are also exacerbated by problems within the new build sector. This has seen international speculators pull back in the face of uncertain or negative returns. It is reported that the number of new building starts in London will fall to just 21,500 this year, meaning only 18,000 new homes will be built by 2021.”

England and Wales

• Average prices in England and Wales have shown almost nil quarterly price growth at 0.27% and now stand at £287,823
• Transactions fell by 12% in Q2 with 844,380 sales annually, the lowest since Q2 2010

Heaton comments: “Despite Government measures to reduce Stamp Duty for 98% of the market and schemes to promote activity such as Help to Buy, weaker sentiment and restrictions on borrowing continue to impact on the domestic market in England and Wales. With static price growth in Q2 and annual transactions levels falling a further 12.3%, the Government seriously needs to address the growing affordability issues within the sector and support the building of more low-cost housing for buyers. The artificial stimulus packages and tax reliefs do not appear to be reinvigorating new buying activity.”

(Source: London Central Portfolio Limited)

Three in five (60%) people surveyed by Masthaven bank believes that they would find it hard to get a mortgage today - half (50%) of UK homeowners surveyed feel this way, indicating some may feel like mortgage prisoners.

According to a new report by challenger bank Masthaven, the mortgage market is not in tune with modern consumers' evolving needs; the world has changed and the mortgage industry needs to play catch up. Today the bank publishes new data which indicates that UK householders sense a ‘computer says no’ mentality from mortgage lenders.

Masthaven’s Game of Loans report found many people surveyed believe they wouldn’t get a mortgage today. The poll, conducted by Opinium, reveals that both would-be and existing homebuyers are unsure if lenders would support them: 60% of the adults surveyed believe that if they were to buy a home today, it would be hard to get a mortgage. The bank is concerned that half (50%) of all adults who are homeowners surveyed feel this way; and it’s worried that they may feel like mortgage prisoners.

The new study - comprising two surveys of over 2,000 UK adults, in January and July 2017 - found that almost two in three (65%) people polled believes that getting a mortgage is about ‘box ticking’ not the reality of someone’s situation. This opinion has risen markedly by ten percentage points (from 55%) since the first poll in January.

It also highlights how people feel the mortgage market must adapt to appreciate their changing lives – a large majority (81%) of people surveyed believe lenders should make an effort to understand homebuyers’ individual circumstances. This view is strong among people aged 55 or over (88%), UK homeowners (84%) and parents (82%).

Age is a contentious issue

Nearly three in four (74%) people surveyed said they feel that meeting repayment criteria should determine mortgage eligibility, not age. Moreover, three in five (60%) of those surveyed believes that everyone who can afford the repayments when they retire should be eligible for a mortgage. This view has risen up from 53% since the January poll.

Commenting on the findings, Jon Hall, Managing Director of Masthaven said: “Just as homes have kerb-appeal to buyers, it seems people have a perceived sense of their own mortgage-appeal to lenders. Our report highlights how many people believe they have low or no appeal to mortgage lenders; they have little faith in the market. Whether these homeowners’ beliefs are founded or not, the industry cannot ignore how customers feel – their perceptions need attention. I believe the industry can adapt, and we’re publishing the report to encourage lenders to look at the new face of home borrowing: ordinary people with normal lives. The UK mortgage industry must create products and processes that are fit-for-purpose for society today – a world that’s rapidly evolved and looks different to even just a few years ago.”

Time for change

Game of Loans examines four audiences segments: self-employed, older borrowers, parents, and younger borrowers. Masthaven suggests that, despite new mortgage regulations providing a more stable framework, lenders have not adapted their approaches to cope with evolving financial lives. The bank is urging lenders to look closer at individual borrowers’ lives, so they can create products and processes that are fit for modern life. For example:

• Self-employed: Given the continuing rise of this workforce, the mortgage industry needs to take a fresh look at how it can support them. Affordability models need to reflect the concept of self-employed income; in many instances self-employed borrowers cannot even get past the initial mortgage selection criteria and progress their case to a trained mortgage underwriter, who would have the skills to be able to read and assess their company accounts.
• Parents: The robust affordability criteria have been set for a very good reason, but in many cases parents believe they can afford to make the mortgage repayments. Responsible lenders should be working with brokers to help find affordable solutions that are fit for modern families.
• Younger borrowers: Continued innovation is needed to help first-time buyers onto the property ladder. From unlocking intergenerational wealth and helping grandparents and parents with equity in their homes support their families, to boosting the building of affordable homes.
• Older borrowers:  The old adage of paying off your mortgage pre-retirement simply isn’t realistic for many people today. As the Government launches Lifetime ISAs to bolster home ownership for the under 40s, it should also consider solutions for an ageing population which keeps mortgages alive for longer.

Jon Hall added: “The audiences examined in our report aren’t niche groups on the fringes of society, they’re growing segments of the population with modern needs that a thriving mortgage market must address. It shouldn’t be 'game over' for many homebuyers before they’ve even put a foot on the property ladder. As a bank we need to make sure our application of the affordability rules are revisited regularly, to check hard-working householders are not being excluded from the mortgage market.  As a specialist lender we put people at the heart of the solution. Manual underwriting drives our decision-making rather than technology, and we work in tandem with brokers to assess customers’ individual needs.  I’m concerned to hear so many borrowers feel unsupported when in reality an experienced lender, with flexible processes and great broker partnerships, may be able to help.”

Other key findings

Alongside how difficult they felt it would be to get a mortgage, Masthaven asked people their views on other topics, including: the mortgage process, the UK housing shortage, intergenerational disparity, and lending into retirement.

Over half (55%) of self-employed respondents believes they would find it hard to get a mortgage today; and 70% of them feel that getting a mortgage is about which financial boxes you ‘tick’, not the reality of your situation.

Respondents’ perception of their ‘mortgage-appeal’ varied across the UK. Respondents in Wales have the strongest doubts - 72% believe they would find it hard to get a mortgage today, compared to 53% in Scotland. 68% of people in the East of England feel it would be hard, compared to 50% in Yorkshire & Humberside.

While many (73%) respondents have never used a mortgage broker or adviser, over a quarter (27%) have. Among the latter group, almost one in five (19%) said it was because their circumstances were “complicated”.

Three in four (75%) respondents believes it is unfair the young are struggling to get onto the housing ladder today. This view rises to 78% among people aged 55 or over. It drops to 72% among men, but rises to 78% among women.

Many people surveyed believe the UK housing gap will grow:  61% predict the shortage of affordable homes will increase in the next five years; this rises to 64% among people aged 55+ and is felt strongest (68%) in Scotland.

Nearly three in five (58%) respondents believes the price difference between homes in the north and south of the UK will increase in the next five years, but views vary - ranging from 79% in Newcastle to 44% in Cardiff.

More than two in three (67%) people polled thinks UK interest rates will increase in the next five years; meanwhile almost a third (32%) believes the average wage of homeowners will decrease in the next five years.

(Source: Masthaven Bank)

People are paying more for their homes around the world, with average house prices up 6.5% in the last 12 months.

But, where have house prices grown faster than the average income?

Assured Removalists have combined data on average annual salary, income tax and house prices to produce a ratio that shows the measure of housing affordability around the world. The higher the ratio is, the less affordable the houses are.

How does your country compare? You can view the full data set here.

Mortgage sales for the UK decreased by £1.8 billion in July, down 10.8% on the previous month, according to Equifax Touchstone analysis of the intermediary marketplace.

Buy-to-let figures were resistant to the general decline, down by just 0.2% (£3.9 million) to £2.6 billion, while residential sales dropped by 12.8% (£1.8 billion) to £12.2 billion. Overall, mortgage sales for the month totalled £14.8 billion, up 10.8% year-on-year.

All regions across the UK suffered a significant fall in sales. Scotland suffered the biggest slump of 19.8%, followed closely by Northern Ireland (-18.5%), and the South East (-15.4%).

John Driscoll, Director at Equifax Touchstone, said: “These figures show how volatile the mortgage market can be. Sales have tumbled in July, with every region suffering substantial declines as buyers are put off by continuing political and economic uncertainty, coupled with the worrying gap between inflation and wage growth. These circumstances may be further compounded by the potential for an interest rate hike as early as September, driven by continued pressure on the pound.

“On a more optimistic note, mortgage sales are up over 10% year-on-year and a dip in sales for July is not uncommon; however, as the summer period comes to a close, the long-term outlook for the market still remains very unclear.”

The data from Equifax Touchstone, which covers the majority of the intermediated lending market, shows that the average value of a residential mortgage in July was £199,286 (2016: £188,115) and £159,721 for buy-to-let (2016: £158,415).

Equifax Touchstone utilises intermediary and customer profiling tools to provide financial services providers with a detailed understanding of their marketplace and client base.

(Source: Equifax)

Tim Hilkhuijsen holds Degrees from Aims Community College in Greeley, Colorado as well as from Southern Illinois University and has 25 years of experience in the field of architecture. With a strong knowledge of both residential and commercial design, including construction methods and materials, Tim’s ability to see a project through, from conception to completion is unsurpassed, as he has been involved in architecture since 1989. His work can be seen throughout the United States such as, South Carolina, Colorado, Missouri, Texas, North Carolina, Utah, including the islands of St. Kitts and Antigua. Tim’s distinguished work has been published and can be found in various books and magazines for which he has received several “Prism” awards for outstanding designs, as well as a SARA award for exemplary graphic representation.

Having a spirited understanding of accrual management, Tim has owned, operated and directed several Architecture firms throughout his career, and is regarded to be one of the top sought after designers in the South Carolina low country. His primary goal has always been customer service and satisfaction and he prides himself to be “only as good as his last job”.

A member of the American Institute of Architects, the Royal Institute of British Architects, as well as the Society of American Registered Architects, Tim and his partner, Kevin Whalley, established Architecture Plus sc, llc in January of 2012. Architecture Plus sc, llc recently partnered with Aaron Ede in order to provide unparalleled services in a challenging market to their discriminating custom residential clients. Here he tells us more about the company’s beginnings, priority toward their clients and recent projects they’ve worked on.

How did the idea about Architecture + come about? How did the company develop into the company it is today?

Kevin Whalley and I struck out on our own back in 2012, when the economic landscape in the United States was a much different, scarier place than it is today. While we understood the risks of starting a business in the middle of the worst recession in recent memory, we also knew it was a chance for us to design and manage projects the way we wanted and the way we needed them to be managed.

We saw an opportunity to combine our 50 years of architecture experience in the Charleston, SC region and grow it together. The combination of our experience allows us to complement each other.

Another major factor in our company’s success is that we learned to be diverse. We’ve learned how to get into new markets and how to address and implement the creation of such new market services.

How has technology changed the architecture sector in recent years?

Technological advancements have made it easier to convey design ideas and executions to clients. Flat, two-dimensional drawings and renderings are no longer the only way to show the scope and scale of a project. Now, we as architects display our creations in three-dimensional graphic presentations that are much more photo-realistic and easier for our clients and their contractors to understand. These tools also enable us to work more closely with general contractors and their estimating departments. It helps them become more accurate during the bidding process and when they are on target with budget, it results into a satisfying reflection of our firm. Drawings are simply much more understandable to read and ideas are more easily conveyed. Not just to our clients, but also to the entire project team that is turning a vision into a reality.

Can you detail any current projects that Architecture + is working on? What are some of the key issues that you are facing in the process?

Some of our most recent projects include a Starbucks, a mixed-use facility, retail and office building, a restaurants and an industrial building. The biggest hurdle we are continuously challenged with is learning to work with local governments. Time equals money and having to go through the rigorous requirement of city review and submittal processes tends to add 6 months to our project timeline. We find that roughly 18 to 20% of a projects’ expense ends up being allocated towards governing regulations. So the challenge for us in the industry is how can we, as professionals of our industry, provide more affordable projects. Whether it’s a multi-family housing project or a commercial project. Average salaries simply do not run parallel to the average wage earner, so we must continue finding a solution, as this is just not a developer problem. It’s going to take work from multiple parties in our industry to band together in search of viable solutions. Finishes that were deemed as upgrades a decade ago, have now become expected standards today.

Website: http://architectureplusllc.com

Our July Investment Insight section looks at the work of Jeff Evans, who is a Partner & Managing Director at Volta Global - a diversified private investment group focused on direct investments in venture capital, private equity, and real estate. Volta was formed in 2015 to manage the proprietary and permanent capital of its founder and partners of the firm. Prior to joining Volta, Jeff had over a decade of multi-faceted experience as an active investor in both public and private companies, and as a co-founder of a venture-backed technology company.

Tell us a bit about what makes Volta Global’s philosophy and company culture unique?

Everything about our investment philosophy and corporate culture stems from our permanent capital base. Because we don’t manage a fund or have external investors to answer to, every investment decision we make is viewed through a long-term lens and must pass the test of being undoubtedly the best usage of the two resources we care about most - our capital and our time. Because we are active in so many different areas and maintain a relatively small headcount at the corporate office, our culture remains very entrepreneurial and filled with intellectual curiosity.

Can you give an example of how your personal investment approach has evolved during your career?

Like many people drawn into this field, I’ve always considered myself to be a value-oriented investor. The idea of being one of the first to discover a business with an underappreciated competitive advantage (or “moat”), and that was currently mispriced by other investors, was an idea that captured my interest very early in my life even before I started doing this professionally. As my career has progressed and involved making investments in many different markets, I think realizing how the characteristics of competitive moats themselves can change or adapt over time has been an important evolution. Many elements that defined what a sustainable and durable competitive advantage looked like 10 or 15 years ago may have been drastically altered over time by factors like technology and changing consumer behaviour. Think about large incumbent businesses in the consumer goods space as a good example. For many decades there existed a hugely profitable moat versus smaller upstart competitors – big barriers to entry built up over time thanks to distribution being incredibly expensive and difficult to accomplish at scale, and the advertising dollars necessary to match brand recognition and awareness with the big players being prohibitively costly for most. Fast forward back to today, and businesses like Dollar Shave Club and Harry’s have leveraged direct-to-consumer distribution models and extremely low-cost (but equally effective) marketing efforts to steal almost one-fifth of the razor market from the big incumbents in only a matter of years. I still believe that investing with a focus on the original value principles is the best path to long-term success today, but investors need to be aware and attentive to how sources of competitive advantage can evolve and erode over time.

What types of businesses does Volta look for in your private equity strategy and can you share one lesson you’ve learned from your activity in the lower middle market buyout space so far?

From a high level, in our control investments we are seeking to acquire profitable and durable businesses, each with between $3-10 million in annual cash flow at time of purchase. We tend to like businesses that most people find boring and unexciting, and where we can make them just a bit more exciting. We also prefer situations with an existing management team in place to stay on and operate the business after a transaction, or where we are facilitating a transfer of the business from one generation of family to the next.

The quality of the relationship developed with the sellers or controlling shareholders of the target business is hard to overstate. Not having a proper alignment of incentives in place, or expecting something that starts out as a poor relationship to eventually sort itself out after you have acquired and taken over the business, can be recipes for disaster. For this reason, we choose our partners very carefully based on their track record of displaying integrity and honesty, and we make sure there is personality fit and proper alignment early on in the process process to avoid pitfalls down the road.

Do you have any guidance for how the average investor can improve the quality of their investment decision-making?

Learn from the best. Find great investors throughout history and be an avid reader of their writings, teachings, and experiences. A strong sense of financial market history is also important - what tends to be “new” is often just an old idea that has been repackaged in a different form. Mental models and internalizing a few big ideas from multiple disciplines beyond finance can also be quite useful as an investor. The idea of compounding is powerful, and how continuous, minor self-improvements every day accumulate over time – simple math tells you that a 1% improvement in a skill compounded every day equates to an almost 38-fold total improvement in that skill over one year. Lastly, surrounding yourself with intellectually curious people that ask a lot of questions is a great way to test your own assumptions about the world and continue to expand your own mental framework.

The biggest investment most people make in their lives is usually buying a home. It has always been however, an ambitious thing to do, and now, in 2017, more so than ever. Below Finance Monthly hears more on the risks of a lifetime ISA from Stefano Giudici, Marketing Manager at Money Farm.

For young people aspiring to buy their first home, speculation about a future slump in house prices could be good news, but for those people who have only just started saving for a deposit, a fall in house prices in the immediate future will come too early.

Average property prices and minimum mortgage deposits

Generally speaking, the smallest deposit to secure a mortgage is 5%. Most lenders are currently asking for a minimum deposit of 10%. According to Halifax, and as reported on the BBC website, the average UK house price fell to £218,390 in June. This means that as a minimum, a deposit of nearly £22,000 would be required.

Of course the larger the deposit you can put down, the small the mortgage; so it’s advisable to save as much, as quickly as you can in order to make mortgage repayments affordable. The best mortgage deals you can make at present require a whopping 40% deposit.

The new lifetime ISA

The government has stepped into the picture to try and help first time buyers by launching the Lifetime ISA or LISA for short. This is a new platform that is designed to take over from the current Help to Buy ISA. To be eligible for the new LISA you must be aged between 18 and 39 years old.

If you do use your LISA to help you to buy a house valued at up to £450,000, the government will add a 25% bonus. The only problem is that if you have to withdraw anything from your LISA for emergency expenditure before you buy a property, the penalty is severe. It amounts to 25%, all of which has to be paid to HMRC.

Beware of accessing LISA investments before you buy a house

The problem for many people who want to invest in their future is that they do not have much disposable income. If all their savings are tied up in a LISA they will have no choice but to access them if an emergency or unforeseen situation arises. This could cost them dear and make a big hole in their home purchase plans.

It is because of this that the FCA advises that investors should only opt for a LISA when they are confident they will not need to access their investment before buying a first home.

LISAs can also be used as an investment for retirement. However, in this context, this 25% penalty can also catch you out if you have to access your savings before you’re 60.

Advice from the FCA

What this means is that for many people, investing in a LISA might not be wise. They would be far better off by using another platform such as a stocks and shares ISA. Although there is no government bonus, the gross total AER would, over a period of time, probably exceed what you would have been given in the way of the government bonus.

The beauty of a stock and shares ISA also is the fact that you can access your investment if you need it, without penalty, in something like 5 to 7 days on average.

What it all amounts to is that you need to be aware of the advantages and the pit-falls that the various investment platforms have. The best thing to do before you commit yourself is to seek advice from an IFA.